New Requirements for the Creation of Hospital Liens

Amendments to C.R.S. § 38-27-101, concerning when and under what circumstances a hospital has a lien for services provided to a person injured due to another person’s negligence, took effect on August 5, 2015. The amendments proscribe additional conditions that must be met before a hospital lien is created.  Specifically, they require a hospital to submit charges for care to the property and casualty insurer and a patient’s primary “payer of benefits” before a lien is created.  As defined in the new version of the statute, “payer of benefits” means an insurer, a health maintenance organization, a health benefit plan, a preferred provider organization, an employee benefit plan, a program of medical assistance under the Colorado Medical Assistance Act, the Children’s Basic Health Plan, any other insurance policy or plan, or “any other benefit available as a result of a contract entered into and paid for by or on behalf of an injured person.”

The new text thus requires that hospitals first seek payment from any source of insurance or health benefits for the injured person, to the extent that the hospital is aware of the source.  The hospital is required to submit charges to any payer available to and identified by the injured person. If the patient has no insurance and so no payers of benefits are identified, a lien may be created.   If the hospital files a lien and is then notified of a payer of benefits, the hospital must try to submit charges to the payer.

The hospital has a valid lien after it satisfies the new submission requirements and the requirements of C.R.S. § 38-27-102, which concerns formalities of filing and notice.  Under C.R.S. § 38-27-102, the hospital must both file the lien with the secretary of state and mail notice of the lien to, among others, the alleged tortfeasor and his or her insurance carrier. 

However, the Colorado Court of Appeals ruled in 2014 that substantial—as opposed to strict—compliance with the formal requirements of C.R.S. § 38-27-102 was sufficient to create an enforceable lien.  Thus, a hospital lien may be valid even if the hospital does not comply with all formal requirements of the statute.  A lien is valid despite noncompliance where the hospital provides timely actual notice of the lien to those against whom it attempts to enforce the lien.  In Wainscott v. Centura Health Corp., 351 P.3d 513 (Colo. App. 2014), the hospital did not identify the tortfeasors responsible for the patient’s injuries and did not serve a required copy of the lien notice on the tortfeasor but did mail a copy of the lien notice to the torfeasor’s insurer and the injured patient well before a settlement took place.  The Court concluded the lien was valid; the tortfeasor’s insurer thus would need to disburse settlement funds directly to Centura, as opposed to disbursing them to the plaintiff.

It remains to be seen whether a hospital lien would be valid if the hospital failed to submit charges to all insurers and payers of benefits before filing the lien.  The new version of C.R.S. § 38-27-101 certainly provides grounds for a challenge to the validity of such a lien, but Courts may continue to enforce liens in “substantial” compliance with the statutes.

Insurers should be especially cautious of all liens for which they have received some form of notice irrespective of strict statutory compliance.