Recently my office has noticed an alarming trend with several hospitals.  

When a person is treated in an emergency room in Texas following an accident, if the hospital has reason to believe a third party may be responsible, it may file a “Hospital Lien” in the records of the county clerk.  Once the lien is filed, it automatically attaches to any recovery the patient receives from the responsible third party.  The result is that if there is any form of settlement with the responsible party or his insurer, the hospital lien must be paid before any of the proceeds are paid to the victim.

The statute that authorizes the lien (Texas Property Code - Chapter 55), does not provide any mechanism for challenging the reasonableness of the hospital’s charges.  Section 55.004 (b) states the the lien “is for the amount of the hospital’s charges for services provided to the injured individual during the first 100 days of . . . hospitalization.”  Section 55.004 (d) (1) provides that the lien does not cover charges for “other services” that exceed a reasonable and regular rate for the services.  (Presumably, the victim could challenge the reasonableness of the charges by filing a lawsuit against the hospital and asking a Court to declare that the charges are not reasonable.)

The alarming trend arises when the patient/victim has health insurance that will cover the charges related to the emergency room visit.

More and more frequently hospitals are refusing to process the victim’s health insurance electing instead to collect from the victim’s liability claim against the responsible third party by way of the hospital lien.

Why do hospitals make this election?  Usually the reason given is that the liability insurer is “primary.”  It is the hospital’s contention that the health insurer will not pay the bill when the need for the service arose from an accident that is someone else’s responsibility.  This contention is FALSE (more on this in a minute).

Frankly, my skeptic belief is that hospitals have determined that they are paid more money for the services when they collect from a hospital lien rather than from health insurers.  Health insurers only pay a pre-determined (or contracted) rate for the services provided by the hospital.  This rate is usually much less than the actual amount charged for the services (typically anywhere from 33 1/3% - 75% of the original charge).  By relying on the rights given it under the hospital lien, the hospital has a claim for 100% of its charges regardless of whether they are reasonable.  

The unfortunate result of this is that victims of negligence are victimized a second time by the very hospitals that treated their injuries.  For example, Texas requires all motorists to maintain minimal liability auto insurance.  Under a minimum liability policy, the most the insurance company will pay any single accident victim is $25,000.  If that victim received emergency medical treatment at a hospital where multiple CT Scans and MRIs were performed, the victim's ER bill could easily exceed $25,000.  When the hospital files a lien for the bill, the auto insurer will pay all the proceeds directly to the hospital in accordance with Ch. 55 of the Texas Property Code.  

If the victim had health insurance, the recent trend has been for hospitals to refuse to process it as previously mentioned.  The poor victim has been victimized again - he will receive no additional compensation beyond the payment of the $25,000 to the hospital - no payment for lost earnings, no payment for pain and suffering, no payment for disfigurement, no payment for impairment, no payment for mental anguish, and, most likely, no payment for the balance of his hospital bill.

The reasons we carry health insurance are many.  One of the reasons is so that we do not have outstanding bills going unpaid.  Claims against responsible third parties should not be settled and released until the victim has had the opportunity to fully assess the nature and extent of his damages.  Once a release is signed, he can’t take it back.  The claim is gone.  In order to properly evaluate the liability claim, the victim will usually take many months to recover from his injuries and determine whether he is fully recovered or whether he has healed as well as can be expected.  Meanwhile, if the hospital has refused to process the victim’s health insurance, the ER bill has remained outstanding.

The hospital’s contention that the health insurer will not pay the bill because the liability insurer is primary is FALSE when contemplating the most common health insurance plans.  Though health insurers may want to initially agree with the hospitals that the liability insurer is primary in order to save money, they will not take this position in writing because it’s not true.

The typical health insurer agreements do not contain provisions that allow the insurer to reject or deny the claim if a responsible third party exists.  There are several reasons for this.  First and foremost, it is rare that a responsible third party ever admits responsibility and agrees to pay all damages caused by his misconduct.  Most responsible third parties not only deny responsibility, but they also deny that the victim was injured, challenge the extent of the alleged injury, and question the reasonableness of the medical expenses.  These issues could take years to resolve.  

