It’s common knowledge that credit card companies sell off bad debt to collection agencies (aka Junk Debt Buyers). It’s also known that hospitals and doctors sell off debt to collection agencies as well. But did you know that hospitals are auctioning their debts off on the internet? Two main companies, ARxChange.com and Medipent.com seem to be handling the bulk of the auctions. According to the Wall Street Journal:

ARxChange.com says it has handled more than $400 million in patient debt in about 27 auctions, involving nine hospital systems and four individual hospitals. Medipent.com 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.

This bears out the normal rates that most collection agencies pay for for debts - fractions of a penny. Once a collection agency purchases a debt, they often get to keep the entire amount they are able to “extract” from a debtor. As we’ve pointed out in our debt settlement procedure, this knowledge can come in handy when making settlement deals with collection agencies. If a collection agency only paid 1 cent on the dollar and you offer them 25% of the debt, they are still making a tidy profit, and will most likely accept such an offer.

The article also points out that hospitals are going after “old debt” - and specifically mentions that some debts originated in 2003. This is interesting, since the statute of limitations (SOL) in some US states is less than 5 years. (The SOL sets limits on the amount of time a creditor or collector has to sue a debtor in court.) Keeping this in mind, I see the chance collection agencies crossing the line here by going after uncollectable old debt. Several state’s attorney general’s have gone after collection agencies trying to collect on debt which is past the statute of limitations.

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