Hospitals auctioning off overdue medical debt to collection agencies

A new trend in hospital medical debt collection has consumer advocates worried about whether patients with huge medical bills will face more aggressive collection tactics from debt collectors.

A Wall Street Journal article reports that more hospitals are auctioning off overdue medical accounts to debt collection agencies in online bidding forums. Debt collection agencies are buying the debt outright or paying hospitals for access to unpaid accounts, according to the WSJ.

As our articles on debt collection and paying for health care costs point out, consumers are defaulting on unpaid credit card debt in greater numbers and at the same time many are being asked to pay a greater share of out-of-pocket health care costs. Families facing huge medical debts are responsible for a large percentage of bankruptcy filings.

The troubling aspect of these developments is the potential for further stress and distress to families facing medical crises. Who wants to get a debt collection call while they're on the way to chemotherapy treatment?

In the past, hospitals and doctors have been willing to work out reasonable payment plans with patients. But selling the debt to collection agencies takes the patient one step away from the hospital and may leave the door open for abuses. Harassing and threatening debtors is illegal under the Fair Debt Collection Practices Act, but that hasn't kept some unscrupulous debt collectors from violating the law in the past.

According to the WSJ, medical debt auction sites (such as ARxChange.com) are taking steps to screen bidders. Hospitals are trying to safeguard patients' privacy and maintain good relations with their medical clients. Unfortunately, the reality is that in this economy, collecting on overdue credit card and medical debt is tough.

See related: ""Med FICO score: Good medicine or bad?" "Worried about health care bills and financial ruin," "15 tips for paying high medical bills," "No credit, no medical service?"