Scalpel, sutures, credit card… - Laurence Fendrich's Health Cap credit card for medical expenses

Nation's Business, April, 1988 by Bill Chastain

The last thing that a medical patient wants to worry about is how to pay the doctor's bill. And the last thing a physician wants to think about while treating a patient is how payment will be made.

For doctor and patient alike, a prescription for avoiding bill-payment headaches could be one of the health-care credit cards now being marketed. One such card is Health Cap, created by Dr. Laurence Fendrich, a dentist in Tampa. He says his health-care card soon could be accepted nationwide as a way to pay for doctors' fees, laboratory tests, hospital stays, surgery-and even veterinary care for house pets.

Fendrich, 32, founded the Tampa-based company that issues the Health Cap card. The card is designed to work like a major credit card, except that it can be used only for medical, dental and other health-care bills. "Most people who have credit cards don't like to have their minimum balance spent on an operation or some kind of dental work," Fendrich explains. "Instead, they would rather have something like Health Cap handy for that type of thing."

Health Cap, launched three years ago, has nearly 50,000 card-holders, Fendrich says, and is accepted at 1,300 health-care offices by about 1,500 doctors, 60 percent of them in Florida and the rest in 34 other states.

Like other credit cards, Health Cap charges users a fee based on the outstanding balance and calculated at an annual percentage rate, currently 18 percent.

For the doctor, use of the card can reduce cash-flow problems and can reduce if not eliminate the need to set payment schedules for patients.

Looking for solutions for such problems, Fendrich conceived the Health Cap idea and in 1985 persuaded Citizens & Southern (C&S) National Bank, in St. Petersburg, Fla., to back the program. C&S decides on patients' applications for the Health Cap card and collects the charges made with the card.

A participating doctor pays an initial fee of $349 plus $10 a month to lease a terminal to process transactions. A Health Cap cardholder pays $24 a year.

When a patient presents the card at a doctor's office, the transaction is recorded; the patient's account is charged; he or she receives printed verification; and the total fee is credited to the doctor's bank account.

C&S was cautious about Health Cap in 1985, since it was a time when some credit-card operations were failing, says David Meyer, senior vice president of the C&S bank in St. Petersburg. "We started out conservatively and concentrated on quality rather than growth. Now I can easily say it has exceeded what I thought to be its potential. It's growing like wildfire."

Another such card, the American Medical Credit Card, is headquartered in Brentwood, Tenn., near Nashville. It began at about the same time as Health Cap and has more than 60,000 cardholders in Tennessee and adjoining states, where it is being test-marketed, says a company official.

The card costs $15 per family per year, uses computer terminals for entering charges and is accepted at more than 1,400 medical facilities. The card is popular with college students, says Nick Petrella, vice president of American Medical Credit Corporation. He says that many students-and their parents-like to have a credit card for health-care expenses so that such charges will not tie up large portions of their credit limits on major cards.

Marketing the Health Cap card to doctors has been "our biggest problem," Fendrich says. While the card is marketed to consumers mainly by direct mail, it is sold to doctors largely through sales calls to their offices and advertising in medical journals.

Among the health-care professionals who have signed on with Health Cap is Tampa dentist John Solak. He says the card "makes dentistry services more available" to some who might have difficulty paying for And it's not a credit card someone can get himself in a jam with. People can't fly to Vegas with it or go out and buy a dress. Face it, there's not a lot of people who are going to impulsively go out for a couple of crowns on their teeth."

Yet some have expressed reservations. A Tampa pediatrician who had not beard of Health Cap, and who declined to be named, stated: "We [doctors] have a responsibility to see about the welfare of our patients. At times this responsibility extends to the good will we offer them.

"One man who brings his five kids to me . . . makes $14,000 per year. So what are you going to do-turn him away if he can't pay? Of course you can't do that. But you would like to get paid for your services, In that respect the card sounds good. On the other hand, I feel better if the patient pays me when he can rather than having him put at the mercy of the finance company by using some medical credit card."

For Fendrich, Health Cap has bad a major impact. He has scaled back his dentistry practice to one day a week and spends the rest of his time on Health Cap business. And if the card catches on nationwide, he says, he may give up dentistry altogether.