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No. 2--03--1106

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT

JUSTICE KAPALA delivered the opinion of the court:

Respondent-appellant and cross-appellee, Provena Mercy Center (Provena), appeals from thejudgment of the circuit court of Kane County granting the motion by plaintiff and petitioner-appelleeand cross-appellant, Servando Lopez, to extinguish Provena's lien under the Hospital Lien Act (Act)(770 ILCS 35/1 (West 2002)). Plaintiff cross-appeals from the trial court's denial of his motion forSupreme Court Rule 137 (155 Ill. 2d R. 137) sanctions. We affirm.
 

I. BACKGROUND

Plaintiff received medical treatment from Provena for injuries suffered on December 23, 2001,during an automobile accident with defendant, Maureen Jane Morley. Provena charged plaintiff$33,753.27 for this treatment. Plaintiff does not dispute that the charges were reasonable andcustomary. Provena took a hospital lien for the full amount of the charges. 770 ILCS 35/1 (West2002).

Plaintiff had health insurance coverage that was administered by United Health Care (United). United had a contract with Provena, in which Provena agreed to accept less than the reasonable andcustomary value of services rendered to certain insured persons, including plaintiff. Under the termsof their contract, the amount paid by United would be considered full payment for the servicesrendered to the insured, and Provena would not seek recovery for any additional amounts from theinsured. United paid Provena $4,900 as full payment for the services rendered to plaintiff.

Plaintiff subsequently filed suit against defendant for his injuries. The parties settled thematter for $120,000. During the settlement negotiations plaintiff represented that his medical billsfrom Provena amounted to $33,753.27. Also, during the pendency of the suit, plaintiff contactedProvena about the balance of his bill. Provena informed plaintiff's attorney on at least two occasionsthat plaintiff had a zero balance with Provena. Plaintiff then filed a petition to adjudicate Provena'shospital lien. Plaintiff's position was that Provena did not have a lien because it had accepted $4,900as full payment from United and, therefore, Provena was not owed any further money. Plaintiff citedour decision in N.C. v. A.W., 305 Ill. App. 3d 773 (1999), that he claimed was conclusive. Provenaresponded that although it could not recover any further amounts from plaintiff directly, it still helda valid lien for the difference between what was charged and what was paid by United. Provenaadmitted that the authority cited by plaintiff supported plaintiff's contentions but Provena also arguedthat we should overrule our previous ruling and allow Provena to recover on the lien. Plaintiff alsomoved for Rule 137 sanctions against Provena for contending that it had a right to recover on the liendespite controlling precedent. The trial court extinguished Provena's lien and denied plaintiff's motionfor sanctions.

Provena filed a timely appeal and plaintiff filed a timely cross-appeal. On appeal, the Illinois Trial Lawyers Association (ITLA) filed a motion for leave to file an amicus curiae brief in supportof plaintiff, which we granted.
 

II. DISCUSSION

Provena contends that our holding in N.C. violates public policy and the language of section1 of the Act (770 ILCS 35/1 (West 2002)) and, therefore, should be overturned. Provena contendsthat we should follow the reasoning enunciated by the Fourth District in Rogalla v. Christie Clinic,P.C., 341 Ill. App. 3d 410 (2003). Plaintiff and the ITLA in its amicus curiae brief argue that ourdecision in N.C. was sound and should be upheld.

In N.C. the plaintiff was injured as result of an automobile accident with the defendant. Theplaintiff was treated at Northern Illinois Medical Center (NIMC). NIMC's bill totaled $22,551. Theplaintiff was insured by Great West Life & Annuity Insurance Co. (Great West) through a preferredprovider organization (PPO) plan. This PPO plan was affiliated with One Health Plan of Illinois, Inc.(One Health). One Health had contracted with NIMC to provide bulk business to NIMC in returnfor NIMC receiving a reduced rate as full payment for its services. This contractual savings waspassed on to Great West through its contract with One Health. One Health's contract with NIMCalso provided that, except for deductibles, coinsurance, copayments, and charges for nonapprovedand noncovered services, a One Health member was not liable for any amount over what was paidby the insurer. As a result, Great West paid NIMC only $4,200 as full payment for the plaintiff'smedical bills. NIMC acknowledged that it had been paid in full by Great West. N.C., 305 Ill. App.3d at 775.

The plaintiff filed a personal injury action against the defendant. During the pendency of thesuit, NIMC took a lien pursuant to the Act against the proceeds of the lawsuit. The plaintiff filed apetition to adjudicate NIMC's lien. Subsequently, the defendant's liability carrier offered thedefendant's policy limit of $100,000 as full and final payment for the plaintiff's claim against thedefendant. The plaintiff accepted the offer. The trial court then determined that NIMC's lien shouldbe extinguished because NIMC's contract with One Health precluded NIMC from collecting underits lien. N.C., 305 Ill. App. 3d at 774-75.

