IN THE SUPREME COURT OF CALIFORNIA
JOEL K. PARNELL,
Plaintiff and Appellant,
S114888
v.
) Ct.App.
5
F038004
ADVENTIST HEALTH SYSTEM/WEST )
et al.,
Kern
County
Defendants and Respondents. )
Super. Ct. No. 239123SPC
Under the Hospital Lien Act (HLA; Civ. Code, §§ 3045.1-3045.6),1 a
hospital that treats a patient injured by a third party tortfeasor may assert a lien
against any judgment, settlement, or compromise recovered by that patient from
the tortfeasor in the amount of its “reasonable and necessary charges” (§ 3045.1).
In this case, a hospital received payment from a patient and his health insurer and
agreed to accept that payment as “payment in full” for its services. Nonetheless,
the hospital asserted a lien under the HLA, seeking to recover the difference
between its usual and customary charges and the amount received from the patient
and his insurer. We now consider whether the hospital may do so. We conclude
that it may not.
1
All further statutory references are to the Civil Code unless otherwise
indicated.
1
I.
Because this case comes before us after the grant of a motion for judgment
on the pleadings, we “accept[] as true all material facts alleged” in the complaint.
(Smiley v. Citibank (South Dakota) N.A. (1995) 11 Cal.4th 138, 146.) The
following facts appear from the allegations of the complaint.
Plaintiff Joel K. Parnell was injured in an automobile accident while a
passenger in a taxicab. At the time of the accident, Parnell had medical insurance
through the Wholesale Beer Distributor Industry Trust Health Plan (the Health
Plan). The Health Plan had contracted with Community Care Network (CCN), a
preferred provider organization, to provide discounts on medical care to its
beneficiaries (CCN agreement). Under the terms of the CCN agreement, the
Health Plan agreed to reimburse preferred providers in the CCN network for
services rendered to its beneficiaries, which included deductibles and copayments
owed by the beneficiaries themselves, in the amount specified in CCN’s provider
agreements. In turn, CCN agreed to accept those amounts as “payment in full for
Health Care Services or Benefits provided to Beneficiaries by CCN providers.”2
Parnell received treatment for his injuries from defendant San Joaquin
Community Hospital, which was owned and operated by defendant Adventist
Health System/West (collectively, the Community Hospital). The Community
Hospital was a preferred provider in CCN’s network and had entered into a
2
The relevant clause in the contract states: “Payor agrees to reimburse, or
directs its Claims Administrator to reimburse, the preferred providers according to
the Reimbursement specified in CCN’s Provider Agreements. Those
Reimbursement Amounts include deductible and copayment amounts and shall
constitute payment in full for Health Care Services or Benefits provided to
Beneficiaries by CCN providers.”
2
provider agreement with CCN (provider agreement). Under the provider
agreement, the Community Hospital authorized CCN “to act in its behalf in
contracting for the provision of” medical services. The Community Hospital
further agreed to provide medical services to the beneficiaries of any contracts
entered into by CCN on its behalf and to accept “as payment in full” the amount
set forth in the agreement which included any deductibles and copayments owed
by the beneficiaries themselves.3
As required by the provider agreement, the Community Hospital presented
a claim for payment for services provided to Parnell to the Health Plan. In
accordance with the CCN and provider agreements, the Health Plan reimbursed
the hospital in the amount specified in the provider agreement. Parnell also paid
the hospital his required share of the deductibles and copayments. Consistent with
the “payment in full” clause in the provider agreement, each bill received by
Parnell from the Community Hospital noted that Parnell had received a “CCN
discount” which “will be ‘written off’ by” the hospital.
3
The relevant clause in the provider agreement states: “(a) Contract
Hospital hereby agrees to provide Inpatient and Outpatient Services to
Beneficiaries, at the Reimbursement Amounts determined and established by CCN
through Payor Agreements with Payors, which Payor Agreements are incorporated
herein by reference. Such Reimbursement Amounts are set forth on Appendix A
attached hereto and incorporated herein. Contract Hospital agrees to accept the
payment specified in Paragraph 4.1 as payment in full for all Inpatient and
Outpatient Services rendered to Beneficiaries. If Contract Hospital renders a
service to a Beneficiary which does not appear in Paragraph 2.11 or 2.12, such as
in emergency, Contract Hospital agrees to accept as payment in full the rate as
provided in Paragraph 4.1 of this Contract. Payors will pay the Contract Hospital
for such services rendered in accordance with the terms and under the express
conditions of this Contract.”
3
Parnell later asserted a tort claim against the driver of the vehicle that struck
the taxicab. Soon thereafter, the Community Hospital filed a notice of lien
“against any final judgment, compromise, or settlement agreement made between”
Parnell and the driver pursuant to section 3045.1 in the amount of $14,450.40.
The lien sought to recover the difference between the “actual” cost of the medical
services and the negotiated amount received by the Community Hospital under the
provider agreement.
In response, Parnell filed the instant action against the Community
Hospital, alleging unfair business practices (Bus. & Prof. Code, § 17200 et seq.),
violation of the Consumer Legal Remedies Act (Civ. Code, § 1750 et seq.),
trespass to chattels, breach of third party contract, and negligence.4 After
answering the complaint, the Community Hospital filed a motion for judgment on
the pleadings. Following a hearing, the trial court granted the motion and held that
“[t]he Hospital’s lien rights provided by Civil Code Section 3045.1 to assert a lien
against a patient’s recovery from a third party tortfeasor to the extent of reasonable
and necessary charges of the hospital, whether by way of judgment, settlement or
compromise is not constrained by the Hospital’s negotiated discount with a health
insurance carrier.”5
The Court of Appeal reversed. According to the court, “based on the
purposes of the act as disclosed in the available legislative history, the [HLA] did
4
Parnell originally filed the lawsuit as a class action. He later sought and
received dismissal of the class action claims without prejudice.