Interestingly, the Texas Supreme Court has interpreted the following clause found in all of our auto policies concerning the Uninsured Motorist coverage:

We will pay damages which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by a covered person . . . caused by an accident.

The Court’s interpretation is that in order for the policyholder to establish that he is legally entitled to recover from the uninsured driver, he must file a lawsuit against his UM insurer and have a Court determine that the other driver was responsible, as well as, the dollar amount of the policyholder’s damages.  Henson v. Southern Farm Bureau Cas. Ins. Co., 17 S.W.3d 652 (Tex. 2000).  That is - in order for the victim to establish a right to recovery from his insurer for UM benefits (to whom he paid premiums), he must file a lawsuit so that a judge or jury can determine legal entitlement to recovery.

If the Texas Supreme Court is unable to establish a legal entitlement to recovery without the benefit of a judge or jury, how can a hospital or a health insurer make that determination?

Another reason health insurers will begrudgingly agree to pay medical expenses related to a liability claim is that their policy undoubtedly contains a provision allowing for reimbursement (subrogation) in the event the policyholder obtains a recovery from the responsible third party.

In the end, if the hospital would simply process the claim with the victim’s health insurance at the outset, they would be paid promptly - though it may be less than 100% of its charges, it would be an amount it has already determined (when it agreed to terms with the health insurer) would be fair for the services rendered.  The victim would have a greater opportunity to resolve his claim against the responsible third party without the necessity of filing a lawsuit.

Final thought - if the hospital refuses to process the health insurance, and the court or the jury does not find in the victim’s favor, then the hospital is likely out of luck - its only recourse will likely be against the victim directly since the health insurer will most likely deny the claim for failure to timely submit it.  
 


Comments

M. Ross Thompson
01/18/2011 08:46

Bart:

I am an attorney in Austin, Texas and have a quick question for you.

If the patient is not "admitted" to the hospital (as appears required by Sec. 55.002(a), but only receives treatment in the hospital's emergency room within the 72 hour period, do you think Sec. 55.002(c) and 55.004(f) will cap the lien at $1000?

Your thoughts?

Thanks, Ross

Reply
01/25/2011 15:18

Your reasoning seems sound. I’m unaware of any case law interpreting the statute otherwise. A strict reading of the relevant sections seems to limit the Emergency Department’s claim to $1,000 so long as the patient is not admitted. A court would have to “legislate from the bench” to say otherwise.

This is a great topic for discussion.

Hospitals are increasingly using technologically advanced equipment in ERs to make diagnoses (i.e. CT Scans, etc.). When a patient is involved in a motor vehicle accident and is brought to the ER by ambulance complaining of back, neck and chest pain, ERs are using the complaints to justify the need for the multiple expensive CT Scans. Oftentimes in these situations, the charges for the ER visit (without an admission to the hospital) exceed $30,000.

Then, as mentioned in the original blog entry, the hospital files a “hospital lien” for these charges against the claim the injured person has against the responsible third party - the person that caused the accident. To add insult to injury, the hospital then refuses to process the bill through the injured person’s health insurance claiming that the responsible third party’s liability insurance should pay the bill. (The hospital makes more $ when the liability carrier pays the bill because the health insurer will reduce the amount of the bill according to contract rates. For the hospital to argue that the health insurance should not have to pay is disingenuous.)

If the commentator’s interpretation of the statute is correct, then the lien should only be for $1,000.

Unfortunately, there is no case law to support it. Consequently, when the liability carrier’s adjuster finally decides to pay the claim, he/she will likely issue a separate check to the hospital for the full amount of the hospital lien (or issue a single check for the amount of the settlement with the hospital included as a payee) and demand that the injured person sign a release of liability in exchange for the payment, or it will demand a release of lien prior to making any payment whatsoever.

Ultimately, the injured victim will face another battle - this time with the hospital.

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PTF
01/25/2012 11:11

If a claimant's hospital lien exceeds the at-fault auto carrier's minimal liability policy limits, will the claimant be responsible for the balance of the lien? And what recourse would the claimant have? For example,if the at-fault carrir has a $25,000 policy but the hospital lien is $50,000, how would the claimant satisfy the balance?

