'MedFICO' can check patients' credit risk

It's a new way for hospitals to gauge your ability to pay, and it's coming soon.

Minneapolis-based Fair Isaac is among those investing in a tool to help hospitals cut down on bad debt. The market has already dubbed it the MedFICO score. But Fair Isaac, reacting to early consumer outrage, says the tool is still being developed and may not even be in the form of a score.

John Ulzheimer, president of consumer education for Credit.com, tells consumers what to expect and why it's better to pay a bill even if you don't agree with it rather than risk blackening your credit history.

Q How might a medical score work?

A MedFICO is still in research and development, but the idea is to use billing patterns to predict the likelihood patients will pay their bills. There already are other commercially available scores such as Equifax.

It's a back-end operation that happens when a patient fills out forms, and the patient will be scored before medical services are rendered. [This way], hospitals can more appropriately allocate resources to certain types of debt. Now, John, he might have a very good score and you can just send him invoices.

Now, David, you may have to track him down. Today, hospitals treat all patients the same.

A Not at all. It would be a PR disaster and questionably legal.

Q Are hospitals doing this already?

A Yes. They can now review your credit report. For example, you have a bill for $1,000 with this hospital and you have an Amex card with a $10,000 limit and a $5,000 balance. The hospital now has the ability to validate whether the consumer can or cannot make payments.

Q How will MedFICO change things?

A I don't think it will. It's not going to be any better because Fair Isaac built it. It's just going to be another tool.

A There are things consumers can do to prepare for the time when they have to go to a hospital. If you've got a high deductible and you're getting bills from providers, are you making those payments on time? If you have a poor medical credit score, in future, those letters may be accompanied by harassing phone calls.

One of the biggest problems is disputes over services rendered and prices charged. Say you go to a hospital and they give you an Advil and charge $79 on the bill. You know you can get Advil for $7 at the grocery store.

Q What do you do?

A Pay it. You choose to lose the battle and continue to win the war. If you choose to fight the fight -- and I've seen this hundreds of times -- you end up with collections on your credit report and then you immediately want to pay. Better to pay first and try and get it back later.

Q What are the chances of that happening?

Q This goes against everything we've been told about being an engaged health care consumer and questioning everything.

A When you sign the forms, there is nothing in there that gives you the ability to negotiate a fee for services rendered.

It may sound like bad advice but [if there's a collection on your credit history] you're going to be paying thousands more for loans over the next seven years because your interest rates are going to be much higher. It's the lesser of two evils.

Q You're asking patients to roll over and play dead.

A In today's credit environment, lenders are scrutinizing everything. To choose not to pay because you don't agree with the charge is very, very foolish.

A That's probably much more explainable. You don't see many $5,000 to $6,000 bills in collections, it's usually $50 to $500. For several thousand dollars, providers are willing to work on a payment plan. But for something small like Advil or a gauze pad, they're not willing to work with you on a payment plan.

Q Describe what your organization, Credit.com, does exactly.

A We do a lot of referrals to lenders and get paid by lenders. We have more than 200 loan products from credit cards to personal loans to home loans to auto loans. I run the educational services group.

Q So I guess the credit crunch means you're pretty busy these days.

A I am buried. Absolutely buried.