Doctors not entitled to lien on patient's personal injury recovery for amount exceeding agreed upon medical services charges

Law Reporter, Apr 2004

Midwest Neurosurgery v. State farm. Ins. Co, _____ N.W.2d _____, No. A-02-559, A-03-076, 2004 WL 26521 (Neb. Ct. App. Jan. 26, 2004).

A Nebraska appellate court held that a health care provider may not secure a lien on any proceeds from its patient's personal injury settlement that exceed the amount charged for medical services pursuant to an employee benefits plan.

Here, Lundin went to Midwest Neurosurgery (Midwest) for treatment after a car accident. Lundin had a health insurance plan as part of her employee benefits, and Midwest and the employer had agreed that Midwest would provide medical services at a reduced rate. Lundin subsequently settled a personal injury suit for the car accident. After her health insurance paid its contractual fee to Midwest, Midwest perfected a lien against her recovery for both the amount Lundin still owed personally and for the difference between her insurance payment and die full amount it would have received without die reduced fee agreement.

State Farm, the tortfeasor's insurer, issued a check payable to both Lundin and Midwest. Lundin sued for a declaratory judgment that Midwest was not entitled to the full amount. Thereafter, Midwest filed suit against State Farm seeking a judgment for the amount in question. The trial court ruled that Midwest was not entitled to a lien on the full amount.

Affirming, the appellate court held that the contract between Midwest and Lundin's employer limits Midwest to recovering only the amount Lundin directly owes, not an amount it might have usually charged. The court rejected Midwest's argument that Neb. Rev. Stat. § 52-401, which provides that a doctor has a lien against a patient's judgment for amounts due for the "usual and customary charges," circumvents the contractual agreement. While the court acknowledged Midwest had a lien against State Farm, it concluded die evidence did not support Midwest's request for more than Lundin owed.

Noting that state jurisprudence provides little guidance, the court looked at cases from other jurisdictions holding that where doctors contractually agree to reduce their charges, they cannot recover amounts in excess of those charges. Once that amount is paid in full, the doctors have no debt owed to them and thus, no expectation that any additional money will be received, the court reasoned.

The court rejected Midwest's argument that its agreement with the employer entitled it to seek additional payment from a primary insurer, and that State Farm was a secondary insurer in this case. State Farm was not a secondary insurer just because Lundin listed it on her registration sheet as being the car insurance provider, die court said. State Farm could only be liable to Midwest if it had settled directly with Lundin, impairing Midwest's lien, which it did not do.

Lundin's Counsel

*Joseph B. Muller, Omaha, Neb.