A Sickly New Health Care Payment Method

(By the way, I’ve been saying for days that I’m going to hit a period of light-to-no posting, and it will probably be tomorrow.)

I came across this item completely by accident, but the Wall Street Journal reported here that some hospitals in this country have come up with a new scheme to make patients pay up who owe money on their care, and that is to auction their debt online.

Yes, I’m serious…

Hospitals have long relied on outside collection agencies to go after debtors. Under traditional arrangements, these agencies receive a percentage of any money they get from a debtor; the more they collect, the more they earn.

Now, some of the same collection agencies, as well as other firms that purchase debt outright, have begun participating as bidders in online auctions, in which they buy the debt or provide guaranteed payments to hospitals for access to the unpaid accounts. Some experts say this gives them more reason to aggressively pursue patients in arrears. Auctions can drive up the amount paid for debt, meaning a collector must recoup more money from patients to cover its initial investment and turn a profit. And the winning bidders often get to keep all the money they collect on the auctioned debt.

Winning bidders may "have to work harder" to make a profit from auctioned debt, says Michael Klozotsky, an analyst at Kaulkin Ginsberg Co., a collections-industry strategic-advice company. "Working harder means sometimes using strategies that are more aggressive."

I can just hear it now – “Hello, Mrs. Wiggins? This is the Acme Benevolent Collection Service calling. It seems that you have an outstanding balance of approximately $750 still to be paid on your deductible before Holy Mother Of God Health Care Partners can be reimbursed for charges associated with your hip replacement. Please consider this call to be your first and only notice that payment is due. If the amount in question is not tendered to us within 30 days, your little cat Tiddles will have an unfortunate accident with a meat cleaver, so please respond promptly. Thanks ever so much.”

Hospitals "don't want a black eye from a PR standpoint," says Joseph LaManna, TriCap's chief executive. Both TriCap and Medipent receive fees from the hospitals and collectors, based on the size of the winning bid.

Of course they don’t Joe (and I should note that TriCap owns ARxChange.com, one of the online collection services, and Medipent.com is another, owned by Medipent L.L.C.).

Participating hospitals say they are still testing the process, often putting up for bid some of their older debt with a low likelihood of being repaid. Bidders typically offer just pennies or fractions of pennies on each dollar owed, reflecting the small amount they expect to collect from patients while still pulling in a profit.

Woman's Christian Association Hospital of Jamestown, N.Y., last fall auctioned about $7 million of debt on ARxChange.com that had already gone through collection efforts by the hospital's staff and by CBJ Credit Recovery, an outside collection agency. CBJ decided to take another shot at the accounts and submitted the winning bid, an agreement to pay the hospital $80,000 over the course of a year in exchange for keeping what it collects from the debtors. "Even though [the unpaid bills] were very old, it was additional value we were able to extract from them," says Chuck Iverson, chief financial officer at the hospital.

Gee, Chuck, do you have an approximate dollar figure on that “additional value,” by any chance?

The federal Fair Debt Collection Practices Act and some state laws govern how debt collectors can treat consumers. For instance, debt collectors aren't allowed to harass consumers or make false statements, including implying they will sue if they don't intend to do so.

Sure, they’re not supposed to do that, but there’s a problem, and I’ll get to it in a minute.

Consumer groups say calling the medical provider or your insurer could help clarify any confusion about what you owe. The hospital also could provide information about financial assistance or charity-care.

The problem is that, according to this, the FTC received over 69,000 complaints about harassment from debt collectors in 2006, the most recent year that statistics are available (up from about 66,000 in 2005), and guess how many lawsuits the FTC filed in response?

One.

And a practice such as selling off the hospital debt of patients online is only going to add to that total (the 69,000, I mean).

Want to bitch about that? Good. Find out who your elected official is from this link and give him or her an earful, and tell them to find out how to hold hearings about this (more work for Henry Waxman, no doubt).

It will be good for your health.