IN THE SUPREME COURT OF TEXAS

IN THE SUPREME COURT OF TEXAS

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No. 05-0108

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Daughters of Charity = Health=20 Services of Waco, A Texas Corporation D/B/A Providence Health Center,=20 Petitioner,

Donald Linnstaedter = and=20 Kenneth Bolen,

Respondents

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On Petition for Review from = the

Court of Appeals for the Tenth = District of=20 Texas

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Argued February=20 14, 2006

Justice Brister delivered the = opinion of=20 the Court.

Justice Willett did not = participate in=20 the decision.

Few = patients=20 today ever pay a hospital=92s full charges, due to the prevalence of = Medicare,=20 Medicaid, HMOs, and private insurers who pay discounted rates.[1] The question = presented here=20 is whether a hospital paid by a workers=92 compensation carrier can = recover the=20 discount from its full charges by filing a lien against a patient=92s = tort=20 recovery. Because hospitals cannot sue such patients for the discount, = we hold=20 they cannot accomplish indirectly (by filing a lien) what they could not = do=20 directly (by filing suit).

Donald=20 Linnstaedter and Kenneth Bolen were injured in an auto collision while = riding=20 together in the course of their employment. Both were treated at a = hospital=20 owned and operated by the Daughters of Charity Health Services of Waco. = Their=20 reasonable and necessary hospital charges totaled $22,704.25, of which = their=20 workers=92 compensation carrier paid only $9,737.54. The hospital does = not dispute=20 that this was all that was due from the carrier under reimbursement = guidelines=20 mandated by the Texas Labor Code.[2]

Less than a=20 week after the accident, the hospital filed a lien for its charges with = the=20 county clerk pursuant to the Texas Property Code.[3] The lien attached = to the=20 employees=92 causes of action, which they filed almost two years later = against the=20 other driver, John Paul Jones. Those claims were eventually settled for=20 $175,000, but Jones=92s insurer paid $12,966.71 of that amount to the = hospital to=20 discharge its lien.

The = employees=20 brought this suit against the hospital for recovery of the $12,966.71. = They=20 claim the lien was invalid under the Labor Code, while the hospital = claims it=20 was valid under the Property Code. Based on an agreed statement of = facts, the=20 trial court entered judgment for the employees, and a divided court of = appeals=20 affirmed.[4] We granted the = petition to=20 consider the interaction between these two provisions.

To = secure=20 costs a health provider may incur treating accident victims, the Texas = Property=20 Code grants hospitals a lien on any cause of action a patient may have = against a=20 tortfeasor.[5] The purpose of = the lien =93is=20 to provide hospitals an additional method of securing payment for = medical=20 services, thus encouraging the prompt and adequate treatment of accident = victims.=94[6] The lien amount = cannot be=20 more than =93a reasonable and regular rate.=94[7] Once the lien is = filed, a=20 tortfeasor cannot obtain a release by judgment or settlement unless the=20 hospital=92s charges are paid in full.[8]

To = ensure=20 full coverage for employees protected by workers=92 compensation, the = Texas Labor=20 Code provides that hospitals =93may not pursue a private claim against a = workers=92=20 compensation claimant=94 for all or part of the costs of treatment.[9] For several = reasons, this=20 provision bars not only lawsuits against such patients, but also liens = against=20 their assets. A lien is part and parcel of the underlying claim, the = former=20 existing only because of the latter.[10] As a chose in = action is=20 the intangible personal property of the claimant,[11] a lien against = such=20 property is necessarily a claim against its owner. Moreover, as a = hospital has=20 neither tort nor contract rights against a tortfeasor who has injured a = patient,=20 the only support for a hospital lien is its claim for reimbursement from = the=20 patient. Thus, a lien against a patient=92s tort recovery is just as = much a claim=20 against the patient as if it were filed against the patient=92s house, = car, or=20 bank account.

So=20 while the Property Code grants hospitals a lien to secure their fees, = the Labor=20 Code prohibits liens against compensation patients. We think both can be = given=20 effect by limiting hospital liens involving compensation patients to = amounts due=20 under the workers=92 compensation system.[12]

A = hospital=20 that treats workers=92 compensation patients is bound by the Labor = Code=92s=20 provisions. Included among those provisions are caps on reimbursement,[13] and a bar = against asking=20 those patients or their compensation carriers for more.[14] Based on = statewide data=20 reflecting reimbursements in other health care delivery systems, the = workers=92=20 compensation fee guidelines are intended to provide both fair and = reasonable=20 reimbursement and effective cost control.[15] A hospital = dissatisfied=20 with its reimbursement may contest it administratively.[16] Accordingly, = prohibiting=20 hospital liens against compensation patients does not frustrate the lien = provisions of the Property Code because reimbursement of =93a reasonable = and=20 regular rate=94 (all the Property Code allows) is already = guaranteed.

Further,=20 granting hospitals a lien in excess of the established guidelines for = fair and=20 reasonable rates would frustrate the Legislature=92s effort to achieve = effective=20 medical cost control through the Labor Code.[17] If a worker = obtains a tort=20 recovery, the compensation carrier is reimbursed first,[18] and the = remainder paid to=20 the worker discharges the carrier=92s obligation to make future medical = payments=20 to that extent.[19] If (as the = hospital=20 argues) a worker=92s recovery can be reduced by a hospital lien, the = hospital will=20 be reimbursed more than the compensation guidelines, and the carrier = will have=20 to pay more in future medical benefits.[20]

The = hospital=92s most salient point is that in the suit against Jones, = Linnstaedter=20 and Bolen sought the full medical charges billed by the hospital rather = than the=20 reduced amount paid by their compensation carrier.[21] We agree that a = recovery=20 of medical expenses in that amount would be a windfall; as the hospital = had no=20 claim for these amounts against the patients, they in turn had no claim = for them=20 against Jones.[22] But we presume = that=20 Jones=92s carrier knew as much, and made its settlement offer = accordingly. While=20 the settlement here exceeded the full medical bill, there is no evidence = it was=20 intended to pay those expenses rather than lost earnings, pain and = mental=20 anguish, or physical impairment.

