Andrews v. Samaritan Health System
In Andrews v. Samaritan Health System (Ct.App.2001)? 36 P.3d 57, the Arizona Court of Appeals held injured patients could not prevent hospitals from balance billing by enforcing statutory medical liens on judgments received from third party tortfeasors. (Andrews, supra, at p. 59.)
In so holding, the Andrews court provided two rationales. (Id. at p. 61.) One rationale was Arizona Revised Statutes, section 33-931, automatically created a medical lien providing that "a hospital provider 'is entitled to a lien for the customary charges for care and treatment ... of an injured person' without specifying further action by the hospitals." (Andrews, supra, at p. 61.)
The other rationale in Andrews arose from the language of the contracts between the defendant hospitals and the patients' health care services plans.
Andrews explained that "the instant contracts each contained language stating that the hospitals accepted the plaintiffs' insurer's payment as 'payment in full,' and all ... expressly reserved the right to recapture the difference between any payments made by the insurer and the providers' customary charges. Unlike the contracts in the cases from other jurisdictions, this reservation clearly qualifies the 'payment in full' language and sets forth the hospitals' expectation to recover their customary charges when possible." (Andrews, supra, 36 P.3d at pp. 60-61.)
As a consequence, "the fact that the hospitals have no personal recourse against plaintiffs, by virtue of their insurance coverage, does not alter the fact that a debt remains between the hospitals' customary charges and the amounts paid by plaintiffs' insurers." (Id. at p. 61.)
Notably, the patients in Andrews, supra, 36 P.3d 57 did not have their recoveries from third party tortfeasors reduced by the hospitals' ability to recover their customary charges when the patients' health plans paid only a negotiated rate because "in their various personal injury suits, plaintiffs all quantified their damages by including the hospitals' full charges for medical services, rather than the discounted amount paid by their insurers." (Andrews, supra, 36 P.3d at p. 59.)
In other words, the plaintiffs in Andrews were able to claim damages in the amount of customary rates based on the express contracts between the hospitals and the health care service plans. (Ibid.)
The Andrews plaintiffs nonetheless argued the hospitals' reservation of rights to customary rates constituted an unfair assignment of their personal injury claims against the third party tortfeasors.
The Andrews court rejected the argument, explaining that "the legislature, in limited circumstances, may abrogate the rule against assigning tort claims. The medical lien statute represents the legislature's abrogation of that rule. The abrogation effected by the medical lien statute serves to ease the financial burden on providers and to encourage hospitals to render emergency care to patients without regard to ability to pay. Here, the plaintiffs' insurers did not assign any rights to the hospitals. Rather, the right to the medical liens springs from Arizona Revised Statutes 33-931. We see no reason to invalidate the medical lien statute as written by the legislature given its obvious value and purpose." (Andrews, supra, at p. 63.)