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October 25, 2026 · News

Alexander Flores, President of Triton Financial Solutions, LLC

How to Buy Medical Debt Portfolios

Level 2 (Intermediate) · By Alexander Flores, Debt Buyer & Triton Financial Solutions, LLC · Last updated: October 25, 2026

Quick answer: To buy medical debt, form an operating company, get licensed in the states on the file, sign the seller’s NDA, review a minimum-necessary data tape, confirm credit reporting and 501(r) limits, price the file, then sign the purchase and sale agreement (PSA) and fund. On DebtMarket, a complete file closes in 1-14 days.

Buying medical debt has more rules than buying credit card paper. Privacy law, the nonprofit hospital tax rules, state medical debt laws and changes to credit reporting all affect what a portfolio is worth and how you can work it. This guide covers each step, links to the primary sources, and gives the date each source was checked. It is general education, not legal advice. Talk to your own counsel before you bid.

How do you buy medical debt?

You buy medical debt through a private sale. A provider, a hospital or an earlier buyer sells charged-off patient balances under a PSA. The usual path is licensing, NDA, data tape review, compliance checks, a bid quoted as a percent of face, and then closing.

Step What happens Who leads
1. Licensing Confirm debt buyer or collection licenses for every state on the file Buyer
2. NDA Sign before any account-level data is shared Buyer and seller
3. Data tape review Check balances, dates, states and documentation, using minimum-necessary fields Buyer
4. Compliance screen Credit reporting, state medical debt laws and 501(r) terms Buyer and counsel
5. Pricing Bid as a percent of face, based on collectability Buyer
6. Closing PSA, bill of sale, funding and file transfer Both parties

For the general version of this process, see our guide on how to buy a debt portfolio.

What licenses do you need to buy medical debt?

It depends on the states where the consumers live. Some states require passive debt buyers to hold a collection agency or debt buyer license. Others regulate only the companies that collect. Check every state on the tape before you sign.

Plan for the following:

  • A state-by-state license check. Licensing is set by each state, and the rules change. Check each state regulator’s current requirements, not an old summary.
  • A licensed servicer, if you won’t collect yourself. Many passive buyers place accounts with licensed agencies or law firms. Your contracts should require them to follow the FDCPA and Regulation F.
  • Proof for the seller. Sellers of medical paper usually ask for license numbers, insurance certificates, a compliance management summary and data security policies before they release a tape.

Qualified buyers can apply through our buyer page.

What is on a medical debt data tape, and how does HIPAA apply?

A medical tape lists account-level balances, dates and consumer identifiers. When the data comes from a HIPAA covered entity, it may include protected health information (PHI). That PHI has to be limited to the minimum necessary and protected by contract.

Here is what the U.S. Department of Health and Human Services (HHS) says, in general terms:

  • “Payment” under the HIPAA Privacy Rule includes “billing, claims management, collection activities” (45 CFR 164.501). HHS calls debt collection a payment activity and says covered entities may use collection agencies through a business associate arrangement (HHS FAQ 268, checked Oct. 25, 2026).
  • Disclosures for payment and health care operations must be limited to the minimum necessary (HHS guidance on treatment, payment and operations, checked Oct. 25, 2026). The HIPAA definition of health care operations also lists “the sale, transfer, merger, or consolidation of all or part of the covered entity with another covered entity” (45 CFR 164.501, checked Oct. 25, 2026). That item covers combining or selling the covered entity itself, not a stand-alone sale of patient accounts.

How HIPAA applies to a particular portfolio sale depends on who the seller is, how the data is structured and what the contracts say. Have privacy counsel review it. In practice, buyers should expect:

Tape field Why buyers need it Handling note
Current balance and original balance Pricing and validation Standard
Date of service, charge-off and last payment Statute of limitations, credit reporting timing, pricing Standard
Consumer state and ZIP code Licensing and state law screen Standard
Insurance and adjustment status Shows whether the balance is really the patient’s share Request a summary, not claim detail
Diagnosis or procedure codes Generally not needed for pricing Leave off the tape unless counsel approves
Provider type (hospital, physician, lab) Collectability and 501(r) screen Use categories where possible

Store the tape encrypted, limit who can open it, and log transfers. Our DebtHub covers data tape fields in more detail.

Can medical debt still be reported to credit bureaus?

Partly. The CFPB’s 2025 rule banning medical debt from most credit reports was vacated in July 2025. The three nationwide bureaus’ voluntary limits still apply, and a growing number of states ban or restrict reporting.

The CFPB’s 2025 medical debt rule and its court status

On January 7, 2025, the CFPB issued a final rule amending Regulation V. It would have barred creditors from considering medical debt information and stopped consumer reporting agencies from including medical debt on credit reports. The rule was published at 90 Fed. Reg. 3276 (Jan. 14, 2025). On July 11, 2025, the U.S. District Court for the Eastern District of Texas vacated the rule in Cornerstone Credit Union League v. CFPB (No. 4:25-cv-16). The CFPB and the plaintiffs had jointly asked the court to do so. The court held that the rule exceeded the CFPB’s authority under the Fair Credit Reporting Act. The CFPB now says its rule materials are “for reference only” (CFPB rule page; court opinion, July 11, 2025; Reuters, July 11, 2025; all checked Oct. 25, 2026).

The bureaus’ voluntary changes

Effective Change by Equifax, Experian and TransUnion
July 1, 2022 Paid medical collection debt removed from credit reports
July 1, 2022 Unpaid medical collections wait one year before appearing, up from six months
April 11, 2023 Medical collections with an initial reported balance under $500 removed

With the April 2023 change, the bureaus said nearly 70% of all medical collection tradelines had now been removed from credit files (joint press release, Apr. 11, 2023, checked Oct. 25, 2026). For a buyer, this means credit reporting is a limited collection tool for small medical balances. Price the file on the assumption that you can’t report them.

