How Hospitals can opt out of billing your health insurance company and be paid 100% out of your personal injury settlement.

    In a recent decision, the Illinois Supreme Court declined to apply the Common Fund Doctrine to Hospital Liens. What is the "Common Fund" doctrine and does this mean anything to me? you might ask. The answer is that it might mean a lot to you if you have a personal injury lawsuit.

     The Common Fund doctrine provides that where an attorney creates a common fund out of which his or her client and other persons or entities are entitled to share in the recovery, the other person or entities are required to pay attorneys fees out of their share of the recovery. The most common example of the Common Fund doctrine at work is where you are in a car accident and are injured. Your employer sponsored health insurance pays your medical bills and your attorney uses those bills to obtain a settlement with the other drivers insurance company. Your health  insurer is entitled to be compensated out of your settlement. The Common Fund doctrine provides that since you pay your attorney a fee of 33%, and your attorney is essntially collecting the medial bills for your health insurance company, the net amount paid back to your insurance company is reduced by 33%. The "savings" as it were, goes to you and increases your net recovery.

   In the scenario described above, the health insurance companies do not pay the medical providers 100% on the dollar. Typically, the health insurers pay a fraction, maybe 25% to 35% of the actual bills. The net effect of the discounts and Common Fund can impact a clients net recovery greatly. Consider this example. You are injured in an automobile accident. Your hospital bills total $100,000. Your health insurer pays $30,000 to the Hospital pursuant to its insurance contracts. Your attorney settles the case for $300,000. The attorneys fee is $100,000 and the health insurer is paid $20,000 on it's lien ($30,000 less 33% reduction pursuant to the Common Fund doctrine) for a net recovery to you of $180,000.

    Now compare this situation to a person who does not have health insurance. Under the Hopital Lien Act, the Hopital can lien your attorneys file to ensure that its bills get paid out of the settlement. Under the Hopital Lien Act there is no application of the Common fund doctrine as recently confirmed by the Illinois Supreme Court. Under this secanrio, the total recovery to the client is $100,000,($100,000 attorney fee and $100,000 paid to the hospital) a difference of $80,000.

   Although hospitals may qualify for not for profit status under the tax code, hospitals are anything but for profits when it comes to treating patients involved in personal injury claims. Hospitals, cognizant of the application of not only the Common Fund doctrine but also the discounts that they have to offer to health insurance companies, are now deliberately not billing the health insurance companies in cases where the patient has a viable personal injury claim. The hospitals are taking the option not to bill the health insurance company and filing liens with the personal injury attorney so that they can reap the award of a bill paid in full when the personal injury case settles. The recent Illinois Supreme Court case upholds the hospital's right to a full recovery of all bills so long as the amount of the bills do not exceed the amount of the settlement.

   I submit that it is unfair for hospitals to have this option. Patients have bought and paid for health insurance and are should be entitled to use it. The reality is that without having health insurance in the first place, no hospital is going to treat you anyway. In those forms that you have to sign before they will give you any treatment, you assign to the hospital all of your insurance rights and claims. If that is the basis for the hospital to admit you and treat you then the hospital should be bound by that and should not be allowed to later opt out of billing your health insurer just because it turns out you have a really good personal injury claim.