The Consumer Financial Protection Bureau (CFPB), the U.S. Department of Health and Human Services (HHS), and the U.S. Department of Treasury (Treasury) just launched an inquiry into medical credit cards, installment loans, and other high-cost specialty financial products. This comes as more and more medical providers are partnering with financial institutions to promote these risky products to patients. While medical credit cards and installment loans can help cover medical costs, they often come with steep deferred interest rates that can financially devastate patients with endless medical debt. As a recent CFPB report found, patients often are presented with these financial products after receiving a bill in their doctor's office that they cannot afford. Trusting their doctor and often in a vulnerable state, patients will sign up for these products without fully understanding the full terms and conditions. This same report found that from 2018 to 2020 these medical credit cards and installment loans were used to pay for almost $23 billion in health care expenses and over 17 million medical purchases.
But the increasing role financial actors play in the U.S. health system is not limited to just these consumer products. More and more, we are seeing the financialization of our health system where health and health care delivery have become a commodity that can be bought, sold, and integrated into the financial system. The rise of private equity firms is perhaps the most startling example as private equity firms have engulfed large swaths of the health system from physician practices to nursing homes to hospitals.
A systematic review recently authored by Joseph Dov Bruch, one of the authors, found that private equity ownership was associated with higher costs to patients with generally mixed to harmful impacts on quality. This comes following a report published recently that found private equity acquisitions were associated with patient expenditure increases ranging from 4 percent to 16 percent in some specialties. Private equity firms are increasingly working with other financial actors like real estate investment trusts (REITs) to capture profit opportunities; in these arrangements, REITs acquire properties (eg, hospitals) from private equity firms and then lease the real estate back to the health care operator tenant (ie, a sale-leaseback). Often, the PE firm and the REIT benefit financially but the health care operator is stuck paying the rental fees. A recent study we conducted found that REITs owned the real estate to 3 percent of hospitals, 9 percent of senior housing/assisted living facilities, 6 percent of medical office buildings, and 12 percent of skilled nursing facilities nationwide.
Prior experience has shown that legislation and regulation can curb the worse impulses of the financial sector. Before the passage of the No Surprises Act, patients were at risk of exorbitant out-of-network surprise bills. Having insurance itself was not a guarantee of financial protection; one study found that 20 percent of commercially-insured patients undergoing surgery at in-network facilities were subject to out-of-network bills. This is in part because private equity firms targeted emergency medicine, anesthesiology, and radiology practices and staffing companies for acquisition–settings where patients generally may not have a choice in the physician who is delivering their care and thus patients were vulnerable to out-of-network fees in these settings. With the passage of the No Surprises Act, the tables have turned back in favor of consumers. Focused only on short-term gains and not on investments in sustainable physician practices, many private equity-backed physician staffing organizations such as Envision Healthcare have declared bankruptcy. Patients need policymakers and regulators to watch out for their interests to ensure that they are not cured into destitution.
The recent focus on medical credit cards and predatory medical debt and collections practices is an important step in shining light on this alarming trend. The intragovernmental collaboration across CFPB, HHS, and Treasury highlights the financialization of health and the need for better regulation across government – working in a coordinated manner to protect patients from these harmful practices. This similar intragovernmental approach should be adopted as regulators and policymakers examine the effects of financialization across the entire health system from hospitals and nursing homes to physician practices. We need to examine as a society whether the buying and selling of our health through financially-motivated actors is truly the price we want to pay for a healthier society.
The opinions expressed in this blog post are the author's own and do not necessarily reflect the view of AcademyHealth or of their respective affiliated employers/organizations.