Have you had a medical bill you couldn’t afford to pay? Medical debt is often cited as a cause when people file for bankruptcy in the U.S. As healthcare costs continue to increase one charity is trying to erase some patients’ medical debt by buying that debt directly from hospitals. But Charlotte’s two largest hospitals, Atrium Health and Novant Health, aren’t selling.
Michelle Crouch wrote about it for the Charlotte Ledger Business Newsletter and N.C. Health News. She joins me now.
Marshall Terry: Tell me about RIP Medical Debt. How does it work? And who are the people it tries to help?
Michelle Crouch: RIP Medical Debt has an interesting model. It was started by two former debt collectors who were in the industry for more than 20 years, and they saw an opportunity to help the people that they were previously trying to collect from. So here's what they do. They buy debt from hospitals at a huge discount for pennies on the dollar. And to get the money to buy that debt, they partner with local community organizations and nonprofits to raise the money to buy that debt. And then instead of trying to profit from it or collect on it, they figure out which patients are low-income, which patients need the help, and they send them a letter and they forgive the debt instead of trying to collect on it.
For example, in Winston Salem, there's a little church called Trinity Moravian. They did a campaign earlier this year and they raised about $15,000 from the community and they were able to use that to partner with RIP and they paid off $3.3 million in medical debt for their local patients and their community. It ended up helping 3,355 families there.
Terry: So hospital systems sell their debt? Why would they do that?
Crouch: This isn't just the bill that you didn't pay last week. The debt that they sell is what's called bad debt. This is debt that they have been trying to collect on for months, sometimes years, and they're not successful in collecting on it. So, at that point, a lot of hospitals say ‘Hey, we're not going to be able to collect on this. We've made our best effort. But if you want to try, Mr. Debt Collector, to collect on this, we'll sell it to you at a big discount.’ So that's the debt we're talking about.
Terry: How big of a problem is medical debt in the U.S.? And how does Mecklenburg County compare?
Crouch: Medical debt is a huge and growing problem. About 13% of all Americans have medical debt in collections and in Charlotte, and actually, in North Carolina as a whole, it's even worse. About 20% of Charlotte residents, Mecklenburg County residents, have debt in collections.
Terry: So why aren’t Atrium and Novant willing to work with this charity RIP Medical Debt? Are they still trying to collect those unpaid bills themselves?
Crouch: What they say is that they already have very robust financial assistance and charity care policies. And they provide millions of dollars in unpaid care to their patients. Both hospitals provide care to uninsured patients who have household incomes of up to 300% of the federal poverty level. And then they also talk a little bit about how they don't currently sell their debt.
So, hospitals have two options when it comes to this bad debt. They can either sell it to the secondary collectors at a big discount, or they can bring in a contractor and get that company to try and collect the bill. Under the billing policies of both hospitals, it looks like that's what they do. They can bring in a contractor who can try to collect on it and then Atrium would get a cut or Novant would get a cut and the contractor would get a cut of any debt that’s collected.
Terry: And what is RIP Medical Debt’s response to Atrium and Novant?
Crouch: Well, they have a couple of different points that they make. First, they say they buy the debt at a very competitive rate. Second, they point out that they are helping people who make up to 400% of the federal poverty level, whereas the hospitals are helping those who make up to 300% of the federal poverty level. And they also target those whose debts exceed 5% or more of their annual income. And finally, they say it's not going to undermine a hospital’s financial assistance policies because, presumably, these are patients who have already been evaluated by the hospitals and they haven't qualified. This is debt that has not been paid. These patients have already gone through the system. And here is a way to forgive debt for some of these patients.
Terry: Now you talked to a retired Atrium physician who is trying to convince the hospitals to work with RIP Medical Debt. Who is he, and what is he doing?
Crouch: So, this is a retired Atrium pediatrician named Chris Lakin, and he heard about RIP and he really wanted to launch a campaign here in Charlotte because he knew that medical debt was a big issue here. And so, he reached out to his former employer and he also reached out to Novant and said, ‘Hey, have you guys considered working with this charity?’ He was very frustrated that the hospitals didn't even seem willing to have a conversation or to consider the possibility of working with RIP.
Terry: So what would have to change for RIP Medical Debt to work with these hospital systems? Is it just up to Atrium and Novant?
Crouch: Yes, that is the situation. Atrium and Novant are both independent nonprofits that have no close connections to local government. Atrium is actually a public hospital authority, and so it is a governmental entity, but it is independent from our county commissioners or our City Council. And so, Dr. Lakin, because he knew it was a public hospital, he tried to reach out to two county commissioners to see if maybe they could help start the conversations between RIP and Atrium. But he was unsuccessful. And when we reached out to those elected officials, they said there was really nothing they could do.
I think at this point, Dr. Lakin is hoping that maybe all of this media attention might make a difference and might persuade one or both hospitals to, at least, consider having a conversation with RIP Medical about working together.
