§ 5.2 Healthcare Provider Liens

• Jurisdiction: Arizona

§ 5.2 – Healthcare Provider Liens

Arizona has a Healthcare Provider Lien statute, A.R.S. §§ 33-931 through 33-936, providing a mechanism for healthcare providers to unilaterally impose a lien against an injured person’s third-party personal injury claim. A.R.S. § 33-931(A). The underlying purpose of this lien statute is to “‘lessen the burden on hospitals and other medical providers imposed by non-paying accident cases.’”⁸ Blankenbaker v. Jonovich, 205 Ariz. 383, 388 ¶ 19, 71 P.3d 910, 915 (2003) (quoting LaBombard v. Samaritan Health Sys., 195 Ariz. 543, 548 ¶ 18, 991 P.2d 246, 251 (App. 1998)) (emphasis added).

a. The Scope of Healthcare Provider Liens

The Healthcare Provider Lien statute creates a limited remedy, not available at common law, for healthcare providers who properly perfect a lien to recover payment for services rendered to an injured person in connection with a related third-party personal injury claim. See A.R.S. §§ 33-931(A) and 33-932; Blankenbaker, 205 Ariz. at 387-88 ¶ 19, 71 P.3d at 914-15. In relevant part, the statute provides:

A lien pursuant to this section extends to all claims of liability or indemnity, except health insurance and underinsured and uninsured motorist coverage . . . for damages accruing to the person to whom the services are rendered, or to that person’s legal representative, on account of the injuries that gave rise to the claims and that required the services.

A.R.S. § 33-931(A) (emphasis added). In other words, this statute permits the imposition of a lien against “claims for damages” caused by injuries that required the medical services subject to the lien. Blankenbaker, 205 Ariz. at 388 ¶ 19, 71 P.3d at 915 n.8.

More specifically, however, the scope of a healthcare provider lien is defined by: (1) the existence of an underlying obligation to a healthcare provider for services rendered as a result of an injury for which a tortfeasor is liable, (2) the healthcare provider’s “customary charges” for those services, and (3) the favorable resolution of the injured person’s third-party personal injury claim.⁹

i. Existence of an Obligation to a Healthcare Provider

Since the Healthcare Provider Lien statute provides security for the payment of unpaid medical services, a healthcare provider lien presupposes the existence of an obligation owed to a healthcare provider by the patient. See Blankenbaker, 205 Ariz. at 388 ¶ 19, 71 P.3d at 915; see Premier Physicians Grp., PLLC v. Navarro, 240 Ariz. 193 ¶ 7, 377 P.3d 988 (2016). Indeed, “[t]he essence of any lien statute . . . requires the existence of an obligation due the lienholder from the person whose property to which the lien attaches.” E.g., Dorr v. Sacred Heart Hosp., 597 N.W.2d 462, 470 (Wis. 1999) (emphasis added).

Therefore, to enforce a healthcare provider lien, a putative lienholder “must establish the . . . underlying obligation” owed to the healthcare provider from the patient whose claim is subject to the lien. Blankenbaker, 205 Ariz. at 387, 71 P.3d at 914 n.5 (emphasis added). This is because, “[a] lien is a means of securing a debt; without a debt, there can be no lien.” Ansley v. Banner Health, 246 Ariz. 240, 248 ¶ 16, 437 P.3d 899, 907 (App. 2019) (citing Matlow v. Matlow, 89 Ariz. 293, 298, 361 P.2d 648, 651 (1961) (“In the absence of an obligation to be secured there can be no lien.”) (emphasis added); A.R.S. § 33-932(A)(5) (requiring healthcare provider liens must specify the “amount claimed due for health care”); see, e.g., Via Christi Reg’l Med. Ctr., Inc. v. Reed, 314 P.3d 852, 862 (Kan. 2013) (“[A] hospital lien requires an underlying debt for the lien to secure. Without such a debt, the lien is invalid.”); Parnell v. Adventist Health Sys./W., 109 P.3d 69, 75 (Cal. 2005) (holding a hospital lien “requires an underlying debt owed by the patient to the hospital.”).

Of course, not every obligation provides support for a healthcare provider lien. Medical services on the underlying obligation must be “causally related” to the personal injury claim. That is, the medical services must be rendered “on account of the injuries that gave rise to the [damages] claims” against the tortfeasor, and not for some other reason. A.R.S. § 33-931(A); see also A.R.S.
§ 33-934(B) (noting a defense to a lien enforcement action is that the “charges [were] not medically necessary or causally related to the event giving rise to the claim to which the lien . . . extends.”).

Also important, healthcare provider liens only apply to obligations owed to a “health care provider.” The term “health care provider” is defined by the statute as anyone who operates a healthcare institution or provides healthcare services, licensed in Arizona, or any political subdivision or private entity with ambulances operated, licensed or registered in Arizona. A.R.S. § 33-931(A); see also Berrey v. Plaintiff Inv. Funding, LLC, 96 F. Supp. 3d 936, 944 n.7 (D. Ariz. 2015) (noting the statute “does not include ‘agent of a healthcare provider’ among those entitled to lien rights.”).

