Research suggests medical debt is made worse by hospital consolidation

Research from the Urban Institute and the Private Equity Stakeholder Project found that hospital market concentration, as well as private equity’s expanding role in billing, tracking, and collecting payments for health care, is exacerbating the country’s medical debt problem. 

New research from several entities suggests that hospital market concentration harms consumers and generally raises prices, exacerbating the US’ already out-of-control medical debt problem.

In separate reports, the Urban Institute and the Private Equity Stakeholder Project each found that hospital market concentration, as well as private equity’s expanding role in billing, tracking, and collecting payments for health care, is exacerbating the country’s medical debt problem. 

These practices push Americans further into medical debt because they “enable aggressive debt collection” and because they’re forced to pay whatever prices the remaining hospital in their respective area charges.

Nationwide, about 100 million Americans owe over $220 billion in medical debt, according to the Consumer Financial Protection Bureau (CFPB). Over 40 million Americans—1 in 5 adults—owe about $88 billion in medical debt in collections, making medical debt the greatest overall source of debt in collections—more than credit cards, utilities, and auto loans. Communities of color and those living in the South are disproportionately affected. 

Things are even worse in North Carolina where as many as three million adults likely carry medical debt, according to Kaiser Family Foundation polling and credit bureau data, and about 8% of residents have medical debt in collections, according to an Urban Institute analysis.

The problem

There are a number of reasons why medical debt is such a crisis in the US. 

Giant medical companies are increasingly buying private practices and smaller pharmacies, a form of medical franchising that taps the companies into new revenue streams, but limits choices for patients and increases costs.

Hospital groups also often issue errant bills that patients don’t know they can contest, or add surprise fees patients have no way of expecting. They additionally often partner with credit card companies to put patients on seemingly helpful payment plans which can actually charge exorbitant interest rates.

Debt collectors also play a key role in driving the problem, targeting families with illegal medical debt collection tactics. 

But research suggests that hospital consolidation — where health care entities merge or are acquired to come under common ownership, dominating a market and reducing competition — is one of the leading factors in why health care prices have risen in recent years, worsening the country’s medical debt problem. 

Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, told NBC News last month that “when hospitals merge, prices go up.” 

In 2017, 90% of hospital markets in the US were highly concentrated, and since then, hospital consolidation has risen to an all-time high. Evidence has shown that when this happens, prices go up for consumers because there simply isn’t anywhere else for them to go when they’re sick or in need, meaning they’re forced to either pay whatever prices the remaining hospital in their respective area charges, or delay seeking treatment, which leads to worse health outcomes. 

When people can’t pay the bill set by the only hospital in their area, it adds to the country’s mountain of medical debt. Delaying treatment also ultimately adds to medical debt as well, because the sicker a person gets, the more treatment they’ll need (and have to pay for) in the future. 

The Urban Institute recently employed the use of its Changing Medical Debt Landscape tool to explore the link between hospital market concentration and people’s ability to pay their health care bills on time.

Miller also told NBC News that one of the reasons North Carolinians shoulder high amounts of medical debt is because of recent hospital mergers that have stifled competition in the industry. 

A new report from the Private Equity Stakeholder Project, a watchdog group, also found that private equity’s expanding role in billing, tracking, and collecting payments for health care is exacerbating the country’s medical debt problem. 

The report found that health care systems have been increasingly outsourcing financial work to private-equity companies that have consolidated debt collectors, claims processing, and billing into sort of “one-stop-shopping services.” From 2014 to 2017, there were 10 to 20 acquisitions of so-called “revenue cycle management businesses” by private equity firms. In both 2021 and 2022, there were 45 acquisitions, and in 2023, there were 31.

The report found that this consolidation and scaling of debt collection companies has “enabled aggressive debt collection.” These private equity firms are using financing tools such as medical credit cards and installment loans that come with high interest rates to make money, but consumers are still unable to pay their bills, pushing them further into debt. 

These firms are therefore “creating and profiting from medical debt,” according to the watchdog group, and it’s not clear whether patients have a full grasp of the terms of these products.

“The private equity industry has tried to downplay the clear fact that it is an essential part of the medical debt crisis,” Michael Fenne, report author and health care researcher at the Private Equity Stakeholder Project said in a statement. 

“For people who are forced to carry medical debt, private equity is a constant presence—from increased health care costs, to high-interest medical debt payments, and including aggressive debt collection practices,” he added. “At every step, private equity firms take resources meant for the provision of care, adding to a debt crisis impacting countless people across the county.”

Possible solutions

Both the Urban Institute and the Private Equity Stakeholder Project say that more protections are needed for patients and consumers in order to mitigate medical debt, something that Vice President Kamala Harris has been working on during her time in the White House. 

For example, the Biden-Harris administration’s American Rescue Plan included funding that will eliminate $7 billion in medical debt nationwide by 2026.

In June, Harris also announced the Consumer Financial Protection Bureau’s proposed rule to remove medical debt from the consumer credit reports of 15 million Americans. 

Barring medical bills from appearing on credit reports would help tens of millions of Americans who have medical debt by eliminating information that can depress their scores, and therefore make it more difficult for them to get a job, rent an apartment, or secure a car loan. 

“No one should be denied economic opportunity because they got sick or experienced a medical emergency,” Harris said in a statement. “That is why I have worked to cancel hundreds of millions in medical debt to date – part of our administration’s overall plan to forgive $7 billion by 2026.” 

Harris has also said she plans to work with states to cancel medical debt for millions more Americans, if elected president in November.

She also announced a series of actions aimed at tackling medical debt and addressing illegal practices committed by third-party debt collectors earlier this month. These actions include attempting to prevent debt collectors from targeting families with illegal medical debt collection tactics, cracking down on certain collectors, and collecting evidence and data on medical debt in the US.

“As someone who has spent my entire career fighting to protect consumers, I am proud to announce today’s new actions to build on our work to reduce the burden of medical debt by increasing pathways for relief and cracking down on predatory debt collection tactics,” Harris said at the time. 

In North Carolina, Gov. Roy Cooper recently announced that nearly 100 hospitals in the state had agreed to participate in his new Medical Debt Relief Incentive Program, which he says will incentivize hospitals to eliminate $4 billion in medical debt for 2 million low- and middle-income North Carolinians over the next two years. 

Participating hospitals will have until July 1 of next year to forgive debts dating back to Jan. 1, 2014.

The Private Equity Stakeholder Project also suggests banning hospitals from levying interest on payments due for patients who qualify for financial assistance and instituting 2% caps on interest for patients who don’t qualify. Its report also calls for transparency around debt collector ownership data including garnishments and home liens, judgment amounts, and geographic information.

The Urban Institute suggests implementing more-stringent requirements on nonprofit hospitals and their use of price and charity care practices similar to those of for-profit hospitals. Earlier this month, the CFPB released a blog post highlighting billing issues that can occur when non-profit hospitals fail to provide financial assistance to patients who are eligible.

The institute also suggests better enforcement of antitrust laws to prevent more anti-competitive mergers from happening in the first place, which would promote a more competitive health care market generally. Its analysis also found that “well-targeted financial support can enhance the financial stability of vulnerable hospitals, potentially preventing closures.” 

Changing the Medicare payment schedule could also reduce incentives for hospital consolidation, because Medicare often pays a higher price for health care services provided in hospital outpatient departments than in a physician’s office. This gives hospitals an incentive to buy smaller practices.

On a broader scale, the Urban Institute says that introducing a public insurance option plan could help reduce health care costs across the nation by lowering premiums and out-of-pocket expenses for consumers.