Reply
05/10/2012 08:26

First, let me apologize for not seeing your comment sooner. Somehow, it went unnoticed.

The short answer to your questions is, "it depends."

Issues that should be considered are whether there are any other applicable liability policies, UIM polices, or other available resources (i.e. health insurance). Additional issues include the reasonableness of the hospital's charges, and whether the lien has been properly perfected. Finally, you may want to consider whether the responsible third party has the ability to satisfy any uninsured portion of your claims.

Ultimately, if there are no other resources available, if the lien is perfected and the charges are reasonable, if the responsible third party is judgment proof, and if the hospital refuses to discuss a negotiated settlement of the lien, you have a choice. Do you settle the claim by accepting the responsible third parties liability policy limits so that you can pay at least a portion of the hospital bill or not?

Behr Law Firm has successfully assisted countless folks in this exact predicament. Please let us know if you are interested in our assistance.

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05/10/2012 03:58

The word ppi indicates the payment protection policy which helps the people to repay the debts like the loans, credit card repayments if he/she cannot able to work due to some cases like accident, sickness, injury, unemployment, etc. where this insurance is not similar to the income protection insurance as it do not covers any debt.

Reply
05/10/2012 08:38

It appears you are referring to Personal Injury Protection benefits (PIP). PIP is a coverage that is offered on all automobile insurance policies in Texas and in many other states.

PIP coverage offers benefits to an insured that is involved in a motor vehicle accident regardless of fault for medical expenses and a portion of the claimant's lost earnings up to the amount of the PIP coverage limits. PIP coverage is typically sold with one of the following limits - $2,500, $5,000, $10,000.

Texas requires all insurers to offer at least $2,500 of PIP coverage on all automobile policies. However, the insured is given the opportunity to "opt out" of the coverage by signing a document (usually the application for insurance) containing a "rejection."

An interesting note about PIP coverage:

Unlike most health insurance coverage, medicaid or medicare coverage, worker's compensation coverage and medical payments coverage, PIP is not entitled to subrogate against an insured's claim against a responsible third party.

In other words, if you are injured in an accident that was caused by another driver's negligence and you make successful claims against the other driver's liability insurance coverage and against your own PIP insurance, you have no obligation to reimburse the PIP insurer from the proceeds obtained from the other negligent driver.

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Lora
06/26/2012 11:21

If the hospital billed my health insurance for the hospital charges, can they "balance bill" and file a lien on the balance even though they accepted payment from my insurance....

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Steve Wisch
08/24/2013 18:35

I am a lawyer in Houston. My practice is substantially limited to representing individuals & some medical providers in health, life and disability insurance disputes, etc. Query: given that every Texas hospital is licensed and regulated, what legal basis exists for total refusal to accept and/or process authorized health insurers and/or plans? I am aware of no case on point & if there is some authority, I believe over the coming years this could become a hot area of litigation.

Steve Wisch
Houston

Reply
Bart Behr
08/27/2013 11:17

If your question does not pertain to a situation involving a liability insurance claim and is strictly limited to the context of someone with health insurance seeking medical treatment from a hospital, the context is beyond the scope of the blog entry. However, I suspect the issue will be dictated by the terms of any agreements between the hospital and the insurer.

If your question is related to a situation involving a liability insurance claim where the hospital has filed a hospital lien, the most interesting authority I have found to contradict the hospital’s refusal to accept health insurance proceeds is: 1) the discussion above about health insurer’s subrogation rights coupled with the Texas Supreme Court’s discussions of reasonable charges found in Heygood v. Escobedo (Tex. 2011) and in Daughters of Charity Health Services of Waco v. Linnstaedter (Tex. 2007) , and 2) Texas Property Code §55.004 (d)(3). This code section states:

A hospital lien described by §55.002 (a) does not cover . . . charges by the physician for services provided under Subsection (c) if the injured individual has coverage under a private medical indemnity plan or program from which the physician is entitled to recover payment for the physician’s services under an assignment of benefits or similar rights.

Though the section appears to pertain only to ER physician charges, it seems reasonable that the concept should extend to hospital charges as well. However, I am unaware of any case law interpreting the applicability of the section to hospital charges.

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