459 P.3d 55
Ariz.2020Background
- Plaintiffs are Medicaid (AHCCCS) patients treated at defendant hospitals; hospitals recorded liens against third-party tortfeasors to collect amounts above Medicaid reimbursement.
- Arizona statutes at issue: A.R.S. § 33-931(A) (medical provider lien for customary charges) and A.R.S. § 36-2903.01(G)(4) (hospital may collect unpaid portion from third-party payors).
- Plaintiffs brought a class action arguing the liens effectuate "balance billing" prohibited by federal Medicaid law (42 U.S.C. § 1396a(a)(25)(C)) and implementing regulation (42 C.F.R. § 447.15).
- Trial court enjoined hospitals from filing or asserting liens against patients’ personal-injury recoveries after AHCCCS payment; court of appeals affirmed, holding the statutes preempted and that patients may enforce federal rights.
- Arizona Supreme Court granted review to decide (1) whether Medicaid patients have a private right to sue to enjoin such liens and (2) whether federal law preempts the lien statutes as applied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Private right of action to enforce § 1396a(a)(25)(C) / §447.15 | Patients may bring equitable suits to enjoin state-law liens that effectuate balance billing; statute creates enforceable right. | Armstrong and Sandoval foreclose or limit private enforcement of Medicaid provisions. | The court held plaintiffs have a private equitable right to enforce §1396a(a)(25)(C) (Blessing factors satisfied); Armstrong does not bar relief here. |
| Preemption of AZ lien statutes as applied (balance billing) | Federal statute and §447.15 bar providers from seeking additional payment; liens that recover amounts beyond Medicaid reimbursement are preempted. | State lien statutes are valid and authorize recovery from third-party payors; CMS/administrative remedies are the proper channel. | The court held A.R.S. §§ 33-931(A) and 36-2903.01(G)(4) are preempted as applied when used to recover the balance above Medicaid reimbursement. |
| Contract / third-party beneficiary claim (PPAs between AHCCCS and hospitals) | Patients may enforce PPAs incorporating federal law as third-party beneficiaries to bar liens. | Contract claims are improper substitute for enforcing federal statutory rights. | Rejected: plaintiffs cannot enforce the PPAs to accomplish what is in essence enforcement of the federal statute. |
| Attorney fees | Plaintiffs seek fees; court of appeals awarded fees under contract statute. | Hospitals argued fees improper or misapplied. | Arizona Supreme Court affirmed attorney fees under the state private-attorney-general doctrine (not on contract basis) and awarded fees in this Court. |
Key Cases Cited
- Armstrong v. Exceptional Child Ctr., 575 U.S. 320 (2015) (limits on private enforcement of certain Medicaid provisions; framework considered but not dispositive here)
- Alexander v. Sandoval, 532 U.S. 275 (2001) (regulations cannot create private right of action)
- Blessing v. Freestone, 520 U.S. 329 (1997) (three-factor test for whether a federal statute confers enforceable individual rights)
- Ex parte Young, 209 U.S. 123 (1908) (equitable injunctions against unlawful state action)
- Wyeth v. Levine, 555 U.S. 555 (2009) (valid federal regulations can have preemptive effect)
- Spectrum Health Continuing Care Grp. v. Anna Marie Bowling Irrevocable Tr., 410 F.3d 304 (6th Cir. 2005) (provider liens impermissibly diminish Medicaid recipients’ recoveries)
- Abbott v. Banner Health Network, 239 Ariz. 409 (2016) (Arizona Supreme Court assumed preemption but upheld prior settlements)
- Ansley v. Banner Health Network, 246 Ariz. 240 (App. 2019) (court of appeals: lien statutes preempted and private right of action available)
- Arnold v. Arizona Dep’t of Health Servs., 160 Ariz. 593 (1989) (private attorney general doctrine standard for awarding fees)
- Astra USA v. Santa Clara Cty., 563 U.S. 110 (2011) (contract claims cannot substitute for private enforcement of federal statutes)
- Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240 (1975) (limitations on fee awards in federal courts; discussed re: private attorney general doctrine)