Accordingly,=20 we hold the hospital=92s lien violated the Labor Code=92s prohibition of = private=20 claims against compensation patients. We affirm the judgments of the = courts=20 below.

_____________________________________

Scott Brister,=20

Justice

OPINION=20 DELIVERED: June 1, 2007

^{^[1]} See George A. Nation III, Obscene = Contracts:=20 The Doctrine of Unconscionability and Hospital Billing of the = Uninsured, 94=20 Ky. L.J. 101, 104 = (2005-06)=20 (arguing that hospital charges labeled as =93=91regular,=92 =91full,=92 = or =91list,=92 are=20 misleading, because in fact they are actually paid by less than five = percent of=20 patients nationally=94).

^{^[2]} See Tex.=20 Lab. Code =A7 413.011.

^{^[3]} See Tex.=20 Prop. Code =A7=A7 55.001‑.008.

^{^[4]} 151 S.W.3d 667 (Tex. App.=96Waco = 2004).

^{^[5]} Tex. Prop. Code=20 =A7 55.002(a).

^{^[6]} Bashara v. Baptist Mem=92l Hosp. Sys., = 685 S.W.2d=20 307, 309 (Tex. 1985).

^{^[7]} Tex. Prop. Code=20 =A7 55.004(d)(1).

^{^[8]} Id. =A7 = 55.007.

^{^[9]} Tex. Lab. Code=20 =A7 413.042(a). The Code makes an exception for = noncompensable=20 injuries or treatment by nonapproved physicians, circumstances not = involved=20 here. See id.

^{^[10]} See Calvert v. Hull, 475 S.W.2d 907, = 911 (Tex.=20 1972) (=93Generally speaking, a specific debt (an obligation to pay = money) is=20 necessary to support a lien; the lien is affixed to land as security for = some=20 obligation to pay money.=94); Univ. Sav. & Loan Ass=92n v. Sec. = Lumber=20 Co., 423 S.W.2d 287, 292 (Tex. 1967) (stating that =93liens are = incidents of=20 and inseparable from the debt=94); Cont=92l State Bank of Big Sandy = v.=20 Pepper, 106 S.W.2d 654, 656 (Tex. 1937) (same); Black=92s Law Dictionary 941 = (8th ed.=20 2004) (=93lien. A legal right or interest that a creditor has in = another=92s=20 property, lasting usu. until a debt or duty that it secures is = satisfied.=94);=20 see also Tex. Prop. = Code=20 =A7=A7 51.0001(6), 53.023.

^{^[11]} See Black=92s Law Dictionary 258 = (8th ed.=20 2004) (defining =93chose in action=94 to include =93[p]ersonal property = that one=20 person owns but another person possesses, the owner being able to regain = possession through a lawsuit=94); see, e.g., Tex. Prop. Code =A7 12.014; = Tex. Prob. Code =A7 3(z); = Red River=20 Nat=92l Bank v. Ferguson, 206 S.W. 923, 924 (Tex. 1918); = Groesbeck v.=20 Bodman, 11 S.W. 322, 324 (Tex. 1889).

^{^[12]} See Tex.=20 Gov=92t Code =A7 311.026(a); Lexington Ins. Co. v. = Strayhorn, 209=20 S.W.3d 83, 86 (Tex. 2006).

^{^[13]} See Tex.=20 Lab. Code =A7 413.011(d); Texas Workers=92 Comp. = Comm=92n v. Patient=20 Advocates of Texas, 136 S.W.3d 643, 652 (Tex. = 2004).

^{^[14]} Tex. Lab. Code=20 =A7=A7 413.016, 413.042(a).

^{^[15]} Id. =A7=A7 413.007‑.008, = 413.011. =20

^{^[16]} Id. =A7 413.031. There is no = indication in=20 the record the hospital has done so here.

^{^[17]} See Tex.=20 Lab. Code =A7 413.011(d).

^{^[18]} Tex. Lab. Code=20 =A7 417.001(b); Argonaut Ins. Co. v. Baker, 87 S.W.3d 526, = 530 (Tex.=20 2002).

^{^[19]} Tex. Lab. Code=20 =A7 417.002.

^{^[20]} The hospital is incorrect that the Fifth = Court of=20 Appeals reached a contrary result in McCollum v. Baylor University = Medical=20 Center, as that court held a hospital lien was enforceable only if = its=20 patient=92s underlying claim was not governed by the workers=92 = compensation=20 act. 697 S.W.2d 22, 25 (Tex. App.=96Dallas 1985, no writ). =

^{^[21]} The hospital does not invoke judicial = estoppel or=20 assert that these allegation were made under oath. See Long v.=20 Knox, 291 S.W.2d 292, 295 (Tex. 1956).

^{^[22]} See Allstate Indem. Co. v. Forth, 204 = S.W.3d=20 795, 796 (Tex. 2006) (holding insured who had no exposure for = unreimbursed=20 medical expenses had no standing to assert claim against her insurer for = underpayment). This rule has since been codified. = See=20 Tex. Civ. Prac. & Rem. = Code=20 =A7 41.0105 (eff. Sept. 1, 2003) (=93In addition to any other = limitation=20 under law, recovery of medical or health care expenses incurred is = limited to=20 the amount actually paid or incurred by or on behalf of the=20 claimant.=94).