How banks and hospitals are cashing in when patients can’t pay for health care

https://www.npr.org/sections/health-shots/2022/11/17/1136201685/medical-debt-high-interest-credit-cards-hospitals-profit

Patients at North Carolina-based Atrium Health get what looks like an enticing pitch when they go to the nonprofit hospital system’s website: a payment plan from lender AccessOne. The plans offer “easy ways to make monthly payments” on medical bills, the website says. You don’t need good credit to get a loan. Everyone is approved. Nothing is reported to credit agencies.

In Minnesota, Allina Health encourages its patients to sign up for an account with MedCredit Financial Services to “consolidate your health expenses.” In Southern California, Chino Valley Medical Center, part of the Prime Healthcare chain, touts “promotional financing options with the CareCredit credit card to help you get the care you need, when you need it.”

As Americans are overwhelmed with medical bills, patient financing is now a multibillion-dollar business, with private equity and big banks lined up to cash in when patients and their families can’t pay for care. By one estimate from research firm IBISWorld, profit margins top 29% in the patient financing industry, seven times what is considered a solid hospital margin.

Hospitals and other providers, which historically put their patients in interest-free payment plans, have welcomed the financing, signing contracts with lenders and enrolling patients in financing plans with rosy promises about convenient bills and easy payments.

For patients, the payment plans often mean something more ominous: yet more debt.

Millions of people are paying interest on these plans, on top of what they owe for medical or dental care, an investigation by KHN and NPR shows. Even with lower rates than a traditional credit card, the interest can add hundreds, even thousands of dollars to medical bills and ratchet up financial strains when patients are most vulnerable.

Robin Milcowitz, a Florida woman who found herself enrolled in an AccessOne loan at a Tampa hospital in 2018 after having a hysterectomy for ovarian cancer, said she was appalled by the financing arrangements.

“Hospitals have found yet another way to monetize our illnesses and our need for medical help,” said Milcowitz, a graphic designer. She was charged 11.5% interest — almost three times what she paid for a separate bank loan. “It’s immoral,” she said.

MedCredit’s loans to Allina patients come with 8% interest. Patients enrolled in a CareCredit card from Synchrony, the nation’s leading medical lender, face a nearly 27% interest rate if they fail to pay off their loan during a zero-interest promotional period. The high rate hits about 1 in 5 borrowers, according to the company.

For many patients, financing arrangements can be confusing, resulting in missed payments or higher interest rates than they anticipated. The loans can also deepen inequalities. Lower-income patients without the means to make large monthly payments can face higher interest rates, while wealthier patients able to shoulder bigger monthly bills can secure lower rates.

More fundamentally, pushing people into loans that threaten their financial health runs against medical providers’ first obligation to not harm their patients, said patient advocate Mark Rukavina, program director at the nonprofit Community Catalyst.

“We’re dealing with sick people, scared people, vulnerable people,” Rukavina said. “Dangling a financial services product in front of them when they’re concerned about their care doesn’t seem appropriate.”

Debt upon debt for patients, as finance firms get a cut of payments

Nationwide, about 50 million people — or 1 in 5 adults — are on a financing plan to pay off a medical or dental bill, according to a KFF poll conducted for this project. About a quarter of those borrowers are paying interest, the poll found.

Increasingly, those interest payments are going to financing companies that promise hospitals they will collect more of their medical bills in exchange for a cut.

Hospital officials defend these arrangements, citing the need to offset the cost of offering financing options to patients. Alan Wolf, a spokesperson for the University of North Carolina’s hospital system, said that the system, which reported $5.8 billion in patient revenue last year, had a “responsibility to remain financially stable to assure we can provide care to all regardless of ability to pay.” UNC Health, as it is known, has contracted since 2019 with AccessOne, a private equity-backed company that finances loans for scores of hospital systems across the country.

This partnership has had a substantial impact on patient debt, according to a KHN analysis of billing and contracting records obtained through public records requests.

Most patients in 2019 were in no-interest payment plans

UNC Health, which as a public university system touts its commitment “to serve the people of North Carolina,” had long offered payment plans without interest. And when AccessOne took over the loans in September 2019, most patients were in no-interest plans.

That has steadily shifted as new patients enrolled in one of AccessOne’s plans, several of which have variable interest rates that now charge 13%.

In February 2020, records show, just 9% of UNC patients in an AccessOne plan were in a loan with the highest interest rate. Two years later, 46% were in such a plan. Overall, at any given time more than 100,000 UNC Health patients finance through AccessOne.

The interest can pile on debt. Someone with a $7,000 hospital bill, for example, who enrolls in a five-year financing plan at 13% interest will pay at least $2,500 more to settle that debt.