5
The trial court originally took the motion under submission and then
conducted a court trial limited to liability and equitable issues. At the end of the
trial, the court took the matter under submission. The statement of decision only
resolved the motion for judgment on the pleadings, and the court entered judgment
in conformance with that ruling.
4
not, and was not intended to, rewrite California law of accord and satisfaction in
such a manner as to permit the hospital to assert a lien in the foregoing
circumstances.” The court therefore disagreed with Swanson v. St. John’s
Regional Medical Center (2002) 97 Cal.App.4th 245 (Swanson) and concluded
that “a hospital that has received full payment for services under the terms of its
contract with a medical insurance provider is not entitled to file a lien to recover
the difference between that payment and the hospital’s ‘usual and customary’
charges for similar services.” The court, however, declined to address the
applicability of the litigation privilege or “to sort out the causes of action and types
of relief to which appellant may be entitled.” Instead, it merely held
“that . . . based on the pleadings before the trial court, [Parnell] has stated a cause
of action for declaratory relief under the Unfair Practices Act (Bus. & Prof. Code,
§ 17200) and the judgment against him, dismissing this action, was erroneous.”
We granted review.
II.
We begin by determining whether a lien asserted under the HLA requires
the existence of an underlying debt owed by the patient to the hospital. Parnell
contends the lien does and, absent such a debt, the hospital may not assert the lien.
Citing Swanson, supra, 97 Cal.App.4th 245, the hospital counters that the lien is
statutory and does not require an underlying debt because it only “seeks recourse
against the third party tortfeasor that caused the injuries.” (Id. at p. 250.) As
explained below, we agree with Parnell.
Under the HLA, any hospital “which furnishes emergency and ongoing
medical or other services to any person injured by reason of an accident or
negligent or wrongful act . . . shall, if the person has a claim against another for
damages on account of his or her injuries, have a lien upon the damages recovered,
5
or to be recovered, by the person . . . to the extent of the amount of the reasonable
and necessary charges of the hospital and any hospital affiliated health
facility . . . .” (§ 3045.1.)6 “The lien shall apply whether the damages are
recovered, or are to be recovered, by judgment, settlement, or compromise.”
(§ 3045.2.) The hospital’s recovery on the lien is, however, limited “to an amount
which could be satisfied from 50 percent of the” amount recovered by the injured
person from the tortfeasor. (Newton v. Clemons (2003) 110 Cal.App.4th 1, 6; see
also § 3045.4.)
To assert the lien, the hospital need not provide notice of the lien to the
injured person. But the lien “shall not be effective . . . unless a written
notice . . . is . . . mailed . . . to each” alleged tortfeasor “known to the hospital
. . . .” (§ 3045.3.)7 If the tortfeasor pays the injured person “after the receipt of
6
Section 3045.1 states: “Every person, partnership, association, corporation,
public entity, or other institution or body maintaining a hospital licensed under the
laws of this state which furnishes emergency and ongoing medical or other
services to any person injured by reason of an accident or negligent or other
wrongful act not covered by Division 4 (commencing with Section 3201) or
Division 4.5 (commencing with Section 6100) of the Labor Code, shall, if the
person has a claim against another for damages on account of his or her injuries,
have a lien upon the damages recovered, or to be recovered, by the person, or by
his or her heirs or personal representative in case of his or her death to the extent
of the amount of the reasonable and necessary charges of the hospital and any
hospital affiliated health facility, as defined in Section 1250 of the Health and
Safety Code, in which services are provided for the treatment, care, and
maintenance of the person in the hospital or health facility affiliated with the
hospital resulting from that accident or negligent or other wrongful act.”
7
Section 3045.3 states: “A lien shall not be effective, however, unless a
written notice containing the name and address of the injured person, the date of
the accident, the name and location of the hospital, the amount claimed as
reasonable and necessary charges, and the name of each person, firm, or
corporation known to the hospital and alleged to be liable to the injured person for
the injuries received, is delivered or is mailed by registered mail, return receipt
(footnote continued on next page)
6
the notice as provided by Section 3045.3, without paying to the” hospital “the
amount of its lien claimed in the notice, or so much thereof as can be satisfied out
of 50 percent of the moneys due under any final judgment, compromise, or
settlement agreement,” then the tortfeasor “shall be liable to the” hospital “for the
amount of its lien claimed in the notice which the hospital was entitled to receive
as payment for medical care and services rendered to the injured person.”
(§ 3045.4.)8
(footnote continued from previous page)
requested, postage prepaid, to each person, firm, or corporation known to the
hospital and alleged to be liable to the injured person for the injuries sustained
prior to the payment of any moneys to the injured person, his attorney, or legal
representative as compensation for the injuries.
“The hospital shall, also, deliver or mail by registered mail, return receipt
requested, postage prepaid, a copy of the notice to any insurance carrier known to
the hospital which has insured the person, firm, or corporation alleged to be liable
to the injured person against the liability. The person, firm, or corporation alleged
to be liable to the injured person shall, upon request of the hospital, disclose to the
hospital the name of the insurance carrier which has insured it against the
liability.”
