Medical Bills for the Uninsured Turned Over to Credit Card Companies and Banks

Long gone are the days when the poorly insured, or uninsured, could make a monthly interest free medical payment to physicians, clinics, or hospitals. Unpaid medical bills are now being turned into consumer debt, with interest rates as high as 27% on past due bills, according to an article in BusinessWeek. Financial giants such as GE, USB, Capital One, and CitiGroup buy the debt at a discount, and then recover the entire amount through huge monthly payments, with large interest rates. Sometimes the newly financed debt increases monthly payments four-fold, creating an extreme financial burden for those on a severely limited income.

Companies such as CompleteCare, and HELP Financial believe it is a way to make the health care business run more efficiently. CompleteCare embraces the concept that "...patients become consumers the minute they walk out of your facility." It currently works with 40 hospitals and over 400 doctors throughout the United States. Hot Spring County Medical Center in Malvern, Arkansas, turned to CompleteCare, hoping that patients would pay more quickly if they were charged interest. "...It would become like a credit card," stated their chief financial officer, Shelia Williams. However, because of numerous complaints, they have decided that patients using CompleteCare would no longer be charged interest.

The Plymouth, Michigan firm, HELP (Hospital Expense Loan Program) has financed close to $300 million in medical bills at 100 hospitals across the country. They purchase the debt at a discounted rate, and then charge patients interest rates of 10% to 18% over a one to five year period. HELP Vice President, Steve Posa, commented, "The motivation for the hospital is really to keep them in the health-care business, and out of the banking business." Satilla Regional Medical Center in Waycross, Georgia has used the services of HELP to reduce outstanding debt levels of the hospital's many uninsured patients. Satilla's Patient Financial Services Manager, Barbara G. Albert, explained their decision this way, "When you go to the dentist or the vet, you know you have to pay. If you go to the hospital, why should it be different?" (It is up to individual hospitals to decide on interest rates, according to Posa.)

Medical administrators have lost untold revenue on nonpaying patients. Even when they hire collection specialists, they rarely recover more than 10 cents on the dollar owed. As a result, they are seeking more reliable avenues of help, such as banks, credit card companies, and private equity firms. Many non-profit hospitals are dealing with a higher percentage of uninsured patients, and don't have sophisticated collection departments. Todd Cole, Director of Patient Accounting, at TriHealth in Cincinnati, remarked, "Hospitals can't just be an interest free finance vehicle. The world of $5.00 sent to the hospital, and they will never send me to collections, never sue me-that world has gone away." He said that they sell their delinquent patient accounts at a large discount, to companies that specialize in collecting consumer debt. Justifying that position he adds, "Hospitals need their cash. It is the lifeblood that supports the doctors, the nurses."

Patients who lack private insurance, but do not qualify for government benefits or charitable programs suffer the most. Medical debt is one of the leading causes of personal bankruptcy. Many patients are not reading the fine print on the contracts that they sign with their medical providers, and are consequently shocked to find that they have agreed to have their unpaid medical service debts financed.

According to the article in BusinessWeek, lawmakers and the IRS are looking into whether non-profit hospitals are providing enough free care to the uninsured, to justify the more than $50 billion allotted in annual tax breaks. Some of these newer financing arrangements may render the medical establishments ineligible for tax-exempt status. Senator Charles Grassley (R-Iowa), of the Senate Finance Committee, warns, "I'm very troubled by what we're seeing with some non-profit hospitals' cozying up to banks, debt buyers, and credit card companies over patients' medical bills." (The American Hospital Association has emphatically stated that non-profits provide more than enough community service to warrant their tax benefits.)

Chris McLean, Chief Financial Officer of Methodist Le Bonheur Healthcare, is not convinced concerning the new financing, and offers a better idea. A majority of his hospitals (five out of seven) serve the poorer population in Memphis. His solution is to give uninsured patients a 50% discount, payable over 5 years, and interest free. Some debts are just written off. Of the other two remaining hospitals, one serves more financially secure clients, and the other is the city's only children's hospital. These two hospitals subsidize the others. McLean offers, "We get a lot of tax breaks, and for that we should produce some community benefit. If we heal somebody medically, but we break them financially, have we really done what is in the best interest of the patient?"

Many Americans already believe that we are in the middle of a health care crisis. Angry at exorbitant prices, they are lobbying for government sponsored universal health care. However, that has not been a good solution in many countries that offer it. Patients often have to wait months to get an appointment, and even longer to get necessary surgery. The quality of health care has decreased, because the doctors have no financial incentive to offer better treatment.

Let's not forget that many materialistic, young Americans would rather purchase a plasma TV or a new Corvette, than medical insurance. Insurance companies put the squeeze on hospitals and medical providers, to give them lower charges. Medicare often pays hospitals less than their costs, and the hospitals then have to raise their prices. (And raise their prices they do!) Have you looked at the cost of bandages or a Tylenol on hospital bills lately? Lack of preventative care is also a major problem in health care costs. Many people use their local emergency rooms for services that a general practitioner should provide, and this drives medical costs up.

Hospitals often charge their self pay customers far more than they would have received, if the patient had been insured. More patients would have health insurance, if they were able to purchase it at a reasonable price. Also patients with pre-existing conditions are often turned down for medical coverage. Many employers (particularly, small business owners) often can't afford to offer company insurance, because the rates are so steep.

If anyone has a true solution, now is the time to speak up!

Source: http://www.businessweek.com/magazine/content/07_49/b4061001.htm