Supreme Court to Hear Hospital Lien Case

COA has issued conflicting opinions about when to bill Medicare

Colorado Supreme Court
The Colorado Supreme Court is moving forward with developing a lawyer well-being program for legal employers by creating a committee to look at implementing the program across Colorado. The program was developed through a pilot program using multiple firms of all sizes, public and private, to explore how to implement well-being initiatives in firms. / Law Week file.

The Colorado Supreme Court on Aug. 17 announced it will weigh in on whether hospitals must first bill Medicare before filing a lien against an accident victim who has other coverage.

The high court’s decision to hear arguments in Harvey v. Centura Health Corporation and Catholic Health Initiatives highlights a recent disagreement by different panels of the Court of Appeals over how to handle such cases. 

In January, the Court of Appeals held that Centura had not violated the state’s hospital lien statute by filing a lien against patient Peggy Harvey without first billing Medicare for treatment she received following a March 2018 car crash. At the time of the crash, Harvey was a Medicare beneficiary and had an automobile insurance policy with medical payment coverage through Geico. The driver who hit Harvey was covered by third-party liability insurance held by his employer. 

The hospital and its collections company submitted charges to the liability carrier and the other driver’s employer but did not receive payment from them or Harvey’s Geico policy. Centura filed a lien against Harvey, who then filed a complaint against the hospital group alleging it had violated Colorado’s hospital lien statute by not billing Medicare first. 

In 2015, the state legislature amended Colorado’s hospital lien statute to require a hospital to first bill an accident victim’s “primary medical payer of benefits” and the liability insurer “to the extent permitted by state and federal law” before filing a lien. 

Centura argued that Medicare is not a primary payer under federal law. According to the Medicare Secondary Payer provisions, Medicare is a “secondary payer” when another insurer, such as automobile or liability insurance, is responsible for primary coverage. 

“Our position is that under the Medicare Secondary Payer Act, Medicare can’t be the primary carrier when there’s an auto liability policy in effect,” said Traci Van Pelt of McConnell Van Pelt, who represented Centura in Harvey. The district court and the Court of Appeals agreed and dismissed the claims against the hospital group.

However, Centura made similar arguments about Medicare in another case, Garcia v. Centura, which a different panel of the Court of Appeals rejected in January. Centura has asked the Colorado Supreme Court to hear Garcia as well, and attorneys familiar with the cases expect the high court to take the case as a companion to Harvey as it irons out the conflicting opinions from the lower courts.

“I think Garcia got it right,” said Nelson Boyle of Burg Simpson, who filed an amicus brief in Garcia on behalf of the Colorado Trial Lawyers Association. He said state’s hospital lien statute and federal law would only conflict if hospitals were required to file liens.

“Centura’s argument rests on the idea that a hospital lien is required by them, but it’s a discretionary thing. They don’t have to ever file or hospital ever,” he said, adding that in Garcia, the Court of Appeals appeared to weigh legislative history and intent more heavily than the Harvey panel, which might have led to the conflicting rulings. 

“The purpose of the hospital lien statute has always been to preserve ‘reasonable and necessary’ payments to hospitals,” the court wrote in its Garcia opinion.  “However, the goal of Centura’s billing and lien practices is to achieve maximum payments — these practices are what the General Assembly sought to curb in enacting the 2015 version of the statute.” 

Under Medicare rules, a hospital may bill Medicare if the tortfeasor’s liability insurer doesn’t pay promptly, but it must do so at the lower Medicare rates, the Court of Appeals said in its Garcia opinion. By filing a lien instead of billing Medicare, the court said, Centura can get the full amount for its hospital bills, adding: “We reject the notion that the General Assembly intended the 2015 amendments to create such a loophole.”

According to Van Pelt, plaintiffs and their attorneys have an incentive to file cases alleging hospital lien statute violations. “What I think is really driving this is that there is a penalty for a hospital that asserts a lien without billing the primary insurer first, and it’s double the amount of the lien,” she said. 

For example, she said, if a hospital bill is $100,000, the plaintiff could seek that amount from the liability insurer while Medicare might only pay the hospital $30,000. If the hospital files a lien for the full bill amount without properly billing the primary payers first, the plaintiff could end up with $200,000 from the hospital in penalties, on top of their payout from the liability insurer.

Van Pelt did not represent Centura in Garcia but she expects to take on the case if it ends up heading to the Supreme Court. She said she has “a half dozen or more” similar cases the district court level that will be pending until the high court rules on Garcia and Harvey.

“I think it’s part of the overall complex health care financing issues that, as a society, we’re trying to address,” she said. “And this is just something that the Supreme Court is going to have to resolve.”

—Jessica Folker

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