In 2019 the Texas Legislature amended the hospital lien statute (§ 55.002(a), Property Code) to clarify that the term “admitted to a hospital” included treatment in the emergency room without subsequent admission as an inpatient (see § 55.0015, Property Code). The change responded to a wave of lawsuits challenging the validity of liens for emergency room services based on the argument that under the statute, the lien only attaches if the patient is admitted for inpatient services. In Texas Health Harris Methodist Hospital Fort Worth v. Stephen Featherly (No. 02-19-00199-CV), the Fort Worth Court of Appeals took up the issue of whether “admitted” as used in the pre-2019 statute applied only to inpatient services. The court determined that it did not: the 2019 amendments (as expressly stated in the legislation) merely clarified the meaning of the pre-existing statute and did not change it.
The facts of the case are probably fairly typical. Featherly was injured in an automobile accident. He visited the emergency room, which treated and released him. He explicitly sought treatment as a self-pay patient. The hospital sent him a bill for $24,682, which it discounted by $11,106.90. Featherly then hired an attorney, who filed suit against the driver of the other vehicle. When the hospital heard about it, it sent Featherly a past-due bill for the entire amount and filed a lien against Featherly’s recovery. In Featherly’s lawsuit against the other driver, he answered an interrogatory that he “incurred” the full amount of the charges. Eventually, Featherly and the driver settled for $500,000. The driver’s liability insurance carrier issued a check to the hospital for $24,682. Meanwhile, Featherly filed a declaratory judgment action arguing that the hospital’s charges exceeded the reasonable and regular rate. The hospital cried foul and asserted the affirmative defense of estoppel on the basis that Featherly used the full amount of negotiate a higher settlement. Featherly also claimed, in response to the hospital’s breach of contract counterclaim, that he lacked capacity to contract. The hospital responded that Featherly’s litigation conduct constituted ratification of the initial acceptance of the emergency room’s charges.
There were a number of issues before the court of appeals, including the interpretation of the hospital lien statute. On the statutory construction issue, the court ruled that the original statute enacted in 1933, which first used the term “admitted,” understood that term in its ordinary meaning of “received” into the hospital. The distinction between inpatient and outpatient services did not emerge until the enactment of Medicare, and even then the Legislature never changed the statute to limit the application to its “term-of-art” meaning of inpatient services. Featherly’s argument that the statute did not apply thus failed.
The court also found for the hospital on the admissibility of the hospital’s evidence that Featherly ratified his contract for emergency services when he later relied on the full amount of the charges in his litigation and settlement negotiations. The trial court excluded the rather substantial evidence of ratification as irrelevant under Rule 403. In determining that the trial court had abused its discretion in excluding the evidence, the court of appeals reviewed Featherly’s litigation conduct and decided that Featherly’s claim for the exact amount of the hospital’s full charges (and the amount of the lien) “arguably manifested his assent and confirmed the contract itself.” Featherly likewise accepted the benefit of the contract. As the court put it, “[T]he backhanded benefit of the contract and the steep hospital bill that ensued was that they gave Featherly leverage to pursue greater damages in his personal injury suit.” The court concluded that the evidence was relevant,and its exclusion constituted harmful and reversible error. The case now heads back to the trial court for a new trial.
The hospital raised further issues on appeal, which the court of appeals overruled. The first was whether a declaratory judgment action could be used to determine the hospital’s reasonable and regular rates for services on the basis that the hospital’s charges raised a question of fact. Citing the Declaratory Judgments Act and other appellate authority, the court of appeals ruled that declaratory judgment in this case was proper, since the Act explicitly calls for issues of fact to be resolved in the same manner as in other civil actions. Moreover, distinguishing between issues of law and fact is a difficult proposition in any event, especially in cases involving the interpretation of written instruments. The hospital further challenged Featherly’s claim under the DJA for attorney’s fees. The court of appeals sided with Featherly because Featherly pleaded only a claim for declaratory relief and no other cause of action. If the hospital lien statute had provided for a private cause of action to enforce the statute, the hospital might have had a point. But it doesn’t, and the court of appeals was not about to imply one.
Justice Walker dissented from the majority on the evidentiary issue. He thought that both sides were gaming the statute, the plaintiff to leverage a bigger settlement, the hospital to walk back its initial discount of the full billed charges. He also would have ruled that the trial court could have excluded the hospital’s evidence of ratification under Rule of Evidence 408, which prohibits admission of settlement negotiations or the fact of settlement. In either case, Justice Walker objected to the majority’s ruling that the trial court abused its discretion.
This case addresses, at least partly, the litigation tactics that have grown up around the hospital lien statute in the past decade or so. These tactics have prompted the Legislature to amend the statute in both the 2019 and 2021 legislative sessions. We will see if any other pre-2019 cases reach the intermediate courts of appeals, and certainly hope that if they do, other courts will adopt the Fort Worth court’s reasoning. The evidentiary issues are also interesting, especially from the point of view of hospitals attempting to assert liens against patients who have contracted for services as uninsured or self-pay and who later file claims for personal injury. As the court of appeals concluded, an uninsured plaintiff’s litigation conduct matters, and trying to have one’s cake and eat it, too, may be frowned upon by the courts.
