March 12, 2020 Articles

State Medical Lien Statutes Open Door to Discovering Hospital Reimbursement Rates

Filing medical liens may subject their reimbursement rates to discovery.

By Catherine A. Green

Over forty states and the District of Columbia have enacted some form of a medical lien statute. See 152 Am. Jur. Trials § 265 (2017) (noting that Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, and Wisconsin have enacted medical lien statutes). Often, these statutes are “limited to the reasonable value of the services rendered by the medical service provider.” As such, cases involving medical liens frequently raise the issue “of what constitutes a reasonable amount” for medical services. This, in turn, has opened the door to discovering providers’ closely guarded reimbursement rates. 

In re North Cypress Medical Center Operating Co.

For example, in In re North Cypress Medical Center Operating Co., the Texas Supreme Court confirmed the discoverability of reimbursement rates. No. 16-0851, 2018 WL 1974376 (Tex. Apr. 27, 2018).

The case involved a dispute between a patient and hospital. The hospital treated the uninsured patient and billed her at its chargemaster rates. Pursuant to Texas law, the hospital filed a lien for the billed amount, and the patient filed suit for declaratory judgment that the “charges were unreasonable and [the hospital’s] lien invalid to the extent it exceeds a reasonable and regular rate for services rendered.” Id. at *1.

During discovery, the patient sought the hospital’s reimbursement rates with various insurers as well as Medicare and Medicaid. Ultimately, the issue reached the Supreme Court of Texas, which found that the reimbursement rates were discoverable. The court found that the information was relevant because one means of challenging a hospital lien is to “‘question the reasonableness of the charges comprising the lien.’” Id. at *2 (quoting Bashara v. Baptists Mem’l Hosp. Sys., 685 S.W.2d 307, 309 (Tex. 1985)). Thus, the court found that “the central issue in a case challenging [a hospital] lien is what a reasonable and regular rate would be” and that “because of the way chargemaster pricing has evolved, the charges themselves are not dispositive of what is reasonable.” Id. at *4. The court ultimately concluded that “[t]he reimbursement rates sought, taken together, reflect the amounts the hospital is willing to accept from the vast majority of its patients as payment in full for such services. While not dispositive, such amounts are at least relevant to what constitutes a reasonable charge.” Id. at *1. The court all but ignored the hospital’s confidentiality argument, instead noting that “[n]othing in the record indicated that the trial court is unwilling to issue a protective order. . . .” Id. at *7.

Bowden v. Medical Center, Inc.

An earlier Georgia Supreme Court Opinion, Bowden v. Medical Center, Inc., involved an almost identical scenario. 773 S.E.2d 692 (Ga. 2015).

In Bowden, the hospital treated an uninsured patient after a car accident. The hospital, pursuant to the Georgia medical lien statute, filed a lien for the medical bills. The patient “sought to invalidate the lien on the ground that the billed charges were grossly excessive and did not reflect the reasonable value of the care she received.” Id. at 285. In doing so, the patient sought discovery of the amounts that the hospital “charged insured patients for the same type of care.” Id. The hospital objected, and the patient brought a motion to compel, which the court granted subject to a protective order. Id. at 693.

The Georgia Supreme Court upheld the trial court’s decision. Id. at 698. In doing so, the court explained that although the amounts that the hospital charges to other patients “for the same type of care during the same general time frame . . . may not be dispositive,” the amount charged to other patients is not “entirely irrelevant—particularly in the broad discovery sense—to the reasonableness of the charges for [the patient’s] care.” Id. at 697.

Other courts have reached similar decisions. See, e.g., Parkview Hosp., Inc. v. Frost ex rel. Riggs, 52 N.E.3d 804, 810 (Ind. Ct. App. 2016), transfer denied sub nom., Parkview Hosp. Inc. v. Frost, 60 N.E.3d 1039 (Ind. 2016).

Conclusion

These cases show a pattern of courts compelling discovery of reimbursement rates for medical lien cases. In light of these cases, health-care providers should be aware that filing medical liens may subject their reimbursement rates to discovery.

Catherine A. Green is an associate at Polsinelli PC in Kansas City, Missouri.


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