Worries About Healthcare Credit Scores

Credit scoring is intended to help hospitals plan debt collection, but could it be used to deny people care?

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You arrive at the hospital for a medical procedure. But instead of checking you in, the person at the front desk says, "Sorry, your healthcare credit score is too low. No healthcare for you!" That's the alarming specter raised by recent reports of the scoring systems hospitals and other providers use to figure out whether patients have the resources to pay and are likely to do so.

Could it happen? Consumer advocates say they've never heard of people being turned away because of their score, and hospitals are adamant that it would never occur. But consumers may still worry, and who can blame them? Regular credit scores are used to approve a car loan or a mortgage. If a bad score can get you turned down in those instances, why not for healthcare?

And hospitals and other medical providers are having a tougher time getting paid these days, as consumers become responsible for picking up more of the tab. In 2006, "uncompensated care"—mostly either charity care or unpaid patient bills—cost hospitals $31.2 billion, according to the American Hospital Association. "There's a growing number of individuals that are looking at copays or have a deductible," says Tim Hurley, a spokesperson for Healthcare Analytics, which has brought healthcare credit scoring into the spotlight lately with news that Fair Isaac, the developer of the well-known, traditional FICO credit score, has invested $10 million in the company to develop a scoring system. "That's a big problem." Testing of its system may begin in some hospitals this summer. But scoring systems aren't new: Credit bureau Equifax has a "payment predictor" that it has been offering to medical providers for five years. SearchAmerica has been in the healthcare credit scoring business for more than twice that long and has more than 900 hospital clients.

Healthcare credit scoring systems are intended to help hospitals sort patients into different buckets based on likelihood and ability to pay, so they can target their collection efforts accordingly. Equifax, for example, estimates that patients with scores of 908 and up are likely to pay their bills without any extra encouragement. This constitutes about 35 percent of patients. A quarter of patients, those with scores from 725 up to 908, will probably pay but may need a little nudge from collectors. Then there's the bottom 40 percent of patients, whose healthcare credit score indicates they're less likely or able to pay; collection efforts with this group may not be worthwhile.

Precisely how the scores are arrived at is closely guarded information. According to the Equifax marketing materials, the credit score is "a statistically derived equation that mathematically, objectively, and consistently analyzes the patient's credit file to identify credit characteristics which have been statistically found to predict a specific type of behavior." As I said, it's a secret.

Healthcare credit scoring systems can also be used to help hospitals identify patients who may qualify for charity care or may be eligible for financial assistance. This is the scoring function that hospitals would prefer people to focus on, and to the extent that a healthcare credit score alerts hospitals to needy patients, that's a plus, say experts.

The scores are never, ever meant to be used to deny care to patients, says Alicia Mitchell, a spokesperson for the American Hospital Association. "We treat first and ask questions later."

Consumer advocates say they're not so concerned that patients will actually be denied care because of their credit score. What does worry them, though, is that the hospitals may try to use the information they glean to pressure the patient. For example, Mark Rukavina, executive director of the Access Project, an advocacy group that works with people who have medical debt, says he has heard of situations in which a healthcare provider will ask a patient very particular questions: "I see your credit card has a credit limit of $10,000, and you've only charged $7,500. Can't you just charge this bill?" That's unfair to patients, he says. "Just because I have a credit limit that's far greater than my balance doesn't mean I want to get anywhere near it or that I have the resources to pay it back," he says.

As for the claim that hospitals use the information in a healthcare credit score to determine eligibility for charity care, consumer advocates are skeptical that the score would provide the information a hospital needs to make that decision. Eligibility is generally determined by income, and that doesn't show up on a credit report. When asked how they get income information, credit scoring companies say "we have ways." "The companies probably have some assumptions that they make based on what your repayment history is," says Chi Chi Wu, staff attorney for the National Consumer Law Center. "But that may not be accurate."

There's much that's unknown about these scores and how they're used in healthcare settings. If you can shed any light on the subject, please get in touch.