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.