A pair of published reports look at what happens when individuals have unpaid debts, either those owed to a state or those owed to a healthcare organization, when what can be done by those entities to collect on those debts. The reports are part of a growing number of news articles aimed at pulling back the curtain on the debt collection industry and offer industry participants an opportunity to contribute the dialogue and discuss the important role they play in the credit cycle.
“What Happens When You Don’t Pay a Hospital Bill,” one headline says it will tell readers. Looking at the experience of one individual who spent weeks in the hospital after undergoing a heart transplant and left with more than $50,000 in bills because some of the doctors at the hospital were not part of the individual’s insurance network, the article shares some of the tactics used by the collector that was tasked with trying to collect on that debt. For example, one collector, who ran a collection agency, tried to connect with the individual on LinkedIn.
Like many articles that detail the plight of patients who are saddled with huge medical bills, this article puts some of the blame on collection agencies, which, at the end of the day, are just doing their jobs. They didn’t operate on the patient. They didn’t inform the patient that the heart surgeon wasn’t part of the patient’s insurance network. They never knew the patient existed until months after she was discharged from the hospital.
After trying to collect on their own behalf for a while, some hospitals and doctors’ offices sell their debt to debt buyers, who pay pennies for each dollar owed, then try their hardest to simply collect more than they paid. Why hospitals sell their debt is a matter of debate, but several consumer lawyers speculated that it’s because hospitals don’t want their good names associated with aggressive debt-collection tactics.
Meanwhile, in South Dakota, a state-run collection operation, called the Obligation Recovery Center, is actually staffed by employees from a third-party agency, which worked to help establish the ORC in 2015. The ORC can suspend hunting, fishing, and driver’s licenses of individuals who do not pay debts that are owed to the state, but as a published report points out, it is often those with the least who are punished the most. States like the idea of the ORC because it does not cost the state any money to operate and anything collected — except for a 20% surcharge kept by the agency — is handed right back to the state. That 20% surcharge is usually not enough for an ORC to consider suing an individual over an unpaid debt, which is why a license suspension is usually the most aggressive tactic to try and spur an individual to make a payment.
