Spectrum Offering Credit Plan

November 5, 2007
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GRAND RAPIDS — Spectrum Health is introducing a zero-interest finance card that allows patients to pay for out-of-pocket hospital charges in monthly payments spread over as long as 25 months.

Offered through the CarePayment division of Portland, Ore.-based investment firm Aequitas Capital Management, the Spectrum Health-branded card will provide patients with a revolving line of credit. There’s no application or approval process. The only requirement to receive a card is a valid Social Security number, according to the CarePayment Web site. The minimum payment is 4 percent of the balance or $25, whichever is higher.

Aequitas keeps a portion of the monthly payments before passing the funds to the hospital, said Joseph Fifer, CFO for Spectrum Health Grand Rapids, which includes Butterworth and Blodgett hospitals. For patients who are good credit risks with credit scores higher than 600, Aequitas pays hospitals the entire balance and assumes the debt itself.

Unlike other cards that have been issued through insurance and other financial companies, the CarePayment cards are not tied to health savings or health reimbursement accounts. Not only are the cards available to self-pay and uninsured patients, but also to those with insurance who face co-pays and deductibles.

CarePayment already is providing cards to patients of Trinity Health-owned hospitals in Cadillac and Gaylord and Schoolcraft Memorial Hospital in Manistique.

Fifer said Spectrum Health hopes to collect on more of its uncollectible debt, which amounted to $27.7 million in the 2005-06 fiscal year audit. The system also recorded $8.1 million in charity care. Spectrum Health has standards to determine who qualifies for charity care or discounts based on income as a percentage of federal poverty standards, he said.

Providing the CarePayment option is part of a larger Spectrum Health effort to make its business operations more “patient-friendly,” Fifer said.

With previous credit arrangements, “the minimum payment that patients were required to pay in some cases was less than the interest charge on that month. You could have negative amortization with the patient making payments and the balance going up because they’re not even paying the interest charge,” Fifer said. “With the zero percent interest, it really gives patients the chance to do what they want to do, which is pay down this debt.”

As patients shoulder a great proportion of their health care bills with higher deductibles, co-pays, health savings accounts and other plans, the industry is struggling to handle payment transactions like a retail business, Fifer said.

“Our industry is getting pushed, and rightfully so, to operate in more of a retail mindset,” he said. “We have to change some of our revenue cycle processes to reflect that. That’s what a patient-friendly billing system is: to make us more like retail and enable folks to pay in different ways that make sense to them and to us.”

For example, Fifer said Spectrum is attempting to work with Priority Health, which is 96 percent owned by Spectrum, to provide patients with an estimate of hospital charges prior to admission.

“It’s our belief that if patients know what their responsibilities are, they can plan accordingly,” he said.

But that requires a major information systems effort, he said. “You’re talking about having information systems that, in effect, talk to each other on a real-time basis. If you came in and had a $1,000 deductible and it’s July, without real-time data exchanges with the health plan we don’t know where you stand on your deduction, and we can’t give you an out-of-pocket estimate without knowing that,” Fifer said.

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