Texas Personal Injury Law Blog

In Re North Cypress Medical Center a Win for the Plaintiff or for Insurance Companies?

courtroom and justice scalesOn April 27, 2018, the Texas Supreme Court recently delivered an opinion declining a Writ of Mandamus in In Re North Cypress Medical Center Operating Co., Ltd. Although that was a “victory” for the Plaintiff, it may very well be a loss for Texas Plaintiffs as a whole and a victory for insurance companies.  Regardless of how one views the results, the opinion is extremely likely to affect personal injury law practice for a long time to come.

Case Background

The case involved a hospital lien field by North Cypress Medical Center against Crystal Roberts over an $11,037.35 emergency medical treatment lien for services rendered in the North Cypress emergency room following a car accident.  The lawyer for Crystal Roberts, after settling the car accident case for $17,380.00, sought to force North Cypress Medical Center to reduce it’s bill by filing a declaratory judgment action asking the Court to find that the medical bills contained in the lien were not reasonable charges for the services provided. Indeed, the car accident company indicated that they were only considering $9,404.00 as the reasonable amount to cover all past medical expenses, not just the hospital’s bill.

In the process of trying to prove their case, the Plaintiff’s lawyer sent a number of requests to the hospital for records demonstrating all insurance company “contracts regarding negotiated or reduced rates for the hospital services provided to plaintiff…” as well as documentation of Medicare reimbursement rates for the services provided. Although this particular patient had no insurance so none of these rates actually applied, the trial court ordered the production of these documents on the basis that they may be relevant to determining whether the rates charged were truly reasonable rates. The ruling was affirmed by the Appellate Court and ultimately in the Supreme Court’s denial of Writ of Error.

Hospital Lien Background

In Texas, a hospital has the right, granted by Statute to file a lien against a person’s personal injury claim against another if that person was treated in the hospital for emergency care within 72 hours of the incident necessitating the care.  Upon filing notice in the proper county, the lien attaches to the victim’s case and then the hospital has a superior right to reimbursement out of any personal injury case to which the emergency care relates.  Failure to repay a hospital lien can result in the insurance company and the client’s attorney being held liable for the nonpayment.

The Dual Pricing System

In the opinion, the Texas Supreme Court elaborates further upon the Haygood v. De Escobedo opinion that explained the two-tear billing system in Texas. Hospitals commonly charge one rate which they call the uninsured individual rate and then accept another reduced rate from insurance companies based upon what their contract says they agree to accept. While this sounds questionable at first, it makes sense. In every other industry you call it a bulk rate discount. The reasonable cost of a car may be $40,000.00 but if you are offering to purchase an entire fleet of 100 of those same cars, you might get them for $20,000.00 or less. There are negotiated bulk rate discounts in every industry.

The problem here is that an uninsured patient as well as the entire auto insurance industry who have no bulk rate discount contract, want to take advantage of bulk discount rates without “buying in bulk.” Aetna and United Health Care and Medicare get negotiated bulk rate discounts because of the volume of patients that these insurance companies refer to them in return.  Auto insurers could negotiate bulk rate discounts and then refer patients to medical providers, but they chose not to.  As a result, they have no right to ask for the discount. However, it would appear that the Texas Supreme Court has decided to allow this plaintiff, to dig into those bulk discount rates presumably to use them to argue that the rates billed are “unreasonable rates.”

The Bigger Picture

This opinion has far greater and far reaching implications that this single case. Defense lawyers are already asking courts for leave to go subpoena these records in cases as a way to challenge whether the bill the Plaintiff’s seek to be reimbursed for are reasonable. In a civil case, it is the Plaintiff’s burden to prove the charges are reasonable charges for the same or similar service in and around the county where they were incurred. If defense lawyers are allowed to defend by subpoenaing hospital reimbursement rates, then what is to stop them from subpoenaing this from every provider and challenging the Plaintiffs bills?

The Potential for Disaster

If this evidence is allowed before a jury, plaintiff’s lawyers will have a big problem.   The plaintiff will have to make a choice, do you try to defend and hope for the best or do you sue the medical provider and try to have the jury declare their lien invalid?

Here is the issue: a hospital lien is a merely statutory document that says a hospital can sue more than the victim for the bill if they fail to pay out of a settlement.  Declaring the lien invalid does not necessarily mean the bill goes away. It just means the hospital can only sue the patient for it. The hospital’s claim against the patient is contractual (based on documents signed upon entry) not based upon personal injury law. Thus, it does not matter if the bill is unreasonable or the lien is declared void, the person receiving treatment still owes it. Declaring the lien void only protects the lawyer and the insurance company. The victim is still on the hook for the bill irrespective of the lien.

So now, if you get injured in a car accident, the other driver’s insurance may be able to challenge whether the medical bill was reasonable by showing what the provider has accepted under other irrelevant circumstances. If they are successful, the accident victim may not get to recover the amount they were charged by a hospital for services rendered. They get awarded only the amount that a confused and misguided jury thinks the hospital should have charged. However, legally, at the end of the day, the victim-patient still owes the full bill to the hospital regardless of what they jury found was “reasonable” for them to charge.  End result, the negligent part is held only partially responsible and the victim gets stuck paying some portion if not all of the medical bill caused by the negligent party.

Cutting Off One’s Own Nose

This verdict, while it never fully says whether the evidence obtains will or will not be admissible in court, is a “win” for Crystal Roberts but a loss for Texans. The ruling of this Court is that Crystal gets the documents she requested, as a way to try to challenge whether the charges are reasonable. If the case eventually goes to trial and a jury agrees they are not reasonable, the lien will be held invalid and neither the lawyer nor the insurance company can be held liable for not honoring the bill out of the settlement proceeds. The client, however, may be stuck for the full bill regardless if she signed the standard assignment of benefits and/or promise to pay that hospitals typically have.

This case certainly seems to be a prime example of cutting off your nose to spite your face. I agree that North Cypress has a reputation among personal injury lawyers of being combative and non-cooperative in negotiating down bills to get cases settled. But in my opinion, this result is far more likely to benefit insurance companies and negligent parties to the detriment of Texas victims. Let us hope the Supreme Court has a change of heart on this issue after they have a chance to see the effects of this case.

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Paul Cannon

Paul Cannon has practiced personal injury trial law since 1995. He is Board Certified in Personal Injury Trial Law (2005). He has earned recognition as a Super Lawyer by Thompson Reuters in 2017 & 2018, and as a Top 100 Trial Lawyer by the National Trial Lawyers Association in 2017. He is a Shareholder, trial lawyer and online marketing manager at Simmons and Fletcher, P.C. His legal writings have been published by the Texas Bar Journal, Business.com, Lawyer.com HG Legal Resources, Lawfirms.com, and others. He has been asked to give education talks and media interviews on dog bite law.