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VOL. 126 | NO. 20 | Monday, January 31, 2011

State Court Ruling Adds Clarity to Hospital Lien Issue

By Bill Dries

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The Tennessee Court of Appeals has added another chapter to what is becoming a thick book of rulings on the issue of how much money hospitals can get from insurers.

The number of hospital liens filed by the Shelby County Health Care Corp. has spiked in the last two years as the company, also known as The Regional Medical Center at Memphis, seeks to recover a larger share of costs from insured patients.

Hospital liens accounted for 2,245 of the 8,378 filings in Circuit Court in 2010, or about 25 percent, according to The Daily News Online, www.memphisdailynews.com. Of the 7,082 filings in Circuit Court in 2009, hospital liens accounted for 910.

A 2003 two-car crash in Woodruff County, Ark., that sent one of the injured to The MED triggered the complex court case that may next find its way back to the Tennessee Supreme Court.

The Tennessee Court of Appeals issued the latest ruling last week, three months after the Supreme Court ruled on other issues in the same lawsuit.

John Baumgartner was the patient at The MED. The driver of the other car, George H. Brewer, was at fault in the crash.

Baumgartner’s wife told staff at The MED that she and her husband had uninsured motorist coverage with Nationwide Mutual Insurance Co.

But Brewer was insured by Hartford Accident and Indemnity and that was noted on the accident report filed by authorities in Arkansas. The MED didn’t get a copy of the report. The hospital had filed a lien against the Baumgartners and Nationwide by the start of 2004. Meanwhile Nationwide and Hartford settled with the Baumgartners paying them a total of $125,000. Baumgartner’s bill at The MED totaled $529,840.

The Baumgartners couldn’t pay the total and subsequently filed for bankruptcy.

Because the car crash was in Arkansas, Nationwide claimed Arkansas common law applied and the Baumgartners had to be made whole before the hospital lien was addressed.

The Tennessee courts rejected the doctrine, which set the stage for a dispute between two conflicting Tennessee laws. One says a hospital can recover “the reasonable cost of such hospital care, treatment and maintenance.” The other says a hospital lien can’t be for more than a third of what a person gets.

The appeals court ruling sided with the one-third limit.

“We agree with The MED that it has been damaged by the Baumgartners’ failure to pay for the medical services provided to Mr. Baumgartner,” Appeals Court Judge Holly M. Kirby of Memphis wrote. “However, payment of the full amount of the medical costs has never been the responsibility of either Hartford or Nationwide. … Requiring the insurance companies to pay the entire cost of The MED’s hospital care would result in a remedy that is incongruent with The MED’s underlying right vis-à-vis the insurance companies.”

The appeals court concluded Hartford and Nationwide impaired a valid lien by The MED when it paid the Baumgartners. That affirmed the holding by Circuit Court Judge Kay Robilio. But the appeals court ruled that had the lien been honored, the hospital would have only been entitled to a third of what the Baumgartners got from both companies.

The ruling also reversed Robilio’s award of $100,000 against Hartford and $8,333 against Nationwide and remanded the case back to the trial court.

The case was transferred in 2007 from Judge D’Army Bailey to Robilio who agreed with his ruling for The MED’s summary judgment motion against both insurers. But Robilio reversed his ruling on attorneys’ fees to be paid by Nationwide, saying they weren’t recoverable as consequential damages.

Everyone challenged the trial court decision. The Tennessee Supreme Court in October reversed an intermediate appellate court decision on another issue but didn’t deal with the issues of whether Nationwide impaired The MED’s lien and if so, how much in damages were recoverable by The Med.

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