VCU Health Will Halt Patient Lawsuits, Boost Aid In Wake Of KHN Investigation

VCU Health, the major Richmond medical system that includes the state’s largest teaching hospital, said it will no longer file lawsuits against its patients, ending a practice that has affected tens of thousands of people over the years.

VCU’s in-house physician group filed more than 56,000 lawsuits against patients for $81 million over the seven years ending in 2018, according to a Kaiser Health News analysis of district court data. Those suits will end and VCU will increase financial assistance for lower-income families treated at the $2.16 billion system, according to Melinda Hancock, VCU’s chief administrative and financial officer.

Melinda Hancock, CFO, VCU Health System(Courtesy of VCU Health)

Kaiser Health News recently reported that UVA Health, the University of Virginia system, had filed more than 36,000 suits over six years against patients who could not pay their bills. That revelation, published last month in The Washington Post, led UVA to pledge to “positively, drastically” reduce patient lawsuits.

VCU’s new stance on lawsuits goes beyond UVA’s, which promised to stop suing only patients whose income is below 400% of poverty guidelines. UVA officials did not respond to requests for comment.

VCU’s flagship hospital, VCU Medical Center, hasn’t filed patient suits in at least seven years, Hancock said in an interview this week. But its in-house physician group continued to sue patients and families for overdue bills.

That approach stopped as of last month, she said. VCU Health, a state-operated system including Richmond’s VCU School of Medicine and Community Memorial Hospital in South Hill, Va., will stop suing patients “as part of normal debt collection,” she said. It is also ending garnishment of patient wages and attaching liens to patient homes, she said.

Hancock said VCU has been considering changing its policies since last year but recent revelations about UVA “expedited” the decision. Starting in June, KHN had requested comment from VCU officials about the health system’s financial assistance and lawsuits.

“We don’t want to be part of that,” she said about patient lawsuits, which are a standard tool for many hospitals seeking to maximize revenue. “We feel that taking care of the patient’s financial health is taking care of their holistic health.”

The system, affiliated with Virginia Commonwealth University, is also considering “how we should address pending lawsuits and retrospective cases,” said spokeswoman Laura Rossacher.

VCU Health will continue to send unpaid debts to collections and report patients with overdue bills to credit agencies.

“We still need to get our bills paid,” Hancock said. “We do need to deploy reasonable collection efforts.”

Policy scholars said the new guidelines, which would make VCU’s collection and billing practices among the most liberal for Virginia hospitals, would still leave many patients vulnerable to credit downgrades, financial hardship and bankruptcy.

“This certainly seems like progress,” said Sara Rosenbaum, a health law professor at George Washington University. But even if no lawsuit is filed, “being an apparent deadbeat on a bill written off as bad debt has terrible and enduring consequences on folks.”

Negative credit reports from a hospital, even without a court case, can send families into a downward spiral, said Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance and Management.

“If they send you to a collection agency, you’re not able to borrow any money because that’s going to put you in such a poor credit rating,” he said. “You cannot expect somebody to pay a $10,000 or $20,000 bill if they don’t have insurance.”

Analysts also criticized as inadequate VCU’s new discounts to the uninsured. Last year, the system started reducing list prices by 45% for those lacking coverage. The previous discount was 25%. Almost nobody pays list charges, which hospitals typically use as a starting point for negotiations with insurers.

But VCU’s average cost of care is 77% below list charges, according to 2017 government filings. That means the uninsured are still paying a big markup under the new policy.

“Most uninsured have very little income, and asking them to pay twice as much as it costs to deliver care is not appropriate,” Anderson said. “It is no wonder why so many cannot pay the bills.”

Uninsured patients paying promptly can receive discounts of up to 55%, Rossacher said. But few are able to do that.

Like UVA, VCU is raising the income threshold for patients seeking financial assistance ― in its case, awarding aid to families with income up to 300% above the federal poverty level, or $77,000 for a family of four. For most patients, the previous cutoff was 200%, or $52,000, for a family of four.

That aid threshold takes effect in November. VCU officials declined to give an estimate of what the new policies would cost the system.

KHN analyzed lawsuits filed by VCU and other hospitals using civil court data collected by Code for Hampton Roads, a nonprofit focusing on improving government technology.

“VCU Health System and its affiliated physicians are making important policy changes that are long overdue,” said Jill Hanken, a health care attorney for the Virginia Poverty Law Center. She urged “further and ongoing oversight” from lawmakers to ensure appropriate indigent care policies.

Virginia Gov. Ralph Northam, a physician, has said little publicly about the state hospitals and doctors under his leadership that often pursue patients for all they are worth.

“No one should go bankrupt because they get sick,” said Northam spokeswoman Alena Yarmosky. “Gov. Northam is glad to see health systems taking real steps to put Virginians first and address aggressive bill collection practices.”

VCU will continue reviewing its collections and assistance policies, Hancock said. “This is an ongoing process,” she said. “It doesn’t’ stop here.”

One impetus to dropping lawsuits was an increasing number of patients with health insurance who still have trouble paying, she said.

“With the rise of high-deductible plans,” in which patients pay thousands before insurance kicks in, she said, “we just felt that there are other collection efforts that were more suitable now.”