Out on a leisurely Fourth of July motorcycle ride in rural Minnesota almost four years ago, Marlyn Bootsma put on his turn signal and slowed to pull into a cemetery. That’s when he was hit from behind.
The impact threw both him and his wife, Kathlene Bootsma, off of their motorcycle. The motorcyclist that hit them ran Marlyn over, crushing his shoulder.
The Woodstock, Minn., couple was airlifted to Avera McKennan Hospital & University Health Center in Sioux Falls, S.D., where they would spend the next several days.
The Bootsmas, self-employed farmers, spend up to $20,000 per year on health insurance, said Jim Malters, the Worthington, Minn., attorney representing the couple in their ongoing court battle against Avera. But now, at a time they needed it most, it wasn’t getting used.
“The hospital in this case figured they would get an additional bonus if they went against my clients and got paid 100%” of charges, Malters said. Avera officials declined to comment on the ongoing case.
When people buy health insurance, they expect it to cover them in catastrophic situations like car accidents. But hospitals often don’t bill patients’ health insurance in those cases, and instead place liens to try to collect higher amounts from auto insurers. It’s easy to see why: It’s one of the only scenarios where they can attempt to collect their full, chargemaster rates rather than settle for insurer-contracted payments that represent a fraction of those prices.
Those inflated charges come from a payout that would otherwise go in part to the injured patient, who likely needs the money for ongoing medical care, missed work or a new vehicle. Hospital chargemaster prices average more than three times Medicare allowable costs—or up to 10 times at the most expensive hospitals, according to a 2015 Health Affairs study.
“The hospitals won’t take what they’ve already agreed upon and instead are, in our opinion, being greedy and trying to take more than they have contractually obligated themselves to accept,” said Larry Centola, a New Orleans attorney who represents patients in such cases. “It’s just not right.”
A long history of litigation
Hospital liens have been the focus of countless lawsuits across the country. The subject is so touchy that most health systems contacted for this article wouldn’t disclose their practices. Whether it’s legal depends on widely varying state laws, existing case law and the contracts between hospitals and health insurers, the latter of which are closely guarded secrets.
Hospitals argue patients’ attorneys use the very charges they’re complaining about to inflate their settlements from auto insurers. Patients’ attorneys “speak out of both sides of their mouths,” said Joel Mohrman, an attorney representing Universal Health Services’ McAllen (Texas) Medical Center in a lawsuit over its lien practices.
Hospital liens underscore an even deeper problem: list prices, which are set as high as possible to gain leverage over health insurers, said George Nation III, a professor of law and business at Lehigh University who has studied hospital liens.
“We have this exorbitant list price and then the price everybody pays, and what’s the point of that?” Nation said. “The point, I think, is to keep everyone confused. That confusion benefits the hospitals in terms of increasing their revenue.”
Ira Rheingold, executive director of the National Association of Consumer Advocates, said he believes all patients coming into the emergency room should have their private health insurance billed in the same manner regardless of the reason they came in.
“In many ways, it sort of shows some of the absurdity of the way hospital billing works,” Rheingold said. “The hospital is simply looking for the opportunity to collect as much money as possible.”
Some states have enacted laws precluding hospitals from filing liens before billing a health insurer. In those cases, Nation said he thinks legislators should also preclude patients’ attorneys from using the high charges to negotiate higher injury settlements.
Most health insurers contacted for this article declined to say whether their contracts with hospitals direct them to first seek payment from another source, such as the liability insurance of the at-fault driver.
The Blue Cross and Blue Shield Association wouldn’t disclose whether the 36 companies it represents have such directives, but Jennifer Atkins, the organization’s vice president of network solutions, said in a statement it’s common practice for hospitals to bill auto insurers first in auto accident cases.
UnitedHealthcare does the opposite. Spokeswoman Maria Gordon Shydlo wrote in an email that the company’s contracts require healthcare providers to bill United directly for care, including after auto accidents.
