McKim v. Southern Illinois Hospital Services
2016 IL App (5th) 140405
| Ill. App. Ct. | 2016Background
- Plaintiff Edwin McKim settled a car-accident claim for $16,000 after receiving treatment at Herrin Hospital and ambulance transport; medical bills totaled $10,172.32 (hospital $5,803; ambulance $1,530; Medicare/Medicare Part D/Medicaid $2,839.32).
- McKim filed to adjudicate liens under the Health Care Services Lien Act (HCSLA), asking that all medical-related liens (including Medicare/Medicaid) be limited to 40% of the settlement ($6,400) and the remainder pro rata to HCSLA lienholders.
- The trial court treated Medicare, Medicare Part D, and Medicaid as HCSLA liens, ordered full reimbursement to those programs, and required the remaining HCSLA lienholders (hospital and ambulance) to share the leftover portion of the 40% cap; it also apportioned plaintiff’s litigation costs pro rata to those HCSLA lienholders.
- Herrin Hospital appealed, arguing (1) Medicare/Medicaid are not HCSLA lienholders and thus should not be included in the 40% cap, (2) HCSLA lienholders should not be forced to share plaintiff’s litigation costs, and (3) the distribution of proceeds was incorrect.
- The appellate court reviewed de novo, found the HCSLA definitions unambiguous, held federal Medicare law and the Illinois Public Aid Code preempt/override inclusion of Medicare/Medicaid in the HCSLA cap, and concluded the trial court improperly assessed costs against HCSLA lienholders.
- The court modified the distribution: Medicare/Part D/Medicaid paid their amounts, HCSLA lienholders limited to one-third of the settlement to be apportioned pro rata between hospital and ambulance, attorney received agreed fee, and plaintiff received the balance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Medicare/Medicaid/Part D claims are included in HCSLA 40% cap | McKim: include those payors in the 40% cap and treat remaining as HCSLA pro rata | Herrin: Medicare/Medicaid are payor/subrogee agencies, not HCSLA providers, so they are not subject to the 40% cap; federal and Public Aid law govern repayment | Held: Medicare/Medicaid/Part D are not HCSLA lienholders; federal Medicare Secondary Payer law and Illinois Public Aid Code control and preempt inclusion in HCSLA cap |
| Whether HCSLA lienholders must contribute to plaintiff's litigation costs under common fund doctrine | McKim: costs should be apportioned to HCSLA lienholders pro rata | Herrin: HCSLA lienholders with perfected liens are not liable for plaintiff’s costs; plaintiff/attorney secured settlement for plaintiff, not providers | Held: Court costs may not be assessed against HCSLA lienholders; Wendling and McVey foreclose deducting attorney fees/costs from HCSLA share |
| Proper calculation of HCSLA recovery percentages when liens exceed statutory cap | McKim: include all medical claims in 40% and pro rata distribute among lienholders | Herrin: only HCSLA lienholders should share 40% pro rata; other payors paid per their statutory schemes | Held: Only HCSLA lienholders share in the statutory cap; when combined HCSLA liens exceed limits, no licensed category may receive more than one-third of the settlement, so HCSLA lienholders split that one-third pro rata |
| Whether federal law (Medicare) and Illinois Public Aid Code preempt HCSLA subrogation claims | McKim: HCSLA amendment permitting subrogation applies | Herrin: Medicare Secondary Payer Act and Public Aid Code give Medicare/Medicaid independent recovery rights and priority | Held: Federal Medicare Secondary Payer provisions and the Illinois Public Aid Code preempt/conflict with applying HCSLA to Medicare/Medicaid claims; HCSLA cannot reduce those programs’ recovery rights |
Key Cases Cited
- McVey v. M.L.K. Enterprises, LLC, 32 N.E.3d 1112 (Ill. 2015) (HCSLA unambiguous; attorney fees and costs not deductible before computing health-care lien percentages)
- Wendling v. Southern Illinois Hospital Services, 950 N.E.2d 646 (Ill. 2011) (hospitals with HCSLA liens are not liable to contribute litigation costs under common-fund theory)
- Stanton v. Rea, 978 N.E.2d 1146 (Ill. App. Ct. 2012) (earlier appellate decision that deducted costs before computing HCSLA shares; later overruled by McVey)
- Wolf v. Toolie, 19 N.E.3d 1154 (Ill. App. Ct. 2014) (interpreting consistent statutory terminology: health-care and attorney liens calculated from same total)
- Blum v. Koster, 919 N.E.2d 333 (Ill. 2009) (standard: de novo review for issues requiring statutory interpretation)