                        COURT OF APPEALS
                         SECOND DISTRICT OF TEXAS
                              FORT WORTH


                              NO. 2-08-228-CV


LARRY DEAN SPEEGLE                                                 APPELLANT

                                        V.

HARRIS METHODIST HEALTH
SYSTEM AND HARRIS                                                   APPELLEES
METHODIST FORT WORTH

                                    ------------

        FROM THE 141ST DISTRICT COURT OF TARRANT COUNTY

                                    ------------

                        OPINION ON REHEARING

                                    ------------

      We withdraw our opinion and judgment of October 29, 2009, and

substitute the following. We deny appellant’s Motion for Rehearing.

                               I.    Introduction

      Appellant Larry Dean Speegle brings this appeal complaining of the trial

court’s summary judgment establishing the validity and amount of a hospital

lien filed by appellees Harris Methodist Health System and Harris Methodist Fort
Worth and granting appellees recovery for the amount of the lien plus attorney’s

fees. We affirm.

                               II.   Background

      On June 15, 2001, Larry Dean Speegle was involved in an automobile

accident with Santiago Guzman, an employee or agent of SpectraSite

Construction, Inc. (SpectraSite). Speegle was care-flighted to Harris Methodist

Fort Worth (the Hospital) where he was admitted and treated from June 15,

2001, to July 11, 2001.      The Hospital’s total charges for this care were

$142,915.01. On June 29, 2001, Harris Methodist Health System and its

subsidiary, the Hospital, filed a notice of hospital lien for these services.

Although Speegle is entitled to Medicare, the Hospital has not billed or received

payment from Medicare for this treatment.

      On or about August 11, 2004, Speegle and his wife entered into a

Compromise Settlement Agreement and Release (the Settlement Agreement)

with Guzman and WesTower Communications, Inc. (SpectraSite’s successor).

The Settlement Agreement provided that “$1,250,000.00[] . . . will be paid to

the Releasing Parties and medical lien holders as follows: 1. $391,064.43 to

Larry Speelge [sic], [the Hospital], Trailblazer Health Enterprises L.L.C. [a

Medicare contractor] and Kent, Good & Anderson, P.C.” $391,064.43 is the

exact total of appellees’ lien amount ($142,915.01) and Medicare’s lien amount

                                       2
($248,149.42). In the Settlement Agreement, the parties further agreed that

“the total of these two liens is being paid as described in Paragraph IV. A. 1.

above with the intent that the liens of [the Hospital] and Medicare will be

satisfied with these funds (emphasis added).“

      On August 9, 2004, SpectraSite’s insurer, Zurich American Insurance

Co., issued to Speegle or his agent a check made jointly payable to Speegle, the

Hospital, Trailblazer Health Enterprises (Medicare’s fiscal intermediary), and

Kent, Good & Anderson, Speegle’s counsel, in the amount of $391,064.43.

Speegle, however, did not pay the Hospital the $142,915.01 payment. 1

Instead, on November 30, 2004, he filed an original petition, seeking a

declaration that the hospital lien is invalid because appellees failed to comply

with Chapter 146 of the Texas Civil Practice and Remedies Code by not billing

Medicare for Speegle’s treatment. Harris Methodist Health System and the

Hospital countersued, seeking a declaration that the lien was valid, recovery of

the amount of the lien under the Settlement Agreement, and attorney’s fees.

      Speegle and appellees filed competing motions for traditional summary

judgment on all claims. The trial court denied Speegle’s motion and rendered

an interlocutory summary judgment granting appellees’ motion on both



      1
       According to Speegle, settlement monies were set aside in a fund to
pay the hospital lien, and “the fund is still in existence today.”

                                       3
counterclaims, fixing the amount of the hospital lien at $142,915.01, and

ordering Speegle to pay appellees that amount.

      The issue of the appellees’ attorney’s fees was tried to a jury. Over

Speegle’s objection, the jury was not asked to segregate attorney’s fees

between appellees’ two claims. The jury returned a verdict awarding appellees

$50,512.50 in attorney’s fees through trial plus attorney’s fees on appeal. The

trial court rendered a final judgment on March 4, 2008, and this appeal

followed.

                           III.   Standard of Review

      In a traditional summary judgment case, the issue on appeal is whether

the movant met the summary judgment burden by establishing that no genuine

issue of material fact exists and that the movant is entitled to judgment as a

matter of law.2 The burden of proof is on the movant, and all doubts about the

existence of a genuine issue of material fact are resolved against the movant. 3

Summary judgment is proper when parties do not dispute the relevant facts. 4




      2
       Tex. R. Civ. P. 166a(c); Sw. Elec. Power Co. v. Grant, 73 S.W.3d
211, 215 (Tex. 2002); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d
671, 678 (Tex. 1979).
      3
           Sw. Elec. Power Co., 73 S.W.3d at 215.
      4
           Havlen v. McDougall, 22 S.W.3d 343, 345 (Tex. 2000).