8
Section 3045.4 states in full: “Any person, firm, or corporation, including,
but not limited to, an insurance carrier, making any payment to the injured person,
or to his or her attorney, heirs, or legal representative, for the injuries he or she
sustained, after the receipt of the notice as provided by Section 3045.3, without
paying to the association, corporation, public entity, or other institution or body
maintaining the hospital the amount of its lien claimed in the notice, or so much
thereof as can be satisfied out of 50 percent of the moneys due under any final
judgment, compromise, or settlement agreement after paying any prior liens shall
be liable to the person, partnership, association, corporation, public entity, or other
institution or body maintaining the hospital for the amount of its lien claimed in
the notice which the hospital was entitled to receive as payment for the medical
care and services rendered to the injured person.”
7
By its terms, the HLA creates a “statutory nonpossessory lien.” (Mercy
Hospital & Medical Center v. Farmers Ins. Group of Companies (1997) 15
Cal.4th 213, 217 (Mercy Hospital).) The lien is “nonconsensual” and
“compensates a hospital for providing medical services to an injured person by
giving the hospital a direct right to a certain percentage of specific property, i.e., a
judgment, compromise, or settlement, otherwise accruing to that person.” (Ibid.)
Because a lien under the HLA is statutory, “[t]he Legislature is . . . free to
define and limit such a lien . . . .” (Mercy Hospital, supra, 15 Cal.4th at pp. 222-
223.) As such, to determine whether such a lien requires an underlying debt owed
by the patient to the hospital, we first look to the statutory language for guidance.
(See Wilcox v. Birtwhistle (1999) 21 Cal.4th 973, 977 (Wilcox) [“The words of the
statute are the starting point”].) Unfortunately, this language is less than clear.
On the one hand, the HLA expressly creates a “lien.” (§ 3045.1.) As a
general rule, “[a] lien is a charge imposed in some mode other than by a transfer in
trust upon specific property by which it is made security for the performance of an
act.” (§ 2872.) Because “[a] security interest cannot exist without an underlying
obligation” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1235), a
lien is typically “but an incident of the debt secured” (Lewis v. Booth (1935)
3 Cal.2d 345, 349) and “presupposes the existence of a debt” (Dorr v. Sacred
Heart Hosp. (Wis.Ct.App. 1999) 597 N.W.2d 462, 470 (Dorr)). By using the term
“lien,” the Legislature arguably intended to give a lien under the HLA the same
characteristics as a typical lien. Under this construction, a lien under the HLA
may not attach absent an underlying debt. (See id. at pp. 469-470.)
Other language in the HLA supports such a construction and suggests that a
lien under the HLA requires an underlying debt owed by the patient to the
hospital. For example, the HLA does not give a hospital an independent cause of
8
action against the third party tortfeasor. Instead, it gives the hospital a lien on any
“damages recovered” by the patient from a third party tortfeasor in the amount of
its “reasonable and necessary charges” for medical services provided to that
patient for injuries caused by the tortfeasor. (§ 3045.1, italics added.) Because the
lien seeks to compensate the hospital for services provided to the patient, the
statutory term “charges” presumably refers to “the charges made to the patient or
[his or] her health insurer.” (Grauberger v. St. Francis Hosp. (N.D.Cal. 2001) 149
F.Supp.2d 1186, 1191, vacated on other grounds, 169 F.Supp.2d 1172.) Under
this construction, “[t]he debt owed by [the patient] to the [h]ospital is the
foundation for the [h]ospital’s lien right.” (Ibid.) The language of section
3045.4—which limits the hospital to recovery of the “amount” it “was entitled to
receive as payment for the medical care and services rendered to the” patient if the
tortfeasor fails to pay the lien before paying the patient—also supports such a
construction. (See Nishihama v. City & County of San Francisco (2001) 93
Cal.App.4th 298, 308 [“The amount that a hospital is entitled to receive as
payment necessarily turns on any agreement it has with the injured person or the
injured person’s insurer”].)
On the other hand, the HLA does not distinguish between insured and
uninsured patients. Moreover, several of its provisions are directed at the third
party tortfeasor, not at the patient. For example, the HLA requires the hospital to
provide written notice of the lien to the tortfeasor, but not to the patient. (See
§ 3045.3.) If the tortfeasor fails to satisfy the lien before paying the patient, the
HLA makes the tortfeasor—but not the patient—liable for the lien amount. (See
§ 3045.4.) And the HLA exempts certain tortfeasors—but not patients—from its
provisions. (See § 3045.6.) By focusing on the tortfeasor—and not on the
9
patient—the HLA arguably does not make the patient’s debt to the hospital the
basis for the hospital’s lien right. (See Swanson, supra, 97 Cal.App.4th at p. 249.)
Because the statutory language is ambiguous, we look to the legislative
history for guidance. (See Wilcox, supra, 21 Cal.4th at p. 977.) This history
strongly suggests that a lien under the HLA requires an underlying debt owed by
the patient to the hospital. The HLA was originally enacted in 1961 to allow
hospitals to recoup losses suffered when a patient “failed to discharge any portion
of the hospital bill” even though that patient had “collected upon a cause of action
against another.” (Enrolled Bill Rep. Mem. from A. Pope to Governor Edmund
Brown on Sen. Bill No. 1140 (1961 Reg. Sess.) July 17, 1961, p. 1, italics added.)
The Legislature was therefore concerned with uninsured patients who failed to pay
any part of their debt to the hospital and enacted the HLA to give hospitals the
ability to collect on this debt. As such, the Legislature presumably intended that
the debt owed by the patient to the hospital be the underlying basis for any lien
asserted under the HLA.
