LIENS
Welcome to Synergy’s blog page dedicated to the topic of lien resolution. Our team of subrogation experts share their InSights and knowledge on the latest developments and best practices in lien resolution. Stay up-to-date with the latest trends and strategies to ensure that you have the information you need to navigate the complexities of lien resolution.
How subrogation and reimbursement claims impact the injury victim’s settlement.
When an individual suffers an injury and seeks medical attention, typically that care is paid for by an insurance carrier. Those bills might be paid by Medicare, Medicaid, TRICARE, or a plan provided through their employer. This is true even if the injury suffered was caused by a third party. The surety of payment for medical services is why individuals are willing to pay high premiums for insurance coverage or to comply with cumbersome federal/state regulations to retain benefits.
However, most purchasers or beneficiaries of these plans and polices are unaware that there are circumstances wherein they will be required to repay these plans thousands or even millions of dollars. The little known and often misunderstood legal principles behind this obligation are subrogation and reimbursement.
Having spent more than 20 years in the health insurance subrogation/reimbursement industry, I have learned that a case example is the best way to explain how subrogation/reimbursement claims impact the individual injury victim.
A Typical Injury Case Example
In the typical case, an individual is injured in a motor vehicle accident. The individual then retains an attorney to assert a claim against the allegedly negligent driver. During the course of pursuing that claim, the attorney is advised that his client’s health insurance carrier paid $20,000 to various medical providers for injuries suffered in the accident. This notice advises the attorney that they are required to repay this amount upon settlement of the motor vehicle case. It is the position of the various insurance providers, government agencies, and courts that it was the at-fault party who should have paid the medical bills, not the injury victim’s own insurance carrier. Therefore, $20,000 from the settlement funds obtained by the injury victim’s attorney to compensate them for their injuries goes back to the insurance company. In many situations, primarily with Medicare, the facts and numbers can mean that the injury victim receives no portion of the settlement, and all of it goes back to the insurance carrier.
Subrogation and Reimbursement Explained
The terms subrogation and reimbursement are used interchangeably both within the industry and often by the courts. Despite this conflation, the two are different legal concepts and hold different perils for the injury victim attempting to obtain compensation for their injuries. Subrogation means to substitute one person for another. Often subrogation is analogized to “standing in someone else’s shoes.” Within our context it means that the health insurance carrier can “stand in the shoes” of the injury victim–essentially becoming the injury victim for the limited purpose of asserting a claim against the at-fault party for the amount of medical benefits they have provided. The insurance carrier asserts a claim independent of the claim being asserted by the actual injury victim. Reimbursement, on the other hand, is when the insurance carrier claims that their insured recovered money from the at-fault party for expenses which the insurance carrier, and not the injury victim, paid. The concept of reimbursement guards against an individual receiving a “windfall” by recovering money for an expense that was paid by another.
To add to this already confusing analysis is that each type of health insurance coverage has different recovery rights. These rights may be governed by state law, federal law or a combination of both.
Repayment considerations with the Medicare Secondary Payer Act
Medicare and Medicare Advantage beneficiaries will face the Medicare Secondary Payer Act when they are attempting to resolve a repayment demand being asserted against any settlement or award they obtain. Under this Act, Medicare is identified as a “payor of last resort” and creates what is often referred to as a “super lien.” The amount due back is calculated per federal regulation and is dependent on the size of the settlement relative to the amount of benefits provided as follows:
- C.F.R. 411.37(c)
- Medicare payments are less than the judgment or settlement.
- Add (Attorney’s Fees) and (Costs) = Procurement Costs
- (Procurement Costs) / (Gross Settlement Amount) = Ratio
- Multiply (Lien Amount) by (Ratio) = Reduction Amount
- (Lien Amount) – (Reduction Amount) = Medicare Demand
- Medicare payments are less than the judgment or settlement.
- C.F.R. 411.37(d)
- Medicare payments are equal to or exceed the judgment or settlement.
- Add (Attorney’s Fees) and (Costs) = Procurement Costs
- Medicare payments are equal to or exceed the judgment or settlement.
- (Settlement Amount) – (Procurement Costs) = Medicare Demand
This “super lien” must be repaid within sixty (60) days of their post-settlement demand. Failure to repay the amount demanded could result in garnishment of Social Security benefits, interest being added to the amount owed, or even a doubling of the amount due, and a direct lawsuit against the injury victim and/or their attorney. There are alternative ways to resolve a conditional payment amount that involves a compromise or waiver request.
Repayment Demands and Medicaid
Another federal government health insurance program that will assert a repayment demand against its beneficiaries is Medicaid. The Medicaid program is funded by the federal government but administered by each state. Part of the requirement for the states to receive Medicaid funds is to assert repayment demands in cases where another party has become responsible for items or services that Medicaid has already provided. The repayment formulas, process, and requirements vary greatly from state to state. Though all of them have statutory rights to repayment under both federal law and state law. Additionally, most states provide for both civil and criminal penalties for individuals, or their attorneys, who fail to repay Medicaid.
