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In a blow to an industry already struggling with the financial constraints of health maintenance systems, a state appeal court ruled Tuesday that hospitals aren’t allowed to recover treatment costs by attaching liens to insured patients’ third-party suits. The case involved a hospital’s efforts to “balance bill” — recover full costs of treatment from the person who caused the patient’s injuries, even though the patient’s insurer had already paid the discounted amount agreed to in contracts. “While it may well be fair and equitable for an indigent or otherwise non-paying patient to share up to half of his or her tort recovery with a hospital that has provided for his or her care,” Justice Steven Vartabedian of Fresno’s Fifth District Court of Appeal wrote, “the issue of fairness and equity becomes somewhat clouded when the patient, through purchase of health insurance, has made prior arrangements with the hospital to pay for treatment he or she may need at a future time. “It is the hospital’s choice,” he continued, “to accept or refuse the level of payment offered by the payor.” Justices Herbert Levy and Dennis Cornell concurred. In Parnell v. Adventist Health System/West, 03 C.D.O.S. 1610, Joel Parnell appealed a Kern County trial court ruling letting the hospital that treated him for injuries attach a lien to his suit against the driver whose vehicle hit the taxi in which he was riding. Parnell’s health insurance had already paid $5,000, as contracted, even though the cost of treatment exceeded $19,000. Parnell sued Adventist in 1999, calling the medical facility’s lien an unfair business practice in violation of the state’s Consumers Legal Remedies Act. While noting that attaching liens is a “common hospital practice” authorized by a 1961 legislative enactment, the Fifth District said balance billing was not contemplated when the statute was passed, nor when it was amended in 1992. In fact, the justices held that a “plain-language reading” of the statute cannot uphold balance-billing charges, since an insured patient’s debt is paid in full. The ruling creates a conflict with Swanson v. St. John’s Regional Medical Center, 97 Cal.App.4th 245, a Second District ruling that came to the opposite decision last year. But the court’s ruling could be merely academic. The California Supreme Court has already accepted two cases with similar issues, McMeans v. Scripps Health Inc., S109573, and Olszewski v. Scripps Health, S098409. In Olszewski, which is set for oral argument in San Francisco March 13, San Diego’s Fourth District ruled federal law pre-empts Welfare and Institutions Code � 14124.791, which lets providers impose a lien on Medi-Cal patients’ third-party suits. Therefore, the court held, the hospital could not place a lien on the tort recovery of patient Cimmaron Olszewski. In McMeans, the same division of the same court overturned a ruling that authorized a hospital’s pursuit of liens against a third party, saying that Civil Code � 3045.1, which limits the lien rights of medical providers, specifically exempts hospitals.

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