On appeal, we affirmed the trial court's decision to extinguish NIMC's lien. N.C., 305 Ill.App. 3d at 775-77. We reasoned that the lien existed to satisfy the plaintiff's debt to the hospital. N.C., 305 Ill. App. 3d at 775. However, we further found that NIMC's contract with One Healthextinguished all debts once NIMC was paid the agreed-upon rate. N.C., 305 Ill. App. 3d at 775.Therefore, we held that the lien must also be extinguished because there was no debt to satisfy. N.C.,305 Ill. App. 3d at 775.

NIMC contended that it could enforce the lien against the defendant's property as the partyresponsible for the plaintiff's injuries even if it could not recover from the plaintiff directly. N.C., 305Ill. App. 3d at 775. We rejected this argument for four reasons. N.C., 305 Ill. App. 3d at 775-76.First, we held that the plaintiff incurred the debt, not the defendant. N.C., 305 Ill. App. 3d at 775.Second, we found that the debt had been paid. N.C., 305 Ill. App. 3d at 775. Third, we found thateven if a debt existed, the lien would be on the plaintiff's assets, not the defendant's. N.C., 305 Ill.App. 3d at 775-76. Finally, we found that the fact that the plaintiff received a settlement from thedefendant did not entitle NIMC to receive more than the amount it contracted for. N.C., 305 Ill.App. 3d at 776.

Next, NIMC contended, citing Gordon v. Forsyth County Hospital Authority, Inc., 409F.Supp. 708 (M.D.N.C. 1975), that the plaintiff would be unjustly enriched by receivingreimbursement for medical bills over the amount he actually paid. N.C., 305 Ill. App. 3d at 776. However, we found Gordon distinguishable. N.C., 305 Ill. App. 3d at 776-77. The plaintiff'streatment in Gordon was given free of charge. N.C., 305 Ill. App. 3d at 776. The plaintiff thenrecovered damages for medical services in his tort suit. N.C., 305 Ill. App. 3d at 776. The hospitalhad a lien against the lawsuit proceeds and the court found that the hospital was due payment underthe lien because it would be unconscionable to permit the taxpayers to bear the expense of theplaintiff's medical services while allowing the plaintiff to recover for those services. N.C., 305 Ill.App. 3d at 776. However, since NIMC had received compensation for its services we found thatGordon did not apply. N.C., 305 Ill. App. 3d at 776-77.

Finally, we noted that it was not inequitable for NIMC to receive only 18.6 cents on thedollar. N.C., 305 Ill. App. 3d at 777. NIMC voluntarily contracted for such a rate in exchange foran increase in patients. N.C., 305 Ill. App. 3d at 777. We found that NIMC was simply experiencingbuyer's remorse. N.C., 305 Ill. App. 3d at 777.

In Rogalla v. Christie Clinic, P.C., 341 Ill. App. 3d 410 (2003), the Fourth District disagreedwith our reasoning in N.C. The plaintiff in Rogalla received medical services from Christie Clinic, P.C.(Christie), in connection with an automobile accident. Christie had entered into a capitation agreementwith the plaintiff's health maintenance organization (HMO), Personal Care. The capitation agreementprovided that Christie would receive a certain amount each month from Personal Care and that thisamount would be considered full payment for all services provided to Personal Care members. Christie also agreed that it would not seek additional payment from Personal Care members exceptfor copayments and deductibles. The agreement further contained a subrogation clause that providedthat Christie would have the right " 'to seek to recover charges incurred as a result of providingMedical/Hospital Services which are the liability of a third party.' " Rogella, 341 Ill. App. 3d at 414. The plaintiff filed suit in relation to the automobile accident and eventually settled. Christie did notseek any payments directly from the plaintiff; however, it did assert a lien against the settlementproceeds. Rogalla, 341 Ill. App. 3d at 412-14. The lien was asserted pursuant to the Physicians LienAct (770 ILCS 80/1 (West 2000)), which stated:

"Every licensed physician practicing in this State who renders services by way oftreatment to injured persons, except services rendered under the provisions of the Workers'Compensation Act or the Workers' Occupational Diseases Act, shall have a lien upon all claimsand causes of action for the amount of his reasonable charges up to the date of payment ofsuch damages." 770 ILCS 80/1 (West 2000).

Rogalla, 341 Ill. App. 3d at 414.

