Settlement Funds Recovered in Personal Injury Lawsuit not Recoverable by Hospital Against Third-Party Insurer

On January 24, 2011, the Georgia Supreme Court unanimously held in MCG Health, Inc. v. Owners Insurance Co., 707 S.E.2d 349, 2011 WL 197893 (Ga. 2011) that “the statutory and regulatory scheme which governs TRICARE does not provide any basis for allowing a contracting civilian healthcare provider to collect treatment costs from a third party tortfeasor.”  As a result, the hospital that treated an injured U.S. Serviceman did not have a claim to any of the settlement he received from the insurance company of the woman who caused his injuries.

MCG Health, Inc. v Owners Insurance Co. Case Details

The case arose from a car wreck in which Braxton Morgan, a U.S. serviceman, sustained various injuries.  Mr. Morgan was covered by the United States Department of Defense TRICARE health insurance program and was taken to the Medical College of Georgia (“MCG”) for treatment.  TRICARE allows beneficiaries to have their healthcare costs paid in full at negotiated amounts and prohibits hospitals from billing beneficiaries beyond the amount paid by TRICARE.

Mr. Morgan’s total costs of medical services provided by MCG were $18,259.  MCG filed a hospital lien for the full costs of services provided to Mr. Morgan pursuant to OCGA § 44-14-470 (Georgia’s hospital lien statute).  Subsequent to MCG filing the hospital lien, Mr. Morgan entered into a release and settlement offer with the defendant’s insurance company (“Owners”) in the amount of $50,000.  MCG then filed a claim against Owners to recover on the hospital lien.  Mr. Morgan filed a motion to dismiss MCG’s complaint reasoning that MCG had to seek payment from TRICARE for medical services caused by the tortious acts of a third party.

MCG Unable to Recover Medical Costs From Settlement

Justice Robert Benham, writing for the Court, concluded that “any state law which interferes with the financing of healthcare claims for TRICARE beneficiaries is preempted as a matter of federal statutory and regulatory law.”  The federal government, not a civilian healthcare provider, may have the right to recover against a third party tortfeasor or its insurer in this context; therefore, MCG cannot recover medical costs from the settlement obtained by Mr. Morgan from his personal injury lawsuit.

The Court held that MCG did not have a right to recover any of the settlement funds from Owner’s paid to Mr. Morgan because those costs were covered by a contract with TRICARE.  MCG’s contract provided that it would accept TRICARE payments as the maximum total charges for the treatment of Mr. Morgan’s personal injuries.  By requesting money outside the coverage of TRICARE, MCG was in essence breaching its contract.

The Georgia Supreme Court’s ruling provides that civilian healthcare providers, like MCG, cannot recover settlement funds or treatment costs from third party tortfeasors or TRICARE beneficiaries because such claims are preempted by federal statutory and regulatory law.

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