NCPA - National Center for Policy Analysis


June 4, 2008

In a move that consumer groups say could increase pressure on people with unpaid medical bills, some hospitals are trying out a new tactic to recoup patients' debts: They're auctioning the debt online, says the Wall Street Journal.

Hospitals have long relied on outside collection agencies to go after debtors.  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.  The winning bidders often get to keep all the money they collect on the auctioned debt, says the Journal.

The auctions reflect hospitals' continuing search for ways to collect from the uninsured and underinsured:

  • In 2006, nearly 5,000 community hospitals provided uncompensated care totaling $31.2 billion -- mostly unpaid patient bills or charity care -- representing nearly 6 percent of all costs, according to the American Hospital Association.
  • One auction company,, says it has handled more than $400 million in patient debt in about 27 auctions, involving nine hospital systems and four individual hospitals.
  • Another company,, says it has hosted events involving 12 New York hospitals and $60 million of debt.

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.

Source: Sarah Rubenstein, "Hospitals Put Patient's Debts Up For Auction," Wall Street Journal, June 3, 2008.

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