How a short-term solution ‘leads to longer-term problems’

Rukavina, the patient advocate, said adding this burden on patients makes little sense when medical debt is already creating so much hardship. “It may seem like a short-term solution, but it leads to longer-term problems,” he said. Health care debt has forced millions of Americans to cut back on food, give up their homes, and make other sacrifices, KHN found.

UNC Health disavowed responsibility for the additional debt, saying patients signed up for the higher-interest loans. “Any payment plans above zero-interest terms/conditions in place with AccessOne are in place at the request of the patient,” Wolf said in an email. UNC Health would only provide answers to written questions.

UNC Health’s patients aren’t the only ones getting routed into financing plans that require substantial interest payments.

At Atrium Health, a nonprofit system with roots as Charlotte’s public hospital that reported more than $7.5 billion in revenues last year, as many as half of patients enrolled in an AccessOne loan were in one of the company’s highest-interest plans, according to 2021 billing records analyzed by KHN.

At AU Health, Georgia’s main public university hospital system, billing records obtained by KHN show that two-thirds of patients on an AccessOne plan were paying the highest interest rate as of January.

A finance firm calls such loans ’empathetic patient financing’

AccessOne chief executive Mark Spinner, who in an interview called his firm a “compassionate, empathetic patient financing company,” said the range of interest rates gives patients and medical systems valuable options. “By offering AccessOne, you’re creating a much safer, more mission-aligned way for consumers to pay and help them stay out of medical debt,” he said. “It’s an alternative to lawsuits, legal action, and things like that.”

AccessOne, which doesn’t buy patient debt from hospitals, doesn’t run credit checks on patients to qualify them for loans. Nor will the company report patients who default to credit bureaus. The company also frequently markets the availability of zero-interest loans.

Some patients do qualify for no-interest plans, particularly if they have very low incomes. But the loans aren’t always as generous as company and hospital officials say.

AccessOne borrowers who miss payments can have their accounts returned to the hospital, which can sue them, report them to credit bureaus, or subject them to other collection actions. UNC Health refers unpaid bills to the state revenue department, which can garnish patients’ tax refunds. Atrium’s collections policy allows the hospital system to sue patients.

Because AccessOne borrowers can get low interest rates by making larger monthly payments, this financing system can also deepen inequalities. Someone who can pay $292 a month on a $7,000 hospital bill, for example, could qualify for a two-year, interest-free plan. But a patient who can pay only $159 a month would have to take a five-year plan with 13% interest, according to AccessOne.

“I see wealthier families benefiting,” said one former AccessOne employee, who asked not to be identified because she still works in the financing industry. “Lower-income families that have hardship are likely to end up with a higher overall balance due to the interest.”

Andy Talford, who oversees patient financial services at Moffitt Cancer Center in Tampa, said the hospital contracted with AccessOne to make it easier for patients to manage their medical bills. “Someone out there is helping them keep track of it,” he said.

But patients can get tripped up by the complexities of managing these plans, consumer advocates say. That’s what happened to Milcowitz, the graphic designer in Florida.

Milcowitz, 51, had set up a no-interest payment plan with Moffitt to pay off $3,000 she owed for her hysterectomy in 2017. When the medical center switched her account to AccessOne, however, she began receiving late notices, even as she kept making payments.

Only later did she figure out that AccessOne had set up two accounts, one for the cancer surgery and another for medical appointments. Her payments had been applied only to the surgery account, leaving the other past-due. She then got hit with higher interest rates. “It’s crazy,” she said.

Lenders see a growing business opportunity

While financing plans may mean more headaches and more debt for patients, they’re proving profitable for lenders.

That’s drawn the interest of private equity firms, which have bought several patient financing companies in recent years. Since 2017, AccessOne’s majority owner has been private equity investor Frontier Capital.

Synchrony, which historically marketed its CareCredit cards in patient waiting rooms, is now also inking deals with medical systems to enroll patients in loans when they go online to pay bills.

“They’re like pilot fish eating off the back of the shark,” said Jonathan Bush, a founder of Athenahealth, a health technology company that has developed electronic medical records and billing systems.

As patient bills skyrocket, hospitals face mounting pressure to collect more, which can make financing arrangements seem appealing, industry experts say. But as health systems go into business with lenders, many are reluctant to share details. Only a handful of hospitals contacted by KHN agreed to be interviewed about their contracts and what they mean for patients.

Several public systems, including Atrium and UNC Health, disclosed information only after KHN submitted public records requests. Even then, the two systems redacted key details, including how much they pay AccessOne.

