August 15, 2024
August 12, 2024
Rohit Chopra
Director
Consumer Financial Protection Bureau
1700 G Street NW
Washington, DC 20552
Submitted Electronically
Re: Prohibition on Creditors and Consumer Reporting Agencies Concerning Medical Information (Regulation V)
The Private Equity Stakeholder Project (PESP) is a financial watchdog organization that seeks to bring transparency and accountability to the private equity industry for the benefit of impacted communities and investors. The Center for Economic and Policy Research (CEPR) is a nonprofit research organization that conducts professional research and public education on key economic and social issues to create an informed public.
We appreciate this opportunity to provide public comment for this proposed rule to amend Regulation V, which implements the Fair Credit Reporting Act (FCRA), by the Consumer Financial Protection Bureau. The proposed rule is timely as the private equity industry’s role in generating medical debt has grown dramatically in recent years.
Along with the other financial and health consequences of medical debt, the reporting of such debt to credit reporting agencies raises barriers to credit even though it is not a good indicator of financial responsibility. Third party debt collectors strategically furnish information to such agencies in order to pressure patients to pay back debt in full. Additionally, the accuracy of medical debt collections is a major policy concern as consumer credit reports have been contaminated with inaccurate medical billing data. Private equity-owned debt collection companies, which may be more aggressive than other debt collectors, have been accused of pursuing medical debts that are not owed, based on allegedly inaccurate data.
Private Equity Stakeholder Project and CEPR commend the proposed rule change as one of multiple solutions needed to help protect patients from unjust impacts of medical debt, and as a necessary step towards addressing the real harms that result from inaccurate medical debt data held by private equity-owned debt collectors and others.
Medical debt is a significant issue in the United States. The Kaiser Family Foundation estimated that Americans owed at least $220 billion in medical debt in 2021 with 78% of medical debt held by individuals who owe more than $10,000. About half of U.S. adults with medical debt report owing more than $2,000. Around 20 million Americans – representing one in twelve adults – had medical debt. Such debt has disproportionately affected individuals with disabilities, who report owing debt at more than twice the rate of Americans without disabilities. Other highly impacted groups have been people in worse health, low- and middle-income adults, people without health insurance, Black people, and middle-aged adults.1
Regardless of disproportionately impacted demographics, all Americans with medical debt suffer significant consequences to their financial and physical well-being.2 Nearly two of five adults aged 19-64 reported in a 2023 Commonwealth Fund survey that their medical, dental, or other health care debt led them to cut back on necessities like food, rent, and heating along with delaying/avoiding necessary health care.3 Nearly 60% of bankruptcy filers from 2013 to 2016 cited medical debt as a contributor to their bankruptcy.4 A March 2024 JAMA analysis of 2018 medical debt data from 2,943 U.S. counties found that a 1% increase in a county’s population with medical debt was associated with a 18.3 and 17.9 more physically and mentally unhealthy days, respectively, in a month per 1,000 people, 1.12 lost years of life per 1,000 people, and an increase of 7.5 per 100,000 in age-adjusted all-cause mortality.6
Another significant impact of medical debt is how it hurts Americans’ ability to access credit for important purchases, such as for a mortgage loan. Medical debt constituted most of the collections on consumer credit reports from 2018 to 2022.7 In 2022, the CFPB made an acknowledged underestimate that $88 billion of medical debt was reflected on Americans’ credit records as of 2021. This debt can lower the credit scores of Americans, raising barriers to accessing credit, increasing interest rates, and hurting individuals’ ability to get loans for their car, home, small business, and more.8
The CFPB recognized in a 2014 report that debt collectors furnish information to nationwide consumer reporting agencies as a strategy to “motivate the consumer to contact the collection agency to resolve the debt.”9
As the CFPB has documented, medical debt is not a very reliable indicator of whether people can pay off their loans. Unpaid medical debt is not as predictive like non-medical collections in showing that an individual is more likely to be delinquent.10 Medical debt differs from other types due to its fundamental causes. Health care in the United States is the most expensive in the world, with Americans paying significantly more for the same services as comparable nations. Unexpected health problems or other services necessary to an individual’s health and wellbeing can result in medical debt rather than frivolous spending.11