The court in Rogalla then examined case law in regard to whether Christie's lien was valid,including our decision in N.C. Rogalla, 341 Ill. App. 3d at 415-20. The court held that the obligationto pay the medical expenses incurred because of the actions of a third party tortfeasor was that of thethird party tortfeasor, not the injured party. Rogalla, 341 Ill. App. 3d at 418. The court next pointedout that the subrogation clause in Christie's contract did not give Christie any new rights but "reserves[Christie's] statutory right to seek relief from third-party tortfeasors." Rogalla, 341 Ill. App. 3d at 418. With regard to N.C., the court adopted the reasoning of the trial court, which stated:

" 'I think that the position taken in N.C., quite frankly *** is simply inconsistent with our entiretheory of tort recovery in personal injury cases and the collateral[-]source rule. It does seemto me that there is an irreconcilable, logical tension here between the situation in which aplaintiff is quite properly allowed to obtain a statement of services from a medical provider andutilize that in negotiating a settlement, or for that matter, in proving the damages to a jury; thatthe jury is allowed to consider that sum which reflects the fair, reasonable, and customarycharges in the community for those services in assessing damages and returning a verdict, butthen we turn around and we tell the people that provided those services, you cannot recoveragainst that. Then the entire theory and rationale for damages seems to suffer a bit of asetback[.]

* * *

*** [U]nder the N.C. case then, the service provider can't possibly recover becausethey have forgiven [the debt]; they've done the right thing and forgiven the debt, thereforethere's no debt for the physician's lien to attach to, and the tortfeasor⁽¹⁾ ends up with a windfall.' " Rogalla, 341 Ill. App. 3d at 418-19.

The court next discussed its holding in First Midwest Trust Co. v. Rogers, 296 Ill. App. 3d 416(1998), overruled on other grounds in Donaldson v. Central Illinois Public Service Co., 199 Ill. 2d 63(2002). In Rogers the court was faced with, inter alia, the issue of whether an injured party canrecover for medical payments that were covered by an HMO and, therefore, were not paid by theinjured party. Rogers, 296 Ill. App. 3d at 431-34. The court found that the collateral-source rulewould allow an injured party to recover reasonable medical expenses even if the injured party wascovered by an HMO because, from the injured party's perspective, the HMO was equivalent to aninsurance policy. Rogers, 296 Ill. App. 3d at 432-33. The collateral-source rule states that benefitsreceived by an injured party from a source wholly independent of, and collateral to, a tortfeasor willnot diminish damages otherwise recoverable from the tortfeasor. Rogers, 296 Ill. App. 3d at 433.Therefore, even if the HMO paid rates well below the full reasonable charges, the injured party couldrecover the full amount. Rogers, 296 Ill. App. 3d at 431-34. This ruling comported with theunderpinnings of the collateral-source rule, namely, that a "wrongdoer should not benefit fromexpenditures made by the injured party, or take advantage of contracts or other relations which existbetween the injured party and third persons. [Citation.]" Rogers, 296 Ill. App. 3d at 432. Further,"[a]lthough injured parties may receive a windfall from the collateral-source rule, it is usuallyconsidered more just for an injured party to receive the windfall than for a wrongdoer to be relievedof full responsibility for his wrongdoing. [Citation.]" Rogers, 296 Ill. App. 3d at 432-33.

Finally, the Rogalla court held that the provision of the agreement that held the plaintiffharmless for the payment of services was not violated by Christie's lien because a physician's lienamounted to a statutory claim against a fund of monies to be paid, not an action against a party. Rogalla, 341 Ill. App. 3d at 419-20.

First, we note that the Act and the Physician's Lien Act, as well as the lien acts covering otherhealth care professionals, have been repealed and are now replaced by the Health Care Services LienAct (770 ILCS 23/1 et seq. (West Supp. 2003)). Even so, section 35 of the Health Care Services LienAct (770 ILCS 23/35 (West 2002)) provides:

"A lien validly created under *** the Hospital Lien Act *** remains in full force andeffect on and after July 1, 2003. Such a lien shall be enforceable according to, and otherwisegoverned by, the provisions of the Act or Code under which it was created, as those provisionsexisted in June 30, 2003." 770 ILCS 23/35 (West 2002).

Provena's lien was created under the Act. Therefore, we analyze the validity of Provena's lien underthe Act.

Having determined that the Act applies, we must now decide whether we will diverge from ourapplication of the Act in N.C. and allow Provena's lien to stand. Provena contends that our decisionin N.C. violates the language of the Act and various public policy principles. However, N.C. does notforeclose the possibility of a hospital receiving less than its reasonable and customary charges as fullpayment from an injured party and its insurer while still having a valid lien. In N.C. we determinedthat "the contract between NIMC and One Health extinguished all debts once plaintiff's insurer paidNIMC at the agreed rate." N.C., 305 Ill. App. 3d at 775. If NIMC's contract with One Health did notextinguish "all debts" a lien would have existed.