AU Health, which did not redact its contract, pays AccessOne a 6% “servicing fee” on each patient loan the company administers. But like Atrium and UNC Health, AU Health refused to provide any on-the-record interviews.

Other hospital systems were even less transparent. Mercyhealth, a nonprofit with hospitals and clinics in Illinois and Wisconsin that routes its patients to CareCredit, would not discuss its lending practices. “We do not have anyone available for this,” spokesperson Therese Michels said. Allina Health and Prime Healthcare also wouldn’t talk about their patient financing deals.

Bush said there’s a reason so few hospitals want to discuss their financing deals: They’re embarrassed. “It’s like they quietly write someone’s name on a piece of paper and slide it across the table,” he said. “They don’t want to be a part of it because they have in their institutional memory that they are supposed to look after patients’ best interests.”

Some hospitals and banks still offer interest-free help

Not all hospitals expose their patients to extra costs to finance medical bills.

Lake Region Healthcare, a small nonprofit with hospitals and clinics in rural Minnesota that contracts with Missouri-based Commerce Bank, charges no interest or fees on payment plans. That’s a decision that spokesperson Katie Johnson said was made “for the benefit of our patients.”

Even some AccessOne clients such as the University of Kansas Health System shield patients from interest. But as providers look to boost their bottom lines, it’s unclear how long these protections will last. Colette Lasack, who oversees financing for the Kansas system, noted: “There’s a cost associated with that.”

Meanwhile, large national lenders such as Discover Financial Services are looking at the patient financing business.

“I’ve had to become more of a health care marketer,” said Matt Lattman, vice president for personal loans at Discover, which is pitching the loans to people with unexpected medical bills. “In a world where many people are ill prepared to cover their health care costs, the personal loan can provide an opportunity.”

Private equity’s power in healthcare continues to grow, raising concerns: KHN report

Private equity groups have invested about $1 trillion into nearly 8,000 healthcare transactions in the past decade, and some experts are pushing for more scrutiny of its increasing influence on the industry amid concern it may be causing higher medical bills and diminished quality of care, a Nov. 14 Kaiser Health News report said.

Because such investment groups typically invest less than $101 million, such transactions do not attract automatic antitrust reviews at the federal level, the report continued. That represents more than 90 percent of private equity investments in the industry.

Nevertheless, companies owned or managed by private equity groups have agreed to pay fines of more than $500 million since 2014 in over 30 lawsuits under the False Claims Act, which deals with false billing submissions, KHN’s investigation found.

The problem may be most acute in certain specialist fields and in certain metropolitan areas. While private equity, for example, plays a role in just 14 percent of gastroenterology practices nationwide, it controls about 75 percent of that market in at least five metropolitan areas across five states, including Texas and North Carolina, according to research from UC Berkeley’s Nicholas C. Petris Center. 

And private equity pockets may be getting deeper. In 2021 alone, over $206 billion was invested by such groups in healthcare, and there is plenty of “dry powder” around for more, KHN reported. The Healthcare Private Equity Association, for example, which boasts about 100 investment companies as members, says the firms have $3 trillion in assets awaiting allocation.

Private equity, like everything else, may have some poor performers but it doesn’t help to generalize as groups “vary tremendously” in how they operate their healthcare investments, Robert Homchick, a Seattle attorney, told KHN.

“Private equity has some bad actors, but so does the rest of the [healthcare] industry,” he said. “I think it’s wrong to paint them all with the same brush.”

Concerns remain, however, that, at least in some cases, private equity involvement is simply a vehicle for maximizing returns, often at the expense of patients. In addition to the $500 million fines, there is also evidence of some private equity groups pushing through additional testing and mandated patient numbers to boost returns, often in medically questionable scenarios, the report said, citing the example of National Spine and Pain Centers previously owned by private equity group Sentinel Partners.

In that case, National Spine paid $3.3 million in a whistleblower case related to allegations of unnecessary treatment and testing, KHN said.

The scope of such private equity dominance in some markets worries many industry observers, and much more needs to be done to help reel in such potential abuses, they say.

“We’re still at the stage of understanding the scope of the problem,” said Laura Alexander, former vice president of policy at the nonprofit American Antitrust Institute, which collaborated on the Petris Center research. “One thing is clear: Much more transparency and scrutiny of these deals is needed.”

The ethics and legality of private equity (PE) once again in the spotlight

https://mailchi.mp/46ca38d3d25e/the-weekly-gist-november-4-2022?e=d1e747d2d8

 In a recent STAT News article, reporters Tara Bannow and Bob Herman took an in-depth look at private-equity firm Welsh, Carson, Anderson & Stowe, examining the performance of four of its healthcare portfolio companies. They show how the firm’s A-list partners, clients, and board members have promoted controversial business practices—often at the expense of publicly funded healthcare programs—that conflict with its well-curated public image.