“These providers also may not place liens or otherwise bill individuals beyond their member cost share,” she said.
Several attorneys said health insurers don’t have much incentive to enforce those policies though, so they tend to look the other way when hospitals place liens.
Several attorneys said health insurers don’t have much incentive to enforce those policies though, so they tend to look the other way when hospitals place liens.
If that happens, patients might be able to sue insurance companies for refusing to enforce their contracts. Louisiana’s Supreme Court determined in 2014 that a patient was justified in suing her insurer, Blue Cross and Blue Shield, for failing to uphold its contract when the hospital filed a lien.
“The less they pay, the better for them,” Centola said. “But they have a duty to protect their insureds, because their insureds are paying them a monthly premium.”
Representatives of the American Hospital Association and the Federation of American Hospitals said hospitals rightfully pursue payment from the liability coverage of drivers who cause accidents, and that state lien laws spell out the specific processes for doing so. FAH CEO Chip Kahn emphasized that managed-care contracts often require hospitals to pursue collection from other third-party sources.
But it’s clear hospital lien practices aren’t always on the up and up. Mitch Burgess, a Kansas City, Mo., attorney, has settled class-action cases with HCA Healthcare’s Research Medical Center in Kansas City, St. Louis-based SSM Health Care and St. Luke’s Health System in Kansas City in which he alleged illegal lien use. Burgess said the practice started popping up about a decade ago.
“I don’t know if all these hospitals went to a conference or started hiring these third-party groups that said, ‘Hey, you can make a lot of money if you don’t submit to health insurance,’ ” he said.
Who gets billed first?
An HCA spokesperson said the company currently bills commercial health insurance first, unless state law requires otherwise. Neither SSM nor St. Luke’s shared its practices.
Mike Aziz, an Atlanta attorney who represents hospitals, always suggests they get legal advice from attorneys who understand state regulations, because vendors don’t always know the details.
“That’s where hospitals get into trouble, I think,” Aziz said.
Avera, whose hospital placed the lien against the Bootsmas, now limits its liens to collecting a medical component of auto insurance policies and then, once that’s exhausted, it bills health insurance, said Rich Korman, Avera’s executive vice president and general counsel. It does not currently place liens seeking payment from the liability portion of auto insurance policies, he added.
The liability insurer of the driver who hit the Bootsmas paid nearly $500,000 in the personal injury case. But Malters, the couple’s attorney, has not paid the hospital. In his lawsuit against Avera, he argued the hospital declined payment when it failed to bill health insurance in the allotted time frame. Avera filed a separate lawsuit against the at-fault driver’s liability insurer seeking to enforce its lien. Korman declined to comment on that case.
For-profit hospital chain Community Health Systems has been sued in multiple states over its aggressive practice of filing liens instead of billing patients’ health insurance.
Today, the Franklin, Tenn.-based company says all of its hospitals bill health insurance first before filing liens, a transition CHS completed a year and a half ago. CHS declined an interview request, and spokeswoman Rebecca Ayer instead provided a brief statement.
“The litigation in our public filings is related to historic industry-wide practices that do not reflect our hospitals’ current practices,” she said.
Some lawsuits against CHS are ongoing, including two in Louisiana. In one, CHS filed a notice of lien for $5,300 on the liability insurance of the driver who hit motorcyclist Dennis Gibson in 2011. Gibson, who had private health insurance through his job with the state, sued, and the case won class-action status. Another Louisiana case is still seeking class-action status.
Centola, the Louisiana attorney representing patients in both cases, said Louisiana law doesn’t permit hospitals to file liens against at-fault drivers. His firm has sued several hospitals in the state and he believes those lawsuits have prompted them to change their practices, CHS included.
In a class-action lawsuit in Arkansas, a CHS hospital was accused of placing a roughly $6,000 lien on a patient’s settlement instead of billing her Blue Cross policy. The parties settled for $2.2 million in 2018. More than 900 people were estimated to be eligible for the class.
