Larry Dean Speegle v. Harris Methodist Health System and Harris Methodist Fort Worth ( 2009 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-08-228-CV
LARRY DEAN SPEEGLE APPELLANT
V.
HARRIS METHODIST HEALTH
SYSTEM AND HARRIS APPELLEES
METHODIST FORT WORTH
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FROM THE 141ST DISTRICT COURT OF TARRANT COUNTY
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OPINION ON REHEARING
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We withdraw our opinion and judgment of October 29, 2009, and
substitute the following. We deny appellant’s Motion for Rehearing.
I. Introduction
Appellant Larry Dean Speegle brings this appeal complaining of the trial
court’s summary judgment establishing the validity and amount of a hospital
lien filed by appellees Harris Methodist Health System and Harris Methodist Fort
Worth and granting appellees recovery for the amount of the lien plus attorney’s
fees. We affirm.
II. Background
On June 15, 2001, Larry Dean Speegle was involved in an automobile
accident with Santiago Guzman, an employee or agent of SpectraSite
Construction, Inc. (SpectraSite). Speegle was care-flighted to Harris Methodist
Fort Worth (the Hospital) where he was admitted and treated from June 15,
2001, to July 11, 2001. The Hospital’s total charges for this care were
$142,915.01. On June 29, 2001, Harris Methodist Health System and its
subsidiary, the Hospital, filed a notice of hospital lien for these services.
Although Speegle is entitled to Medicare, the Hospital has not billed or received
payment from Medicare for this treatment.
On or about August 11, 2004, Speegle and his wife entered into a
Compromise Settlement Agreement and Release (the Settlement Agreement)
with Guzman and WesTower Communications, Inc. (SpectraSite’s successor).
The Settlement Agreement provided that “$1,250,000.00[] . . . will be paid to
the Releasing Parties and medical lien holders as follows: 1. $391,064.43 to
Larry Speelge [sic], [the Hospital], Trailblazer Health Enterprises L.L.C. [a
Medicare contractor] and Kent, Good & Anderson, P.C.” $391,064.43 is the
exact total of appellees’ lien amount ($142,915.01) and Medicare’s lien amount
2
($248,149.42). In the Settlement Agreement, the parties further agreed that
“the total of these two liens is being paid as described in Paragraph IV. A. 1.
above with the intent that the liens of [the Hospital] and Medicare will be
satisfied with these funds (emphasis added).“
On August 9, 2004, SpectraSite’s insurer, Zurich American Insurance
Co., issued to Speegle or his agent a check made jointly payable to Speegle, the
Hospital, Trailblazer Health Enterprises (Medicare’s fiscal intermediary), and
Kent, Good & Anderson, Speegle’s counsel, in the amount of $391,064.43.
Speegle, however, did not pay the Hospital the $142,915.01 payment. 1
Instead, on November 30, 2004, he filed an original petition, seeking a
declaration that the hospital lien is invalid because appellees failed to comply
with Chapter 146 of the Texas Civil Practice and Remedies Code by not billing
Medicare for Speegle’s treatment. Harris Methodist Health System and the
Hospital countersued, seeking a declaration that the lien was valid, recovery of
the amount of the lien under the Settlement Agreement, and attorney’s fees.
Speegle and appellees filed competing motions for traditional summary
judgment on all claims. The trial court denied Speegle’s motion and rendered
an interlocutory summary judgment granting appellees’ motion on both
1
 According to Speegle, settlement monies were set aside in a fund to
pay the hospital lien, and “the fund is still in existence today.”
3
counterclaims, fixing the amount of the hospital lien at $142,915.01, and
ordering Speegle to pay appellees that amount.
The issue of the appellees’ attorney’s fees was tried to a jury. Over
Speegle’s objection, the jury was not asked to segregate attorney’s fees
between appellees’ two claims. The jury returned a verdict awarding appellees
$50,512.50 in attorney’s fees through trial plus attorney’s fees on appeal. The
trial court rendered a final judgment on March 4, 2008, and this appeal
followed.