The subsequent revisions to the HLA in 1992 do not compel a different
conclusion. In response to the difficulties encountered by hospitals in “keeping
their emergency rooms open,” the Legislature expanded the HLA to permit
hospitals to recover compensation for more than just the first 72 hours of
emergency care. (Assem. Com. on Judiciary, conc. in Sen. amends. on Assem.
Bill No. 2733 (1991-1992 Reg. Sess.) as amended June 25, 1992, p. 2.) Under the
revised (and current) version, the hospital could now recover for all “treatment,
care, and maintenance of the [patient] . . . resulting from [the] accident or
negligent or other wrongful act.” (§ 3045.1.) In making these revisions, however,
the Legislature was again concerned with “accident victims” who are “uninsured”
10
and who do not pay their debt to the hospital. (Assem. Com. on Judiciary, conc. in
Sen. amends. on Assem. Bill No. 2733 (1991-1992 Reg. Sess.) as amended
June 25, 1992, p. 2.) Thus, by expanding the HLA, the Legislature merely sought
to enhance the ability of hospitals to collect on this debt. It did not intend to alter
the underlying basis for the lien—i.e., the debt owed by the patient to the hospital
for its medical services.
Contrary to the assertion of the Community Hospital, the legislative history
behind section 3040—which addresses liens “asserted by a licensee of the
Department of Managed Care or the Department of Insurance” or by “a medical
group or an independent practice association”—is inapposite. (§ 3040, subd. (a).)
As an initial matter, we note that, although relevant, “a legislative expression of
the intent of an earlier act is not binding upon the courts in their construction of
the prior act . . . .” (Eu v. Chacon (1976) 16 Cal.3d 465, 470.) In any event, we
do not believe that the legislative history of section 3040 is helpful here.
Enacted in 2000 (Stats. 2000, ch. 848, § 1), section 3040, among other
things, limits the amount that certain medical care providers, such as health
maintenance organizations, may collect on a lien “for the recovery of money paid
or payable to or on behalf of an enrollee or insured for health care services
provided under a health care service plan contract or a disability insurance policy.”
(§ 3040, subd. (a).) For medical services “not provided on a capitated basis,”
these providers may only recover “the amount actually paid” for the services.
(§ 3040, subd. (a)(1).) For medical services “provided on a capitated basis,” these
providers may only recover “the amount equal to 80 percent of the usual and
customary charge for the same services by medical providers that provide health
care services on a noncapitated basis in the geographic region in which the
services were rendered.” (§ 3040, subd. (a)(2).) Although section 3040 expressly
11
exempts hospitals that assert a lien under the HLA from its provisions (§ 3040,
subd. (g)(3)), nothing in its language or history suggests the Legislature intended
to alter the HLA in any way. To the contrary, the legislative history indicates the
Legislature did not intend for section 3040 “to limit hospital liens now available
under” the HLA. (Sen. Judiciary Com., Rep. on Sen. Bill No. 1471 (1999-2000
Reg. Sess.) as amended Apr. 27, 2000, p. 4.)
The Community Hospital correctly notes that, in exempting liens asserted
under the HLA from the scope of section 3040, the Legislature was aware of
Satsky v. United States (S.D.Tex. 1998) 993 F.Supp. 1027 (Satsky)—which held
that a hospital may not assert a lien under Texas law if the patient’s debt to the
hospital has been satisfied. (Sen. Judiciary Com., Rep. on Sen. Bill No. 1471
(1999-2000 Reg. Sess.) as amended Apr. 27, 2000, p. 4.) But the discussion of
Satsky in the legislative history is hardly as conclusive as the Community Hospital
suggests. On the one hand, the committee reports do suggest that California law is
different from Satsky. (See, e.g., Sen. Judiciary Com., Rep. on Sen. Bill No. 1471
(1999-2000 Reg. Sess.) as amended Apr. 27, 2000, p. 4 [suggesting that, unlike in
Texas, “California hospitals have an independent right to assert a lien under” the
HLA].) On the other hand, the same reports state that the law surrounding such
liens is still evolving and, in doing so, imply that California courts could still
follow Satsky. (Sen. Judiciary Com., Rep. on Sen. Bill No. 1471 (1999-2000 Reg.
Sess.) as amended Apr. 27, 2000, p. 4 [observing that Satsky “merely illustrates
how the area of health care liens is evolving, as more and more consumers become
aware of and challenge billing practices of health care service plans”].) Given the
equivocal nature of the legislative history of section 3040, we decline to rely on it.
Indeed, our construction of another lien statute analogous to the HLA prior
to the enactment of section 3040 confirms that a lien under the HLA requires the
12
existence of an underlying debt owed by the patient to the hospital. In City & Co.
of San Francisco v. Sweet (1995) 12 Cal.4th 105, 108 (Sweet), we determined the
applicability of the common fund doctrine9 to a lien asserted under Government
Code section 23004.1, which “gives a county a first lien for the cost of medical
care it has provided to an injured person against any judgment that person recovers
from a third person who is responsible for the injury.” (Sweet, at p. 108.)
Specifically, we considered “whether that lien is subject to equitable reduction for
a portion of the attorney fees incurred by the injured party in recovering damages
from the person responsible for the injury” (ibid.), and concluded that it is not (id.
at p. 118).
