WORK PRODUCT OF MATTHIESEN, WICKERT & LEHRER, S.C. Page 2 Last Updated 1/13/22
Perfecting Hospital Liens
States differ on their procedures, but a hospital lien is generally perfected by filing with the county clerk, the district court, or other government body specified in the
hospital lien statute, written notice of the name and address of the patient, the third-party tortfeasor (if know), the liability carrier (if known), the name and address of
the hospital, and the amount of the lien. Once a notice of hospital lien is filed in the county where the hospital is located, the district court/clerk is usually required to
maintain a hospital lien docket that can easily be searched, and in which any hospital lien claim filed is entered. The district court usually lists the name of the injured
person, the name of the person, firm, or corporation alleged to be liable for the injuries and damages, the date and place of the accident, and the name of the hospital
or other institution making the claim. The district court also often maintains an index of the hospital lien docket under the name of the injured person. Hospitals are
often then required to send, by certified mail or other means, written notice of the lien filing to the patient, the third-party tortfeasor, and/or the liability carrier.
Hospital liens vary widely from state to state. These variations include such things as whether or not the lien applies to workers’ compensation claims and/or wrongful
death claims. Some states (e.g., Tennessee) limit the percentage of the total settlement that can be recovered under a hospital lien when the patient is not “made whole”
by the third-party settlement. Other states (e.g., New York and Alabama) require that the treatment occur within a certain time frame in relation to the accident which
caused the injury in order for the lien to be able to apply to medical expenses incurred as a result. In other states, if an attorney requests a copy of a client’s bill and/or
medical records, that documentation must be provided free of charge to the attorney, possibly within a limited period of time, or the lien is not valid.
The hospital lien laws of thirty-two (32) states provide that an attorney’s lien/fee takes precedent over the hospital lien. These include AL, AK, AZ, AR,GA, ID, IN, IA, KS,
LA, ME, MD, MA, MN, MO, MT, NE, NV, NM, NY, NC, OK, OR, RI, SD, TN, TX, UT, VT, VA, WI, and the District of Columbia. Six (6) states’ statutes provide that the hospital
lien takes precedence over all other liens (CA, CO, DE, CT, NJ, NH). Other states, like Vermont, provide that the hospital lien cannot take more than two-thirds (2/3) of
the total third-party settlement or $500, whichever is higher, after attorneys’ fees. Twenty-four (24) states have legislated that hospital liens cannot be recovered from
workers’ compensation settlements. Yet other states (e.g., New Jersey) subordinate a physician’s or dentist’s lien cannot claim more than 25% of the third-party recovery
remaining after a hospital lien has been repaid.
The amount asserted in a hospital lien has also become a point of contention across the country and varies from state to state. While the law in every jurisdiction allowed
plaintiffs in personal injury lawsuits to recover the “reasonable value” of the medical services incurred, defendants have begun to argue that such medical expenses are
neither “reasonable” nor “incurred” by the plaintiff because they were paid by a collateral source (e.g., private health insurance, state Medicaid, Medicare, workers’
compensation, governmental assistance programs, etc.). A “collateral source” is benefits received by the plaintiff from a source wholly independent of any collateral to
the wrongdoer. The defendants argue that the medical bills are not “reasonable” because they were reduced or written off by the insurance provider, who accepted
insurance payments; thus, defendants argue that the injured plaintiff’s reasonable medical expenses and damages should be limited to sums “actually paid” by the
insurer and proof of the full medical charges that were billed (either written-off or paid by insurance) should be excluded. Proving the reasonable value of medical
services has become both controversial and confusing; and every state has gone its own way in dealing with the issue. For a chart covering the subject of the amount of
medical expenses that can be introduced into evidence and/or recovered in personal injury civil litigation—amount charged, amount paid by the patient or a collateral
source (such as workers’ compensation or health insurance), or some other amount—in all 50 states, see HERE.
Another growing area of controversy is the utilization of hospital lien filings even before the medical expenses are presented to the patient’s commercial health insurance
company/plan. The purpose of this is that it can assert a lien for the full “retail” reasonable and necessary medical expenses, as opposed to the discounted amount it is
limited in recovering from the health insurance company/plan. Some claimed hospitals were “gaming the system” by lying in wait and relying on hospital liens, because
they netted a higher reimbursement than submitting them to the health insurance company/plan. In other words, some claimed that hospitals were using the hospital
lien system—originally intended to make sure hospitals got paid after treating uninsured accident victims—as a sword, rather than a shield.