Bank Loans Signed in the Hospital Leave Patients Vulnerable

Consumers — especially those whose insurance doesn’t cover a particular procedure, doctor or treatment — can end up on the hook for hundreds or thousands of dollars in medical bills. How do you make sure you’re getting a good financing deal? Here’s advice from the experts.

Wait. Don’t commit to a payment plan until you’re home and recovered. A loan may be the best option, but it’s hard to make a good decision under pressure.

Do your research. There are charities that specialize in medical bill payments and other organizations that may help. Nonprofit hospitals are legally required to provide financial assistance for certain low-income patients; figure out if you qualify.

Find out what Medicare, which covers older and disabled people, pays for the same treatment. Don’t pay above that amount.

A patient can then sign up for a loan, often without a credit check. Patients write monthly checks to the lender, which has paid the hospital while keeping a designated percentage of the bill as a fee.

Proponents view financing as a useful alternative to medical credit cards, which can surprise users with high interest rates. The partnerships are tempting for hospitals because they shift the burden of administering monthly payment plans and collection efforts.

Federal law requires lenders to be transparent about the loan terms, a protection that extends to consumers entering such health care arrangements. That means disclosure of interest rates, other fees and the payment schedule.

Even so, said Gerard Anderson, a Johns Hopkins health policy professor and an expert on health care pricing, “it’s an often gentler version of asking you to pay up.”

But an on-the-stretcher sell leaves patients little opportunity for due diligence. “What’s the charge they’re using to determine what’s a reasonable amount to pay?” Anderson said.

Cameron was suspicious of the $830 estimate of her bill because she had good coverage from her job at the University of Arkansas. She and her husband had extensive experience with the health care system and its costs. No one had ever asked her to pay upfront, even when her husband owed tens of thousands for cancer treatment.

“It just felt so uncomfortable to us that they would try to push us through a bank, which is designed to make a profit,” Cameron said.

A Growth Business with Risk of Default

At Florida-based Orlando Health, which works with ClearBalance, loans typically range from $3,000 to $7,000, said Michele Napier, the health system’s chief revenue officer. The highest debt a patient has taken on — about $13,000 — was because of a high-deductible plan, she said.

“All of a sudden a catastrophic event occurs, and to have $13,000 in the bank account is a lot to ask,” she said. “They’re able to spread those payments.”

Low-income patients without insurance likely will not need loans to finance large bills because they should quality for aid from the hospital, or be treated as charity care, Napier said.

It’s a conversation that starts at registration, she added. “If a patient shares with us that they have no resources or limited resources to pay, we will provide information on our financial assistance and other programs including screening them for Medicaid.”

The idea is to foster open conversations about costs and help patients and doctors weigh their options, both financial and medical, said Rick Gundling, a senior vice president at the Healthcare Financial Management Association, a trade group.

“The patient may say, ‘Hey, do I need to do this knee surgery now? Can we wait until I save up, or do I have other options, like physical therapy?’” he said. “The doctor may say … let’s look at other options.”

But the loans can be merely an expedient solution, leading vulnerable patients to sign up to pay far more than they should, said Kathleen Engel, a research professor of law at Boston-based Suffolk University and an expert in consumer credit and mortgage finance.

“The hospital potentially is charging the patient the full, what I would call ‘whack rate,’ for their care,” she said. “They try to collect the debt.”

Because many of these loans come without credit checks or affordability tests, the odds are higher that a loan could be financially unwise, experts warn.

At ClearBalance, loans average about $1,700, Haupt said. In practice, that means some patients are financing $150 bills, while others have them for as large as $50,000.

Default rates vary across the country, with the highest default rates — up to 1 in 5 patients — in places such as Texas and Louisiana. In other areas, closer to 6 or 7 percent of patients ultimately cannot pay off their loans.

“Some of these people are destined to default,” Engel said. “If you have to get a loan for $500 for medical care, that means you are really living at the margins.”

Cameron declined the loan — and chose not to hand over any other form of payment. She wanted to wait until she received her insurance statement.

In the end, the couple owed only $150, the copayment for an ER visit. “It felt to us like it could screw someone over who wasn’t aware about how to work that system,” she said, though she admitted to feeling intimidated as she lay on the stretcher.

She added: “It can be scary, feeling like you owe someone money.”