Hospitals auctioning off patient debt online

Struggling to cut their bad debt ratios--some of which are lowering the stock prices of publicly-held chains--hospitals are beginning to use a new channel to collect on patient bills. Rather than simply hiring collections agencies, some are beginning to put patient debts up for auction online. Bidders on the debt may include the same agencies that serve the hospitals, some of which provide guaranteed payments to hospitals in exchange for giving them access to the debt. Meanwhile, the auctions are also attracting other companies that buy the debt outright.  

Many of these auctions are run through ARxChange.com, a TriCap Technology Group site, while others use medipent.com's Medipent LLC. The companies say that they vet collectors to see that they will use the right tactics before participating in auctions, and also, try to make sure that collectors comply with the hospitals' standards for collections (such as whether they record phone calls). Also, hospitals have the final say over who bids on their accounts, and at least on ARxChange.com, don't necessarily choose the highest bidder.

Despite these safeguards, some critics argue that auctions change the dynamics of hospital collections unfavorably. Usually, collectors are paid a percentage of what they collect, sometimes more when they collect more. But in many of these cases, however, winning bidders get to keep all of the money they collect. This gives them a greater incentive to be aggressive in their tactics, some observers say.

To learn more about this trend:
- read this Wall Street Journal article (sub. req.)

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In 2007, bad debt rising for hospitals
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FL hospital sued over sale of $1.9B in bad debt

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