Negotiating Tips for Hospital Liens in Personal Injury Cases

Continuing our series on how to approach liens in personal injury cases and how to negotiate the different types of lien claims that arise in personal injury cases, we now address negotiating hospital lien claims.

Hospital lien claims generally arise because your client received emergency care at a hospital following their accident, and your client did not have insurance to pay for the hospital treatment, your client's health insurance covers part of the hospital bill but not all of it, or the hospital learns that a third party is responsible and refuses to submit the bill to your client's insurer.

Hospital lien claims are problematic for several reasons:
1. The charges claimed are often grossly inflated and well above what any insurer would pay;
2. Hospitals often have statutory lien rights, and generally do not have to reduce their lien claims to the same extent as health or med pay insurers;
3. Hospitals may refuse to bill your client's insurer and instead assert a lien against your client, so you are stuck negotiating with the hospital, rather than a health or med pay insurer;
4. Even if your client's hospital bill is partially paid by their insurer, the hospitals may try to balance bill your client for the difference between what the insurer paid and the hospital's "normal" charges. (Note the quotation marks; there is nothing normal about these charges. If you have ever been charged $71.00 for a Tylenol, you know what I am talking about); and
5. If the hospital lien is not settled, it will hold up receiving the settlement check from the responsible third party.

Here are some considerations to take into account when dealing with these often difficult hospital liens, and keep them from eating up all of your client's recovery.

Tip #1: Find Out If a Hospital Lien Exists

Was your client treated at a hospital for injuries related to their personal injury claim? At your intake meeting with the client, your first questions will be regarding where they sought treatment, whether there are there any outstanding bills, and have they received any lien notices.

Even if your client has not received any lien notices, you should be able to deduce very quickly whether a potential lien exists, based on whether they received treatment at a hospital, was the bill paid, and whether it was paid in full or in part. Additionally, when you submit requests for records to each facility at which your client received treatment, as sure as you can count on death and taxes, the hospital will come calling looking for its share.

Many states provide hospitals with statutory liens for the cost of medical services provided to someone who sustained injuries for which a third party is responsible. It is important to research the specific law of your state.

For example, in California, the Hospital Lien Act is codified in California Civ. Code section 3045.1- 3045.6. Under Cal. Civ. Code section 3045.1., a hospital that provides emergency and ongoing medical or other services to any person injured by reason of an accident or negligent or other wrongful act, shall, if the person has a claim against another for damages on account of his or her injuries, have a lien upon the damages recovered to the extent of the amount of the reasonable and necessary charges of the hospital.

As is discussed below, there are very specific requirements that the hospital has to fulfill in order to have a valid lien, and limits on what the hospital can recover from the third party settlement.

If the third party pays your client without satisfying the lien, the third party is liable to the hospital for the amount claimed in the hospital's lien. See, Cal. Civ. Code section 3045.4.

Unsettled hospital liens will therefore hold up receiving your client's settlement check, as third parties do not want to be on the hook for these liens. They will not release the check until they have written confirmation the lien has been settled. It is therefore imperative to make sure that hospital liens are settled so your client's funds are not held up at the end of the case.

Tip #2: Did the Hospital Perfect Their Lien?

Statutory schemes providing hospitals with liens may require that the hospital provide notice of its lien, that the notice meet certain specifications, and that the notice must be provided within a specified period of time.

If there is such a requirement, and the hospital failed to provide notice, failed to send the notice to the proper party, failed to set forth all of the required information, failed to properly serve the notice, or failed to send the notice in time, as required by any applicable statute, then the lien claim may not be invalid.

For example, in California, under Cal.Civ. Code section 3045.3, a hospital must provide notice of the lien and is not effective unless it contains all the information required by the statute, is sent by registered mail, return receipt requested, and is sent to the responsible third party and their insurer prior to the payment of funds to the injured person, his/her attorney or legal representative.

Under Cal. Civ. Code section 3045.5, the hospital has one year after the date of the payment to the injured person to enforce its lien by filing an action at law.

Tip #3: Determine if Any Part of the Bill Has Been Paid and If Any Balance Exists

Review the billing records from the hospital and/or records from your client's insurer to see if the hospital bill has been paid, in full or in part.

The hospital bill will reveal whether the amount paid by an insurer was accepted as payment in full, even if it was less than the amount charged (i.e. contract rate versus charged rate). The bill will show whether any amounts were adjusted, whether the balance is zero, or if there is any balance remaining.