In Richmond v. Caban, 324 Ill. App. 3d 48 (2001), this court decided that a lien could survivedespite an agreement by a hospital to accept less than its full reasonable and customary charges as fullpayment from the injured party and its insurer. In Richmond, the hospital had an agreement with theinsurer that it would first seek to recover from the third party tortfeasor before seeking payment fromthe insurer. Richmond, 324 Ill. App. 3d at 50. The hospital decided to file a lien against the proceedsof the injured party's lawsuit and never billed the insurer for any services. Richmond, 324 Ill. App. 3dat 50. We held that a lien did exist because there had been no payment made to the hospital and therewas no requirement that the hospital first seek reimbursement from the insurer. Richmond, 324 Ill.App. 3d at 51-52. Our holding in Richmond demonstrates that hospitals can enter into agreementsto accept less than their reasonable and customary charges from insurers and injured parties but retaintheir other rights, including hospital liens, to recover the balance of their charges.

Provena contends that our decision in N.C. essentially creates a new category of damages byallowing an injured party to recover more than was actually paid to the hospital and that it does adisservice to the public policy of lessening financial burdens on hospitals. As to the former contention,the court in Rogers explained that allowing an injured party to recover such a windfall is not a newcategory of damages but simply an application of the collateral-source rule. With respect to Provena'slatter contention, our decision in N.C. does not violate the public policy of lessening the financialburden on hospitals because, as our decision in Richmond makes clear, hospitals may still enter intocontracts which lessen the liability of insurers and injured persons while retaining their rights torecover through hospital liens. N.C. simply gives effect to contracts between insurers and hospitals. We see no reason why such contracts should be ignored simply because, but for such contracts, validliens would exist. The public policy to lessen financial burdens on hospitals does not encompassrelieving hospitals of contractual obligations which they later regret undertaking. Provena alsocontends that our holding allows recovery of less than the Act mandates. The lien covers only theamounts of the debt owed and our holding in N.C. does nothing to lessen that recovery.

We believe that the Rogalla court read our decision in N.C. too broadly and failed to recognizethat N.C. simply gives effect to contracts. A hospital's ability to preserve its lien rights lies within itsown hands. If a hospital contracts in such a manner that a debt survives, then the lien will survive also. Our decision in N.C. does not to abrogate a hospital's ability to so contract. We believe our decisionin N.C. gives effect to both the contracts that hospitals enter into and the Act. Therefore, we believeour decision is sound. Accordingly, we decline to overturn our previous ruling in N.C., and we rejectthe court's reasoning in Rogalla.

As to the facts of this case, the contract between Provena and United is not in the record. Consequently, we cannot determine whether the contract extinguishes all debts. However, theappellant has the burden of producing a sufficient record on appeal to support a claim of error. Foutchv. O'Bryant, 99 Ill. 2d 389, 391-92 (1984). In the absence of a sufficient record, we will presume thatthe judgment of the trial court conforms to the law and that there are sufficient facts to support thejudgment. Foutch, 99 Ill. 2d at 391-92. Therefore, we will presume that the trial court properlyapplied N.C. and that Provena's contract with United extinguished all debts. See Meyers v. Hablutzel,236 Ill. App. 3d 705, 708 (1992).

Because we have found that the trial court properly extinguished Provena's lien under ourholding in N.C., we need not address plaintiff's second contention that because of Provena's statementsto plaintiff that he had a zero balance Provena should be equitably estopped from asserting that it isowed monies that can be recovered through the lien.

Next, we turn to plaintiff's cross-appeal of the trial court's denial of his motion for Rule 137sanctions. We review a trial court's denial of Rule 137 sanctions for an abuse of discretion. Century-National Insurance Co. v. Tracy, 316 Ill. App. 3d 639, 651 (2000). Plaintiff contends that becauseProvena argued that it had a valid lien despite clear case law to the contrary, sanctions should havebeen awarded. We disagree. Rule 137 allows for "a good-faith argument for the extension,modification, or reversal of existing law." 155 Ill. 2d R.137. Provena acknowledged in the trial courtthat N.C. was controlling law but contended that the law should be changed. Provena made severalarguments regarding public policy and cited relevant authority in support of its contentions. Therefore, we find that Provena made a good-faith argument for the reversal of existing law and didnot violate Rule 137. Accordingly, we affirm the trial court's denial of Rule 137 sanctions.
 

III. CONCLUSION

For the foregoing reasons, we affirm the orders of the circuit court of Kane Countyextinguishing Provena's hospital lien and denying plaintiff's motion for Rule 137 sanctions againstProvena.

Affirmed.

HUTCHINSON and GROMETER, JJ., concur.

1. We note that, although the court used the word "tortfeasor," we believe the court wasactually referring to the windfall that is received by the injured party, because in N.C. the plaintiffreceived the windfall, not the tortfeasor.