Increasingly trial attorneys are discovering that settlement of a personal injury or wrongful death claim with the tortfeasor can be the beginning not the end of negotiations or even litigation. Once settlement funds are received, the often-protracted lien resolution process begins, especially hospital liens.
Hospitals typically demand reimbursement of their full, undiscounted list prices for medical items and services despite various limitations codified in most states’ lien statutes and ordinances. Hospitals often assert these liens rather than submitting claims to Medicare or Medicaid, and sometimes even “choose” to stand on lien rights rather than billing an injury victim’s private health insurance. Lien disputes must be resolved, and liens released, prior to full disbursement of settlement proceeds and in many cases, prior to attorneys’ fees and costs being collected. Indeed, in some states and circumstances, significant reduction of large hospital liens is absolutely required if fees and costs are to be recovered at all, and if an injury victim is to receive any of the proceeds of her or his tort action. In other jurisdictions, legal fees and costs, and in some instances Plaintiffs themselves, are protected by “equitable distribution” provisions, ensuring a fair split, with only a portion of settlement proceeds being attached by hospital liens regardless of how large the hospital’s bill or how small the settlement.
However, when an injured Plaintiff does not have health insurance to pay medical expenses, or if hospitals choose not to bill available public or private coverage, most states do offer statutory lien rights against tort recoveries. But importantly, almost all such statutes and ordinances limit liens to “reasonable hospital charges,” denying hospitals the unbridled license to collect liens in whatever unreasonable amounts they wish.
Most hospitals use an internal list of codes and corresponding prices for thousands of billable services and items, called a “charge-master” price list, to populate an Itemized Bill with their respective charges for the care rendered to a patient. These chargemaster rates are unilaterally set with no regulatory oversight (in most states) and without regard for the actual costs incurred in rendering the services. Most hospitals chargemaster rates are several times their average costs, but some are as high as ten times costs, or even more. However, these are just total, or average, cost to charge ratios. Cost to charge ratios for certain specific items and services, like CT Scans for example, can even be multiples HIGHER than these egregious average costs. For example, consider this excerpt from an actual Cost Report, detailing the costs of CT Scans rendered to a Plaintiff at a Florida hospital:
In this example, the hospital charged, filed a lien, and demanded payment in full of rates that were more than forty-four times the hospital’s self-reported costs for these CT Scans.
Uninsured injury victims are among the very small fraction of the patient population asked to pay full chargemaster rates. Ironically, this segment of the patient population are among the only healthcare consumers represented individually by counsel in their bill negotiations. However, their individual (versus group) status, leaves them with the least bargaining power. This is so due to often lopsided lien statutes and ordinances, a knowledge gap with regards to the hospital’s internal cost data, in combination with ethical requirements that disputed lien amounts be held in Trust until negotiated or adjudicated.
No federal or state law, other than in Maryland and West Virginia, regulates hospital mark-ups. Accordingly, it is incumbent upon plaintiff’s lawyers to educate themselves on lien statutes and county lien ordinances, the cases interpreting them, as well as the state and federal case law regarding the reasonable value of healthcare. Additionally, obtaining access to a hospital’s self-reported cost data can provide invaluable ammunition for an attorney’s hospital lien negotiations.
A 2015 study published by HEALTH AFFAIRS examined the fifty hospitals whose charges and self-reported costs represent the highest mark-ups in the country. The study used hospitals’ self-reported costs as compared to their chargemaster rates to arrive at “overall” or “total” cost to charge ratios for each hospital, but ratios for individual revenue centers within every hospital are also available. The study concluded that on average, hospitals charge 3.4 times their costs (an average mark-up which has nearly tripled from 1.35 in 1984 to 3.4 in 2012) but reaches a staggering average of 10.1 times cost (a more than 1,000% mark-up) for the top 50 hospitals analyzed in the study.
Not surprisingly, the study also found these 50 hospitals with the highest mark-ups are overwhelmingly a) for profit hospitals, b) part of a “health system”, c) located in urban centers, and d) are not teaching hospitals. The hospitals all fall within 13 states and 40% are in Florida. The highest charge-to-cost ratio, i.e., the two hospitals tied for the most egregious mark-ups in the country, are Okaloosa Medical Center in Florida and Carepoint Health-Bayonne Hospital in New Jersey (each reporting charges averaging 12.6 times their costs, or a 12,600% average mark-up!). The top fifty hospitals identified and analyzed in the HEALTH AFFAIRS study, are:
- North Okaloosa Medical Center (FL)
- Carepoint Health-Bayonne Hospital (NJ)
- Bayfront Health Brooksville (FL)
- Paul B Hall Regional Medical Center (KY)
- Chestnut Hill Hospital (PA)
- Gadsden Regional Medical Center (AL)
- Heart of Florida Regional Medical Center (FL)
- Orange Park Medical Center (FL)
- Western Arizona Regional Medical Center (AZ)
- Oak Hill Hospital (FL)
- Texas General Hospital (TX)
- Fort Walton Beach Medical Center FL)
- Easton Hospital (PA)
- Brookwood Medical Center (AL)
- National Park Medical Center (AR)
- Petersburg General Hospital (FL)
- Crozer Chester Medical Center (PA)
- Riverview Regional Medical Center (AL)
- Regional Hospital of Jackson (TN)
- Sebastian River Medical Center (FL)
- Brandywine Hospital (PA)
- Osceola Regional Medical Center (FL)
- Decatur Morgan Hospital (AL)
- Medical Center of Southeastern Oklahoma (OK)
- Gulf Coast Regional Medical Center (FL)
- South Bay Hospital (FL)
- Fawcett Memorial Hospital (FL)
- North Florida Regional Medical Center (FL)
- Doctors Hospital of Manteca (CA)
- Doctors Medical Center (CA)
- Lawnwood Regional Medical Center & Heart Institute (FL)
- Lakeway Regional Hospital (TN)
- Brandon Regional Hospital (FL)
- Hahnemann University Hospital (PA)
- Phoenixville Hospital (PA)
- Stringfellow Memorial Hospital (AL)
- Lehigh Regional Medical Center (FL)
- Southside Regional Medical Center (VA)
- Twin Cities Hospital (FL)
- Olympia Medical Center (CA)
- Springs Memorial Hospital (SC)
- Regional Medical Center Bayonet Point (FL)
- Dallas Regional Medical Center (TX)
- Laredo Medical Center (TX)
- Bayfront Health Dade City (FL)
- Pottstown Memorial Medical Center (PA)
- Dyersburg Regional Medical Center (TN)
- South Texas Health System (TX)
- Kendall Regional Medical Center (FL)
- Lake Granbury Medical Center (TX)
Reasonable hospital charges are the costs of rendering care plus a reasonable profit. Experts have opined that the reasonable profit which should be afforded to hospitals for the care they render is between 25% and 40%.