Repayment Demands and Medicaid
Federal employees, both civilian and military, also face a daunting challenge when attempting to resolve their personal injury actions. Many civilian federal employees received their health insurance via the Federal Employee Health Benefits Act (FEHBA). These plans are quasi-government plans that are administered by private insurance carriers but overseen by the Office of Personnel Management. (OPM). Recently FEHBA plans achieved a significant victory before the United States Supreme Court in case called Nevils. In this case, the FEHBA plans were able to obtain a ruling which allows them to circumvent state law and enforce the terms of their plan as written. Since this is as relatively new change in interpretation there have been no cases yet limiting the rights of these plans. Fortunately, these plans are all available for review online at the Office of Personal Management website
Repayment demands from Veteran Affairs and TRICARE
Members of the military and their families must confront repayment demands from both Veterans Affairs (VA) and TRICARE. Both forms of insurance require the beneficiary to notify them of the potential for a third party to be responsible for the items or services they have provided. What is especially unique about military repayment demands is their request that the injury victim’s attorney represent the United States government free of charge. While there is no requirement that an attorney agree to this representation, the government can make resolving their interest more cumbersome in the event they refuse to sign the form. This is another example of the kind of leverage the government and insurance providers use on the trial attorney in an effort to obtain repayment.
Repayment demands and ERISA
Though tens of millions of Americans receive their insurance coverage via a government-sponsored plan, most are covered by an employer-sponsored health plan. These plans are established under the Employee Retirement Income Security Act (ERISA). An ERISA plan’s rights to repayment from an injury victim’s settlement or award is greatly dependent on how the ERISA plan is funded. Large employers with substantial assets often have a “self-funded” ERISA plan. This means that claims are paid by the company itself (or a fund it establishes) rather than by an insurance company. The law gives these “self-funded” ERISA plans extremely strong recovery rights. These same rights do not exist if the employer has a “fully insured” plan wherein an insurance carrier pays claims.
It is the “self-funded” ERISA plans which most often exercise subrogation and reimbursement rights as separate causes of action. An ERISA plan may have the right to initiate a law suit in the name of one of its plan members without even informing the individual. The “self-funded” ERISA recovery industry returned over $1,000,000,000.00 to ERISA plans in 2014 alone. This is $1 billion in settlement proceeds taken from injury victims each year. The rationale the United States Supreme Court gave when they last opined on ERISA was that the employee “bargained” for the subrogation/reimbursement rights that were contained in their contract for insurance.
Repayment demands and Hospitals/Providers
In addition to the repayment of insurance providers, there are situations where a hospital or provider may assert a repayment demand themselves. Often these repayment demands from providers is due to a lack of insurance, or a choice on the part of the provider not to bill insurance. Addressing these types of repayment demands may involve not only state statutes, but perhaps even county ordinances.
Identifying and resolving healthcare repayment obligations is a challenging part of any modern-day personal injury claim. Failure to properly address these claims could result in the loss of benefits, the accrual of interest, or even the imposition of civil or criminal penalties against both the injury victim and their attorney.
Watch a video overview of our lien resolution services or visit the home page for a complete listing of our settlement services.
There are a myriad of benefits when law firms outsource lien resolution services. Law firms that partner with a reliable, third-party consultant that specializes in resolving liens can enjoy the following benefits:
- Reduced Operating Costs: Time is money and law firms improve their bottom line by outsourcing time-consuming tasks to experienced professionals.
- Effective Results: By partnering with a knowledgeable professional who understands the comprehensive lien laws, you ensure compliance and obtain effective results.
- Solution-Oriented: When you accelerate lien resolution, your clients are pleased with their experience working with your law firm resulting in more quality leads.
In this brief article, the professional consultants at Synergy Settlement Services will discuss how law firms can perform their due diligence when hiring a consultant. We will also discuss a few basic qualifications every lien resolution consultant should possess.
Are You Hiring an Experienced Professional?
Naturally, when law firms hire a consultant to perform any legal tasks, especially a specialized task like lien resolution, they are partnering with this company because they require a knowledgeable and experienced professional that will be a solution provider to their needs. So the first matter of business is to ensure that this company’s expertise is in resolving liens and that this has been a principal aspect of their business for quite some time.
Are They Knowledgeable in All Aspects of Lien Resolution?
If you are relying on a third party to resolve your liens, ensure they aren’t outsourcing your services to another third party. Along with getting a better understanding of their business model, make certain that this specialized service provider has a good rapport with national healthcare agencies and has experience resolving issues related to Medicare, Medicaid, and unreasonable hospital liens as well as a firm understanding of comprehensive federal statutes like ERISA liens. Make certain they have a system in place that ensures compliance regarding all these issues.
Can They Manage a Large Capacity of Cases?
Along with learning about their experience and lien resolution process, the company you hire needs to have the bandwidth to manage a large capacity of cases for your law firm. It’s important to learn more about how many consultants will be working on your lien resolution and about other specialized services that the company can provide you with. You can always task them with resolving liens for your firm and then broaden the scope of specialized settlement services they can assist you with over time.