The Gist: This article emphasizes how the complex and opaque regulatory structure of American healthcare allows motivated parties like PE firms to find technically legal, though ethically suspect, business models, which can easily tip over into outright illegality.

It highlights the “revolving door” flow of executives between industry and government, which allows investment firms to play a long game by actively shaping the regulatory landscape and lobbying to create business opportunities where none previously existed. Justified backlash at “gotcha” business models and profit-seeking at the expense of vulnerable patients may swamp any positive contribution that PE investment and rollups may make to the business of healthcare.

Private equity (PE)-backed physician practices increase healthcare spending and utilization

https://mailchi.mp/6a3812741768/the-weekly-gist-september-9-2022?e=d1e747d2d8

A recent JAMA study of 578 US dermatology, gastroenterology, and ophthalmology practices acquired by PE firms from 2016 to 2020 found a steady rise in spending in the two years after acquisition, indicating that the average charge per commercial claim increased 20 percent, and the average allowed amount per claim rose 11 percent. It also found that, compared to a large control group with similar patient risk scores, PE-acquired practices saw new patient visits increase by 38 percent and total visit volume increase by 16 percent. 

The Gist: While the study’s authors note that these findings could be explained by changes in practice operations or management, they point out they could also be caused by an overutilization of profitable services not tied to an increase in value or benefit to the patient. 

We think the latter is likely the case here, and that this study provides evidence of PE-induced overutilization aimed at meeting aggressive growth targets.

But this is just the latest wave of ownership-induced overutilization: 20 years ago the same spotlight was on physician-owned imaging, cardiac, and other outpatient diagnostics, with several studies then documenting higher utilization in these facilities. Nonetheless, this latest trend is an important one to document and quantify, as the number of physicians working in PE-backed organizations continues to rise.

Critics say Mark Cuban’s pharmacy isn’t tackling the big issue: brand-name drugs

Mark Cuban’s pharmacy, Cost Plus Drug Co., has hundreds of drugs marked at discounted prices, but some pharmacy experts say there’s a larger problem that needs fixing, CNBC reported July 28. 

The online pharmacy launched in January with about 100 drugs, and by its one-year anniversary, plans to have more than 1,500 medications, according to the company’s website. The business model, which allocates for a $3 pharmacy dispensing fee, $5 shipping fee and a 15 percent profit margin with each order, aims to uproot the pharmaceutical industry, which has faced criticism for years about its opaque business practices

Gabriel Levitt, the president of PharmacyChecker, a company that monitors the cheapest drug prices, told CNBC there’s more to be done.

“As much as I support the venture, what they’re doing does not address the big elephant in the room,” Mr. Levitt said. “It’s really brand-name drugs that are increasing in price every year and forcing millions of Americans to cut back on medications or not take them at all.”

Brand-name drugs are 80 percent to 85 percent more expensive than generics since brand-name drugs have to repeat clinical tests to prove efficacy, according to the FDA. Cost Plus Drug Co. only offers generics. Mr. Cuban told CNBC he hopes to sell brand-name medications “within six months,” but added that it’s a tentative timeline.

Hospitals performed 100,000 unnecessary surgeries in the first year of COVID-19, Lown Institute says

https://www.fiercehealthcare.com/providers/hospitals-performed-100000-surgeries-elderly-2020-lown-institute

U.S. hospitals performed more than 100,000 surgeries on older patients during the first year of the pandemic, according to a new Lown Institute analysis. 

The healthcare think tank relied on Medicare claims data and analyzed eight common low-value procedures. It called the 100,000 procedures unnecessary and potentially harmful in a press release. It found that between March and December 2020, among the most-performed surgeries were coronary stents and back surgeries. 

The procedures either offered little to no clinical benefit, according to the institute, or were more likely to harm patients than help them. 

“You couldn’t go into your local coffee shop, but hospitals brought people in for all kinds of unnecessary procedures,” Vikas Saini, M.D., president of the Lown Institute, said in a statement. “The fact that a pandemic barely slowed things down shows just how deeply entrenched overuse is in American healthcare.”
 
Here is the volume of each procedure analyzed, for a total of 106,474 procedures identified:

1. Stents for stable coronary disease: 45,176
2. Vertebroplasty for osteoporosis: 16,553
3. Hysterectomy for benign disease: 14,455
4. Spinal fusion for back pain: 13,541
5. Inferior vena cava filter: 9,595
6. Carotid endarterectomy: 3,667
7. Renal stent: 1,891
8. Knee arthroscopy: 1,596

Among the “U.S. News & World Report” 20 top-ranked hospitals, all had rates of coronary stent procedures above the national average in what the Lown Institute called “overuse.” Four had at least double the national average, including the Cleveland Clinic, Houston Methodist Hospital, Mt. Sinai and Barnes Jewish Hospital. The procedures and overuse criteria were based on previous Lown research.

