Heart breaking Quest, LabCorp,Conduent Inc. and CareCentrix Inc. — American Medical's fourlargest clients — stopped doing business with the company after itsrecent data breach. (Photo: Shutterstock)

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Retrieval-Masters Creditors Bureau Inc., whose business wasblamed for a large-scale data breach that affected millions of Quest Diagnostics Inc. customers,filed for Chapter 11 protection, citing fallout from the securityissue.

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The company, which collects patient receivables for medical labsunder the name American Medical Collection Agency, listed assetsand liabilities of as much as $10 million in its bankruptcypetition filed in the Southern District of New York. It's aiming toliquidate, the company said.

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Related: Health care data breaches highlight limits ofHIPAA's vendor oversight

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Court documents cited a breach discovered in March that affectedmillions of people, including customers of Quest Diagnostics andLaboratory Corporation of America. Soon after, Quest, LabCorp,Conduent Inc. and CareCentrix Inc. — American Medical's fourlargest clients — stopped doing business with the company, leadingto the bankruptcy filing, according to court papers.

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A representative for Retrieval-Masters didn't provide acomment.

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Cascading events

The data breach created a “cascade of events” resulting in thebankruptcy filing, Chief Executive Officer Russell H. Fuchs said ina court declaration. It incurred “enormous expenses that werebeyond the ability of the debtor to bear,” he said.

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Those expenses included more than $3.8 million spent on mailingmore than 7 million individual notices to people whose informationhad been potentially hacked. Fuchs personally lent the company $2.5million to help pay for those mailings, he said in the declaration.In addition, IT professionals and consultants hired in connectionwith the breach had cost Retrieval-Masters about $400,000 by thetime of the filing.

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The Elmsford, New York-based company learned of the breach afterreceiving notices saying a high number of credit cards tied to itsweb portal were connected to fraudulent charges, Fuchs said. Questis facing a lawsuit in California and inquiry in Michigan about thebreach.

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Retrieval-Masters has slashed staff to 25 from 113 at the end of2018, according to court papers.

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Retrieval-Masters also collects non-medical consumer debt,according to its website. Fuchs founded the company in 1977 and wasinitially focused on small-dollar debt collections for direct-mailmarketers, such as the various book-of-the-month or record clubsthat predated the e-commerce boom, before transitioning intopatient receivables, the declaration shows.

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The case is Retrieval-Masters Creditors Bureau Inc., 19-23185,U.S. Bankruptcy Court for the Southern District of New York (WhitePlains)

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