Idaho Supreme Court Strikes Down $183k Medical Lien in Patient Protection Ruling
In 2020, the Idaho Patient Act, I.C. § 48-301 et seq. (the Act) was passed to increase transparency in medical billing and avoid leaving patients with unexpected debts from providers they did not know. Prior to the Act, when those debts went to collections, the law provided excessive attorney fee awards for providers while offering little guidance for Courts to prevent abuse of the collections process. The Idaho Legislature ratified the Act to regulate the “fair collection of debts owed to health care providers.”
In DeKlotz v. Neuroscience Associates, et al. (NSA), the Idaho Supreme Court addressed the interplay between Idaho’s medical lien statutes, I.C. § 45-701 et seq., and the Act. More specifically, the Court addressed whether the Act applied to a medical lien recorded by a provider and whether the lien was invalid because the provider failed to bill the patient’s insurance before recording the lien.
The Idaho Supreme Court’s decision may surprise you.
Background
Guy DeKlotz suffered spinal fractures in a car accident and underwent emergency surgery performed by Dr. Paul Montalbono, M.D., an owner of NSA, who was the on-call emergency trauma surgeon at St. Alphonsus Regional Medical Center at the time of DeKlotz’s admission. Instead of billing DeKlotz’s health insurer SelectHealth, Montalbono, who was not a contracted physician with SelectHealth, recorded a lien against DeKlotz’s potential legal claims against the other driver involved in the accident, which was permitted under Idaho’s medical lien statute, I.C. § 45-704B. The lien was in the amount of $183,829.60.
DeKlotz filed a lawsuit challenging the lien and argued that it was invalid because Montalbano failed to comply with the Act, which requires, among other things, that providers bill insurance before pursuing “extraordinary collection actions” against patients. At the time Montalbano’s medical lien was filed, the Act defined “extraordinary collection actions” as:
[A]ny of the following actions done in connection with a patient's debt:
....
(c) Commencing any judicial or legal action or filing or recording any document in relation thereto, including but not limited to:
(i) Placing a lien on a person's property or assets;
(ii) Attaching or seizing a person's bank account or any other personal property;
(iii) Initiating a civil action against any person; or
(iv) Garnishing an individual's wages.
The trial court held that Montalbono’s lien did not fall within the Act’s definition of “extraordinary collection action” because Montalbono never demanded payment from DeKlotz. Therefore, the trial court held that Montalbono’s lien was valid and DeKlotz’s claims were dismissed. DeKlotz appealed to the Idaho Supreme Court.
The Idaho Supreme Court’s Reversal
The first issue addressed by the Idaho Supreme Court was whether the Act (through its definition of an “extraordinary collection action”) applied to Montalbono’s medical lien. The Court first determined that Montalbono’s lien on DeKlotz’s potential legal claims against the other driver involved in the accident were DeKlotz’s “property or assets.” This is because Idaho law has long recognized that the right of a person to sue another for an injury is “property.”
The Idaho Supreme Court next determined that Montalbono’s lien was recorded “in connection with a debt of DeKlotz.” In reaching this decision, the Court focused on the standard patient payment contract that Montalbono had DeKlotz sign. That contract stated that, if another person caused the patient’s injury, then Montalbono could file a medical lien – but the contract also stated that the patient was ultimately responsible for paying all medical charges, including, but not limited to, after “all possible insurance carriers have paid.” Therefore, the Court held that Montalbono’s medical charges were a ”debt” of DeKlotz, and that Montalbono’s medical lien was an “extraordinary collection action” that was subject to the requirements of the Act.
The Idaho Supreme Court then addressed whether Montalbono’s lien was valid or not under the Act, which requires providers to bill a patient’s insurance prior to recording a medical lien. The Court held that Montalbono, who conceded that he did not bill DeKlotz’s insurance prior to recording the lien, did not comply with the Act. As a result, the Court held that Montalbono’s lien was invalid.
Interestingly, the Court was sympathetic to Montalbono because, at the time the lien was recorded, it would have been difficult or impossible to meet the statutory requirements of both the Act and the statutes permitting the filing of medical liens. Under the Act, providers could not record a medical lien until 90 days after providing a patient with a final statement (which had to contain detailed descriptions of all reductions, adjustments, offsets, including insurance payments received from third-party payors, such as the insurance companies of other drivers who caused auto accidents), and identify the final amount that a patient was liable to pay. But under the medical lien statutes, a medical lien was required to be recorded within 90 days after the last day of medical service to be valid. While recognizing the difficulty that providers (such as Montalbono) would have in complying with both the Act and medical lien statutes, the Court nevertheless enforced the statutory provisions “as written” and stated that “the power to correct [the issue] is legislative, not judicial.” [Important note: The Act and medical lien statutes at issue in this case were amended to address these and other issues.]
Finally, the Idaho Supreme Court awarded DeKlotz attorney fees on appeal under the Act, because he was the prevailing party. The Court also directed the trial court to issue a judgment in DeKlotz’s favor and to determine whether he was entitled to an attorney fee award for the fees he incurred before the trial court. Given the fee award on appeal by the Idaho Supreme Court, it is likely that DeKlotz will be awarded fees before the trial court.
Takeaway
Healthcare providers in Idaho must now comply with both the Act’s statutory requirements as well as with requirements set forth in Idaho’s medical lien statutes before recording medical liens against patients. Collectively, the requirements are detailed, specific, and could be characterized as “onerous.” If a provider fails to comply and a patient successfully challenges a medical lien in court, that provider could be on the hook for the patient’s attorney fees.