The basis for this conclusion was our finding that the lien claimant, the City
and County of San Francisco (County), and the patient had a creditor-debtor
relationship. (See Sweet, supra, 12 Cal.4th at p. 117.) Thus, by asserting the lien,
the County merely sought to recover on the debt owed by the patient for medical
services provided by the County. (See id. at p. 118.) Because the County, as the
patient’s creditor, did “not have an interest in recovery in common with the”
patient (id. at p. 117), we concluded that the common fund doctrine did not apply
and that “the amount of the lien may not be reduced or diminished by apportioning
attorney fees . . . .” (Id. at p. 118.)
In further support, we noted that our reasoning accorded with the reasoning
of most of “the courts of our sister states that have considered the question”
9
“The common fund doctrine recognizes the common law ‘historic power of
equity to permit the trustee of a fund or property, or a party preserving or
recovering a fund for the benefit of others in addition to himself, to recover his
costs, including his attorneys’ fees, from the fund or property itself or directly
from other parties enjoying the benefit.’ ” (Sweet, supra, 12 Cal.4th at p. 110.)
13
(Sweet, supra, 12 Cal.4th at p. 118)—including the Montana Supreme Court’s
decision in Sisters of Charity of Providence of Mont. v. Nichols (Mont. 1971) 483
P.2d 279. (Sweet, at p. 118.) Specifically, we cited with approval the Montana
Supreme Court’s conclusion that a statutory lien asserted by a hospital against its
patient’s recovery from a third party tortfeasor “was based on a debt owed to the
hospital” by the patient. (Ibid., italics added.)
Although Sweet addressed Government Code section 23004.1, we find its
reasoning equally applicable here. Like Government Code section 23004.1,10 the
10
Government Code section 23004.1 states: “(a) Subject to the provisions of
Section 23004.3, in any case in which the county is authorized or required by law
to furnish hospital, medical, surgical, or dental care and treatment, including
prostheses and medical appliances, to a person who is injured or suffers a disease,
under circumstances creating a tort liability upon some third person to pay
damages therefor, the county shall have a right to recover from said third person
the reasonable value of the care and treatment so furnished or to be furnished, or
shall, as to this right, be subrogated to any right or claim that the injured or
diseased person, his guardian, personal representative, estate, or survivors has
against such third person to the extent of the reasonable value of the care and
treatment so furnished or to be furnished.
“(b) The county may, to enforce such rights, institute and prosecute legal
proceedings against the third person who is liable for the injury or disease in the
appropriate court, either in its own name or in the name of the injured person, his
guardian, personal representative, estate, or survivors. Such action shall be
commenced within the period prescribed in Section 340 of the Code of Civil
Procedure. In the event that the injured person, his guardian, personal
representative, estate, survivors, or either of them brings an action for damages
against the third person who is liable for the injury or disease, the county’s right of
action shall abate during the pendency of such action, and continue as a first lien
against any judgment recovered by the injured or diseased person, his guardian,
personal representative, estate, or survivors, against the third person who is liable
for the injury or disease, to the extent of the reasonable value of the care and
treatment so furnished or to be furnished. When the third person who is liable is
insured, the county shall notify the third person’s insurer, when known to the
county, in writing of the lien within 30 days following the filing of the action by
(footnote continued on next page)
14
HLA gives a hospital the right to assert a lien against any judgment recovered by a
patient from a third party tortfeasor for the reasonable value of the medical
services furnished to that patient. (See Civ. Code, §§ 3045.1, 3045.2.) And, like
Government Code section 23004.1 (see Sweet, supra, 12 Cal.4th at p. 120 [holding
that a county hospital may still recover directly from the patient notwithstanding
Gov. Code, § 23004.1]), the HLA is “not exclusive, and the hospital may still
proceed directly against the patient for any unpaid balance” (Mercy Hospital,
supra, 15 Cal.4th at p. 217). For purposes of determining whether a lien under the
HLA requires an underlying debt, we therefore see no material difference between
Government Code section 23004.1 and the HLA.
Indeed, Sweet recognized the similarities between the two statutory
schemes and relied in part on these similarities in concluding that a lien under
Government Code section 23004.1 is not subject to equitable apportionment.
(See Sweet, supra, 12 Cal.4th at p. 122, fn. 11 [noting that the HLA, like Gov.
Code, § 23004.1, does not expressly preclude the applicability of the common
fund doctrine].) A recent Court of Appeal decision has also recognized these
similarities and, consistent with Sweet, held that the common fund doctrine does
not apply to a lien asserted under the HLA. (Day v. Alta Bates Medical Center
(2002) 98 Cal.App.4th 243, 252 (Day).) In doing so, the Court of Appeal
concluded that the two statutory lien schemes “should be similarly construed and
(footnote continued from previous page)
the injured or diseased person, his guardian, personal representative, estate, or
survivors, against the third person who is liable for the injury or disease; provided,
however, that failure to so notify the insurer shall not prejudice the claim or cause
of action of the injured or diseased person, his guardian, personal representative,
estate, or survivors, or the county.”
15
applied.” (Id. at p. 253.) We agree and conclude that a lien under the HLA, like a
lien under Government Code section 23004.1, is premised on a creditor-debtor
relationship between the hospital and the patient. (Sweet, at p. 117; Day, at
p. 252.) In other words, a lien under the HLA is based on a debt owed by the
patient to the hospital. (See Sweet, at pp. 117-118; Day, at pp. 252-253.)
The Community Hospital’s contention that any recovery on a lien under the
HLA comes from the tortfeasor—and not from the patient—does not alter our
conclusion. As explained above, a lien under the HLA is simply a legal claim
upon the property of another in satisfaction of a debt owed by a patient for medical
services provided by the lien claimant. Thus, absent an underlying debt, the
hospital may not recover on the lien even assuming that the recovery comes from
the tortfeasor.