III. Standard of Review
In a traditional summary judgment case, the issue on appeal is whether
the movant met the summary judgment burden by establishing that no genuine
issue of material fact exists and that the movant is entitled to judgment as a
matter of law.2 The burden of proof is on the movant, and all doubts about the
existence of a genuine issue of material fact are resolved against the movant. 3
Summary judgment is proper when parties do not dispute the relevant facts. 4
2
 Tex. R. Civ. P. 166a(c); Sw. Elec. Power Co. v. Grant, 73 S.W.3d
211, 215 (Tex. 2002); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d
671, 678 (Tex. 1979).
3
 Sw. Elec. Power Co., 73 S.W.3d at 215.
4
 Havlen v. McDougall, 22 S.W.3d 343, 345 (Tex. 2000).
4
When reviewing a summary judgment, we take as true all evidence
favorable to the nonmovant, and we indulge every reasonable inference and
resolve any doubts in the nonmovant’s favor. 5 Evidence that favors the
movant’s position will not be considered unless it is uncontroverted. 6 But we
must consider whether reasonable and fair-minded jurors could differ in their
conclusions in light of all of the evidence presented. 7
The summary judgment will be affirmed only if the record establishes that
the movant has conclusively proved all essential elements of the movant’s
cause of action or defense as a matter of law. 8 When both parties move for
summary judgment and the trial court grants one motion and denies the other,
the reviewing court should review both parties’ summary judgment evidence
and determine all questions presented. 9
5
 Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).
6
 Great Am. Reserve Ins. Co. v. San Antonio Plumbing Supply Co., 391
S.W.2d 41, 47 (Tex. 1965).
7
 See Wal-Mart Stores, Inc. v. Spates, 186 S.W.3d 566, 568 (Tex.
2006); City of Keller v. Wilson, 168 S.W.3d 802, 822–24 (Tex. 2005).
8
 Clear Creek Basin Auth., 589 S.W.2d at 678.
9
 Valence Operating Co., 164 S.W.3d at 661.
5
IV. Validity of the Hospital Lien
In his first issue, Speegle challenges the trial court’s order granting
appellees’ summary judgment on their hospital lien and breach of contract
claims. Speegle contends that the lien is invalid because the Hospital was
required to timely bill and receive payment for its services from a third party
payer, Medicare, rather than create a lien under Chapter 55 of the Texas
Property Code.
To secure the costs hospitals incur when treating accident victims,
Chapter 55 of the Texas Property Code generally grants hospitals a lien on any
cause of action a patient may have against a tortfeasor. 10 Specifically, section
55.002(a) of the property code provides:
A hospital has a lien on a cause of action or claim of an individual
who receives hospital services for injuries caused by an accident
that is attributed to the negligence of another person. For the lien
to attach, the individual must be admitted to a hospital not later
than 72 hours after the accident. 11
10
 Tex. Prop. Code Ann. § 55.002(a) (Vernon 2007); see Daughters of
Charity Health Servs. of Waco v. Linnstaedter, 226 S.W.3d 409, 411 (Tex.
2007). The parties do not dispute that appellees are a “hospital” within the
meaning of this statute. And, contrary to Speegle’s contention, Chapter 55
does not prohibit liens involving treatment of individuals who are Medicare
beneficiaries or covered under private medical insurance. See Tex. Prop. Code
Ann. §§ 55.001–.008 (Vernon 2007).
11
 Tex. Prop. Code Ann. § 55.002(a).
6
This lien attaches to the plaintiff’s cause of action, a judgment, or the proceeds
of a settlement. 12 Once the lien is filed, a tortfeasor cannot obtain a release by
judgment or settlement unless the hospital’s charges are paid. 13
Prior to 1980, federal law provided that “Medicare was the primary payer
for hospital and medical services received by its beneficiaries.” 14 In 1980,
however, Congress enacted secondary payer provisions that provided that
Medicare is a secondary payer in certain cases when a Medicare beneficiary is
covered by other insurance. 15 The purpose behind the secondary payer
provisions was to achieve major fiscal savings in the Medicare program. 16 As
stated in the House Report on the bill in which the secondary payer provision
was originally enacted, Congress intended to reverse the policy then in effect
that established Medicare as the primary payer “even in cases in which a
12
 Id. § 55.003(a) (Vernon 2007).
