After years of suing former patients by the thousands for unpaid medical bills, Carilion Clinic is scaling back a collection process that at times has mistakenly ensnared the poor.

From January through September, the health care system filed 2,525 collection cases. That compares with 10,690 court judgments filed during the same period last year -- a decrease of 76 percent.

At the same time, Carilion has upped the amount it spends on charity care, which was more than $51 million last fiscal year.

"Maybe their sense of charity has expanded broadly enough to include not seeking judgments against people who clearly cannot afford to pay them," said David Beidler.

An attorney with the Legal Aid Society of the Roanoke Valley, Beidler and others have complained in the past that indigent people sometimes get sucked into the collection process of the region's largest health care provider.

But that appears to be changing with the decrease in judgments, which Carilion spokesman Eric Earnhart attributed to two reasons:

• An expanded charity care policy enacted in February means that more people are qualifying for free or discounted care. Consequently, fewer patients are winding up in Roanoke's small claims court, where Carilion accounted for 51 percent of the total caseload for the first five months of 2008.
• By using a new TransUnion credit database implemented in January, Carilion is identifying more nonpaying patients who should have qualified for charity care, but didn't. In the past, some of those people were taken to court.

"Our concern that people were potentially falling through the cracks was one of the reasons we pursued the TransUnion database," Earnhart said in an e-mail last week.

Cutting the caseload

As part of its nonprofit mission, Carilion is tasked with providing health care to more than 1.5 million residents in Western Virginia, whether they can afford it or not.

Carilion says it takes legal action only against the delinquent patients who it believes are able to pay their bills. To let those people skate would only increase the cost of health care for those who do pay, it says.

It can be tricky, however, to identify who can and who cannot pay.

When indigent patients do not fill out the paperwork required to qualify them for charity care, and when they do not respond to inquiries about outstanding bills and their ability to pay them, Carilion says it has no choice but to take them to court.

"Filing a judgment is a last resort to communicate with people who have not responded," Earnhart wrote.

But now, with the new database, Carilion can research the financial backgrounds of its nonresponsive patients to determine whether or not to take them to court.

The 2,525 judgments through September of this year were filed in the courts of Roanoke and other Southwest Virginia jurisdictions where Carilion operates its seven hospitals.

In Roanoke General District Court, the decrease has been so sharp that Carilion, which used to have one or two days a week devoted solely to its massive caseload, now only appears several times a month.

Before changing its policy, Carilion obtained about 33,000 judgments in Roanoke's small claims court from between 2003 and mid-2008, according to a computer analysis of court records. That accounted for 40 percent of the court's caseload, putting the nonprofit organization far ahead of any landlord, bank or other business that sued for unpaid bills.

Many of the people sued by Carilion didn't show up in court, leading to default judgments against them, and sometimes garnishments on their paychecks and liens against their homes.

Suing people who can't pay

It is difficult to determine just how many poor people Carilion has mistakenly taken to court because they didn't provide financial information.

"But I think it's safe to assume some of them would have" qualified for charity care, Earnhart said.

In interviews with The Roanoke Times last year, two people who should have been covered by Carilion's charity care policy told of how they were billed, and later sued, for the cost of their treatment.

David Crimmins, a house painter who at the time could not afford a car or a telephone, had $97 a week garnished from his meager paycheck to satisfy a bill of nearly $2,000 from Carilion,

After being asked by the newspaper about Crimmins' case, Carilion determined he should never have been sued and refunded him the money that was taken from his paycheck.

In a similar case, a single mother of two was billed $420.25 for the treatment of her 1-year-old son, who was covered by Medicaid. After first disputing Princess Moyer's assertion that she showed her son's Medicaid card to emergency room officials, Carilion eventually relented and wrote the bill off.

At the time, Carilion said both Crimmins and Moyer did not submit the financial information that would have entitled them to free care. Both former patients disputed that.

Many hospitals are lacking when it comes to promoting their charity care policies, according to an investigation of medical collection practices conducted in 2005 by a coalition of legal aid attorneys in Virginia.

"It is one thing to have financial aid and charity care policies in place; it is quite another to make them accessible to the public," the advocacy team concluded in its report. "It is in this latter area that a majority of hospitals have failed."

Carilion says it hopes to take even fewer people to court in the future as it works to educate patients about their options under the charity care program.

Although the recession has left more people struggling to pay their bills, Carilion is not the only creditor in Roanoke to take a less aggressive approach in court these days.

"Our filings in general from all sectors have decreased," said Ron Albright, clerk of Roanoke General District Court.

"The economy hasn't helped anything. I think a lot of people are feeling like it's a waste of time" to sue debtors who have no ability to pay, he said.

Charity care costs rise

A bleak economy was one reason Carilion loosened its charity care guidelines in February.

"We recognize that we are the 'safety net' health care provider in this region, and that people are under increasing financial pressure, so we expanded our guidelines to make it possible for more people to qualify for charity care or discounted care," Earnhart said.

Under the policy, a patient with an income at or below the federal poverty guideline -- $10,830 for an individual; $22,050 for a family of four -- qualifies for free care.

For those who make up to four times the poverty guideline, Carilion has a sliding scale of discounts between 25 percent and 75 percent, depending on income. To qualify for full discounts, patients must have no more than $100,000 in real estate equity.

Although the new policy was in effect for only part of the 2009 fiscal year that ended Sept. 30, Carilion has seen its charity care costs increase considerably. The $51 million spent in the 2009 fiscal year was a 26 percent increase from the year before.

What Carilion devoted to charity care amounted to about 5.1 percent of its total revenues.

Treating the poor is just one of the community benefits Carilion performs in order to maintain its tax-exempt status with the Internal Revenue Service. The nonprofit spends several million dollars more a year for medical education and grants to community groups.

15 months of bad press

Carilion is by far the Roanoke Valley's largest provider of charity care.

Lewis-Gale Medical Center in Salem spent $7.9 million on treating the poor in 2007, according to the Virginia Health Information network.

While the worsening economy was one reason Carilion expanded its charity care, officials with the health system have acknowledged that public outcry over its debt collection practices was also a factor.

Pat Palmer, the founder of Medical Billing Advocates of America, a Salem-based organization that helps patients with disputed bills, says she thinks the changes at Carilion are a reaction to bad publicity.

Last year, The Wall Street Journal reported that a monopoly by Carilion in the Roanoke Valley has led to higher health care costs, an assertion the health care system disputes.

Carilion also has been stung by reports of its debt collection process, a federal inquiry prompted by the suicide of an emergency room patient and a finding by the Federal Trade Commission that its acquisition of two outpatient clinics would have stifled competition.

"They have just been bombarded with bad press for a while, and that's one way for them to try to ease it up," Palmer said of the recent changes. "I'm wondering if this is temporary."

Do the new policies at Carilion represent real change for the health care giant?

Palmer, for one, says she will be watching.