July 12, 2008

Psychiatric Group Faces Scrutiny Over Drug Industry Ties

By BENEDICT CAREY and GARDINER HARRIS

It seemed an ideal marriage, a scientific partnership that would attack mental illness from all sides. Psychiatrists would bring to the union their expertise and clinical experience, drug makers would provide their products and the money to run rigorous studies, and patients would get better medications, faster.

But now the profession itself is under attack in Congress, accused of allowing this relationship to become too cozy. After a series of stinging investigations of individual doctors’ arrangements with drug makers, Senator Charles E. Grassley, Republican of Iowa, is demanding that the American Psychiatric Association, the field’s premier professional organization, give an accounting of its financing.

The association is the voice of establishment psychiatry, publishing the field’s major journals and its standard diagnostic manual.

“I have come to understand that money from the pharmaceutical industry can shape the practices of nonprofit organizations that purport to be independent in their viewpoints and actions,” Mr. Grassley said Thursday in a letter to the association.

In 2006, the latest year for which numbers are available, the drug industry accounted for about 30 percent of the association’s $62.5 million in financing. About half of that money went to drug advertisements in psychiatric journals and exhibits at the annual meeting, and the other half to sponsor fellowships, conferences and industry symposiums at the annual meeting.

This weekend in Chicago, the psychiatry association’s board will meet behind closed doors, in part to discuss how to respond to the increasingly intense scrutiny and questions about conflicts of interest.

“With every new revelation, our credibility with patients has been damaged, and we have to protect that first and foremost,” said Dr. Steven S. Sharfstein, a former president of the association and now president of the Sheppard Pratt Health System in Baltimore. “I think we need to review all arrangements between doctors and industry and be very clear about what constitutes a conflict of interest and what does not.”

One of the doctors named by Mr. Grassley is the association’s president-elect, Dr. Alan F. Schatzberg of Stanford, whose $4.8 million stock holdings in a drug development company raised the senator’s concern. In a telephone interview, Dr. Schatzberg said he had fully complied with Stanford’s rigorous disclosure policies and federal guidelines that pertained to his research.

Blocking or constraining researchers from trying to bring medications to market “will mean less opportunities to help patients with severe illnesses,” Dr. Schatzberg said, adding, “Drugs that are helpful may not be developed by big pharmaceutical companies, for a variety of reasons, and we need some degree of communication between academia and industry” to expand options for patients.

Commercial arrangements are rampant throughout medicine. In the past two decades, drug and device makers have paid tens of thousands of doctors and researchers of all specialties. Worried that this money could taint doctors’ research plans or clinical judgment, government agencies, medical journals and universities have been forced to look more closely at deal details.

In psychiatry, Mr. Grassley has found an orchard of low-hanging fruit. As a group, psychiatrists earn less in base salary than any other specialists, according to a nationwide survey by the Medical Group Management Association. In 2007, median compensation for psychiatrists was $198,653, less than half of the $464,420 earned by diagnostic radiologists and barely more than the $190,547 earned by doctors practicing internal medicine.

But many psychiatrists supplement this income with consulting arrangements with drug makers, traveling the country to give dinner talks about drugs to other doctors for fees generally ranging from $750 to $3,500 per event, for instance.

While data on industry consulting arrangements are sparse, state officials in Vermont reported that in the 2007 fiscal year, drug makers gave more money to psychiatrists than to doctors in any other specialty. Eleven psychiatrists in the state received an average of $56,944 each. Data from Minnesota, among the few other states to collect such information, show a similar trend.

In both states, individual psychiatrists are not top earners, but consulting arrangements are so common that their total tops all others. The worry is that this money may subtly alter psychiatrists’ choices of which drugs to prescribe.

An analysis of Minnesota data by The New York Times last year found that on average, psychiatrists who received at least $5,000 from makers of newer-generation antipsychotic drugs appear to have written three times as many prescriptions to children for the drugs as psychiatrists who received less money or none. The drugs are not approved for most uses in children, who appear to be especially susceptible to the side effects, including rapid weight gain.

Senator Grassley’s investigations have not only detailed how lucrative those arrangements can be but have also shown that some top psychiatrists failed to report all their earnings as required.

