SUBROGATION LIENS Personal Injury Cases JUDY KOSTURA Before

SUBROGATION & LIENS Personal Injury Cases JUDY KOSTURA �

Before handing over your client’s money to health plans and hospitals … learn the rules.

Rule 1. Read.

Rule 2. What kind of interest or lien asserted? Subrogation vs Reimbursement vs Assignment Case law: “no meaningful difference between the two. ” Wausau v Wedel Tx. SCt 06 08 2018. BUT: BAM! Blue, Aldous and Malouf & $114 M jm for Hill. Aldous v Darwin Nat’l Assurance Co 5 th Cir, 03/16/17: “Darwin, get off your Nat’l Ass and sue third party, because your subro interest vs 3 rd party is not a right of reimb against your own insured. ”

• Rule 3. Who is the Plaintiff in relationship to the subrogation interest or lien asserted? child Employee participant; or injured spouse; or derivative claimant Wrongful death or estate Start early. Be consistent. Be strategic.

Ch. 140 Civil Prac. & Rem. Code For insured health, disability, occ injury; & self-funded state & local gov’t plans (not self funded ERISA) Not w/c, not M/Care, not M/Caid (see separate rules) 1/3 1/3 of 3 rd party recovery if not enough $ No subrogation to PIP No subrogation to UM/UIM if ptf or family purchased it No subro to children’s or w/d recoveries (but yes to parents’ and estate’s recoveries)

CHILDREN “Neither the next friend nor the parent of a minor child is authorized to … throw away” the “substantial rights” of a minor child; Lowery v. Berry, 269 S. W. 2 d 795, 797 (Tex. 1954).

Incompetent or disabled claimant requiring a special needs trust? ACS v Griffin: SNT was subject to subro interest but wife’s* derivative claim was not. [*ex-wife as of appeal. Get a conflicts waiver. ]

Wrongful death cases: In the Matter of Boisseau, U. S. District Court, Northern District of New York, (CV-00549 -LEK-ATB Jan. 30, 2017) The probate exception operates as a bar to the exercise of federal jurisdiction. When probate exception applies, no ERISA preemption. But see: Publix Super Market, Inc. , v. Figareau, 2019 WL 2635747 (U. S. D. Ct. M. D. Florida June 27, 2019) Hospital Lien does not attach to w/d proceeds. Medicare’s interest does not attach to w/d proceeds. Sigmundik: if you bring both w/d and survival claim, allocate.

Rule 4: Who is the employer through which the health plan arises? Private industry: often ERISA; If insured, Ch. 140 will regulate If state or local government Never ERISA, Ch. 140 will regulate If church, not ERISA; Ch. 140 will regulate

ERISA Claims: Insured plans regulated by Ch 140; self funded plans are not. Pull back the curtain on self funded ERISA plans with stop loss coverage

Rule 5. What is source of money out of which the subrogated recovery is sought? 3 rd party money: Subrogation interest or lien attaches 1 st party PIP: if the subro interest is regulated by Texas CPRC Ch. 140, then no subro 1 st party UM/UIM or Med Pay: if the subro interest is regulated by Texas CPRC Ch. 140, then no subro IF client or immediate family bought the 1 st party coverage. BUT: Subro interest MIGHT attach if someone else bought the 1 st party coverage and Plan and SPD clearly reach it (US Airways: self funded ERISA plan did not specify. ) 3 rd party $: hospital lien and child support lien attach 1 st party $: Hospital lien: NO. Child support lien: YES. Medicare subro interest does not attach to settlement with self insured individual (non-business) defendant

Rule 6. The statutory basis for the interest or lien MATTERS a/k/a: when in doubt read the instructions

Per Ahlborn, Medicaid gets only its pro-rata share. Not a waiver; don’t beg. Warning: Ahlborn killed off by Congress. Not.

