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Hospitals' Bid for Quick Cash Leaves Patients Worse Off

Medical credit cards shift the burden of medical financing onto
unsuspecting consumers who could have qualified for other means of
payment.

In early May, the American Association of Healthcare Administration
Management (AAHAM), a trade association for the revenue cycle management
industry, descended upon Washington for its annual lobbying push.
Revenue cycle management (RCM) is the intermediary business process of
collecting payments and managing medical billing, which involves
liaising between insurance providers, hospitals, patients, and
government programs like Medicare and Medicaid.

Hospital systems and insurance companies are all trying to get paid as
quickly as possible, which is entirely natural. But in the case of
health care, the sheer administrative bloat and red tape one needs to go
through to get paid distracts medical providers from their essential
function: treating patients.

The drive to streamline payments and avoid insolvency has created an
urge to financialize the medical billing process. That's where revenue
cycle managers enter the scene. Hospitals are increasingly interested in
outsourcing
<[link removed]>
the process entirely to a third party, even as they report frustrations
working with outsiders.

One of the biggest players in the RCM space is the company R1 RCM,
formerly known as Accretive Health. Founded in 2003, R1 has expanded its
reach across the health care sector, even as it has racked up
investigations and scorn from regulators over patient data protection
<[link removed]>
and debt collection
<[link removed]>
practices.

In recent years, R1 RCM has taken over revenue cycle management from
nonprofit hospital systems. Among them are District Medical Group's
chain of more than 650 providers
<[link removed]>
and Ascension's
<[link removed]>
more than 3,000 locations, most concentrated through the Midwest. Though
these billing companies are primarily concerned with getting hospitals
paid by insurance, those practices can also filter down to patients.

Ahead of AAHAM's Washington lobbying day
<[link removed]>,
Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra spoke
to the organization about concerns over the consequences of medical debt
from the patient perspective. He explained how the billing and insurance
complexities of providing health care can come at the expense of patient
welfare. But at the end of his speech, Chopra homed in on how medical
providers are encouraging patients to finance their procedures with
something called "medical credit cards." He warned
<[link removed]>
AAHAM of "the long-term effects of financialization on medical
payments," calling the practice "harmful to the entire healthcare
ecosystem."

[link removed]

The quickest way to pay an obligation is to put it on credit. Medical
credit cards are not a new form of financing, but in the past they have
typically been reserved for elective surgeries and dental procedures.
Today, their usage has expanded to basic medical treatment and emergency
services. They're great for hospitals because the parent company for
the credit card is paying the hospital up front for the cost of a
procedure.

The problem is that these alternative forms of credit are deceptive from
the start. Patricia Kelmar, senior director for health care campaigns at
the Public Interest Research Group (PIRG), explained to the

**Prospect** that when consumers are talking finances with a medical
provider there's an implicit trust. The last thing someone expects is
their doctor upselling them a credit card.

For patients, a medical credit card can be appealing. For example, one
of the most popular medical credit cards is CareCredit, a subsidiary of
Synchrony Financial. It offers a deferred interest payment plan,
sometimes promoted as "No interest if paid within [x] months." But if a
payment is missed or a patient doesn't pay off the balance within the
timeframe, they're liable for

**all** of the interest accrued from the beginning of the loan.

Regulators have taken notice. Earlier this month, the CFPB issued a
report titled "Medical Credit Cards and Financing Plans
<[link removed]>."
In the report, it said that medical credit cards "are typically more
expensive than other forms of payment due to the higher interest
payments." From 2018 to 2020, consumers paid $1 billion in deferred
interest payments for health care charges. And according to the CFPB's
analysis, 20 percent of consumers incurred interest on their deferred
interest plans. Those with a lower credit score failed to pay at an even
higher rate.

Those stories seem to follow the items in the CFPB's consumer
complaint database
<[link removed]>.
More than 200 entries describe consumers getting smacked with
retroactive interest payments or being misled about the terms of the
loans they were taking out. One particular complaint described
<[link removed]>
paying interest on top of interest, creating a stacking effect. Some
consumers are set up for failure. A customer who used a CareCredit card
for a veterinary hospital bill warned others in a subreddit
<[link removed]>
that the minimum payment for a 12-month auto-pay plan added up to less
than the original loan's total, meaning there would be payments left
over even after the loan was paid "in full."

This isn't the first time CareCredit's actions have come under
scrutiny from regulators. Back in 2013, the CFPB ordered CareCredit's
former parent company, GE Capital Retail Bank, to refund customers $34.1
million
<[link removed]>
for deceptively enrolling them in medical credit cards.

A report published in April
<[link removed]>
from the National Consumer Law Center based upon surveys from consumer
advocates provides a look into the sorts of customers who rely on
medical credit cards. Almost half of those interviewed said their
clients' medical bills were submitted for loans without cross-checking
their medical insurance, meaning that there's a chance that the
expenses could have been covered by other means. One attorney said:
"Medicaid members have paid for services on medical credit cards that
Medicaid would have paid had the provider submitted a prior
authorization request and/or claim." Another attorney said: "By getting
paid directly from the finance company, providers avoid insurer scrutiny
of costs and billing practices."

That part is key in this resurgence of medical credit cards. Kelmar
noted that over a dozen states
<[link removed]>
have started to implement protections on medical debt, and the CFPB has
instituted changes to credit reporting
<[link removed]>
of medical debt. Add to that the No Surprises Act
<[link removed]>, which limited so-called "surprise
billing" for out-of-network services, and medical debt is far less
harmful for consumers than it was a decade ago.

Elisabeth Benjamin, vice president of health initiatives for the
Community Service Society of New York, described short-term victories
that the state had passed
<[link removed]>
on consumer medical debt. One of those bills barred medical providers
from garnishing patients' wages and placing liens on their homes to
collect on medical bills. The other required hospitals and other
providers to disclose fees in advance to patients. But these protections
are forfeited when medical debt is discharged onto a medical credit card
like CareCredit.

By having financial firms front a loan for patients, the financial
burden shifts from originally being between providers, insurance, and
patients, to now being managed between patients and an outside player
like Synchrony Financial. Functionally, hospitals are outsourcing
financial liability for immediate cash flow, and circumventing consumer
protections all in the same move.

"Each year we help around 30,000 New Yorkers and save them about $40
million in health care costs," Benjamin said. "One of the things that
we've seen in the last couple of years is a 64 percent increase in
medical debt cases ... It just feels like whack-a-mole on the medical
debt issue."

~ JAROD FACUNDO, WRITING FELLOW

Follow Jarod Facundo on Twitter <[link removed]>

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