Virginia Statute of Limitations FIFO Quandary

Key Points:

1. The Virigina House passed HB 34 in January.
2. Reduces the statue of limitations (SOL) to three years and expands the definition of medical debt and types of facilities subject to the law.
3. Providers should look at how close accounts are to SOL and potentially start a payment plan.

The Bill

The Virgina House recently passed HB 34, a bill that would reduce the Virginia statute of limitations (SOL) on medical debt to three years from the current five years while also expanding the definition of medical debt and the types of facilities that are subject to the law. States such as Delaware, Maryland, Mississippi, New Hampshire, North Carolina, and South Carolina already have SOLs of three years.

What Does the Bill Mean?

The Virginia statute of limitations bill, which goes to the Senate next, would limit the time creditors have to take certain actions such as filing lawsuits for unpaid medical debts. The proposed legislation defines medical debt as any debt arising directly from healthcare services, owed to healthcare providers. While the bill would reduce the amount of time a healthcare provider has to take action, there is one exception — if the contract with a hospital or healthcare provider is for a payment plan that allows for a longer period of time for the collection of debt by the hospital or healthcare provider.

The reduction in the Virginia statute of limitations for medical debt to three years is a significant change when you consider the fact that most health systems use a First In, First Out (FIFO) accounting method, where debts are paid off in the order they were incurred.

What’s Next?

This bill prompts healthcare providers to have a conversation in regard to when a payment plan payment potentially should be applied to an account that hasn’t received a payment, but has aged to the point of coming close to the Virginia Statute of Limitations.

Statute of limitations in most instances doesn’t prevent collection (except in Wisconsin), but it does provide a whole other set of regulations such as updated language on statements to patients and communication requirements if and when a patient asks over the phone. The Virginia statute of limitations change could lead to more accounts reaching the stage of recovery earlier.

It should be noted that a previous form of the bill was vetoed back in 2022 by Gov. Glenn Youngkin because there was some confusion that the bill could have been read as applying to other forms of debt rather than medical debt.

Reducing the statute of limitations can have an impact on your revenue recovery. Americollect will continue to track the progress of this bill as it now goes to the Senate.