After The Times reported on such an arrangement involving Dr. Melissa P. DelBello of the University of Cincinnati, Mr. Grassley asked the university to provide her income disclosure forms and asked AstraZeneca, the maker of the antipsychotic Seroquel, to reveal how much it paid her.

In scientific publications, Dr. DelBello has reported working for eight drug makers and told university officials that from 2005 to 2007 she earned about $100,000 in outside income, according to Mr. Grassley.

But AstraZeneca told Mr. Grassley it paid her more than $238,000 in that period. AstraZeneca sent some of its payments through MSZ Associates, an Ohio corporation Dr. DelBello established for “personal financial purposes.”

The University of Cincinnati agreed to monitor those payments more closely.

In early June, the senator reported to Congress that Dr. Joseph Biederman, a renowned child psychiatrist at Harvard Medical School, and a colleague, Dr. Timothy E. Wilens, had reported to university officials earning several hundred thousand dollars apiece in consulting fees from drug makers from 2000 to 2007 when in fact they had earned at least $1.6 million each.

Another member of the Harvard group, Dr. Thomas Spencer, reported earning at least $1 million after being pressed by Mr. Grassley’s investigators. The Harvard psychiatrists said they took conflict-of-interest policies seriously and had abided by disclosure rules.

In late June, after Mr. Grassley singled out Dr. Schatzberg, Stanford disputed some of the numbers in the report and has denied that Dr. Schatzberg violated any research rules devised to police such conflicts.

In an interview on Wednesday, Dr. Nada L. Stotland, president of the psychiatric association, said the group had studied Mr. Grassley’s letter and Stanford’s response and agreed with Stanford. Dr. Schatzberg will take over as president of the association as planned, she said.

“The larger issue here is that there’s a revolution going on” in how medicine handles industry money, said Dr. Stotland, a psychiatrist at Rush Medical College in Chicago. “That’s good, that’s what we need, and I believe we’ve been on the cutting edge of that revolution in many ways.”

Dr. Stotland said that the association began reviewing the income it received from pharmaceutical companies last March, to identify potential conflicts. Doctors and academic researchers generally worked at arm’s length from industry until the early 1980s, when Congress passed the Bayh-Dole Act. This legislation encouraged closer collaboration between researchers and industry to bring products to market more quickly. The act helped foster the growth of the biotech industry, and soon professors and universities were busy obtaining patents and building relationships with industry.

Some psychiatrists have long argued that consulting with a company — to help design a rigorous drug trial, for instance — benefits patients, as long as the researcher has no financial stake in the product and is not paid to speak about the drug to other doctors, like a traveling pitchman.

Others say industry and academic researchers are now so deeply intertwined that exposing doctors’ private arrangements only stokes suspicion without correcting the real problem: bias.

“Having everyone stand up like a Boy Scout and make a pledge isn’t going to quell suspicion,” said Dr. Donald Klein, an emeritus professor at Columbia, who has consulted with drug makers himself. “The only hope to rule out bias is to have open access to all data that’s produced in studies and know that there are people checking it” who are not on that company’s payroll.

Studies have shown that researchers who are paid by a company are more likely to report positive findings when evaluating that company’s drugs. The private deals can directly affect patient care, said Dr. William Niederhut, a psychiatrist in private practice in Denver who receives no industry money.

Dr. Niederhut said company-sponsored doctors had spread the word that new and expensive drugs were better in treating bipolar disorder than lithium, the cheaper old standby treatment.

“It’s a sales pitch, and now it’s looking like a whole lot of people would have done better if they’d started on lithium in the first place,” Dr. Niederhut said in a telephone interview. “The profession absolutely has to come clean on these industry deals, and soon.”

Tighter rules, stronger statements and more debate may not make much difference, if Mr. Grassley’s findings are any guide. Universities have rules requiring that faculty members disclose their outside income so that conflicts of interest in research or patient care can be managed. But some of the psychiatrists named in the investigations apparently ignored the rules.

“I think we may be coming to a point where hospitals and medical schools have to get serious about sanctioning,” said Dr. Paul S. Appelbaum, director of the division of psychiatry, medicine and the law at Columbia. “You can suspend doctors’ privileges, or suspend their right to treat patients; both have a huge impact on income and career. But if you’re serious about these disclosure policies, you have to be willing to back them up.”

