Understanding Texas Hospital Liens and Avoiding Settlement Pitfalls

From an insurer’s perspective, whether a hospital has filed or may file a hospital lien is an important element to a bodily injury settlement discussion. The Texas hospital lien law is codified under Chapter 55 of the Texas Property Code and currently encompasses Sections 55.001 - 55.008, as well as Section 55.0015.

In general, Chapter 55 allows hospitals that provide emergency services to accident victims to file a lien against personal injury causes of actions, settlements, and even judgments, and thus secure their debt against any cause of action the patient may have against the tortfeasor or liable third party. A hospital lien attaches to a bodily injury or Texas survival statute judgment and to the proceeds of a settlement. A hospital lien does not attach to UM/UIM benefits, PIP benefits, Med-Pay, wrongful death claims, claims brought under Texas worker’s compensation laws, or the Federal Employees Liability Act. Hospitals that assert a lien against these latter types of claims do so incorrectly. 

The legislative purpose of the statute is to encourage hospitals to treat accident victims by providing hospitals with an additional method of collecting payment for emergency medical services. In order to be effective, Chapter 55 liens must be filed in the property records of the county where the services were provided. The lien must contain certain basic identifying information about the patient, the hospital, and the liable third party. Although chiropractors, physical therapists, and many other medical providers often assert that they “have a lien” for their charges, the hospital lien statute does not recognize these entities as eligible to file liens.

A hospital’s lien may include only charges incurred during the patient’s first 100 days of treatment, and the patient must have been admitted to a hospital within 72 hours of the accident. If a patient is transferred to another hospital for further treatment of the same injuries, the other hospital can also file a lien that must be satisfied as well. An injured individual is considered admitted to a hospital if the individual is allowed access to any department of the hospital for the provision of any treatment, care, or service to the individual. In other words, a patient no longer must be formally “admitted” in order for the hospital to be able to file a lien. Even if the patient never admitted to the emergency room, any lab work or radiology scans would be enough for the hospital to file a lien.

A hospital lien does not extend to charges that exceed a “reasonable and regular rate” for the services provided. In other words, Texas law requires that hospitals establish that the rates they have charged a patient are usual and customary before a lien may attach to that patient’s cause of action. However, to meet this burden a hospital need only prove that the rates charged are in line with those charged to other patients within that particular hospital.  

Also, under the currently effective version of Chapter 55, the hospital lien is capped at the lesser of:

         (1) the amount of the hospital’s charges for services provided to the injured individual during the first 100 days of the hospitalization; or

         (2) 50% of all amounts recovered by the injured individual in a lawsuit or settlement.

For example, if the claimant settles a claim for $40,000 and the claimant has a hospital lien in the amount of $50,000, the hospital is not entitled to more than $20,000 of the settlement.

Many adjusters and attorneys incorrectly assume that because they were not put on notice of the lien that they do not need to satisfy it. Because the hospital has no obligation to notify the patient, the attorney, or the adjuster attempting to settle a case in which a hospital lien has been filed, the attorney or adjuster must affirmatively check for liens in the property records of the county where services were provided. Many Texas counties now allow for this to be done online. Obtaining a release from a claimant regarding a cause of action to which a lien has attached is not valid against the hospital unless the hospital has been paid or is a party to the release. Also, merely including indemnity language in a release signed by a claimant will not sufficiently discharge potential liability for failing to satisfy a hospital lien (and will not protect an insurer if the claimant has already spent the money).