Hospitals short on cash are more likely than their financially flush counterparts to offer patients interest-accruing loans or credit cards to pay for their care.

Such loans, called “medical payment products,” are often administered by third-party companies. Hospitals and physician practices operate them too, however. And regardless of administrator, these financing instruments have aroused concern from the Consumer Financial Protection Bureau as well as HHS and even the U.S. Treasury.

A new analysis conducted at the University of Southern California suggests it’s not the practice of medical financing per se that risks financially exploiting patients. Instead, when there’s trouble of this type, the culprit is usually in the structure of the payback arrangement.

What’s more, only 8.5% of 670 nationally representative and randomly selected hospitals promoted interest-bearing medical payment products on their websites between June 2023 and January 2024.  

Publishing this and other findings in JAMA Health Forum March 29, senior study author Erin Duffy, PhD, MPH, and colleagues note that 50 million Americans have a financing plan to pay off medical or dental bills. Around 1 in 4 of these plans bears interest.

Such arrangements “may introduce consumer protections concerns when patients are marketed high-interest financing in lieu of aid or interest-free payment plans,” the authors point out.

Modest charges in plain view

Reporting the results of the study, the authors show that 129 of the 670 hospitals (19.25%) offered any medical payment product on their website over the half-year period ending this past January.  

Meanwhile, hospitals offering any medical payment product were significantly more often nonprofit (96% vs. 80%) and less often received Medicaid Disproportionate Share payments vs. hospitals without any medical payment products (50% vs. 66%).

A majority of the hospitals promoting payment plans, 56% (72 of 129), only offered plans that did not involve interest.

Hospitals offering interest-bearing payment plans were significantly more often nonprofit (95% vs 82%) and had higher total 2021 unreimbursed and uncompensated care costs as a percentage of operating expenses (8.5% vs 7%) than other hospitals.

More:

• Hospital-administered payment plans were offered by 583 hospitals (87.01%).
• Plan details were available online for 150 (22.39%) of these; the remainder provided a telephone number.
• Among those with detail online, four explicitly charged interest or fees (5.26% and 9% annual percentage rate; $3.95 per month and $4.95 per month).

Those are reasonable interest rates and fees, but the small number of hospitals with detailed transparency on the matter could suggest “surprise” high interest rates and monthly charges lurking out of sight at many hospitals.

A recommendation for legislators, regulators

In their discussion, Duffy and co-authors underscore that nonprofit hospitals and those with more unreimbursed and uncompensated care disproportionately promoted interest-bearing medical payment products, “possibly to mitigate their financial strain.”

The authors conclude:

These findings suggest that policies limiting hospitals’ promotion of medical payment products may need to be coupled with efforts to stabilize hospital finances, as hospitals may be using medical payment product promotion when they lack the resources to offer long-term interest-free financing.

Potential regulations, the authors add, “should target specific aspects of product design rather than third-party medical financing broadly.”

The paper is posted in full for free.