• Tom Manges

For a Few Dollars More: Hospital Liens and Other Dirty Tricks Part 1

For many years, § I.C. 32-33-4, the “Hospital Lien Statute,” (“Statute”) had allowed hospitals to charge different amounts to patients depending on the circumstances requiring the patients’ care. But the amount a hospital receives as payment, and the amount a patient is obligated to pay, should not change just because the patient was harmed due to the negligence of others.

The major hospital systems in Indiana do not agree with that basic principle, and in fact have taken an “over our dead body” approach in fighting it. Having lost major legislative ground with the passing of the revised Statute on July 1, 2013, hospitals continue to do all they can to maximize profits. This includes questionable billing practices, and aggressive litigation to secure the right to charge whatever they wish.

What the July 1, 2013, “new” Hospital Lien Statute fixed

The version of the Statute that existed prior to July 1, 2013, allowed it to be used as a profit generator for hospitals. This was rectified with the July 1, 2013, amendments to the Statute. The ITLA has a strong interest in preserving the integrity of this new version of the Statute, which greatly enhanced the rights of all patients.

The new Statute, still codified as I.C. 32-33-4, looks very different from the 2002 version. A simple comparison shows that the Legislature wanted to ensure that the amount of money a hospital receives for its services would not depend on the circumstances that required the care (e.g., a third party liability claim). Every substantive change expanded the rights of patients, and curtailed the rights of hospitals. Key changes include the following:

A. Hospitals cannot file liens if the patient has Medicare

The Legislature nullified Parkview Hospital, Inc. v. Roese, 750 N.E.2d 384 (Ind. App. 2001) by adding Medicare to the list of exemptions under I.C. 32-33-4-3(b)(3). Now, if a patient is a Medicare recipient, the statute simply is not applicable.

B. The “patient’s rights” clause

The 2013 Statute added several “restrictions” on lienholders with the completely new Section (3.5). This lists several patient rights that exist even after a lien is properly perfected.

3.5(c): If a hospital lienholder settles or compromises a claim in an amount less than the amount of its lien, the hospital lienholder is barred from seeking any additional reimbursement from the patient or the patient's representative.

This was meant to correct the “balance billing” practice allowed by Clarian Health Partners v. Evans, 848 N.E.2d 763 (Ind. Ct. App. 2006). It should be noted that some hospitals still try to evade this rule by refusing to officially “settle or compromise”, even if mandated by the “20% rule”. They do this with the full intent of billing the patient for any shortfall after the liability case is over. If a hospital is to be paid anything less than the full amount it claimed in its lien, lawyers should not allow a payment to be made without getting something in writing acknowledging that the payment is a “settlement” or “compromise.”

3.5(d): A hospital lienholder is barred from seeking from the patient or the patient's representative payment for any amount of the hospital's charges that exceed the patient's financial obligation to the hospital under the terms of any private benefits to which the patient is entitled, including the terms of any health plan contract and medical insurance. The lien must reflect credits for all payments, contractual adjustments, write-offs, and any other benefit in favor of the patient.

This ended the practice of hospitals filing liens without reducing the amount by pre-negotiated contractual discounts mandated by health insurance plans. Many hospitals had been “forgetting” to give the patients credit for these discounts.

3.5(e): A hospital lienholder is barred from enforcing the collection of charges covered by this chapter until the cause of action, suit, or claim accruing to the patient has been resolved by compromise, settlement, or judgment.

If a hospital chooses to use the Statute, it may not harass a patient with collections activity until the liability case is over.

C. Hospitals must reduce charges by “any benefits” (Medicaid) before filing a lien

The old version of I.C. 32-33-4-3(b)(5) [2002] required hospitals to reduce charges only by the “amount of any medical insurance proceeds” before filing the lien [emphasis added]. But it did not require hospitals to submit charges to other “benefit” plans for discount and payment. The main “benefit” patients usually have that is not “insurance” is Medicaid. Hospitals HATE to turn bills into Medicaid.

In earlier drafts of the 2013 Statute revision, Medicaid was included along with Medicare as being excluded from the Statute. For political reasons, the word “Medicaid” was stricken from the final version of the law that went into effect on July 1, 2013. Most hospitals in Indiana have since argued this is “Legislative intent” that hospitals do not have to submit charges to Medicaid, and can file liens right away at the full chargemaster rates. Parkview Hospital has made this practice a part of its written lien policy. This was the subject of the St. Vincent’s v. White appeal (discussed below). In that case, the hospital refused to submit charges to Medicaid. White’s counsel filed a motion quash, which was granted by the trial court. St. Vincent’s appealed. Shortly after White’s response brief and the ITLA amicus briefs were filed, St. Vincent’s dropped the appeal, thus avoiding a court of appeals decision that would have halted this practice.