Private equity has been a major factor in the growing U.S. medical debt crisis. Across the country, it has helped drive up healthcare costs through the acquisitions of hospitals, health systems, and physician practices. In recent years, several studies have confirmed private equity’s
role in driving up healthcare costs for patients and payers.12
For patients who cannot afford these growing costs, private equity-owned companies have created healthcare debt through medical credit cards, installment loans, and other payment products, which can burden patients with high interest payments on top of the debt itself.13
Those who cannot pay their medical debts may receive a call from private equity-owned debt collector – some of which have received highvolumes of debt-related consumer complaints..14
Private equity has had a hand in the creation of medical debt through medical credit card companies such as AccessOne.15 In January 2022, North Carolina’s treasurer criticized some of the state’s non-profit hospitals for billing poor patients instead of providing charity care, despite the hospitals’ more than $1.8 billion in tax breaks. Three health systems used billing services from AccessOne, which encouraged patients to use medical credit cards that could charge interest rates as high as 18% after a promotional period.16
A partnership with AccessOne at a public university-run healthcare system in North Carolina had substantial impact on patient debt. Most UNC Health patients were in no-interest plans when AccessOne took over billing services, according to a records analysis by KFF. Once the private equity-owned company took over, patients increasingly enrolled in one of AccessOne’s plans exposing them to high interest rate payments.17
In one two-year period at UNC, the percentage of AccessOne payers who were enrolled in the highest-interest loan plan increased from 9% to 46%. Within one year, nearly half of patients in debt to AccessOne were enrolled in the company’s highest-interest payment plan. High interest payments on medical credit card debts paid to a private equity-owned company have left these patients worse off.18
Medical credit cards also impact dental patients. In an investigation from 2019, the Fresno Bee found that, across California, dentists seemed to be inflating costs and pressuring patients to put services on a medical credit card.19
The report found that the largest dental chain in California, owned by private equity, had promoted zero interest financing from CareCredit on its website, without mentioning the 27% interest rate that can become effective after a six- to 24-month promotional period.20
A key factor in contemporary debt collection has been the growth of RCM companies that employ an aggressive business model which can raise the financial strain on patients. In the 2000s, there were only a few RCM companies that predominantly focused on providing billing and payment collection services to health providers, namely hospitals. However, the market significantly grew, as hospitals and other providers increasingly outsourced RCM services following the passage of the 2008 Health Information Technology for Economic and Clinical Health (HITECH) Act and the 2010 Affordable Care Act (ACA).21
The former incentivized providers to adopt electronic health record (EHR) systems that were interoperable, meaning that they could exchange information with other software like RCM systems.22 These RCM systems grew to be more sophisticated and broad-ranging in provided services compared to the earlier 2000s, such as providing end-to-end RCM that oversees a provider’s billing practice from an initial patient appointment all the way through treatment completion and payment.23
The latter significantly expanded the demand for EHR and RCM systems due to millions of people gaining health insurance coverage and, thus, increased access to care.24 At the same time, many Americans adopted high deductible health plans (HDHPs) from the ACA’s Health Insurance Marketplace which offered lower premiums and lower upfront costs. Concurrently, employers also adopted HDHPs as a means to lower spending while health costs overall were increasing. In 2007, 17.5% of Americans under the age of 65 with private insurance were in a HDHP, rising to 25.3% by 2010, 43.7% in 2017, and roughly 51% in 2023.25 A key consequence of HDHPs is that they pushed significantly higher medical costs onto insured patients, contributing to the rise in medical debt.26
Outsourcing of RCM services will likely only increase in the future. A 2022 survey found that 61% of health care providers planned to outsource RCM to external entities.27 One industry analyses projected the RCM outsourcing market to grow from $27.8 billion in 2023 to $102.9 billion by 2032.28 Therefore, as health care providers increasingly outsource to RCM companies, patients will likely be subject to increased financial pressure, including the threat of lower credit scores from reported medical debt to credit agencies if the current proposed rule is not finalized.
