Where Does $100 to RIP Medical Debt Go?

Most recently, the national news has given quite a bit of airtime to a non-profit known as RIP Medical Debt, calling the organization out for doing good deeds like paying off medical bills for people unable to settle these debts. Seems RIP Medical Debt has been acquiring bad debt (debt sent to collection agencies) for pennies and paying off that debt thereby erasing a person’s obligation to pay accumulated medical bills.

Established in 2014 by two former debt collection executives, RIP Medical Debt was created to collect donations to buy large bundles of medical debt and then forgive that debt with no tax consequences (although the donor making the donation to RIP Medical Debt gets the deduction).

Based in Rye, New York, RIP Medical Debt reported total revenue of $5.5 million in 2018, most of which came from contributions.

Expenses totaled $5.3 million and can be viewed two ways:  by broad general category (i.e. debt purchased, program services, management and general expenses, and fundraising) or by specific line item category (i.e. compensation, office-related expenses, travel and conferences, debt purchased, fees for services, etc). Both are beneficial with the latter approach providing more detail.

The unspent revenue – $200,000 – was added to the fund assets, which had a net balance of $1.3 million at year-end.

Expenses by Broad General Category

The $5.3 million in expenses were categorized as follows:

• $2.3 million (42% of revenue):  Medical Debt Purchased
• $1.8 million (33% of revenue):  Program Services
• $ .7 million (12% of revenue):  Management and General Expenses
• $ .5 million ( 9% of revenue):  Fundraising

Using the above information, $100 in revenue was spent as follows:

$100:  Revenue

-$ 33:  Program Services

-$ 12:  Management and General Expenses

-$  9:  Fundraising

–$ 54: Subtotal, Program, Management and General Expenses, and Fundraising

$  46: Remaining Revenue

-$ 42:  Medical Debt Purchased

$   4:  Unspent Revenue:  To Fund Balance

As illustrated above, $54 out of every $100 was spent on program services, management and general expenses and fundraising. $42 out of every $100 was used to buy medical debt.

Expenses by Specific Line Item Category

The $5.3 million in expenses were categorized as follows:

• $2.3 million (42% of revenue):  Medical Debt Purchase
• $1.3 million (24% of revenue):  Fees for Services
• $ .8 million (14% of revenue):  Compensation
• $ .4 million (7% of revenue):  Data Purchase and Data Analysis
• $ .3 million (5% of revenue):  Office-related Expenses
• $ .2 million (4% of travel):  Travel and Conferences

As illustrated above, Fees for Services is the largest expense after medical debt purchase. These fees were primarily for software and system consultants, publicity and public relations, and other professional services.  Compensation of $800,000 was for 9 employees. The COO, Craig Antico was compensated $344,465. If the COO’s compensation is subtracted out of total compensation, then 8 employees were compensated about $455,000, or an average compensation of $57,000.

Using the above information, $100 in revenue was spent as follows:

 $100:  Revenue

-$ 24:  Fees for Services

-$ 14:  Compensation

-$  7:  Data Purchase and Data Analysis

-$  5:  Office-related Expenses

-$  4:  Travel and Conferences

-$ 54: Subtotal Expenses

$ 46:  Revenue Remaining

-$ 42:  Medical Debt Purchase

$  4:  Unspent Revenue:  To Fund Balance 

As illustrated above, $54 out of every $100 was spent on organization expenses while $42 out of every $100 was spent on medical debt purchase. $4 out of every $100 was not spent, thus increasing the fund balance at year-end.

To read the IRS Form 990 (2018), click here.