Wisconsin Supreme Court Rules That Hospitals May File Liens on Injury Settlements of Medicaid Recipients

WDC Journal Edition: Summer 2013
By: John P. Loringer, O’Connell, Tivin, Miller & Burns, L.L.C.

The Wisconsin Supreme Court recently issued a decision in Gister v. American Family Insurance Company[1] holding that charitable hospitals can pursue payment for medical care provided to a Medicaid-eligible patient by filing a lien against a personal injury settlement between the patient and the tortfeasor's insurance company. This ruling allows a hospital treating the injured Medicaid beneficiary/plaintiff to forego billing Medicaid and to instead claim a statutory lien against the proceeds of the settlement.

Gister v. American Family Insurance Company

Gister involved a motor vehicle accident wherein a driver negligently ran a stop sign and crashed into a car occupied by Jaymie Gister and her two sons (“the Gisters”). The vehicle that struck the Gisters belonged to Jonathon and Mabel Harms, who had it insured with American Family Mutual Insurance Company (“American Family”). The applicable policy with American Family provided coverage of up to $250,000 for each injured individual, with a total cap of $500,000 for each accident.

The Gisters suffered injuries and were treated at St. Joseph’s Hospital. St. Joseph’s calculated the total cost of the medical care received by the Gisters at $182,799.61. The Gisters were all eligible for Medicaid at the time of the accident and were covered by Badger Care—the Wisconsin Medicaid Program which provides health care for Wisconsin’s low- to moderate-income families. St. Joseph’s proceeded to file liens in the amount of the calculated charges pursuant to Wis. Stat. § 779.80 against the proceeds of any future settlement between the Gisters and American Family.

Following the filing of the liens, the parties sought declaratory relief in circuit court—St. Joseph’s seeking an order declaring the liens valid and the Gisters seeking one declaring them unenforceable. The circuit court ruled in favor of St. Joseph’s and held the liens valid. In ruling in favor of the hospital, the court reasoned that St. Joseph’s was authorized by Wis. Admin. Code § DHS 106.03(8) to either file the liens or bill Medicaid. The relevant portion of Wis. Admin. Code § DHS 106.03(8) states:

If a provider treats a recipient for injuries or illness sustained in an event for which liability may be contested or during the course of employment, the provider may elect to bill MA [Medicaid] for services provided without regard to the possible liability of another party or the employer. The provider may alternatively elect to seek payment by joining in the recipient's personal injury claim or workers compensation claim, but in no event may the provider seek payment from both MA [Medicaid] and a personal injury or workers compensation claim. Once a provider accepts the MA [Medicaid] payment for services provided to the recipient, the provider shall not seek or accept payment from the recipient's personal injury or workers compensation claim.

The Gisters appealed this decision and the court of appeals reversed and remanded.[2]

The court of appeals primarily relied upon the holding in Dorr v. Sacred Heart Hospital,[3] a case where the injured patient was insured by a health maintenance organization (HMO) that had a contract with the treating charitable hospital. The court in Dorr held that when a contract between an HMO and a hospital contains a hold harmless provision, the hospital may not file a lien against the HMO patient’s property because the HMO patient is not indebted to the hospital for the medical services provided.[4]

The court of appeals rejected St. Joseph’s argument that Wis. Admin. Code § DHS 106.03(8) provided authority for the liens.[5] Specifically, the court held that § DHS 106.03(8) said nothing about seeking payment from third-party settlements, nor did St. Joseph's demonstrate that the Gisters owed a debt to the hospital and, therefore, the court concluded that the provision had no bearing on the validity of St. Joseph’s liens.[6]

Following the reversal by the court of appeals, the Wisconsin Supreme Court granted St. Joseph’s petition for review. In concluding that hospitals could place liens on the personal injury settlements of Medicaid-eligible patients, the Wisconsin Supreme Court examined the applicable state and federal framework surrounding Medicaid and, in particular, Wis. Stat. § 779.80 (“the hospital lien statute”). Section 779.80 provides that a charitable hospital “shall have a lien for services rendered…to any person who has sustained personal injuries as a result of…any tort of any other person.” The lien “shall attach to” the patient’s settlement against the tortfeasor.[7] The court’s analysis began with the premise that the liens filed by St. Joseph’s were properly filed under the hospital lien statute and that the contention was solely “whether they were barred by some other authority.”[8]

