In Morgan v. Saint Luke’s Hospital of Kansas City, 403 S.W. 3d 115 (June 28, 2013), the Missouri Court of Appeals addressed this issue of first impression and reversed the trial court’s grant of judgment on the pleadings, holding that St. Luke’s was not entitled as a matter of law under Section 430.230 to assert a lien on the patient’s claim against a third party tortfeasor where the patient’s insurer had already paid the patient’s bill pursuant to its discounted payment agreement with the hospital.  In this case, the plaintiff had been the victim of a motor vehicle accident, had been treated at St. Luke’s, and her insurer had then paid her bill in full according to a discounted payment agreement between St. Luke’s and the insurer.  Eager to recover 100% of its billed charges rather than merely the discounted rate, St. Luke’s returned the discounted payment to the insurer, and then filed a lien for 100% of its billed charges on Ms. Morgan’s claim against the third party driver/tortfeasor.  Ms. Morgan then filed this case, seeking to represent putative class asserting claims of tortious interference with their contracts with their health insurance providers, unjust enrichment, and violation of the MMPA.  The trial court granted judgment for St. Luke’s on the pleadings, finding that Section 430.230 granted St. Luke’s an unlimited right to file a lien on her third party tort claim.

Writing for the panel, Judge Howard reversed, relying upon the principle that an underlying debt is necessary to support a lien, and that the discounted payment by the insurer had effectively discharged the debt.  The Court of Appeals sided with the weight of authority from other jurisdictions that had construed similar statutes to convey no right to impose a lien against the claim of a patient against a third party tortfeasor for an amount beyond that dictated by the contract between the health care provider and the insurer.   In doing so, the Court specifically declined to adopt the approach utilized by the Illinois Court of Appeals where that court had construed the lien as based not on the patient’s debt, but on the debt owed by the third party tortfeasor to the patient and the provider.  Judge Howard did note that factual issues remained, such as whether the contract between the insurer and the health care provider required St. Luke’s to submit her claim to her insurer and whether St. Luke’s was required to accept the reduced compensation as payment in full.  But those issues will need to be resolved on remand.

The Court expressed no opinion on any class certification issues, but this will be an interesting case to follow, particularly due to the increasing prevalence of this practice.  Clearly the variability (or lack thereof) in the contractual language contained in insurer-provider agreements and insurer-patient agreements will be critical.  Stay tuned.