RIP Medical Debt to buy and eliminate $278 million of Ballad Health patient debt

About 82,000 former Ballad Health patients will soon have almost $278 million worth of outstanding bills eliminated under an agreement with a charity that buys and forgives the debt.

The agreement with Ballad, a not-for-profit system based in Johnson City, Tenn., marks RIP Medical Debt’s first debt purchase directly from a hospital. RIP previously only bought medical debt from debt collectors. A July 2020 HHS Office of Inspector General advisory opinion opened the door for hospitals to sell or donate debt direct to the group.

“This really is the tipping point for us going forward,” said Allison Sesso, RIP’s executive director. “We look forward to working with a lot more hospitals. Even those that feel they have a very robust charity care policy in place should give us a call to review who has slipped through the cracks.”

At Ballad, many patients eligible for free or discounted care—known as charity care—don’t get it. In a news release announcing the RIP deal, Ballad’s chief population health officer said that everyone who will have their debt abolished under the deal with RIP qualifies under Ballad’s charity care policy, but either didn’t take advantage of it previously or their circumstances have changed.

“By removing this burden of old debt, we hope to better engage with our patients, so they access care and other services when they need them without the fear of unmanageable expenses,” Ballad’s Anthony Keck said in the release. Ballad did not return a request for comment.

Tax forms for the two health systems that combined to form Ballad in early 2018 show that 37% of patients whose unpaid bills were marked as bad debt would have qualified for financial assistance. Ballad hasn’t disclosed that information in its own tax form.

Mark Rukavina, head of Community Catalyst’s Community Benefit and Economic Stability project, said that’s unusually high, and he wonders why the health system didn’t reach out to those patients and grant them financial assistance.

“It’s incumbent on hospitals that have numbers like that to look at their policies and find out why one-third of that bad debt was attributed to patients who qualified for financial assistance,” Rukavina said.

One reason for Ballad’s high patient debt load might be its arduous application process for financial assistance, Rukavina said. Patients must give a detailed breakdown of their monthly expenses, including mortgage payments, electric, water, food and clothing. There’s also an asset limit of $10,000, not including the patient’s primary residence.

“On the surface I would say this is a very burdensome application,” Rukavina said. “Asking for all this information is going to scare some people away.”

Patients whose debt is forgiven will receive letters informing them at the end of June. That likely won’t include the thousands of patients who are battling lawsuits from Ballad. That’s because any debt RIP buys is cleared of anything related to the courts, Sesso said.

Ballad sues patients aggressively over unpaid bills. It filed about 5,700 lawsuits against patients in its first fiscal year as a health system.

The benefit of buying debt directly from hospitals instead of debt collectors is it’s newer, which means less time for collection efforts and patients are less likely to delay future medical care, she said.

“The sooner you get that relieved and off your back, the mental anguish of trying to figure out how to pay that, that all gets relieved sooner,” Sesso said. “That’s our goal.”

Some of the bills RIP bought from Ballad are a decade old, she said.

RIP buys the debt for rates that are competitive with for-profit debt collectors hospitals would otherwise sell to, Sesso said. She declined to disclose how much RIP paid Ballad for the debt.

In its news release, Ballad noted it has raised eligibility for full charity care from 200% to 225% of the federal poverty level. Despite that, the health system fell below the terms of its state-mandated charity care requirements in fiscal 2020.

The terms of Ballad’s certificate of public advantage—a state contract that allowed it to form—require it to provide more free or discounted care—known as charity care—and unreimbursed Medicaid than it did before the merger that formed the health system. Ballad spent about $24 million in fiscal year 2020 on charity care, which is below the $38.4 million minimum requirement for that year, the system’s financial statement shows.

Ballad said that’s partly because Medicaid enrollment increased during the year, which cuts demand for charity care. However, Ballad’s shortfall from providing care to Medicaid patients was even larger than its charity care miss. That was about $36 million in fiscal 2020, well below the $67.5 million state-mandated minimum.

Ballad also attributed the lower spending in part to decreased patient volumes during the COVID-19 pandemic, a common refrain among the country’s largest not-for-profit health systems. Regardless, regulators in Tennessee and Virginia have asked the health system to audit its patient access and prove that uninsured patients are not restricted from receiving medical care. That audit is set to be completed this year.

Larry Fitzgerald, the official in charge of monitoring Ballad’s compliance with the COPA, wrote in a letter to state regulators that changes to Tennessee’s Medicaid program will permanently reduce the number of patients who require charity care. Based on that, he said Ballad will likely never provide charity care above the minimum set in 2017. He approved Ballad’s request to waive its charity care requirement in fiscal 2020.

Sesso said RIP is in talks with other health systems who are considering both donating and selling their debt to the charity. The organization chose Ballad to be first because of a suggestion from a donor, a Virginia not-for-profit group called The Secular Society. She said Ballad should get credit for being the first.

“They did take a risk by being the first out here,” she said, “and, frankly, opened themselves up to a greater look at their practices, which isn’t always an attractive thing to do.”