We are seeing more inquiries about hospital liens lately. With the rise in medical costs, it’s no surprise that the healthcare industry is looking for ways to collect on some substantial bills. With the COVID-19 pandemic delaying revenue-producing activity, there is sure to be more activity in this area.
Many hospital liens result from charges made to accident victims. Often these individuals have no choice of where they are taken for emergency care. In some cases, hospitals and other healthcare organizations exploit liens as a way to bring in more revenue.
What is a hospital lien, anyway? Also called a medical lien, it is a specific legal tool to compel payment of a medical debt. The liens are governed at the state level — there have been recent changes in Texas law regarding hospital liens.
Defining a Hospital Lien
A lien is a court document, a legal instrument conveying one party's rights to hold the property of another party for payment. A hospital or medical lien notifies court officers of a debt with a medical facility.
The steps of using a hospital lien include:
- Sending a Notice of Intent to the patient-debtor 15 days before the lien is placed (or within the time limit set by state law).
- Noting court action in the patient’s attorney file while ensuring the medical facility followed the appropriate laws and strict protocols.
- Paying off the medical debt through a settlement or court award.
Any medical facility employing a physician (MD) can place liens on an injury claim legally as long as it follows state law and protocols. Facilities include hospitals, nursing homes, physician practices, and intensive care facilities.
A caveat — Hospital or medical liens only apply to individuals without health insurance. Patients with health insurance have every expectation of having expenses paid when their insurer processes the claim. If the facility bypasses insurance filing, that is where problems occur. The patient should inform the facility in writing immediately to confirm his or her health insurance information.
Limits on a Hospital Lien
Most state laws require a lien to be reasonable. The criteria for reasonable is often set by comparing the charges to that which a patient with Medicare, Tricare, Blue Cross, or another insurer receives. Charges sent to uninsured patients are considered as well.
One tactic to reduce a medical lien is to approach the medical organization early in the process. If the medical organization is consulted before a settlement or trial, the patient or attorney can negotiate for reduced expenses.
Hospital Liens in Texas
Section 55 of the Property Code allows Texas hospitals to secure a lien to an insurance settlement if a patient receives medical services due to a third party’s negligence. The trouble occurs when the hospital bypasses the patient’s right to use healthcare insurance and goes straight to filing a lien.
Without a lien, hospitals have limited methods for recovering payment of emergency services. The facility may bill only the patient. If the patient can’t pay, the only options left to the organization is to send a bill to a collection service or file a lawsuit.
Since filing lawsuits is cost-prohibitive, the Texas legislature created the statutory hospital lien.
- The code gave hospitals the power to place liens on settlement funds of accident victims who received hospital services within 72 hours of the accident.
- All the hospital had to do was file a written notice of lien with the county clerk of the county where the medical services were provided.
- The hospital was required to notify the victim of the lien, the patient, before the settlement funds are paid.
Filing the lien placed the hospital first in line for compensation, ahead of the patient/victim.
Clarifications to Section 55 in 2019
After a few too many surprises, the legislature clarified parts of Section 55 through HB 2929, which was implemented on September 1, 2019.
First, the bill clarified the meaning of admission to a hospital. An injured individual is now considered admitted to a hospital “… if the individual is allowed access to any department of the hospital for provision of any treatment, care, or service to the individual.”
The bill also defined the charges a lien may not cover, including charges for other services that exceed the regular and reasonable rate.
Other clarifications limited the power of hospital liens.
- The lien is limited to the lesser of the following:
- The patient’s hospital charges for the first 100 days of hospitalization OR
- 50% of the total settlement, judgment, or another instrument to which the lien is attached.
- The hospital may not include charges paid by health insurance.
- The victim gets credit for any charges the victim’s health insurer paid on his or her behalf.
Before these changes, accident victims could find themselves on the hook for a high hospital bill.
How Hospitals Exploit Liens
Not to gang up on all hospitals, but as the saying goes, one bad apple can spoil the entire barrel.
Hospitals negotiate rates with health insurers, which then pay the discounted rate. Hospitals and medical providers receive less payment than they might like or need when providing services to an insured patient.
To boost revenues, the hospital may do an end-run around the insurance, failing to file claims. Instead, the facility immediately bills the victim or files a lien after an accident so they can receive higher payments than the insurance provides.
Some hospitals follow this practice because Texas law limits drivers to $30,000 of liability coverage on their auto insurance. Today that can be a drop in the bucket towards an emergency medical bill. In some events, that hospital bill may be inflated.
If the at-fault driver's liability carrier doesn't pay the settlement before addressing other outstanding liens, the victim is charged with paying more for the same services without the insurance discount.
Because of the exploitation of a few bad actors, accident victims have found themselves victimized twice.
Fortunately, depending on state law, a hospital lien has no effect on the patient’s business or personal credit rating, depending on the state law. For example, in Georgia, a lien is not considered evidence of an individual's ability to pay a debt.
In addition, hospital liens may not attach to worker’s compensation benefits or the victim’s non-public liability insurance policy. This includes the policy coverage against uninsured or underinsured motorists. In Texas, the line is limited to a maximum of $1,000 and may cover only the emergency physician’s charges for the first week of emergency care.
Your best bet is to retain an attorney to help you through the legalities if you receive a Notice of Intent to file a lien from a medical facility. If you have been in an accident, your personal injury lawyer can add the notice to your file.
Medical emergencies are stressful enough without worrying about huge medical bills. Refer to your state’s hospital lien laws to determine how to address any notification you receive. Retain a lawyer to help and, for those injured in an accident in the State of Texas, be aware of the clarifications added to Section 55 by House Bill 2929.