Medicare: Start early and ID the body parts and dx codes; Lawyers liable for failing to repay. Repay past medical bills; Medicare Set Aside: Required? if not enough $$, document why no MSA [WARNING: MSA rules coming in August? !? ] Providers MUST bill Medicare within a year or only collect co-pay and deductible. Subro interest attaches to 3 rd party, first party UM/UIM, PIP, Med Pay BUT not to W/D COA nor to pmt from unins indiv deft Medicare Advantage plans have the same rights as Gov’t M/C (but supplements do not; likely regulated by Ch. 140)

Do providers have to bill Medicare? How much can they charge if the bill the patient or 3 rd party claim? We have ANSWERS!

< 120 days is too early for providers to bill Medicare > 1 year is too late to bill Medicare 121 -364 days is JUST RIGHT to bill Medicare Failure to timely bill Medicare: providers cannot bill patient for more than patient co-pay and deductible (Claims Manual 70. 4 and 09/19/17 CMS Learning Article)

https: //www. cms. gov/Outreach-and-Education/Medicare-Learning. Network-MLN/MLNMatters. Articles/downloads/SE 17018. pdf.

https: //www. cms. gov/Outreach-and. Education/Medicare-Learning-Network. MLN/MLNMatters. Articles/downloads/SE 17018. pdf

https: //www. cms. gov/Outreach-and-Education/Medicare-Learning. Network-MLN/MLNMatters. Articles/downloads/SE 17018. pdf

State law and Prop Code 55. 002(a) applies. In re North Cypress: conduct discovery on amount Medicare would have paid. Limiting charge applies. https: //www. medicare. gov/yourmedicare-costs/part-a-costs/assignment/costs-andassignment. html

A 6 con’t on next slide https: //www. cms. gov/Outreach-and. Education/Medicare-Learning-Network. MLN/MLNMatters. Articles/downloads/S E 17018. pdf

A 6 continued: Requiring cost sharing… great, if enforceable

A health care provider who has not entirely opted out of Medicare but who does not accept Medicare for this patient’s treatment is limited in the amount the provider can charge and collect. The “limiting charge” is a maximum of 15% over Medicare’s approved amount for most services. https: //www. medicare. gov/your-medicare-costs/part-acosts/assignment/costs-and-assignment. html

https: //www. cms. gov/Outreach-and. Education/Medicare-Learning-Network. MLN/MLNMatters. Articles/downloads/SE 17018. pdf

Danger, Will Robinson! (Will defendants claim plaintiffs cannot recover if providers cannot recover, or does collateral source rule apply? ) https: //youtu. be/OWw. OJl. OI 1 n. U

Workers’ Compensation Update: In Re Old Republic, June 12, 2019, Tyler court: TDI has exclusive juris to decide subro dispute. Not sure the Supreme Court agrees: Wausau v Wedel (Tex 2018) and Exxon Mobil v Ins Co State of Pa (Tex. 2019): Waivers in contract are effective to waive subrogation. Allocation: Fort Bend County v. Norsworthy, 2019 pet. den. : giving 3 rd party $ to kids preserves Mom’s ongoing worker’s comp survivor benefits.

Rule 7. Know the statute and case law re: hospital liens

Hospital lien money at work healing the poor at North Cypress Medical Center

HB 2929 Effective date 06/10/2019: Q: cap apply to liens already on file? Or just liens filed > 06/10/2019? Hospitals want retroactive application of “admission” …

NOTE: this provision IS a reiteration of existing law:

Definition of Admission: The legislature fibbed about “not changing the existing law” [speaker’s personal opinion]:

You are on constructive notice; to challenge the hospital’s lien: 1) Look for mistakes in the lien. 2) Bill must be the regular and reasonable rate Property Code § 55. 002(a). Speegle: liened gross charges, but De Escabedo: A Medicare eligible patient should not pay 3 -4 x the Medicare rate. Affordable Care Act: outlaws chargemaster rate or gross charges for indigent patients; IRS Code 501(r) (some say if 3 rd party claim, then Pt not indigent). 3) Hospital must timely bill available health insurance. Ch. 146 and CMS Learning Article 09/19/2017 and Claims Manual 70. 4 limit bill amount during first year to Medicare rate (if Medicare billed) or Medicare +15% if liability claim billed; limits to co-pay and deductible after billing period expires. Enacted after Speegle and (my opinion) overrules Speegle

