Image of the text of Ala. Code §§ 35-11-371, 35-11-372 fading into an image of hundred dollar bills with a red transparent banner that reads "Hospital Liens" in white lettering

Alabama’s Amended Hospital Lien Laws

Photo Credit: Texas Senator Submits Bill to Allows Hospitals to Continue Scamming Patients, Moore L. Firm, https://moore-firm.com/texas-senator-submits-bill-to-allow-hospitals-to-continue-scamming-patients/ (last visited Dec. 4, 2019).

By: Lauren Wiggins
Research and Writing Editor, American Journal of Trial Advocacy

Medical bills are a primary source of damages that personal injury suits seek to recover.  Those bills can be astronomical when such an injury requires treatment at a hospital whether through a few hours in the emergency department or an extended period of hospital admission.

Alabama Code section 35-11-370 creates a hospital lien.[1]  This statute grants hospitals an automatic lien on a patient’s judgment or settlement arising from injuries for which the hospital treated the patient within a week of being injured.[2]  Once perfected, the hospital’s lien has priority over all other claims on the funds, except for an attorney’s lien.[3]  When someone is awarded a judgment or enters into a settlement agreement, the funds are paid first to any attorney or hospitals with perfected liens.  The plaintiff is paid any portion of the judgment or settlement that remains after the liens have been satisfied.

On August 1, 2019, Alabama’s H.B. 11 went into effect.[4]  The bill amended Alabama’s hospital lien laws, specifically sections 35-11-371 and 35-11-372 of the Alabama Code, which deal with hospital liens’ perfection and subsequent satisfaction or release, respectively.[5]  The bill’s long title states that the amendment requires hospitals to seek compensation with an injured person’s health insurance provider and allows hospitals to perfect liens on a patient covered by health care insurance only in “certain circumstances.”[6]

Prior to the amendment’s effective date, hospital liens were only subject only to procedural limitations.[7]  The law required the hospital to file a certified statement containing certain information in the probate court where the accident occurred within ten days of discharging the patient.[8]  Within a day of filing the lien, the hospital was required to mail a copy of the lien to the patient.[9]  Upon fulfilling these procedural steps, the hospital’s lien was perfected.

By not placing any limitations on hospital’s ability to perfect a lien, the old law incentivized hospitals to file a hospital lien rather than bill a patient’s health care insurance when the hospital believed the patient would file a lawsuit.[10]  In choosing to file a lien rather than bill the patient’s health care insurance, the hospital took the risk that it would not recover any payment if the patient did not file a claim related to his injury or did not win such a claim.[11]  If the patient did receive a judgement or settlement, the hospital lien would attach to the full amount of the hospital bill, rather than the health care insurer’s discounted rate of reimbursement.[12]

The current law, as amended by H.B. 11, requires hospitals to submit an accurate claim to the patient’s health care payor for satisfaction.[13]  The statute defines a health care payor as “a health care insurer, health maintenance organization, or health care service plan . . . authorized to provide health care coverage in the state.”[14]  If the insurance provider has a contract with the hospital to provide services for individuals covered by the insurer at a reduced rate, payment under the reduced rate constitutes full satisfaction of the hospital’s claim.[15]

The law allows a hospital to perfect a lien on an insured patient in two situations, and these situations are differentiated by whether or not the hospital knows that the patient has health care insurance.[16]  If the hospital knows a patient is covered by health care insurance, the hospital can only perfect a lien within 20 days after receiving a notice that the insurer has denied the claim.[17]  The insurer is presumed to have denied the claim if it does not satisfy the claim within 45 days.[18]  If the insurer pays only a portion of the bill, the hospital must include the amount paid and any price reductions based on the hospital’s contract with the insurer in the certified statement the hospital files to perfect the hospital lien for the remaining debt.[19]

If the hospital does not know that the injured patient is covered by health insurance, or the patient is covered by Medicaid or Medicare, the hospital can perfect its lien within 20 days of discharging the patient.[20]  If the hospital learns that the patient is covered by health insurance after it has already perfected a lien, then the hospital must bill the patient’s insurer.[21]  The hospital is allowed to retain its lien while waiting for payment from the health care insurer.[22]  After the insurer pays, the hospital must release its lien within ten days of receiving payment.[23]

Although the amendments drastically limit the circumstances in which hospitals may perfect a lien, the new law made some procedural changes to the perfection process.  These changes make the procedural aspect of filing the lien easier for hospitals.  Hospitals file the certified statement at the probate court in the county where the hospital is located rather than the county where the patient was injured.[24]  The period to file was lengthened from 10 days to 20 days.[25]  However, a hospital may still perfect its lien after the 20-day period has elapsed if it provides actual notice to those liable for the damages.[26]

The Alabama Legislature unanimously passed this amendment to the hospital lien statutes.[27]  The bill received broad support as a measure to protects patients’ interests.[28]  By refusing to file a claim with the patient’s health care insurance in order to obtain their billed price through a hospital lien, the hospital arguably deprives patients of a main benefit of being insured.[29]  In exchange for paying insurance premiums, the plaintiff receives a discounted rate.[30]

