Midwest Neurosurgery v. State Farm Ins.

• Decision Date: 17 September 2004
• Docket Number: No. S-02-559, No. S-03-076.
• Citation: 686 N.W.2d 572,268 Neb. 642
• Parties: MIDWEST NEUROSURGERY, P.C., appellant, v. STATE FARM INSURANCE COMPANIES, appellee. Debbie Lundin, appellee, v. Midwest Neurosurgery, P.C., appellant.
• Court: Nebraska Supreme Court

686 N.W.2d 572

268 Neb. 642

MIDWEST NEUROSURGERY, P.C., appellant, v. STATE FARM INSURANCE COMPANIES, appellee.

Debbie Lundin, appellee, v. Midwest Neurosurgery, P.C., appellant.

Nos. S-02-559, S-03-076.

Supreme Court of Nebraska.

September 17, 2004.

Gregory C. Scaglione, Christopher J. Basilevac, and Julie A. Schultz, of Koley Jessen, P.C., L.L.O., Omaha, for appellant.

David C. Mullin, of Fraser, Stryker, Meusey, Olson, Boyer & Bloch, P.C., Omaha, for appellee State Farm Insurance Companies.

Joseph B. Muller, of Law Offices of Ronald J. Palagi, P.C., Omaha, for appellee Debbie Lundin.

Edward F. Hoffman, of Cada, Froscheiser, Cada & Hoffman, for amicus curiae Bryan LGH Medical Center.

Lyman L. Larsen and Neil B. Danberg, Jr., of Stinson, Morrison & Hecker, L.L.P., Omaha, for amicus curiae Nebraska Hospital Association.

HENDRY, C.J., and CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

CONNOLLY, J.

In dispute is the amount of a physician's lien that Midwest Neurosurgery, P.C. (Midwest), has on a settlement between Debbie Lundin and Tiffani Monasmith. State Farm Insurance Companies (State Farm) is Monasmith's automobile liability insurer. State Farm, on behalf of Monasmith, and Lundin settled a claim arising out of an automobile collision allegedly caused by Monasmith. Midwest treated Lundin for injuries she sustained in the collision. Midwest's prevailing charge for the services provided to Lundin was $23,193.40. But consistent with the terms of a preexisting agreement with Lundin's health insurer, Midwest agreed to accept $7,669.17 as "payment in full" from Lundin and her health insurer.

The issue is whether Midwest's physician's lien extends to the difference between the prevailing charge and the amount it agreed to accept as "payment in full." The Nebraska Court of Appeals concluded that the lien did not extend to the difference. We agree and affirm.

I. BACKGROUND

When the collision occurred, Lundin was insured under her employer's health plan, the Christian and Missionary Alliance (C&MA) employee benefit plan. The network administrator for the C&MA plan was Midland's Choice. For our purposes, the distinction between C&MA and Midland's Choice is not important and to avoid confusion we will refer to them jointly as "C&MA." Within the health insurance industry, it is common for insurers and medical providers to enter into agreements in which the provider agrees to accept as full payment an amount less than what is billed to the insured patient. In exchange for the provider's agreeing to offer its services at a discounted rate, the insurer agrees to create incentives for its insureds to use the provider, thus helping to ensure a higher volume of patients for the provider. Anne Maltz, Practising Law Inst., Litigation and Administrative Practice Course Handbook Series, Health Insurance 101 (2004).

C&MA and Midwest had entered into such an agreement before Midwest provided medical services to Lundin (Managed Care Agreement). The Managed Care Agreement provided:

The Plan Physician agrees to accept as payment in full for providing Covered Services to Plan Patients amounts equal to the Plan Physician's then prevailing charge; however, in the event the Plan Physician's then prevailing charge is for a Covered Service listed on the Plan Physician Fee Schedule, and exceeds the amount computed in accordance therewith, the Plan Physician agrees to accept as payment in full the amount computed in accordance with the Plan Physician Fee Schedule.

The "then prevailing charge" for the services Midwest provided to Lundin was $23,193.40. But because this was more than the amount allowed by the "Plan Physician Fee Schedule," Midwest accepted $7,669.17: $6,783.20 from C&MA, and an $885.97 copayment for which Lundin is responsible.

After it treated Lundin, Midwest sent a letter to State Farm in which Midwest claimed that it had a physician's lien under Neb.Rev.Stat. § 52-401 (Reissue 1998).

State Farm, on behalf of Monasmith, later entered into a settlement agreement with Lundin; Midwest did not take part in the settlement negotiations. Under the agreement, Lundin released Monasmith from any liability in exchange for $50,000, the limits under Monasmith's liability policy.

Lundin and Midwest agree that Midwest has a lien on a portion of the settlement proceeds, but they dispute the amount. Midwest claims that the lien is for $16,410.20, the difference between the "then prevailing charge" and the amount Lundin and C&MA were required to pay after the bill was adjusted in accordance with the Managed Care Agreement. Lundin claims that the lien is for $885.97, the total amount of the copayments she still owes to Midwest.

