Taking a financial history: Determining the health of your patient's credit rating

Getting credit information on your patients could help them qualify for assistance and help you figure out who is likely to pay bills. Plenty of companies will sell you the information, but is it worth the ethical and financial price?

By Emily Berry — Posted Jan. 19, 2009

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As patients become responsible for a growing portion of their medical bills, more hospitals and some physicians are adding a financial inquiry to the history they take from new patients.

A typical credit check -- the kind an auto dealer or furniture store would run before lending to a customer -- doesn't directly reflect medical debt, though it will show collection agency accounts that originated as medical bills.

But there are several companies, including the major credit reporting agencies, that want to sell physicians and hospitals information on a patient's creditworthiness by giving a detailed history of payments on credit cards, car loans and mortgages.

"Hospitals and physicians are experiencing more high-deductible plans than ever; more of their revenue has to come directly from the patient, and that's forcing the industry into a more retail model," said Daniel Johnson, president and CEO of SearchAmerica, a firm that provides credit information to hospitals.

The company, based in Maple Grove, Minn., was recently purchased by credit reporting agency Experian for $90 million.

Hospitals and doctors already using programs from SearchAmerica or its competitors usually use the information in two ways.

First, they run a "financial triage" when a patient arrives for treatment or schedules a procedure. The hospital or doctor's office can determine whether the patient likely qualifies for charity programs, self-pay discounts or government assistance. In some cases, the software will prompt whomever is talking to the patient to offer a payment plan, a prompt-pay discount, or other help with the bill.

The second use comes into play when a bill is overdue.

Though the programs differ in how they analyze a person's financial past, generally they separate patients into those more or less likely to pay a bill. That allows hospitals, in particular, which have larger volumes of overdue bills, to focus collection efforts on people likely to pay.

"With co-pays and deductibles, almost every patient is going to owe something, and what we're seeing from balances is [physicians' offices] are really not doing an effective job at collecting the money or making arrangements on the front end," said Earl Winter, chair and CEO of nTelagent, a company that helps hospitals and physicians predict who is likely to be eligible for Medicaid, and who is likely to pay an overdue bill.

What's out there

Though their work isn't common knowledge among consumers yet, several companies are angling for a top spot in the "medical credit check" market.

In late 2007, news swirled around a startup company called Healthcare Analytics that was funded by Tenet Healthcare Corp. and Fair Isaac, the developer of the widely used FICO credit score. Several reports suggested the company was developing a "medFICO." But that never happened, Fair Isaac spokesman Craig Watts said.

"Such a score doesn't exist nor will any product exist with that name," he said.

The company, now called Connance, does offer a product that automates and monitors a hospital's accounts that have been sent to collection agencies, Watts said. Connance said its chief executive was out of the country and unavailable for comment.

But others do offer medical credit scores and financial histories, and that business is brisk.

SearchAmerica has about 500 hospitals as customers and just closed a deal with Kaiser Permanente to supply financial screening software to all of Kaiser's hospitals, Johnson said.

He said the company offers a medical credit score that uses traditional credit history, plus other information that helps confirm a patient's identity and gauges ability to pay.

Though it has so far sold just to hospitals, some of the facilities have shared the program with their employed physicians. SearchAmerica also is preparing to release a "light" version of its program that will be affordable for physicians, he said.

Nashville, Tenn.-based nTelagent uses predictive modeling to analyze data from several sources -- real estate records, census data, public records -- all but credit history. It just added its first physician customers in the last quarter of 2008.

Winter, the company's CEO, doesn't think traditional credit history is the best predictor of whether a patient will pay.

"The thing with a credit report is, it's a history, and that's not the position you're necessarily in today," he said. "It's become abnormal for people not to change jobs quite a bit." Winter said he also prefers to work with market data instead of credit histories to avoid any question of illegality.

It is legal to get a credit score or use credit information in many if not all cases, even though the prospective patient is not getting a loan, said Rebecca Kuehn, assistant director of the division of privacy and identity protection at the Federal Trade Commission, which regulates credit reporting.

Doctors and hospitals are legally allowed to run credit checks if they are poised to offer a payment plan or other "deferred payment" of a bill, she said.

