The amount of a hospital lien and how it gets paid or resolved differs based on State Standards. It is essential to understand State-level rules and statutes about how hospital liens work. Each Standard may have different due process rights. When an individual is involved in a personal injury, allegedly caused by another (sometimes referred to as alleged ‘tort-feasor’), this is called “third party liability or ‘TPL.’ EMTALA requires that hospitals treat and stabilize patients without considering whether the patient has insurance. In a personal injury case where a patient has health insurance, one might presume that is is easy to determine the value of the medical care based on the amount paid by the health insurance, adding in any out-of-pocket costs paid by the plaintiff. This is not true. There are two other Standards:
Collateral Source Rule and Hospital Lien
- insurance as a collateral source of valuation: If the patient has insurance, collateral source rules in many states stipulate that the only admissible amount in litigation is the amount charged. In some states, if any portion of the medical bills has already be paid by insurance, that amount may be considered, but only for bills that have been paid.
- a lien as a collateral source of valuation: If the patient does use their insurance or is not insured, a hospital may file a lien. A hospital lien can entitle the provider to a portion of an award resulting from litigation. In some jurisdictions, there have been rulings regarding whether a lien is a collateral source. There have been rulings regarding whether a company that purchases liens (sometimes called ‘factoring’) at a discount is a collateral source.
Lien Value must be based on Reasonable Charges
Some states have determined that liens are invalid to the extent they seek to secure charges that exceed what is reasonable (for example, see specifics in Texas, below)
Hospital Lien State Standards
States regulate hospital liens. There are differences in California, Texas, Florida, and New York.
Below is a summary of lien Standards in these states.
California Hospital Lien
California Hospital Lien Act (HLA California Civil Code sections 3045.1 to 3045.6)
The California Standard states that hospitals may claim repayment for all “emergency and ongoing” medical care provided to a patient injured in an “…accident, or negligent or wrongful act…”
The hospital could place a lien on an alleged tortfeasor “to the extent of the amount of the reasonable and necessary charges of the hospital.” (See Civ. Code, § 3045.1; see also Gov. Code, § 23004. Note that this is different from the ‘allowed amount’.
Under this Standard, a Hospital lien imposes a duty on a defendant to pay the hospital for emergency and ongoing services provided to an injured patient who has sued the third party for causing the harm. A defendant who settles with a patient without honoring a hospital lien remains liable to the hospital for the cost of care provided. (Civ. Code, § 3045.4.)
However, Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541 has a two-factor set of considerations:
- “Write-offs” by providers that are the difference between what is charged and what is paid
- What is a ‘reasonable’ charge.
It is interesting to note that The California Supreme Court ruled that the collateral-source rule did not apply to “written-off” amounts, since the plaintiff was never going to be responsible for the written-off charges. The Court held write-offs were never recoverable tort damages in the first instance and, therefore, the collateral-source rule never came into play. Yet, the Court repeatedly stated that it was not abrogating the collateral-source rule, even acknowledging the fact that insurance should continue to be inadmissible under the collateral-source rule.
Since ‘write-offs’ are possibly uknowable and could be speculative, the Usual Customary and Reasonable Charges Standard is the one that we use in California personal injury cases.
Texas Standards require a hospital provides treatment to anyone in need of emergency medical attention. The Texas medical lien Standard (Texas Property Code 55.002(a)), automatically grants a lien for medical care provided as a result of injuries caused by an accident that is attributed to the negligence of another person. This enables a hospital that provides emergency care to uninsureds to claim a percentage of a legal award that the patient could receive for the accident.
Lien Limits in Texas
Texas provides limits on liens.
- A hospital can place a lien only for the first 100 days of treatment.
- Emergency room physicians, who may charge for care separately from a hospital facility fee can place liens on the first seven days of care.
- Medical care providers cannot place a lien in a county with a population of fewer than 800,000 people.
- Liens do not apply to excessive charges above a reasonable rate. According to TEX. PROP. CODE § 55.004(d)(1) a medical lien is invalid to the extent it seeks to secure charges that exceed a “reasonable and regular rate.” See IN RE K & L AUTO CRUSHERS, LLC AND THOMAS GOTHARD,JR., RELATORS
Therefore, we use the Usual Customary and Reasonable Charges Standard in Texas personal injury cases.
Hospital liens are treated differently in Florida. This is because the State does not have a jurisdiction-wide statute. The Florida lien law that was ruled unconstitutional in 2012 in Shands Teaching Hospital & Clinics, Inc. v. Mercury Ins. Company of Florida. Therefore, some Florida counties set their own hospital lien standards.