If No Payments Made

If no payments were made, that will be clear, and the balance will be the entire amount of the charges. That amount will be their lien claim.

If Payments Were Made

If payments were made, then it is important to determine whether the payment was accepted as payment in full. If the bill shows that the hospital made a contractual adjustment to the bill, then that should indicate that the hospital agreed to accept the contract rate payment made by the insurer.

If the balance is zero, there should be no outstanding amount due to the hospital.

If the balance is not zero, and there were payments and adjustments, it is important to determine why there is a balance remaining. Does it represent your client's co-pay or deductible? If so, then your client is likely responsible for this amount. Check with your client regarding the terms of their health insurance plan and see if this is a valid co-pay or deductible charge.

However, if the amount does not appear to be a valid co-pay or deductible, you need to determine if this is an attempt by the hospital to improperly balance bill your client.

Tip #4: Is Hospital Improperly Attempting to Balance Bill?

Balance billing occurs when a hospital charges your client for the difference between the hospital's charged rate and the amount your client's health insurer paid to the hospital as its contract rate.

Balance billing is prohibited when the hospital accepts payments from Medicare or a state Medicaid program. See, 42 U.S.C. 1395cc(a)(1)(A) [Medicare]; and 42 U.S.C. section 1396(a)(25)(c) [Medicaid]. See also, Olszewski v. Scripps Health (2003) 30 Cal.4th 798.

For private health insurance, balance billing may not be allowed depending on your jurisdiction. It is important to check the law applicable to your jurisdiction.

In California, the case of Parnell v. Adventist Health System West (2005) 35 Cal.4th 595 holds that when a hospital agrees to accept, as payment in full, amounts paid by a health insurer, it cannot bill for the difference between the amount paid and the higher amount that the hospital might otherwise charge. Id at 599.  

The caveat, however, is that the Court left open the possibility for hospital and health insurers to contract around this rule. "If hospitals wish to preserve their right to recover the difference between the usual and customary charges and the negotiated rate through a lien under the HLA, they are free to contract for this right. Our decision today does not preclude hospitals from doing so." Id at 611.

Therefore, if you are met with an attempt to balance bill, which is not for co-pays or deductible, argue it as unlawful pursuant to the Parnell case, unless the hospital can prove that they have contracted for the right to recover the difference.

Relevant to this discussion is that the prohibition on balance billing can apply to emergency room physicians, who often bill for their services separately.

In Prospect Medical Group, Inc. v. Northridge Emergency Medical Group (2009) 45 Cal.4th 497 the court held that "billing disputes over emergency medical care must be resolved solely between the emergency room doctors, who are entitled to a reasonable payment for their services, and the HMO, which is obligated to make that payment. A patient who is a member of an HMO may not be injected into the no balance billing for emergency physician services dispute. Emergency room doctors may not bill the patient for the disputed amount." Id at 502.

I have been presented with the argument that the Prospect case does not apply to PPOs because the plan at issue in Prospect was an HMO that was governed by the Knox-Keene Act. In my case, we determined that the particular PPO was one that happened to be covered by the Knox-Keene Act as well, so the issue was averted in that case.

Tip#5: Is Hospital Improperly Attempting to Recover from UM or UIM funds?

Hospital liens may only be limited to recovery from third party funds, depending on the language of the governing statute. See for example, Cal. Civ. Code 3045.1 [hospital liens limited to "if the person has a claim against another for damages"], Cal. Govt. Code 23004.1 [county hospital liens limited to when "circumstances creating a tort liability upon some third person to pay damages therefore, the county shall have a right to recover from said third person the reasonable value of the care and treatment so furnished"].

This is not to say that these hospitals will simply walk away from outstanding bills if the only recovery is from an Uninsured Motorist claim, or if the third party policy is limited and there is Underinsured Motorist funds that will supplement the recovery for your client. But, if the language so limits, then their lien claim may only apply to the third party recovery, so you will have significant leverage in negotiating these hospital bills.

Tip #6: Reduce for Unrelated and Unreasonable Charges and Obtain Credit for Co-pays

Review the itemization of charges for any unrelated charges or double billing, and have these charges removed.

