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Frosting a Hospital Lien, and Other Tips Part 2

May 3, 2018

B.  “Only mostly dead”: Hospital Lien cases since 2013

 

The major hospitals in Indiana lost no time after the Legislative defeat in 2013.  They immediately starting “interpreting” the Statute to suit their needs. Much of this relies on creatively cherry-picking pieces of the law.  Hospitals often have succeeded in these strategies based on (1) ignorance of the law by most people they deal with, and (2) the unwillingness of most patients and lawyers to fight unfair liens.  True, these fights take some time, and delay distribution of settlement funds (something many plaintiffs are not willing or able to endure). However, necessity is causing more plaintiffs to fight back.  Two examples of this have reached our Courts of Appeals, although only one resulted in a reported opinion.

 

1. Indiana’s Hospital Lien Statute Applies to Medicaid: St. Vincent v. White

 

Shortly after the new Statute passed, many hospitals created in-house policies, instructing their billing people to ignore Medicaid for patients involved in liability accidents.  The main justification for this was the absence of the word “Medicaid” from the new Statute. The hospitals were well aware that the word “Medicaid” had been juxtaposed to “Medicare” in early versions of the legislation, but dropped before final enactment.  Ignoring the rules regarding the interpretation of statutes, the hospitals have argued that this deletion was somehow “Legislative intent” that Medicaid may be ignored if the patient was involved in a tort case.

 

This was challenged in a 2014 case.  St. Vincent Anderson Regional Hospital (“St. Vincent”) filed a lien against the settlement of a Medicaid beneficiary, Rashauna White, for 100% of its claimed charge: $1,634.  All attempts by her lawyers (who are ITLA members) to negotiate this charge were rebuffed by the hospital. Therefore, White’s lawyers filed a motion to quash the lien(6).  The trial judge ruled against the hospital(7).  The hospital appealed(8).  White’s lawyers, and ITLA amicus, filed briefs arguing, among other things, that the hospital’s position was contrary to the plain language of the revised Section 3(b)(5) of the Statute(9).

 

St. Vincent dropped the appeal after reading these briefs to avoid creating precedent that would stop their lucrative practice.  Dropping the modest lien of $1,634 helped Ms. White, but was a small price for the hospital to pay in exchange for the freedom to ignore Medicaid, and bilk patients in tort cases for full Chargemaster rates.  This improper practice continues widely to this day, and should be challenged wherever practicable. Thus far, hospitals have been adept at settling these claims where they see “bad” (for them) trial court orders and/or the risk of adverse precedent. The battle continues.

 

2. Indiana’s Hospital Lien Statute Still Allows the Patient to Contest “Reasonableness” of Charges: Parkview v. Frost

 

Thomas Frost was seriously injured in a motorcycle accident on October 8, 2013.  He was taken by air ambulance to Parkview Hospital, where he underwent multiple surgeries.  He had a significant brain injury, and was in a coma for about four weeks. His condition improved enough to be later transferred to the skilled nursing facility at Parkview.  By then, his mother had been appointed as his guardian. The next day, Parkview asked his mother to sign an admission agreement as his guardian that contained a term entitled "Agreement to Pay”.  That clause (in the fine print) provided in relevant part: "The patient or person financially responsible for the patient, in consideration of the services to be rendered to the patient, is obligated to pay the account of the Hospital on all charges for services rendered."

 

Frost was uninsured, but had a good tort claim against the truck driver that caused his injuries.  Parkview filed liens under the Statute. Frost’s lawyers (ITLA members Ed Chester and Laura Ezzell, both ITLA members) hired a billing expert to question the charges.  Parkview’s final amended lien sought $625,117.66. Frosts lawyers filed a declaratory judgement action under Section 4(e) of the Statute, and sent discovery to Parkview seeking disclosure of discounts it gave to health insurance, Medicare, Medicaid, and other entities for the same services it was charging Frost.  Parkview refused to answer discovery, arguing that Section 4(e) was mooted by the “Agreement to Pay” that Parkview billing staff got Frost’s mother sign in her capacity as his guardian. Parkview then filed a Motion for Summary Judgment, seeking an order that its Chargemaster rates were per se “reasonable” based on the “contract” created by the “Agreement to Pay”.  