In re N Cypress Med Center (Tex. 04/27/18) Allows discovery on hospital lien for uninsured patient “The reimbursement rates sought, taken together, reflect the amounts the hospital is willing to accept from the vast majority of its patients as payment in full for such services. While not dispositive, such amounts are at least relevant to what constitutes a reasonable charge. ” “The fact that explanations exist for disparate reimb rates does not render them wholly immaterial. ” Discovery to be produced: • • All k’s re nego rates for Ptf’s hospital services including from Aetna, 1 st Care, UHC, BCBS, Medicare, Medicaid; Annual Medicare cost reports for the year Ptf was treated; Medicare reimbursement rate for x-rays, CT scans, lab tests and ER services; Medicaid reimbursement rate for x-rays, CT scans, lab tests and ER services. [Presage Mitigation of Damages as the wrong issue? ] “The issue is not whether Ptf may take advantage of [health] ins she did not have… but what a reasonable and regular rate would be. ”

In re Halliburton, mandamus relief denied, No. 17 -0042, mitigation of damages arguments rejected by the Texas Supreme Court which disallowed discovery of reimbursement rates by health insurers: Halliburton argued: • Judge abused discretion in denying Halliburton discovery vital to its mitigation of damages defense; • Discovery is relevant to a valid defense • Discovery is not barred by collateral source rule • Halliburton had no adequate remedy on appeal • The denied discovery (of insurance reimb rates) goes to the heart of Halliburton’s defense • Public policy interests weigh in favor of granting relief. • 2019 legislature rejected proposed legislation declaring failure to mitigate by not using health insurance (Ct follows legislative lead, does not legislate from bench. )

In re North Cypress, consistent with Allstate Indemnity Co. v Memorial Hermann Health System, 14 -13 -00307 -CV, (Tex. Civ. App. June 26, 2014) allowing Allstate to audit bill and challenge amount. Pleading DTPA and fraudulent lien and avoiding Med Mal report requirements: see Mc. Allen Hospitals v Gomez, No. 13 -12 -00421 -CV 02/28/2013 Don’t claim mental anguish or you may have to file a med mal expert report. Don’t claim Ptf is a 3 rd party beneficiary to health insurance reimbursement contract with hospital or Ptf may be subject to any arbitration clause in that contract. Cardon Healthcare Network, Inc. ; and Seton Healthcare Services of Austin v. Goldberg (Tex. App. – Austin, March 2, 2018) No. 03 -17 -00474 -CV

Discovery: Go to the hospital website. Identify all plans accepted by the hospital:

For each health plan accepted by the hospital, ask: 1. For plan 1, what $amount would Hospital have accepted as payment from Ptf? 2. For Plan 2, what $amount would Hospital have accepted as payment from Ptf? 3. For Plan 3, what $amount would Hospital have accepted as payment from Ptf? Etc.

More rogs bc hosp lien must be for the regular and reasonable amount: What % of your indigent patients actually pay full chargemaster or gross charges? What % of your insured patients actually pay the chargemaster or gross charges? What % of your uninsured patients actually pay the chargemaster or gross charges? RFAs: Hospital does not regularly collect the full gross or chargemaster rates from indigent patients; Hospital does not regularly collect the full gross or chargemaster rates from insured patients;

If Ptf is indigent, ASK the hospital: Per § 501(r)(5) of the Internal Revenue Code regulating hospitals, as added by the ACA, and the Technical Explanation, please tell me the amount that [hospital]would have accepted as payment in full for Plaintiff’s treatment if paid by: a. ) Medicare; b. ) the lowest-paying negotiated health plan rate; c. ) the average of the three lowest-paying negotiated health plan rates.

Texas Health & Safety Code Sec. 311. 031(2)(a) requires hospitals to determine if Pt. is “medically indigent” or “financially indigent”. Ask if they evaluated Ptf’s income.

Q: Can hospital “discriminate” against unins pts; see In re Fraudulent Lien Litigation, MDL NO. 15 -0360, pending in 444 th Judicial Dist. , Cameron County? How to use discovered rates at trial? Can deft send similar discovery to other medical care providers for follow up care?

