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What's behind no-interest medical credit

A man walks past Mount Sinai Hospital on August 4, 2014 in New York City.

A bigger and bigger chunk of the money hospitals get comes from you and me, thanks to a rise in what are known as high deductible health plans, in which consumers are spending more out-of-pocket for their own care.

With millions more people newly insured under the Affordable Care Act holding those plans, hospitals are thinking hard about the best way to collect from us when we can't pay our bills. In some cases, that means no-interest payment plans.

Craig Froude, CEO of CarePayment, says business is booming for his company, which works for hospitals offering patients no-interest payment plans.

We will actually double in revenue in this year,” he says, “and we will probably double again in 2015.”

The Kaiser Family Foundation reports the number of workers with deductibles has jumped from 55 percent to 78 percent since 2006.  

Froude says that's why hospitals are lining up outside his door.

“And so what we are really seeing patients are having to figure out how they are going to afford healthcare,” he says.

Hospitals do a good job getting money from insurers, but when it comes to what individuals owe, Fraude says it's just about 17 cents on the dollar. And that won't cut it as collections become a bigger part of the business.

“We're trying to get ahead of this curve because we want to be able to continue being financially viable,” says Melanie Wilson of North Carolina-based Novant Health.

Two years ago, Novant stopped offering a payment plan with a 12 percent interest rate and introduced a no-interest option. Wilson says collections bumped up 6 percent.

They see that we are not here to just make money,” she says. “We're here to do the right thing.”

Not all hospitals can go that route. Sandra Wolfskill with the non-profit Healthcare Financial Management Association expects some hospitals to keep using loans or credit cards with interest because those lenders give hospitals money up front.

"I think the hospitals that are financially stressed may be more inclined to go with the credit card option because it moves their cash flow much quicker,” Wolfskill says.

Patients often don't know what they owe until the bill shows up, she says, adding that hospitals need to find a way to make that stop.

About the author

Dan Gorenstein is the senior reporter for Marketplace’s Health Desk. You can follow him on Twitter @dmgorenstein.

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