For over a decade, Synergy Settlement Services has worked to successfully resolve liens for the clients of numerous law firms. If you are interested in eliminating the burden related to lien resolution services, please speak with our knowledgeable and experienced team of professionals today.
For more information about how you can benefit from lien resolution services or to schedule a consultation, please submit our contact request form.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.
Some of the most frustrating and murky issues facing attorneys representing injured clients stem from alleged “liens” against settlement proceeds. The Florida Bar’s position on these issues, and the limited laws delineating them, have been ever-shifting and evolving.
Ethical Obligation to Protect Liens
One constant in this otherwise uncertain area, is this: Attorneys representing injured Plaintiffs in personal injury actions have an ethical responsibility to use all reasonable efforts to resolve disputes between clients and known third-party lienholders.
Injury attorneys cannot unilaterally arbitrate such disputes. If a dispute cannot be resolved through negotiation, “the lawyer should consider the possibility of depositing the property or funds in dispute into the registry of the applicable court so that the matter may be adjudicated.” Comment to Rule 5-1.2, Rules Regulating the Florida Bar. The Ethics Committee has stated that an injury attorney should “endeavor to assist his client and the physician in effecting a compromise.” Opinion 67-36, Professional Ethics of the Florida Bar. If such efforts fail, “the lawyer should institute an interpleader action in a court of competent jurisdiction naming his client and the physician as defendants.” Id., emphasis added.
In 2004, issues involving “Letters of Protection” were specifically addressed in Opinion 02-4. The Ethics Committee again reiterated its position that a lawyer “cannot take it upon himself or herself to decide who is entitled to what.” Id. The Committee also reiterated that a lawyer holding disputed funds “should institute an interpleader action.” Id. (citing Opinion 67-36 and Rule 5-1.2). However, an interpleader action is not “the only alternative.” Opinion 02-4. Other options include, but are not limited to, seeking declaratory relief under Fla. Stat. § 86.021 and/or Fla. Stat. § 501.211(1), Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA).
A Wild Ride, from Pintaluga to Staff Opinion 38866
The Florida Bar Ethics Counsel should clarify, once and for all and by written ethics opinion, the Bar’s final position on an attorney’s ethical responsibilities regarding the protection of third-party interests in settlement proceeds. Thus far they have not done so, despite their position seeming to swing radically in recent years.
While advice from the Ethics Hotline is helpful, it is not in writing and cannot be relied upon to definitively protect you. Similarly, even written staff opinions are “advisory” and as such, “are intended to provide guidance to the inquiring attorney and are not binding; the advisory opinion process is not designed to be a substitute for a judge’s decision or the decision of a grievance committee.” Staff Opinion 38866. Only a published ethics opinion can settle the issues surrounding lien rights and the ethical responsibilities flowing therefrom. That said, reports of advice from the Ethics Hotline and staff opinions have been the only guidance on lien issues, since Opinion 67-36 and Opinion 02-4, and form the only basis from which we may attempt to guess the Bar’s position.
For roughly five years (from sometime after August 2013 until August 2018) the Bar’s position on the protection of injury-related medical bills appears to have swung wildly. Starting sometime in 2013, the Bar incorrectly interpreted the Supreme Court’s Consent Judgment in Florida Bar v. Pintaluga (Case No. SC13-1021) to mean all known accident-related medical bills must be protected in trust, whether the provider holds a lien or not. This position was unfounded in law, nor in fact, for several reasons.[1] Most importantly, Pintaluga was not factually square with that issue. In Pintaluga, there was a lien, created by a letter of protection (LOP) signed by the client (the only issue was whether the lien was valid if not also signed by the attorney). Not surprisingly, the lien was held to be valid because it was signed by the client and the attorney was aware of it. Further, the Bar’s entirely novel position that all injury-related bills must be protected regardless of whether liens existed, flew directly in the face of the well-settled Ethics Opinions discussed above, and the robust body of case law delineating hospitals’ rights when they do, and do not, have liens (including the two Supreme Court opinions discussed below).
In August of 2018, Staff Opinion 38866 corrected this misplaced position and clarified that “[i]f the providers have valid legal claims to the funds held in trust” the funds must be protected, but “if third parties do not have valid claims to the funds, the lawyer should disburse the funds to the rightful owner.” The key words being “to the funds.” The converse, just having a legal claim AGAINST THE PLAINTIFF (i.e., being a mere creditor, having a mere “debt”) does not satisfy this definition, and never has. Third parties must evince legal claims TO THE SETTLEMENT PROCEEDS. Stated differently, there must be a “lien” for an attorney to withhold money in trust against the client’s wishes. Simply put, you must protect “liens” but not “debts.” The litmus test is evidence of some statutory, ordinal or contractual lien. Without it, “the lawyer should disburse the funds to the rightful owner”–i.e., to the plaintiff (upon demand). Arguably, an attorney not only “may” disburse upon demand, she or he “must” release funds to the client absent a lien.