Hospitals argued that the practice of recovering the full bill did not actually deprive the patient of any benefit because personal injury plaintiffs submit the hospital’s full bill, without the insurance company’s deduced rate, when proving damages in court.[31]  This practice stems from the collateral source rule, which prohibits a tortfeasor from having his liability reduced due to a plaintiff’s relationship third party, such an insurance provider.[32]  In Alabama, however, the collateral source rule has been abrogated by statute.[33]  Under Alabama law, a defendant may introduce the discounted rate the plaintiff’s insurance company paid.[34]  The plaintiff may introduce the price of obtaining that insurance coverage as well as any amount the plaintiff is obligated to reimburse the insurance company or hospital by subrogation.[35]  This statute allows, but does not require, the jury to consider all of the relevant figures in determining an award for medical bills.[36]

When considered in light of the abrogated collateral source rule, Alabama’s amendment to the hospital lien laws protects the patient’s interests by allowing the patient-plaintiff the benefit of retaining any extra compensation for medical bills that an informed jury may decide to award.  On the other hand, by requiring hospitals to bill the health care insurance and accept their reduced compensation rate, the amendment gives both patient-plaintiffs and defendants an opportunity for leverage in settlement negotiations.  Because Alabama law gives a jury the discretion to consider both the hospital’s full bill and the amount paid by a plaintiff’s health care insurance provider, either party may use the uncertainty of a jury award to make a settlement offer seem more or less appealing.

In short, the amended hospital lien laws continue to ensure that hospitals are paid, have the potential to reduce a tortfeasor’s damages, and provide that any “windfall” resulting from the patient’s having been injured goes to the patient rather than the hospital.


[1] Ala. Code § 35-11-370 (West, Westlaw through 2019 Act 540).

[2] Id.  

[3] Id.  

[4] Summaries of General Laws Enacted and Constitutional Amendments Proposed by the Legislature of Alabama at the 2019 Regular Session, Ala. Legis. Servs. Agency 17 (last visited Dec. 4, 2019), http://lsa.alabama.gov/PDF/LRS/2019-summaries.pdf.

[5] H.B.11, 2019 Reg. Sess. (Ala. 2019), http://alisondb.legislature.state.al.us/ALISON/SearchableInstruments/2019RS/PrintFiles/HB11-enr.pdf.

[6] Id.

[7] Ala. Code § 35-11-371 (2018) (current version at Ala. Code § 35-11-371 (West, Westlaw through 2019 Act 540).

[8] Id.  

[9] Id.  

[10] See Michael K. Beard & Dylan H. Marsh, Arbitrary Pricing and the Misuse of Hospital Lien Statutes by Healthcare Providers, 38 Am. J. Trial Advoc. 255, 257–58 (2014) (characterizing as a nation-wide trend the practice of rejecting health care insurance in favor of hospital liens). 

[11] Id.  

[12] Id.  

[13] Ala. Code § 35-11-371(b) (West, Westlaw through 2019 Act 540).

[14] Ala. Code § 35-11-371(a)(1) (West, Westlaw through 2019 Act 540).

[15] Ala. Code § 35-11-371(a)(2) (West, Westlaw through 2019 Act 540).

[16] Ala. Code § 35-11-371(b) (West, Westlaw through 2019 Act 540). 

[17] Ala. Code § 35-11-371(b)(1) (West, Westlaw through 2019 Act 540).  

[18] Id.  

[19] Id.  

[20] Ala. Code § 35-11-371(b)(2) (West, Westlaw through 2019 Act 540).

[21] Ala. Code § 35-11-371(b)(3) (West, Westlaw through 2019 Act 540). 

[22] Id.  

[23] Id.  

[24] Ala. Code § 35-11-371(c) (West, Westlaw through 2019 Act 540).  

[25] Ala. Code § 35-11-371(b) (West, Westlaw through 2019 Act 540). 

[26] Ala. Code § 35-11-371(d) (West, Westlaw through 2019 Act 540). 

[27] AL H.B. 11, Bill Track 50 (last visited Dec. 4, 2019), https://www.billtrack50.com/BillDetail/1009859.

[28] Edward O’Neal, Alabama Legislative Update: Lottery, Unemployment Compensation and More, Birmingham Bus. J. (Apr. 29, 2019, 12:00 PM), https://www.bizjournals.com/Birmingham/news/2019/04/29/alabama-legislative-update-lottery-unemployment.html.

[29] Tara Barnow, Hospital and Patients’ Attorneys Spar over Lien Practices, Mod. Healthcare (May 25, 2019, 1:00 PM), https://www.modernhealthcare.com/providers/hospitals-and-patients-attorneys-spar-over-lien-practices.

[30] Id.  

[31] Id.  

[32] 2 Alabama Personal Injury & Torts §  14:34 (2019 ed.)

[33] See Ala. Code § 12-21-45(a) (2018) (“In all civil actions where damages for any medical or hospital expenses are claimed and are legally recoverable for personal injury or death, evidence that the plaintiff’s medical or hospital expenses have been or will be paid or reimbursed shall be admissible as competent evidence.”).

[34] Ala. Code § 12-21-45(a) (West, Westlaw through 2019 Act 540).  

[35] Ala. Code § 12-21-45(b)–(c) (West, Westlaw through 2019 Act 540). 

[36] Crocker v. Grammer, 87 So. 3d 1190, 1193 (Ala. Civ. App. 2011) (citing Marsh v. Green, 782 So. 2d 223, 233 n.2 (Ala. 2000)).

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s