The Gisters raised two arguments in support of their position that the hospital liens were improper: (1) that Wis. Stat. § 49.49(3m)(a) barred St. Joseph’s liens because they constituted “direct charges” imposed by a hospital on Medicaid-eligible patients; and (2) that pursuant to the holding in Dorr, the Gisters’ eligibility for Medicaid prevented the hospital from billing the Gisters directly and, therefore, they owed no debt to the hospital for their medical care. The court found neither contention persuasive.

Wisconsin Stat. § 49.49(3m) Did Not Bar the Hospital’s Liens.

Wisconsin Stat. § 49.49(3m)(a) provides in relevant part that “[n]o provider may knowingly impose upon a recipient charges in addition to payments received for services under [Medicaid] or knowingly impose direct charges upon a recipient in lieu of obtaining payment under [Medicaid]” except under specific enumerated conditions. In arriving at the conclusion that the liens filed by the hospital were permissible and did not constitute “direct billing” of the Medicaid-eligible patients, the Supreme Court examined the state and federal legal framework of the Wisconsin Medicaid program to “best harmonize the provision with related regulations.”[9]

First, the court discussed federal regulations and relevant caselaw concerning third party liability, including 42 U.S.C. § 1396a(25)(c), which states that hospitals such as St. Joseph’s may not seek to collect money from Medicaid-eligible individuals where third parties are obliged to pay an amount at least equal to the amount that would be paid by Medicaid for the service.[10] The court concluded that St. Joseph’s liens were an effort to “collect from” the patients and, therefore, subject to the federal limits as described in § 1396a(25)(c).

The court found that this interpretation was also supported by Wis. Admin. Code § DHS 106.03(08), which permits hospitals to either bill Medicaid or join personal injury lawsuits when liability may be contested.[11] Specifically, the majority determined that the Gisters’ position that the hospital liens were an “impermissible direct charge upon them” in violation of Wis. Stat. § 49.49(3m)(a), but somehow valid if the hospital joins in the lawsuit after it is filed, was inconsistent with § DHS 106.03(08).[12] In finding that the action by St. Joseph’s could not be a “direct charge in one circumstance and not in another,” the court focused on the underlying similarities between filing a lien and joining in a lawsuit—notably, that the money sought originated from the same source (American Family), went to the same recipients (the Gisters and St. Joseph’s), and was designated for the same purpose (to satisfy the medical expenses incurred by the Gisters after the accident).[13]

Lastly, the court looked to decisions of federal appellate courts which upheld the validity of the liens similar to St. Joseph’s. For example, in Miller v. Gorski Wladyslaw Estate,[14] a 2008 decision from the Fifth Circuit, the hospital intervened in a patient's federal lawsuit against an alleged tortfeasor and its insurers, seeking to enforce the hospital's statutory lien against settlement or judgment obtained by the patient as a result of the accident in which patient sustained injuries.[15] The Miller court rejected the argument that “a health care provider cannot seek to collect payments from that patient if a third party is liable for the patient’s medical expenses.”[16] In rejecting this position, the court noted that “[c]aselaw uniformly indicates that the limitations on provider reimbursement are triggered…when a provider elects to bill and accepts payment from Medicaid for the services it provides to the patient.”[17]

Dorr Was Factually and Legally Distinguishable.

