When one agrees to accept a payment as one "in full", does it really mean "payment in full?" According to the California Supreme Court, the answer is - sort of.
In Parnell v. Adventist Health System / West, the high court held that when a hospital treats an injured plaintiff and then accepts the contractually-agreed upon reduced rate from the plaintiff's medical insurance provider as "payment in full," the hospital cannot then assert a lien under the Hospital Lien Act (Cal. Civ. Code, secs. 3045.1-3045.6) against the plaintiff's damage recovery from the third-party tortfeasor. The court reasons that acceptance of the payment in full from the plaintiff's insurance carrier extinguishes the plaintiff's obligation to the hospital and, thus, removes any basis for the assertion of the HLA lien.
This opinion is remarkable, however, not for its 23-page dissertaion on why "payment in full" really means payment in full. That's because in the Court's eyes, it really does not. After waxing philosophically about the hospitals dire financial conditions, the Court explains to the hospitals how to evade this opinion:
"By precluding the Community Hospital from asserting a lien under the HLA in this case, we simply give effect to its contracts. [Citation.] If hospitals wish to preserve their right to recover the difference between the usual and customary chanrges and the negotiated rate through a lien under the HLA, they are free to contract for this right. Our decision today does not preclude hospitals from doing so." Can anyone guess what revisions are going to be made to the contracts between hospitals and insurance providers?
I am mystified by the Court's apparent belief that the hospitals need to be rescued from a financial crisis. As I see it, the hospitals stand to double-dip if they follow Justice Brown's advice. First, they get volume of patients by entering into these "preferred"-type agreements with insurance carriers. Second, they get to recover the full amount of charges for the treatment they would have been entitled to receive if they did not give the insurance companies a volume discount.
I am equally mystified by the Court's lack of realization that if the HLA lien is not extinguished by the payment in full by the plaintiff's insurance carrier, this is going to make settlement really difficult. In many cases, that hospital lien (particularly at the "customary" level) is going to eat up all or most of the available coverage / funds to pay any judgment or settlement, leaving no funds for wage loss, gen. damages, or attorneys' fees. If that's the scenario, where is the settlement "carrot?"
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