A new 'credit score' for patients?

By Liz Pulliam Weston

Credit scores can be complicated, confusing, easy to trash and hard to fix. Yet they're increasingly important components of our lives, used by lenders, landlords and insurers to evaluate our financial worthiness.

So the recent news that a startup company was developing a "medical FICO score" to gauge people's ability to pay hospital bills created quite a stir.

Consumers, privacy advocates and bloggers speculated on the many ways the so-called MedFICO could be used and misused to determine who gets health care or even jobs (assuming employers might use low scores to exclude unhealthy potential hires).

That's a lot of sound and fury to focus on something that doesn't actually exist.

"There's no such thing as MedFICO," said Steven Campanini, a spokesman for the Tenet Healthcare hospital chain. Tenet is one of the investors in Healthcare Analytics, the startup in question; the others are Fair Isaac, the creator of the FICO credit score, and venture-capital company North Bridge Venture Partners. Each company has chipped in $10 million.

What Healthcare Analytics is developing "is not a credit score," Campanini said. "It's not even a score."

Then what is it?

Healthcare Analytics hopes to create a suite of tools that may help drag the notoriously muddled world of hospital billing into the 21st century.

The goal isn't to benefit consumers. It's to help hospitals -- most of which are not-for-profit -- deal with a rising mound of unpaid bills as the number of uninsured and underinsured patients soars. If hospitals can figure out who can pay and how much, they might just be able to stay in business. If they continue as they are, wasting their money hounding people who can't pay, they might not.

If the idea of more efficient hospital billing and collections scares you -- well, you need to know how the current system works against you. Read "Why medical debts shouldn't count" for more details on how inefficient and irrational medical billing practices can trash your credit and your finances.

A rational hospital billing system might not, for example, send a $30,000 bill to an uninsured patient who makes $20,000 a year. What if instead of dunning the patient for months, turning the account over to collections for pennies on the dollar and trashing the person's credit, the hospital's billing department discounted the tab and offered a reasonable payment plan that fit the patient's financial circumstances?

Or how about creating a sensible procedure for doling out charity funds? Most hospitals earmark money to pay the bills of indigent patients, but the institutions may not have objective procedures to decide who gets the help. Too often, patients aren't even told the money exists or how to apply for assistance, so instead of going to the most deserving, the money may go to the best negotiators or the ones who are the most skilled at threading through the bureaucratic maze.

Hospitals can already check credit

Would Healthcare Analytics' tools actually improve hospital billing practices? It's impossible to tell; the company is months away from even having anything to beta test.

Right now, the startup is collecting and poring over billing records from hospitals across the country. It's also examining collections tools and procedures widely used in the lending industry to see what, if anything, could be translated to the world of hospital billing.

Continued: Should we be concerned?

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