The Fourteenth Court of Appeals in Houston recently found an insurer had standing to challenge medical charges subject to a hospital lien in a personal injury lawsuit. In Allstate Indem. Co. v. Memorial Hermann Health System, No. 14-13-00307-CV, 2014 WL 2895187 (Tex. App.—Houston [14th Dist.] June 26, 2014), a person received emergency care at Memorial Hermann Hospital for injuries sustained in an automobile accident caused by Allstate’s insured.  Allstate paid the injured party $2,118 on behalf of its insured to settle the claim but did not discharge the hospital lien. Memorial Hermann sent a letter to Allstate alleging that it had violated the lien which secured $4,956 in medical charges. Allstate then filed a declaratory judgment action seeking a declaration that it had the right to challenge the reasonableness of the hospital’s billed services.  The trial court granted Memorial Hermann’s plea to the jurisdiction and its motion for summary judgment on its counterclaim for the medical expenses.

On appeal, Memorial Hermann argued Allstate was not a party to its contract with the injured party and therefore had no standing to challenge the reasonableness of medical bills.  The court first noted that under the Uniform Declaratory Judgment Act, Allstate was affected by the Hospital Lien Statute because Memorial Hermann’s lien attached to the proceeds of Allstate’s policy.  The court then discussed a dispute among Texas appellate courts on whether the Hospital Lien Statute established a separate cause of action against an insurer independent of the patient’s obligation to pay the hospital bill.  It cited a recent Texas Supreme Court case that questioned whether the statute created this cause of action.[1]  In that case, the high court noted that a valid hospital lien that is not paid out of settlement proceeds revives the patient’s cause of action and the hospital retains its lien on that cause of action.  Because of this remedy already available to a hospital and an injured party, the court questioned the “propriety of reading into the statute such an additional remedy [against an insurer].”  However, the court did not resolve the issue because it was not raised by the parties.

The Houston court nevertheless concluded that Allstate had standing to challenge the reasonableness of the medical bills and remanded the case to the trial court.  Because the Texas Supreme Court has called into question this basis of Allstate’s argument, however, it is unclear whether the Houston court’s ruling would be upheld on appeal.  Until the high court resolves this issue, insurers may have a new remedy to challenge the amount of a hospital’s medical expenses.

[1] McAllen Hospitals, L.P. v. State Farm Cnty. Mut. Ins. Co. of Tex., --S.W.3d--, 2014 WL 1998245, at *5-6 (Tex. May 16, 2014).

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