Changes in the Hospital Lien Statute


by Stacy Thompson

When an individual is involved in a motor vehicle accident and is treated at a local emergency room for their injuries, there is a good chance that the hospital will file a lien against their recovery.  From an insurance company’s perspective whether a hospital has filed or may file a lien is an important element to any settlement for multiple reasons and many times can make a normally simple settlement extremely complicated.

A. The Basics

To help hospitals recover payment, the Texas legislature created statutory hospital liens. A large majority of hospitals are filing liens in accident cases because they can charge higher rates for their services and often times medical insurance companies are refusing to pay if the treatment was necessitated by an accident.  Chapter 55 of the Property Code gives hospitals the power to place liens on the settlement funds of crash victims who receive hospital services within 72 hours of an accident. To secure the lien, the hospital must file written notice of the lien with the county clerk of the county where the medical services were provided and notify the victim of the lien before the settlement funds are paid. Once the hospital follows those steps, it has the right to be paid before anyone else-including the actual victim.

The hospital lien statute in Chapter 55 of the Texas Property Code legally requires a patient to pay the hospital bill/lien from their settlement under the following circumstances:

Sec. 55.002. LIEN:

  • Claimant received treatment at that hospital within 72 hours of the car accident;
  • The car accident was caused by another driver and claimant filed a personal injury claim;
  • If claimant is transferred to another hospital for further treatment, the other hospital can also file a lien and must be paid as well.

The statute also makes liens valid for “emergency medical services providers,” under certain circumstances which includes emergency transportation companies and emergency room doctors. Generally, if the county in which you were treated has a population of 800,000 or less, emergency medical service providers can file a lien. It is important to note that an emergency room physician can file a lien against a settlement, although it must be attached to the hospital lien itself.  An ambulance can only assert a lien if it provided services within 72 hours of the accident and the amount of its lien is limited to $1,000.

In order to be valid, the hospital or emergency services company must meet the following requirements when filing a lien against an individual’s claim:

  • The hospital or emergency services company filed the lien in writing BEFORE the claimant was paid the settlement;
  • The hospital or emergency services company mailed the claimant (or their legal representative) a written notice of the lien; and
  • The hospital or emergency services company filed the lien in the county where the claimant received their services

B. Changes to the Hospital Lien Statute

Section 55.002 requires an individual to be “admitted” to a hospital not later than 72 hours after the accident in order for a hospital lien to attach.  Tex. Prop. Code § 55.002(a).  Prior to the recent amendment, many attorneys would argue that the hospital could not maintain a lien against their client’s proceeds because the client was never “admitted” to the hospital.  For instance, they would argue that the client was only treated in the emergency room (i.e. not admitted to the hospital itself), therefore the lien should not attach.

The new law, which is currently effective, closes this loophole and expands hospital rights with this new language in Section 55.0015, “For purposes of this chapter, an injured individual is considered admitted to hospital if the individual is allowed access to any department of the hospital for the provision of any treatment, care, or service to the individual.” Tex. Prop. Code § 55.0015.

In other words, a patient no longer has to be formally “admitted” in order for the hospital to be able to file a lien. Even if the patient never left the emergency room, any lab work or radiology scans would be enough for the hospital to file a lien.

The new law also placed some limits on hospital liens. Under the new, currently effective version of Section 55.004, the hospital lien is capped at the lesser of:

(1) the amount of the hospital’s charges for services provided to the injured individual during the first 100 days of the hospitalization; or

(2) 50% of all amounts recovered by the injured individual in a lawsuit or settlement.

For example, under the new law, if you settle a claim for $30,000 and the claimant has a hospital lien in the amount of $50,000, the hospital is not entitled to more than $15,000 of the settlement.

Also, the hospital lien statute only allows hospitals to collect money from a third party and cannot attach to underinsured or uninsured motorist benefits.

C. The Best Way to Handle Cases Where Hospital Liens Exist/May Exist

In McAllen Hospitals v. State Farm, the Texas Supreme Court held that placing the name of the hospital on a settlement check is insufficient to discharge an insurer’s duty to pay a hospital lien under Chapter 55.

Facts

  • 2 people injured in a car wreck caused by a State Farm insured;
  • Each injured person received medical treatment from McAllen Medical Center;
  • Hospital perfected a statutory lien for medical bills;
  • State Farm, aware of lien, settled with injured persons;
  • Checks delivered to injured persons payable to injured person and hospital as co-payees;
  • Injured persons only endorsed and cashed checks, didn’t pay McAllen Medical Center; and
  • McAllen Medical Center sued State Farm for amount of liens.

State Farm argued it made a good faith effort to pay the lien off by including the hospital’s name on the check.  The Court stated that was not good enough.

Takeaways

  • Writing one check jointly to claimant and counsel and entrusting counsel to pay health care liens will not suffice to discharge lien.
  • Merely including indemnity language does not suffice to discharge lien (and will not help if the claimant has spent the money and is judgment-proof).

If a lien is not filed while negotiating settlement, continue to negotiate the settlement but advise that if a hospital lien is filed the claimant will be responsible for paying any hospital lien out of the settlement proceeds.  When the claim is settled, check the county records to see if a lien has been filed.  If not, have the attorney/recipient of the check sign and date a receipt (with time) upon receipt of the check.  If a hospital lien is filed after the date and time the settlement check was picked up, the insurer has discharged his duty and can prove there was no lien on file at the time the settlement was funded.

What may seem straightforward in the beginning can turn complicated in a hurry.  Please feel free to call us with any questions or concerns.