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Are Doctors Like Wall Street Lenders?

May 07, 2010

What do doctors and dentists have in common with Wall Street lenders? It may be more than you think. Health professionals worry that they're getting unfairly lumped in with bankers in financial overhaul legislation, currently pending in Congress.

A provision of the bill would give broad oversight to a new regulatory agency — the Consumer Financial Protection Agency — to police lending practices to make sure banks and other financial institutions don't extend credit inappropriately. Too-easy credit was the main contributing factor to the economic meltdown.

Because doctors, dentists and other health care providers sometimes technically act as lenders by allowing their patients to pay for care in monthly installments - such as allowing a patient to pay for $5,000 worth of braces over a year - some are increasingly worried that their practices might be subjected to the new agency’s regulatory requirements.

Physicians and dentists envision lots of paperwork, reporting requirements and related staff time. Michael Graham, managing director of government affairs for the American Dental Association, says that while they "have no idea" what those requirements would be, because the regulations aren't written yet, they're sure about one thing: it'll cost money.

As currently drafted, the bill would exempt sellers of nonfinancial goods and those not "engaged significantly" in lending. The measure's supporters say the bill does not apply to health care practitioners. But, organizations like the ADA and the American Medical Association maintain that, because the legislation does not contain a definition of "significantly," they could eventually find themselves under CFPA's watchful eye.

A letter from 23 health care trade groups outlines this and other worries. One big worry is that, since the committee report language expressly exempts dentists, all other health care professionals are then would be included by default. The American College of Emergency Physicians, the American College of Surgeons and the American Physical Therapy Association were among the letters other signers. Meanwhile, the U.S. Chamber of Commerce includes this issue – as it might affect small businesses - on a website, www.stopthecfpa.com. The groups also have the support of Rep. Nydia Velazquez, chairwoman of the House Committee on Small Business, who sent a letter echoing their concerns.

Senate Banking Committee Chairman Chris Dodd said last week that claims by the Chamber that dentists and orthodontists would fall under the purview of the agency are wrong. "An orthodontist is not a significant financial player. If your orthodontist, or doctor, or dentist lets you pay your bill over a series of months, they're not covered. If your local grocer or butcher keeps a tab and bills you at the end of the month, they're not covered," Dodd said in a press release.

A separate measure, known as the "red flag rule," highlights exactly why dentists and doctors are leery of CFPA's unintended consequences. Under the red flag action, doctors may soon be required to start assisting government investigators to help stop identity theft. The rule, which is scheduled to take effect June 1, was designed with financial institutions and other creditors in mind. But doctors will likely have to adhere to the regulation, too.

Once again, the reason is that medical professionals extend credit to patients and allow them to pay in monthly installments. The Federal Trade Commission has, so far, not been swayed by health providers' arguments for an exemption. Legislation to achieve this fix passed the House but is awaiting Senate action, said Graham, of the American Dental Association.

Graham and others are working with Dodd to clarify the language in the financial overhaul bill. "We know Sen. Dodd meant it for financial institutions," Graham said. "God bless him, but we don't think it's clear enough."

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