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How Hospital Liens Affect Accident Victims’ Rights

Being injured in a car wreck is a trauma that doesn’t end when you’re released from the hospital. There are accident reports to obtain, insurance claims to file, follow-up visits to the doctor, and often a vehicle to replace. Missed work, long-term pain management, and medical copays and deductibles create financial burdens. 

This is why car crash victims are frequently dependent on a judgment or settlement from the accident to cover many of the resulting expenses.

What are hospital liens?

Unfortunately, accident victims are sometimes surprised to learn the hospital that treated them for their injuries is entitled to be paid out of the victim’s settlement or judgment. This is called a hospital lien, and in Alabama, the law creates a legal right for hospitals to be paid. 

The American Journal of Trial Advocacy explains Alabama’s hospital lien laws with this:

Alabama Code section 35-11-370 creates a hospital lien. This statute grants hospitals an automatic lien on a patient’s judgment or settlement arising from injuries for which the hospital treated the patient within a week of being injured. Once perfected, the hospital’s lien has priority over all other claims on the funds, except for an attorney’s lien. When someone is awarded a judgment or enters into a settlement agreement, the funds are paid first to any attorney or hospitals with perfected liens. The plaintiff is paid any portion of the judgment or settlement that remains after the liens have been satisfied.

Hospital liens originally were intended to ensure hospitals were paid for their services, but the old Alabama law placed no limitations on a hospital’s ability to perfect a lien. 

How are Hospitals taking advantage of accident victims?

Unfortunately, hospitals in Alabama and throughout the country have been leveraging these rights to their advantage. Instead of billing an accident victim’s health insurance carrier, or Medicare/Medicaid, who negotiate a discounted rate for the hospital’s services, the hospitals hold onto those bills for attachment onto the crash victim’s personal injury claim. By doing so, the hospital is able to inflate their billing to an amount much greater than they would otherwise pay an insurance company, resulting in more money for you to pay back.   

Hospital lien laws vary from state to state. In the case of one patient interviewed for a New York Times article on hospital liens, the patient expected her Medicaid coverage to be billed for hospital services after her accident. Medicaid would have paid $2,500 in this case, but the hospital bypassed Medicaid and perfected a lien of the full-billed price, amounting to $12,856.

Other accident victims interviewed for the article were similarly shocked to receive hospital bills that should have been covered by their health care insurance, and they were dismayed to learn the hospitals took much of the settlements from their accidents.

The New York Times article correctly asserts that such liens “can torpedo patients’ credit scores and leave them unable to pay for needed follow-up care.”

How does the law in Alabama address hospital liens today?

Fortunately, in 2019 the Alabama legislature passed HB 11, amending the previous law and narrowing the circumstances under which hospitals can perfect liens. 

The amended law requires hospitals to submit an accurate claim to the patient’s health care payor, which it defines as “a health care insurer, health maintenance organization, or health care service plan.” If the health care payor has a contract with the hospital under which services are paid at a reduced rate, the reduced rate is considered full satisfaction of the hospital’s claim.

The amended law still allows hospitals to file liens when: 

  • The patient entered the hospital within 1 week of being injured
  • The patient has no health insurance
  • The insurance provider denied coverage
  • The insurance provider did not pay the bill within 180 days of the bill’s submission

If the hospital does not know a patient is covered by health care insurance, or if the patient is covered by Medicare or Medicaid, the amended law allows the hospital to perfect a lien within 20 days of discharging the patient from the hospital. If the hospital later learns the patient has health insurance, it must bill the insurance, but the hospital is allowed to maintain the lien until payment is made. The lien must be released within 10 days of payment by the insurer. 

Ultimately, the amendment to Alabama’s hospital lien laws was a positive move to protect patients’ rights, but accident victims may still be subject to hospital liens based on their insurance coverage. 

Regardless of the type of coverage you have, calling a personal injury attorney should be one of your first acts after being injured in an auto accident. Here at Hornsby, Watson & Hornsby, our attorneys are experienced litigators with a background in negotiating fair settlements for accident victims. We’ll guide you through the complicated process of filing a lawsuit if necessary, and we’ll negotiate in your best interest with insurers and the hospital where you received care.

Call us today at 256-650-5500 for a free consultation.

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