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Credit Checks Can Go a Long Way in Determining Consumers’ Ability to Pay

Healthcare providers are using credit checks at a higher rate to determine consumers’ ability to pay a bill and, in some cases, their overall spending activity and credit history, according to a report by Healthcare Finance Associate Editor Susan Morse.

The trend started to pick up with the Affordable Care Act in existence, a growing underinsured population and out-of-pocket costs for consumers, according to the article.  “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 in the article. “They owe money; hospitals need a way to assess risk.”  

On the front end, a hospital can use a credit report to determine a consumers’ ability to pay their portion of a medical bill. David Esquivel, an attorney with Bass, Berry & Sims in Nashville, Tenn., said in the article that collection agencies use credit reports on the back end if they are working on accounts for a healthcare provider client.

“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,” according to Healthcare Finance.  A more detailed report can highlight consumers’ “lifestyle choices” and what they spend their money on in addition to how they keep up with their bills, according to the article. The cost of credit reports range from 50 cents up to $1.25, adding up to between $10,000 and $15,000 per month.

According to a 2015 study from Crowe Horwath LLP in 2015, hospitals in the U.S. are experiencing a change in their financial risk as a result of insured patients carrying more financial responsibility through their health plans, ACA International previously reported.  The study found that since the enactment of the Affordable Care Act in October 2013, overall provider collections have improved and part of their revenue has “shifted to a more reliable payer source from previously uninsured self-pay patient responsibility.”

Notably, total accounts receivable (A/R) from insured self-pay patients increased 13 percent from June 2014 to June 2015, according to the study. Total A/R over the same time period from uninsured self-pay patients decreased 22 percent, mostly as a result of high financial risk patients joining Medicaid in expansion states.  For every one uninsured self-pay patient payment dollar in the first quarter this year, there were approximately 22 insured self-pay patient payment dollars.

Lower average payments from the insured self-pay population weigh more heavily than uninsured payments on a provider’s bottom line, according to the report.  In 2015, three of the major U.S. consumer reporting agencies, Equifax, TransUnion and Experian, announced the National Consumer Assistance Plan, which includes changes to how consumers’ medical debts are listed on their credit reports, ACA reported in the May 2015 issue of Pulse.

The plan for CRAs aims to enhance their ability to collect complete and accurate consumer information and will provide consumers more transparency and a better experience interacting with credit bureaus about their consumer credit reports.  Medical debts won’t be reported until after a 180-day waiting period from the date of delinquency.

The plan will ensure medical debt information on consumers’ credit reports is accurate for healthcare providers evaluating those reports, but other details about their bill pay history and spending habits can be helpful if providers choose to access services that provide more in-depth reports.  More information:

Last modified onWednesday, 18 May 2016 18:41
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