Regulators seek feedback about medical credit cards as potential restrictions loom

A federal request for information signals heightened scrutiny on the issuance of credit cards in healthcare settings.

The Consumer Financial Protection Bureau, Department of Health and Human Services and Department of the Treasury sent out an RFI in July to gain stakeholder feedback on whether the widespread availability of medical payment products such as credit cards drives medical debt.

“In particular, the agencies seek comment on whether these products may allow healthcare providers to operate outside of a broad range of patient and consumer protections,” the RFI states.

“The agencies also seek comment on whether these products may contribute to healthcare cost inflation, displace hospitals’ provision of financial assistance, lead patients to pay inaccurate or inflated medical bills, increase the amount patients must pay due to financing costs, or otherwise harm patients’ mental, physical and financial well-being, including through downstream credit reporting and debt collection practices.”

HFMA is working on a written response to the RFI. In an interview, HFMA’s Rick Gundling, FHFMA, CMA, senior vice president for content and professional practice guidance, said medical credit cards can be useful for patients with certain financial needs. The cards should be evaluated among the various financial options that are pertinent to a particular patient, including the hospital’s financial assistance policy.

“It’s not ideal for everything and everybody, but there are instances and different consumers [for whom] it does make sense,” Gundling said.

In a scenario involving cosmetic surgery, Gundling said as an example, a patient with means could obtain a credit card, pay off the balance in a year or so and avoid prematurely withdrawing money from a CD account.

In that case, “it’s just a financing tool to help me bridge time,” he said.

An expanded scope of utilization

The RFI states that one credit card vendor’s customer base grew from 4.4 million to 11.7 million between 2013 and 2023, while its number of provider partners rose from 177,000 to 250,000.

Such increases might stem from apparent changes in the function of medical credit cards, said Tom Policelli, CEO of Health Payment Systems (HPS) and of PayMedix, an HPS affiliate that has processed more than $5 billion in medical payments for hospitals and physician practices.

“In-network services that were covered by the insurance plan never had any external financing associated with [them],” he said. “The hospital or provider group would just either get paid or not get paid, or they kind of handled it themselves. But [for] the out-of-network or uncovered services, credit cards have been used for decades. And that hasn’t been alarming to regulators or anybody else.”

As credit cards increasingly are applied to more urgent healthcare situations, Policelli said, the risk increases of practices such as cherry-picking customers based on their ability to pay. That’s a concern raised in the RFI, as are the questions of whether the cards drive higher-priced in-network care and skew financial incentives for providers.

“I look at this as a very serious move, especially because it’s by three agencies,” he said. “This doesn’t happen very often, at least in my experience.”

Policelli said stakeholders should be prepared for some type of regulatory action to result from the RFI, which also asks questions about the practice of offering installment loans.

“My experience [with] the HHS side is that when they put out questions like this, it’s a strong indication of where they’re going,” he said. “I would expect — absent universal responses against them in the questioning — that they will head in this direction.”

Best practices for card issuance

For hospitals, Gundling emphasized, the key is to help patients understand their financing opportunities.

Patients should be informed of their out-of-pocket responsibility for a service, then of whether they qualify for the hospital’s financial assistance policy or whether, unbeknownst to them, they’re eligible for coverage such as Medicaid, a subsidized Affordable Care Act marketplace plan or worker’s compensation.

From there, they can determine whether a medical credit card is preferable to options such as withdrawing money from a bank, taking out a loan or borrowing funds from friends and family.

“What I think happens is people move to the medical credit card too quickly before they ask other questions,” Gundling said.

When patients choose to apply for a card, providers should make sure the terms and conditions are clear. For example, low interest rates may apply only for a year before hefty increases kick in.

“I don’t think medical credit cards should be the scapegoat, but I don’t think they should be oversold either,” Gundling said. “These cards are one of many options.”

Said Policelli, “Continue to take credit cards for bariatric surgeries or all the voluntary stuff or the out-of-network stuff people are doing. But if your insurance company is paying for a portion of the bill and someone’s trying to make you use an interest-bearing credit product for the other part of the bill, that’s what the feds are going after.”

One challenge is that conversations combining money and health can be awkward, especially during a stressful healthcare encounter.

“Hospitals need to get to that extra customer service, [show] empathy, make sure [patients] understand,” Gundling said. “Review your procedures, make sure patients understand all the options they have for financial assistance and meeting their financial obligation.”

Additional actions

The RFI on medical payment products was released as part of a Biden administration push to promote consumer-friendly healthcare policies. A fact sheet published in July also includes:

• Proposed restrictions on certain short-term insurance plans and fixed-indemnity plans
• A crackdown on a potential loophole in the No Surprises Act whereby health plans contract with hospitals but still claim they are not technically in-network
• Stricter requirements to make information about facility fees publicly available to consumers

The last point ties into concerns among policymakers that off-campus clinics are carrying higher charges than they should. Those concerns are behind ongoing efforts to increase billing transparency among providers and to potentially expand site-neutral payment policies as soon as 2025.