A growing market?
Traditionally, hospitals have worked with collection agencies, with the agencies keeping a percentage of whatever they collect from patients. In the auctions, agencies and others buy the debt outright, or provide guaranteed payments to hospitals for access to the unpaid accounts.
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A growing market . . . and a potential disaster. This kind of arrangement nearly sank Greater Southeast General Hospital in Washington, DC. They sold their receivables to a debt marketer who bundled and securitized the hospital’s unpaid debt. The securitizer went bankrupt and in chapter 11 stopped paying the hospital but claimed the right to still collect on the debts under the terms of the contract with the hospital and to satisfy the terms of their bankruptcy claim.
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