Mediation Message No. 26


Hospital liens in personal injury litigation impact settlement negotiations, since both plaintiffs and defendants take them into consideration in determining what sums the plaintiffs shall net after such liens have been paid off. Hospitals, too, rely on these liens to recover the difference between what they are paid by patients and/or their carriers and the reasonable value of the medical services provided. Parnell v. Adventist Health System/West (2005) 35 Cal.4th 595 states, however, that such liens, to be valid, require an underlying debt by the patient to the hospital.

In Parnell, the plaintiff, who was injured in a vehicle accident, was treated at a hospital for his injuries. The hospital, because of a preferred provider agreement with plaintiff’s health plan, accepted payment from the health plan as payment in full for its medical services. Thereafter, the hospital, pursuant to the Hospital Lien Act ([HLA]; Civ.Code §§ 3045.1-3045.6), filed a lien with the defendant driver in the plaintiff’s ensuing civil action (under the HLA, the lien is filed with the defendant and not the plaintiff) against any judgment, compromise or settlement for the difference between the actual cost of the medical services given the plaintiff and the negotiated amount received by the hospital under the provider agreement.

Parnell provides that the HLA gives hospitals the right to assert liens against any judgments recovered by patients from third party tortfeasors for the reasonable value of the medical services furnished the patients but that, in the instant matter, the hospital’s lien was invalid because there was no outstanding debt owed by the plaintiff to the hospital. In part, Parnell relied on City & County of San Francisco v. Sweet (1995) 12 Cal.4th 105, which holds that a lien by a county, pursuant to Gov’t. Code § 23004.1, that seeks recovery from a tortfeasor for the reasonable value of the care and treatment given a county patient requires the existence of an underlying debt by that patient to the county.

While recognizing that its decision hurts financially-strapped hospitals, Parnell gave hospitals an out, suggesting that they can avoid the consequences of the decision by contracting with health plans to preserve their rights to recover through an HLA lien the difference between their usual and customary charges and any negotiated rate.

Copyright, Michael D. Marcus, July 2005

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