Arizona Medical Lien Law – A Primer

Author: J.P. Harrington

Lienholder Rights/Remedies

Any lien recorded by a doctor, hospital or other health care provider is only a lien against any liability settlement or judgment in favor of the injured party. It is not a lien against any other property of the injured party. Medical liens are not enforceable against wrongful death settlements when the settlement is for the surviving spouse and/or the children’s damages and the settlement does not include the decedent’s accident-related medical expenses. Medical liens also do not apply to uninsured or underinsured settlements.

In order to perfect the lien granted by A.R.S. § 33-931, the licensed health care provider must, within thirty days after the patient has received any services relating to the injuries (except a hospital which must do so within thirty days after the patient is discharged), record a verified statement. This statement must contain information including the name and location of the provider, the name and address of the patient, date of services, and the amount claimed due. The statement must be recorded in the office of the recorder of the county in which the health care provider is located. A.R.S. § 33-932. In addition, the health care provider must, within five days after recording the claim, mail a copy by certified mail to the injured person and to each person, firm, or corporation claimed to be liable for damages, and their respective insurance carriers, at the address(es) given in the statement. Id. Liens perfected by hospitals pursuant to this article have priority for payment over other health care provider liens. See A.R.S. § 33-931(D). If a hospital, doctor, or other health care provider files a lien with the County Recorder, that provider has a lien for its “customary charges” against the liability settlement. However, “customary charges” do not equate to “reasonable and necessary charges”. LaBombard v. Samaritan Health System, 195 Ariz. 543, 991 P.2d 246 (App. 1998). If a hospital, doctor, or other health care provider asserts that the patient owes more than what the health care provider is customarily provided for the services pursuant to its contracts with insurance company, it is called balance billing. Pursuant to LaBombard, a provider is required to reduce its balance billing amount (total amount billed less payments by health insurance) by procurement costs (percent of attorney’s fees and costs to obtain the settlement).

An attorney who represents a person making a claim for personal injuries at the time of judgment or settlement, who has notice of the lien and does not honor it, can be held liable for the lien. A.R.S. § 33-931(A). Any action by a health care provider to enforce a lien must be commenced within two years of the entry of a judgment in favor of the patient, or within two years from the date that a patient reaches a liability settlement. A.R.S. § 33-934(B). However, an action to enforce a lien may not be brought against the patient, but against those liable for the patient’s damages, and only after the lien is “filed” in the county where suit is to be brought. Blankenbaker v. Jonovich, 205 Ariz. 383, 387, 71 P.3d 910, 914 (2003). Health care providers may bring an action against a patient for the value of services rendered or unjust enrichment, but not for enforcement of a medical lien pursuant to the medical lien statutes. In Blankenbaker, the Arizona Supreme Court held that when, as in A.R.S. § 33-932, a statute “creates a right and also provides a complete and valid remedy for the right created, the remedy thereby given is exclusive.” 205 Ariz. 383. If a health care provider refuses to negotiate a lien to its customary charges, patients may institute a declaratory action to have the court determine whether the customary charges have been paid and if any further debt is owed. A.R.S. §§ 12-1831, et seq.

Recent Case Law

Two recent cases have supplemented Arizona Medical Lien Law. In Midtown Medical Group, Inc. dba Priority Medical Center v. Farmers Insurance Group, decided on July 15, 2014, the Arizona Court of Appeals addressed what constitutes satisfaction of a properly perfected medical lien. Priority Medical Center (“PMC”) provided medical treatment to two patients injured in separate accidents insured by Farmers. PMC had each sign a document entitled “Lien, Contract and Authorization to Release Medical Records”. PMC also properly perfected its lien against any insurance recovery by the patients. After settling with Farmers, each patient received a settlement check with PMC as a joint payee. Neither patient had PMC endorse the check before negotiating it. Having not been paid for its services, PMC sued Farmers to enforce both liens under A.R.S. § 33-934(A) and sought declaratory relief to permanently enjoin Farmers from paying any claimant without separately satisfying the medical provider’s lien. The Superior Court dismissed and the Court of Appeals reversed. The Court explained that A.R.S. §33-934(A) provides that when an injured person recovers settlement or judgment and the medical lien holder is not paid and has not released its lien, the lien holder can sue the insurer responsible for paying all or part of the damages. The statute does not preclude an action against the insurer for non-payment even though the lien holder was a joint payee on the check. The bank’s failure to ensure proper endorsement, did not relieve Farmers of its own lien responsibility. Farmers acted in derogation of the liens in failing to follow the express statutory requirements that it obtain releases from the lien holder. Therefore, the best practice when settling a case involving medical liens is to obtain a release for the lienholder.

In Abbott v. Banner Health Network, decided on December 23, 2014, the Arizona Court of Appeals held that hospitals that accept payment from the Arizona Health Care Cost Containment System (“AHCCCS”) for services to AHCCCS patients cannot later impose or enforce liens on funds the patients obtain from third party tortfeasors related to the hospital service provided. Patients injured by third-party tortfeasors were treated by hospitals which accepted payment from AHCCCS for same. The hospitals recorded liens for the difference between the amount billed for the services and the amount paid by AHCCCS. After receiving personal injury settlements, the patients agreed (through accord and satisfaction agreements) with the hospitals to pay the hospitals’ reduced amounts from the settlement funds in return for the hospitals’ release of the liens. The patients then sued the hospitals seeking a declaration the hospitals’ liens were invalid. The Superior Court dismissed the case and the Court of Appeals reversed. In the “Provider Participation Agreements” between AHCCCS and the hospitals, the hospitals agreed to comply with federal law. Federal Medicaid law prohibits balance billing by a health care provider. The federal law preempts an Arizona statute to the contrary to the extent the Arizona statute allows providers who accept AHCCCS payments to assert balance billing liens. Because the liens were prohibited and unenforceable, so too were the accord and satisfaction agreements based on them. This case is distinct from others allowing liens where federal preemption was not discussed (LaBombard v. Samaritan Health Sys., 195 Ariz. 543, 991 P.2d 246 (App. 1998)) and the services were paid pursuant to a private contract rather than AHCCCS (Andrews v. Samaritan Health Sys., 201 Ariz. 379, 36 P.3d 57 (App. 2001)).

ABOUT THE AUTHOR: J.P. Harrington Bisceglia is senior counsel at Tyson & Mendes LLP. She specializes in general liability defense, insurance coverage and bad faith litigation . Contact J.P. at 602.386.5644 or jpharrington@tysonmendes.com.

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