“We’ve known for over a decade that we shouldn’t be putting so many stents into patients with stable coronary disease, but we do it anyway,” Saini said. “As a cardiologist, it’s frustrating to see this behavior continue at such high levels, especially during the pandemic.”

In response to the Lown analysis, the American Hospital Association said in a statement Tuesday that delays or cancelations in non-emergency care may have negative outcomes on patients. “Lown may define these services as ‘low value,‘ but they can be of tremendous value to the patients who receive them,” the statement read.

It also pointed to its response to last year’s Lown analysis, which it criticized as being based “on data that are not only incomplete, but also not current.” The organization argued the services surveyed only represent a portion of the care hospitals provide. It added that procedures are determined by physicians based on an evaluation of the patient’s medical needs. 

Houston ER physicians say they were urged to avoid COVID tests, work sick

A group of emergency room physicians filed a lawsuit in March alleging representatives for their employer, American Physician Partners, discouraged them from testing for COVID-19 and pressured them to work while ill, according to the Houston Chronicle

Brentwood, Tenn.-based American Physician Partners staffs and manages ER physicians at more than 15 Houston Methodist facilities, including hospitals and emergency care centers. The lawsuit, which does not involve Houston Methodist employees, centers on a dispute between eight physicians and APP

The physicians allege APP is underpaying them and engaging in “unethical practices,” such as urging physicians with COVID-19 to work, as a way to boost revenue. 

APP’s protocol, “discourages testing and disregards physician, staff, and patient safety when a doctor does test positive for COVID-19,” the lawsuit alleges. The physicians claim APP is putting “profit over patient.” 

APP denied its involvement in the alleged financial damages in a response to the physicians’ complaint filed April 25. The company told the Houston Chronicle that it has been in discussions with the physicians since they raised concerns four months ago. 

“We advised them at that time that their concerns do not reflect the facts known to APP and otherwise appear to be based on misinformation,” APP said in a statement to the Chronicle. “Thus we are disappointed these physicians — who represent a very small minority of the physicians APP partners with in the Houston area — have decided to move forward with this litigation. We remain open to continuing our dialogue with these physicians outside of the litigation, which, again, APP believes is without merit.” 

Houston Methodist, which isn’t involved in or named in the lawsuit, said it cannot comment on the specific allegations, according to the Chronicle. “We are unaware of any ER doctor who came to work after testing positive for COVID-19,” a hospital spokesperson told Becker’s. 

Read the full Houston Chronicle article here.  

When consumer health technology leapfrogs medical science 

At a recent health system physician leadership retreat, two cardiologists presented a fascinating update on the electrophysiology (EP) service line. Electrophysiologists use advanced heart mapping and ablation technologies to diagnose, pinpoint, and treat abnormal heart rhythms, and the field has made dramatic advances over the past decade. The success rate of interventions has risen, and procedures which used to take hours in a cath lab are now performed in a fraction of the time—with some patients even able to go home same-day. 

This increased efficiency has expanded the EP program’s capacity, but the system still finds itself overwhelmed with demand. The system is located in a high-growth market, and demand is also fueled by shifting demographics, with more aging Baby Boomers seeking care. But a key driver of growth has been the spread of “smart watches” like the Apple Watch and Fitbit, which tout the ability to detect abnormal heart rhythms like atrial fibrillation. With “half of the community walking around with an EKG on their wrist”, the number of patients seeking evaluations for “a-fib” has skyrocketed: at this system, over 50 percent growth in patient volume, leading to 25 jump in procedures during the pandemic. 
 
While the doctors were excited about growth, they also stressed the need to rethink care pathways to make sure that electrophysiologists’ time was prioritized for the patients who needed it most. The system should look to develop care pathways and technology that enable other physicians to readily triage and manage routine atrial fibrillation.

But smartwatch-driven self-diagnosis raises larger questions about how doctors and hospitals must adapt when consumer technology outpaces the science evaluating its effectiveness, and the health system’s ability to meet new demand. With private equity firms now focused on acquiring cardiology practices, this massive spike of demand, coupled with the ability to move more heart rhythm procedures outpatient, is seen by investors as a significant profit opportunity—making it even more critical for doctors, researchers, and hospitals to ensure that sound clinical guidelines are developed to drive high-quality, appropriate management.