Are Hospital Liens being Used Fairly?

Hospital liens were originally meant to protect hospitals that treated the indigent, the uninsured. The lien afforded them the opportunity to recover their costs if the patient got a settlement. Now, hospital file liens against every car accident patient, even those patients with Personal Injury Protection (the primary insurer) and health insurance (the secondary insurer). Is it legal or proper to file a hospital lien claiming the patient is indebted when the patient is fully insured? No!

I get calls from lawyers throughout Florida and the United States as well as former patients complaining about liens being filed against them. Here is the main complaint: “I have auto insurance and health insurance and the hospital is refusing to bill my health insurer because they want to recover money directly from my settlement.” Naturally, the solvent and responsible patient is aghast that the hospital is refusing to bill health insurance. Patients reasonably expect that their health insurer will pay their bills and they do not want their personal injury settlement to be reduced by paying hospital bills that health insurance should pay.

Some hospitals are using the hospital liens to maximize financial recovery by attempting to recover the usual and customary fees (which are unrealistically high) from patients’ settlements rather than accepting the health insurance negotiated (and much lower) rates. This tactic was not the intent of hospital liens.

Hospital Liens Explained

The original purpose of hospital liens was to protect a hospital that treated an uninsured patient. The lien applies to the financial recovery the patient may obtain from the party that caused the accident that lead to the hospitalization or an insurance settlement in which the uninsured patient was a beneficiary. Thus, a hospital lien allows a hospital to make a recovery for its fees from the tortfeasor’s insurance company.

In the 1930s states began permitting hospital liens to alleviate the heavy burden of treating uninsured or insolvent patients, and to incentivize hospitals to treat a patient before checking whether the patient was capable of paying for their services. However, as times have progressed hospitals have begun to use hospital lien statutes to subvert health insurance or government plans in an attempt to recover full chargemasters rates, rather than the contracted rates a hospital would receive from the plaintiff’s health insurance or government plan. Hospitals’ use of liens in this way has come to a detriment to injured plaintiffs and attorneys alike.

The main issue stems from the drastic difference between the rates hospitals would receive from accepting payments from a plaintiff’s health insurance or government plans versus the amount hospitals receive by billing full chargemaster rates. By their nature chargemaster prices are unreasonably high as they are not derived from market forces; rather they are unilaterally set by the hospital and bear no meaningful relationship to the actual cost of goods or services, or their value to the marketplace. Thus, hospitals who believe the patient may pursue a personal injury claim may refuse to file a claim with the patient’s health insurer or government-sponsored plan, preferring instead to seek a greater reimbursement by filing a lien on the patient’s tort recovery. This is a deceptive practice because patients fully expect that their health insurance will pay their medical bills. When a hospital accepts payment on from a health insurer, the patients balance is adjusted and the patient is only responsible for a co payment.

From the attorney’s perspective, most hospital lien statutes make no provisions for attorneys’ fees, addressing only a hospital’s right to attach to any settlement or judgment awarded to a plaintiff to cover all “reasonable” medical services the hospital has provided. Therefore, attorneys are sometimes reluctant to take cases where the potential recovery would not be sufficient to cover both the inflated chargemaster price being billed by the hospital and attorney fees. Thus, if plaintiffs are unable to find an attorney to take their case this allows the tortfeasor’s insurance company to avoid paying even when the insured is liable, and further, the injured party may still be liable for the medical expenses if the hospitals time to file with the plaintiff’s health insurance has passed.

To combat hospitals using hospital liens in this way attorneys must be prepared to argue in court that the chargemaster rate being billed by a hospital is unreasonable. In 2006, the United States District Court in the Southern District of Florida outlined four factors the court should look at to determine if a hospital’s chargemaster rate is reasonable. These factors include (1) the rate the provider charges other patients for the same services; (2) the chargemaster rates of similarly situated hospitals and providers in the community; (3) the sums routinely accepted by the hospital and other similarly situated hospitals for similar services; and (4) the provider’s internal cost structure and historical profit margins.

Specifically, in Florida, unlike other states, there exists a mixed system where counties have the power to authorize hospital liens through county ordinances. Previously, counties in Florida could authorize the use of liens through special acts or ordinances, however in 2012 the Supreme Court of Florida in Shands Teaching Hosp. & Clinics, Inc. v. Mercury Ins. Co. of Fla., 97 So. 3d 204 (Fla. 2012) held that the use of special acts to authorize medical liens was unconstitutional. Currently, ten counties in Florida authorize medical liens through the use of county ordinances. The chart below will spotlight the ten counties that currently authorize hospital liens, highlight the hospitals covered by those ordinances, and provide a direct link to the applicable ordinance.

1. 152 Am. Jur. Trials 265 (Originally published in 2017
2. Michael K. Beard & Dylan H. Marsh, Arbitrary Healthcare Pricing and the Misuse of Hospital Lien Statutes by
   Healthcare Providers, 38 Am. J. Trial Advoc. 255, 257 (2014)
3. Michael K. Beard & Dylan H. Marsh, Arbitrary Healthcare Pricing and the Misuse of Hospital Lien Statutes by
   Healthcare Providers, 38 Am. J. Trial Advoc. 255, 257–58 (2014)
4. George A. Nation III, Hospitals Use the Pernicious Chargemaster Pricing System to Take Advantage of Accident
   Victims: Stopping Abusive Hospital Billing, 66 Drake L. Rev. 645, 650–51 (2018)
5. Meta Calder, Florida's Hospital Lien Laws, 21 Fla. St. U. L. Rev. 341 (1993)
6. George A. Nation III, Hospitals Use the Pernicious Chargemaster Pricing System to Take Advantage of Accident Victims: Stopping Abusive Hospital Billing, 66 Drake L. Rev. 645, 671 (2018)
7. Michael K. Beard & Dylan H. Marsh, Arbitrary Healthcare Pricing and the Misuse of Hospital Lien Statutes by Healthcare Providers, 38 Am. J. Trial Advoc. 255, 277 (2014)
8. Michael K. Beard & Dylan H. Marsh, Arbitrary Healthcare Pricing and the Misuse of Hospital Lien Statutes by Healthcare Providers, 38 Am. J. Trial Advoc. 255, 258 (2014)
9. Meta Calder, Florida's Hospital Lien Laws, 21 Fla. St. U. L. Rev. 341 (1993)
10. Meta Calder, Florida's Hospital Lien Laws, 21 Fla. St. U. L. Rev. 341, 344–45 (1993)
11. Meta Calder, Florida's Hospital Lien Laws, 21 Fla. St. U. L. Rev. 341, 344–45 (1993)
12. Colomar v. Mercy Hosp., Inc., 461 F. Supp. 2d 1265, 1269-72 (S.D. Fla. 2006)