Swanson v. St. John's Regional Med. Center

• Decision Date: 28 March 2002
• Docket Number: 2,B148128
• Court: California Court of Appeals Court of Appeals
• Parties: JAMES SWANSON, Plaintiff and Appellant, v. ST. JOHN'S REGIONAL MEDICAL CENTER et al., Defendants and Respondents.IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX Filed

JAMES SWANSON, Plaintiff and Appellant v ST. JOHN'S REGIONAL MEDICAL CENTER et al., Defendants and Respondents

No. B148128

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT DIVISION SIX

Filed 3/5/02

3/28/02

2d Civil (Super. Ct. No. CIV 198655)(Ventura County)

Barbara A. Lane, Judge Superior Court County of Ventura

William John Weilbacher, Jr., Robert Chatenever, for Appellant.

Manatt, Phelps & Phillips; Barry S. Landsberg, Harvey L. Rochman and Joanna S. McCullum, for Respondents.

YEGAN, Acting P.J.

In this action for violation of the Unfair Competition Law (UCL; Bus. & Prof. Code, 17200 et seq.), James Swanson appeals from the judgment of dismissal entered after the trial court sustained, without leave to amend, the demurrer of respondents St. John's Regional Medical Center, Pleasant Valley Hospital, and Catholic Healthcare West. The trial court ruled that hospital liens filed pursuant to the Hospital Lien Act (Civ. Code, 3045.1 et seq.) fall within the safe harbor provision of the UCL and are not an unfair business practice. We affirm. (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 182-184.)

Safe Harbor Immunity

Appellant has filed this action on behalf of California residents alleging: "Defendants provide medical treatments to PATIENTS with medical insurance who are injured through the acts of third parties. When those PATIENTS subsequently recover damages from the third party tortfeasors, Defendants, as a practice, unlawfully, unfairly, and fraudulently assert an interest in the tort recovery pursuant to California Civil Code sec. 3045.1." The complaint alleges that respondents' hospital liens constitute an unfair business practice and are based on a "double billing" calculation in which "[t]he amount of the lien pursued by Defendants is greater than what the liability of the PATIENT would have been for the medical services . . . under the terms of the contracts between the PATIENTS' medical insurance carriers and the Defendants."

The Hospital Lien Act (HLA) (Civ. Code, 3045.1 et seq.) provides that hospitals may assert a lien on recoveries from a third party tortfeasor for the reasonable value of services provided the patient.¹ In Mercy Hospital & Medical Center v. Farmers Ins. Group of Companies (1997) 15 Cal.4th 213, 215-216, our California Supreme Court described the essential features of the HLA: "[W]hen a hospital provides care for a patient, the hospital has a statutory lien against any judgment, compromise, or settlement received by the patient from a third person responsible for his or her injuries, or the third person's insurer, if the hospital has notified the third person or insurer of the lien. (Civ. Code [fn. omitted], 3045.1, 3045.2, 3045.3.) If the hospital is paid at the time the judgment, compromise, or settlement is disbursed, it is entitled to receive as much of its lien as can be satisfied out of 50 percent of the recovery. ( 3045.2, 3045.4.)"

Appellant contends that it is an unlawful business practice to file hospital liens on third party tortfeasor recoveries where the patient's medical insurance carrier has paid the hospital an agreed upon, discounted amount for the medical services. It is settled that a business practice does not violate the UCL if it is permitted by law. (Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494, 1505; Shvarts v. Budget Group, Inc. (2000) 81 Cal.App.4th 1153, 1157-1158.) In Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th 163, 182, our Supreme Court held: "Specific legislation may limit the judiciary's power to declare conduct unfair. . . . When specific legislation provides a 'safe harbor,' plaintiffs may not use the general unfair competition law to assault that harbor."

The HLA authorizes the very business practice that appellant claims is unlawful.² It does not distinguish between insured and uninsured patients. Hospitals may assert liens "to the extent of the amount of the reasonable and necessary charges of the hospital . . . for the treatment, care, and maintenance" of a patient injured by a tortfeasor. ( 3045.1.) In construing a statute, "the office of the judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, or to omit what has been inserted . . . ." (Code Civ. Proc., 1858; Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494, 1503.) Because hospital liens are authorized by the HLA, appellant has no claim under the UCL. (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th at pp. 182-184; see also Olszewski v. ScrippsHealth (2001) 88 Cal.App.4th 1268, 1289-1290 [review granted Aug. 29, 2001, S098409].)

