Recourse vs. Non-Recourse Patient Financing

In contemporary healthcare financing, some healthcare providers prefer to partner with non-recourse lenders for third-party financing for their patients. In the short run, the preference may shorten the time to offering a nonrecourse financing program. Non-recourse lenders have been around in various forms for decades and offer credit products to qualified patients to repay the patients obligation to the provider. This can help reduce a provider’s patient A/R for the consumers who qualify for these types of loans.

However, it is also clear that a reliance on non-recourse lenders can cause unforeseen problems with patient relationships and reduce total payments received by the provider. Since non-recourse lenders must protect their own financial health and hedge against risk, they must decline to extend credit to a significant portion of eligible patients. As a result, the patients who most need payment plan options are the very ones getting declined and left with the health system for further action.

Rejecting patients from potential financing options not only harms a provider’s patient experience, but it also delays and reduces the likelihood of repayment. Alternatively, non-recourse vendors who accept riskier patients must charge exorbitant fees to the provider and/or the patient, making the solution a last resort at best with steep costs locked in. For healthcare providers that would like to maximize bill repayment while nurturing patient relationships, recourse lenders can be a valuable partner, offering payment options and lower factor fees.

Shared Upside: the Difference between Recourse and Non-Recourse Lending

The central difference between recourse and non-recourse lending is where the risk and upside reside. In a non-recourse model, the lender takes ultimate ownership for the loan for a large fee and retains any upside or loss that is realized. If the patient defaults on their loan, the lender pursues the patient for this liability. In recourse-based models, the patient risk of non-payment remains with the provider as it is in the normal course. The fees charged are smaller and the provider retains any upside in collections. If a patient fails to pay off a recourse financing loan, the net difference is returned to the healthcare provider.

How do Recourse and Non-Recourse Financing Plans Affect Patients?

There are some considerations to keep in mind when evaluating non-recourse solutions:

• Credit impact: Non-recourse lenders will have a negative impact on consumer’s credit. Converting these healthcare liabilities into consumer credit liabilities allows the lender to use these debts in a traditional bankruptcy scenario.
• Discrimination: Non-recourse lenders employ credit checks with specific limits and parameters to decrease their risk and liability. This results in a substantial portion of eligible patients being denied some or all of the capital needed to pay for their care. Because these patients are usually denied due to their credit history, non-recourse lenders often contribute to long-existing systemic inequalities in financing availability for certain demographics and populations.
• Cost: Factoring/discount rates for non-recourse solutions can be extraordinarily high. As compared to other revenue cycle strategies, rates can be 5x-10x more expensive. The providers paying this discount have locked in the downside case, and any upside in collections by the lender is not shared with the provider but retained by the non-recourse lender.
• Negative Terms: Non-recourse solutions were originally developed for elective and cosmetic procedures. Patients ultimately accepted into a non-recourse program can be faced with high interest rates like a credit card, retroactive penalties, negative credit reporting, collection tactics, and other punitive actions.
• Smaller Financial Impact: Non-recourse lenders reject many eligible patients, so providers may see little impact to their total debt load and repayment. This can be problematic for healthcare providers with large populations that require financing. In addition, the administrative burden of managing internal payment plans remains with the provider for those not qualified.

Using a recourse financing partner such as AccessOne can help negate many of these difficulties while offering technologies developed to better engage consumers and lower recourse experience. Because healthcare providers ultimately control the patient’s balance, recourse lenders can offer much more generous rates and accessibility than nonrecourse lenders. For example, AccessOne offers flexible term limits and low-to zero-interest payment plans to every patient that is interested in a financing plan.

Systematic Non-discrimination: All patients should be offered a flexible range of payment plan terms that can be individualized to their needs. Recourse lenders are invaluable in breaking down systemic exclusions that exist for major demographic populations in need of financing. It is an unfortunate reality that many patients are excluded and rejected from financing because non-recourse models have deemed them high-risk. Because recourse lenders can provide financing to all eligible patients, they can provide a financial lifeline to in-need groups. Nonrecourse loan models have caused too much burden on patients who need Healthcare costs coverage.

Historically, recourse rates in traditional patient financing have been viewed as a negative. With patient financing companies that only provide fully funded 0% interest payment plans, recourse rates are typically double digits. However, AccessOne has innovated in the patient financing space on numerous program details, and one of these innovations is lowering recourse to 5% or less. Using AI-driven technology, AccessOne funds based on predicted patient payment behavior which drastically lowers recourse debt.

What About Healthcare Provider Liability?

Because recourse lenders do not take full ownership of a patient’s debt, there is a misinformed belief that recourse lenders do not reduce a provider’s liabilities. First, it is worth mentioning that a recourse loan lender is not adding any additional debt, the debt is already owned by the provider. Using a recourse lender as a partner will help patients complete repayment and lower the bad debt held by providers. Recourse lending programs typically have factor fees around 90% from their patients, greatly helping to both increase revenue and cash flow, while simultaneously reducing bad debt for providers.

Recourse lenders have also made enormous strides in providing services that help to cut down on both the resources used to engage patients for repayment, as well as a healthcare provider’s delinquent and uncompleted debt. At AccessOne, not only do we offer a full-service package that takes over all patient-provider communication, billing, and administration, we also implement automation and AI-driven technology at every step to streamline patient repayment and create efficiencies with patient account.

The Value of a Recourse Lending Partner

Healthcare financing is a complex and multi-varied environment. Each healthcare provider’s financial situation can vary greatly from institution to institution. There may be no single ideal solution that would work in all instances. Recourse financing partners can play a major role in helping providers improve both payment collection as well as patient relationships.

At AccessOne, we merge the accessibility and equity of recourse lending with technological innovation and automation to create a unique solution that is neither purely recourse nor non-recourse. We invite you to receive your free ROI (return on investment) analysis and see how AccessOne can help improve your patient financing.