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Via Christi Reg'l Med. Ctr., Inc. v. Reed

Supreme Court of Kansas

December 20, 2013

IVAN M. REED, Appellant, and PATTERSON GOTT & BURK, L.C., as successor entity of PATTERSON GOTT & GRAYBILL, L.C., Defendant

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Review of the judgment of the Court of Appeals in 45 Kan.App.2d 356, 247 P.3d 1064 (2011).

Appeal from Reno District Court; TIMOTHY J. CHAMBERS, judge.



1. A hospital lien requires an underlying debt for the lien to secure. Without such a debt, the lien is invalid.

2. A hospital ordinarily is entitled to be compensated for the reasonable value of services rendered, even absent an express contract, under a theory that services rendered give rise to a debt.

3. A hospital lien claimant must bring itself clearly within the provisions of the authorizing statute in order to maintain a valid lien.

4. Absent ambiguity or uncertainty in the language of a statute, a court is not free to read into the statute something not readily found in it. K.S.A. 65-407 does not provide that substantial compliance satisfies the requirements for an effective and enforceable hospital lien. A hospital must strictly comply with the statute.

5. In order to recover under the Kansas Consumer Protection Act, a party must establish that he or she was " aggrieved" by the violation of the Act. A hospital is permitted to file a lien only for the reasonable and necessary charges for the treatment, care, and maintenance of a patient during his or her hospitalization. Overcharges and duplicate charges are neither reasonable nor necessary. A patient's interest in the timely availability of his or her entire settlement amount from a party liable for his or her injuries that is encumbered by a hospital lien is directly and negatively affected by a hospital's filing and attempt to enforce a lien that exceeds the reasonable and necessary charges for the patient's care. Such a patient qualifies as aggrieved under the Kansas Consumer Protection Act.

6. Evidence of overcharges and duplicate charges and of vague or incomprehensible entries in a hospital bill raises a genuine issue of material fact on whether the hospital that filed and pursued enforcement of a lien supported by the bill knew or should have known that it was making untrue representations to the patient in violation of the deceptive acts and practices provision of the Kansas Consumer Protection Act. When the patient comes forward with such evidence, summary judgment in favor of the hospital on the patient's deceptive acts and practices claim is improper.

7. The Kansas Consumer Protection Act prohibits unconscionable acts and practices and not simply unconscionable outcomes. An unconscionable act violates the Act whether it occurs before, during, or after a transaction. It is legally possible for a hospital to violate the Act's prohibition on unconscionable acts or practices by filing or pursuing enforcement of a lien supported by a bill that contains inaccuracies.

8. Industry practice alone is not a complete defense against an unconscionable acts or practices claim under the Kansas Consumer Protection Act.

9. The proper price for nonexistent property or services is zero. When a hospital files and pursues enforcement of a lien supported by a bill containing overcharges and duplicate charges, it is possible that it knew or should have known that the price charged for nonexistent items grossly exceeded the price at which similar property or services were readily obtainable in similar transactions by similar consumers. Because the district court judge in this case did not analyze the legal question of unconscionability in the first instance under the correct legal framework--deceptive conduct by the supplier plus unequal bargaining power between the supplier and the consumer--and the record on appeal may have been limited or skewed by that error, the question is not appropriate for resolution on appeal. Rather, summary judgment in favor of the hospital on the patient's unconscionable acts claim under the Kansas Consumer Protection Act must be reversed and the claim remanded for evaluation of the evidence and the claim's legal merit in the district court.

10. Filing and pursuit of enforcement of a hospital lien supported by a single aggregate bill for a single hospital stay constitutes one transaction under the Kansas Consumer Protection Act.

N. Russell Hazlewood, of Graybill & Hazlewood, L.L.C., of Wichita, argued the cause, and Jacob S. Graybill, of the same firm, was with him on the briefs for appellant Ivan M. Reed.

Jay F. Fowler, of Foulston Siefkin LLP, of Wichita, argued the cause, and Holly A. Dyer and James D. Oliver, of the same firm, were with him on the briefs for appellee Via Christi Regional Medical Center, Inc.

BEIER, J. MORITZ, J., not participating.


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[298 Kan. 505] Beier, J.

Ivan Reed received life-saving medical treatment at Via Christi Regional Medical Center, Inc. (Via Christi), after his car collided with a Union Pacific Railroad train. Via Christi filed a hospital lien under K.S.A. 65-406 et seq. to collect on its bill for the services provided Reed. The lien initially purported to encumber $84,744.11 of Reed's $540,000 settlement with Union Pacific; Via Christi eventually modified the amount to $83,365.64 held by Reed's counsel pending resolution of this dispute.

Via Christi brought this action against Reed to enforce its lien. Reed denied the lien's validity and asserted counterclaims under the Kansas Consumer Protection Act (KCPA), alleging that Via Christi had engaged in deceptive and unconscionable acts and practices in its efforts to enforce the lien. Both parties filed motions for partial summary judgment. The district court judge ruled in favor of Via Christi on the lien and against Reed on his counterclaims, and the judge entered a journal entry to enforce the full amount of the lien.

The Court of Appeals panel affirmed the enforceability of Via Christi's lien but, recognizing that Via Christi had received more from the district judge than it had sought in its motion, vacated the amount awarded and remanded the case for a hearing on what portion of the lien amount constituted an equitable distribution [298 Kan. 506] under K.S.A. 65-406(c). Via Christi Regional Med. Center, Inc. v. Reed, 45 Kan.App.2d 356, 367-70, 247 P.3d 1064 (2011).

Reed successfully petitioned this court for review of the Court of Appeals decision.