Hospital Liens
Hospital liens have been the subject of much litigation, some of it very recent. Unlike forty other states (and the District of Columbia),[2] Florida has no statewide lien statute. Instead, some Florida counties have liens, while others do not. This distinction has also been in flux between 2009 and 2018. Most Florida hospital lien laws cover all hospitals in the county, while a minority restrict the lien to “public hospitals” or “charitable hospitals.”
Hospital lien laws which were created by special act are unconstitutional under Article III, § 11 of the Florida Constitution. Of the approximately 22 counties which have hospital lien laws, 13 were created by a special act, and 6 more were created by a combination of a special act and a county ordinance. Because the Florida Constitution states “[t]here shall be no special law or general law of local application pertaining to…creation, enforcement, extension or impairment of liens based on private contracts,” hospital lien laws have been challenged as unconstitutional special acts in three cases.[3]
The 1st DCA in Mercury v. Shands found “that chapter 88-539 is a special law which creates a lien based on a private contract between Shands and its patient, in violation of article III, section 11(a)(9), of the Florida Constitution.” The Supreme Court reversed the 1st DCA as to Alachua County, but in doing so articulated a bright line test: liens in counties with county ordinances are constitutional, while liens promulgated ONLY by special act, are not. Accordingly, counties which have enacted lien laws by county ordinance are not be affected by Mercury v. Shands. In 2017, Lee Memorial resisted the Shands decision, arguing its contracts are “public” (not “private”) and as such, the constitutional test articulated in Shands did not apply.
The Second DCA disagreed, upholding the trial court’s determination that Lee’s liens are unconstitutional. Lee Memorial Health Systems appealed to the Supreme Court, which affirmed the Second DCA, stating:
We agree with the trial court and the Second District that the LMHS Lien Law violates article III, section 11(a)(9) as a special law pertaining to the creation, enforcement, extension or impairment of liens based on private contracts.
However, be careful in “non-lien” counties. Many hospitals, including but not limited to Sarasota Memorial Hospital, are creating liens by contract, at admission. This relatively new but inevitable practice of adding “lien language” to admission contracts has the possible effect of creating liens anywhere, regardless of whether a county has a valid lien ordinance.
Conclusion
Attorneys must protect liens by withholding monies in trust, over the wishes of their clients. Liens can be created by statute (though Florida does not have a lien statute), by county ordinance (in the following eight Florida counties which have them), or by contract (usually, an LOP or similar document signed by a patient and/or attorney, or more recently a hospital admission contract). If no lien exists, lawyers arguably not only “may” but “must” release settlement proceeds upon their client’s demand. The Florida counties with valid hospital liens by county ordinance are:
- Alachua
- Bay
- Brevard
- Broward
- Duval
- Hillsborough
- Miami Dade
- Orange
Unless and until county ordinances are passed in other counties, or a statewide lien statute is passed, injury-related hospitals bills in all other Florida counties are not secured by liens.
[1] This position was evinced only by reports of advice from the Ethics Hotline, instructing attorneys to withhold ALL injury-related bills which were included in a demand package. The position was not, to my knowledge, reduced to writing in a staff opinion or otherwise.
[2] See Ala. Code § 35-11-370; Alaska Stat. § 34.35.450; Ariz. Rev. Stat. Ann. § 33-931; Ark. Code Ann. § 18-46-101; Cal. Civ. Code § 3045.1; Colo. Rev. Stat. Ann. § 38-27-101; Conn. Gen. Stat. Ann. § 49-73; Del. Code Ann. tit. 25, § 4301; D.C. Code § 40-201; Ga. Code Ann. § 44-14-470; Haw. Rev. Stat. § 507-4; Idaho Code Ann. § 45-701; 770 Ill. Comp. Stat. Ann. 23/1; Ind. Code Ann. § 32-33-4-1; Iowa Code Ann. § 582; Kan. Stat. Ann. § 65-406; La. Rev. Stat. Ann. § 9:4751; Me. Rev. Stat. tit. 10, § 3411; Md. Code Ann., Com. Law § 16-601; Mass. Gen. Laws Ann. Ch. 111, § 70a; Minn. Stat. § 514.68; Mo. Ann. Stat. § 430.230; Neb. Rev. Stat. Ann. §§52-401 & 52-402; Nev. Rev. Stat. Ann. § 108.590; N.H. Rev. Stat. Ann. § 448-A:1; N.J. Stat. Ann § 2a:44-35; N.M. Stat. Ann. § 48-8-1; N.Y. Lien Law § 189; N.C. Gen. Stat. Ann. § 44-49; N.D. Cent. Code Ann. § 35-18-01; Okla. Stat. Ann. tit. 42 §§43 & 44; Or. Rev. Stat. Ann. § 87.555; R.I. Gen. Laws Ann.§§9-3-4 to 9-3-8; S.D. Codified Laws § 44-12-1; Tenn. Code Ann. § 29-22-101; Tex. Prop. Code Ann. § 55.001; Utah Code Ann. § 38-7-1; Vt. Stat. Ann. tit. 18, § 2253; Va. Code Ann. § 8.01-66.2; Wash. Rev. Code Ann. § 60.44.010; Wis. Stat. Ann. § 779.80
[3] Palm Springs General Hospital, Inc. Of Hialeah v. State Farm Mutual Automobile Insurance Company, 218 So 2d 793 (Fla. 3d DCA 1969), affirmed, State farm Mutual Automobile Insurance Company v. Palm Springs General Hospital, Inc. Of Hialeah, 232 So. 2d 737 (Fla. 1970); Hospital Board of Directors of Lee County v. McCray, 456 So 2d 936 (Fla. 2d DCA 1984); Mercury Insurance Company of Florida v. Shands Teaching Hospital & Clinics, 21 So. 3d 38 (Fla. 1st DCA 2009).