Rule 8: be proactive: Rep Letter to Insurance Companies to (try to) keep them from buying hosp lien or subro interest cheap: I represent [PTF] for any and all bodily injury claims. My contract provides for an attorney lien on any recovery, settlement or judgment. My client and I do not authorize you to make any payments to any providers or lienholders. All medical bills must be negotiated through my office; you are not authorized to negotiate any medical bills for my client. If you pay anyone other than my client and my firm, you will have made a gift to them, and tortiously interfered with my contract with my client. I will assert an attorney fee in the original value of the payment, pursuant to State Farm v. Erivas. [But see Stern Law Group v GEICO, Houston Court of Appeals]

Rule 9. Indemnification provisions: The Plaintiff indemnifies, not the attorney. See ethics opinions in paper. Make Defendant give Plaintiff notice first to preserve defenses.

Rule 10: Protect yourself as well as your clients. Q: Is attorney liable for not paying subrogation interests or liens? A: Read all the cases… U. S. Bank Nat’l Assn v Sheena, (Tex. App. Houston 14 th 10/29/2015) [Not a subrogation op]: “attorney immunity” protected attorney who disbursed $900, 000 in property damage insurance funds after notice that the client defaulted on his mortgage and the bank claimed an interest in the funds. Relied on Cantey Hanger, LLP. v. Byrd, 467 S. W. 3 d 447 (Tex. 2015): the “allegedly fraudulent [attorney] conduct was within the scope of its representation of a client… and not foreign to the duties of an attorney…” The 5 th Circuit, in Troice, et al vs. Proskauer Rose, L. L. P. , et al (5 th Cir. 03/10/16) granted attorneys immunity from suit, not just liability. But if funds are in your trust account, injunction and constructive trust for ERISA plan may be imposed: Central States v Haynes et al, (7 th Cir. 07 20 2020)

And see: Ethics Op. 681 and case law: AIG Life Ins. Co. v. Federated Mut. Ins. Co. , 200 S. W. 3 d 280 (Tex. App. -Dallas, 2006): if lawyer “acted with malice [in distributing funds after notice of a lien], exemplary damages are recoverable for conversion and for conspiracy. ” Also Estrada v. Wausau Ins. Co. , 985 S. W. 2 d 480 (Tex. App. B San Antonio 1998, no pet. ) tagging the plaintiff and his lawyer. [Attorney immunity not raised as affirmative defense. ] Central States v. Lewis and Lashgari, No. 12 -2214 (7 th Circuit, Mar. 12, 2014), An attorney’s appeal of contempt charges was “frivolous; ” the court “smelled a rat, ” called the attorney “untrustworthy” and directed the trial court to consider jailing the lawyer and reporting him to the state bar. The attorney’s allocation of settlement funds as excluding past medical bills was “nonsense” displaying “contumacious effrontery. ” He and his client were both ordered to pay the $180, 033. 46 lien from the $500, 000 settlement. Medicare and MA plans may impose liability on the attorney; double damages may be sought under 42 USC Sec 1395 y(b)(3)(A); Humana v Paris Blank LLP (US ED Va. 05/10/16)(mo to dismiss denied). [Federal law trumps doctrine of attorney immunity? ]

ARE SETTLING INSURERS liable if plaintiff does not pay? Central States v. Health Special Risk, Inc. et al (5 th Cir. 06 -23 -2014): the ERISA plan can’t sue other health insurers, not in contractual privity with the plan, to recover under the ERISA plan’s subro rights or coordination of benefits provisions. This case may convince third party liability & first party UM carriers not to name health plan on check. The 5 th Circuit, in Avmed Inc. , et al. v. Browngreer PLC, et. al. , 2008 WL 4909535, 11 -172008, the ERISA plans “failed to demonstrate that an identifiable fund potentially susceptible to [ERISA] liens are currently within the possession and legal control of the plan beneficiaries or their agents. ” The court refused to enjoin distribution of settlement funds to Vioxx MDL claimants. Once $ is in your trust account, injunction more likely to be granted.

Rule 11: Determine best choice of law for your client. It might not be Texas.