Editor’s note: This is Dr. Eastern’s last “Managing Your Practice” column for Dermatology News. After his first column was published in 1986, Dr. Eastern continued writing his column monthly until the mid-1990s, resuming in 2005. In total, he has written over 300 columns on topics relevant to medical practice, ranging from hiring employees, selling and merging practices, complying with OSHA, and avoiding embezzlement, to electronic health records, burnout, medical assistants, negative online reviews, artificial intelligence in the office, and more. In the future, he will continue to provide commentary on practice issues with an occasional guest editorial.
Medicare reimbursement cuts, increasing overhead and staff salaries, and inflation have made running a profitable private practice increasingly challenging, particularly for rural and smaller offices. Medical credit cards are an increasingly popular choice to fill this gap.
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Traditionally, these cards were used to help cover procedures insurance didn’t cover — such as cosmetic procedures — but over the years, they have been expanded to cover other healthcare charges, mostly for patients who are paying out of pocket due to inadequate insurance or other reasons.
Advantages for physicians include immediate payment from the credit card company and reduced billing and collection costs. Patients are also less likely to delay or defer treatment if they can charge the payment and pay it back in installments.
The first step in offering medical credit cards is signing up with one or more third-party card companies. CareCredit is the most common provider in the medical credit card market. Other vendors include Wells Fargo, AccessOne, Alphaeon Credit, and iCare Financial. (As always, I have no financial interest in any product or service mentioned in this column.) A member of your staff signs patients up, and the credit card company checks their credit. If approved, the card company pays you your fee and assumes responsibility for collecting from the patient.
The interest charge on medical credit cards is often deferred for a period of time, typically between 6 and 24 months. If patients pay off the debt within this time, they can avoid paying interest. But, like other credit cards, if they make late payments or have an unpaid balance once the promotional period ends, they may end up with interest and fees totaling 25%-30% or more. It is important to make it very clear to your patients that payments are interest-free only if they are all made on time and within the promotional period.
Dr. Joseph S. Eastern
According to a Consumer Financial Protection Bureau report released earlier this year, deferred interest medical credit cards or loans were used to pay nearly $23 billion in healthcare expenses from 2018 to 2020. Individuals unable to complete payment during the promotional period paid $1 billion in deferred interest payments during that period.
Despite the growing popularity of medical credit cards among physicians, it is worth noting that some consumer groups view them as predatory financial products, marketed toward people in tough financial situations. A coalition of 60 health advocacy groups has urged the Biden Administration to ban deferred interest medical credit cards. So there is that much more reason to choose candidates for medical credit cards carefully, and to make them fully aware of what obligations they are assuming.
Patients who do not think they can pay off the balance within the interest-free time frame should probably be advised to pursue an alternative payment method, such as using a conventional credit card, taking out a personal or home-equity loan, or borrowing from a retirement savings account. Some physicians are willing to negotiate a reduced fee for patients who agree to pay cash at the time of service.
Those who do choose to apply for a medical credit card should be informed of their options, which can vary considerably depending on the product and the third-party vendor. Some medical credit products can be used only for elective procedures, but some can be used more broadly for various medical expenses. Check to make sure that each patient’s financing option can be used for his or her desired medical service.
Some payment products can only be used at specific practices or groups, while others can be used at a variety of medical offices and hospitals. If a patient arrives with a medical credit card already in hand, confirm that it is one that your office accepts.
Interest rates generally vary with each card and vendor. Make patients aware of when interest rates start accruing and if the plan offers a fixed or variable APR, or if it charges compounding interest. Confirm if there is a deferred interest option, and if so, for how long.
Different medical credit products also have varying fees and payment schedules. See that each patient reads the terms of the agreement to understand when interest may start to accrue or change, as well as when certain fees may apply. Understanding when the payments are due will help them avoid additional fees, including late fees. Some medical payment plans may also have administrative or processing fees. If so, patients should be made aware of them.
Dr. Eastern practices dermatology and dermatologic surgery in Belleville, New Jersey. He is the author of numerous articles and textbook chapters, and is a longtime monthly columnist for Dermatology News. Write to him at dermnews@mdedge.com.