Indeed, a comparison of Government Code section 23004.1 and the HLA
makes this clear. Under Government Code section 23004.1, subdivision (a), the
county is “subrogated to any right or claim that the injured or diseased person . . .
has against” the third party tortfeasor “to the extent of the reasonable value of the
care and treatment” furnished. The county may file its own action against the
tortfeasor.11 (See Gov. Code, § 23004.1, subd. (b).) By contrast, the HLA only
gives a hospital the right to file its own action against the tortfeasor if that
tortfeasor fails to pay the lien before paying the patient. (See Civ. Code,
§ 3045.4.) Thus, recovery on a lien under Government Code section 23004.1 is
more likely to constitute recovery from the tortfeasor—and not from the patient—
11
If the patient files his or her own action against the tortfeasor, the county
hospital’s right of action abates and continues as “a first lien against any judgment
recovered by the” patient. (Gov. Code, § 23004.1, subd. (b).)
16
than recovery on a lien under the HLA. Nonetheless, we held that a lien under
Government Code section 23004.1 requires the existence of an underlying debt
owed by the patient to the county. (See Sweet, supra, 12 Cal.4th at p. 118.) As
such, we can hardly reach a contrary conclusion as to a lien asserted under the
HLA.
We therefore find inapposite the other statutory liens cited by the
Community Hospital. (See, e.g., Lab. Code, §§ 3856, subd. (b) [employer’s lien
for worker’s compensation benefits], 3865 [Employment Development
Department lien for compensation to the employee for lost earnings], 4417
[Asbestos Workers’ Account lien]; Health & Saf. Code, § 121270, subd. (m)
[AIDS Vaccine Victims Compensation Fund lien].) These statutes, unlike
Government Code section 23004.1 and the HLA (see ante, at pp. 12-16), do not
reference an independent debt owed by the beneficiary—i.e., an employee or
vaccine victim—to the lien claimant.12 In any event, the unique nature of hospital
liens make any comparison to these other statutory liens dubious at best.
12
In particular, we do not find persuasive the hospital’s analogy of a lien
under the HLA to a worker’s compensation lien. Unlike the hospital liens (see
Sweet, supra, 12 Cal.4th at pp. 117-118; Day, supra, 98 Cal.App.4th at p. 253), a
worker’s compensation lien requires equitable apportionment of any attorney’s
fees incurred (Lab. Code, § 3856, subd. (b); see also Quinn v. State of California
(1975) 15 Cal.3d 162, 170 [holding that Lab. Code, § 3856, subd. (b) “requires”
“the application of the equitable principle of reasonable apportionment”]).
Moreover, the employer’s recovery on a worker’s compensation lien depends
“entirely upon the worker’s success in his third party suit.” (Quinn, at p. 168,
fn. 10.) By contrast, a hospital may still pursue an action directly against the
patient for the amount owed for its services notwithstanding its lien. (See Sweet,
at p. 120; Mercy Hosp., supra, 15 Cal.4th at p. 217.)
17
In reaching this conclusion, we agree with the vast majority of courts from
our sister states that have construed hospital lien statutes analogous to the HLA.13
We therefore disapprove of Swanson v. St. John’s Regional Medical Center,
supra, 97 Cal.App.4th 245, to the extent it conflicts with our decision today and
hold that a lien under the HLA requires the existence of an underlying debt owed
by the patient to the hospital and that, absent such a debt, no lien may attach.
III.
We now apply our holding to this case. For the medical services provided
to Parnell, the Community Hospital received payment from Parnell and the Health
13
(See, e.g., Satsky, supra, 993 F.Supp. at p. 1029 [holding that the hospital
lien depends “ ‘upon the existence’ ” of a debt]; Trevino v. HHL Financial Servs.,
Inc. (Colo. 1997) 945 P.2d 1345, 1350 [“The Legislature clearly intended to offer
hospitals additional protection for medical services debts by enacting the hospital
lien statute”]; Maxwell v. South Miami Hospital Foundation, Inc.
(Fla.Dist.Ct.App. 1980) 385 So.2d 127, 127 (Maxwell) [holding that
extinguishment of the underlying debt extinguished the hospital’s statutory lien];
Kenneth F. White, Chtd. v. St. Alphonsus Reg. Medical Center (IdahoCt.App.
2001) 31 P.3d 926, 931 [“[a] hospital . . . is a creditor who possesses a lien on the
tort recovery to secure payment of its charges for services provided to the injured
party”]; Lopez v. Morley (Ill.Ct.App. 2004) 817 N.E.2d 592, 599 [the hospital’s
“lien covers only the amounts of the debt owed”]; Cullimore v. St. Anthony
Medical Center, Inc. (Ind.Ct.App. 1999) 718 N.E.2d 1221, 1225 [“In the case of a
hospital lien, the lien secures the underlying debt for medical treatment and care”];
Wright v. First Nat’l Bank in Albuquerque (N.M. 1997) 941 P.2d 498, 501
(Wright) [holding that a hospital may not assert a statutory lien in an amount
exceeding the amount it agreed to accept from the patient’s insurer]; Maber, Inc. v.
Factor Cab Corp. (1963) 244 N.Y.S.2d 768, 772 [holding that satisfaction of a
hospital’s lien “is ultimately that of the original or underlying debts incurred by
the injured person”]; Dorr, supra, 597 N.W.2d at p. 470 [holding that the hospital
lien statute “requires an underlying debt to support the lien”]; but see Rogalla v.