As of December 2020, Florida counties with hospital lien Standards are:
- Hillsborough County
- Lee County
- Miami-Dade County
- Orange County
New York State Lien Statutes
In New York, subrogation is an important consideration. To illustrate, if a driver of a car hits your car, the injured party can sue the driver. This might result in a settlement with the driver who caused the accident and their insurance for $90,000. Yet, a health insurance company might be paid $10,000 to reimburse them for medical bills related to the injured party’s medical care to treat the injuries. The insurance company can claim a right of subrogation in the form of a lien against the settlement for $10,000.
New York General Obligations Law section 5-335 removed health insurance liens against personal injury settlements, with certain exclusions for NY State Medicaid, Medicare, and ERISA plans (under the ‘Employee Retirement Income Security Act’).
This gave rise to new defense strategies. Under New York 5-335 health care insurers could claim to be ERISA-plans that are protected even if they are not ERISA plans. Plans that make this claim could attempt to place a lien on a settlement even when they are not technically entitled to make such a claim.
Liens May be Difficult to Resolve without an Expert Witness and an Attorney
Liens can be problematic in personal injury and third-party liability cases. This is because a health plan or ERISA plan may only adjudicate a medical claim for payment after a lien is released. Hospitals may make more from the lien value on a personal injury claim than if they submit a claim to an insured’s health insurance. Therefore the hospital has a potential option to never submit the medical bills to insurance. On the other hand, we have seen attorneys file complaints against hospitals for tortious interference with an insured’s health plan in retaliation.
Plaintiffs who need a settlement and wish to move on with their lives may believe that they must accept losing a large potion of the settlement to a hospital lien. This is not always true. Plaintiffs who have the help of counsel and an experienced expert witness in medical billing and medical coding can use this litigation team to provide an independent value of the medical care.
Although it may seem that only plaintiffs and their attorneys are interested in the value of the lien, defense attorneys are interested in knowing the value as well. Defendants want to establish a fair assessment of the value of the medical care, which may be a lower value than the lien.
In turn, at the time of an expert deposition, the plaintiff may have an interest in this same value to negotiate the lien after the litigation.
 There are important categories of due process under the Fourteenth Amendment : (i) procedural due process and (ii) substantive due process.
Procedural due process is based on principles of “fundamental fairness,” that address which legal procedures are required to be followed in state proceedings.
Courts have identified the basis for such protection from the due process clauses of the Fifth and Fourteenth Amendments to the Constitution, which prohibit the federal and state governments, respectively, from depriving any person of “life, liberty, or property, without due process of law” This is used to evaluate whether states can apply the law at all, regardless of the procedure followed. In contrast, substantive due process typically deals with specific subject areas, such as liberty of contract or privacy. It has in the alternative emphasized the import of both non-economic and economic matters. In theory, procedural and substantive due process are closely related. In reality, substantive due process has had greater political import. This is because its application can restrict significant portions of a state legislature’s substantive jurisdiction.
Although the rights protected by substantive due process could be be controversial, its theoretical basis is established. It forms the basis for most constitutional case law today. Passage of the Reconstruction Amendments (13th, 14th, and 15th) provided federal courts with authority to intervene if a state threatens a fundamental right of its citizens. This is one of the essential doctrines ﬂowing from the Bill of Rights to states through a Due Process Clause. (See cite here).
 EMTALA, the Federal Emergency Medical Treatment and Labor Act requires that anyone admitted to an emergency department must be treated and stabilized, regardless of their insurance status or ability to pay.
 The ACA, or Patient Protection and Affordable Care Act mandates a maximum out-of-pocket cost (OOPM) for ACA qualified health plans.
 Under the Affordable Care Act, out-of-pocket maximums do not apply to out-of-network charges. So, if an injured patient receives care from a hospital that is in the patient’s network of insureds, but one of the physicians is out of network, that physician’s bill may result in an additional out-of-pocket cost to the insured injured patient. (See also Allowed Amount).
 Some states grant automatic liens to hospitals; others forbid many times liens. See the State-specific guidance.
 Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) added mandatory reporting requirements concerning Medicare beneficiaries who have coverage under the group health plan (GHP) arrangements as well as for Medicare beneficiaries who receive settlements, judgments, awards, or other payment from liability insurance (including self-insurance), no-fault insurance, or workers’ compensation, collectively referred to as Non-Group Health Plan (NGHP) or NGHP insurance.