Lake Region Healthcare: Helping more patients with the right financing program.

The COVID-19 crisis underscored the need for providers to maintain rigorous cost management and substantially improve patient access to care. Lake Region Healthcare is no exception. Serving five counties in west central Minnesota and eastern North Dakota, Lake Region Healthcare is an independent health system consisting of two hospitals, 10 clinics, a cancer center, two surgicenters and senior living. Lake Region Healthcare’s 1,100 employees include 120 physicians and advanced practice providers. The health system has been designated a Top 100 Rural & Community Hospital by the Chartis Center for Rural Health and received patient safety awards from the Minnesota Hospital Association.

Change needed in patient financing.

Patient financing was identified as a particular stress point as Lake Region Healthcare balanced financial discipline and affordability. Many patients were struggling to meet their out-of-pocket obligations. Ashley Carr, former Patient Finance Supervisor, noted, “It is often difficult for patients to fathom how they will pay bills when confronted with them.” The financial strains threatened loss or deferral of many elective procedures.

Demand for financing was growing on a trajectory that would substantially increase the healthcare system’s debt if it relied on short-term loans offered in-house. Lake Region Healthcare was offering long-term financing options through a non-bank financial company, but disenchantment with the program had grown. An analysis revealed several problems:

• High and variable fees. In addition to a flat monthly fee percentage for loan amounts transferred, the financing company charged fees based on each loan’s term. A sliding scale ranged from 3% to 26%. The average loan term of 32 months produced an effective combined rate of 28.5% and total fees well over a million dollars per annum. The variability was another concern. “Having a stable fee structure is important in a tight budget environment,” Carr explained, “especially with the pandemic’s uncertainties.”
• Extra staff work. Internal staff was handling the bulk of the patient relationship management rather than the financing firm.
• Underperformance on growth. Lake Region Healthcare believed that the outside firm was not optimizing the number of patients receiving long-term loans.

The solution: HSF®

Lake Region Healthcare found its solution in Health Services Financing (HSF®) by CommerceHealthcare®. HSF® is a flexible, efficient lending program offering patients low or no interest loans for terms of six months to five years. There are no credit checks. Financing is structured as a line of credit with three patient-friendly features:

• It can be issued at any point in the billing cycle.
• One credit line can consolidate charges incurred across facilities.
• It can accommodate costs from subsequent care encounters.

What proved decisive was that the CommerceHealthcare® flat percentage fee on its total loan dollar amount was less than half the prior firm’s combined rate. Cash flow was attractive given HSF®’s expeditious payment of the complete approved patient obligation amount (seven days maximum). Payments are electronically delivered with ERA transaction files for posting speed and accuracy.

HSF® was launched at Lake Region Healthcare’s Prairie Ridge Healthcare critical access hospital. CommerceHealthcare acquired the outstanding loan portfolio. Positive performance and cost savings made leadership eager to extend the benefits across the entire enterprise. The flagship Lake Region Hospital came on board three months after Prairie Ridge.

High marks for implementation and program management. 

The vendor transition initially triggered some staff resistance. They had developed specific ways of working on the financing program. Supervisor Carr relied on the steady communication and implementation skill of CommerceHealthcare. “From the start, the bank was invested in making it work and supporting us.”

HSF® is designed to require minimal technical implementation. Commerce Bank trains staff on proven customer scripts and streamlined workflow. Carr appreciated the team’s diligence.

As staff perceived the ease of working with HSF®, they became very supportive.

Another critical success factor is effective ongoing program administration. Observing that vendors vary widely in this category, Carr said, “As an administrator, I just want a program to work without having to think about it much. If an issue arises, we want it resolved quickly.” She pointed to several elements of the bank’s approach that fit her standard of strong support:

• Regular check-ins
• Identifying and flagging problems
• Prompt communication
• Recommends actions
• Offers innovative ways to adapt to healthcare’s changes

Results exceed expectations.

For only part of 2021, CommerceHealthcare funded nearly the entire 2020 loan amount. Lake Region Healthcare realized an estimated $169,000 fee savings, tracking favorably to its original projection based on three-year average loan volume.

Given this success, the 2022 forecasted loan funding potential was set at approximately $1.7 million, which is above historical levels. The pace set for the next several months of 2022 will exceed that forecast by 30%.

The strong uptick demonstrates another crucial outcome: patient satisfaction with the program. Carr attributes it to the ability of CommerceHealthcare to tailor financing to each individual.

Lake Region Healthcare has experienced few defaults and its delinquent recourse rate is below the national average.

The health system and Commerce Bank are actively working to expand HSF® across the other practices. Increased patient awareness and education are the keys. Lake Region Healthcare is leveraging CommerceHealthcare marketing materials and producing various communications, including letters to patients in advance of a direct call to personalize the interaction. Two targets for information are the clinics and especially the Emergency Department.

Additional benefits multiply the value. 

HSF® is augmenting Lake Region Healthcare’s benefits through:

• Improved staff productivity. Time previously devoted to program administration has been freed up to work on other priorities.
• Budget clarity. Confidence is enhanced by HSF®’s fixed fee structure.
• Speed to cash. Rapid reimbursement accelerates cash flow and reduces receivables. The bank does not “season” accounts, as many financial vendors do, waiting to see a patient’s payment record before releasing funds to the provider.
• Program consistency. Lake Region Healthcare believed its previous vendor was inconsistent in managing progress and not flagging problematic accounts. CommerceHealthcare maintains clear standards for consistent patient and institutional discipline.
• Strong risk management. Lake Region Healthcare had initial trepidation about HSF®’s no-credit-check policy but has experienced few recourses. Should a recourse loan default, the bank refunds its fees. Additional risk reduction for providers comes from the bank’s reasonable at-will exit contracts.
• Commercial bank advantages. HSF® creates a direct bank-to-provider relationship with no “middleman” as is frequently the case with non-bank financing companies. This helps reduce costs, maintain tighter control and eliminate uncertainties regarding which lenders are involved. Commerce Bank also offers financial strength, security and scalability that enables flexible customer offerings.

Future directions.

Lake Region Healthcare is testing financing based on pre-service estimates, an increasingly popular step. HSF® fully supports such financing, funding 100% of the estimated amount and using the flexible credit line to reconcile over or underpayments.