Unlike the Gisters, who were Medicaid-eligible, in Dorr the patients/plaintiffs had medical insurance coverage through an HMO which had a contract with the hospital where the medical care was provided. More specifically, under the terms of the contract between the HMO and the hospital, the hospital was required to provide medical services to Mrs. Dorr at an agreed-upon rate.[18] The contract also contained a “hold harmless” clause, by which the hospital agreed not to bill, or hold liable, the HMO’s subscribers for expenses covered by the contract.[19] The court of appeals in Dorr determined the hospital lien was impermissible and held that “when [the HMO] immunity provisions apply or when a contract between an HMO and a hospital contains a hold harmless provision, no hospital lien can be filed against an HMO patient’s property because the HMO patient is not indebted to the hospital for the medical services provided.”[20]

In Gister, the Wisconsin Supreme Court specifically limited the scope of Dorr and made specific efforts to “clarify the teaching of Dorr.”[21] In limiting the holding of Dorr, the court focused on the application of the proposition that a lien “presupposes the existence of a debt” and that medical services rendered give rise to a debt.[22] Concluding that these two positions rest together “uneasily,” while acknowledging that other courts “have wrestled with the resulting tension in a variety of different ways,” the court in Gister held that a case-by-case analysis is proper:

When a court is presented with a challenge to a hospital lien against a settlement between a patient and a third-party tortfeasor and their insurer, it should ask whether the applicable statutory and regulatory framework permits the lien in light of the specific facts of the case. Part of that analysis will be an examination of whether the possibility of the patient ever owing a debt to the hospital is legally foreclosed in such a way as to render the lien invalid.[23]

The court further noted that the court of appeals' decision in Gister, which found St. Joseph’s Hospital liens impermissible, did not perform the case-by-case analysis of the applicable statutory and regulatory framework, and instead “side-stepped [the] analysis of where the debt legally belong[ed].”[24]


The dissent, authored by Justice Bradley, concluded that the Gisters were entitled to a declaration that the hospital’s liens were invalid based upon the principles underlying Wisconsin’s Medicaid program. In particular, the dissent relied upon the principle established by Wis. Stat. § 49.49(3m)(a) and Wis. Admin. Code § DHS 104.01(12)(b) that a hospital cannot charge Medicaid recipients for services covered by Medicaid because the Medicaid recipients are not liable for the cost of those services.[25] Second, the dissent noted that in situations where a third-party tortfeasor may be liable for services provided to a Medicaid recipient, the hospital has two billing options: bill Medicaid or attempt to recover its charges by joining the personal injury lawsuit.[26] The law governing Wisconsin’s Medicaid program, according to the dissent, did “not authorize any third option.”[27]


Following the decision in Gister, hospitals will now be able to pursue payment from tortfeasors in lieu of claiming reimbursement through the Wisconsin Medicaid program. It should be noted that this holding is expressly limited to Medicaid-eligible patients and has not been extended to situations involving Medicare.

References[1] 2012 WI 86, 342 Wis. 2d 496, 818 N.W.2d 880.

[2] Gister v. Am. Family Mut. Ins. Co., unpublished slip op., No. 2009AP2795 (Wis. Ct. App. Nov. 11, 2010).

[3] 228 Wis. 2d 425, 597 N.W.2d 462 (Ct. App. 1999).

[4] Id. at 435.

[5] Gister, 342 Wis. 2d 496, ¶¶ 18-20.

[6] Id.

[7] Wis. Stat. § 779.80

[8] Gister, 342 Wis. 2d 496, ¶ 10.

[9] Id., ¶ 12.

[10] Id., ¶ 10 (citing Wesley Health Care Ctr., Inc. v. DeBuono, 244 F.3d 280, 281 (2d Cir. 2001)).

[11] Id., ¶ 14.

[12] Id.

[13] Id.

[14] 547 F.3d 273 (5th Cir. 2008).

[15] Gister, 342 Wis. 2d 496, ¶¶ 21-22; Miller, 547 F.3d at 276-277.

[16] Gister, 342 Wis. 2d 496, ¶ 23; Miller, 547 F.3d at 282.

[17] Gister, 342 Wis. 2d 496, ¶ 23; Miller, 547 F.3d at 282.

[18] Dorr, 228 Wis. 2d at 430.

[19] Id. at 433.

[20] Id. at 435.

[21] Gister, 342 Wis. 2d 496, ¶ 50.

[22] Id., ¶¶ 51, 53; Dorr, 228 Wis. 2d at 437.

[23] Gister, 342 Wis. 2d 496, ¶¶ 53, 60.

[24] Id., ¶ 59.

[25] Id., ¶ 71.

[26] Id., ¶ 78.

[27] Id.