I have been taking some questions from our clients and from my network about this recent Fairfax article on Afterpay's planned entry into the GP market. It's safe to say that fintech innovation in healthcare is a passion of mine, so I have documented some thoughts on the topic from a practice owner perspective.
Firstly, Afterpay is not completely new to the regulated healthcare industry. It has been providing a sugar hit to Dental industry sales in relatively recent times, with the major Dental corporate chains heavily marketing the availability of 'buy now, pay later' services.
But it's not all sunshine, lollipops and rainbows. In my discussions with the Dental market, one corporate group discovered that they had to employ a staff member, full time, just to manage their Afterpay-processed income. I kid you not.
As a payment method in healthcare, I find it worthwhile to consider that Afterpay:
- has no integration to Practice Management Systems. Sure, it's a slick user experience for those millennial patients, but a regular dollop of double data entry for you dear Practice Owner!
- only settles amounts net of fees, and thus provides a somewhat infernal bank reconciliation experience, even amongst the bank rec nightmare that is the healthcare payments spectrum in general.
- causes consternation with respect to charging practitioners for a share of their billings: Should the practice wear all of those chunky merchant fees? Or the practitioner? Or some other arrangement? Hmmm.... let's revisit those weighty contracts, shall we?
Further to these points, I highly recommend reading some of Jason Andrew's informed and entertaining commentary on the vendor microeconomics of Afterpay and its ilk.
So.... despite knowing all of this (much of it after the fact), would that Dental group still have invested in Afterpay? Hell yes they would, in a heartbeat. In fact, they wished they had moved on it sooner; so high were they from their sugar hit to sales. Fresh choppers all round. This article is no beat up on Afterpay, and I would have some confidence that the administrative pain points will be addressed over time.
But do I see Afterpay being widely used in General Practice in the foreseeable future? Hell no. A few points come to mind:
- General Practice services are predominantly bulk billed direct to Medicare (and DVA, Workcover, etc). As the Feds will spin the statistics, GP bulk billing rates were 86% in the most recent quarter. Some bulk billing practices still charge patients directly for some items like vaccinations, but this is no segment opportunity for Afterpay.
- For those practices that do privately bill Medicare-funded services, there are a number well-used solutions in the industry that instantly finance the patient for the Medicare component. Tyro has been doing this for some 13 years, and with a PMS integration to boot! And there are increasingly app-driven payment services providing similar functionality. Medipass and Whitecoat come to mind. These services are also beginning to offer integrated claims for 457 and student visa holders. And.... they integrate!
- Considering the above, what proportion of the General Practice revenue spectrum would realistically suit Afterpay-like solutions, especially among patients from the Afterpay-like generation? Substantial out of pocket costs are relatively rare in General Practice, unlike many services offered by non-GP specialists.
A potential short term exception would be among the small but growing number of General Practices that offer cosmetic procedures, often performed by General Practitioners. There has been some confusion as a result of AHPRA's guidelines that medical practitioners should not offer financing schemes to patients seeking major or minor cosmetic procedures. For clarity, the Medical Board of Australia has specifically excluded Afterpay and similar 'buy now, pay later' services from the definition of 'financing schemes'. So....why not grab a piece of that action?
Again much of the above commentary relates to the short-term state of play, and these are fast times in fintech. Afterpay will evolve. I would suggest their main game is not expansion of the 'buy now, pay later' sector; but to become one of the generationally dominant digital conduits between consumers and vendors of all retail stripes. Maybe there will be some future tie up with the likes of Healthengine or HotDoc? Watch this space....?
For the time being, if there are General Practices thinking of offering Afterpay, my advice would be to consider the trade-offs of volume growth vs margin hit, and for what proportion of your billings spectrum would Afterpay be realistically relevant? The margin consideration should include the additional cost of administering and accounting for the service. Finally, consider how the contractual relationship with your practitioners could (or should?) be affected by the merchant fee conundrum.
And while I am at it, it may come as no surprise that Surgical Partners' bank reconciliation technology can assist with the challenges referred to above. Our friendly team can advise on how to work around the lack of an Afterpay integration to your Practice Management System (PMS), and provide tips on how to handle the reconciliation of the merchant fee component of the settlement. We are here to help!
As always, I welcome your thoughts in the comments below, particularly any contribution from Mathew Cagney. And happy to stand corrected on any of the above assertions. We are all learning in what is a fascinating time to be involved in healthcare fintech.
