Liens: Validity of Hospital Lien for Balance Billing on AHCCCS Payments Against Tort Recovery

Ansley v. Banner Health Network, __ Ariz. Adv. Rep. __ (App. Div. I, April 3, 2018) (J. Johnsen)

HOSPITAL DOES NOT HAVE A LIEN AGAINST TORT RECOVERY FOR FULL VALUE OF SERVICES RENDERED WHERE IT AGREED TO ACCEPT A LOWER AMOUNT FROM AHCCCS

Plaintiffs are tort victims who sued the defendant hospitals in a class action seeking to enjoin them from enforcing liens  against their tort settlements for the full value of services rendered to them where the hospitals were under contract with Arizona Health Care Cost Containment System [AHCCCS] to accept payment at rates below their customary charges (aka “balance billing”). The trial court certified the plaintiffs as a class and  enjoined  the hospitals from balance billing, but denied plaintiffs' summary judgment on their breach of contract claims.  The Arizona Court of Appeals affirmed the granting of injunctive relief but reversed and remanded the trial court ruling denying plaintiffs summary judgment on the contract claim finding plaintiffs to be third party beneficiaries under the contracts between the hospitals and AHCCCS and that these contracts were breached by the hospitals' attempts to enforce the preempted liens.

The liens  in question were recorded pursuant to Arizona Revised Statutes ("A.R.S.") sections 33-931 (2018) which allows for a lien in the amount of customary charges against tort recoveries  and 36-2903.01(G)(4) (2018) which allows recovery of unpaid portions of bills served on AHCCCS against third party payors.

In addressing [the lien claim] we conclude that (1) federal law 42 C.F.R. § 447.15 (2018)] preempts the Hospitals' rights under Arizona law to impose liens on the patients' tort recoveries to recover the balance between what AHCCCS paid the Hospitals and the Hospitals' customary rates, (2) the Patients are third-party beneficiaries of the contracts the Hospitals entered with AHCCCS, and (3) those contracts require the Hospitals to comply with the preemptive federal law. . . . The regulation plainly bars a hospital that has contracted with AHCCCS from billing a patient for the balance between what AHCCCS has paid and the hospital's customary rates. We hold this regulation likewise bars a hospital from imposing a lien on the patient's tort recovery for the balance.