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Liens: Hospital Balance Billing Liens and Health Care Services Organizations

Posted by Ted A. Schmidt | Sep 02, 2021 | 0 Comments

Liens: Hospital Balance Billing Liens and Health Care Services Organizations

Grunwald v. Scottsdale Healthcare Hospitals, No. 1 CA-CV 20-0188 (App. Div. I, August 26, 2021) (J. Thumma)


Plaintiffs were treated for injuries in car accidents at defendant hospitals. After being paid for these services by plaintiffs' health insurance companies, defendant hospitals filed liens for the difference between what the insurers and plaintiffs paid the hospitals and the hospitals' customary charges.  Plaintiffs argued that the liens were void because they were in violation of A.R.S. § 20-1072(F) (2021), which provides that a hospital may not charge “an enrollee of a health care services organization”[HCS0]  more than what  the hospital agreed to charge the enrollee in the hospital's contract  with the HCSO. The trial court granted defendants partial summary judgment, Ariz.  R.  Civ.  P.  54,(b), finding the term HCSO to be ambiguous  yet synonymous with “health maintenance organization [HMO]. Plaintiffs' insurers are not HMOs therefore plaintiffs are not entitled to the protection of the statute since they are not enrollees of an HCSO. The Arizona Court of Appeals affirmed.

A.R.S. § 33-931(A) gives hospitals the right to file and enforce liens in the amount of their customary charges for treatment rendered to injured patients. The defendants agreed to accept payment for medical care at specified rates with plaintiffs' health insurance companies but in those contracts reserved the right to enforce liens for the difference between the contracted rate and the hospital's customary charges.  However, A.R.S. § 20-1072 precludes such a lien against enrollees of HCSOs. 

Both the trial court and court of appeals found that the legislature's attempt to define HCSO was ambiguous and circular. This finding kicks in secondary rules of statutory construction—the court is to consider the statutory “context; its language, subject matter, and historical background; its effects and consequences; and its spirit and purpose” in defining the term.  Historically HMO's have served the purpose, have been treated as and best meet the definition and purpose of an HCSO. All three branches of government have treated HMOs as HCSOs for years.  Accordingly the court finds that HCSO is synonymous with HMOs, plaintiffs are not enrollees in an HMO/HCSO and therefore cannot void the balance bill liens.

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About the Author

Ted A. Schmidt

Ted's early career as a trial attorney began on the other side of the fence, in the offices of a major insurance defense firm. It was there that Ted acquired the experience, the skills and the special insight into defense strategy that have served him so well in the field of personal injury law. Notable among his successful verdicts was the landmark Sparks vs. Republic National Life Insurance Company case, a $4.5 million award to Ted's client. To this day, it is the defining case for insurance bad faith, and yet it is only one of several other multi-million dollar jury judgments won by Ted during his career. He is certified by the State Bar of Arizona as a specialist in "wrongful death and bodily injury litigation".


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