Private equity emerged as a significant player in the RCM market in the 2010s; by July 2024, PE firms backed 104 RCM companies.29 Some private equity-owned debt collectors have suggested that they are more aggressive than other companies. Professional, a private equity-owned debt collector, says its service line Professional Credit offers its clients return rates 5% to 10% higher than the debt collection industry average.30
Private equity-owned debt collectors may be significantly more aggressive in collecting medical debts. Receivable Solutions (RSi), an RCM company owned by WestView Capital Partners,31 has received industry recognition for its debt collection services.32 RSi has promoted its claims that the company outperformed two competing debt collectors by 27% to 41%, respectively, at one 500-bed hospital. RSi also highlights how it doubled collections in its first year – with annual increases since – while collecting patient debts at a 2,000-bed children’s healthcare system.33
Some private equity-owned debt collection companies have taken measure of the medical debt crisis. Brown & Joseph observed in one blog post – titled “Medical Bills: The Leading Cause of Bankruptcy” – that despite an ongoing U.S. medical debt crisis, in one year only half of people in the U.S. with unpaid bills were contacted by a collection agency. “The reason why this amount is so low despite high amounts of medical debt is that most bad debt is simply written off by health care providers.”34 It continued:
The American Hospital Association found that the amount of bad debt written off for almost 5,000 hospitals nationwide was over $39 billion. This bad debt can be attributed to insurance reform, but it also has to do with hospitals’ outdated revenue cycle management (RCM).35
Debt collectors can achieve significant scale under private equity ownership. Veritas Capital owns revenue cycle management company MiraMed, which provides third-party collection services to U.S. hospitals and physicians.36 The company merged with Coronis Health in 2022 to create an 8,500-employee end-to-end platform serving healthcare providers across various specialties.37
Some private equity-owned debt collectors operate through subsidiaries. Annuity Health is a technology-driven debt collection company providing collections services including bad debt recovery.38 The company segments its debt collection services into two subsidiaries – AMCOL Systems and Arcadia Recovery Bureau – in order to comply with legal requirements.39 Annuity was formed from the merger of revenue cycle management companies AMCOL Systems and RevMD Partners.40 In 2018, Annuity Health was acquired by private equity firm Pine Tree Equity.41
For almost two years, two private equity-owned RCM companies helped a large non-profit hospital chain in the collection of unlawful medical charges against patients who were likely qualified for charity care.42
The private equity-owned RCM companies – Optimum Outcomes and Harris & Harris – sent collection letters to patients that failed to include mandatory written disclosures informing patients about charity care discounts before aggressively collecting on their medical debt.43
The debt collectors were ordered to reform their practices, and together paid approximately $1.8 million in penalties.44 Providence entered into an agreement requiring the health system to forgive $137 million in debt and provide $20 million in refunds to nearly 100,000 patients.45
In 2019, Optimum Outcomes and Harris & Harris were contracted to collect patient medical debts on behalf of hospital chain Providence.46 A year earlier, Providence executives had established a program called “Rev-Up,” requiring employees to pressure payments from patients, including those eligible to receive free care. Providence hired debt collectors to pursue patients who did not make payments.47
The attorney general in Washington described Optimum Outcomes’ role in the scheme:
Optimum’s failure to conduct even the most rudimentary compliance task, either before commencing collection efforts or at any time for the 17 months thereafter, demonstrates Optimum’s blatant disregard and disrespect for Washington law. This disrespect of Washington law and Optimum’s bad faith are further evidenced by the fact that Optimum never obtained the correct in-state license to collect debt for Providence during the entire time period that it collected in Washington.48
A trial court found that Optimum Outcomes had acted in bad faith in collecting the Providence medical debt:
… it chose to do business in Washington; it failed to comply with Washington’s laws, without evidence it did an even rudimentary check of them; it offered no plausible explanation as to how it missed this important detail compared to other important details it got right (like where to send money) …49
Following a trial in which the court found the company had acted in bad faith, Optimum Outcomes was ordered to make reforms and to pay the state $10 per violation – totaling $827,290 for more than 82,000 claims – and legal fees estimated to exceed $400,000.50
Harris & Harris agreed to pay $1 million and to reform its practices to settle claims that it unlawfully collected medical payments from more than 160,000 patients without providing required disclosures about rights related to their medical debt. “By excluding those disclosures,”
