How Do Debt Collection Restrictions Affect Hospitals and Patients?

Abstract

Tighter regulations on consumer debt collectors, although intended to curb predatory practices, may disrupt industries to which such debts are owed. Using a paired-county stacked difference-in-differences design, we show that these regulations adversely affect hospitals. While hospital patient volume remains unchanged, their accounts receivable, liabilities, and profitability deteriorate, with stronger effects in states with ex-ante higher debt collector density. Consequently, treatment capacity, employment, and care quality at hospitals decline, while patterns indicating upcoding in hospitalization emerge. Additionally, non-profit hospitals reduce charity care for uninsured patients. Overall, ignoring spillovers of consumer financial protection laws on non-financial sectors may overstate their benefits.

Keywords: Access to Healthcare, Consumer Debt Collection Regulation, Hospital Finances