Copyright 2008 The New York Times Company

New study about antidepressants – Big Pharma and medical agency working close together to save profits and careers

The news that antidepressants in actual fact don’t work better than sugar pills and increase the risk for suicide have filled major media the last year. Psychiatrists, Big Pharma and medical agencies, responsible for distorting the facts for many years, are now working hard to save profits and careers.

Sweden 6/25/2008 07:29 PM GMT (TransWorldNews)

The new study, “A Regulatory Apologia - A review of placebo controlled studies of new-generation antidepressants”, claiming that antidepressants work well for all forms of depression should be seen in that light. It’s another good example of how alleged objective medical agencies work close together with the pharmaceutical industry and its paid psychiatrists to increase sales.

The study was announced in the journal of the Swedish Medical Association (Läkartidningen) April 15, 2008. In the article the longstanding advocate for antidepressant drugs Professor Björn Beerman from the Swedish equivalent to the FDA, the Medical Products Agency (MPA), promoted continued high level use of these drugs. Beerman did not believe in the data presented internationally and said (as many times before) “there is no doubt that the medication has effect and that this is independent of degree of depression”. He further stated that “the effect should be less good in milder depression, that we don’t believe in”.

In the article Beerman with pride announced the new study from the MPA; a study supposed to prove his statements. The study was said to be submitted for publication in the most prestigious medical journal on the planet, the Lancet.

But this part of the story needs to be told:

What Beerman didn’t say (April 15) was that the Lancet already, almost two weeks earlier, (April 4) had rejected the article – it was not to be published. The MPA then made another try, and submitted the data to the British Medical Journal (BMJ) – another journal with high impact. But the response was the same, the BMJ rejected the material.

So the agency – with its for Big Pharma so important “research message” – went directly to the manufacturers, or more correctly to a journal with an editor-in-chief who probably has meant more for the approval and sales of antidepressant drugs internationally than anyone else: The agency submitted its article to European Neuropsychopharmacology, with its editor-in-chief, Dr. Stuart Montgomery. And it was accepted.

For those not familiar with the work of Dr. Montgomery it can be said that he played a major role in helping Big Pharma to get new antidepressant drugs approved in the beginning of the 90-ties (despite that the actual data already at that time showed the drugs gave an increased risk of suicide).  He was also responsible for the famous concealment of Seroxat/Paxil severe withdrawal symptoms. Instead of accepting the clear withdrawal symptoms so that patients and doctors could be warned Dr. Montgomery and colleagues misclassified these symptoms as signs of recurring depression – needing more drug treatment.

So a study with the PR-message that antidepressants work well for all forms of depression would most likely be very welcome in the European Neuropsychopharmacology. And it was. One of the reviewers of the article made the point very clear, saying: “This meta-analysis is very timely in the situation when the recent meta-analysis of Kirsch et al. (2008) induced a lot of uncertainty about the efficacy of antidepressants, both in the psychiatric community as well as in public opinion.” It was recommended that the article should be published “without any delay, given the situation mentioned above [“uncertainty … in the psychiatric community as well as in public opinion”].”

The MPA and its counterpart FDA have done almost nothing to use the wealth of data in its files to show the actual suicide risks with antidepressants, and to warn doctors and the public. (See the newly unsealed extensive analysis by Dr. Joseph Glenmullen of GlaxoSmithKline’s hiding of Seroxat/Paxil suicide data, as an example of how the pharmaceutical industry can act, and how ineffective and silent a regulatory agency can be in questioning the data in the drug applications http://finance.senate.gov/press/Gpress/2008/prg061208a.pdf , 4MB.) The lack of positive drug effects has always been denied by the MPA. The ineffective system for postmarketing surveillance of adverse drug effects is putting the public at severe risk – yet it is allowed unchanged year after year. The often horrible withdrawal symptoms of antidepressant drugs have been explained away as signs of recurring depression – and thus transformed to evidence of positive drug effects; and this manipulation has been accepted by the regulatory agencies. The MPA and the FDA, supposed to protect the public, are agencies out of control, and see the pharmaceutical industry as their real clients.