1. LUNDIN'S DECLARATORY JUDGMENT ACTION AGAINST MIDWEST AND MIDWEST'S COUNTERCLAIM

As partial payment of the settlement agreement, State Farm sent a check for $16,410.20 to Lundin's attorneys. The check was made payable to Lundin, her attorneys, and Midwest. After Lundin's attorneys received the check, they tendered $885.97 to Midwest, claiming that the amount was for "full and final payment on her bill." Midwest refused the check from Lundin's attorneys, claiming that it was entitled to the entire $16,410.20.

Lundin then brought a declaratory judgment action against Midwest, seeking a determination that Midwest was entitled to only $885.97 of the settlement funds. Midwest filed a counterclaim seeking a declaration that neither Lundin nor her attorneys had an interest in the State Farm check and ordering them to endorse and deliver the check to Midwest for payment on its perfected physician's lien. Following a bench trial, the court ruled for Lundin and ordered the parties to return the check to State Farm and have State Farm issue two new checks: one made payable to Midwest for $885.97, and one made payable to Lundin and her attorneys for $15,524.23.

2. MIDWEST'S ACTION AGAINST STATE FARM

While Lundin's action was pending, Midwest filed an action against State Farm. In the petition, Midwest alleged that State Farm had impaired its lien by settling directly with Lundin; naming Midwest, Lundin, and Lundin's attorneys as payees on the check; and delivering the check to Lundin's attorneys. Both parties moved for summary judgment. The district court granted summary judgment to State Farm, concluding that because State Farm made the check payable to Midwest as well as Lundin and Lundin's attorneys, it had sufficiently protected Midwest's lien.

3. COURT OF APPEALS' DECISION

The two cases were consolidated for appeal, and the Court of Appeals affirmed both. Regarding Lundin's declaratory judgment action, the court held that under § 52-401, a physician's lien "cannot exceed the amount the health care provider agreed to accept for the services rendered to a patient, even if the usual and customary charge for such services is greater than that sum." Midwest Neurosurgery v. State Farm Ins. Cos., 12 Neb.App. 328, 336, 673 N.W.2d 228, 235 (2004). Regarding Midwest's case against State Farm, the court stated, without analysis, that the grant of summary judgment was proper.

II. ASSIGNMENTS OF ERROR

Midwest assigns that the Court of Appeals erred in (1) failing to acknowledge Midwest's contractual rights to pursue payment from sources other than the patient and health insurer in accordance with the coordination of benefits language contained in both the Managed Care Agreement and Lundin's patient registration sheet; (2) concluding that a physician's lien against the tort-feasor and liability insurer cannot exceed the amount the physician agreed to accept from the health insurer and patient, thus denying full payment of the medical bills; and (3) failing to acknowledge that State Farm breached its duty to not impair Midwest's physician's lien rights by issuing the settlement check for $16,410.20 to Midwest, Lundin, and Lundin's attorneys.

III. STANDARD OF REVIEW

In Midwest's case against State Farm, the district court denied Midwest's motion for summary judgment and granted State Farm's motion for summary judgment. In Lundin's declaratory judgment action against Midwest, the court entered judgment for Lundin after a bench trial. In both cases, however, the facts are essentially undisputed. In determining the resolution of these appeals, we focus on the meaning of § 52-401 and the contracts between Lundin and Midwest and Midwest and C&MA.

Interpreting § 52-401 presents a question of law. When reviewing questions of law, an appellate court has an obligation to resolve the questions independently of the conclusion reached by the trial court. Unisys Corp. v. Nebraska Life & Health Ins. Guar. Assn., 267 Neb. 158, 673 N.W.2d 15 (2004).

The interpretation of the Managed Care Agreement involves a question of law, for which this court has an obligation to reach its conclusions independent of the determinations made by the court below. See Professional Bus. Servs. v. Rosno, 268 Neb. 99, 680 N.W.2d 176 (2004).

IV. ANALYSIS

1. RESOLUTION OF LUNDIN'S DECLARATORY JUDGMENT ACTION AND MIDWEST'S COUNTERCLAIM

The issue in the declaratory judgment action between Lundin and Midwest centers on the amount of the lien that Midwest had on Lundin's settlement. Lundin seeks a declaration that Midwest is entitled to only $885.97 of the settlement fund. Midwest seeks a declaration that it is entitled to $16,410.20. We begin our analysis with an overview of § 52-401 and then turn to the question of the amount of Midwest's lien.

(a) Operation of Lien Statute

Even in the absence of an express contract, the rendering of medical services creates an implied contract between the provider and the person being given the medical care. AMISUB v. Allied Prop. & Cas. Ins. Co., 6 Neb.App. 696, 576 N.W.2d 493 (1998). Thus, health care providers and their patients stand in a creditor-debtor relationship; but unlike other creditors, the health care providers named in § 52-401 are often called upon to provide their services...