Litigation Privilege

The complaint is also barred by section 47, subdivision (b)(2) which provides an absolute privilege for communications made in a judicial or quasi-judicial proceeding. (Rubin v. Green (1993) 4 Cal.4th 1187, 1194.) Lien notices authorized by law are protected by the litigation privilege. (E.g., Frank Pisano & Associates v. Taggart (1972) 29 Cal.App.3d 1, 25 [mechanic's lien]; Wilton v. Mountain Wood Homeowners Assn. (1993) 18 Cal.App.4th 565, 569 [homeowner's association assessment lien].) Appellant may not plead around the privilege "'by relabeling the nature of the action as one brought under the unfair competition statute.' [Citation.]" (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th at p. 182.)

Balance Billing

Appellant argues that the hospital liens are based on the unlawful practice of "balance billing."³ Hospitals make it a business practice to assert liens on third party tortfeasor recoveries even though the patient's medical insurance carrier has agreed to pay the hospital bill for a discounted amount. The "balance" billed is the difference between the reasonable value of the hospital services and the negotiated amount paid by the patient's medical insurance carrier.

Appellant claims that the medical insurance payment extinguishes the patient's "debt" to the hospital. Without an underlying debt, there is no common law right to assert a lien. ( 2872, 2874.) The HLA, however, is a statutory lien and does not require that the patient owe the hospital a debt. (Mercy Hospital & Medical Center v. Farmers Ins. Group of Companies, supra, 15 Cal.4th at pp. 222-223; e.g., Andrews v. Samaritan Health System (Ariz App 2001) 36 P.3d 57, 61-62 [Arizona hospitals may assert statutory liens (A.R.S. 33-931) for balance of customary charges not paid by patient's health insurer].) A statutory lien does not require that the recipient of the service owe a debt for the service from which the lien arises. (E.g., Lab. Code, 3852 [workers' compensation lien on injured employee's recovery from tortfeasor]; Lab. Code, 4417 [Asbestos Workers' Account liens]; Health & Saf. Code, 121270, sub. (k) [AIDS Vaccine Victims Compensation Fund liens]; Kain v. Dept. of Health Services (2001) 91 Cal.App.4th 325 [award under National Vaccine Injury Compensation Program subject Welf. & Inst. Code, 14124.71 to Medi-Cal lien].)

Enacted in 1961, the HLA originally provided that hospitals could assert liens for the reasonable value of emergency services to patients injured by third parties. "The apparent purpose of former section 3045.4 was to secure part of the patient's recovery from liable third persons to pay his or her hospital bill, while ensuring that the patient retained sufficient funds to address other losses resulting from the tortious injury." (Mercy Hospital & Medical Center v. Farmers Ins. Group of Companies, supra, 15 Cal.4th at p. 217.)

In 1992, the Legislature amended the HLA to encompass all hospital services provided a patient injured by reason of a third party's "negligent or other wrongful act." (Stats. 1992, ch. 302, 1; No. 7 West's Cal. Legis. Service, p. 1017; 4 Witkin, Summary Cal. Law, Personal Property (9th ed. 2000 Supp.) 191, pp. 94-95.) The HLA lien is not a charge against the patient. To the contrary, it is a "statutory medical lien in favor of a hospital against third persons liable for the patient's injuries." (Mercy Hospital & Medical Center v. Farmers Ins. Group of Companies, supra, 15 Cal.4th at p. 217.)

Under the HLA, the hospital seeks recourse against the third-party tortfeasor that caused the patient's injuries. ( 3045.4, 3045.5; compare Andrews v. Samaritan Health System, supra, 36 P.3d at p. 62 [under Arizona statute (A.R.S. 20-1072), hospital lien is not a billing or collection action].) The out of state cases cited by appellant are inapposite and involve hospital liens assessed directly against the patient or liens that violated federal law. (Wright v. First National Bank In Albuquerque (N.Mex. 1997) 941 P.2d 498, 500 [hospital lien on funds belonging to patient]; Dorr v. Sacred Heart Hospital (Wis.App. 1999) 597 N.W.2d 462, 470 [hospital lien against patient]; Holle v. Moline Public Hospital (C.D. Ill. 1984) 598 F.Supp. 1017, 1021 [hospital lien violated federal Medicare law, 4 USC 1395cc(a)(1)(A)]; Satsky v. United States. (S.D.Tex. 1998) 993 F.Supp. 1027, 1029-1030 [lien invalid where debt extinguished because of federal Medicare limit on hospital charges].)

Appellant complains that HLA liens are an unfair business practice whenever the lien amount exceeds the negotiated amount paid by the patient's medical insurance carrier. The argument is without merit. The Legislature has exempted hospital liens from balance billing limits. On September 28, 2000, it enacted section 3040 to impose balance billing limits on health maintenance organizations (HMOs) that pay reduced, negotiated rates for patient treatment and assert liens on third-party tortfeasor recoveries for the full amount of the hospital charges. (Stats. 2000, ch. 848, 1; No. 10 West's Cal. Legis. Service, pp. 4505-4506.) Section 3040 provides that the HMO lien may not exceed the...