It’s first in a situation, where independent analyses of data submitted to the FDA show no positive effect of antidepressant drugs compared to placebo, that the Swedish MPA puts all its “research resources” in action to prove the opposite. The eagerness for collaborating with Big Pharma in getting out a PR-message, to handle the “uncertainty about the efficacy of antidepressants, both in the psychiatric community as well as in public opinion”, is yet another example of betrayal of the real clients – the public.

Janne Larsson

Reporter – investigating psychiatry

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By Julie Appleby, USA TODAY

People with health insurance are having more trouble paying for prescription drugs as higher out-of-pocket costs for medications and a slowing economy strain family budgets, according to surveys and health care analysts.

The Virginia-based National Patient Advocate Foundation, which helps people struggling to pay medical bills, found that 31% of the 44,729 people it aided last year cited drug co-payments — the patient's portion of the drug's cost — as their top medical-debt problem.

"Incomes aren't going up, but co-payments are," says Gary Claxton of the Kaiser Family Foundation, which studies health policy.

In some cases, the patient's share of drug costs is no longer a flat dollar amount, but a proportion that can range from 20% to 70%.

"Some families that have to deal with chronic or critical illness are not in a position to maintain that," says Nancy Davenport-Ennis, who heads the patient foundation.

Among evidence of increasing problems:

• 13% of insured Americans report paying for drugs is a serious problem, says a recent poll by USA TODAY, the Kaiser Family Foundation and Harvard School of Public Health. That's up from 9% in a foundation survey in 2000. The latest poll of 1,695 adults had a margin of error of +/—3 percentage points.

• The 31% reporting drug payments as their top medical-debt problem to the patient foundation rose from 26% of people in 2006 and 17% in 2005.

Co-payments have risen most sharply for costly types of drugs, Kaiser surveys of employers show.

Patient payments for generic drugs rose 38% from 2000 to 2007, and some brand-name drugs rose 48%, the Kaiser data show. Inflation rose 21% during those years.

In the Kaiser survey of 68 million workers with job-based prescription drug benefits, about 7% had coverage requiring special payments for a few costly types of drugs, including some treatments for cancer and multiple sclerosis. For those drugs, the average 2007 cost was $71 per prescription, up 20% from 2004.

Prescription drugs account for about 10% of all health care spending in the USA. Spending on drugs rises faster than inflation most years, so insurers and employers have tried to slow spending increases, in part by encouraging use of lower-cost generic drugs.

"It's a balance of making sure people have access to the newest developments while … trying to encourage cost-containment," says Karen Ignagni, president of America's Health Insurance Plans, the industry's lobbying group.

Debra Minkkinen, 47, of Coon Rapids, Minn., says her family refinanced the house, added credit card debt and finally asked for help from the patient foundation after her son had surgery for a brain tumor. The chemotherapy and radiation treatments affected his body's production of growth hormone.

Though her insurance set most drug co-payments at a flat $25 per prescription, it had a special category for high-tech drugs, such as growth hormone. For it, the family had to pay 20% of the cost, about $512 a month.

"That was a huge amount for us," she says. "You don't realize without reading the fine print (of your policy) what kind of costs you face when you really need it."

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Top News November 21, 2007, 12:01AM EST text size: TT

Fresh Pain for the Uninsured

As doctors and hospitals turn to GE, Citigroup, and smaller rivals to finance patient care, the sick pay much more

by Brian Grow and Robert Berner

In a lucrative new form of fiscal alchemy, a growing number of hospitals, working with a range of financial companies, are squeezing revenue from patients with little or no health insurance. April Dial's dealings with Hot Spring County Medical Center in Malvern, Ark., illustrate how the transformation of medical bills into consumer debt means quicker cash for medical providers but tougher times for many patients of modest means.

Dial, a 23-year-old truck-stop waitress who earns $17,000 a year plus tips, suffers from Type 1 diabetes. Sudden drops in her blood sugar level have sent her to the emergency room four times in the past three years. In September she spent three days at Hot Spring, including two in intensive care, fighting complications from her ailment. The bills came to more than $14,000. Dial's job offers no health insurance.

Until recently her mother, Carolyn, who waits tables at the same roadside diner, sent Hot Spring $100 a month under the nonprofit hospital's longstanding zero-interest payment plan. Dial says she couldn't make payments herself because she spends more than $150 a month for other treatment and insulin.

