Health credit cards under scrutiny by N.Y. attorney general

Andrew Cuomo says "kickbacks" to physicians and other medical professionals only aggravate consumers' economic burdens.

By Emily Berry — Posted Aug. 23, 2010

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New York Attorney General Andrew Cuomo has taken on what he sees as injustice and fraud by health insurers in high-profile investigations. But his office now has turned its eye on consumer credit companies, along with physicians and others, that he says have victimized patients by persuading them to use health care credit cards.

Consumer credit card companies have been offering physicians and other health professionals "kickbacks" in exchange for pushing costly financing on patients interested in elective procedures, Cuomo said.

"Health care debt is the No. 1 cause of individual bankruptcy, and this scheme is contributing to the economic burden being felt by consumers," he said in a news release.

Health credit cards are offered by a medical practice as a means of giving patients an alternative way to pay bills. They are backed by major lenders, and have been pitched to medical professionals as a strategy for improving collections from patients.

Cuomo's office announced a series of subpoenas and an investigation into GE Money's CareCredit card Aug. 4. Days later, his office said the inquiry was expanded to include health credit cards offered by JPMorgan Chase and Citigroup.

Hundreds of consumer complaints prompted the investigation, according to Cuomo's office. Prosecutors suspect that patients have in many cases been pushed into high-interest debt to pay for health care, his office said.

They claim credit card companies use deceptive sales tactics, including zero-interest introductory periods, to lure patients, then jack up interest rates retroactively to 25% or higher if the balance isn't paid in full within a promotional period.

CareCredit claims about 7 million account holders, and 130,000 participating practices, including medical doctors and other health professionals who offer mostly elective procedures, such as LASIK, cosmetic surgery and bariatric surgery. From the beginning, GE Money said it was not concentrating its marketing on primary care physicians.

CareCredit spokesman Stephen White and Citigroup spokesman Samuel Wang said their companies will cooperate with the investigation. JPMorgan Chase declined to comment.

The card companies charged a fee to doctors' offices that offered the card, then discounted the fee if a certain number of patients signed up, according to the news release. The practices were paid for services within 48 hours, which created another incentive for them to recommend the cards, Cuomo said.

"Patients are being misled into paying for services they never received by the people they should be able to trust the most -- their doctors," he said in the release. "Doctors are supposed to represent patients, not credit card companies, no matter what kind of kickbacks they are offered."

Cuomo sent letters to several professional organizations asking them to explain why CareCredit lists them as endorsing its services. He also listed individual practices and organizations -- mostly dental, chiropractic and medispa groups -- that took the card as being subpoenaed for his investigation.

The American Dental Assn. released a statement saying in part, "First and foremost, dentists are health care professionals, and they want to help their patients receive the treatment they need and want." But the statement also said patients should understand the terms of any financing agreement.

The American College of Eye Surgeons was among the organizations Cuomo contacted. Executive Director Gilbert Wheeler said the group doesn't endorse any products and never endorsed CareCredit, but that members receive a discount on the transaction fee charged to businesses that accept CareCredit.

The Cuomo investigation is not the only state-level inquiry involving CareCredit. Minnesota Attorney General Lori Swanson sued two chiropractic practices in 2009 alleging that patients were signed up for CareCredit cards unbeknownst to them, with inflated income levels on their applications, then stuck with balances that came with high interest rates to pay for bogus, unnecessary treatment plans.

In 2007, Cuomo's office pushed the largest health insurers in New York to pledge to disentangle cost profiles from so-called quality ratings, which he said were too often presented as based on clinical sores when they were in fact cost-based.

The next year, he sued many of those insurers over their out-of-network reimbursement system. He said most of them were using a closed loop system to artificially depress those reimbursement levels, feeding reimbursement data into a database held by the UnitedHealth Group subsidiary Ingenix.

The American Medical Association has sued insurers over the same issue. Those lawsuits, along with Cuomo's, have been settled, with hundreds of millions of dollars in restitution for physicians and an agreement by insurers to establish a system for determining appropriate out-of-network pay.

Cuomo, a son of former New York Gov. Mario Cuomo, is a Democratic candidate for governor.

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