The Third Thursday webinar Hospital Liens – Cost Transparency, Friend or Foe?, which aired in February is now available here.
On June 18, 2018, the U.S. Department of Justice’s Attorney’s Office for the Eastern District of Pennsylvania announced a recently concluded settlement with a plaintiff firm involving the repayment of Medicare Conditional Payments. The government’s investigation arose under the Medicare Secondary Payer provisions of the Social Security Act, which authorizes Medicare, as a secondary payer, to make conditional payments for medical items or services under certain circumstances. When an injured person receives a settlement or judgment, Medicare regulations require entities who receive the settlement or judgment proceeds, such as the injured person’s attorney, to repay Medicare within 60 days for its conditional payments.
In their claim, the government alleged that Rosenbaum failed to submit timely payment for nine (9) of his cases between May 10, 2011, through March 2, 2017. Pursuant to the Medicare Secondary Payer provisions of the Social Security Act,42 U.S.C. $ 1395y, if Medicare does not receive timely repayment, these same regulations permit the government to recover the conditional payments from the injured person’s attorney and others who received the settlement or judgment proceeds.
Under the terms of the settlement agreement, Rosenbaum agreed to pay a lump sum of $28,000. Rosenbaum also agreed to (1) designate a person at the firm responsible for paying Medicare secondary payer debts; (2) train the designated employee to ensure that the firm pays these debts on a timely basis; and (3) review any outstanding debts with the designated employee at least every six months to ensure compliance. In addition, Rosenbaum acknowledged that any failure to submit timely repayment of Medicare secondary payer debt may result in liability for the wrongful retention of a government overpayment under the False Claims Act. You can review the settlement agreement HERE
In their press announcement, the United States Attorney’s Office for the Eastern District of Pennsylvania was clear.
“This settlement agreement should remind personal injury lawyers and others of their obligation to reimburse Medicare for conditional payments after receiving settlement or judgment proceeds for their clients. ‘When an attorney fails to reimburse Medicare, the United States can recover from the attorney—even if the attorney already transmitted the proceeds to the client,’ said U.S. Attorney William M. McSwain. ‘Congress enacted these rules to ensure timely repayment from responsible parties, and we intend to hold attorneys accountable for failing to make good on their obligations.’”
In addition to utilizing the Medicare Secondary Payer Act as a means to ensure compliance, the U.S. Attorney’s office reminds trial counsel of the applicability of the Federal False Claim Act. As part of the settlement agreement Rosenbaum acknowledged:
“…failure to submit timely repayment of Medicare Secondary Payer debts may result in its liability for the wrongful retention of a government overpayment pursuant to the False Claims Act, 31 U.S.C. $$ 3729(a)(1XD), (G), and other applicable law.”
A violation of the False Claims Act can result in triple damages, attorney’s fees, and fines (per each fraudulent claim).
Synergy’s Medicare services are designed to ensure that the trial attorney complies with obligations to Medicare while at the same time making sure the injury victim realizes as much of their settlement proceeds as possible. Our Medicare Audit & Verification Services will take the entire Medicare reporting and auditing process off your plate and allow you to focus on what you do best. This service includes the utilization of a little-known process allowing expedited disputing of unrelated charges and obtaining a final conditional payment amount before mediation.
Once settlement has been secured and a Final Demand obtained from Medicare, Synergy can continue working to add value to your case by attempting to secure a refund of the Final Demand payment from Medicare. To date, Synergy has obtained over $5,000,000 in refunds for our clients. Understanding the complex world of Medicare Conditional Payments is necessary to not only avoid potential pitfalls but also to maximize your client’s recovery.
If your firm is struggling to comply with the Medicare Secondary Payer Act, then turn to Synergy to see how we can reduce your workload, increase your firm’s efficiency, help avoid liability, and even secure additional settlement dollars for your client.
Increasingly trial attorneys are discovering that settlement of a personal injury or wrongful death claim with the tortfeasor can be the beginning not the end of negotiations or even litigation. Once settlement funds are received, the often-protracted lien resolution process begins, especially hospital liens.
