• MCG Health, Inc. v. Owners Insurance
  • May 24, 2011 | Authors: Kathryn M. Almar; Arthur N. Lerner
  • Law Firm: Crowell & Moring LLP - Washington Office
  • The Supreme Court of Georgia affirmed the dismissal of a hospital's complaint on preemption grounds, finding that the statutory and regulatory scheme underlying the federal TRICARE program, which insures active-duty service members, precludes enforcement of a state statutory hospital lien against the insurer of a third-party tortfeasor for recovery of the costs of beneficiary healthcare.

    MCG Health, Inc. ("MCG"), a civilian provider of healthcare, filed a complaint against Owners Insurance Company ("Owners") in order to execute a hospital lien in the amount of $18,259.61 for healthcare services provided to Braxton Morgan, who was treated for injuries incurred in a car accident caused by a third party tortfeasor. Prior to the litigation, Morgan separately settled with Owners, the third-party tortfeasor's insurer, on the basis of the accident. Morgan, an active-duty Army member, received healthcare coverage under the United States Department of Defense TRICARE health insurance program ("TRICARE"). MCG contracted with Humana Military Healthcare Services, Inc. ("Humana") to provide certain services for TRICARE beneficiaries.

    MCG's claim against Owners derived from a Georgia statutory provision which allows for the establishment a hospital lien on any cause of action belonging to the recipient of hospital services for payment of those services. MCG argued that nothing in the terms of its contract with Humana or otherwise prevented the hospital lien statute's application in the case. The Supreme Court of Georgia rejected MCG's arguments and affirmed dismissal of the complaint, though on different grounds than those the Court of Appeals.

    The Supreme Court of Georgia held that federal law preempted application of the Georgia hospital lien statute. In the court's view, pursuant to the Federal Medical Care Recovery Act (FMCRA), only the federal government is entitled to recover from either a third party tortfeasor or its insurer for the payment of a TRICARE beneficiary's healthcare costs. Though the TRICARE manual, incorporated into MCG's contract with Humana, contains language supporting MCG's claim to recovery of the hospital lien, the court determined that the manual does not carry the force of law and, thus, was of no avail to MCG. As a civilian healthcare provider, MCG could not recover from the third party's insurer.

    The court also held that the terms of MCG's contract with Humana prevented recovery of the hospital lien in any case. The contract terms precluded MCG's ability to charge the beneficiary personally for any covered care received. Because recovery of the hospital lien would have required payment out of Morgan's prior settlement with Owners for the third party's tort liability, a hospital lien would violate the contract terms prohibiting payment directly from the beneficiary. To the extent that other contract terms protected MCG's right to a hospital lien, those terms were deemed unenforceable in light of the inconsistent federal provisions governing the TRICARE program already found to preempt the state hospital lien statute.