Debt Purchaser Sues Hospital Over $1.9 billion Portfolio

A debt purchaser specializing in medical debt has charged a Miami hospital with breach of contract, breach of implied duty of good faith and fair dealing, and not fulfilling accounting obligations over a $1.9 billion portfolio it bought from the hospital.

West Conshocken, Pa.-based International Portfolio, Inc. (IPI) on Oct. 2 sued Jackson Memorial Hospital and its owner, the Public Health Trust of Miami-Dade County, in Miami federal court over the $1.87 billion portfolio it purchased last December for $5.7 million.

Jackson Hospital has 1,498 beds with 2005 revenues of $1.4 billion, according to its Web site.

The past-due self pay, insurance and managed care accounts were dated from 1998 through 2005, according to a report last week in the South Florida Business Journal.

The suit alleges that by February Jackson had determined that $984 million worth of the debt shouldn’t have been part of the deal, with many of the patients “dead, bankrupt, on Medicare or Medicaid … (and) those who didn’t owe anything or had duplicate accounts,” according to the Business Journal.

The hospital replaced those accounts in March with another group of accounts that IPI claims were worth only $682 million. Jackson told IPI in April to stop collecting on $578 million worth of the portfolio to give it time to review the accounts. The suit alleges that Jackson recalled $573.8 million of those accounts and refunded $1.8 million to IPI, according to the Business Journal.

Joel Hirschorn, a Coral-Gables, Fla.-based attorney representing IPI, bemoaned the competence of the accounting staff of the public health trust. “A private business could never survive the way they run this business,” said Hirschorn.

IPI also alleges that Jackson sent a letter to patients in the $578 million segment of the portfolio to apologize for IPI’s collection activities and informing them their accounts had a zero balance.

IPI claims that a third party collection agency that Jackson hired, Argent Healthcare Financial Services, told some debtors that they owed nothing on their accounts, even when IPI’s records showed payment was due.

IPI’s Jackson accounts this month had a value of $961.6 million. IPI claims that Jackson in August offered to refund the purchase amount. In a statement to the Business Journal, Jackson reported it “strongly disagrees with the allegations and will defend its position vigorously.” 

Hirschorn said that the discovery process on the suit could begin in about four weeks. “If they had half a brain they would try to settle this before hand.”