Revisiting Healthcare Merchant Status

By Jack Duffy

Executive Vice Presidenthospital bill

Some time ago I wrote an article questioning why healthcare was the only consumer activity that routinely extended credit to its patients (customers) without a specific agreement for repayment.  Each year billions of dollars are lost to patients who often, for their own reasons, fail to pay their portion of the healthcare bill.  Additional billions are spent to engage collection agencies to send letters and make calls to attempt to recover these lost revenues.


As a person who travels frequently, it is second nature to approach hotel front desks and rental care counters with my credit card of choice already out of my pocket.  I use the same response when approach the coffee counter or sandwich shop.  Contrast this with my quarterly visits to my physician.  I have never been asked or paid the visit co-payment at the time of service.  That is 0 for 20 in the past five years.  I do pay when the bill is received a few weeks later but the time value of money has been lost and a cost for the bill has been incurred. Of greater importance is the fact that for everyone who does pay there are at least as many patients who do not.


Might there be a simple solution to reducing both the expense and losses associated with failure to collect?  All elective services will require the imprinting of a valid bank credit card.  The card will be charged for visit co-payment at the time of service and co-insurance balances, if any, at the time the insurance carrier remit their portion of the service. A hold on the line of credit will be placed on the credit card for the estimated patient balance.  Disputed balances due to insurance denials will be pended until the patient and/or healthcare provider appeals the decision.


The vast majority of patient balances can be resolved using this method. For the 3% to 5% of American households who go not have a credit card, another financial instrument may be available. If successful, this merchant approach to the community would save billions of dollars and create a level playing field with other service providers in the community.


With the advent of the Health Care Exchange many uninsured or underinsured people will have the opportunity to have coverage.  The merchant process above is not designed to manage catastrophic healthcare expenses.  It will not resolve the debate about the disparity between charges and average payments from insurance companies.  It will go a long way to eliminate the delays and costs associated with the current failed process. I would predict that after the first round of patient questions about why they never had to pay before, the use of a credit card at the point of service would become no more of an issue when compared with hotels, car rental companies and virtually every other merchant who shares main street America with healthcare providers.


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