13
 Id. § 55.007 (Vernon 2007); Linnstaedter, 226 S.W.3d at 411.
14
 Am. Hosp. Ass’n v. Sullivan, No. 88-2027(RCL), 1990 WL 274639,
at *6 (D.D.C. May 24, 1990).
15
 Omnibus Budget Reconciliation Act of 1980, Pub. L. No. 96-499,
§ 953, 94 Stat. 2599 (codified as amended at 42 U.S.C. § 1395y(b)(2) (Supp.
2009)).
16
 Varacalli v. State Farm Mut. Auto. Ins. Co., 763 F. Supp. 205, 208
(E.D. Mich. 1990); see also Abrams v. Heckler, 582 F. Supp. 1155, 1164
(S.D.N.Y. 1984).
7
beneficiary’s need for services [was] related to an injury or illness sustained in
an auto accident and the services could have been paid for by a private
insurance carrier under the terms of an automobile insurance policy.” 17
At the time of Speegle’s treatment at the Hospital, the relevant secondary
payer statute, 42 U.S.C. § 1395y(b)(2)(A), provided in pertinent part:
Payment under this subchapter may not be made, except as
provided in subparagraph (B), with respect to any item or service
to the extent that --
....
(ii) payment has been made or can reasonably be expected to
be made promptly (as determined in accordance with regulations)
under a . . . liability insurance policy or plan . . . . 18
This statute expressly prohibits Medicare from paying if a liability carrier has
already paid or is reasonably expected to pay “promptly.” According to the
regulations adopted by the Health Care Financing Administration (HCFA),
“promptly” is defined as within 120 days of the earlier of the date a lien is filed
against a potential liability settlement or the date of discharge. 19 Therefore,
under federal statutory and regulatory laws, Medicare is a secondary payer in
17
 H.R. Rep. No. 96-1167, § 825, at 389 (1980), as reprinted in 1980
U.S.C.C.A.N. 5526, 5752.
18
 42 U.S.C. § 1395y(b)(2)(A) (2001) (current version at 42 U.S.C.
§ 1395y(b)(2)(A), (B) (Supp. 2009)).
19
 42 C.F.R. § 411.50(b) (2001).
8
situations where a Medicare beneficiary’s hospital bill is covered by liability
insurance, and Medicare is prohibited from paying during the 120-day
“promptly” period. 20
With respect to the rights of providers after the expiration of the
“promptly” period, the HCFA issued a 1995 memorandum providing that the
provider or supplier “may, but is not required to bill Medicare for conditional
payment if the liability insurance claim is not finally resolved.” 21 HCFA’s
successor entity, the Centers for Medicare & Medicaid Services (CMS), has
published this same construction in Chapter 2 of its Medicare Secondary Payer
Manual (MSPM). 22 Section 40.2 of the MSPM is entitled “Billing in MSP
Liability Insurance Situations” and provides, in pertinent part:
Generally, providers . . . must bill liability insurance prior to the
expiration of the promptly period rather than bill Medicare. . . .
20
 The HCFA regulations provide that “Medicare benefits are secondary
to benefits payable by a third party payer even if State law or the third party
payer states that its benefits are secondary to Medicare benefits or otherwise
limits its payments to Medicare beneficiaries.” 42 C.F.R. § 411.32(a)(1) (2001)
(emphasis added).
21
 Joiner v. Med. Ctr. E., Inc., 709 So. 2d 1209, 1220 (Ala. 1998)
(emphasis added) (quoting an August 21, 1995 HCFA memorandum, which
was in turn quoted in a March 12, 1996 HCFA memorandum).