Hospitals typically demand reimbursement of their full, undiscounted list prices for medical items and services despite various limitations codified in most states’ lien statutes and ordinances. Hospitals often assert these liens rather than submitting claims to Medicare or Medicaid, and sometimes even “choose” to stand on lien rights rather than billing an injury victim’s private health insurance. Lien disputes must be resolved, and liens released, prior to full disbursement of settlement proceeds and in many cases, prior to attorneys’ fees and costs being collected. Indeed, in some states and circumstances, a significant reduction of large hospital liens is absolutely required if fees and costs are to be recovered at all and if an injury victim is to receive any of the proceeds of her or his tort action. In other jurisdictions, legal fees and costs, and in some instances Plaintiffs themselves, are protected by “equitable distribution” provisions, ensuring a fair split, with only a portion of settlement proceeds being attached by hospital liens regardless of how large the hospital’s bill or how small the settlement.
However, when an injured Plaintiff does not have health insurance to pay medical expenses, or if hospitals choose not to bill available public or private coverage, most states do offer statutory lien rights against tort recoveries.[1] But importantly, almost all such statutes and ordinances limit liens to “reasonable hospital charges,” denying hospitals the unbridled license to collect liens in whatever unreasonable amounts they wish.
Most hospitals use an internal list of codes and corresponding prices for thousands of billable services and items, called a “charge-master” price list, to populate an Itemized Bill with their respective charges for the care rendered to a patient. These chargemaster rates are unilaterally set with no regulatory oversight (in most states) and without regard for the actual costs incurred in rendering the services. Most hospitals chargemaster rates are several times their average costs, but some are as high as ten times costs, or even more. However, these are just total, or average cost to charge ratios. The cost to charge ratios for certain specific items and services, like CT Scans for example, can even be multiples HIGHER than these egregious average costs. For example, consider this excerpt from an actual Cost Report, detailing the costs of CT Scans rendered to a Plaintiff at a Florida hospital:
In this example, the hospital charged, filed a lien, and demanded payment in full of rates that were more than 44 times the hospital’s self-reported costs for these CT Scans.
Uninsured injury victims are among the very small fraction of the patient population asked to pay full chargemaster rates. Ironically, this segment of the patient population is among the only healthcare consumers represented individually by counsel in their bill negotiations. However, their individual (versus group) status, leaves them with the least bargaining power. This is so due to often lopsided lien statutes and ordinances, a knowledge gap with regards to the hospital’s internal cost data, in combination with ethical requirements that disputed lien amounts be held in Trust until negotiated or adjudicated.
No federal or state law, other than in Maryland and West Virginia, regulates hospital mark-ups. Accordingly, it is incumbent upon plaintiff’s lawyers to educate themselves on lien statutes and county lien ordinances, the cases interpreting them, as well as the state and federal case law regarding the reasonable value of healthcare. Additionally, obtaining access to a hospital’s self-reported cost data can provide invaluable ammunition for an attorney’s hospital lien negotiations.
A 2015 study published by HEALTH AFFAIRS examined the fifty hospitals whose charges and self-reported costs represent the highest mark-ups in the country.[2] The study used hospitals’ self-reported costs as compared to their chargemaster rates to arrive at “overall” or “total” cost to charge ratios for each hospital, but ratios for individual revenue centers within every hospital are also available. The study concluded that on average, hospitals charge 3.4 times their costs (an average markup which has nearly tripled from 1.35 in 1984 to 3.4 in 2012) but reaches a staggering average of 10.1 times cost (a more than 1,000% markup) for the top 50 hospitals analyzed in the study.[3]
Not surprisingly, the study also found these 50 hospitals with the highest markups are overwhelmingly a) for-profit hospitals, b) part of a “health system”, c) located in urban centers, and d) are not teaching hospitals.[4] The hospitals all fall within 13 states and 40% are in Florida. The highest charge-to-cost ratio, i.e., the two hospitals tied for the most egregious markups in the country, is Okaloosa Medical Center in Florida and Carepoint Health-Bayonne Hospital in New Jersey (each reporting charges averaging 12.6 times their costs, or a 12,600% average markup!). The top fifty hospitals identified and analyzed in the HEALTH AFFAIRS study are:
- North Okaloosa Medical Center (FL)
- Carepoint Health-Bayonne Hospital (NJ)
- Bayfront Health Brooksville (FL)
- Paul B Hall Regional Medical Center (KY)
- Chestnut Hill Hospital (PA)
- Gadsden Regional Medical Center (AL)
- Heart of Florida Regional Medical Center (FL)
