What Healthcare Providers Must Know About Virginia’s Medical Debt Law

Virginia’s Medical Debt Protection Act: What Health Care Providers Need to Know Before July 1, 2026

Roughly 100 million Americans carry some form of medical debt, including many Virginia patients. In the 2025 session, the Virginia General Assembly passed House Bill 1725—the Medical Debt Protection Act (the “Act”)—which was signed into law and codified at Chapter 59 of Title 59.1 of the Code of Virginia. The Act takes effect July 1, 2026, and will materially change how many healthcare organizations bill, collect, and in some cases, sell medical debt. The law reaches beyond hospitals. Depending upon the entity and the debt at issue, it may affect hospitals, hospital-affiliated outpatient facilities, large physician and specialty practices, ambulatory and other outpatient providers, skilled nursing facilities, assisted living facilities, collection agencies, medical debt collectors, and medical debt buyers.

The Act creates a framework that distinguishes among large health care facilities, medical creditors, medical debt collectors, and medical debt buyers. Some requirements apply only to certain categories, while others apply more broadly. Key operational areas include interest and late-fee limits, prohibited collection tactics, timing and content of pre-collection notices, debt-sale contract requirements, policy alignment, and refunds of overpayments.

Because violations are treated as prohibited practices under the Virginia Consumer Protection Act (“VCPA”), affected organizations should use the period before July 1, 2026, to review billing workflows, vendor arrangements, patient-facing documents, and collection policies to ensure compliance by when the Act takes effect.

Who Is Covered?

The Act applies to several categories of entities; each defined in Va. Code § 59.1-611:

Large health care facilities include:

Any hospital licensed by the Virginia Department of Health
Any outpatient clinic or facility operating under a hospital license
Any practice providing outpatient medical, surgical, behavioral, optical, radiology, laboratory, dental, or other healthcare services with annual revenues of at least $20 million

This definition may capture organizations that do not traditionally think of themselves as hospital-regulated entities, including larger physician groups, multispecialty clinics, and certain outpatient platforms.

Medical creditors are any entity that provides health care services for which a consumer owes medical debt, or previous owed medical debt that has since been sold. This category is important because providers that are not large health care facilities may still be subject to the Act as medical creditors.

Medical debt buyers are persons engaged in the business of purchasing or collecting medical debt on behalf of another entity, whether directly or through attorneys or third-party collectors.

Medical debt collectors include any person that regularly collects medical debts originally owed to another—including medical debt buyers.

Key Requirements

1. Interest and Late Fee Caps

Large health care facilities and medical debt buyers may not charge any interest or late fees on medical debt until 90 days after the due date on the final invoice. After that 90-day window, interest and late fees are capped at 3% per annum. Providers that currently assess interest earlier or at higher rates will need to modify their billing systems and patient account terms before July 1, 2026.

**This interest rate and late fee cap does not apply to medical creditors.

2. Prohibited “Extraordinary Collection Actions”

The Act prohibits all medical creditors and medical debt collectors from using the following extraordinary collection actions to collect medical debts:

Causing an individual’s arrest;
Causing an individual to be subject to a writ of body attachment;
Foreclosing on an individual’s real property;
Placing a lien on an individual’s personal property; or
Garnishing the wages of any individual who qualifies for financial assistance under the financial assistance policy applicable to the underlying debt.

These prohibitions apply across the board—not just to large health care facilities—and do not expire or sunset. Providers that have used any of these tools should immediately evaluate whether those practices can continue after July 1, 2026.

3. Mandatory Pre-Collection Notice

No extraordinary collection action may be initiated until 120 days after the due date on the final invoice. Before any such action, the medical creditor or collector must provide the patient with written notice at least 30 days in advance. That notice must include:

If the debt arose from services at a large health care facility, a statement of whether financial assistance is available and a plain-language summary of the financial assistance policy;
A list of the specific extraordinary collection actions that will be taken which may be hard to predict and anticipate definitive in advance; and
A deadline—at least 30 days after the notice date—when those actions will be initiated.

This notice requirement creates both a compliance obligation and a documentation burden. Providers and their collection agencies or debt collectors will need templated notices and tracking systems to demonstrate and maintain compliance.

4. Requirements for Selling Medical Debt

Medical creditors may not sell a patient’s medical debt to a buyer unless a legally binding written agreement is in place that requires the buyer to:

Refrain from any prohibited extraordinary collection action;
Limit interest charges to no more than 3% per annum;
Return or recall the debt if the patient is determined to be eligible for financial assistance under the original creditor’s policy; and
Follow procedures ensuring the patient pays no more than the amount they actually owe under the applicable financial assistance policy.

Critically, the selling creditor remains liable for any violations committed by the debt buyer, subject to any indemnification provisions the parties may negotiate. This retained liability is a significant departure from the typical “true sale” framework and will require careful drafting of debt sale agreements.

5. Billing and Collections Policy Consistency

Large health care facilities may not use—or permit a medical debt collector to use—any extraordinary collection action that is not described in the facility’s billing and collections policy. Facilities should audit their existing policies to ensure they accurately and transparently reflect intended collection practices and do not authorize actions that the Act now prohibits, or which are not now disclosed.

6. Refunds for Overpayments

If a patient has paid more than they owe after applying any financial assistance discount, the large health care facility or medical debt collector (as specified in the debt sale agreement) must refund the excess within 60 days of determining the overpayment. Facilities should build refund tracking into their revenue cycle workflows.

Enforcement

Violations of the Act constitute prohibited practices under the Virginia Consumer Protection Act (§ 59.1-196, et seq.). This means the Virginia Attorney General and private plaintiffs may pursue enforcement, and penalties can include actual damages, civil penalties, attorney’s fees, and injunctive relief. The consumer protection framing is deliberate and signals that the legislature views aggressive medical debt collection as a consumer harm, not simply a business dispute. Early enforcement may be rigorous to establish test cases and encourage compliance.

Action Steps for Virginia Providers

With July 1, 2026, approaching, health care organizations should take the following steps now:

Determine whether your organization qualifies as a “large health care facility” under the revenue and licensure thresholds.
Review and update your financial assistance policy to ensure it is current, accessible, and capable of being summarized in plain language for patient notices.
Audit your billing and collections policy to identify and remove any extraordinary collection actions now prohibited by the Act.
Revise patient account terms to eliminate interest or late fee assessments that begin earlier than 90 days after the final invoice due date.
Update your contracts with third-party debt collectors and collection attorneys to incorporate the Act’s requirements and appropriate indemnification provisions.
Renegotiate or restructure debt sale agreements to include the mandatory contractual protections and evaluate your retained liability exposure.
Implement a pre-collection notice workflow that documents the 120-day waiting period and 30-day notice delivery, including plain-language financial assistance summaries.
Establish a refund tracking process for identifying and processing overpayments within the 60-day window.

Contact Us

If you have questions about the Medical Debt Protection Act or how it affects your organization’s billing and collections practices, please contact the Health Care and Consumer Debt Collection teams at Kaufman & Canoles.