22
 U.S. Dep’t of Health & Human Servs., Ctrs. for Medicare & Medicaid
Servs., Medicare Secondary Payer (MSP) Manual, ch. 2, § 40.2 (2009),
http://www.cms.hhs.gov/manuals/downloads/msp105c02.pdf.
9
Following expiration of the promptly period . . . a provider . . . may
either:
• bill Medicare for payment and withdraw all claims/liens
against the liability insurance/beneficiary’s liability
insurance settlement . . . ; or
• maintain all claims/liens against the liability
insurance/beneficiary’s liability insurance settlement.
....
The following applies to providers who participate in Medicare . . . :
• if the provider bills Medicare, the provider must accept
the Medicare approved amount as payment in full and
may charge beneficiaries only deductibles and
coinsurance.[sic]
• if the provider pursues liability insurance, the provider
may charge beneficiaries actual charges, up to the
amount of the proceeds of the liability insurance less
applicable procurement costs but may not collect
payment from the beneficiary until after the proceeds
of the liability insurance are available to the
beneficiary. 23
Therefore, under HCFA and CMS regulations, after the 120-day
“promptly” period ends, whenever services provided to a Medicare beneficiary
are also covered by a liability insurance policy, providers have the right either
to bill Medicare or to maintain a lien against a potential liability insurance
settlement.
23
 Id. (emphasis added).
10
An agency’s construction of its own regulations is entitled to substantial
deference. 24 We, therefore, defer to the appropriate agency’s construction of
federal Medicare law granting appellees a federal right to maintain their lien
against Speegle’s liability insurance settlement in lieu of billing Medicare. 25
Accordingly, we hold that the Hospital is entitled to recover the $142,915.01
amount of the lien from Speegle. 26 We overrule the portion of Speegle’s first
24
 Lyng v. Payne, 476 U.S. 926, 939, 106 S. Ct. 2333, 2341 (1986);
see Legend Airlines, Inc. v. City of Fort Worth, 23 S.W.3d 83, 95 (Tex.
App.—Fort Worth 2000, pet. denied); see also United States ex rel. Thompson
v. Columbia/HCA Healthcare Corp., 20 F. Supp. 2d 1017, 1046 (S.D. Tex.
1998) (“As the agency charged with enforcing regulations . . . HHS’ and its
subdivision’s, HCFA’s, interpretation of those regulations is entitled to
deference.”).
25
 Our holding does not address the validity of a hospital lien in
situations where the patient is the beneficiary of private medical insurance
rather than Medicare.
26
 Speegle cites Linnstaedter, 226 S.W.3d at 411, for the proposition
that appellees may not file a lien against Speegle’s tort claim because a hospital
cannot sue a patient for the difference between its normal rate and an
applicable discounted rate. Id. However, that case involved a patient covered
under workers’ compensation insurance, and the court expressly grounded its
holding on the Texas Labor Code’s prohibition of claims against workers’
compensation patients. Id. (citing Tex. Lab. Code Ann. § 413.042(a) (Vernon
2006) (providing that hospitals “may not pursue a private claim against a
workers’ compensation claimant” for all or part of the costs of treatment)).
Speegle also cites federal case law prohibiting a hospital lien when the provider
had already received payment from a third party payer yet still sought to
enforce its lien to collect the difference between its normal charges and the
discounted reimbursement rate; those cases likewise do not apply here because
the Hospital has not been paid by Medicare. See Rybicki v. Hartley, 792 F.2d
260, 261 (1st Cir. 1986) (lien holder had been paid by Medicare); Satsky v.
