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Is Medical Debt Causing Hospital Bankruptcy Filings?

Posted By admin || 22-May-2010

Medical Bills Causing Hospital Bankruptcy

The country has been hit by a string of hospital bankruptcy filings and closings that could impact healthcare access for many communities. St. Vincent's Hospital is the latest hospital to file Chapter 11 bankruptcy in the hope that the bankruptcy filing will allow it to continue operating and caring for its patients until it closes.  The hospital filed Chapter 11 bankruptcy with more than $1 billion in debt and few assets. There has been a lot of hand wringing and finger pointing; but what is the core cause of this rash of hospital bankruptcy filings?  Hospitals depend on the payments it receives from insurers and patients to survive.  Without that income their cash flow slows to a trickle and eventually stops.  That is the way the systems works.  But what happens when millions of Americans no longer have health insurance because they are unemployed?  What happens when millions of Americans are unable to pay their medical debt because they don't have any health insurance or cash because of unemployment?  What happens is that hospitals don't get paid.   Even if the hospitals become aggressive (and they have) by sending more medical debt accounts to collections, you can't get blood from a turnip.  Most of those Americans suffering under medical debt are not paying simply because they can't.  They are often unemployed and uninsured which makes medical debt just another debt that is likely to go unpaid or even eventually discharged in bankruptcy.  While outstanding and unpaid medical debt on a small scale won't send hospitals into bankruptcy, large scale defaults on medical debt could send many hospitals into bankruptcy essentially battering our already suffering healthcare infrastructure.
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