People use three types of credit cards to pay for healthcare: general credit cards, credit cards co-branded with hospitals, and healthcare credit cards.  In turn, there are three main types of healthcare credit cards: those that look like general credit cards focused on healthcare; those that offer lines of credit associated with HSAs; and those that use a system of healthcare reward points to pay medical bills. These credit cards often have high interest rates or else low initial rates that skyrocket if payment is late.  People often get approved much more quickly despite credit history than with standard cards.  In the case of co-branded credit cards, patients are sometimes unaware that they are signing up for credit card debt.  Cards are intended for medical expenses that are not emergencies, because hospitals have to cover emergencies.  This is for elective procedures as well as routine medical expenses that if otherwise not treated affects care continuity and prevention.

CareCredit is a healthcare card offered by GE Money.  It is not co-branded with any provider or insurance company.  Over six million cardholders have used it for elective procedures such as LASIK and vision care, veterinary medicine, dentistry, cosmetic surgery, hearing care and more.  Terms are as follows: variable APR is 22.98% and variable delinquency APR of 28.99%.  The total loan volume for GE Money in 2007 was $5 billion.

AMEX HealthPay Plus card, a healthcare payment solution for participants in Empire’s CDH plan. The card, provided by AMEX Bank, provides two payment options in a single payment option to providers, physicians, pharmacies and hospitals. It is tied to both an HSA and a line of credit to help cover costs that may exceed the balance of the HSA. To enable this single-source solution, Empire integrated their claims processing with American Express payment processing.

Aequitas Capital Management, a private equity firm in Portland, Ore., provides financing through its CarePayment card to 50,000 patients treated at two dozen hospitals. CarePayment charges no interest on debts repaid within 25 months. However, they offer prompt pay discounts for patients who pay within 1-6 months. Aequitas makes money by buying patient debts for about 80˘ on the dollar and then seeking to recover the full amount.

It’s a potential way for hospitals to offload risk. The hospital gets paid immediately for services and does not have to expend resources on collections. The credit card company generates revenue on interest and/or buying the debt at a discount. Insurance company gets a healthier pool. Patient is better able to manage the medical expense but may be subject to negative terms. The credit card company most likely aligns with an insurance company or a hospital.

Speaks to multiple leverage points.

• Predictability across multiple pricing and payment strategies:
• Adds predictability to the payment strategy
• Realignment of collections practices and perceptions of shared risk in system:
• Decreases risk and collection costs for hospital
• Risk falls almost entirely on patients – not much sharing
• Rebalancing of Intermediation and Disintermediation:
• Insurance companies recognizing the patient portion and designing solutions
• Hospitals and patients see their interests aligned and are working together to replace the insurance company with a credit card company (with the result that hospitals enjoy decreased risk while consumers face increased risk).
• Anticipation of out-of-pocket revenue and expenses
• Increases visibility into revenue for hospitals
• Could increase visibility into expenses for consumers, but sometimes in exchange for unfavorable terms and increased cost
• Smoothing the vicissitudes of  individual financial context in the face of the cost of healthcare events:
• Smoothes the cost of care through planned payment system