The New Basics: When Your Doctor Sells Credit Cards

Credit-card issuers are stepping up their marketing of health-care cards and lines of credit that help borrowers finance costly elective medical procedures. The cards, which typically boast initial interest rates of 0%, are targeted to clients of plastic surgeons, dentists and even veterinarians.

Though they help some people pay for important procedures, the cards come with a number of drawbacks that may not be apparent at sign-up, including rates that can quickly spike.

Some big firms are ramping up their offerings. Citigroup Inc. offers the Citi Health Card, while J.P. Morgan Chase & Co. pitches ChaseHealthAdvance, a line of credit aimed at helping customers finance elective health procedures such as corrective eye surgery. Even General Electric Co.'s GE Money unit offers a card, called CareCredit.

In the past two years, such specialty cards have swelled in popularity among health-care providers -- driven, in part, by baby boomers to finance devices like hearing aids and expensive procedures not covered by insurance, says Gina Calabrese, a professor at St. John's University School of Law in New York.

The card issuers don't disclose their outstanding loan volume, but GE's CareCredit card -- the field's largest -- is accepted by roughly 140,000 health-care providers, a 40% increase from three years ago.

A growing number of patients at plastic surgeon Jeffrey Spiegel's office in Boston, for example, have started using the CareCredit card to finance procedures like Botox, says Kelly Bennett, the practice's coordinator. Veterinary Emergency and Referral Group, a specialty animal hospital in Brooklyn, N.Y., gives patients who balk at expensive treatments for pets the option of paying on a CareCredit card.

In part, the card issuers are taking advantage of gaps in health-insurance policies for procedures like dental implants, corrective eye surgery and cosmetic surgery. By 2015, patients could be forking over roughly $150 billion in out-of-pocket health-care costs, according to consulting firm McKinsey & Co., up from an estimated $45 billion in 2010.

Citigroup's card allows patients to start treatments immediately instead of having to delay expensive procedures, says spokeswoman Elizabeth Forgarty, adding that the card's growth has been "robust." J.P. Morgan's line of credit "offers consumer financing for medical needs and health-care needs that may not be covered by insurance," spokesman Steve O'Halloran says.

For providers, the cards promise relief from billing headaches and the expense of wrangling cash from patients. The cards also can drive up business, since they allow patients to finance expensive elective procedures they might otherwise forgo.

But for some patients, the cards can lead to medical-billing nightmares, according to Minnesota Attorney General Lori Swanson, who says that her office has seen a surge in complaints about the cards over the past year.

Ms. Swanson says patients may not be getting complete information about rate terms and conditions -- such as how long promotional rates last.

GE Money spokeswoman Cristy Williams says her company provides "extensive training programs for our providers" and monitors their activity closely.

In addition, some health-care providers have been accused of signing up patients for cards without their consent, says Ms. Swanson, who has sued two chiropractors for allegedly doing this. Following the suits, filed in Minnesota state court in November 2009, one clinic closed. The other lawsuit is still pending.

The medical credit cards also have drawn criticism for their billing terms. The cards typically offer interest-free payments for up to a year, but when new rates kick in, they can be sharply higher.

For instance, rates on GE's CareCredit can surge to 26.99% after the promotional period ends, and the card charges "retroactive" interest rates as high as 26.99% -- meaning that if you make late payments, you may be charged interest on the previous year's balance. Ms. Williams says the rates are fully disclosed and the vast majority of account holders pay off their balances before the promotion ends.

Missing several payments on any health-care card can ding your credit score.

Another problem, say consumer advocates, is that medical providers charge patients for the full cost of a procedure at the first visit even before multistage medical work is completed. If patients are dissatisfied with their care, it is difficult to dispute since they already have been charged for it, says Mark Rukavina, who heads the Access Project, a Boston-based health-care advocacy organization.

Laura Moritz is fighting to revoke a $4,694 charge on her CareCredit card for annual heart scans. Last August, the Lyons, Ill., resident says, she signed up for the procedures with a provider that has since gone out of business. After receiving a single scan, Ms. Moritz tried to cancel the contract, but the medical provider said it "had already been paid in full by CareCredit" and couldn't reverse the charge, according to court records filed in U.S. District Court in Chicago. She is suing GE Money Bank.

GE declined to comment on an individual borrower, but noted that 96% of cardholders it surveyed report they are "highly satisfied" with the product.

There are ways to avoid such problems. First, ask questions to dodge any aggressive sales tactics, and take time to review the card terms. Try to work out a payment plan directly with your provider. Failing that, use your regular credit card, assuming it has good terms and conditions. If possible, use a reward card so you get a plane ticket in exchange for that root canal.

The vast majority of these cards promise 0% interest for at least six months, says Chi Chi Wu, an attorney at the National Consumer Law Center, a consumer-advocacy group in Boston. Be sure you know the terms of the promotional period to avoid getting socked with high interest charges. And if you do opt for a credit card, ask your doctor if you will be charged for the entire procedure at the outset.