The city has committed to spend $1.3 million toward erasing medical debt
The city has committed to spend $1.3 million toward erasing medical debt for residents. Now it must get buy-in from local healthcare providers. Credit: Charles Maldonado / Verite News

The New Orleans City Council is closing in on completing a deal, announced late last year, that could erase more than $100 million in medical debt for city residents over three years. But to achieve that goal, the city and a nonprofit group administering the program still need buy-in from the debt holders: the region’s two major hospital networks.  

The council in December allocated $1.3 million in federal pandemic relief funds to forgive up to $130 million of medical debt held by city residents through a partnership with the New York-based nonprofit RIP Medical Debt. 

RIP Medical Debt has signed a contract with the city, which now awaits final approval by the City Council. According to a draft version of the contract, the goal is to forgive $40 million of medical debt this year, $50 million in 2024 and another $40 million in 2025. 

But the biggest hurdle to success, according to the nonprofit’s CEO Allison Sesso, is getting an agreement with New Orleans’ two biggest hospital systems: Ochsner Health and LCMC Health.

“Without them, none of this works,” Sesso said. “We gotta make sure the hospitals get on board here. Ochsner and LCMC, the two big players.” 

Ochsner declined to comment for this story. LCMC did not respond by the time this story was published.

RIP Medical Debt’s mission is to purchase and forgive billions of dollars in medical debt owed by Americans.

“It is a growing crisis that has to be addressed,” Stesso said. 

The nonprofit typically buys older debt at a steep discount, and estimates that on average it can buy and forgive $100 of debt for every $1 it spends. According to its website, it has bought and forgiven $8.5 billion in medical debt for roughly 5.5 million individuals and families since it was founded in 2014.

While the group originally relied on private sector donations, it has found increasing success in getting funding directly from local governments. In November, New Orleans joined a growing list of local governments — including Cook County, Illinois and Pittsburgh — directly allocating money to the cause. 

RIP Medical Debt has two ways to buy medical debt. When the nonprofit started, it mostly bought debt from “secondary markets,” meaning the debt hospitals had sold to debt collection agencies. In the past few years, the nonprofit has also begun purchasing debt directly from hospitals.

The second method — buying debt directly from hospitals — still makes up a minority of the money spent by RIP Medical Debt throughout the country. But Sesso said that working directly with hospitals will be especially important in New Orleans.

“I’m pretty sure they don’t sell debt to the secondary market,” Sesso said. 

Sesso said that if Ochsner and LCMC aren’t selling their debt to secondary buyers, the only option is to buy the debt directly from those hospitals. But the hospitals first need to negotiate with RIP Medical Debt and agree to sell. 

“​​They hold the debt, so they need to say yes,” Sesso said. 

Asked how negotiations with the hospitals are going so far, Sesso was noncommittal. 

“I just hope that they’ll come to the table, that’s all I can say,” she said. “I honestly don’t think we’ve had enough engagement with them. And I don’t think that’s our fault. … We’ve reached out to them but we haven’t received a, ‘We’re going to go ahead and move forward with this’ from them yet.”

Sesso said that neither of the hospitals have yet signed a “business associate agreement” with RIP Medical Debt, which she said is the first step in working with them. 

“In order for us to engage with a hospital they need to sign a business associate agreement to share data with us. Once a hospital does that, we know they tend to be generally serious about working with us. And I can tell you we don’t have those yet” from Ochsner or LCMC.

Sesso said that efforts will continue to get Ochsner and LCMC on board.

“We’re in good shape and ready to roll,” she said.

In an emailed statement, Mayor LaToya Cantrell’s office said the city has had “positive initial conversations with local providers about the project.”

“Future discussions and negotiations with providers about purchasing specific medical debts will be led by RIP Medical Debt,” the statement said. 

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Before joining Verite, Michael Isaac Stein spent five years as an investigative reporter at The Lens, a nonprofit New Orleans news publication, covering local government, housing and labor issues. During...