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Arizona high court rules hospitals' practice of 'balance billing' violates federal law

Arizona high court rules hospitals' practice of 'balance billing' violates federal law

  • Updated

PHOENIX — Hospitals that accept payments from the state’s Medicaid program can’t then go after money owed to the patient by a third party, the Arizona Supreme Court ruled.

In a unanimous ruling Monday, the justices voided sections of state law that allowed hospitals to impose financial liens on others when the amount paid by the Arizona Health Care Cost Containment System doesn’t cover what they say are the full bill charges.

Justice Clint Bolick, who wrote the opinion, said the practice, and the Arizona law that allowed it, violate federal law.

The ruling is most immediately a victory for about 50 patients who found the hospitals that provided their care were trying to seize money due to the patients.

Attorney Lance Entrekin said such instances can include a situation where the patient was in an automobile accident and was trying to collect money from the driver of the other vehicle.

In some cases, the patients agreed to pay a negotiated amount in exchange for the hospital releasing the lien. Other cases involved those who simply challenged the liens.

But Monday’s decision now sets a binding precedent.

AHCCCS provides free or low-cost medical coverage for patients of limited income. The medical providers that contract with AHCCCS agree to accept what it offers in payments.

Hospitals aren’t, and haven’t been, allowed to engage in “balance billing,” going after the patient directly for what AHCCCS does not pay.

But the hospitals argued that state law specifically allowed them to place a lien — essentially a claim — on any funds that may be due the patient from someone responsible for causing their injury.

Bolick said federal law expressly says state Medicaid programs must limit their participation to providers who accept the amounts paid by the agency as “payment in full.”

“The hospitals’ liens are designed to secure payment from third parties in excess of the Medicaid reimbursement,” Bolick wrote.

“Such use of the lien statutes cannot coexist with the federal prohibition against balance billing, and therefore the statutes so applied are preempted.”

Attorney Richard Burnham, who represents the nearly three dozen hospitals that were sued, said his clients have not been pursuing the liens since a trial judge ruled against them several years ago.

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