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West v. Shelby County Healthcare Corp.

Supreme Court of Tennessee, Jackson

December 19, 2014

DIANE WEST ET AL.
v.
SHELBY COUNTY HEALTHCARE CORPORATION D/B/A REGIONAL MEDICAL CENTER AT MEMPHIS

Session: April 9, 2014.

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[Copyrighted Material Omitted]

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Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals Affirmed in Part and Reversed in Part. Appeal by Permission from the Court of Appeals, Western Section, Circuit Court for Shelby County. No. CT-006339-07. Donna M. Fields, Judge.

Judgment of the Court of Appeals Affirmed in Part and Reversed in Part.

John I. Houseal, Jr. and Don L. Hearn, Jr., Memphis, Tennessee, for the appellant, Shelby County Healthcare Corporation, d/b/a Regional Medical Center at Memphis.

Eugene A. Laurenzi, Memphis, Tennessee, and A. Wilson Wages, Millington, Tennessee, for the appellees, Diane West, Jammie Heags-Johnson, and Charles Garland, Individually and on behalf of all other persons similarly situated.

W. Bryan Smith, Memphis, Tennessee, for the Amicus Curiae, Tennessee Association for Justice.

WILLIAM C. KOCH, JR., J., delivered the opinion of the Court, in which SHARON G. LEE, C.J., JANICE M. HOLDER, CORNELIA A. CLARK, and GARY R. WADE, JJ., joined.

OPINION

WILLIAM C. KOCH, JR., J.

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This appeal involves the ability of a hospital to use a hospital lien to recover from a third-party tortfeasor the unadjusted cost of the medical services it provided to a

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patient whose injuries were caused by the third party. Three patients were injured in separate, unrelated motor vehicle accidents in Memphis, Tennessee. All of them were treated at the Regional Medical Center at Memphis, and either their insurance company or TennCare paid the hospital the full amount of the adjusted charges for their care, in accordance with their contracts with the hospital. Despite receiving these payments, the hospital declined to release the lien it had perfected under the Tennessee Hospital Lien Act, Tenn. Code Ann. § § 29-22-101 to -107 (2012). The patients filed suit in the Circuit Court for Shelby County seeking to quash the liens and monetary damages. In response, the hospital asserted that its refusal to release the liens was consistent with the Tennessee Hospital Lien Act and was permitted by its contracts with the patients' insurance companies. The trial court dismissed the suit on the merits, and the patients appealed to the Court of Appeals. The intermediate appellate court reversed the trial court, determining that the hospital could not maintain its lien because each of the patients' debts had been extinguished when the hospital accepted payment from the patients' insurance companies for the full amount of the hospital's bill based on the adjusted charges it had agreed to with either the patient's insurance company or TennCare. West v. Shelby County Healthcare Corp., No. W2012-00044-COA-R3-CV, 2013 WL 500777 (Tenn. Ct. App. Feb. 11, 2013), reh'g denied (Tenn. Ct. App. Mar. 12, 2013). We granted two of the three patients' Tenn. R. App. P. 11 applications for permission to appeal. We have determined that, except for the unpaid co-pays and deductibles which are a patient's responsibility, neither the Tennessee Hospital Lien Act nor the hospital's contracts with the patients' insurance companies authorized the hospital to maintain its lien after the patients' insurance company paid the adjusted bill. However, we have also determined that one of the patients who had not extinguished her debt to the hospital was not entitled to have the lien against her extinguished.

OPINION

I.

We begin with a general description of the billing and collection practices at issue in this case. The Regional Medical Center at Memphis (" the Med" ) is a nonprofit hospital operated by the Shelby County Healthcare Corporation. When a patient receives treatment at the hospital, the Med categorizes the patient according to the type of injury and the circumstances surrounding the injury. If the Med decides that a third party may be personally liable for the patient's injuries, the hospital perfects a lien for the full, unadjusted charges for the care the patient received while hospitalized, pursuant to the Tennessee Hospital Lien Act (" HLA" ), Tenn. Code Ann. § § 29-22-101 to -107 (2012).

Once the Med has perfected its lien, it pursues payment from the third-party tortfeasor for the full, unadjusted cost of the services provided to the patient. Frequently, while these collection efforts are proceeding, the Med also bills the patient's insurance company for the medical services the patient received while hospitalized. The cost of the services reflected on the bill to the insurance company is generally less than the cost of the services upon which the hospital based its lien because the hospital discounts its charges pursuant to the contract between the Med and the patient's insurance company.

As a matter of practice, the patient's insurance company pays the Med for the adjusted costs of the medical services. This payment discharges the debt the patient's insurance company and the patient owe to the hospital, except for any co-pays and deductibles that are the patient's responsibility.

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However, the Med does not release its lien when it receives the insurance company's payment. Instead, the Med continues its efforts to collect the full, non-discounted cost of its treatment from the third-party tortfeasor. Whenever the Med is able to collect the full amount of its unadjusted cost from the third-party tortfeasor directly or from the patient's recovery from the third-party tortfeasor, it refunds any payment or payments already received from the patient's insurance company. The Med releases its lien only after it has been paid for the full, unadjusted cost of its services.

We now summarize the evidence regarding two of the three patients who originally filed suit in this case. We are omitting the evidence relating to the third patient because we did not grant the Med's Tenn. R. App. P. 11 application with regard to this patient.[1]

Diane West

Diane West was injured in a motor vehicle accident on July 30, 2006, in Memphis, Tennessee. She was treated at the Med and released on the same day. On August 10, 2006, the Med perfected a lien in the amount of $14,008.97 for medical services it provided Ms. West.

Ms. West was insured by Blue Cross Blue Shield of Alabama (" BCBSA" ) through Blue Cross Blue Shield of Tennessee (" BCBST" ). The Med sent a statement to BCBSA which, consistent with its institution agreement with BCBST, billed BCBSA $3,215.72 for the medical services it had provided to Ms. West. BCBSA paid this bill in full, and Ms. West received a processed claim report from BCBSA dated March 8, 2007, stating that " [t]his provider has agreed to accept the eligible charge as payment in full . . . You owe [the Med]: $0.00."

Despite the payment received from BCBSA, the Med declined to release its $14,008.97 lien. The Med asserted in a letter to Ms. West's lawyer that under its institution agreement with BCBST, the payment from BCBSA was " contingent" upon either final acceptance of the payment by BCBSA and the Med or recovery from the third-party tortfeasor of the full, unadjusted amount of the hospital lien.

Jammie Heags-Johnson

Jammie Heags-Johnson was injured in a motor vehicle accident on July 21, 2006, in Memphis, Tennessee. She was treated at the Med and released on the same day. On August 3, 2006, the Med perfected a lien in the amount of $4,304.92 for the medical services it provided Ms. Heags-Johnson on July 21, 2006. On November 22, 2006, the Med perfected an amended lien that included the original $4,304.92, as well as an additional $338.42 -- the unadjusted cost of additional medical services provided to Ms. Heags-Johnson on August 8, 2006.

At the time of the accident, Ms. Heags-Johnson was insured by Accordia National Insurance which is part of the Baptist Health Services Group of the Mid-South, Inc. (" BHSG" ). In accordance with its provider agreement with BHSG, the Med made a $880.98 adjustment to the costs of the services it provided to Ms. Heags-Johnson on July 21, 2006, and billed her insurance company for ...


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