By Consumers for Quality Care, on February 26, 2018
A recent Kaiser Health News article highlights an increasingly popular trend that is potentially harmful for consumers. In a new scheme designed to ensure hospitals are getting paid for the services they provide, the facilities are pairing with lending services and offering patients loans on the spot.
Private doctors’ offices and surgery centers have long offered such no- or low-interest assistance for services not covered by insurance or to patients paying themselves for an expensive test or procedure with a fixed price. But health experts say promoting bank loans at hospitals and, particularly, in their emergency departments, raises concerns.
Bruce Haupt, the chief executive of loan company ClearBalance, reports that 15-20% of facilities around the country have teamed up with lenders to offer patients loans. He and other experts expect that figure to grow.
The federal government estimated that in 2016 alone consumers spent over $352 billion on out-of-pocket health care. With surprise out-of-network bills, opaque hospital list prices, and high insurance deductibles, it is easy to understand why patients could opt to pay their impending health care costs with a personal loan. However, that solution is far from simple.
For one thing, the cost estimates provided are likely based on a hospital’s list price and may be far higher than the negotiated rate ultimately paid by most insurers. Patients may feel they have no choice but to sign up since they need treatment — and the quick loan process means they may well be signing on for expenses they cannot afford to pay.
Proponents say that the hospital-lender collaborations are a better option for consumers than high-interest credit cards. The loans are not exempt from federal regulations that require transparency on interest rates, payment schedules, and other fees.
However, Max Rukavina, a medical debt expert, says although the loans may seem like a good deal in the moment, they are not good for consumers in the long term.
“If you pay zero percent interest on a seriously inflated charge, it’s not a good deal,” he said.
Health care experts are not clear on how exactly these charges are calculated. They suspect, however, that they may be inflated.
“The hospital potentially is charging the patient the full, what I would call ‘whack rate’ for their care,” said Kathleen Engel, a research professor of law at Boston-based Suffolk University and an expert in consumer credit and mortgage finance. “They try to collect the debt.”
Loan officers will lay out the hospital’s estimate of patient costs and present payment options. It is not unusual for this information to be relayed while patients are still undergoing treatment. Patients can sign up for the loans immediately, often without a credit check. Once discharged, the patient is responsible for repaying the lender, which takes a cut of the collection as a fee.