Hospital Liens In Alabama
In Alabama, hospital liens and the manner of their enforcement are established by statute. The hospital lien provisions can be found at Alabama Code §35-11-370, et seq. There is also a body of case law that addresses these liens.
A. What is the purpose of the hospital lien statute?The purpose of the hospital lien statute is to induce hospitals to *receive a patient injured in an accident, without first considering whether the patient will be able to pay the medical bills incurred.* Ex parte University of South Alabama, 761 So.2d 240, 244 (Ala. 1999). To accomplish this purpose, the legislature has given hospitals a basically automatic lien on the money received as a result of your client*s personal injury case. The Alabama Supreme Court *has recognized that the hospital-lien statute is to be construed broadly in order not to defeat a valid hospital claim.* Id. This language has been cited over and over again to support an ever-expanding territory for hospital liens, both in applicability and enforcement.
B. Is the lien really automatic or does it have to be perfected somehow?The short answer is *Yes* to both, but feel free to do the research if you feel your case involves a very special situation where the hospital dropped the ball in perfecting its lien. The simple rule is that it is automatic against your client, the hospital*s patient, but has to be perfected, or there has to be actual notice shown, as against others, including potentially you. Alabama Code *35-11-371 states how a hospital lien is perfected. Generally, it requires the filing of a verified statement with the probate court within 10 days of discharge. This is for notice purposes. The case law, however, has given hospitals lots of wiggle room. You can start here:
Where the patient was admitted to the hospital within one week of date she was shot, the hospital was granted an automatic lien for reasonable charges concerning care, treatment and maintenance of the patient. *Guin v. Carraway Methodist Medical Center, 583 So.2d 1317 (Ala.1991); Cited in Mitchell v. Huntsville Hosp., 598 So.2d 1358 (Ala.1992). It has generally been held or recognized that perfecting requirements should not be technically applied so as to defeat just hospital claims, and that such statutes are to be liberally construed in this respect. See Guin. Where hospital's statutory lien for cost of services to patient was late, such tardiness of hospital's filing resulted only in hospital being an unsecured creditor until time when filing occurred. *Purpose of filing was to notify third parties, not patient, of claim. See Guin. In sum, the hospital lien is automatic with regard to enforceability against the patient, but must be perfected for the hospital to have claims against insurers, or even attorneys, for impairment of the lien. See Ex parte Infinity Southern Ins. Co., 737 So. 2d 463 (Ala.1999).
There does remain the question of actual notice. Considering the purposes and broad interpretation of the statute, the Alabama Supreme Court has held that failure to provide constructive notice by properly complying with the perfection requirements of *35-11-371 was immaterial to the validity and enforceability of the lien when there is evidence of actual notice of the lien. See Board of Trustees of Univ. of Ala. ex rel. Univ. of Ala. Hospital v. American Resources, Inc. Co., 5 So.3d 521 (Ala. 2008). As a cautionary note, this case involved the hospital going after everyone involved, including the estate of the deceased patient, the insurers and lawyers. It was, however, very clear that all involved had actual notice of the lien. Incidentally, this case also addressed the issue of the applicability of a hospital lien to a wrongful death claim. The Court determined that the hospital lien did not attach to the proceeds of a wrongful death claim due to the provisions of the Alabama Wrongful Death Act (Ala. Code *6-5-410). The proceeds of a wrongful death claim are punitive and not subject to the payment of debts or liabilities of the deceased, but must be distributed according to the statute of distributions.
C. What funds of money does the hospital lien apply to?Alabama Code *35-11-370 states:
*Any person, firm, hospital authority, or corporation operating a hospital in this state shall have a lien for all reasonable charges for hospital care, treatment, and maintenance of an injured person who entered such hospital within one week after receiving such injuries, upon any and all actions, claims, counterclaims, and demands accruing to the person to whom such care, treatment, or maintenance was furnished, or accruing to the legal representatives of such person, and upon all judgments, settlements, and settlement agreements entered into by virtue thereof on account of injuries giving rise to such actions, claims, counterclaims, demands, judgments, settlements, or settlement agreements and which necessitated such hospital care, subject, however, to any attorney's lien.*
As such, whenever your client is a person who has been injured by a third party and receives treatment at a hospital in Alabama within a week of the incident, the hospital can claim a lien on the proceeds of any settlement or judgment in your client*s case. The hospital will likely issue a notice of a hospital lien pursuant to the above code section.