Christie Clinic, P.C. (Ill.Ct.App. 2003) 794 N.E.2d 384, 392 (Rogalla) [holding
that the hospital’s statutory lien was not based on the patient’s debt to the
hospital].)
18
Plan in the amount specified in the hospital’s provider agreement. Under the CCN
and provider agreements, the Community Hospital agreed to accept this amount as
“payment in full.” As conceded by the Community Hospital, Parnell’s entire debt
to the hospital has therefore been extinguished. Indeed, the bill sent by the
Community Hospital to Parnell noted the hospital’s usual and customary charges
and stated that the difference between these charges and the amount owed under
the insurance contract “is the CCN discount received for using a CCN facility”
and will be “ ‘written off’ ” by the hospital. Because Parnell no longer owes a
debt to the hospital for its services, we conclude that the hospital may not assert a
lien under the HLA against Parnell’s recovery from the third party tortfeasor.
In reaching this conclusion, we follow the lead of most of our sister courts
that have addressed the same question under hospital lien statutes analogous to the
HLA.14 To the extent our sister courts have reached a contrary conclusion, most
of those cases are distinguishable.
For example, in Alaska Native Tribal Health Consortium v. Settlement
Funds Held For Or To Be Paid On Behalf Of E.R. (Alaska 2004) 84 P.3d 418
14
(See Satsky, supra, 993 F.Supp. at p. 1027 [“As there is no debt, there can
be no lien”]; Maxwell, supra, 385 So.2d at p. 127 [holding that settlement of the
debt underlying the hospital’s lien extinguished the lien]; Lopez v. Morley, supra,
817 N.E.2d at p. 599 [holding that a hospital’s lien “covers only the amounts of
the debt owed”]); Midwest Neurosurgery, P.C. v. State Farm Ins. Cos. (Neb.
2004) 686 N.W.2d 572, 581 [limiting the hospital’s lien to the amount the hospital
agreed to accept as payment in full from the patient and his insurer]; Wright,
supra, 941 P.2d at pp. 500-501 [holding that the hospital could not assert a lien for
its full charges because it had agreed to accept the insurance payment as payment
in full]; Dorr, supra, 597 N.W.2d at p. 473 [holding that “the hospital is precluded
from making any claim for payment” using the lien statute because its provider
agreement “negates the existence of a debt owed by the” patient “to the
hospital”].)
19
(Alaska Native Tribal Health Consortium), the Alaska Supreme Court held that a
hospital may assert a lien against a native Alaskan even though federal law
provides that patient with free health care. (Id. at p. 421.) In reaching this
conclusion, the court relied on the fact that “federal law makes clear that [the
native] does not personally have to owe [the hospital] anything for a debt to arise
from his receipt of free medical services . . . .” (Id. at p. 425.) By contrast, there
is no analogous federal law implicated in this case. In any event, Alaska Native
Tribal Health Consortium does not appear to be applicable to California’s hospital
lien statutes because recovery under Alaska’s hospital lien statute is subject to
equitable apportionment under the common fund doctrine. (Id. at pp. 421, 434.)
As noted earlier (see ante, at pp. 12-15), we have refused to apply the common
fund doctrine to California’s hospital liens (see Sweet, supra, 12 Cal.4th at p. 118;
Day, supra, 98 Cal.App.4th at p. 253.)
Likewise, Andrews v. Samaritan Health System (Ariz.Ct.App. 2001) 36
P.3d 57, 61 (Andrews), disapproved on other grounds in Blankenberger v.
Jonovich (Ariz. 2003) 71 P.3d 910, is inapposite. In Andrews, the Arizona Court
of Appeal concluded that a hospital could assert a lien to recover the difference
between the contract payments and its customary charges. But, unlike the
Community Hospital’s provider agreement, most of the provider agreements at
issue in Andrews expressly reserved the hospital’s “right to recapture” this
difference. (Id. at p. 61.) Although Andrews did extend its holding to a provider
agreement analogous to the Community Hospital’s agreement, it did so based on
the language of Arizona’s hospital lien statute which, unlike the HLA, states that a
hospital “ ‘is entitled to a lien for the customary charges for care and treatment . . .
of an injured person’ without specifying further action by the hospitals.” (Ibid.,
italics added.)
20
Only Rogalla, supra, 794 N.E.2d at page 392, squarely supports the
hospital’s interpretation of the HLA. In that case the court held that a hospital lien
seeks to recover the tortfeasor’s debt to the hospital, and not the patient’s debt.
(But see Lopez v. Morley, supra, 817 N.E.2d at p. 599 [holding that the lien
“covers only the amounts of the debt owed”].) Rogalla, of course, is not binding
on us. Based on the applicable legislative history and our decision in Sweet, we
decline to follow it.
In doing so, we recognize that California hospitals face mounting financial
pressures, and that many, if not all, of these hospitals may “face a genuine
financial crisis that threatens their ability to continue to serve their communities.”
(Cal. Healthcare Assn., Special Rep., California Hospitals’ Financial Condition:
On Life Support (June 2004) p. 1.) We also recognize that our ruling today may
result in a significant hardship for many of these hospitals. Indeed, we have no
doubt that, as claimed by the Community Hospital and various amici curiae,
“hospitals negotiate and enter into discounted rate agreements with the expectation
that they will be entitled to recover additional funds from other payors who have
an obligation to pay for the hospital’s services.” Although we have no wish to
exacerbate the financial crisis faced by California hospitals, our job is to construe
our statutes in accordance with the Legislature’s intent and the controlling case
law. As such, hospitals may look to the Legislature for relief from these financial
pressures, but not to this court.