Being in a car accident is already emotionally trying, said Ben Gastel, a Nashville attorney who is suing CHS over its lien practices in Tennessee. Patients go to the hospital expecting they’ll get the benefits of their health insurance, he said.
“They know there’s a deep pocket here to get out from underneath those contracted rates,” Gastel said. “There’s a basic unfairness about that.”
Hospitals tend to argue that the money is coming from State Farm—in other words: auto insurers, not patients, but Centola said that’s not the case.
“You pay years and years of premiums and the benefit you’re supposed to get as a result is a reduced medical charge,” he said. “The hospitals really don’t understand the fact that they’re taking money out of individuals’ pockets.”
Liens in the Lone Star State
Hospital liens are a particularly contentious subject in Texas, where ongoing litigation seeks to prevent hospitals from filing them against insured patients.
Texas law has a unique stipulation: In order for hospitals to file liens, patients have to be admitted to the hospital. Patients’ attorneys argue that since their clients were only treated in emergency rooms, hospitals can’t file liens against them. The Texas Hospital Association is championing a bill at the state Legislature that would, among other things, clarify that admission refers to being treated anywhere in the hospital.
“It’s always made sense to us that those patients would fall under the lien law,” said Cesar Lopez, THA’s associate general counsel.
Texas hospitals typically start the lien process once they know the patient was in an auto accident, Lopez said. If they subsequently learn the patient has health insurance, they attempt to bill that, he said, adding the THA does not condone rejecting health insurance to collect on liens.
The problem is hospitals don’t always remember to have the liens formally released, and patients can’t collect on their injury settlements until that happens, said J. Michael Moore, a McAllen, Texas, attorney who is suing hospitals over their lien practices.
UHS’ McAllen Medical Center is currently appealing to the state Supreme Court in a lawsuit over its lien practices. At issue is whether the hospital can legally file liens against patients who only visited the ER and whether the hospital’s charges are reasonable, as the law requires.
Mohrman, the Houston attorney representing the hospital, said his interpretation of the law is that the hospital can file notices of liens at its chargemaster rates, which is its current practice.
The company that handles liens for McAllen Medical Center typically files notices of liens after treating auto accident victims to ensure the hospital gets paid, Mohrman said. The hospital subsequently bills health insurance if it learns patients have coverage and, once it receives payment, does not pursue the lien beyond the patient’s co-pay or deductible, he said. The hospital then has the liens released.
“The hospitals I know much, much prefer to go ahead and deal with health insurers to get paid sooner rather than later for a certain amount,” Mohrman said. “The idea that they’re waiting to supposedly reap these windfalls from a lien later on—maybe there are some out there, but I think it’s pretty far-fetched.”
Patients who testified before Texas lawmakers in April said that’s not their experience.
Cynthia Salgado told legislators she spent up to four hours in the hospital after being rear-ended on her way to work in early 2013. Her husband gave the hospital her Blue Cross and Blue Shield policy, but the 53-year-old McAllen resident said the hospital did not bill it and instead placed a lien for more than $30,000. It’s still there.
“It’s really upsetting because here we are having to be in compliance with what’s been mandated,” Salgado said in an interview. “And then when we need it, we can’t even use it.”
Even though liens are only supposed to attach to the settlement, Moore said they have appeared on credit reports and affected people’s abilities to get jobs and mortgages. Lopez countered Texas hospital liens only attach to recoveries patients obtain from at-fault parties, so they should not affect homes, wages or other property.
But Salgado said she was turned down for a job as an insurance agent when the company saw the lien. San Antonio resident Antonio Ramirez similarly testified he was turned down for a job as a police officer because a lien showed up on his credit report.
“We have clients with full coverage and the hospitals still refuse to bill health insurance and they’re filing the lien, because they know they can collect five to six times more,” Moore said. “People just don’t know what to do.”
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