11
issue challenging the trial court’s judgment in favor of appellees on their
hospital lien.27
V. Federal Medicare Law Preempts Section 146.002(c) of the
Texas Civil Practice and Remedies Code
In his second issue, Speegle argues that the trial court erred by denying his
summary judgment motion to invalidate the hospital lien because appellees
failed to comply with Texas Civil Practice and Remedies Code section
146.002(c)’s requirement that health care service providers timely bill third
party payers, including Medicare, whenever they are “authorized” to do so. 28
Civil practice and remedies code section 146.002(c) provides:
If the health care service provider is required or authorized to
directly bill a third party payor operating under federal or state law,
including Medicare and the state Medicaid program, the health care
service provider shall bill the third party payor not later than:
(1) the date required under any contract between the health
care service provider and the third party payor or the date
required by federal regulation or state rule, as applicable; or
United States, 993 F. Supp. 1027, 1028–29 (S.D. Tex. 1998) (lien holder paid
by private prepaid insurance plan); Holle v. Moline Pub. Hosp., 598 F. Supp.
1017, 1019 (C.D. Ill. 1984) (lien holder paid by Medicare).
27
 Based on our holding regarding appellees’ recovery under the hospital
lien, we need not reach, and express no opinion regarding, the portion of
appellant’s first issue challenging the trial court’s judgment granting appellees’
breach of contract claim. See Tex. R. App. P. 47.1.
28
 See Tex. Civ. Prac. & Rem. Code Ann. § 146.002 (Vernon 2005).
12
(2) if there is no contract between the health care service
provider and the third party payor and there is no applicable
federal regulation or state rule, the first day of the 11th
month after the date the services are provided. 29
Under section 146.003(a), a health care service provider who violates
section 146.002‘s prompt billing requirements “may not recover from the
patient any amount that the patient would have been entitled to receive as
payment or reimbursement under a health benefit plan or that the patient would
not otherwise have been obligated to pay had the provider complied with
Section 146.002.” 30 Thus, chapter 146 requires medical care providers to bill
Medicare for services received by Medicare-eligible patients when providers are
permitted—such as after the 120-day “promptly” period. 31 In such a
circumstance, section 146.002(c) conflicts with federal law requiring Medicare
to be regarded as a secondary payer and granting hospitals the option of
maintaining a hospital lien, even if they are authorized to bill Medicare instead. 32
29
 Id. § 146.002(c) (emphasis added).
30
 Id. § 146.003(a) (Vernon 2005) (emphasis added).
31
 Id. § 146.002(c); see 42 U.S.C. § 1395y(b)(1) (2001).
32
 See 42 C.F.R. § 411.32 (2001); Joiner, 709 So. 2d at 1220–21
(applying Medicare secondary payer statutes and HCFA policies); Parkview
Hosp., Inc. v. Roese, 750 N.E.2d 384, 390–91 (Ind. Ct. App. 2001) (same).
Appellees elected to maintain the hospital lien rather than bill Medicare.
13
When state and federal law conflict, we look to federal preemption
principles derived from the Supremacy Clause of the United States
Constitution. 33 When a state law conflicts with valid federal law, the state law
is preempted and has no effect. 34 A federal agency acting within the scope of
its congressionally delegated authority may similarly preempt state law. 35 A
state law conflicts with federal law and is thus preempted when the state law
stands as an “obstacle to the accomplishment and execution of the full
purposes and objectives of Congress.” 36 In determining whether a state statute
is an obstacle to the accomplishment and execution of the full purposes and
33
 U.S. Const., art. VI, cl. 2 (“This Constitution, and the Laws of the
United States which shall be made in Pursuance thereof . . . shall be the
supreme Law of the Land; and the Judges in every State shall be bound
thereby, any Thing in the Constitution or Laws of any State to the Contrary
notwithstanding.”).
34
 City of New York v. Fed. Commc’ns Comm’n, 486 U.S. 57, 63–64,
108 S. Ct. 1637, 1642 (1988); see also BIC Pen Corp. v. Carter, 251 S.W.3d
500, 504 (Tex. 2008).
35
 City of New York, 486 U.S. at 63–64, 108 S. Ct. at 1642; La. Pub.
Serv. Comm’n v. Fed. Commc’ns Comm’n, 476 U.S. 355, 368–69, 106 S. Ct.
1890, 1898–99 (1986).