The essence of the “hospital must submit to Medicaid” argument is essential for any plaintiff’s attorney to know. The new I.C. 32-33-4-3(b)(5) expanded the lien prerequisite greatly, stating that the hospital charges: (5) must:

(A) first be reduced by the amount of any benefits to which the patient is entitled under the terms of any contract, health plan, or medical insurance; and

(B) reflect credits for all payments, contractual adjustments, write-offs, and any other benefit in favor of the patient; after the hospital has made all reasonable efforts to pursue the insurance claims in cooperation with the patient. [emphasis added].

The plain language of this revision thus requires hospitals to “first” reduce charges by any benefits to which the patient is entitled under the terms of any “contract” or “health plan”. In addition, this section explicitly requires hospitals to give patients the benefits of all adjustments by the “contract” or “health plan.”

This change specifically mandates the submission of bills by hospitals to “any benefit” the patient has. Medicaid is a “benefit.” Medicaid qualified patients are beneficiaries under the

contracts between Medicaid and providers. There is no language in the new Statute exempting Medicaid from this requirement. The hospitals have been arguing that the “Legislative intent” is proven by the word “Medicaid” being dropped from the final law. However, Indiana does not keep Legislative histories. The “intent” of a statute need not be considered if the language is clear. There is no need to construe a statute unless it is ambiguous. The Legislature could have specifically stated that Medicaid is not a “benefit” for the purposes of Section 3(b)(5), but it did not do so.

Thus, every practitioner should be asserting that hospitals are required by the Statute to submit all charges to Medicaid before filing a lien. Be aware that many hospitals (Parkview/St. Vincent’s/Eskanazi) do not agree with this. Clients should be instructed to provide Medicaid information to all providers and be watchful for billing/lien notices in the mail. If you become aware that a hospital is refusing to submit charges to Medicaid, you should send a certified letter demanding that all charges be submitted, stating (1) that you are instructing your client not pay any bill until you receive written assurance that the charges have been discounted and paid by Medicaid, (2) that you will not accept the validity of any lien filed under the Statute, and (3) that if the hospital fails to submit its charges to Medicaid it accepts the risk that it will receive no payment at all.

It should be noted that the Legislature had no reason to include Medicaid in the list of exemptions in Section 1 of the Statute. Medicare was listed as an exclusion to specifically repudiate the Roese case, which removes that program from this discussion. Since the Legislature did not list Medicaid under the exclusions in Section 1, its participants are still arguably subject to the Statute. This simply means that hospitals may still file liens for the “amount designated as a copayment or deductible” after they comply with Section 3(b)(5) by submitting charges for payment and adjustment.

The position of the ITLA is that the Statute applies to Medicaid. This means that hospitals must first submit bills for payment and adjustment to Medicaid for qualified patients. Afterward, hospitals are free to file a lien if there is any remainder properly owed by the patient.

D. Hospital Liens do not apply to “medical payments” coverage

Hospitals would routinely mark patients’ “med pay” as “primary” in their billing systems upon admission, even if they knew the patients also had health insurance. Med pay is coveted by hospitals, since they usually would get paid 100% of their billed charges (until the limits were exhausted). Med pay carriers do not have pre-negotiated discounts, and med pay adjusters do not usually spend time reviewing charges for reasonableness. This is likely due to the fact that med pay limits are typically very low, the most common being $5,000 per person, per accident. Some (such as this author) took the position that hospitals were not entitled to these funds even under the prior version of the Statute. Med pay, after all, must be jealously guarded, and used to pay medical bills only after charges are discounted and paid by a client’s medical insurance (or Medicaid). This was often, sadly, a moot issue because hospitals usually “stole the med pay” before a patient retained counsel. Many practitioners, even once retained, were not aware of this trick, and took no steps to prevent it. Patients then lost the ability to use the med pay to cover charges not paid or discounted by their plans.

I.C. 32-33-4-3(d) explicitly fixed this by stating that the lien does not apply to a patient’s disability insurance, or “automobile or homeowner's insurance that provides for medical payments.”

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