Sophisticated Help

In October she learned that Hot Spring had transferred her account to a company called CompleteCare, one of the many small firms fueling the little-known medical debt revolution. Enticed by the enormous potential market of uninsured and poorly insured patients, financial giants such as General Electric (GE), U.S. Bancorp (USB), Capital One (COF), and Citigroup (C) are rapidly expanding in the field or joining the fray for the first time. CompleteCare informed Dial that under the complicated terms of her newly financed debt, her minimum monthly payment had shot up more than fourfold, to $455. Dial says she doesn't have anywhere close to that amount left over after rent, food, and other doctor visits: "Every extra dime I have goes to paying medical bills."

Collecting from "self-pay" patients like Dial has long been the bane of medical administrators. When they don't get paid immediately, hospitals typically recover around 10¢ on the dollar owed, even when they hire collection specialists. So hospitals and clinics are bringing in more sophisticated help. They are transferring patient accounts wholesale to finance experts, banks, credit-card companies, and even private equity firms. Many of these third parties use credit scores and risk-analysis software to price the debt and impose interest rates as high as 27% on past-due bills.

Among hospitals, nonprofits like Hot Spring County Medical Center are more likely than for-profit rivals to join forces with finance firms. Fewer nonprofits have effective in-house collection departments, and in many regions a higher proportion of patients at nonprofits lack insurance. "Hospitals can't just be an interest-free finance vehicle," says Todd Cole, director of patient accounting at TriHealth, a $2 billion pair of nonprofit hospitals in Cincinnati. "The world of $5 sent to the hospital and they will never send me to collections, never sue me—that world has gone away," he adds. TriHealth sells patient accounts at a steep discount to firms that specialize in collecting delinquent consumer debt. "Hospitals need their cash," Cole says. "It is the lifeblood that supports the doctors, the nurses."

Crafty Cards

For hospitals and outside firms to obtain that cash, someone has to pay. The people most likely to feel the pain are often those least able to afford it—patients who lack private insurance but who are not poor enough to qualify for charity care or government benefit programs. The pool of self-pay patients is mammoth: Some are among the nation's 47 million uninsured; others are among the 16 million whose plans offer scant coverage or have deductibles as high as $10,000. Several recent studies have shown that medical debt is a leading cause of personal bankruptcy filings.

A host of nimble firms like Complete­Care in North Little Rock, Ark., began exploring this terrain years ago. Bigger players have jumped in more recently, although the market remains fragmented and reliable market share information isn't available. U.S. Bank, a U.S. Bancorp unit, finances about $2 million in patient debt per month through a medical-benefit firm, charging most customers annual interest of 13.5%, and as much as 24% on late bills. General Electric's powerful financial arm markets its CareCredit card to dentists, plastic surgeons, and some hospitals, with loan volume expected to hit $5 billion this year, up 40% from 2006. Citigroup and Capital One now offer similar cards. "Everybody is saying [medical finance] is the next horizon—whether it is lines of credit or credit cards," says June St. John, a senior vice-president at Wachovia (WB), which is exploring the business. Whetting all these appetites is the $250 billion consumers pay in medical expenses out of their pockets, an amount that doesn't include insurance premiums. That's an estimate for 2005 from the consulting firm McKinsey & Co. The figure could hit $420 billion by 2015.

BusinessWeek's investigation of the fast-expanding ­medical-finance field has uncovered hazards, however. Many patients say they don't realize their debts are being shifted to such interest-charging middlemen as GE Money Bank, the unit that issues the Care­Credit card. That's what happened to Alice Diltz when she visited Hillside Dental Care in Queens, N.Y., in October, 2005. Diltz, a 68-year-old part-time hospital aide, needed implants for two rotting teeth and three missing ones. The Hillside staff told her she would have to pay $7,450. But her dental insurance, provided by her retiree husband's policy, offered only $200 for extractions. Diltz paid $250 from her pocket and signed up for what she says she thought was an installment plan directly with the clinic. In fact, she signed an application for Care­Credit, which was labeled as such, but in small print. Diltz says neither Hillside dentist Ben Mokhtar nor his staff mentioned a credit card.