It is important to note, however, that hospital liens are not limited to proceeds received by a patient as a result of a tort action or settlement. Hospital liens can apply to payments that are contractual in nature such as med pay and often involve the hospital lien holder going after the deeper pockets of the insurance carrier that allegedly impaired the lien by paying the money to the patient.
D. What happens when a hospital claims that its lien has been impaired?The foregoing discussion brings up the important impairment provisions of *35-11-372:
*During the period of time allowed by Section 35*11*371 for perfecting the lien provided for by this division and also after the lien provided for by this division has been perfected, as provided in this division, by any lienholder entitled thereto, no release or satisfaction of any action, claim, counterclaim, demand, judgment, settlement, or settlement agreement, or of any of them, shall be valid or effectual as against such lien unless such lienholder shall join therein or execute a release of such lien.*
*Any acceptance of a release or satisfaction of any such action, claim, counterclaim, demand or judgment and any settlement of any of the foregoing in the absence of a release or satisfaction of the lien referred to in this division shall prima facie constitute an impairment of such lien, and the lienholder shall be entitled to a civil action for damages on account of such impairment, and in such action may recover from the one accepting such release or satisfaction or making such settlement the reasonable cost of such hospital care, treatment and maintenance. Satisfaction of any judgment rendered in favor of the lienholder in any such action shall operate as a satisfaction of the lien. Any action by the lienholder shall be brought in any court having jurisdiction thereof and may be brought and maintained in the county wherein the lienholder has his, its, or their residence or place of business. If the lienholder shall prevail in such action, the lienholder shall be entitled to recover from the defendant, costs and reasonable attorney's fees. Such action shall be commenced against the person liable for such damages within one year after the date such liability shall be finally determined by a settlement release covenant not to sue or by the judgment of a court of competent jurisdiction.*
It is clear that the lien applies to money received from a settlement or judgment in a personal injury case; this includes uninsured and underinsured motorist claims. It does not attach to a person*s real property or personal property - - despite what some frightened clients might initially think when they receive it. What else?
In Progressive Specialty Ins. Co. v. University of Alabama Hosp., the Court of Civil Appeals held that the hospital lien statute applied to moneys due to the patient as a result of a contractual undertaking such as a policy of insurance. 953 So.2d 413 (Ala.Civ.App. 2006). Here, Progressive had paid the $2,000.00 policy limits of med pay coverage under the patient*s automobile insurance policy directly to the patient. The hospital claimed that by doing so, Progressive had impaired its hospital lien. The Court of Civil Appeals agreed and affirmed the trial court*s award of the full hospital lien amount of $27,898.57 as well as $4,000.00 in attorney*s fees.
While Progressive Specialty Ins. Co. v. University of Alabama Hosp., discussed above, is illustrative of the point that hospital liens can apply to money paid under an insurance contract, the result, in terms of the amount awarded to the hospital, would be different today after a very recent case originating out of the Circuit Court of Mobile County, Ex parte Alfa Mutual Insurance Company, 2017 WL 15333374 (Ala.2017). In this case, the patient was admitted to USA after an accident and subsequently died as a result of her injuries. Alfa, the patient*s automobile insurer, paid $2,000.00 under the med pay coverage to the patient*s parents for funeral expenses. Despite Alfa having presented USA with a check for $2,000.00 one month later (which USA did not negotiate), the trial court entered a judgment against Alfa for the full amount of USA*s lien, $36,438.50, plus attorney*s fees of $5,166.69.
