In Vitro a Fertile Niche for Lenders

Julie Barth's prayers were answered when a doctor in Crystal Lake, Ill., told her in vitro fertilization might get her pregnant.

But he didn't stop there, referring her to a "fertility finance" company that lent her $5,000 at an interest rate of 7.99% to help cover the $24,000 procedure. Her daughter, Olivia, was born about a year later.

"You can't put a price on a smile like that," says Ms. Barth, 32 years old. She hopes to pay off her loan from Springstone Financial LLC, based in Southborough, Mass., by her daughter's third birthday in 2014.

At a time when many traditional lenders are struggling, companies that join forces with doctors to make loans for in vitro fertilization, egg harvesting and other fertility treatments say their business is thriving.

One reason: Fertility-finance companies are getting a boost from the banking industry's retrenchment. For example, credit has become tight for home-equity loans and credit cards, two ways couples often have paid for fertility treatments that often top $20,000. Mike Gilroy, Springstone's president, says business is robust because "if the time is right" to have a baby, "people want loans even in a sluggish economy."

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Close Clayton Hauck for The Wall Street Journal

Julie Barth (with daughter, Olivia) borrowed from a fertility-finance company for her in vitro treatments.

Amid a struggling economy, companies in the business predict that lending will grow this year as demand swells from couples desperate to have a baby but unable to afford fertility procedures on their own.

Despite the demand from would-be parents, the loans have generated criticism from some doctors, concerned that they take advantage of couples' desire to have a baby at any cost. Some doctors won't offer the loans. Others worry that doctors who invest their own money in fertility-finance companies will push the loans on patients.

The loans typically are unsecured and carry interest rates of as much as 22%, more than the average credit-card rate of around 17%. The rates offered vary based on the lender's evaluation of a patient's credit-worthiness.

Fertility finance is "pretty much a recession-proof business, since the biological clock doesn't stop," says Doug Weiss, senior vice president of IntegraMed America Inc., a fertility-clinic operator based in Purchase, N.Y.

Borrowing for Baby

• Some fertility doctors tell their patients about the loans.
• Some clinics let patients apply for loans on their websites.
• Interest rates range from 3.99% to 22%
• In vitro fertilization is the most popular fertility treatment in the U.S.

WSJ reporting

IntegraMed sets up couples with loans through a partnership with Springstone and NBT Bancorp of Norwich, N.Y. The partnership's number of loans jumped 41% in 2011 from a year earlier, and totaled $15.4 million.

"I have never been more confident about the opportunity we have in front of us," Jay Higham, IntegraMed's president and chief executive, told investors after the company reported record quarterly earnings last Thursday.

Regulators don't keep track of the number of fertility-related loans, but firms in the industry say they totaled about $4 billion last year, up slightly from 2010, although there is no independent verification of that amount.

Dozens of companies make these loans. As part of their pitch, the companies tell doctors that loans will increase patient demand. Lenders say the doctors don't get fees or commissions on the loans.

"Offering affordable financing to your patients is a way to GROW your practice," My Medical Funding, a fertility-finance company in Tampa, Fla., says on its website. The company didn't return calls for comment.

The lenders ask doctors to promote the loans to their patients and stock clinics with brochures. Some clinics allow patients to apply for loans directly through their websites.

"We thought it was the best option because we trust our doctor," says Karen Coker, a 27-year-old police-station clerk in New Carrolton, Md. She just received an $18,700 loan from CapexMD with a rate of 12%.

The courtship with doctors is mutual, says David Treisman, chief financial officer of Capex Management Inc., which owns CapexMD, a Scottsdale, Ariz., company specializing in fertility loans. "Clinics contact us because they have a sense of the number of patients they are missing out on if they don't offer financing," he says.

Yet some doctors are uncomfortable getting involved with the loans. "These patients are very vulnerable to predatory lending," says Charles W. Montieth, a Chapel Hill, N.C., doctor who runs a clinic for women who want to get pregnant after reversing a tubal sterilization. The clinic doesn't offer loans.

Also contentious are refund programs that offer money back if in vitro fertilization fails and patients don't take a baby home. One of IntegraMed programs refunds 70% of the $24,000 sticker price for a package of six IVF treatments if they all fail. If the first treatment works, the borrower still owes the entire $24,000, resulting in a larger profit for clinics.

Rafat Abbasi, a reproductive endocrinologist whose Bethesda, Md., fertility clinic doesn't offer the refund programs, worries some doctors will screen for women who will get pregnant on the first round, tipping the scale in the clinics' and lenders' favor.

"It's a valuable program which patients love," IntegraMed's Mr. Weiss says. "The criticism doesn't take into account the need of many patients who very well might not get pregnant on the first round."

The company doesn't disclose how many women in the refund program get pregnant on their first round.

The American Society for Reproductive Medicine, a trade group representing fertility doctors, doesn't have a policy on doctors making the loans. The American Medical Association didn't return calls for comment.

Regulatory oversight varies by lender. Loans made by banks are governed by state and federal banking regulators. In contrast, CapexMD and other firms that get money from private investors—including doctors whose clinics offer the loans—aren't monitored by banking agencies. Doctors aren't required to disclose their investment in the lender to their patients.

The loans emerged about a decade ago but became more popular during the financial crisis, according to fertility-finance companies.Capital One Financial Corp., the fifth-largest bank in the U.S. by deposits, dominated the market until 2009. Some doctors set up kiosks in their offices where patients could apply for the bank's loans.

A Capital One spokeswoman said the decision to stop making loans in 2009 was based on a "variety of factors," including that the business didn't fit with the company's "long-term strategic focus." Since the McLean, Va., company's exit, other lenders have flooded the market.

In December, CapexMD agreed to start making loans to patients buying eggs from the World Egg Bank in Phoenix, which previously offered financing through Capital One. Purchasing eggs from a stranger can cost up to $40,000.

"CapexMD has helped fill the lending void," says Diana Thomas, World Egg Bank's president.

After trying unsuccessfully for five years to get pregnant, Ms. Barth saw in vitro fertilization as her last chance. In August 2010, her doctor said she was an excellent candidate for the procedure. Elated, she was determined to do anything to pay the $24,000 bill.

Her doctor, Laurence Jacobs, says the clinic tells patients about the loans because now "bank loans are so scarce." To make sure patients get a good deal, Dr. Jacobs says he tells them to do their own research.

Fertility-finance companies say the industry will continue to thrive. In January, Dr. Jacobs sat through a PowerPoint presentation by CapexMD aimed at convincing him to invest in the company and offer its loans to patients. "They told us that interest would surge because patients want expensive treatments and banks aren't lending," Dr. Jacobs says. "They pitched it as a gold mine."