We reverse the Court of Appeals and the district court on the enforceability of Via Christi's lien and remand to the district court for entry of judgment in favor of Reed regarding Via Christi's lien and its equitable distribution claim against Reed's settlement proceeds and then for further proceedings on Reed's KCPA claims.

Factual and Procedural Background

This case began on November 18, 2001, when a Union Pacific train struck the vehicle Reed was driving. Paramedics initially took Reed to a hospital in Hutchinson, but he was transferred to Via Christi in Wichita for emergency trauma care.

The day after the accident, Reed's sister met with a Via Christi representative in the hospital's surgery waiting room. The representative asked Reed's sister to sign a document titled " ADMISSION CONSENT, PROMISE TO PAY FOR SERVICES AND ASSIGNMENT OF INSURANCE BENEFITS." Reed's sister said Reed was unemployed and did not have health insurance and expressed concern about Paragraph 8 of the document, which was labeled " PROMISE TO PAY FOR SERVICES AND GRANT OF SECURITY INTEREST IN HEALTHCARE INSURANCE RECEIVABLIES." The representative told Reed's sister to cross out that paragraph, write " Do not agree to pay" next to it, and initial the document next to those marks. Reed's sister followed these instructions.

The consent document also included the following language in its Paragraph 4:

" DIRECTION TO PAY MEDICAL INSURANCE BENEFITS DIRECTLY TO MEDICAL CENTER AND ASSIGNMENT OF INSURANCE BENEFITS. I certify that the information given by me in applying for payment under the Social Security Act is correct. I authorize release of any information needed to act on this request and direct that payment of authorized benefits be made on my behalf. I hereby assign payment for the unpaid charges of physicians' services for whom the Medical Center is authorized to bill. I understand and agree that I am responsible

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for any remaining balance not covered by insurance. I promise to pay [298 Kan. 507] Via Christi any medical insurance benefits I receive which relate to or arise from hospital care which is the subject of this admission. I hereby assign to Via Christi any and all medical benefits payable from any policy of insurance insuring the patient or person responsible for the patient's care (including, but not limited to, Medicare, Medicaid, Blue Cross & Blue Shield and others) to be paid directly to Via Christi to be applied to the charges for services rendered."

The consent document did not include any language indicating that Reed's sister was authorized to act on Reed's behalf in any way. The document's line for the signature of the " Patient or Responsible Person" was left blank. Reed's sister signed and dated the document as " (Sister) Edie Reed" on the document's line for the signature of " Other." Rochelle Bryant also signed the document for Via Christi.

Via Christi also informed Reed's sister that the hospital worked with Midland Professional Associates (Midland) and that a representative of Midland would talk to her and Reed about applying for public benefits for Reed. A representative from Midland met with Reed and helped him fill out a benefits application dated November 27, 2001. However, for reasons unknown, this application was never filed with what was then called the Kansas Department of Social and Rehabilitation Services (SRS). Had the application been filed and approved, the hospital could have been reimbursed $19,367.68 for its services through Reed's public benefits.

Reed was discharged from Via Christi on December 2, 2001. Three days after his release, Reed sought public benefits through SRS. He qualified for SRS's MediKan benefits program, and his benefits were made retroactive to the first day of the month in which his application was approved, i.e., December 1. Via Christi submitted a claim for services provided on and after that date; but it failed to include Reed's beneficiary number, and the claim was denied.

Almost a year later, Via Christi filed a Notice of Hospital Lien pursuant to K.S.A. 65-406 et seq., in district court in Sedgwick County. It sought to collect from any tort recovery Reed received as a result of the train-car accident. Via Christi claimed that its " reasonable and necessary charges" for Reed's treatment totaled [298 Kan. 508] $84,774.11, and it attached a 45-page itemized statement to document the charges. A copy of the notice with the billing statement was sent to Reed and his attorneys. Via Christi did not identify Union Pacific as an allegedly liable third party in the filing, and it did not provide Union Pacific with notice of the lien.

In December 2002, Reed sent a demand letter to Union Pacific seeking $2,285,487.14 in damages, providing Union Pacific with the Via Christi itemized bill. Reed ultimately filed suit against Union Pacific, and he and the railroad settled for $540,000 in August 2004.

Attorneys for Reed and Via Christi attempted negotiations to resolve the hospital lien, and ultimately $83,365.64 was placed in Reed's attorneys' trust account. Via Christi unsuccessfully offered to settle for $65,000. Reed sent Via Christi a check for $21,000 as " full and final payment." Via Christi returned the check uncashed.

Via Christi filed this action in October 2004, seeking enforcement of its lien against the settlement proceeds in the trust account of Reed's attorneys. It later amended its petition to advance a claim that it was a third-party beneficiary entitled to specific performance of Reed's settlement agreement with Union Pacific, including an indemnification provision recognizing its lien.

Reed's answer denied the validity of Via Christi's lien. Reed also pursued counterclaims under the KCPA, alleging that the hospital had engaged in deceptive and unconscionable acts and practices in 736 " individual sales" reflected in his hospital bill, each of which qualified as a " consumer transaction" under K.S.A. 50-624(c). He set out his deceptive act allegations and prayer for injunctive relief in this way:

" Via Christi has engaged in a series of 'deceptive' acts and practices in connection with each consumer transaction . . . .
. . . .

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" Reed is entitled, for the benefit of the general public, to an injunction or restraining order calculated to curb and prevent Via Christi from continuing its practices of abusing its patients/consumers through its deceptive charging and billing practices, its practice of concealing and failing to credit to its patients' accounts payments received from Medicaid, its employment of deceptive Admission Agreement, and its deceptive misuse of the Kansas hospital lien statute."

[298 Kan. 509] Reed set forth the following, very similar allegations and prayer for injunctive relief on his ...

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