After this result was affirmed by the Court of Civil Appeals, consistent with prior case law, the Supreme Court reversed, stating that *[t]he purpose of the statute is not to precipitate additional litigation, provide a windfall for hospitals, or saddle insurers with uncontracted-for liability in the event they pay a policy benefit that happens to be subject to a hospital lien.* The Court held that the amount of damages recoverable by the hospital for any impairment of the lien was limited to the $2,000.00 policy limit, i.e., not the full amount of the lien and *not exceed[ing] the amount that would be recoverable against an insurer under the terms of the policy.* Id. This case may represent a promising toe-hold for pushing back into the territory marked out by the hospitals under the lien provisions.
E. What are *reasonable charges*?Given the language of *35-11-370, an area of contention has been what constitutes *reasonable charges.* That issue has been litigated and was addressed in Roberts v. University of Alabama Hospital, 27 So. 3d 512 (Ala. Civ. App. 2008). In that case the trial court had relied on the testimony of hospital employees to determine that the charges in question were reasonable. Those employees had testified that the charges had been determined by reference to a uniform, industry-standard, annually updated, pricing list - - *Charge Master.* The Court of Appeals found this evidence to be competent to demonstrate the *reasonable charges* to which the hospital lien would extend.
As most of us know, however, the amount that a patient without health insurance is billed by a hospital is often much higher than the reduced amount a health insurance provider would pay for the same services. In Roberts, counsel for the patients focused on this disparity, making the point that the hospital had a practice of accepting less than the full amount of its billed rates from patients having Blue Cross and Blue Shield, Medicare and Medicaid. The Court of Appeals, however, agreed with the trial court, affirming the ruling that this evidence was of no probative value concerning the ultimate question of the *reasonable charges* assessed by the hospital. In doing so, the Court of Appeals noted that the hospital*s acceptance of lower payments from these third-party payors stemmed from legal and contractual requirements and that the trial court could properly disregard this evidence.
In University of South Alabama Hospital v. Blackmon, the Court of Appeals acted consistent with its reasoning in Roberts. 42 So. 3d 1258 (Ala.Civ.App. 2010). It considered that the hospital had presented evidence to the trial court indicating that the lien was based upon charges listed in the Charge Master and those charges had been audited and were reasonable. Further, it considered evidence presented by the hospital that its cost-to-charge ratio (227%) was in line with, if not lower than that of other hospitals in the area. In doing so, the Court disregarded evidence that patients with health insurance received significant discounts, the hospital had marked up a band aid 1000 percent and was charging nine dollars for a pill that cost ten cents.
Reading these cases, it is hard to find that the Court of Civil Appeals has really articulated an objective standard for what is a reasonable charge for any given service. If you look closely at the testimony recounted in the cases, it seems abundantly clear that what is a *reasonable charge* is whatever the hospital says is reasonable - - hard not to feel this is circular. What the hospitals seem to be doing is an aim-high approach - - setting an initially high uniform rate across all types of patients, to say there is a standard, and adjusting down according to given the fund of available money that exists. If there is a legal or contractual requirement - - take what you can get. If there is an uninsured patient willing to pay some cash - - reduce and take what you can get. If there is a liability settlement - - take all of it if necessary. If there is a big pocket like an insurance company - - try to overreach and get it all. The last is the only scenario in which the Court has so far been willing to slap their hand.
In his regard, it is interesting to consider what, if any impact, the Alabama Supreme Court*s language in Ex parte Alfa Mutual Ins. Co., might ever have on the *reasonable charge* issue. When is setting a high standard rate and then reducing at will or as required by law or contract, setting up a *windfall* scenario for the hospital when they choose to hold out for the tort settlement proceeds? Recall that in Ex parte Alfa Mutual Ins. Co., a lien impairment case, in limiting what a hospital lien holder could be awarded against an insurer, the Supreme Court made the somewhat general statement that *[t]he purpose of the statute is not to precipitate additional litigation, provide a windfall for hospitals, or saddle insurers with uncontracted-for liability** 2017 WL 15333374 (Ala.2017) (Emphasis added). Maybe no impact, but maybe there is a signal there in this broad language.
F. What is a *hospital*?Again, the statutory lien is only available to hospitals. Doctors, chiropractors, or other healthcare providers cannot assert a lien against a settlement or judgment unless the injured party executes a document conveying rights to any claims. This may get tested as hospital expand the reach of their systems, e.g., at least one hospital in Baldwin County has opened its own free standing *urgent care* clinic and has indicated an intent to file hospital liens for services rendered there.
