Hospitals will not be required to reimburse AHCCCS patients who paid off their medical liens.
Arizona hospitals scored a partial victory this week with an Arizona Supreme Court decision that allows health facilities to keep years of payments from Medicaid-insured patients who agreed to share portions of their injury settlements to pay medical bills.
However, the state’s high court did not address a separate legal issue: whether the mechanism used by hospitals to collect these payments — filing medical liens against patients — is an allowable practice under Medicaid’s rules.
Lawyers representing hospitals and consumers expect future rounds of court challenges before that question is answered in Arizona.
What are medical liens, and are they legal?
Supreme Court rulings
For decades, hospitals placed medical liens on patients insured by the Arizona Health Care Cost Containment System, or AHCCCS, to recoup any portion of their medical bills that went unpaid by the state’s Medicaid program. Hospitals contend that AHCCCS, which provides health insurance for low-income and disabled residents, pays less for medical services than what a hospital customarily charges.
The medical liens allowed hospitals to negotiate settlements with patients who collected personal-injury awards — for example, payments from an automobile insurer following a car crash. As part of these settlements, the hospital would agree to release the medical lien in exchange for a payment collected from the patient’s personal-injury settlement.
HEALTHCARE: Health insurance no guarantee of lower bills | Complaints mount as $13,000 shocks patient
Medical liens are allowed under Arizona law, but lawyers representing AHCCCS patients contend these liens amount to “balance billing” and are not allowed under Medicaid’s rules.
The Arizona Supreme Court case stemmed from a Maricopa County Superior Court case filed in 2012 by a group of AHCCCS patients who sought to recover their medical-lien payments to hospitals. The patients sought six years’ worth of payments worth potentially millions of dollars.
The lower court dismissed the portion of the lawsuit involving patients who had initially agreed to pay their liens, ruling that the agreements reached with the hospitals were “final and binding regardless of the validity of the underlying claims.”
The Arizona Court of Appeals reversed the lower court’s decision, ruling that the liens were void because federal law trumps state law. That set up the high court’s review of the matter.
The Arizona Supreme Court sided with the lower court. It acknowledged that courts in other jurisdictions have found that hospitals are not allowed to collect additional payments from Medicaid-insured patients. However, the court said those court decisions did not apply to agreements Arizona hospitals negotiated in the past with AHCCCS patients.
“While federal law may preempt state law in situations like these, the issue was not settled in Arizona when these agreements were entered into. The stated public policy in Arizona as reflected by our statutes was that such liens were valid,” Justice Robert M. Brutinel wrote in the court’s opinion.
Hospitals get to keep medical-lien payments
The bottom line: Hospitals will not be required to reimburse AHCCCS patients who paid off their medical liens.
“The net result is the hospitals don’t have to give the money back,” said Geoffrey Trachtenberg, an attorney representing the AHCCCS patients.
The high court did not address the question of whether the medical liens are allowed under federal law going forward.
However, a Maricopa County Superior Court judge has granted summary judgment on behalf of a second group of AHCCCS patients who did not agree to settle their medical liens. In that case, the court issued an injunction preventing hospitals from enforcing medical liens on AHCCCS patients. So for now, Arizona hospitals are no longer allowed to collect on medical liens.
AHCCCS, on the other hand, is still allowed to collect on medical liens filed against patients that it insures.
Richard Burnham of Gammage and Burnham, the law firm representing the hospitals, said he expects hospitals to continue to wage a legal battle to support the use of medical liens. But he said no final decision has been made.
For now, hospitals are relieved they won’t have to reimburse patients who already settled hospitals’ claims.
“We are happy to have this one resolved at this point,” Burnham said.