Which state medical debt laws affect buyers?

Many states now restrict medical debt credit reporting, and some add contract and collection rules. The National Consumer Law Center (NCLC) counts 15 states plus the District of Columbia that limit medical debt reporting.

The NCLC lists California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, Virginia and Washington (NCLC, “The Latest on Keeping Medical Debt Out of Credit Reports”, checked Oct. 25, 2026). Some examples from that list:

State Law Effective What it does (summary)
California SB 1061 Jan. 1, 2025 (some parts July 1, 2025) Limits furnishing, reporting and use of medical debt. A medical debt can become void and unenforceable if it is knowingly furnished to a credit bureau.
Colorado HB 23-1126 Aug. 7, 2023 (sunsets July 2, 2028) Limits bureaus from reporting medical debt
Connecticut Public Act 24-6 July 1, 2024 Limits furnishing. Provider contracts with collectors must bar reporting.
Maryland HB 1020 (2025) Oct. 1, 2025 Limits furnishing, reporting and use. Contract terms required.

California’s bill text is summarized on CalMatters Digital Democracy, and the California Attorney General has issued a consumer alert on it (both checked Oct. 25, 2026). Many states also set interest caps, require charity-care screening or restrict lawsuits on medical debt. Run every state on the tape through counsel, and expect sellers to exclude some states.

How do nonprofit hospital 501(r) rules affect a medical debt sale?

For a tax-exempt hospital, selling patient debt counts as an “extraordinary collection action” (ECA) unless a written agreement signed before the sale meets four IRS conditions. Buyers should expect those terms in the PSA.

Under 26 CFR 1.501(r)-6(b)(2), the sale is not an ECA if the purchaser agrees to the following (IRS, Billing and collections, Section 501(r)(6); 26 CFR 1.501(r)-6; both checked Oct. 25, 2026):

  1. The purchaser won’t engage in any ECAs to obtain payment.
  2. The purchaser won’t charge interest above the rate in effect under IRC § 6621(a)(2) at the time of sale.
  3. The debt can be returned to or recalled by the hospital if the patient is found eligible for financial assistance under the hospital’s financial assistance policy (FAP).
  4. If a FAP-eligible account isn’t recalled, the purchaser follows procedures that keep the patient from paying more than their FAP-eligible amount.

ECAs include credit reporting and legal actions such as lawsuits, liens and wage garnishment. The IRS also says a hospital “is held accountable for the ECAs of third parties… to which it sells debt.” Expect recall rights, servicing limits and audit rights in nonprofit hospital paper, and price them in.

How is medical debt priced?

Medical debt is bid as a percent of face value, based on expected collections after costs and compliance limits. We couldn’t find a reliable, current public price range for medical debt, so this guide doesn’t quote one.

Published prices are rare because most sales are private and covered by NDAs. Here are the factors buyers weigh:

Factor Effect on price
Age since date of service and charge-off Older paper and paper near or past the statute of limitations is worth less
Balance size Balances under $500 can’t be reported to the bureaus under their voluntary policy
State mix States that ban reporting or restrict collection lower expected recoveries
501(r) terms Recall rights and the ban on ECAs limit how the paper can be worked
Insurance adjustment status Unresolved claims bring disputes and put-backs
Prior placements and sales Paper that has already been placed or resold usually prices lower
Documentation (itemized statements, chain of title) Better documentation supports validation and higher bids

Sellers can request a pricing review through our seller page.

Why should medical debt review be NDA-first?

Medical tapes carry sensitive consumer data. Signing an NDA before release limits who sees the data and keeps the file from being shopped. DebtMarket shares tapes only after an NDA, never on a public auction list.

Our process:

  • NDA first. No account-level data goes out until the NDA is signed.
  • Screened buyers. The file goes only to qualified buyers from our network of 200+, after their licensing is checked.
  • No public auction. The portfolio is never posted publicly.

How long does it take to close a medical debt purchase?

On DebtMarket, a complete file closes in 1-14 days. Closing means signing the PSA, delivering the bill of sale, funding and transferring the file.

Closing checklist:

Document or step Purpose
Purchase and sale agreement (PSA) Reps and warranties, put-backs, 501(r) terms, data security terms
Bill of sale and final account schedule Transfers title to the listed accounts
Chain of title Links the original provider to each later owner
Funding Wire on the agreed date
Secure file transfer and media Encrypted delivery of the account data and statements
Notices and servicing setup Validation notices under Regulation F, plus any notices required by state law

Frequently asked questions

Can individuals buy medical debt?

Sellers generally sell only to operating companies that hold the required state licenses and can show compliance and data security controls. DebtMarket works only with qualified business buyers.

Is buying medical debt legal?

Yes. Federal law doesn’t ban buying medical debt. HIPAA, the IRS 501(r) rules, the FDCPA and Regulation F, and state laws all limit how it is sold and collected. Get advice from your own counsel.

Where can I buy medical debt portfolios?

Medical paper is sold privately by providers, hospitals and existing debt owners, often through brokers. On DebtMarket, qualified buyers review files under NDA. Apply as a buyer.

Next step: Buyers can apply as a qualified buyer. Sellers can start a confidential sale. To learn more, browse DebtHub.

Sources (checked October 25, 2026)

This article is general information, not legal advice. Laws change, so confirm the current rules with counsel before you buy or sell.