Tenet Medical Accounts Sale Involved WAM, NCO, and CarVal

After a week or so of rumors and speculation, West Asset Management, MEDCLR, and CarVal Investments announced late Wednesday that they had partnered with to purchase a large portfolio of medical debt from Tenet Healthcare, one of the largest hospital operators in the U.S.

According to the joint release, the portfolio consisted of self-pay accounts that were aged more than 270 days and all belonged to hospitals Tenet had divested.  Tenet had also already charged off the accounts.  The deal took place in the fourth quarter of 2006.

In a filing with the SEC Tuesday, Tenet said that they received $16 million for the portfolio.  Although no face-value amount has been disclosed, rumors and industry insiders peg the portfolio’s value at around $1 billion.  In the joint release Wednesday, the parties stated that they believed the accounts represented the “largest portfolio of healthcare receivables ever purchased in the healthcare industry.”

The sheer size and reputations of the players involved also raised eyebrows.  MEDCLR is owned by NCO Financial Systems, CarVal is a subsidiary of food and agricultural powerhouse Cargill, and WAM is the ARM division of call center giant West Corporation.  This was not exactly an accident according to the release.

“Purchasers like MEDCLR and West, with expertise in healthcare receivables, can offer hospitals cash value from accounts that have already been written off,” said WAM senior consultant Tye Hanna.

CarVal provided due diligence and investment capital to pull off the deal.  The company has a standing relationship with WAM and MEDCLR and has partnered with the two on numerous portfolio purchases, including medical debt.  In fact, one debt purchasing insider referred to the trio as "The Three Amigos."  MEDCLR, through its relationship with NCO, and WAM will be responsible for collecting on the accounts.  Although there has been speculation as to the specific assignment values, a WAM spokesman told insideARM last night that the breakdown will not be disclosed.