The Emerging Law of the Statutory Hospital Lien in Colorado
| Publication year | 1996 |
| Pages | 61 |
| Citation | Vol. 25 No. 7 Pg. 61 |
1996, July, Pg. 61. The Emerging Law of the Statutory Hospital Lien in Colorado
Hospitals face many problems in the collection of outstanding medical bills incurred by a patient who has been injured due to a third party's negligence. If the patient has no health insurance or resources to pay for hospital services when they are received, the patient will usually request the hospital to suspend collection activities until the patient's claims against the third party have been resolved. Even if the patient is potentially covered by health insurance or a government health benefit program, the insurer or government program typically serves, in such cases, as a "secondary payor" and will not pay hospital bills until benefits from the primary payor---the third party---have been exhausted.
Other problems may arise when the patient resolves his or her claims against the third party. Since the hospital has no standing to collect directly from the third party, absent an assignment or lien, the third party may not honor the hospital's right to payment. In many cases where a patient has been paid directly by the liable party for all of the patient's damages, including the hospital bills, the patient has refused to pay the hospital in full for the services that have been received.
The Colorado legislature responded to these problems in 1967 with the enactment of the Colorado Hospital Lien Statute ("Hospital Lien Statute" or "Statute").(fn1) During the past two years, the Colorado Court of Appeals has issued the only two published opinions under the Statute in the cases of Rose Medical Center v. State Farm Mutual Automobile Insurance Company(fn2) and Trevino v. HHL Financial Services, Inc. and University Hospital.(fn3) This article provides an overview of the Hospital Lien Statute and explains the impact of these two decisions on hospitals and their patients. Additionally, the article addresses an oral opinion issued by the Denver District Court on a lien validity issue.(fn4)
The Hospital Lien Statute provides that every hospital duly licensed in Colorado has a lien for all reasonable and necessary charges for services provided to an individual injured by the negligent or wrongful acts of a third party on any amount payable to the injured person for his or her injuries.(fn5) The lien does not apply to cases arising under Colorado's Workers' Compensation Act,(fn6) and it is subordinate to statutory attorney liens.(fn7)
A lien created pursuant to the Hospital Lien Statute attaches to the "net amount payable to such injured person, his heirs, assigns, or legal representatives out of the total amount of any recovery or sum had or collected, or to be collected, whether by judgment, settlement, or compromise, by such person, his heirs, or legal representatives as damages on account of such injuries."(fn8) Any hospital charges that are incurred after the judgment, settlement or compromise are not covered by the lien.(fn9)
While the hospital lien is created at the time at which services are rendered to the injured person, the lien is unenforceable unless written notice of the lien is given pursuant to the terms of the statute, which defines the scope and manner of the notice to be given.(fn10) Notice may be given by two different methods. Hospital lien notices may be recorded with the Secretary of State,(fn11) which entails a filing fee. The notice requirements also may be satisfied by filing the notice in the patient's personal injury litigation.(fn12) In the former case, notice also must be given by certified mail to all interested parties.(fn13) In the latter case, notice is sufficient if copies of the filed lien are mailed to the attorneys of record for the parties in the pending action.(fn14)
The Hospital Lien Statute also has enforcement provisions.(fn15) If the hospital has provided the statutory notice of the lien to interested parties and has duly recorded such notice in accordance with the statute, any person who pays over...
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