- Orange Park Medical Center (FL)
- Western Arizona Regional Medical Center (AZ)
- Oak Hill Hospital (FL)
- Texas General Hospital (TX)
- Fort Walton Beach Medical Center FL)
- Easton Hospital (PA)
- Brookwood Medical Center (AL)
- National Park Medical Center (AR)
- Petersburg General Hospital (FL)
- Crozer Chester Medical Center (PA)
- Riverview Regional Medical Center (AL)
- Regional Hospital of Jackson (TN)
- Sebastian River Medical Center (FL)
- Brandywine Hospital (PA)
- Osceola Regional Medical Center (FL)
- Decatur Morgan Hospital (AL)
- Medical Center of Southeastern Oklahoma (OK)
- Gulf Coast Regional Medical Center (FL)
- South Bay Hospital (FL)
- Fawcett Memorial Hospital (FL)
- North Florida Regional Medical Center (FL)
- Doctors Hospital of Manteca (CA)
- Doctors Medical Center (CA)
- Lawnwood Regional Medical Center & Heart Institute (FL)
- Lakeway Regional Hospital (TN)
- Brandon Regional Hospital (FL)
- Hahnemann University Hospital (PA)
- Phoenixville Hospital (PA)
- Stringfellow Memorial Hospital (AL)
- Lehigh Regional Medical Center (FL)
- Southside Regional Medical Center (VA)
- Twin Cities Hospital (FL)
- Olympia Medical Center (CA)
- Springs Memorial Hospital (SC)
- Regional Medical Center Bayonet Point (FL)
- Dallas Regional Medical Center (TX)
- Laredo Medical Center (TX)
- Bayfront Health Dade City (FL)
- Pottstown Memorial Medical Center (PA)
- Dyersburg Regional Medical Center (TN)
- South Texas Health System (TX)
- Kendall Regional Medical Center (FL)
- Lake Granbury Medical Center (TX)
Reasonable hospital charges are the costs of rendering care plus a reasonable profit. Experts have opined that the reasonable profit which should be afforded to hospitals for the care they render is between 25% and 40%.[5]
Chargemaster rates bear no rational relationship to a hospital’s costs or to the amounts hospitals accept in arms-length transactions. Accordingly, “discounts” from full billed charges are illusory. Negotiating down from full billed charges using no data or information other than the artificially inflated chargemaster rates appearing on a bill and lien is never in your client’s best interests.
Synergy’s Medical Bill Clinic (SMBC) offers Hospital Cost Reports, using the same data sets relied upon in the HEALTH AFFAIRS study, but applying each itemized charge appearing on a specific client’s hospital bill to its respective revenue center’s cost-to-charge ratio reported under oath by that specific hospital, to estimate the actual cost of care for any given hospital visit. Your client’s itemized hospital bill is run against the hospital’s self-reported data and a detailed Cost Report generated, for your use in negotiations.
Using “cost of care” as the basis for negotiating the resolution of hospital liens transforms the discussion and yields dramatic results. Significant savings can more readily be negotiated if discussions are framed in terms of the profit a hospital needs to realize, from the treatment of your injured client. And to negotiate based on profits, you must know the costs. Much like knowing what a used car dealer paid for a car on its lot, SMBC’s Hospital Cost Reports “invert the argument,” allowing negotiations to be approached from a “cost-up” perspective, rather than groveling for a “discount” from unilaterally set, patently unreasonable chargemaster rates.
Visit the Synergy Medical Bill Clinic page for more information.
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Flipping the Script on Hospital Lien Reductions.
Almost all states have hospital lien statutes endowing hospitals with powerful lien rights against personal injury settlements. Because injury victims do not agree to prices in advance, and injury attorneys typically have no more than the hospital’s unilaterally set full billed charges to negotiate from, overpaying for hospital care is all too common. This presentation explains how to obtain and use hospital cost data to empower your lien negotiations, and why this data and argument is so relevant and effective under most states’ lien statutes and common law.
Presented by Synergy Settlement Services
[1] See Ala. Code § 35-11-370; Alaska Stat. § 34.35.450; Ariz. Rev. Stat. Ann. § 33-931; Ark. Code Ann. § 18-46-101; Cal. Civ. Code § 3045.1; Colo. Rev. Stat. Ann. § 38-27-101; Conn. Gen. Stat. Ann. § 49-73; Del. Code Ann. tit. 25, § 4301; D.C. Code § 40-201; Ga. Code Ann. § 44-14-470; Haw. Rev. Stat. § 507-4; Idaho Code Ann. § 45-701; 770 Ill. Comp. Stat. Ann. 23/1; Ind. Code Ann. § 32-33-4-1; Iowa Code Ann. § 582; Kan. Stat. Ann. § 65-406; La. Rev. Stat. Ann. § 9:4751; Me. Rev. Stat. tit. 10, § 3411; Md. Code Ann., Com. Law § 16-601; Mass. Gen. Laws Ann. ch. 111, § 70a; Minn. Stat. § 514.68; Mo. Ann. Stat. § 430.230; Neb. Rev. Stat. Ann. §§52-401 & 52-402; Nev. Rev. Stat. Ann. § 108.590; N.H. Rev. Stat. Ann. § 448-A:1; N.J. Stat. Ann § 2a:44-35; N.M. Stat. Ann. § 48-8-1; N.Y. Lien Law § 189; N.C. Gen. Stat. Ann. § 44-49; N.D. Cent. Code Ann. § 35-18-01; Okla. Stat. Ann. tit. 42 §§43 & 44; Or. Rev. Stat. Ann. § 87.555; R.I. Gen. Laws Ann.§§9-3-4 to 9-3-8; S.D. Codified Laws § 44-12-1; Tenn. Code Ann. § 29-22-101; Tex. Prop. Code Ann. § 55.001; Utah Code Ann. § 38-7-1; Vt. Stat. Ann. tit. 18, § 2253; Va. Code Ann. § 8.01-66.2; Wash. Rev. Code Ann. § 60.44.010; Wis. Stat. Ann. § 779.80.