While having her teeth pulled, Diltz began to bleed heavily. She got scared and left the dental office after the extractions. Four days later she canceled the implants, assuming her dealings with Hillside were over. But several weeks later she received a bill from CareCredit for $7,000. Hillside had transferred that amount to the credit-card company, which in turn paid the clinic about $6,300 up front. Diltz says she called CareCredit to dispute the charge, but bills kept arriving. Several weeks later, she says she called again and objected in writing. But GE told her she had missed a 60-day deadline and couldn't reverse the charge.

Outside Scrutiny

The GE card typically comes with an introductory 0% interest rate, but after Diltz didn't make her initial payment, the rate leapt to 26.99% on an annual basis. In August, 2006, GE Money Bank sued her in state court in Queens. With the help of the nonprofit Elder Law Clinic at St. John's University School of Law, she contested the debt, which grew to $10,175. "It was horrible to get those letters from GE," says Diltz. She and her husband live on $18,000 a year from her part-time job and social security benefits. "It was so stressful from day to day."

A GE spokeswoman, Cristy F. Williams, said in an e-mail that the vast majority of CareCredit's 6 million customers are satisfied. In the Diltz case, "we provided her with a dispute form and discussed the dispute process with her a number of times," Williams added. "She did not respond for several months." However, on Nov. 12, after BusinessWeek inquired about the case, GE said it had changed its stance. Williams said the company would erase Diltz's debt and remove any reference to it on her credit report. The spokeswoman said GE had begun to reassess Diltz's account on its own initiative. "We could have and should have been more sensitive to Ms. Diltz," she said.

Diltz's lawyer, Gina Calabrese, said she was skeptical that GE would have reversed itself absent a reporter's asking questions. "They knew about all these facts almost a year ago," the attorney said. "Imagine what is happening to all the unrepresented people who have valid cases." Mokhtar and his staff declined to comment.

About-Face

In another instance, BusinessWeek's questions prompted GE to acknowledge that a medical clinic had pressured uninsured patients into using the CareCredit card. Dawn Shelly, 33, visited the Christie Clinic in Urbana, Ill., in late 2003 for a sinus infection. She told a staff member she couldn't afford to pay the $90 bill in cash. At the time she earned $7.50 an hour as a part-time school bus monitor; the job didn't offer insurance. The clinic, Shelly says, told her the only option was to apply for CareCredit. She says she thought she was signing up for a program similar to insurance, under which she would owe only a modest co-payment. "I never would have signed up if I knew it was really a credit card," she says.

Her CareCredit balance mounted with several additional visits to the clinic and a local emergency room, where she was treated by a clinic doctor. Unable to keep up with payments, Shelly, now unemployed, owes $3,485 to CareCredit, according to an Oct. 24 collection letter. Much of that balance comes from late fees and finance charges of 26.99%.

Until recently, the Christie Clinic's Web site stated that patients who couldn't pay in full "must apply for Care­Credit." After BusinessWeek asked GE about the clinic's policy, the company said it would correct the situation. "We are instructing the provider to remove the language and change their policy for soliciting applicants for CareCredit," said GE's Williams. She added that GE would drop all fees and finance charges from Shelly's bill. The company also will try to resolve the concerns of any other patients who were required to use CareCredit, she said.

In early November, the Christie Clinic removed all references to payment policies from its Web site. Anni McClellan, the clinic's director of financial services, said it is reviewing the policies. Christie discusses a variety of payment options with patients, she said. "There are so many specific circumstances surrounding each patient's financial conditions."

The Fine Print

Early experiments with financing self-pay medical bills began in the 1980s, when consumer-credit executives saw an opportunity in soaring debt levels and inefficient hospital billing practices. Most patients think that "your doctor will probably see you again and the hospital will not turn you away if you don't pay the bill," says Richard L. Clarke, chief executive of the Healthcare Financial Management Assn., an industry group. "On the other hand, with the credit card or a loan [from] the bank, people will be more concerned about defaulting because that is almost certain to cut them off from credit."

