Colorado State Law Protects Injured Persons from Premature Liens from Hospitals

Hospital Must Bill Primary Insurer Even if Medicare or Medicaid First Before Asserting a Lien

Sep 29, 2021

FACTS

The Lien Statute provides that before a lien is created, every duly licensed hospital that treats a person injured through the negligence or other wrongful acts of another must first submit all reasonable and necessary charges for hospital care or other services for payment to the property and casualty insurer and the primary medical payer of benefits available to and identified by or on behalf of the injured person, in the same manner as used by the hospital for patients who are not injured as the result of the negligence or wrongful acts of another person, to the extent permitted by state and federal law.

The Supreme Court concluded Medicare is a patient’s primary health insurer, the Lien Statute requires a hospital to bill Medicare for the medical services provided to the patient before asserting a lien against that patient. Such an interpretation is consistent with the language of the Lien Statute, which distinguishes between “the property and casualty insurer,” on the one hand, and “the primary medical payer of benefits,” on the other, and also reflects the legislature’s intent to protect insureds from abusive liens. Moreover, this interpretation yielded no conflict between the Lien Statute and the MSP Statute. Hospital liens are governed by state, not federal, law, and merely enforcing our Lien Statute does not make Medicare a primary payer of medical benefits in violation of the MSP Statute.

Both Harvey and Manzanares had automobile insurance, Harvey through GEICO and Manzanares through State Farm. These policies included medical payment (“Med Pay”) coverage for medical bills incurred as a result of a motor vehicle accident. In addition, the third-party tortfeasors who caused Harvey’s and Manzanares’s injuries also had automobile insurance.

Both Harvey and Manzanares advised Centura of all of the available health and automobile insurance policies. Centura then assigned the women’s accounts to a collection agency, Avectus Healthcare Solutions, for processing, and Avectus apparently submitted Centura’s medical expenses to each of the automobile insurers involved, including the automobile insurers for Harvey, Manzanares, and the third-party tortfeasors. Within two weeks after submitting these charges to the various automobile insurers (and within two months of the women’s respective discharges from their hospital stays), Centura filed hospital liens against both of the women.

Centura conceded that it did not bill either Medicare or Medicaid before filing the above-described liens.

Both Harvey and Manzanares subsequently brought suit, alleging that Centura had violated the Lien Statute by not billing Medicare for the services provided to the women prior to filing the above-described liens.

The district courts concluded that Centura had no obligation to bill Medicare before filing the liens at issue because (1) the Lien Statute requires only that hospitals bill primary medical payers of benefits if allowed under both state and federal law and (2) although the women’s primary health insurer was Medicare, federal law required that Medicare be treated as a secondary payer. Harvey appealed, but in a unanimous, published decision, a division of the court of appeals affirmed the district court’s judgment in her case. The Court of Appeal agreed and the appeal was forwarded to the Supreme Court.

ANALYSIS

The Supreme Court concluded that the pertinent language of the Lien Statute is ambiguous, and that the Lien Statute required Centura to bill Medicare before filing liens against Harvey and Manzanares.

The Lien Statute and the MSP Statute

The Lien Statute provides, in pertinent part:

Before a lien is created, every hospital duly licensed by the department of public health and environment . . . which furnishes services to any person injured as the result of the negligence or other wrongful acts of another person and not covered by the provisions of the “Workers’ Compensation Act of Colorado”, articles 40 to 47 of title 8, C.R.S., shall submit all reasonable and necessary charges for hospital care or other services for payment to the property and casualty insurer and the primary medical payer of benefits available to and identified by or on behalf of the injured person, in the same manner as used by the hospital for patients who are not injured as the result of the negligence or wrongful acts of another person, to the extent permitted by state and federal law. [§ 38-27-101(1) (emphases added by the court).]

Because both Harvey and Manzanares were Medicare recipients, the MSP Statute also applies in this case and informs the Supreme Court’s analysis of what is “permitted” under federal law. The MSP provisions do not create lien rights when those rights do not exist under State law. Where permitted by State law, a provider, physician, or other supplier may file a lien for full charges against a beneficiary’s liability settlement.

The issue before the Supreme Court was the meaning of “primary medical.” The General Assembly’s primary intent to protect accident victims from the aggressive lien practices that some hospitals had employed at that time tends to support the statutory construction advanced by Harvey and Manzanares in this case.

When Medicare is a patient’s primary health insurer, the Lien Statute requires a hospital to bill Medicare for the medical services provided to the patient before asserting a lien against that patient.

First, the MSP Statute does not govern hospital liens; such liens are matters of state law.

Second, Centura correctly observes that, subject to certain exceptions, the MSP Statute prohibits Medicare from paying any hospital bills to the extent that “payment has been made or can reasonably be expected to be made under . . . an automobile or liability insurance policy or plan.” § 1395y(b)(2)(A)(ii). But nothing in the Lien Statute requires the hospital to bill Medicare if such payment will be made, or is expected to be made, by the property and casualty insurers. Under the Lien Statute, a hospital must bill any liability and casualty insurers-and thereafter, if the charges remain unpaid and the promptly period has expired, Medicare-before asserting a hospital lien.

Third, the Lien Statute in no way conflicts with Congress’s purpose in passing the MSP Statute, namely, “to reduce the costs of the Medicare program by making Medicare the secondary payer in certain situations.” Smith v. Farmers Ins. Exch., 9 P.3d 335, 338 (Colo. 2000).

Conclusion

For these reasons, the Supreme Court concluded that when Medicare is a patient’s primary health insurer, the Lien Statute requires a hospital to bill Medicare for the medical services provided to the patient before asserting a lien against that patient. This interpretation is consistent with the language of the Lien Statute and reflects the legislature’s intent to protect insureds from oppressive hospital liens. In addition, this interpretation is consistent with the MSP Statute because hospital liens are governed by state, not federal, law and merely enforcing our Lien Statute does not make Medicare a primary payer of medical benefits in violation of the MSP Statute.

Accordingly, the Supreme Court reversed the decisions of the division below in Harvey v. Centura Health Corp., 2020 COA 18M, 490 P.3d 564, and of the district court in Manzanares v. Centura Health Corp., No. 19CV30025 (D. Ct., Pueblo Cnty. July 16, 2019).

ZALMA OPINION

The Lien Statute in Colorado was enacted to protect accident victims from abuse by hospitals that asserted liens against patients immediately upon discharge even though they were insured by Medicare, Medicaid or casualty insurance. The Supreme Court confirmed the intent of the statute to protect patients from abuse and required that the hospital bill Medicare and any available casualty insurance before asserting a lien. The hospital, therefore, has no right to abuse a patient who is insured, even if insured by federal Medicare or Medicaid.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com

and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at https://www.rumble.com/zalma ; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4