Fresh Pain for the Uninsured

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Outside Scrutiny

The GE card typically comes with an introductory 0% interest rate, but after Diltz didn't make her initial payment, the rate leapt to 26.99% on an annual basis. In August, 2006, GE Money Bank sued her in state court in Queens. With the help of the nonprofit Elder Law Clinic at St. John's University School of Law, she contested the debt, which grew to $10,175. "It was horrible to get those letters from GE," says Diltz. She and her husband live on $18,000 a year from her part-time job and social security benefits. "It was so stressful from day to day."

A GE spokeswoman, Cristy F. Williams, said in an e-mail that the vast majority of CareCredit's 6 million customers are satisfied. In the Diltz case, "we provided her with a dispute form and discussed the dispute process with her a number of times," Williams added. "She did not respond for several months." However, on Nov. 12, after BusinessWeek inquired about the case, GE said it had changed its stance. Williams said the company would erase Diltz's debt and remove any reference to it on her credit report. The spokeswoman said GE had begun to reassess Diltz's account on its own initiative. "We could have and should have been more sensitive to Ms. Diltz," she said.

Diltz's lawyer, Gina Calabrese, said she was skeptical that GE would have reversed itself absent a reporter's asking questions. "They knew about all these facts almost a year ago," the attorney said. "Imagine what is happening to all the unrepresented people who have valid cases." Mokhtar and his staff declined to comment.

About-Face

In another instance, BusinessWeek's questions prompted GE to acknowledge that a medical clinic had pressured uninsured patients into using the CareCredit card. Dawn Shelly, 33, visited the Christie Clinic in Urbana, Ill., in late 2003 for a sinus infection. She told a staff member she couldn't afford to pay the $90 bill in cash. At the time she earned $7.50 an hour as a part-time school bus monitor; the job didn't offer insurance. The clinic, Shelly says, told her the only option was to apply for CareCredit. She says she thought she was signing up for a program similar to insurance, under which she would owe only a modest co-payment. "I never would have signed up if I knew it was really a credit card," she says.

Her CareCredit balance mounted with several additional visits to the clinic and a local emergency room, where she was treated by a clinic doctor. Unable to keep up with payments, Shelly, now unemployed, owes $3,485 to CareCredit, according to an Oct. 24 collection letter. Much of that balance comes from late fees and finance charges of 26.99%.

Until recently, the Christie Clinic's Web site stated that patients who couldn't pay in full "must apply for Care­Credit." After BusinessWeek asked GE about the clinic's policy, the company said it would correct the situation. "We are instructing the provider to remove the language and change their policy for soliciting applicants for CareCredit," said GE's Williams. She added that GE would drop all fees and finance charges from Shelly's bill. The company also will try to resolve the concerns of any other patients who were required to use CareCredit, she said.

In early November, the Christie Clinic removed all references to payment policies from its Web site. Anni McClellan, the clinic's director of financial services, said it is reviewing the policies. Christie discusses a variety of payment options with patients, she said. "There are so many specific circumstances surrounding each patient's financial conditions."

The Fine Print

Early experiments with financing self-pay medical bills began in the 1980s, when consumer-credit executives saw an opportunity in soaring debt levels and inefficient hospital billing practices. Most patients think that "your doctor will probably see you again and the hospital will not turn you away if you don't pay the bill," says Richard L. Clarke, chief executive of the Healthcare Financial Management Assn., an industry group. "On the other hand, with the credit card or a loan [from] the bank, people will be more concerned about defaulting because that is almost certain to cut them off from credit."

That's precisely the strategy that drives CompleteCare, the small Arkansas firm, which says it works with 40 hospitals and more than 400 physician practices across the country. Addressing potential health-industry clients, the company boasts on its Web site that it "pioneered the concept that patients become consumers the minute they walk out of your facility." April Dial, the diabetic waitress, says she didn't realize she had been transformed in this manner until weeks after leaving Hot Spring Medical Center in September.

Dial says a hospital financial counselor told her mother by phone in October that Hot Spring had discounted her debt by roughly 50%, to $7,300, before transferring the balance to CompleteCare under a contract the company signed with the hospital in June. Although she was surprised to learn about the transfer, Dial in fact had signed an admission-consent form at Hot Spring that included a small-print section authorizing the hospital to turn over her account. In contrast to the hospital's former zero-interest payment plan, Complete­Care charged Dial 5.75% interest on the first $2,500 of her balance, with a minimum monthly payment of 10% of the outstanding debt. CompleteCare initially applied the 10% rate to only $4,545 of the total bill, and required that Dial pay $455 a month.

After BusinessWeek contacted CompleteCare in early November, and Dial asked to have her case reviewed, the company said it would lower her minimum payment to $125, interest-free. CompleteCare President Steven C. Owen said the company changed the terms because Dial's "situation is so dire in terms of the balance owed. Our whole philosophy is trying to make it easy to pay."