read a press release from the Washington attorney general’s office, “Harris & Harris created barriers that kept patients from learning about and accessing financial assistance on their hospital bills.”51
Hospital chains such as Providence can assign patient medical debt to a collection company by contracting with the company to collect debts on its behalf for a commission. In other cases, a collection company may buy medical debt from a hospital and keep the entire amount that it
collects.51
In recent years, non-profit hospitals have spent less on charity care, with median charity care as a percentage of operating expenses declining from 1.21% in 2020 to 0.99% in 2022..52 A recent study looking at 2,425 non-profit hospitals found that 80% spent less on financial assistance and community investment than the value of their tax breaks.53 Federal law requires non-profit hospitals to provide some level of charity care, but hospitals have broad flexibility to establish their own eligibility criteria.54
Hospital debts comprise a significant portion of medical debt. Nearly three in four adults with past-due medical debt report owing debt to hospitals. In a majority of cases, people with past-due medical bills were contacted by a debt collection agency.55
Patients at mission-driven hospitals are not exempt from medical debt risk. Non-profit hospitals and their debt collector company partners are among the most aggressive pursuers of medical debt.56 In 2023, Human Rights Watch found that the U.S. non-profit hospital model contributes to abusive medical billing and debt collection practices and undermines human rights.57
Accuracy of medical debt collections is a major policy concern. Consumer credit reports have been contaminated with inaccurate medical billing data, according to the Consumer Financial Protection Bureau, which estimated in 2022 that U.S. consumer credit reports included $88 billion in medical bills.58
A number of private equity-owned debt collectors have received complaints in the CFPB consumer complaint database primarily around attempts to collect debts that are not owed or collecting wrong amounts.59
Receivables Management Partners has been private equity-owned since 2007 and a Meduit subsidiary since 2017.60 The company received at least 980 complaints related to medical debt collection from 2011 through July,61 including 277 complaints for attempts to collect debt not owed and 148 complaints for continued attempts to collect debt not owed.62
CMRE Financial Services has been a private equity-owned subsidiary of NexPhase Capitalowned Meduit since February 2020.63 According to a search of the CFPB consumer complaint database from the beginning of March 2020 through July 2024, CMRE Financial Services has received at least 839 complaints.64 Among the complaints, 672 were related to debt collection.65 At least 464 of these complaints relate to medical debt,66 including 236 complaints for attempts to collect debt not owed. Additionally, 113 complaints related to written notifications about the debt, including not receiving enough information to verify the debt and not receiving any notice of the right to dispute the debt.
Optimum Outcomes was under private equity ownership from 2011 until January 2021.67 According to the CFPB Consumer Complaint Database, the company received 580 complaints during this time.68 At least 392 of the complaints were about attempts to collect medical debt.69 More than 260 of the complaints were for attempts, or continued attempts, to collect debt not owed.70
Debt collector Harris & Harris was acquired by Clarion Capital Partners in September 2019.71 Since then, it has received at least 713 complaints through July 2024,72 including 653 complaints related to attempts to debt collection.73 At least 295 complaints related to medical debt and 221 complaints were made by people who did not know what type of debt was being collected.74
Private equity’s role in exacerbating the medical debt crisis is becoming increasingly clear, as it both raises healthcare costs for patients and utilizes aggressive debt collection strategies, including furnishing information to credit reporting agencies that harms patients’ credit scores
regardless of if such data is actually indicative of their financial responsibility. In July, private equity was one of the topics discussed during a hearing on the growing medical debt crisis held by the Senate Health, Education, Labor, and Pensions Committee. The hearing highlighted private equity’s ownership of hospitals and healthcare practices, as well as medical credit cards. Senator Chris Murphy noted the “extraordinary new phenomenon driven in part by the financialization of our health care system.”75
For people with medical debt, private equity may be present at every juncture: high healthcare prices paid in credit; interest rates making it harder to cover costs; and the aggressive collectors of unpaid debts. At every step private equity firms are positioned to take a cut of funds meant to go towards healthcare – contributing to and benefiting from an unsustainable crisis that burdens millions of people under billions in debt.