[2] Extreme Markup: The Fifty US Hospitals With The Highest Charge to Cost Ratios, by Ge Bai and Gerard F. Anderson – HEALTH AFFAIRS 34, No. 6 (2015) https://www.healthaffairs.org/doi/pdf/10.1377/hlthaff.2014.1414
[3] Id.
[4] Id.
[5] Witness Testimony of Dr. Gerard Anderson, House Energy and Commerce Committee, Subcommittee on Oversight and Investigations June 24, 2004
An intriguing case, Mayo v NYU Langone Med. Ctr., just came out of the Supreme Court of New York, reminding the trial bar that when resolving a conditional payment for a Medicare beneficiary only the “Final Demand” letter is final. Reliance upon a “Conditional Payment Letter” (CPL) is inappropriate. The Mayo case revolved around whether a settlement agreement may be declared void, based on an incorrect assumption of the Medicare conditional payment amount. The conditional payment amount in this specific case had been no higher than $2,824.50 for about a year according to Medicare CPLs. The Parties entered into a settlement agreement, thinking that the Medicare lien would not exceed $2,824.50, and distributed the funds. After the funds were distributed, the Centers for Medicare and Medicaid Services (CMS) came back and issued a Final Demand of $145,764.08 for related medical care. In the end, the Plaintiff was successful in showing that the settlement agreement was based on the incorrect assumption that the Medicare lien would not exceed $2,824.50, and the Settlement Agreement was vacated.
Synergy’s lien resolution group has seen many cases like this one, where attorneys settle a case based on the assumption that they know the final Medicare lien amount, only to later receive a Final Demand which is much greater than anticipated. Fortunately, Medicare has recently released a tool which is very useful in avoiding such situations. Synergy regularly utilizes this tool to achieve exceptional results in cases for clients which have enrolled in this process prior to settlement. Using this tool can eliminate cases, like Mayo, where attorneys are surprised once they receive a Final Demand from Medicare.
The tool is the Final Conditional Payment Process and was part of the revamped Medicare Secondary Payer Recovery Portal (MSPRP), which came online in January 2016. CMS added functionality to the old MSP Web portal that allows users to notify them when the specified case is approaching settlement, and download time and date stamped Final Conditional Payment Summary forms and final amounts, before reaching a settlement. Additionally, the new portal ensures that relatedness disputes and any other discrepancies are addressed within eleven (11) business days of receipt of dispute documentation.
The process is straightforward and addresses many of the issues that have plagued the plaintiff’s bar in attempting to settle a personal injury action without any certainty of the repayment amount due to Medicare. The process begins when the beneficiary, their attorney, or another representative (SLRS), provides the required notice of pending liability insurance settlement to the appropriate Medicare contractor at least one hundred twenty (120) days before the anticipated date of settlement. If the beneficiary, their attorney, or another representative, believes that claims included in the most up-to-date Conditional Payment Summary form are unrelated to the pending liability insurance “settlement”, they may address discrepancies through a dispute process available through the portal. This dispute may be made once and only once. Following the dispute, CMS has only eleven (11) business days to resolve the dispute. If CMS does not respond within that 11-day window the dispute is automatically granted.
After disputes have been fully resolved, a time and date stamped Final Conditional Payment Letter may be downloaded through the portal. This form will only constitute the Final Conditional Payment amount if settlement is reached within 3 days of the date the Conditional Payment Letter was downloaded. If settlement is not reached within these 3 days, it does not negatively impact your case, but rather will kick you out of this process, and you will be unable to use the Final Conditional Payment Process again for that specific case.
To complete the process, within thirty (30) days of the settlement Medicare is provided the settlement information. This information will include the total settlement/award amount, attorney fee amount or percentage, litigation costs, and any “No-Fault” benefits directly received by the plaintiff. If this information is not provided within thirty (30) days, the Final Conditional Payment amount obtained through the Web portal will expire. To avoid what happened in New York, and to speed the resolution of all your cases involving a Medicare beneficiary, Synergy recommends utilizing all the tools CMS has made available to the trial bar.
Synergy Lien Resolution deals with Medicare on a daily basis. We can help make the process easier and more efficient by handling the resolution of conditional payments directly with Medicare on your behalf. To learn more online about our services, go to Synergy’s Medicare Refund page Should you have questions about how to take advantage of these tools, or if they apply to your case please do not hesitate to contact our experienced and dedicated lien resolution team.
Jasmine Patel
Medicare Lien Resolution Specialist
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