36
 Wyeth v. Levine, ---- U.S. ----, 129 S. Ct. 1187, 1193–94 (2009)
(quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 404 (1941));
see also BIC Pen Corp., 251 S.W.3d at 504.
14
objectives of Congress in passing a federal statute, we look to the language of
the statute and Congress’s intent. 37
We have held that 42 U.S.C. § 1395y(b)(1) and HCFA regulations provide
that Medicare is the secondary source of payment when other funds are
available to pay a Medicare-eligible patient’s hospital charges. 38 The
requirement in section 146.002 that health care providers must bill Medicare
whenever authorized to do so presents an obstacle to accomplishing this
objective. Therefore, we hold that section 146.002(c) is preempted to the
extent it requires a hospital to bill Medicare as a primary source of payment
when other funds are available to pay the hospital charges. 39 We overrule
Speegle’s second issue.
VI. Segregation of Appellees’ Attorney’s Fees
In his third issue, Speegle argues that the trial court erred by awarding
appellees’ attorney’s fees based on the jury’s verdict because appellees were
37
 See Wyeth, ---- U.S. ----, 129 S. Ct. at 1194–95 (holding that “the
purpose of Congress is the ultimate touchstone in every pre-emption case” and
determining intent through statutory language and legislative history).
38
 See 42 U.S.C. § 1395y(b)(1) (2001); 42 C.F.R. § 411.32 (2001).
39
 See, e.g., BIC Pen Corp., 251 S.W.3d at 504 (holding that “state law
is impliedly preempted if it ‘actually conflicts with federal law or regulations,’
because . . . state law obstructs accomplishing and executing Congress’ full
purposes and objectives”).
15
not entitled to recover attorney’s fees on their claim to enforce the lien 40 and
the recoverable fees were not segregated from the non-recoverable fees. 41
As a general rule, fee claimants have always been required to segregate
attorney’s fees between claims for which they are recoverable and claims for
which they are not. 42 Only when a claimant establishes that the same “discrete
legal services advance both a recoverable and unrecoverable claim” are the fees
“so intertwined that they need not be segregated.” 43
The Hospital pleaded for recovery of attorney’s fees under sections
37.009 and 38.001 of the Texas Civil Practice and Remedies Code. 44 The
40
 Hermann Hosp. v. Vardeman, 775 S.W.2d 866, 868 (Tex.
App.—Houston [1st Dist.] 1989, no writ) (holding that “the hospital lien statute
. . . clearly does not provide for the recovery of attorney’s fees for enforcement
of the lien”).
41
 Speegle does not challenge the reasonableness or necessity of the
attorney’s fees apart from his claim that they should not be awarded because
they are not segregated.
42
 Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 313 (Tex.
2006).
43
 Id. at 313–14; see Hong Kong Dev., Inc. v. Nguyen, 229 S.W.3d
415, 455 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (op. on reh’g).
Speegle’s contention that Chapa demands segregation of recoverable and non-
recoverable fees in all cases is incorrect. See Chapa, 212 S.W.3d at 313–14.
44
 See Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (Vernon 2008)
(authorizing award of attorney’s fees to any party to declaratory judgment
action); Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (Vernon 2008)
(authorizing award of attorney’s fees on breach of contract and other claims).
16
Hospital’s defense of Speegle’s declaratory judgment action and its action to
recover on the lien both depended on establishing the validity of the hospital
lien. Because discrete legal services advanced both the declaratory judgment
action and the action to recover on the lien, the resulting legal fees were so
intertwined that they need not be segregated. 45 Thus, the trial court did not err
by failing to segregate attorney’s fees. We overrule Speegle’s third issue.
VII. Conclusion
We affirm the trial court’s final judgment decreeing that appellant take
nothing, that the Hospital’s lien be fixed at the sum of $142,915.01, and that
the Hospital recover that amount under the lien, in addition to interest and
attorney’s fees.
PER CURIAM
PANEL: CAYCE, C.J.; DAUPHINOT and WALKER, JJ.
DELIVERED: December 17, 2009
45
 See Chapa, 212 S.W.3d at 313–14.
17