On March 9, 2020, the Arizona Supreme Court settled a reoccurring issue of concern in personal injury matters. In Ansley v. Banner Health Network, the Supreme Court held that 1) plaintiffs had a private right of action to challenge the lien statutes; and 2) the lien statutes are unconstitutional as applied.[1]

Plaintiffs were patients who were treated at defendant hospitals under the state’s contract provider for the federal Medicaid program, known as Arizona Health Care Cost Containment System (“AHCCCS”). AHCCCS negotiates reimbursement rates with hospitals for Medicaid recipients. After negotiating payments, defendants would record liens against the third party tortfeasor who caused the patients’ injuries in order to recover the remainder of their fees exceeding Medicaid reimbursement, often referred to as “balance billing”.

Hospitals operated in accordance with A.R.S. § 33-931(A), which states medical providers, such as hospitals, are “entitled to a lien for the care and treatment…of an injured person…for customary charges for care.” A.R.S. § 36-2903(G)(4) states, a “hospital may collect any unpaid portion of its bill from other third-party payors….” Plaintiffs brought this class-action to challenge liens arguing Arizona Revised Statute § 33-931(A) and 36-2903.01(G)(4) were preempted by federal Medicaid law and regulation (U.S.C. § 1396a(a)(25)(C) and 42 C.F.R. § 447.15) and therefore prohibited hospitals from balance billing patients.

A Private Right of Action

First, the Court considered whether plaintiffs had a private right of action to enforce the Medicaid law. U.S.C. § 1396a(a)(25)(C) does not expressly provide a private right of action, stating, “in the case of an individual who is entitled to medical assistance under the State plan with respect to a service for which a third party is liable for payment, the person furnishing the service may not seek to collect from the individual…payment of an amount for that service….” The Court stated balance billing where the payment, which would otherwise go to the plaintiff from the third-party tortfeasor and instead goes to the defendant, is exactly what U.S.C. § 1396a(a)(25)(C) sought to prevent. The Court held federal Medicaid law requires hospitals to accept payment from Medicaid agencies, such as AHCCCS, as payment in full.

Defendant hospitals argued there were two administrative remedies available to patients, which, they argued, precluded a private right of action. The Court disagreed, stating the remedies proposed by defendants neither preclude a private right of action nor provide a meaningful alternative means of relief. The Court therefore held a private right of action exists for patients to challenge the state lien statutes.

Preemption

Finding a private right of action existed, the Court then considered whether federal law preempts Arizona’s lien statutes as applied. 42 C.F.R. § 447.15 provides, “[a] state plan must provide that the Medicaid agency must limit participation in the Medicaid program to providers who accept, as payment in full, the amounts paid by the agency plus any deductible, coinsurance or copayment required by the plan to be paid by the individual.” As such, the Arizona laws were in direct conflict with the federal Medicaid law’s purpose, and compliance with both the federal and state law is impossible.  Thus, A.R.S. § 33-931(A) and A.R.S. § 36-2903.01(G)(4) are preempted by federal law.

Takeaway

Ansley is a win for patients seeking recovery against third-party tortfeasors. It allows patients to challenge hospitals who utilize “balance billing” to recover costs exceeding Medicaid reimbursement. This should not change the nature of personal injury settlements in Arizona. Rather, in cases involving AHCCCS recipients, more of the settlement will be passed onto the patient. However, hospitals could choose not to accept Medicaid payments and instead place a lien on the third-party tortfeasor to collect the entire amount charged. Tyson & Mendes, LLP will continue to monitor changes to Arizona law regarding Ansley’s effect on healthcare provider liens.

[1] Ansley v. Banner Health Network, 2020 WL 1126300 (Ariz., 2020).

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