If you are injured in an automobile accident, you may find yourself at the Emergency Department. Maybe your injuries are minor enough that you can be discharged to home. Maybe they are more serious and you need to be admitted to the hospital. Either way, thank goodness, you have health insurance to pay for the hospital bills. After you have been home for a while, a letter comes in the mail. It is from the hospital or someone representing the hospital. It says, “This is not a bill,” and it is not. It is a lien on any recovery you might get from the person who caused you to be injured in the accident.
“What is this and what is happening?” you may ask yourself. I have insurance and my insurance has paid the hospital in full. Why does the hospital have a right to any money I might get from the person who injured me? The answer is a perversion of Arizona law that allows hospitals to extort money from you, even though they have received everything they agreed to collect from your insurance company.
Almost every health insurer enters into agreements with local hospitals which establish the amount or percentage of the bill the health insurance company will pay, if one of its insureds ends up in the hospital. If you have seen a hospital bill and compared it to the Explanation of Benefits you receive from your insurance company, you will have seen that the hospital has agreed to accept about 8% to 10% of the hospital bill in full settlement for the services it has provided. The hospitals that your insurance company has made agreements with are said to be “in network.” If you go to a hospital that is in network, the insurance company may reward you with a smaller or no co-pay in return for helping it get the discounts from the hospital. If you are in an accident out of state or are taken by ambulance to a hospital out of network, the insurance company may not get a discount and you may have to pay a bigger portion of the total bill. These agreements between hospitals and the health insurance companies are closely kept business secrets. You can rest assured, however, that the amount the hospital agrees to accept is more than enough to cover its costs and to allow it to make a profit.
Section 33-931 of the Arizona Revised Statutes quite properly provides that health care providers may have a lien on any recovery made by a person to whom they provide medical services. The lien is to be in the amount of their “customary charges” for the treatment given. The problem arises when the hospital claims that its “customary charge” is not the amount it agreed to accept from your insurance company. Instead, it claims its “customary charge” is the “sticker price” at the bottom of the bill, before the discounts the hospital agreed to give. Of course, very few people ever really pay “sticker price” for a hospitalization. Those without insurance don’t have the money to pay while those with insurance usually receive huge discounts off the “sticker price.”
Should the accident that sent you to the hospital not be your fault and you make a successful claim against the person who injured you, the hospital stands there with its lien and wants to get paid the difference between its “sticker price” and the amount it agreed to take from your insurance company. It disingenuously takes the position that it is not you who is paying for its lien; it is the person who injured you. Of course, this ignores the reality that its lien must be paid out of the money the other driver is willing to pay you for the injury you suffered.
If you want to keep your money, your only option is to go to court and defend against the lien by pointing out that the “sticker price” is not its customary charge. Its customary charge is the amount it agreed to take from your insurance company. The hospital knows that by now you are tired of lawsuits, tired of waiting, and just want to take your settlement money or your verdict and go home. You can’t do that without resolving the hospital’s lien. The hospital doesn’t want a lawsuit with you either. It knows its position is weak. For that reason, it is always willing to discount the amount of its lien, in return for your prompt payment. Any payment it receives is like manna from heaven. It goes right to the bottom line. It is new money over and above what the hospital agreed to accept from your insurance company. You are the only loser here.
Write or call your state representative or senator. Ask that this legalized extortion be stopped. Ask that the law be amended to provide that, if the hospital or health care provider has agreed to accept a certain amount for its services and has been paid that amount, it has no lien on your recovery.