Liens/Accord & Satisfaction: Balance Billing on AHCCCS Lien Prohibited

Abbott v. Banner Health Network, 702 Ariz. Adv. Rep. 14 (App. Div. I, December 23, 2014) (J. Kessler)

HOSPITAL LIENS ON AHCCCS PAID SERVICES PREEMPTED AND PROHIBITED BY FEDERAL LAW/ACCORD AND SATISFACTION AGREEING TO LIEN UNENFORCEABLE

Plaintiffs are a group of people who received health care paid for by Arizona Health Care Cost Containment System [AHCCCS) from defendant's hospital.  When plaintiffs' brought claims against third parties for the underlying injuries that created the need for the medical care defendant sought to enforce a balance billing lien against the third party recoveries.  In other words, defendant filed a lien on the difference between what AHCCCS paid and what it would normally bill a patient without AHCCCS coverage. After the services were rendered defendant had each plaintiff execute an accord and satisfaction agreeing to the right to balance bill.

Plaintiffs sued claiming the accord and satisfaction was unenforceable because federal law preempts state law and prohibits balance billing. The trial court granted defendant's motion to  dismiss, finding the accord  and satisfaction enforceable and binding. The Arizona Court of Appeals reversed.

42 USC secs. 1396a(a)(25)(C) & 42 CFR 447.15 prohibit medical providers from collecting anything more for their services than what is paid by Medicaid/AHCCCCS for AHCCCS patients. The defendant expressly agreed in its contract with plaintiffs to comply with  federal law. Because the balance billing lien is disallowed by federal law and because federal law preempts state law (ARS sec. 33-931 & 36-2903.01) the accord and satisfaction was void due to improper subject matter (an illegal act) and lack of consideration (defendant had no right to balance bill so plaintiff received nothing of value in exchange for agreeing to lien).