Insurance professionals could help avert trauma, pain and remorse by helping clients construct a Plan B should they carry debt.
Aug. 23--Patients who end up with hefty medical bills now have another payment option: an interest-free loan without the worry of a credit check.
As patients' deductibles continue to rise, leaving them unable to pay for services in one lump sum, health finance experts say hospital officials are looking for creative ways to collect on patient balances.
Five months ago, SSM Health Care inked a deal with Commerce Bank to offer these interest-free loans with three- and five-year terms to patients in the health system's four-state footprint -- Missouri, Illinois, Oklahoma and Wisconsin.
Since the program was launched in March, $6.5 million has been lent to about 4,000 patients, said Paul Sahney, vice president of revenue management for SSM Health Care. About 154,700 patients were admitted to SSM's 19 hospitals in fiscal year 2013.
The interest-free option is the main reason why the loans are popular, he said, in addition to not checking a patient's credit, bank record or assets.
"The need for something like this has always existed," Sahney said. "Out-of-pocket costs, which is the deductible, co-pay, will continue to rise very significantly over the next five years."
The average annual deductible is $1,135, according to the Henry J. Kaiser Family Foundation's 2013 survey of employer health benefits.
Hospitals have long worked out payment plans with patients in-house and still do at BJC HealthCare's 12 hospitals, as well as St. Luke's Hospital and St. Anthony's Medical Center.
But some say working with banks might make more sense for hospitals.
"They (hospitals) have not had robust collection efforts for payments from individuals," said Joseph Fifer, president and CEO of Healthcare Financial Management Association.
Sahney agrees. He said his hospitals are not positioned to effectively manage monthly payments from patients like banks already do with home and car loans.
Plus, a patient may be more inclined to a pay a bill from a bank rather than one from a hospital, Fifer said.
"A consumer might act differently if a bank is trying to collect something than a hospital is," Fifer said.
Sahney expects the new relationship with Commerce, which receives a service fee for administering these loans, will ultimately drive down the health system's bad debt, which totaled $157 million in 2012 and grew to $204.7 million in 2013, SSM's finance department reports.
Overall, Missouri hospitals' bad debt totaled $493 million in 2013, according to a Missouri Hospital Association report. In 2012, the overall bad debt totaled $486.5 million.
Mark Huebner, vice president of health care banking for Commerce Bank, said partnering with hospitals "fits in the wheelhouse of Commerce Bank perfectly."
After seeing an "explosion" in out-of-pocket balances for patients, Commerce invested a few million dollars in its IT system about three years ago to make it very simple to issue these patient loans.
SSM can easily submit the payment information to the bank when a patient expresses interest. From there a patient with a balance of $7,000 or more for hospital services is eligible for a five-year term loan. There is no minimum payment but the first payment must be $300, Sahney said.
Anyone whose hospital bill is more than $300 is eligible for the loan. No one is denied the interest-free loan even if it appears they have no ability to pay.
If a patient stops paying or defaults, SSM "would then be the ones to move forward with attempts to collect," said SSM spokesman Steve Van Dinter.
Before working with Commerce, SSM managed a payment plan for patients' in-house. The program allowed patients to pay back their balances over a 12-month period. Since partnering with Commerce, this payment plan has been reduced to less than six months.
SSM isn't the only local health system working with Commerce.
About a year ago, Chesterfield-based Mercy Health began working with Commerce to offer loans to patients in the St. Louis area, and recently expanded its loan options with Commerce.
Like SSM, Mercy will now switch to interest-free loans for up to a five-year term instead of a just a three-year option, said Robin Sumner, executive director of patient services.
This trend of hospitals joining forces with financial institutions to provide loans to patients is catching on in other markets across the U.S.
Executives with Oregon-based CarePayment, which offers a plan similar to Commerce's program, say business is booming as more providers, mainly hospitals, look to partner with the finance company.
"We've seen a significant uptick in interest from providers in the last 12 months," said Chief Operating Officer Ann Garnier. "We're seeing double-digit growth."
Terms vary by provider but typically reach up to $25,000 over a period of six years. As patients struggle to meet their deductibles and hospitals look to collect, companies like hers will continue to grow, she said.
"It's great that everybody has access to insurance but at the same time the cost of that insurance and their out-of-pocket costs could be a barrier to actually getting medical care," said Garnier.
She said CarePayment and others help "bridge the gap" for patients.
Samantha Liss is a business reporter at the Post-Dispatch. Follow her on Twitter @samanthann and the business section @postdispatchbiz.
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