Chargemaster rates bear no rational relationship to a hospital’s costs or to the amounts hospitals accept in arms-length transactions. Accordingly, “discounts” from full billed charges are illusory. Negotiating down from full billed charges using no data or information other than the artificially inflated chargemaster rates appearing on a bill and lien is never in your client’s best interests.
The only way to properly negotiate a hospital lien is by obtaining a Hospital Cost Report, using the same data sets relied upon in the HEALTH AFFAIRS study, but applying each itemized charge appearing on a specific client’s hospital bill to its respective revenue center’s cost-to-charge ratio reported under oath by that specific hospital, to estimate the actual cost of care for any given hospital visit. Your client’s itemized hospital bill is run against the hospital’s self-reported data and a detailed Cost Report generated, for your use in negotiations.
Using “cost of care” as the basis for negotiating the resolution of hospital liens transforms the discussion and yields dramatic results. Significant savings can more readily be negotiated if discussions are framed in terms of the profit a hospital needs to realize, from the treatment of your injured client. And to negotiate based on profits, you must know the costs. Much like knowing what a used car dealer paid for a car on its lot, Hospital Cost Reports “invert the argument,” allowing negotiations to be approached from a “cost-up” perspective, rather than groveling for a “discount” from unilaterally set, patently unreasonable chargemaster rates.
Contact me to learn more about using a Hospital Cost Report to resolve a problematic hospital lien.
Article Authored by Michael D. Walrath, Esq., Synergy Medical Bill Clinic
 See Ala. Code § 35-11-370; Alaska Stat. § 34.35.450; Ariz. Rev. Stat. Ann. § 33-931; Ark. Code Ann. § 18-46-101; Cal. Civ. Code § 3045.1; Colo. Rev. Stat. Ann. § 38-27-101; Conn. Gen. Stat. Ann. § 49-73; Del. Code Ann. tit. 25, § 4301; D.C. Code § 40-201; Ga. Code Ann. § 44-14-470; Haw. Rev. Stat. § 507-4; Idaho Code Ann. § 45-701; 770 Ill. Comp. Stat. Ann. 23/1; Ind. Code Ann. § 32-33-4-1; Iowa Code Ann. § 582; Kan. Stat. Ann. § 65-406; La. Rev. Stat. Ann. § 9:4751; Me. Rev. Stat. tit. 10, § 3411; Md. Code Ann., Com. Law § 16-601; Mass. Gen. Laws Ann. ch. 111, § 70a; Minn. Stat. § 514.68; Mo. Ann. Stat. § 430.230; Neb. Rev. Stat. Ann. §§52-401 & 52-402; Nev. Rev. Stat. Ann. § 108.590; N.H. Rev. Stat. Ann. § 448-A:1; N.J. Stat. Ann § 2a:44-35; N.M. Stat. Ann. § 48-8-1; N.Y. Lien Law § 189; N.C. Gen. Stat. Ann. § 44-49; N.D. Cent. Code Ann. § 35-18-01; Okla. Stat. Ann. tit. 42 §§43 & 44; Or. Rev. Stat. Ann. § 87.555; R.I. Gen. Laws Ann.§§9-3-4 to 9-3-8; S.D. Codified Laws § 44-12-1; Tenn. Code Ann. § 29-22-101; Tex. Prop. Code Ann. § 55.001; Utah Code Ann. § 38-7-1; Vt. Stat. Ann. tit. 18, § 2253; Va. Code Ann. § 8.01-66.2; Wash. Rev. Code Ann. § 60.44.010; Wis. Stat. Ann. § 779.80.
 Extreme Markup: The Fifty US Hospitals With The Highest Charge to Cost Ratios, by Ge Bai and Gerard F. Anderson – HEALTH AFFAIRS 34, No. 6 (2015) https://www.healthaffairs.org/doi/pdf/10.1377/hlthaff.2014.1414
 Witness Testimony of Dr. Gerard Anderson, House Energy and Commerce Committee, subcommittee on Oversight and Investigations June 24, 2004
Jason D. Lazarus is the managing partner and founder of the Special Needs Law Firm; a Florida law firm that provides legal services related to public benefit preservation, liens and Medicare Secondary Payer compliance. He is also a founding Principal and Chief Executive Officer of Synergy Settlement Services, which offers healthcare lien resolution, Medicare secondary payer compliance services, pooled trust services, settlement asset management services and structured settlements.