That's precisely the strategy that drives CompleteCare, the small Arkansas firm, which says it works with 40 hospitals and more than 400 physician practices across the country. Addressing potential health-industry clients, the company boasts on its Web site that it "pioneered the concept that patients become consumers the minute they walk out of your facility." April Dial, the diabetic waitress, says she didn't realize she had been transformed in this manner until weeks after leaving Hot Spring Medical Center in September.

Dial says a hospital financial counselor told her mother by phone in October that Hot Spring had discounted her debt by roughly 50%, to $7,300, before transferring the balance to CompleteCare under a contract the company signed with the hospital in June. Although she was surprised to learn about the transfer, Dial in fact had signed an admission-consent form at Hot Spring that included a small-print section authorizing the hospital to turn over her account. In contrast to the hospital's former zero-interest payment plan, Complete­Care charged Dial 5.75% interest on the first $2,500 of her balance, with a minimum monthly payment of 10% of the outstanding debt. CompleteCare initially applied the 10% rate to only $4,545 of the total bill, and required that Dial pay $455 a month.

After BusinessWeek contacted CompleteCare in early November, and Dial asked to have her case reviewed, the company said it would lower her minimum payment to $125, interest-free. CompleteCare President Steven C. Owen said the company changed the terms because Dial's "situation is so dire in terms of the balance owed. Our whole philosophy is trying to make it easy to pay."

Dubious "Help"

Hot Spring's chief financial officer, Sheila Williams, said the hospital switched to Complete­Care hoping that patients "would pay a little faster if they were charged interest. It would become like a credit card." CompleteCare ran an ad in a local newspaper this summer to announce the change. But in recent weeks, she said, the hospital has reconsidered the arrangement in response to a complaint from a patient other than Dial. Hot Spring decided that effective Nov. 9, patients using CompleteCare would no longer be charged interest. "We just rethought it and decided that maybe it is not in the best interest of our patients," the hospital executive said.

Dubious innovations in medical financing are beginning to gain attention in Washington. Lawmakers and the IRS are investigating more broadly whether nonprofit hospitals provide sufficient free care to the uninsured to warrant more than $50 billion in annual tax breaks. Senator Charles Grassley (R-Iowa), the ranking Republican on the Senate Finance Committee, says some new financing arrangements appear to undermine the justification for tax-exempt status enjoyed by more than half of the country's 5,700 hospitals. "I'm very troubled by what we're seeing with some nonprofit hospitals' cozying up to banks, debt buyers, and credit-card companies over patients' medical bills," Grassley said in a statement responding to questions from BusinessWeek. The American Hospital Assn. said it hasn't studied the financing in question, but the trade group has repeatedly asserted that nonprofits provide ample community service to justify their tax benefits.

One of the leaders in this new field, HELP Financial, says that it merely makes the health-care business run more smoothly. The privately held Plymouth (Mich.) firm, whose initials stand for Hospital Expense Loan Program, says it has financed close to $300 million in medical bills at 100 hospitals nationwide. HELP purchases the debt at a discount and then charges patients interest of 10% to 18% over periods of one to five years. "The motivation for the hospital is really to keep them in the health-care business and out of the banking business," says HELP Vice-President Steve Posa.

Mia and Jase Redick reluctantly became HELP customers earlier this year and then discovered that they owed the company a hefty 14.5% on a bill of $6,293. In January, Mia, 36, had been rushed to Satilla Regional Medical Center in Waycross, Ga., after suffering a mild stroke. Tests revealed a small hole in her heart, a congenital defect that eventually required surgery. Mia, a pharmacy worker, and Jase, a job trainer for the state of Georgia, earn a combined $90,000 a year and have two small children. They lost state-provided insurance when Jase became an independent contractor in 2005, and had chosen to save money by going without coverage at the time Mia had the stroke. The couple assumed they would be able to pay the $6,293 tab for emergency care and tests in monthly interest-free installments. For years that's how Mia's family, Waycross natives, had used Satilla's in-house payment program. "It's what we always did," she says.

But on the winter morning when Mia arrived at the emergency room, a hospital administrator informed the Redicks that Satilla no longer offered its old payment plan. Jase says he was distraught and refused to discuss money that day. At a meeting the next week, the Redicks say they were told they had two options: retire the debt within 90 days and receive a 15% discount, or finance through HELP. With insufficient cash in the bank, the Redicks chose HELP. Distracted by Mia's condition, they didn't ask about having to pay interest. The bill arrived in March with the 14.5% rate, which translates into a monthly payment of $148. On top of $24,000 they owe to another hospital where Mia had surgery in February, "the overall cost of the debt is a lot to handle," says Jase.

