Hospitals X-Ray Patient Credit Scores

More and more are buying credit data to see if the sick can afford treatment

By Robert Berner and Chad Terhune

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Maupin has no savings but was denied a free CAT scan due to her credit score Nancy Newberry

In the hospital business they call it a "wallet biopsy." A growing number of medical centers are using sophisticated software that digs into patients' finances to help determine whether they will receive free or discounted care.

The procedure, which is not understood by most patients or even many doctors, generally doesn't come into play when there is an emergency. But it has raised eyebrows for several reasons: Hospital administrators are looking at patient data—credit scores, credit-card limits, and 401(k) balances—not usually associated with treatment decisions.

Patients are surprised to learn that they're being subjected to the analysis, especially so in the case of nonprofit hospitals that historically have been magnanimous with charity care. And some health experts fear that hospitals will use techniques borrowed from the mortgage and car-loan industries to deny treatment to consumers with little or no health insurance.

"The hospitals are trying to balance their mission with the financial realities of the market," says Aaron Katz, a lecturer on health policy at the University of Washington in Seattle. "That has led to certain decisions, such as a wallet biopsy, that could affect [a patient's] access to care."

Debbie Maupin, 41, already has felt the procedure's sting. The Dallas resident fractured her skull, neck, and back in a car crash in April 2005. Parkland Health & Hospital System gave her free care worth more than $100,000 because her job as a mortgage adviser offered no health insurance. When she returned in June 2006 for a scheduled CAT scan, however, Parkland told her she no longer qualified as a charity case "because my credit score was too high," she says. A hospital financial counselor, she adds, refused to show her a copy of her credit report. Unable to work because of her injuries, she says she's "living off borrowed money from my father and friendsI have nothing in the bank." She never got the scan.

Parkland, a nonprofit that operates 11 medical facilities in the Dallas area, uses patient financial-analysis software provided by SearchAmerica in Maple Grove, Minn., one of the numerous data-mining companies around the country that have signed up hospitals as clients. Beth Keating, Parkland's patient financial-services manager, says the hospital has no record of Maupin's reapplying for charity care in 2006. Keating says Parkland analyzes credit scores when deciding who can afford to pay for care. But the chain's policy is not to mention the scores to its patients, Keating says, and Parkland wouldn't rely solely on a credit score in choosing whether to provide free service. "We are very generous in our charity care, giving over $100 million in free care last year," she adds.

Rush University Medical Center in Chicago also employs patient-analysis software sold by SearchAmerica. Without pointing a finger at any particular hospital company, Charles Behl, a senior financial executive at Rush, expresses concern that rivals may misuse the tool.

Rush employs the SearchAmerica program to evaluate uninsured patients and those whose insurance requires large deductibles or offers only meager benefits. If a patient's household income totals no more than 250% of the federal poverty line—$10,400 for an individual, more depending on family size—Rush provides free care regardless of credit scores or card limits, Behl says.

Nevertheless, the software sometimes labels patients who qualify for charity treatment as "likely" to pay. An aggressive hospital billing department might be tempted to ignore its traditional charity standards and seek payment from lower-income patients identified in this fashion, says Behl. "That's the danger."

TARGETING A 401(K)

Bruce Nelson, SearchAmerica's vice-president for sales and marketing, says that scenario isn't likely to happen. "Hospitals don't override their charity policies," he says.