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Hospitals defend lien law before Supreme Court

By Jim Saunders
12/9/2010 © Health News Florida

The case started routinely enough: Almost five years ago, pedestrian Krystal Nicole Price was hit by a car and taken to Shands teaching hospital in Gainesville.

But that Dec. 11, 2005, accident spurred a legal fight that landed in the Florida Supreme Court on Wednesday, with justices weighing a constitutional question that could affect dozens of hospitals across the state.Our eAlert subscribers read it first!

Shands and Mercury Insurance Company of Florida, an auto insurer, are fighting over a law that has allowed the hospital to use liens to recoup the costs of caring for poor or uninsured accident victims. An appeals court last year found the law unconstitutional --- a decision that Shands argues jeopardizes similar laws in as many as 20 other counties and could lead to higher Medicaid and Medicare costs for taxpayers.

"This case will determine the continued validity of hospital lien laws in Florida,'' Shands said in a brief to the Supreme Court.

Essentially, the lien law gives Shands the legal right to collect insurance money that otherwise would go to accident victims in settlements or lawsuits.

In the Price case, Shands used the lien law to try to collect about $38,000 from Mercury, which insured the owner of the car involved in the accident. Instead, Mercury paid $10,000 to Price and another $10,000 to Shands -- the limit under personal-injury protection coverage.

Supreme Court justices peppered attorneys for the hospital and insurance company with questions Wednesday. The court typically does not issue rulings for months.

Mercury contends that Shands has "greatly exaggerated and mischaracterized the scope'' of the case. The insurer said in a brief that it is not challenging hospital-lien laws generally, but contends the law passed for Alachua County --- and Shands --- in 1988 violates the state constitution.

''Mercury respectfully submits Florida courts surely can and most certainly should 'second-guess' a law if, as enacted by the Florida Legislature, it is unconstitutional,'' the brief says.

Nevertheless, the case has drawn briefs, with the Attorney General's Office and Florida Hospital Association siding with Shands and the Florida Justice Association, a trial-lawyers group, backing Mercury. The hospital association said 21 counties have lien laws, though they are not all the same as the Alachua County law.

Medicaid and Medicare could be affected because hospitals try to collect money from insurers before billing the government for care of the program's beneficiaries. While hospitals likely would turn more to the government for payment, the Attorney General's Office said it would require a detailed study to project a precise amount of money.

The case involves a certain type of law known as a "special law,'' which typically is designed to affect specific areas or people instead of the entire state. Mercury points to part of the Florida Constitution that bars the use of special laws for the "creation, enforcement, extension or impairment of liens based on private contracts.''

The Shands lien law is such as special law, as are many of the other hospital-lien laws in the state. In its brief, Mercury says the constitutional provision is designed to make sure lien laws are statewide and uniform.

Mercury attorney Jeffrey Kirsheman told the Supreme Court that the problem currently is that the state has a "patchwork of lien laws.''

But Shands attorney Joel Walters said lien laws are needed to help care for indigent and uninsured patients.

"You're providing the incentive for hospitals like Shands ... to continue to treat the indigent patient beyond the emergency room,'' he said.

Many of the justices' questions, however, centered on an Alachua County hospital-lien ordinance that largely mirrors the special law passed by the Legislature. Chief Justice Charles Canady questioned whether Shands could continue pursuing liens under the county ordinance, even if the special law is unconstitutional.

"Counties can do all sorts of things that the Legislature might not be able to do under a special law,'' Canady said.

But Kirsheman, the Mercury attorney, said hospital-lien laws would need to be statewide.

"Logically, how could a local government enact an ordinance that is inconsistent with the Florida Constitution?'' he asked.

--Capital Bureau Chief Jim Saunders can be reached at 850-228-0963 or by e-mail at jim.saunders@healthnewsflorida.org