Private equity-owned healthcare companies have contributed to high costs for patients, which can result in medical debt. Private equity-owned RCM has contributed to inaccurate and sometimes unlawful debt being tied to consumers credit reports. Private-equity-backed debt collectors exacerbate the existent perverse incentives of outsourced RCM for aggressive collection strategies and strategic reporting of medical debt to credit reporting agencies as a threat to patients. The proposed rule change is one of multiple solutions needed to help protect patients from unjust impacts of medical debt, and it is a necessary step towards addressing the real harms that result from inaccurate medical debt data held by private equity-owned debt collectors and others.
We again appreciate this opportunity to provide public comment for this proposed rule to amend Regulation V, which implements the Fair Credit Reporting Act (FCRA), by the Consumer Financial Protection Bureau, and we support the proposed rule change as one of multiple solutions needed to help protect patients from unjust impacts of medical debt.
|
/s/ Michael Fenne Michael Fenne |
/s/ Brandon Novick Brandon Novick |
| Company | Owner(s) | Core Services |
|---|---|---|
| AccessOne | Frontier Capital (since 201776 | Medical payment products |
| Adreima | Waud Capital Partners (2008-2017); FinThrive subsidiary (2017-2021) | Debt collection |
| AGS Health | EQT (since 201977) | Revenue cycle management platform |
| AMCOL Systems | Annuity Health subsidiary (since 202178) | Debt collection |
| Annuity Health | Pine Tree Equity (since 201879) | Debt collection |
| CarePayment | Cedar Springs Capital (acquired in 2017 – current ownership status unknown) |
Medical payment products |
| ClearBalance | Angelo Gordon & Co (acquired in 2012 – current ownership status unknown) |
Medical payment products |
| CMRE Financial Services | Meduit subsidiary (since 202080) | Medical payment products |
| Coronis Health | Veritas Capital (since 201581) | Debt collection |
| Ensemble Health Partners | Warburg Pincus, Berkshire Partners (since 202282 | Revenue cycle management platform |
| FinThrive | Pamplona Capital Management (2016-2021); Clear Lake Capital (since 202183) | Revenue cycle management platform |
| Harris & Harris | Clarion Capital Partners (since 201984) | Debt collection |
| Meduit | NexPhase Capital (since 201785) | Debt collection |
| MiraMed | Coronis Health subsidiary (since 202286) | Debt collection |
| Optimum Outcomes | Waud Capital Partners (2011-2017; Adreima subsidiary 2013-2017); FinThrive subsidiary (2017-2021) | Debt collection |
| PrimaHealth Credit | Red Door Capital Partners (since 202287) | Medical payment products |
| Professional | Tonka Bay Equity (since 202188) | Debt collection |
| R1 RCM | New Mountain Capital (largest shareholder); TowerBrook Capital Partners, Clayon Dubilier & Rice (acquisition announced June 2024)89 | Revenue cycle management platform |
| Receivable Solutions (RSi) |
WestView Capital Partners (since 201990) | Debt collection |
| Receivables Management Partners |
Meduit subsidiary (since 201791) | Debt collection |
| Revco Solutions | Longshore Capital Partners (since 202092) | Debt collection |
| Revecore | GrowthCurve Capital, Riverside Partners (since 202293) | Revenue cycle management platform |
| RevMD Partners | Annuity Health subsidiary (since 202194) | Debt collection |
| SimiTree Healthcare Consulting |
Sheridan Capital Partners (since 202195) | Debt collection |
| Varsity Healthcare Partners |
Ventra Health (since 201996) | Revenue cycle management platform |
| Waystar | EQT AB, CPP (since 201997); Bain Capital (since 201698); Francisco Partners (since 202099); following 2024 IPO CPP, EQT, and Bain will beneficially own approximately 29.2%, 22.3%, and 16.8%100 | Revenue cycle management platform |
