Hospitals are increasingly turning to credit checks to determine both an individual's ability to pay and to mine data on their patients' population health.
"The new self-pay accounts receivable is rising at an uncontrollable rate, creating an accounts receivable headache," said Jordan Levitt, partner and cofounder of Payor Logic, a vendor that offers hospitals credit checks on patients.
"They owe money, hospitals need a way to assess risk," Levitt said.
Starting in 2006, the practice started to take off, Levitt said. The Affordable Care Act fueled the need as the law created a large, underinsured population.
"Health insurance is expensive, what used to be a small part of somebody's income and has become a large part," Levitt said. "What was 5 percent is now 15 to 30 percent of gross income going to healthcare."
Attorney David Esquivel with Bass, Berry & Sims in Nashville, specializes in credit reporting, often being employed by hospitals to interpret reports and to review contracts with vendors. Requests for the latter are increasing, he said.
Esquivel said he's seen credit reports used on both the front end and back end of the revenue cycle operation.
On the front end, a hospital can determine ability to pay.
"There's a lot more private pay, and sometimes coverage under insurance is limited," he said.
"That's the purpose of getting one of these reports: whether you provide service, under what terms, or need more money up front."
Esquivel said, "I've also seen it on the back end, trying to collect money owed and for debt collection."
A useful tool of the credit report is determining whether to pursue an unpaid bill, Esquivel said. A credit report can show if the patient has a long history of not paying his or her bills, or whether good credit history indicates payment is worth pursuing.
"Where I've seen it used is whether it's worth your while to try to collect," he said. "We have clients who offer a product to hospitals. They do an analysis, credit history, the amount owed, a hospital's charity policy. They advise the hospital: put money into collections or this is somebody it's not worth doing that, you might as well write it off as charity care."
While a standard credit report gives information on whether credit card debt, a mortgage, a car loan, is paid on time, the other reports can also take a deeper dive into lifestyle choices, such as frequent pizza purchases, cigarette buying habits, a fall-off in buying prescription drug refills or a lack of vehicle registration, which could indicate a problem in getting to appointments.
Esquivel said he more often deals with the traditional credit report, but that he's heard of the other kind of report being used.
"I've heard services that will look at social media presence, have people running analytics, figuring out from Facebook, what are your interests? Are you a smoker? What sort of websites do you visit? Your purchasing history," Esquivel said. "This is the issue of big data, the data available on each of us now. It paints a specific picture of who you are."
Credit checks are not used to deny non-elective treatment, both experts said.
"They have to treat you," Levitt said.
The cost of a report is an estimated 50 cents to $1.25 for each inquiry, he said.
In a month, that spend can add up to $10,000 to $15,000, which Levitt believes can be made up in increased cash flow.
"Everybody's trying to figure out how to reduce that cost of care," he said. "Does 50, 70 cents make the cut? There is no other way to find out that information."
Patient privacy concerns are the same as for health records, said Levitt and Esquivel.
"HIPAA (Health Insurance Portability and Accountability Act) governs us," Levitt said. "The Fair Credit Reporting Act is about the same as handling medical record data."
If a hospital uses a vendor, the provider is taking little risk, he said.
There are still things hospitals need to have in place, Esquivel said.
"It's important when they receive credit reports to have safeguards in place that they are being used for the right purpose."
Esquivel also agreed that hospitals must treat credit reports with the same respect for privacy as health records.
A best practice is to get permission for the credit check on the admission form, Esquivel said.
Patients also give express permission if they give information indicating they can't pay up front and are seeking credit, he said.
"The credit system is regarded as pro-consumer," Esquivel said. "This is a voluntary system."
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Protections for the consumer increased after the financial crisis of 2008. The Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Credit Protection Bureau, which enforces consumer protection laws and regulates how companies use credit reporting and collection services.
"When a vendor provides credit information, there's a well developed body of federal law and regulations," Esquivel said. "Industries that traditionally relied on credit are used to this, but it's new to healthcare."
One warning comes from a 2012 case, in which the Minnesota Attorney General pursued alleged privacy breaches and unseemly collection practices against Accretive Health, a medical debt collector and revenue cycle management service. Accretive agreed to pay $2.5 million to resolve allegations that it used questionable tactics to collect payment for Minnesota hospitals.