 

At the heart of Parkview’s claim was its hope to extend the holding from Allen v. Clarian Health Partners, Inc., 980 N.E.2d 306 (Ind. 2012) to all cases, including those in which a hospital chose to file a hospital lien.  Allen was an attempted certification of a class action on behalf of ordinary uninsured patients seeking the right to question Chargemaster rates in non-tort cases.  It had nothing to do with the hospital lien statute or personal injury cases. After a strongly pro-patient Court of Appeals decision by Judge Najam, the Indiana Supreme Court reversed, holding that the “contracts” created by the intake forms at hospitals, although adhesive, and at Chargemaster rates, were enforceable.  

 

But the trial court in Frost denied Parkview’s attempt to extend Allen to the hospital lien Statute.  His opinion not only upheld the right of Frost to conduct full discovery of discounts Parkview gave other entities, but went much further, holding that:

 

The Court concludes that evidence of discounts provided to patients who either have private health insurance or who are covered by government healthcare reimbursement programs is relevant to the determination of what are reasonable charges under Indiana's Hospital Lien Act, and are admissible for such a determination. [emphasis added].

 

Parkview appealed this order, and ITLA amicus became involved.  The Indiana Court of Appeals affirmed the trial court in Parkview Hospital, Inc. v. Frost, 52 N.E.3d 804 (Ind.Ct.App.2016), explicitly repudiating the application of Allen to hospital lien cases.  Surprisingly, Judge Najam authored a dissenting opinion, though, arguing that Allen did apply.  This is surprising, of course, because Judge Najam authored the eloquent Court of Appeals opinion in Allen which explained in great detail the inherent disconnection between Chargemaster rates and what may be considered “reasonable” amounts for bills.  The Frost dissent revisits the bitter taste that must have been left when the Indiana Supreme Court’s final opinion in Allen allowed hospitals a free hand in billing uninsured patients.  Perhaps Judge Najam was hoping that the Supreme Court would use Frost as a vehicle to reverse the harm created by the final Allen decision.

 

Emboldened by Judge Najam’s dissent, Parkview sought transfer, which was denied on October 3, 2016.  Parkview Hospital, Inc. v. Frost, 60 N.E.3d 1039 (Ind.2016).  Prior to denial, the Indiana Supreme Court heard oral argument on September 1, 2016, during which Parkview “doubled down” on its pitch that Allen should be extended to cases where a patient signs an admission agreement that contains an “Agreement to Pay”.  Counsel for Frost and ITLA amicus argued that, while sympathetic to the plight of uninsured patients caused by Allen, the focus should be kept on the explicit language of Section 4(e) of the lien Statute itself.  Filing lien under the Statute is a voluntary act on the part of a hospital, which should not be allowed to evade the rules of that Statute(10).  The denial of transfer means that the Court of Appeals decision (upholding the trial court’s order) is the “law of the land”.  

 

The rule is now clear: if a hospital chooses to file a lien under the Statute, the patient may still challenge the reasonableness of the charges by filing a motion to quash per Section 4(e).  When that is done, the patient has the right to perform discovery regarding the costs of each item charged, and the discounts the hospital gives to all other entities. More importantly, evidence of these discounts and costs are admissible on the issue of “reasonableness”.  Based on this, it is no longer necessary to retain a billing expert to create admissible evidence to challenge charges.

Parkview inexplicably still files briefs arguing that the “Agreement to Pay” in its admission agreement (“contract”) is somehow relevant to hospital lien cases.  This assertion, where presented, should be firmly disputed, as this was explicitly refuted by Frost.

 

C.  Tips for defeating Hospital Liens: PROCEDURAL ATTACKS (invalid lien)

 

1. MUST FIRST rule

 

A lien amount “must first” be reduced per Section 3(b)(5) 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.  

 

a. The lien is invalid if the hospital files it before complying with the “must first” rule.  

b. Whether or not the benefit plan actually pays any bills is irrelevant. The hospital must give credit for benefits & discounts “to which the patient is entitled”.

c. Medicaid IS a health benefit plan.  If the patient has Medicaid and the hospital participates in Medicaid, the hospital is obligated to submit bills to Medicaid before filing a lien.  The big hospital systems usually ignore Medicaid(11).  This violates both the lien statute and Medicaid rules.

 

2. Medicare patients exempt

 

No hospital lien allowed if patient has Medicare (or Medicare Advantage Plan).

 

3. Lien properly perfected per Sections 4(a) and 4(b)?  

 

a. Filed in the right location?: Was it filed in the recorder’s office of the county in which the hospital is located?  

b. Notice of filing sent to all the right parties, lawyers, and the Department of Insurance?

c. Filed within 90 days of discharge of patient?

 

4. Is it a “fake” lien?  

 

Watch out for collection agency forms and letters that claim “liens”, but really only concern balances.  Check the Recorder’s office for the County where the bills were incurred.