In any event, we believe that the solution lies in the hands of the hospitals.
By precluding the Community Hospital from asserting a lien under the HLA in
this case, we “simply give[] effect to” its contracts. (Lopez v. Morley, supra, 817
N.E.2d at p. 599.) If hospitals wish to preserve their right to recover the difference
between usual and customary charges and the negotiated rate through a lien under
21
the HLA, they are free to contract for this right. Our decision today does not
preclude hospitals from doing so.15 (See, e.g., Andrews, supra, 36 P.3d at p. 61.)
Accordingly, we conclude that the Community Hospital may not assert a lien
under the HLA against Parnell’s recovery from the third party tortfeasor.16
15
Contrary to Parnell’s assertion, neither Insurance Code section 10133.2 nor
Health and Safety Code section 1373.18 precludes hospitals from contractually
preserving their right to recover “reasonable and necessary charges” pursuant to a
lien under the HLA. (Civ. Code, § 3045.1.) Both statutes limit only the
“copayment amounts” recoverable by a health care provider pursuant to contract.
(Ins. Code, § 10133.2; Health & Saf. Code, § 1373.18.) Because recovery
pursuant to a lien under the HLA is contingent on the patient’s recovery of
damages from a third party tortfeasor, it is not a patient copayment. Indeed,
nothing in either Insurance Code section 10133.2 or Health and Safety Code
section 1373.18 purports to limit recovery under the HLA.
16
Because our holding relies solely on the absence of a debt underlying the
lien, we do not reach, and express no opinion on, the following issues: (1)
whether Olszewski v. Scripps Health (2003) 30 Cal.4th 798, and Hanif v. Housing
Authority (1988) 200 Cal.App.3d 635, apply outside the Medicaid context and
limit a patient’s tort recovery for medical expenses to the amount actually paid by
the patient notwithstanding the collateral source rule; (2) whether the HLA
violates due process; and (3) whether hospitals may waive their rights under the
HLA.
Like the Court of Appeal, we also decline to address “the issue of litigation
immunity for filing notices of liens” and leave the sorting out of “the causes of
action and types of relief to which [Parnell] may be entitled” to the proceedings on
remand.
22
IV.
We affirm the judgment of the Court of Appeal.
BROWN, J.
WE CONCUR:
GEORGE,
C.J.
KENNARD,
J.
BAXTER,
J.
WERDEGAR,
J.
CHIN,
J.
MORENO,
J.
23
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. Name of Opinion Parnell v. Adventist Health System/West
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 106 Cal.App.4th 580
Rehearing Granted
__________________________________________________________________________________
Opinion No.
S114888Date Filed: April 4, 2005
__________________________________________________________________________________
Court:
SuperiorCounty: Kern
Judge: Sidney P. Chapin
__________________________________________________________________________________
Attorneys for Appellant:
King & Hanagami, William K. Hanagami; Law Offices of Ralph B. Wegis and Ralph B. Wegis for Plaintiffand Appellant.
Ian Herzog; Sharon Arkin; David Rosen; James Sturdevant; Bruce M. Brusavich; Donald de Camara; Scott
H. Z. Sumner; Dan Wilcoxen; Lea-Ann Tratten; Enser & Chang and Stuart B. Esner for Consumer
Attorneys of California as Amici Curiae on behalf of Plaintiff and Appellant.
__________________________________________________________________________________
Attorneys for Respondent:
Latham & Watkins, Robert D. Crockett, Sara Mars; Law Offices of Deborah Giles and Deborah Giles forDefendants and Respondents.
Manatt, Phelps & Phillips, Barry S. Landsberg and Joanna S. McCallum for Catholic Healthcare West,
Scripps Health and the Regents of University of California as Amici Curiae on behalf of Defendants and
Respondents.
Lois Richardson for California Healthcare Association as Amicus Curiae on behalf of Defendants and
Respondents.
Friestad & Giles, Deborah Giles and Christine Friestad for Scripps Health as Amicus Curiae on behalf of
Defendants and Respondents.
Dennis J. Herrera, City Attorney (San Francisco), Joanne Hoeper and David B. Newdorf, Deputy City
Attorneys; Manuela Albuquerque, City Attorney (Berkeley); and Casey Gwinn, City Attorney (San Diego),
for City and County of San Francisco and League of California Cities as Amici Curiae. Horvitz & Levy, Lisa Perrochet, H. Thomas Watson and Orly Degani for Association of California
Insurance Companies, Personal Insurance Federation of California and American Insurance Association as
Amici Curiae.
Counsel who argued in Supreme Court (not intended for publication with opinion):
William K. HanagamiKing & Hanagami
11661 San Vicente Blvd., Suite 500
Los Angeles, CA 90049-5113
(310) 996-1101
Bruce M. Brusavich
523 West Sixth Street, Suite 524
Los Angeles, CA 90014
(213) 630-1990
Deborah Giles
Law Offices of Deborah Giles
4665 Alta Rica Drive
La Mesa, CA 91941
(619) 579-1735
Barry S. Landsberg
Manatt, Phelps & Phillips
11355 W. Olympic Boulevard
Los Angeles, CA 90064
(310) 312-4000
| Date: | Docket Number: |
| Mon, 04/04/2005 | S114888 |
