Credit reports: why hospitals need it?

Privacy issues are the most vital factor that comes in the mind of consumers frequently but then also number of hospitals are digging patients' personal financial information to evaluate how likely they are to pay their bills.

Few hospitals are poking into patients' credit reports, which contain information on people's lines of credit, debts and payment histories. Some hospitals are also contracting with outside services that predict a patient's income and whether he or she is likely to walk away from a medical bill. Hospitals often use these services when patients are uninsured or have big out-of-pocket costs despite having health insurance.

Hospitals say the practice helps them identify which patients to pursue actively for payment because they can afford to pay. They say it also allows them to figure out more quickly which patients are eligible for charity care or assistance programs.

Administrators also argue that these credit checks can help them minimize losses. In 2006, nearly 5,000 community hospitals provided uncompensated care costing $31.2 billion, the vast majority of it charity care or unpaid patient bills, according to the American Hospital Association.

Karen Godfrey, who runs revenue management at Baptist Health South Florida says Hospitals have "a limited amount of resources that are available to actually execute the collection process,” a Miami system of five nonprofit hospitals that is likely to adopt one of these systems soon. "You want to concentrate on the ones that have the ability to pay."

Consumer advocates say the practice creates the potential for hospitals to misuse the information by denying or cutting back on patients' care if they can't pay. Hospitals say that doesn't happen. Hospitals often ask patients for permission to access their financial records, but such authorization is sometimes buried in the fine print.