Friday, November 28, 2008

Using credit history to price hospital care

One of the most popular posts on this site has been the use of credit history to price car insurance. It is a high quality data set (relatively few errors) that can be accessed instantly (only with your permission) for a variety of uses. Credit history is is a good predictor of behavior, from the likelihood that you will get into a car accident to the likelihood of losing your cell phone.

Now hospitals are using credit scores to determine what to charge patients:
In the hospital business they call it a "wallet biopsy." A growing number of medical centers are using sophisticated software that digs into patients' finances to help determine whether they will receive free or discounted care.
This allows hospitals to avoid giving free care to patients who falsely claim to be indigent.

EXTRA CREDIT: how could a non-indigent patient defeat this price discrimination scheme?


  1. Since the credit score is calculated based on how much in debt one is, I think a person who has paid their debts and performs cash transactions would have a low credit score. Therefore, they would appear to have a low credit score and appear potentially indigent. In reality they could be cash rich and without debt.

  2. Another possibility for a non-indigent person to defraud a charity screen is to provide fake identification that will not link to a credit report.

    I take issue with this approach to screening since it seems to be ripe with opportunity for abuse by health care systems. However, a possible upside is the ability to look at credit reports to review where/how people are spending their money. If they report little income yet have multiple creditors (appliance, computer, car, etc.), perhaps they are living beyond their means and need to realign their finances to fund helath care priorities rather than leaving it to tax payers and charities.

  3. Without steering our way toward a) out-and-out fraud (providing a false ID) or b) having to rely on a relatively limited scenario (a would-be credit worthy person with no credit history), consider another way:

    If the person has the time (i.e. it's not an emergency procedure) he could charge up all available lines of credit to give the appearance he suddenly became destitute. Maybe he could even open a few store credit cards while he's at it. While this won't destroy an otherwise stellar credit score overnight, if questioned, the patient could point to the suddenly maxed out lines of credit and say he's hit hard times and has to charge everything to get by. Then, when he gets out of the hospital, he can pay down the lines of credit. Unethical, certainly, but probably legal and relatively easy and fast.

  4. Dr. Guy, your assumptions on credit score calculation are only about 20% correct. While you are correct, there are a few people with "no credit" (e.g. cash rich), anyone who has "paid their debts" on time will have a solid, perhaps not stellar, credit score.

    I am struck by the folks who openly, whole-heartedly, support this price discrimination scheme. I, frankly, dispise these types of price discrimination schemes. Why should I pay more for the same exact service than someone else becuase I make more money?

  5. The sad truth is that most people have no value of health care and are not willing to pay any of of pocket expense even when that are capable. I recently had a patient how following a surgery became upset when his insurance would not pay for him to transfer from jockeys to boxers. He felt that was a legitimate medical expense that he should not have to pay.

    I agree with you regarding price discrimination. As a consumer/patient, I really hate it too. However, people are much more willing to charge a $2500 plasma screen than pay a $20 co-pay for an ED visit. Those who can pay should pay. Why does an aspirin in the hospital cost $8? Because those of us who can pay are paying for the whole floor.

    Many patients who are classified as medically indigent promptly
    bring in their loan forbearance papers for their trucks, boats,or even jet skis. Folks bring these papers and expect that hospital case managers and providers to fill these forms in ASAP.