Posted by Bill Sandweg on 08 February 2021.
Last week’s New York Times ran an article about how rich hospitals profit from their patient’s car accidents. The article showed how hospitals take advantage of old lien laws enacted to ensure patients received treatment in the days before widespread health insurance coverage to seize all or a part of the patient’s recovery from the person who injured them.
The law of many states, including that of Arizona, allows a medical care provider to have a lien against the property of its patient. The idea in passing those laws was to give hospitals and other medical providers assurance that they would be paid and thus give them an incentive to care for patients who may not be insured or have the money to pay the bill immediately. The liens are usually permitted in a reasonable and customary amount for the care provided.
The point of the Times article is that many wealthy hospitals are refusing to bill Medicare or Medicaid or sometimes even the patient’s private health insurance and, instead, filing liens against any lawsuit recovery the patient may be entitled to make because of the injury that led to the need for medical treatment. The reason for the refusal to bill available governmental or private health insurance is that what the hospital can collect from these sources is usually far less than what the hospital actually writes down on the hospital bill. The amount it writes down is the “sticker price.” Medicare and Medicaid specifically limit the amounts a hospital can charge for certain procedures. Private insurers, on the other hand, usually negotiate a discount schedule with hospitals which results in them also paying substantially less than the “sticker price.” If allowed to get away with it, the hospitals can collect much more through lien enforcement than they could get from Medicare, Medicaid or the patient’s private insurance.
In Arizona, our situation is a little different. The hospitals have tried to avoid collecting from Medicare and AHCCCS, Arizona’s version of Medicaid, but lawsuits from patients have put an end to that. If they collect from Medicare or AHCCCS, they cannot file a lien against any recovery the patient might make. The rule is different, however, if the patient has private insurance.
If a patient in Arizona is injured through the fault of someone else and has private insurance, the hospital will collect the amount it agreed to accept from the insurance company. It will then file a lien against any recovery the patient might make from the person responsible for the injury which sent the patient to the hospital in the first place. The lien will be for the difference between the “sticker price” on the hospital bill and the amount the hospital agreed to accept from the patient’s health insurance company. The hospital sends the lien to the patient along with a form stating, “This is not a bill.” And it isn’t, because the patient doesn’t owe the hospital anything, unless there is a co-pay or deductible which has yet to be satisfied. Once the patient’s insurance company pays the hospital, the patient is off the hook.
So how does the hospital justify it lien? It does so by taking the position that the lien is not a charge on the patient but is a way of collecting the “reasonable” amount of the bill which was not paid by insurance from the person who caused the injury which led to the hospitalization. Of course, this is a fraud as the money to pay the lien comes directly out of the patient’s recovery. If the hospital did not seize it through the lien, the patient would get the money. It is doubly a fraud because the hospital takes the position that the “sticker price” on the hospital bill, which the hospital never collects from anyone, is the reasonable cost of the care it provided. In actual fact, the reasonable cost of the care is the amount the hospital agrees to accept from health insurance companies. If it was not reasonable, the hospitals would never agree to it in the first place. The money the hospitals collect through these liens is pure profit, which goes directly to their bottom lines.
Why does the legislature permit this charade to continue? If you have to ask that question, you have not been paying attention or following this blog over the years. Money talks. The hospital chains, which use these liens to pad their bottom lines, spend lots of money at the legislature to make sure this gravy train does not stop any time soon. In Arizona, when it is a question of regular citizens against the hospitals or other big business operations, the regular citizen does not stand a chance.