Time for some midwest news: Richfield Bank banks on elective surgeries as growth niche
Dee DePass
Star Tribune
Monday, June 25, 2001
It took only six minutes of suctioning, slicing and cornea flipping to erase 30 years of poor sight for Kent Erickson.
Twelve weeks after his laser surgery, Erickson sees better than 20/20. He has his doctor to thank, and his bank to pay.
Richfield Bank & Trust financed Erickson's laser eye surgery with an unsecured loan for $2,900. The bank took his application over the phone,
approved the loan request in 90 minutes, and soon issued two checks to his Southdale Eye Clinic surgeon and hospital.
Erickson said he is "thrilled" with the results of the surgery, which will cost him $93 a month for three years. An avid softball player, he now
plays without the contact lenses that faithfully gave him tantrums each time he went to bat.
"I was very, very impressed with the services I got at that bank," said Erickson, 38.
Since getting into elective-surgery financing early last year, Richfield has financed Erickson and 1,000 other customers in a lending niche that
has extended the bank's loan portfolio to people who'd never heard of it before.
The business started with a phone call from the St. Paul Eye Clinic, where patient financing of $3,000 surgeries was a common problem. Soon Southdale Eye Clinic and
the cosmetic surgery outfit WestHealth wanted help too.
In response, Richfield designed its "YourCare" medical loan program for elective eye surgeries, facelifts, lyposuction, breast implants and other costly procedures not
covered by insurance. The loans require no collateral, and applications are available online.
Richfield staffed the program with six employees and began marketing it aggressively.
Today 15 clinics participate, and applications from 2,000 patients are pending. The 1,000 loans the bank has issued average $4,000 each.
Richfield President and COO Lynn Evans said sometimes the bank wins a clinic's business account after agreeing to finance its cosmetic surgery. "Either way, we still
make money on those $4,000 notes."
The bank's executive vice president and chief loan officer, Katie Kelley, sees the new loans -- which carry an interest rate three percentage points above the prime
rate, currently 10 percent -- as a marketing coup.
"About 95 percent of these are people who would not have thought of banking with Richfield. It's an excellent development tool to expand our consumer line."
Bank's assets grow
The bank's assets recently grew 60 percent to $700 million through a new emphasis on commercial real estate lending. Surgical loans promise similar growth in
percentage terms.
For now, Lasik surgery, which corrects near-sightedness by obliterating a few micron-thin layers of cornea, is the bank's most popular surgical loan.
"Lasik eye surgery was first developed in 1997. But a couple of years ago it began to grow suddenly and then it was out of the ballpark," said Dr. Dan Nichols, who is
president of St. Paul Eye and oversees the group's seven clinics. Candidates for Lasik surgery asked about financing daily, but the clinic couldn't provide it.
Lasik "just overwhelmed our practice and became our most common procedure. We went to Richfield Bank and said 'Hey, will you help us out?'"
The ability of these loans to extend Richfield's lending reach was on display June 13 in St. Paul.
It was 2:48 p.m. at the Progressive Eye-Care center, and Dr. Richard Launer peered through a microscope into Deanna Lucius' clamped-open eye.
Lucius' iris flashed large on a screen above as a suction ring made a sound like a dentist's drill as it peeled away a thin slice of Lucius' cornea. Wearing shorts and Nikes,
Lucius lay relaxed on the padded table as the rat-tat-tat-tat-tat of the $500,000 VISX Laser took 28 seconds to correct 20 years of poor sight.
Launer flipped the flap of her cornea back into place, swabbed it down and declared, "looks good." By 2:52 p.m., he'd moved to her right eye.
"I just want to see the alarm clock when I wake," Lucius said before the surgery. She drove two hours from her home in Spooner, Wis., to the Midway clinic. She'd never
heard of Richfield Bank until her doctor back home referred her to Progressive Eye, which referred her to Richfield. She signed the loan papers for the $2,600 procedure
right before going to the operating table.
Seconds after her surgery, Lucius posed for a photo with Dr. Launer.
"It's blurry, but it already seems a bit better than what I saw without my glasses," she said.
Other possible loans
Eye surgeries could be just the beginning. The bank hopes to get bigger in loans for plastic surgery and even bigger-ticket items -- adoptions and infertility treatments
that can cost up to $25,000.
Only a few plastic surgery patients have found their way to Richfield so far. In March, the bank entered into agreements with several new plastic-surgery outfits.
"We want to create more avenues for distribution of bigger-ticket" procedures, Kelley said.
While laser eye surgery costs about $3,000, a facelift can cost three times that amount.
"We have a lot of patients interested in having a procedure done and having no way to pay for it," said WestHealth CEO Mike Smith, who first contacted Richfield
Bank last year.
WestHealth performs 3,000 surgeries a year, including eight breast-implant surgeries each week at about $4,000 per patient. Lyposuction -- WestHealth's most popular
surgery -- for abs, arms, thighs and chins also can run into thousands of dollars.
"Richfield has a very competitive interest rate -- far, far, far below the cost of any of the credit card financing arrangements some of our patients have used at 18 or 19
percent," Smith said.
Others in market
Richfield isn't the only player in the market. But it is one of the most aggressive.
Health Capital Financial Group in Connecticut finances Lasik Plus surgeries in Maple Grove and Edina for First Union and MBNA banks. It currently charges
anywhere from 12.99 to 27.99 percent through MBNA, depending on the customer's credit standing.
Loan processor Odette Torrens says that's justified. "There is no collateral. If a person doesn't pay the car [note], the bank takes the car. If you don't pay for the eye
surgery, we can't say, 'Excuse me, we need your eyes back.'"
But Kelley from Richfield said her bank hasn't seen repayment problems with its surgical loans and is comfortable with its 10 percent rate.
Wells Fargo, which began financing Lasik surgery for HealthPartners patients last year, offers four-year, 12 percent loans. The bank has financed 50 surgeries to date
but has no plans to expand beyond HealthPartners, said Nicollet Avenue branch manager Ken Palmer, who runs the program.
Of course, regardless of the interest rate, debt is debt. And some people have no interest in trying to pay for improvements in their sight or looks on the installment plan.
Asked about a loan for her Lasik eye surgery, Edina resident Sue Jordan said, "Not us!"
She saved for her March surgery through the pretax medical flex plan at her husband's job. She put the $3,000 on her charge card and paid it off as soon as the bill came
in. "You don't spend what you don't have," she said.
Mike Stadther, WestHealth surgical services director in Plymouth, sees a natural barrier that could prevent the market for cosmetic-surgery loans from growing into a
huge business.
"It's a huge privacy thing," he said, adding that only 10 patients there have applied for YourCare loans.
"If I wanted breast implants and didn't want anyone to know, I would just call WestHealth" and pay for it directly.
"Who wants to go talk to a banker about having breast implants or lyposuction? "People on the West Coast talk about their plastic surgery. We're not there yet in
Minnesota."
-- Dee DePass is at ddepass@startribune.com .
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