The University of Virginia Health System, which sues thousands of patients each year, seizing wages and home equity to collect on overdue bills, said Friday it would increase financial assistance, give bigger discounts to the uninsured and “reduce our reliance on the legal system.”

“This will have a huge impact on patients to the good,” Doug Lischke, UVA Health System’s chief financial officer, said in an interview. The changes will “positively, drastically reduce the legal process” of lawsuits, garnishments and property liens, he added.

Lischke called the new policy “a first step” that could later include additional financial assistance. He said the state-owned health-care system also plans to ask the Virginia General Assembly to change a law requiring state agencies, including health systems, to “aggressively collect” unpaid bills and charge 6 percent interest on the balance.

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But independent experts said the policy change, which comes on the heels of a Kaiser Health News investigation published in The Washington Post detailing the public medical center’s aggressive collection practices, still leaves numerous patients exposed to lawsuits and crippling bills. KHN found that UVA sued patients more than 36,000 times over six years ending in June 2018, sending many families into bankruptcy. It routinely billed uninsured patients for far more than what a typical insurance company would have paid.

By leaving family assets vulnerable and not fully discounting list-price charges, the new guidelines remain “very tough on the poor and near-poor who have managed to amass anything of value that will help them with the daily costs of life,” said Sara Rosenbaum, a health policy professor at George Washington University.

The amended policy will make it easier to qualify for financial assistance, awarding aid to families with incomes of up to 400 percent of the federal poverty level, or $103,000 for a family of four. Until now, families making more than half that were ineligible — the most restrictive financial assistance rules of any major hospital system in Virginia, the KHN analysis found.

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UVA also said that except in “unusual circumstances,” it will not sue patients unless balances are more than $1,000 and families make more than 400 percent of the poverty guidelines.

“While these changes represent a step in the right direction, it’s unfortunate that UVA, a public institution, insists on still suing patients,” said Marty Makary, a surgeon and researcher at Johns Hopkins Medicine who studies hospital debt collection. “In my conversations with UVA surgeons, they are appalled by the practice of their center in suing patients and want it to stop.”

The health system has not decided what to do about patient lawsuits in the pipeline, Lischke said. Online court records show there are hearings scheduled for hundreds of UVA Medical Center cases over the next few weeks.

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Mary Washington Healthcare of Fredericksburg, Va., criticized earlier this summer for a far-smaller number of lawsuits, said it would suspend suing patients and seek to eliminate garnishments. Methodist Le Bonheur Healthcare in Memphis, another on a growing list of hospitals called out for aggressive collections, said it would suspend all court activity for a month.

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The changes at UVA are slated to take effect Jan. 1, but officials said they are “committed to working with anyone who currently has an outstanding balance or debt that they are struggling to pay.”

The health system will apply the new policies to patients treated in July 2017 or later, Lischke said. That means patients on current payment plans, or with judgments against them, could have bills eliminated or adjusted. But he said there will be no refunds of payments already made.

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Taken together, the changes will cost UVA “millions to tens of millions,” he said, declining to give a more precise figure. UVA Medical Center, the flagship hospital of UVA Health, made an $87 million operating profit on revenue of $1.7 billion in the fiscal year ending in June and held stocks, bonds and other investments worth about $1 billion.

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UVA began reviewing its billing and collections policies after being informed of KHN’s findings in August. It examined policies of neighbor hospitals such as Mary Washington, as well as of other major academic medical centers, Lischke said.

Previously just $4,000 in a retirement account could bar UVA patients from financial help, no matter how low their income. Now patients can have at least $50,000 in savings beyond the value of their home and car and still get assistance if they meet the income test, according to the new policy.

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The nonprofit health-care system also said it would grant discounts of 40 percent to uninsured patients to better reflect the lower rates negotiated and paid by insurance companies. Until now, uninsured patients got only 20 percent off the list or “chargemaster” price, plus an additional 10 to 15 percent if they paid promptly, which few were able to do.

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Shaving 40 percent from list prices, which are used as a starting point for insurer negotiations, puts the bills for uninsured patients more in line with those who are covered by commercial health plans, Lischke said.

But Rosenbaum said that discount should be even greater. She recommended the uninsured be billed at Medicare payment levels, which can be 75 percent or more off a hospital’s list prices. The total of UVA’s cash revenue from all health plans and government programs is 70 percent below its list prices, financial forms filed with the Department of Health and Human Services show.

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“Even a 40 percent write-off of charges remains a brutal exposure” for the uninsured, Rosenbaum said. “How could they possibly remain tied to their chargemaster and keep a straight face?”

Lischke said UVA would consider that adjustment as part of its continuing review of billing and collections.

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The new policy will not help the 20 University of Virginia students reported by KHN to have “active holds” on their enrollment this semester because they owe money to UVA Medical Center. UVA treats unpaid hospitals bills the same as unpaid tuition.

UVA has not approached legislators yet about changing billing laws but hoped to have next year’s General Assembly consider it, Lischke said.

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“I am hopeful that we are able to influence a change to not only the Debt Collection Act” requiring aggressive collection “but also the state indigent-care guidelines,” he said.

Gov. Ralph Northam (D), a physician who is close with L.D. Britt, a Norfolk surgeon and professor who is chairman of the health system’s board, said Monday he was “glad to hear the UVA Health System is in the process of changing their policies and practices.”

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Hancock is a senior correspondent and Lucas is data editor for Kaiser Health News, a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation that is not affiliated with Kaiser Permanente.

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