In summary, absent an underlying and outstanding obligation to a healthcare provider for services related to a third-party injury claim, “there can be no lien.” See Matlow, 89 Ariz. at 297-98, 361 P.2d at 651. In circumstances where the underlying obligation has been satisfied, released, or extinguished—such as where bills are “paid in full” by an insurer—an otherwise valid lien will cease to exist. See, e.g., Ansley, 246 Ariz. at 248-49, 437 P.3d at 907-08; Abbott v. Banner Health Network, 236 Ariz. 436, 444 ¶ 23, 341 P.3d 478, 486 (App. 2014), reversed on other grounds, 239 Ariz. 409, 372 P.3d 933 (2016); Best Fertilizers of Arizona, Inc. v. Burns, 116 Ariz. 492, 493, 570 P.2d 179, 180 (1977).

ii. Customary Charges

Notwithstanding the amount of unpaid bills owed, healthcare provider liens only secure a provider’s “customary charges” for lien-related services. See A.R.S. § 33-931(A). The term “customary charges” acts as a cap; “it prevents the lien from being an amount greater than what the provider typically charges other patients for the services that it provided to the injured party.” See Midwest Neurosurgery, P.C. v. State Farm Ins. Cos., 686 N.W.2d 572, 579 (Neb. 2004).

“Customary charges,” therefore, are not the same as “billed charges.” Customary charges are the amounts “commonly” or “habitually” accepted by a healthcare provider and “may indeed be lower than its ‘billed charges.’” LaBombard v. Samaritan Health Sys., 195 Ariz. 543, 552 ¶ 34, 991 P.2d 246, 255 (App. 1998) (emphasis added). To determine a provider’s “customary charges,” it is necessary to obtain information showing the amounts that a provider has previously accepted as payment in full for the particular services subject to the lien. Cf. Banner Health v. Medical Sav. Ins. Co., 216 Ariz. 146 ¶¶ 25-26, 153, 163 P.3d 1046, 1103 (App. 2007) (distinguishing “customary charges” under the Healthcare Provider Lien statute as being “quite different” from enforcing “Charge Description Master” rates filed with the Department of Health Services).

iii. Resolution of a Third-Party Personal Injury Claim

A healthcare provider lien is dependent upon the favorable resolution of a causally related third-party personal injury claim. Section 33-934(A) allows a healthcare provider to recover an amount up to the amount collected or to be collected by the injured person from a third party who is “liable” or “responsible” for damages based upon a “judgment, settlement or compromise.” A.R.S. § 33-934(A). The reference to a “judgment, settlement or compromise” means the healthcare provider lien cannot exceed the amount due or paid by a tortfeasor or their insurance company in connection with the resolution of a related personal injury claim.

Conversely, if there is no third-party recovery on a damages claim subject to a healthcare provider lien, the lien amount is zero, and the healthcare provider’s recourse is limited to making a direct claim against the injured party on the underlying debt or obligation. See, e.g., Blankenbaker, 205 Ariz. at 388
¶ 19, 71 P.3d at 915; see also A.R.S. § 33-934(C) (“This section does not create any rights or causes of action on behalf of the lienholder other than are provided for in this section.”).

b. Limitations on Healthcare Provider Liens

The most common issues limiting healthcare provider liens are: (1) whether the lien is properly perfected, (2) the nature of the injured person’s claim, (3) the nature of the charges or medical care, (4) the existence of any applicable indemnification provisions, and (5) application of a procurement cost reduction. We will also discuss whether healthcare provider liens extend to “medical payments” coverage and the impact of “comparative fault” on these liens. See infra §§ 5.2(b)(vi) and (vii).

i. Perfection

The provisions of Arizona’s lien statutes must be strictly followed. Premier Physicians Grp., PLLC v. Navarro, 240 Ariz. 193 ¶ 8, 377 P.3d 988 (2016). To be enforceable, a healthcare provider lien must be timely recorded in the office of the county recorder in the county where the healthcare provider is located. A.R.S. § 33-932(A). A healthcare provider lien must be verified, state the name and location of the healthcare provider, the name and address of the executive officer or agent of the healthcare provider, the date or range of dates services were rendered, and the amount claimed due for those services as of the date the lien is recorded. A.R.S. § 33-932(A).

The verified statement must also include “a statement regarding whether the patient’s treatment has been terminated or will be continued.” A.R.S. § 33-932(B). Provided that a properly recorded lien indicates treatment is continued, subsequent treatment may also be subject to the lien during the “continued period.” Id. Although there is scarce case law on this topic, the statutory phrase “continued period” suggests any additional treatment must be “continuous,” i.e., substantially uninterrupted...