Discounted Debt

Officials at Satilla say they brought in HELP in 2002 to reduce bad debt levels among the large population of uninsured patients in the hospital's rural south Georgia region. Through October, HELP had acquired $718,000 in Satilla debts. HELP pays 92¢ per dollar owed to the hospital. Satilla could trim the firm's 14.5% interest rate by selling debts at a greater discount but has chosen not to, according to Brenda Williamson, the hospital's accounts-receivable supervisor.

Barbara G. Albert, Satilla's patient financial services manager, stressed that the Redicks turned down Satilla's discounted 90-day payment plan.

With more uninsured patients failing to pay medical bills, she said Satilla has to rely on HELP. "When you go to the dentist or the vet, you know you have to pay. If you go to the hospital, why should it be different?" said Katrina Wheeler, Satilla's chief financial officer. HELP's Posa said that it's up to ­Satilla and other hospitals to decide on appropriate interest rates: "What is right in one market may not be right for another."

Melvin Johnson, 55, another Satilla patient, has insurance, but his low-cost policy with AARP, the retiree-advocacy group, didn't cover the colonoscopy his doctor ordered in September. Johnson turned out not to have cancer, but the visit produced a bill for $3,304. He and his wife, Dolores, earn about $35,000 a year from her work as an outreach coordinator at a community health center and his construction job. Satilla's cut-off for charity care is twice the federal poverty level, or $27,380 for a two-person household. Unable to pay in cash, the Johnsons chose HELP. The 14.5% interest rate means their monthly payment comes to $125. "It has caused us to rearrange our budget," says Dolores, 35. "We've had to cut other expenses and reduce our savings." Satilla's Albert said the couple could have bought better private coverage. "They're saving money," the hospital manager said. HELP imposes a cost on the hospital, her colleague Williamson added, in that Satilla gives HELP an 8¢-per-dollar discount on patient debt.

Patient Focus

Some medical financing programs manage to turn a profit without charging patients conventional interest. Aequitas Capital Management, a private equity firm in Portland, Ore., provides financing through its CarePayment card to 50,000 patients treated at two dozen hospitals. CarePayment charges no interest on debts repaid over 25 months. Aequitas Chief Executive Robert Jesenik says his firm makes money by buying patient debts for about 80¢ on the dollar and then seeking to recover the full amount.

But patients aren't necessarily better off with CarePayment because they sometimes forgo discounts hospitals offer to people who pay in cash. At Spectrum Health, a nonprofit group of seven hospitals in Grand Rapids, Mich., self-pay patients who can write a check within 30 days receive a 20% discount; those who pay within six months get 10% off. Patients who charge their debts to CarePayment get no discount. Referring to CarePayment, Kathleen Engel, an associate professor at Cleveland-Marshall College of Law, asserts: "This is a markup, not a markdown." Engel, a consumer law expert, says that because hospitals effectively charge more when patients use CarePayment, the hospitals should disclose the price difference as the equivalent of an interest rate under the federal Truth in Lending Act.

Joseph Fifer, Spectrum's vice-president of finance, said its disclosure is legally sufficient. Steven M. Wright, Aequitas' senior managing director for health markets, agreed. Wright said Aequitas complies with the law by disclosing its payment terms when it sends CarePayment charge cards to new customers. From his position as chief financial officer of Methodist Le Bonheur Healthcare, a $1.2 billion nonprofit network in Memphis, Chris McLean has grown increasingly skeptical of all these developments. Five of his seven hospitals serve a large portion of Memphis' poor population. Instead of selling medical debt, Methodist gives self-pay patients a 50% discount. Many are then allowed to pay over five years, interest-free. The debts of many others are immediately written off. One of Methodist's facilities serves a wealthier clientele and another is the city's only children's hospital; those units subsidize the other five. "We get a lot of tax breaks, and for that we should ­produce some community benefit," says McLean. "If we heal somebody medically, but we break them financially, have we really done what is in the best interest of the patient?"