 

5. Are the charges in the lien only from the “hospital”?  

 

The hospital lien cannot contain charges from medical providers owned or affiliated with the hospital, but which do not meet the definition of a “hospital” under IC 16-18-2-179.  Many hospitals try to slip in bills for ambulance services or other practice groups they own/control.

 

6. No such thing as an “Amended Lien” 

 

There is nothing in the statute that allows a hospital to “amend” its lien.  If there were “omitted bills”, billing errors, or a second hospital admission, the hospital cannot merely send out an “amended lien”.  It must file another lien, properly, and on time.

 

D.  Tips for defeating Hospital Liens: SUBSTANTIVE ATTACKS

 

1. Frost attack.  

 

If the lien seems valid, perform full discovery to challenge the reasonableness of the charges per Section 4(e).

 

a. Liens are usually filed at Chargemaster rates. These are now universally recognized to have no relationship to “reasonableness” per Stanley v. Walker.

b. File declaratory judgment action (you can do this in circuit, superior or probate court).

c. Send discovery to the hospital regarding:

1. The cost of each service or item charged.

2. Discounts the hospital gives to other health plans like Medicare, Medicaid, uninsured, or other special groups (i.e., Amish).

 

2. Are there any billing errors?  

 

Have the bills and records been reviewed to check for double billing, billing for services that were not delivered, or other issues.  A billing review service may be hired for this.

 

3. Are the charges “reasonable and necessary”?   

 

A billing review service could also look at the charges to see if they are inflated for this region, or based on other standards.

 

4. 20% rule reduction   

 

Section 3(c) mandates that the patient be left with 20% of the liability recovery after the attorney fee and expense reduction.  For instance, on a $100,000 recovery the patient must be left with $20,000. However, the patient must satisfy any other medical balances or non-hospital liens out of that amount.  Now that Stanley v. Walker has unmasked Chargemaster rates as being, per se, unreasonable, this rule should be rarely used, as it will still usually give the hospital too much money.  In the post-Frost era, we can now do full discovery of the real costs/discounts associated with the charges.

 

E. DEMAND WITHDRAWAL OF THE LIEN

 

This invokes the $25/day penalty under Section 7 of the statute.  Nearly every hospital lien is arguably invalid. Sending a withdrawal demand establishes an anchor date for calculating the potential penalty.

 

F. FILE A MOTION TO QUASH THE LIEN PER SECTION 4(e)

 

This right has existed for a long time, but since the Frost case it has more teeth, and with less cost.  The discounts/costs of each service are discoverable, and admissible on the issue of “reasonableness”.  No expert required.

 

G. NEW IDEA: JOIN HOSPITAL THAT FILED THE LIEN IN YOUR THIRD PARTY LAWSUIT? WHEN?

 

The hospital lien Statute is a personal injury statute.  The right to contest the reasonableness of the charges is exactly the same as the right granted to the defendant in tort cases to contest the bills that plaintiffs claim.  The plaintiff should not be subjected to disparate findings. By filing a lien, the hospital has arguably agreed to subject itself, and the determination of the “reasonableness” of its charges, to the courts.  A hospital would thus likely have the right to intervene prior to a tort jury verdict, since that verdict would arguably be res judicata. However, would that require special verdict (or page of the verdict form) devoted just to the question of “reasonable value of the medical expenses”?  Do we want that? Is it better to wait until after the outcome of the tort case before challenging the lien?


 

Conclusion

 

The information shared in this article is the culmination of 25 years of experience and knowledge gained in large part through membership in ITLA.  This piece builds on countless other articles and speeches given by our fellow members over the years at great cost of their own time, and for no direct financial compensation.  The fight never ends, but together we are stronger.

“We learn from failure, not from success!”

― Bram Stoker, Dracula

 

(6) Rashauna White v. St. Vincent Anderson Regional Hospital, Madison Circuit Court 3, Cause #: 48C03-1407-CT-105.

(7) See the Frost trial court summary judgment order, attached as Exhibit A.

(8) St. Vincent Anderson Regional Hospital v. Rashauna White, Indiana Court of Appeals Cause number: 48A05-1412-CT-546.

(9) See also the 2015 Verdict article by Tom Manges, Indiana’s Hospital Lien Statute Applies to Medicaid.

(10) The September 1, 2016, oral argument is archived at the mycourts.in.gov/arguments.

(11) See Indiana’s Hospital Lien Statute Applies to Medicaid, Tom Manges, Verdict (9-1-15).

(12) See Exhibit B for sample complaint.

 

 

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