G. Does the hospital have to bill my client*s health insurance?When a patient arrives at a hospital by way of an ambulance or helicopter, the *red flag* goes up*.ching ching*.possible lawsuit. Often, the hospital or its representative will file and provide notice of a lien even when the patient has available health insurance coverage.
In some instances the hospital is contractually obligated to bill a patient*s heathcare insurance company and accept its payment as full satisfaction of the charges. It has been argued that the patient is a third-party beneficiary of the agreement between the patient*s health insurance and the hospital.
The BlueCross BlueShield of Alabama*s coordination of benefits and subrogation policy provides that when dealing with accident related claims;
*When treating a member that has been involved in an accident of any nature, claims should immediately filed with BlueCross BlueShield of Alabama. In contracts, it is BlueCross*s policy to consider each claim under normal contract benefits and make payment accordingly to the provider****..Liens should not be filed against a patient with valid BlueCross BlueShield of Alabama coverage, except to cover any deductibles, copayments or other out-of-pocket expenses related to treatment. Any such liens should be filed only after reasonable efforts to collect such patient-pay amounts have been made.*
For this reason it is important to provide health insurance information to the hospital as soon as possible.
H. Does the hospital have to bill my client*s Medicare/Medicaid?In general, a secondary payor does not have to be billed. Hospitals may not be required to accept payments from a patient*s healthcare insurance provider, and can instead file, perfect, and assert its lien to recover payment from any settlement or judgment, Joiner v. Medical Center East, Inc., 709 So.2d 1209 (Ala. 1998). In Joiner, a Medicare beneficiary was injured in an automobile collision and was subsequently treated at Medical Center East. The hospital filed a lien and asserted a claim against the settlement with the automobile liability carrier. The hospital *elected to forego billing Medicare* for its services, and refused to accept payment from Medicare. Joiner, 709 So. 2d at 1210. Our supreme court held that Medical Center East was not obligated to file a claim with Medicare and had a *right under federal law to obtain full payment of its charges* from the settlement. Id. at 1221.
For claims involving persons covered by Alabama Medicaid, the Alabama Medicaid Agency Administrative Code, Chapter 560-X-1-.07(03) provides:
*(3) Providers have freedom of choice to accept or deny Medicaid payment for medically medically necessary services rendered during a particular visit. This is true for new or established patients. However, the provider (or their staff) must advise each patient prior to services being rendered when Medicaid payment will not be accepted, and the patient will be responsible for the bill. The fact that Medicaid payment will not be accepted must be recorded in the patient*s medical record.*
Once a patient is accepted as a Medicaid patient, Chapter 560-X-7-.24(4) states that he or she is *not responsible for the difference between the charges and the amount paid by Medicaid for the covered services* and Chapter 560-X-7-.24(5) dictates that *providers agree to accept the amount paid by Medicaid as payment in full.*
In light of the foregoing, it appears that if a hospital accepts a Medicaid beneficiary and does not advise said patient that Medicaid will not be accepted prior to rendering treatment and make a note of it in the patient*s medical record, the hospital would be in violation of the administrative code if it were to file a lien and asserted a claim for its total charges from the proceeds of a settlement or judgment.
I. Does the hospital owe me a reduction or to share in the costs of recovery - - attorney*s fees?Alabama Code *35-11-370 states that the hospital lien is subject to an attorney*s lien. So, the attorney gets paid first and the hospital can only assert a lien to the extent of the net settlement amount for those proceeds. The courts have determined, however, that the common fund doctrine and the lien statutes do not require the hospital to *share* in your attorney*s fees or expenses as a cost of recovery. See Mitchell v. Huntsville Hospital, 598 So. 2d 1358 (Ala.1992). The problems becomes acute when your seriously injured client runs up a significant bill with an admission and is either uninsured and/or the policy limits of the available insurance are low (liability and/or UM/UIM). These are difficult situations. Some hospitals will negotiate reductions or splits, but some will not.