Charity plans to wipe out $278M of Ballad Health's outstanding patient medical debts

A stack of medical bills
The deal is a "win-win" for Ballad Health and its patients, RIP Medical Debt said, and could also serve as a model for future charitable purchases of medical debt from provider organizations. (Griffin Pivarunas for KHN)

A national charity will buy $278 million in medical debt directly from Appalachian-area health system Ballad Health, helping provide financial relief to 82,000 patients.

Ballad Health announced Tuesday it reached an agreement with RIP Medical Debt, a national nonprofit that purchases and abolishes medical debts, to sell and eliminate millions in outstanding healthcare expenses.

The agreement will affect roughly 82,000 people who had previously received services from the 21-hospital community health system. The provider noted that nearly all of these individuals met the cutoff for its charity care policy but only recently became qualified due to recent updates or did not seek out the support on their own.

To reach them, RIP will be mailing letters in yellow envelopes to those now eligible for debt elimination during the week of June 28.

“We’ve screened over a hundred thousand individuals in our service area for food and housing insecurity, exposure to domestic violence and other health-related social needs, and we’ve found, again and again, many services exist to support these individuals and families, but as a system and community, we previously haven’t connected with them appropriately,” Anthony Keck, chief population health officer at Ballad Health, said in a statement.

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“By removing this burden of old debt, we hope to better engage with our patients, so they access care and other services when they need them without the fear of unmanageable expenses,” he said.

The deal only applies to nongovernmental payer medical debts, the groups wrote, meaning RIP will not be forgiving patients’ Medicare or Medicaid debts, and patients with multiple outstanding accounts with Ballad Health may still be responsible for the other payments.

Founded in 2014 by former debt collectors, RIP uses donated funds to purchase medical debts from other buyers and collection agencies. The nonprofit claims it is generally able to clear $100 of debt for each dollar it spends.

To date, RIP said it has wiped out more than $4.5 billion in medical debts belonging to over 2.7 million families with financial burdens, sometimes through charity campaigns focused on specific geographic regions and other times through single donations as large as $250 million. Over the years, it has enjoyed publicity and major donations from HBO’s “Last Week Tonight” and philanthropist MacKenzie Scott.

RIP and Ballad said they began discussing the possibility of a direct arrangement in 2020 and have been hammering out legal and technical considerations in the time since. Of note, the partners pointed to a July 2020 Advisory Opinion from the Department of Health and Human Services Office of Inspector General that, under certain conditions, allows providers to sell or donate debts to the charity for abolishment.

The partners suggested that their newly announced arrangement could act as a “test case” for RIP to make similar deals with other health systems across the country.

“Collaborating directly with healthcare providers allows us to abolish burdensome medical debts earlier in their life cycles and we encourage other community-minded doctors and hospitals to explore partnering with us so that together we can continue to relieve the debt burden on individuals, and families, so they can have a fresh start,” Allison Sesso, executive director of RIP Medical Debt, said in a statement.

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A representative for RIP told Fierce Healthcare the company is unable to disclose the exact price it paid for the debt, but the pricing process is generally similar to that of a traditional debt purchase—debts that are only one or two years old run the charity about 1% to 1.25% of the debt’s value, whereas those over 10 years old could be as low as 0.03%.

Ballad’s collection of debts was a mixture of different ages, but “in this case we purchased for pennies on the dollar,” the representative said.

Providers have plenty to gain from working with RIP directly, the representative said. Although most of what the charity buys would normally be written off by a hospital as bad debt and likely wouldn’t impact their credit score, allowing the debts to hang over patients’ heads can deter them from seeking future care and worsen outcomes.

“We know medical debt is a social determinant of health. So RIP is keen to work with any and all providers to essentially do the same thing we did with Ballad—see if there are qualifying accounts the entity owns, then either purchase them at a competitive market rate … or have it donated,” the representative said. “It’s a win-win that clears bad debts and also allows a hospital to show the community it’s interested in helping people.”

Ballad Health was formed in 2018 through the merger of Mountain States Health Alliance and Wellmont Health System and at the time agreed to terms with state regulators to focus additional investment funds into community health efforts.

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Recently, these have included “raising our eligibility for full charity from 200% to 225% of the federal poverty limit, reducing charges for urgent care services by 17% and increasing self-pay discounts to 85% off charges and implementing presumptive eligibility which eliminates burdensome paperwork requirements for people to be considered for charity care,” Chief Financial Officer Lynn Krutak said in a statement.

With lower-than-average per capita incomes and higher disease burdens spread across its rural patient population, “it made sense for us to look at the RIP model to see if we could extend these efforts further,” Krutak said.

Hospitals and systems have been under increased scrutiny related to their patient collection practices.

An investigation from last month found that Community Health Systems filed more than 19,000 lawsuits against patients for allegedly unpaid medical bills since March 2020. More recently, a Johns Hopkins and Axios report found that more than a quarter of the highest-revenue hospitals in the U.S. sued their patients over unpaid medical bills from 2018 to 2020. Ballad itself was dinged by press in 2019 for bringing similar cases against its patients.

On the other hand, the University of Virginia health system announced in April that it would be canceling a backlog of tens of thousands of cases against patients related to its collections policies. The decision affects all liens and judgments filed against households making less than 400% of the federal poverty guidelines, it said, although most families who had already surrendered money to the system would not have their payments returned.