Such an arrangement qualifies as an offer of credit, and so creates a "permissible use" of a credit check under the federal Fair Credit Reporting Act, Kuehn said.

Many, but not all, of the "medical credit check" systems are based on credit histories gathered by the three large credit reporting agencies: Equifax, Experian and TransUnion.

The companies are among those selling programs to doctors and hospitals that go beyond just a credit report or score -- they might look at income, home value and a person's history of paying medical bills.

That detailed information and analysis is above and beyond what a doctor or hospital could access by simply running a credit check like the ones a department store or bank would.

Because the "medical credit-check" products are all priced according to size of a practice or hospital or volume of patients, none of the firms would say what it charges. The fact that hospitals have so far been the primary customers suggests the services aren't cheap -- but doctors are beginning to buy them.

The all-important return on investment has been convincing for customers -- as much as $11 for every $1 spent on his company's products, SearchAmerica's Johnson claimed.

But practice management consultant Jeff Denning, of Practice Performance Management, based in La Jolla, Calif., said that while creditworthiness is a legitimate criterion for accepting a patient, he was skeptical physicians would want to screen patients using financial analysis.

Particularly because of the cost and time, he said, it probably wouldn't help primary care doctors much.

"Uninsured patients can usually pay for what most family physicians have to offer," Denning said.

Many doctors would be particularly squeamish about "an economic triage" to decide whom to treat, said Keith Borglum, a practice management consultant with Professional Management and Marketing, based in Santa Rosa, Calif.

American Medical Association policy doesn't specifically address credit reporting, but its ethics guidelines prohibit using patients' ability to pay to decide whether to treat them.

Denning said most medical offices could improve their collection efforts without having to check patients' credit history. His advice is to try to collect from anyone and everyone with a late bill, he said.

"Don't try to guess who will pay because you'll be wrong," he said. "For most medical bills, using the same follow-up procedure for all of them makes sense. I don't want employees making any decisions in that process. I want the policy to tell them what to do every day."

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Screening for financial health

As the burden of uncompensated care mounts, some companies are offering credit histories to help physicians and hospitals screen prospective patients and collect overdue bills. The AMA doesn't have a policy about checking a patient's credit history. But the Association does address how a patient's presumed ability to pay factors into decisions on whether to treat:

"The AMA believes that the medical profession will see to it that every person receives the best available medical care regardless of his ability to pay, and it further believes that the profession will render that care according to the system it believes is in the public interest; and that it will not be a willing party to implementing any system which we believe to be detrimental to the public welfare. ...

"Physicians, as professionals and members of society, should work to assure access to adequate health care. Accordingly, physicians have an obligation to share in providing charity care, but not to the degree that would seriously compromise the care provided to existing patients. When deciding whether to take on a new patient, physicians should consider the individual's need for medical service along with the needs of their current patients. Greater medical necessity of a service engenders a stronger obligation to treat."

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Who's in debt?

Americans of all income levels are carrying medical debt and struggling to pay medical bills on time. By annual income, these are the percentage of adults ages 19 to 64 with accrued medical debt or medical bill problems, which is defined as people having problems or an inability to pay, being contacted by a collection agency or significantly changing their way of life to pay medical bills.

2005 2007
Low income (less than $20,000) 43% 53%
Moderate income ($20,000-$39,999) 48% 56%
Middle income ($40,000-$59,999) 32% 39%
High income ($60,000 or more) 20% 25%
All income levels 34% 41%

Source: Commonwealth Fund Biennial Health Insurance Surveys (link)

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More in debt

The number of Americans ages 19 to 64 experiencing problems paying medical bills rose five percentage points in a two-year period.

Adults experiencing problem
In the past 12 months 2005 2007
Had problems paying or were unable to pay medical bills 39 million (23%) 48 million (27%)
Contacted by collection agency for unpaid medical bills 22 million (13%) 28 million (16%)
Had to change way of life to pay bills 24 million (14%) 32 million (18%)
Any of the above 48 million (28%) 59 million (33%)

Source: Commonwealth Fund Biennial Health Insurance Surveys (link)

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