Reevaluating Credit Scoring in Healthcare

As comprehensive health care legislation is phased into effect, the healthcare industry continues to be under scrutiny for the cost of services, particularly those incurred by the uninsured and underinsured.

This criticism was a large driver in the passing of the Patient Protection and Affordable Care Act (PPACA; Public Law 111-148), which creates insurance exchanges and expands Medicaid to play a major role in covering more uninsured people. With enrollment in these programs expected to cover at least 19 million currently uninsured patients, hospitals are continually looking for new ways to assist patients in qualifying for government programs.

In recent years, an ever-increasing number of hospitals began using credit scoring to determine if a patient has a propensity to pay their bill, be eligible for government programs, or charity care. However, with Medicaid expanding and health insurance exchanges forming, does it make sense to continue using credit scores when they are not used in any government program’s application process?

Following the backlash of collection practices and criticism of hospital’s charity programs, many hospitals sought a review of patient finances to ensure patients without a means to pay would not go to collections, even if they did not provide the necessary documents for a charity application.  For credit bureaus, Healthcare was seen as one of the last untapped markets, and – in a rush to sell credit products – many agencies began selling credit reports as a technology solution to screen uninsured self-pay patients for charity and government programs.

A credit report replaced what was once a thorough exam of the customer’s situation that involved a review of an application, employment verification through pay stubs, tax return information, and other documents provided by the patient to determine eligibility. One needs to only look at the subprime lending practices that contributed to the current mortgage crisis to realize that a simple credit check is not enough to determine a person’s ability to pay, and has limits as a verification tool.  This is not to say that credit information does not have a purpose in healthcare. Credit information is a valuable tool in checking the accuracy of an address, social security number, reported income, and outstanding loans.

It is important to remember that a credit score is simply showing a propensity to pay, and the income listed in a credit report is usually the income a person provides when trying to obtain a loan. Credit Scores were designed to automate the underwriting process for credit data on middle and upper income individuals with extensive transactions. Low income individuals typically don’t have enough of a credit history to have anything more than a “thin file” with the major credit bureaus.  A person can be an excellent manager of their modest personal finances, and therefore have a high credit score, but be unprepared and ill-equipped financially for a sudden injury or illness. Should these patients receive financial assistance, or conversely found ineligible for charity care based on the credit information? A patient’s credit report will not reveal that a person recently lost their job, or that an injury or illness they are being treated for forced them to leave a job. A credit report does not show a patient’s age, or if the person is blind or disabled. For these reasons, credit scoring alone cannot be used to determine a patient’s ability to be eligible for financial assistance.

The PPACA requires a streamlined enrollment system that ensures applicants are screened for all available health subsidy programs and enrolled in the appropriate program with minimal collection of information and documentation from the applicant. This puts the onus on the hospital to gather the necessary information. Currently, only a completed application can determine if a patient has the potential to be approved for the current and expanding government programs. To be approved for these programs, the necessary documentation will have to be gathered, which is based largely on information supplied by the patient or someone acting on the patient’s behalf. There have been recent advances made in human resources and payroll services that have automated much of the employment and income verifications necessary for approval of patient applications.  Along with electronic capture of tax return information, a door has been opened for hospitals to automate and streamline the document gathering process.  If hospitals tap into these new resources, they will be able to speed up the completion of an application, which will result in faster submittals and approvals.

Instead of credit information, income verification via electronic pay stubs and tax returns will be more necessary to hospitals in light of healthcare reform. While hospitals can effectively use credit reports to potentially verify the information the patient has submitted, government programs require employment and income verification within their registration applications. With Medicaid expanding and insurance exchanges forming to cover more of the uninsured population, automation necessary to streamline the application process must be focused more on what information will help people apply for the new programs; something a credit score won’t do. Automated programs that utilize application information and verifications, such as tax return information and pay stubs, will be of greater assistance to hospitals and their patients as they apply for the new programs.

Christopher Thunder is a policy analyst and writer for R&B Solutions, a Medicaid Advocacy company headquartered in Waukegan, Illinois.

Ryan Brebner is Manager of Business Development for R&B Solutions, and is responsible for leading the company’s sales and marketing. Ryan is an active member of HFMA, AAHAM, and NAHAM. For further information, Ryan Brebner can be reached at 847-887-8514.

About R&B Solutions (www.randbsolutions.com)
R&B Solutions is a leading Medicaid Advocacy corporation that both uninsured patients and medical providers alike have come to trust to solve many of the problems facing uninsured patients and the medical facilities from which they seek help. R&B Solutions offers a wide variety of solutions for medical providers to assist their patients. The company uses highly-trained patient advocates efficient in State Human Services processes, internally developed software, and years of legal experience to identify and assist the uninsured. R&B Solutions offers expertise in the field of Medicaid Advocacy (inpatient solution), Solutions for Uninsured Patients (SUP), outpatient solutions, and RAMP (Rapid Application for Medical Programs), proprietary software that screens for Medicaid and charity eligibility. Founded in 1986, R&B assists health care providers and their uninsured patients across the United States.