Also, review the charges to make sure that the charges are reasonable. This may be difficult, considering that most charges on any medical bills seem exorbitant these days. However, after reviewing a slew of medical bills, you will start to get a feel for the pricing of certain services in the geographical area that you practice. When it comes time to negotiate, raise the issue of reasonableness, and if the defendant in your case is also raising the issue, advise of that as well. One case in California has held that the burden is on the hospital to demonstrate the reasonableness of their charges to recover on their lien.  

Be sure to obtain a credit for any co-pays or deductible payments made by your client. These can be subtracted from the total hospital lien claim.

Tip #7: Reduce for Actual Recovery of Medical Bills

If certain medical bills are not part of the settlement offer, then it makes sense to argue that they should not be included in the lien claim. Many hospital lien claims include bills for unrelated treatment so look through the bills very carefully.

Additionally, in some cases, policy limits will be an issue, such that the amount of wage loss or pain and suffering my make up most of the recovery. In such a scenario, it may be worth making the argument that not all of the medical damages have been recovered.

For a related discussion on this topic with regard to Medicaid liens, see State Medicaid Liens Limited by U.S. Supreme Court in Wos v. E.M.A. But see this discussion of the passage of Section 202 of the Bipartisan Budget Act and its effect on the holdings of these cases.

Tip #8: Common Fund / Attorney Fees and Costs  

Check the law of your jurisdiction as to whether the common fund doctrine applies, or whether attorney fees and costs can be deducted first.

In California, hospital liens are not subject to a reduction pursuant to the common fund doctrine for share of attorney fees and costs. See, Parnell v. Adventist Health Systems/West, supra, 35 Cal.4th 595. 

However, County of San Bernardino v. Calderon (2007) 148 Cal.App.4th 1103 confirmed that the HLA does not give hospital liens a first priority, and therefore an attorney lien had priority over the hospital lien as it was created by the attorney retainer agreement before the hospital lien was created upon sending of the notice of the lien.  

Therefore, although you cannot use common fund, you can take attorney fees and costs out of the gross settlement first, and then calculate the hospital's lien claim out of the net settlement.

If you have a county hospital lien under Cal. Govt. Code 23004.1, county hospital liens do have first priority over any other liens so you will not be able to use the net settlement.

Tip #9: Reduce to the Statutory Cap

If there is a statutory scheme for reducing hospital liens, follow the language of the statute.

In Cal. Civ. Code 3045.4, the hospital lien is limited to 50% of the amount due your client after paying any prior liens. As stated above, take out attorney fees and costs first (and any other possible prior liens), and then the cap on the hospital lien should be 50% of the net remaining.

Again, if you have a county hospital lien, they will likely demand the full amount without reduction because they have a first priority lien, and they do not have to reduce for common fund.

Tip #10: Reduce for Proportionate Share of the Statutory Cap Where Appropriate

As appropriate, if you have multiple lien claims in addition to the hospital lien claim, lay out for the hospital all of the other lien claim amounts, and make the argument that the total lien claims cannot exceed 50% of the net due to your client.

See Tip #6 in the article on Negotiating Tips for Health Insurance Liens in Personal Injury Cases for an example on how to calculate a lien claim's proportionate share of a statutory cap.

Tip #11: Make Equitable Arguments

Whether reductions for comparative fault, made whole, or other considerations are provided for under the governing statute, it may be worth making these arguments to the hospital lien claimant in order to reduce their claim. Hospitals and counties may have some discretion to consider reductions, particularly if hardship would result for your client.

As always, such communication needs to be made early in your case, well before you reach a final settlement. You have leverage before the settlement is finalized. Do not waste it. If the hospital sees that their unwillingness to deal will scuttle the entire settlement, and possibly cause everyone to risk getting nothing, they may be more likely to consider a reduction.

Tip #12: Common Sense and Courtesy Should Prevail

As stated in our other articles discussing liens, common sense and courtesy should guide you in this area of law. Statutes do not always provide a clear cut answer to every scenario, and case law can be complex and confusing. Legal arguments are important, to be sure, but building rapport with the lien claimant early on in the case, and appealing to their common sense is also important. Generally, people prefer to be paid something so they can close the account.

*Every case is unique and will require up-to-date research specific to your jurisdiction. This article is intended to highlight general concepts, and is not meant as an exhaustive discussion, nor a guarantee of a particular result.*

For further discussion on liens, please see: