On July 7, 2023, the Consumer Financial Protection Bureau, U.S. Department of Human Services, and U.S. Department of Treasury (collectively, the “agencies”) launched an inquiry into high-cost specialty financial products being offered to patients as a way to pay for routine medical care.

According to a fact sheet issued by The White House, the agencies are “collaborating to explore whether health care provider and third-party efforts to encourage consumers to sign up for medical credit cards and loans are operating outside of existing consumer protections and breaking the law.”

As the Biden Administration is signaling concern over the finance products being marketed to patients, now is a good time for providers to review the finance products they promote and the procedures they utilize to ensure compliance with existing laws and regulations. In doing so, providers should review all steps in the process from how patients are identified as potentially eligible to when patients are removed from or complete the program.

HIPAA

Since patient identifiable information protected by the Health Insurance Portability & Accountability Act (“HIPAA”) is broadly defined and includes the patient’s receipt of, and payment for, health care, information transmitted by the provider to a third-party financer is likely to be considered protected health information protected by HIPAA. Providers should ensure they are complying with HIPAA prior to disclosing any patient information to the third-party financer. We typically advise providers to get the patient’s prior written authorization, using a HIPAA-compliant authorization form, before providing any individually identifiable information to the financer.

Sometimes financers will encourage providers to disclose patient information to them prior to the patient requesting it based on a “business associate agreement” the financer has signed with the provider. In these situations, often the provider will forward the financer-specific patient information before the patient has expressed an interest in the financing product. Providers relying on a business associate agreement rather than a patient authorization to transmit patient information to a third-party financer should consult their legal counsel to ensure the disclosure for health care operations is appropriate based on the specific facts.

Finally, providers should review how financing products are marketed to patients to ensure HIPAA compliance. HIPAA generally requires a patient’s written authorization prior to using or disclosing their health information for marketing purposes unless an exception applies. “Marketing” is defined as “a communication about a product or service that encourages recipients of the communication to purchase or use the product.” 

Financial Assistance Policies

Providers who have financial assistance or charity care policies should review how the financing products they promote are coordinated with these policies. This is especially important for providers required by federal or state laws to implement these policies, such as tax-exempt hospitals under IRC 501(c)(3). Ideally, finance products would be offered after consideration and application of available financial assistance. Providers should review:

• Whether patients are informed of available financial assistance prior to being offered financing options;
• What, if any, financial assistance is available to the patient after he/she has enrolled in a financing option if his/her circumstances change prior to full payment;
• How patients are advised on the interaction between the financing products and potentially available financial assistance;
• What discounts or pricing patients are offered and the impact, if any, on their enrollment in financing products.

No Surprises Act & Billing Disputes 

Due to new federal protections relating to surprise medical bills that went into effect in 2022, providers will want to ensure the use of financing products does not interfere with a provider’s ability to comply with the No Surprises Act. 

Specifically, uninsured and self-pay patients who are entitled to a good faith estimate must be allowed to initiate mandatory dispute resolution procedures if the actual bill is $400 or more than the provided estimate. All collection procedures must cease during the dispute resolution process. In addition, if the patient is successful, the provider can only charge the patient the amount in the estimate. Providers will want to ensure any third-party products they are promoting are structured to ensure they can comply with their responsibilities under the No Surprises Act.

Additionally, it would be wise for providers to consider how all patients, including those currently not protected by the No Surprises Act, dispute medical bills after financing is received and applied to outstanding balances as well as what, if any, fees or interest should be waived in light of billing errors or disputes.

Incentives & Kickback Issues

The agencies’ inquiry specifically states they are looking at the types of incentives received by health care providers from third parties to promote financing products. Providers should review their relationships to determine what, if any, remuneration they are receiving in connection with the financing product outside of payment of the amount owed to the provider by the patient. To the extent the provider does receive an incentive to promote a product, the provider should discuss the incentive with legal counsel.

Reasonableness of Terms & Communication Strategies 

The agencies’ inquiry and subsequent press releases send a message that the Biden Administration is concerned about, and looking to protect consumers from, finance products that increase medical debt and raise the ultimate consumer cost of medical services through high fees and interest rates.

To maintain trust and goodwill with patients, as well as reduce the risk associated with their promotion of these products, providers will likely want to choose and recommend products with reasonable terms and avoid surprise or high fees. Providers should also consider whether they received patient complaints regarding the products they are recommending and ensure the third parties they work with are reputable and comply with applicable laws.

The agencies also raised concerns about patients feeling pressured or coerced into signing up for finance products. Providers should review how and when the products are communicated to patients and what, if any, representations the provider is making to patients regarding the products and/or what will happen if the patient decides not to utilize a financing product and cannot pay his/her bill. Providers should consider what, if any, other alternatives are offered to patients as potential payment options, including payment plans before utilizing financing products.

Providers and financing vendors who promote or offer these products to patients should strongly consider commenting in response to the agencies’ inquiry, including providing information on best practices that could be useful to the agencies and help guide future rulemaking. 

Public comments can be submitted until September 11, 2023, via email to MedicalDebtRFI_2023@cfpb.gov by referencing Docket No. CFPB-2023-0038 in the subject line.