As Virginia’s Hospitals Cut Back on Suing Patients, the Focus Needs to Shift to Transparent Billing.

By Edward Lebar, senior staff editor

In October of this year, VCU Health, a health services network with seventy locations in the state of Virginia,[1] announced that they would no longer be filing suits against patients that failed to pay their medical bills in a timely manner.[2] Over the last seven years, over fifty-one thousand suits had been filed for over eighty-one million dollars in medical debt.[3] Such suits resulted in garnishments on patients’ wages and bank accounts, liens placed on patients’ property, and in many cases, patients’ families going into bankruptcy.[4] VCU Health joins a growing list of Virginia-based hospitals and health services groups scaling back on and oftentimes ending the practice of suing patients for unpaid medical debt.[5]

A month prior, The University of Virginia dismissed a number of pending suits for collection of unpaid medical debt immediately after the publication of a report in the Washington Post publicizing the practice.[6] The University previously argued that the hospital would be unable to maintain positive operating income with the same high level of patient care if they did not aggressively collection on unpaid bills.[7] The University also stated that they would only sue for unpaid medical debt as a matter of last resort, only to be done after repeated notices had been sent to the debtors and they had been advised on receiving financial assistance.[8]  Despite these defenses, the University quickly changed course after the Washington Post publicized the report, announcing that they would “increase financial assistance, give bigger discounts to the uninsured and reduce [their] reliance on the legal system.”[9]

While the Washington Post report highlighted stories of patients that were forced into selling their homes and personal belongings, borrow money from friends and family, and oftentimes going into bankruptcy due to outstanding medical bills,[10] the majority of medical debts sent to collections agencies are for small amounts.[11] Even these small amounts can have disastrous consequences for families. Collection agencies will often report these unpaid debts to credit reporting agencies,[12] downgrading the patient’s credit score and their access to favorable loans and mortgages from banks.[13]

A report by the Consumer Financial Protection Bureau in 2014 also highlighted the fact that many patients who do not pay their medical debt because they lack the funds.[14] Instead, the report found that medical bills go unpaid because the patients are confused as to who or what they owe.[15] Thanks to a lack of price transparency for medical procedures and the overall complexities of insurance coverage and cost sharing, patients take hits to their credit score for medical bills that they either thought they paid already or thought their insurance covered.[16]  Experts agree that hospitals in Virginia need to undergo a shift towards billing transparency in addition to leniency towards medical debtors.[17] Despite efforts by Virginia’s hospitals to end the practice of suing for medical debt, without true transparency in billing, they’re only treating the symptoms instead of the root cause.

[1] VCU Health, https://www.vcuhealth.org/locations/locations-map.

[2] Jay Hancock & Elizabeth Lucas, VCU Health Halting Patient Lawsuits that Affected 56,000 over 7 years, Richmond Times Disp., (Oct. 9, 2019), https://www.richmond.com/news/virginia/vcu-health-halting-patient-lawsuits-that-affected-over-years/article_e22c7612-e36d-5462-b328-3a4602a45dc2.html

[3] Id.

[4] See Ruth Serven Smith, UVA Drops 14 Medical Debt Lawsuits after Investigative Report on Aggressive Billing, Collections, Richmond Times Disp., (Sept. 12, 2019), https://www.richmond.com/news/virginia/uva-drops-medical-debt-lawsuits-after-investigative-report-on-aggressive/article_d43402d2-07aa-5b5c-8d16-e848beed2f23.html.

[5] Id.

[6] Id.

[7] Jay Hancock & Elizabeth Lucas, ‘UVA has Ruined Us’: Health System Sues Thousands of Patients, Seizing Paychecks and Putting Liens on Homes, Wash. Post, (Sept. 9, 2019), https://www.washingtonpost.com/health/uva-has-ruined-us-health-system-sues-thousands-of-patients-seizing-paychecks-and-putting-liens-on-homes/2019/09/09/5eb23306-c807-11e9-be05-f76ac4ec618c_story.html.

[8] Id.

[9] Jay Hancock & Elizabeth Lucas, UVA Health System Revamps Aggressive Debt Collection Practices after Report, Wash. Post., (Sept 13, 2019), https://www.washingtonpost.com/health/uva-health-system-revamps-aggressive-debt-collection-practices-after-story/2019/09/13/4a381a0a-d629-11e9-9343-40db57cf6abd_story.html.

[10] Jay Hancock & Elizabeth Lucas, ‘UVA has Ruined Us’: Health System Sues Thousands of Patients, Seizing Paychecks and Putting Liens on Homes, Wash. Post, (Sept. 9, 2019), https://www.washingtonpost.com/health/uva-has-ruined-us-health-system-sues-thousands-of-patients-seizing-paychecks-and-putting-liens-on-homes/2019/09/09/5eb23306-c807-11e9-be05-f76ac4ec618c_story.html.

[11] Consumer Financial Protection Bureau, Consumer credit reports: A Study of Medical and Non-Medical Collections 5, (2014) (finding that the average value of medical tradelines was $579, significantly smaller than debts for credit cards or student loans) https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf.

[12] Id at 4.

[13] Jay Hancock & Elizabeth Lucas, ‘UVA has Ruined Us’: Health System Sues Thousands of Patients, Seizing Paychecks and Putting Liens on Homes, Wash. Post, (Sept. 9, 2019), https://www.washingtonpost.com/health/uva-has-ruined-us-health-system-sues-thousands-of-patients-seizing-paychecks-and-putting-liens-on-homes/2019/09/09/5eb23306-c807-11e9-be05-f76ac4ec618c_story.html.

[14] Consumer Financial Protection Bureau, Consumer credit reports: A Study of Medical and Non-Medical Collections 5, (2014) (finding that, of consumers with only medical debt tradelines, 50% have otherwise perfectly clean credit reports with no signs of past delinquencies) https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf.

[15] Id at 6.

[16] Id.

[17] See Ruth Serven Smith, UVA Drops 14 Medical Debt Lawsuits after Investigative Report on Aggressive Billing, Collections, Richmond Times Disp., (Sept. 12, 2019), (quoting Marty Makary, a professor of surgery at Johns Hopkins University, “We are living in an era where hospitals need to be more honest with prices and services…” “You have to change the business of medicine so that it is fair and honest and kind. Nobody went to medical school to have their patients sued into poverty.”) https://www.richmond.com/news/virginia/uva-drops-medical-debt-lawsuits-after-investigative-report-on-aggressive/article_d43402d2-07aa-5b5c-8d16-e848beed2f23.html.

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