                                       4
      When reviewing a summary judgment, we take as true all evidence

favorable to the nonmovant, and we indulge every reasonable inference and

resolve any doubts in the nonmovant’s favor. 5        Evidence that favors the

movant’s position will not be considered unless it is uncontroverted. 6 But we

must consider whether reasonable and fair-minded jurors could differ in their

conclusions in light of all of the evidence presented. 7

      The summary judgment will be affirmed only if the record establishes that

the movant has conclusively proved all essential elements of the movant’s

cause of action or defense as a matter of law. 8 When both parties move for

summary judgment and the trial court grants one motion and denies the other,

the reviewing court should review both parties’ summary judgment evidence

and determine all questions presented. 9




      5
           Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).
      6
      Great Am. Reserve Ins. Co. v. San Antonio Plumbing Supply Co., 391
S.W.2d 41, 47 (Tex. 1965).
      7
       See Wal-Mart Stores, Inc. v. Spates, 186 S.W.3d 566, 568 (Tex.
2006); City of Keller v. Wilson, 168 S.W.3d 802, 822–24 (Tex. 2005).
      8
           Clear Creek Basin Auth., 589 S.W.2d at 678.
      9
           Valence Operating Co., 164 S.W.3d at 661.

                                        5
                        IV.   Validity of the Hospital Lien

      In his first issue, Speegle challenges the trial court’s order granting

appellees’ summary judgment on their hospital lien and breach of contract

claims. Speegle contends that the lien is invalid because the Hospital was

required to timely bill and receive payment for its services from a third party

payer, Medicare, rather than create a lien under Chapter 55 of the Texas

Property Code.

      To secure the costs hospitals incur when treating accident victims,

Chapter 55 of the Texas Property Code generally grants hospitals a lien on any

cause of action a patient may have against a tortfeasor. 10 Specifically, section

55.002(a) of the property code provides:

      A hospital has a lien on a cause of action or claim of an individual
      who receives hospital services for injuries caused by an accident
      that is attributed to the negligence of another person. For the lien
      to attach, the individual must be admitted to a hospital not later
      than 72 hours after the accident. 11




      10
         Tex. Prop. Code Ann. § 55.002(a) (Vernon 2007); see Daughters of
Charity Health Servs. of Waco v. Linnstaedter, 226 S.W.3d 409, 411 (Tex.
2007). The parties do not dispute that appellees are a “hospital” within the
meaning of this statute. And, contrary to Speegle’s contention, Chapter 55
does not prohibit liens involving treatment of individuals who are Medicare
beneficiaries or covered under private medical insurance. See Tex. Prop. Code
Ann. §§ 55.001–.008 (Vernon 2007).
      11
            Tex. Prop. Code Ann. § 55.002(a).

                                        6
This lien attaches to the plaintiff’s cause of action, a judgment, or the proceeds

of a settlement. 12 Once the lien is filed, a tortfeasor cannot obtain a release by

judgment or settlement unless the hospital’s charges are paid. 13

      Prior to 1980, federal law provided that “Medicare was the primary payer

for hospital and medical services received by its beneficiaries.” 14     In 1980,

however, Congress enacted secondary payer provisions that provided that

Medicare is a secondary payer in certain cases when a Medicare beneficiary is

covered by other insurance. 15      The purpose behind the secondary payer

provisions was to achieve major fiscal savings in the Medicare program. 16 As

stated in the House Report on the bill in which the secondary payer provision

was originally enacted, Congress intended to reverse the policy then in effect

that established Medicare as the primary payer “even in cases in which a




      12
            Id. § 55.003(a) (Vernon 2007).
      13
            Id. § 55.007 (Vernon 2007); Linnstaedter, 226 S.W.3d at 411.
      14
         Am. Hosp. Ass’n v. Sullivan, No. 88-2027(RCL), 1990 WL 274639,
at *6 (D.D.C. May 24, 1990).
      15
         Omnibus Budget Reconciliation Act of 1980, Pub. L. No. 96-499,
§ 953, 94 Stat. 2599 (codified as amended at 42 U.S.C. § 1395y(b)(2) (Supp.
2009)).
      16
        Varacalli v. State Farm Mut. Auto. Ins. Co., 763 F. Supp. 205, 208
(E.D. Mich. 1990); see also Abrams v. Heckler, 582 F. Supp. 1155, 1164
(S.D.N.Y. 1984).

                                        7
beneficiary’s need for services [was] related to an injury or illness sustained in

an auto accident and the services could have been paid for by a private

insurance carrier under the terms of an automobile insurance policy.” 17

      At the time of Speegle’s treatment at the Hospital, the relevant secondary

payer statute, 42 U.S.C. § 1395y(b)(2)(A), provided in pertinent part:

      Payment under this subchapter may not be made, except as
      provided in subparagraph (B), with respect to any item or service
      to the extent that --

               ....

            (ii) payment has been made or can reasonably be expected to
      be made promptly (as determined in accordance with regulations)
      under a . . . liability insurance policy or plan . . . . 18

This statute expressly prohibits Medicare from paying if a liability carrier has

already paid or is reasonably expected to pay “promptly.” According to the

regulations adopted by the Health Care Financing Administration (HCFA),

“promptly” is defined as within 120 days of the earlier of the date a lien is filed

against a potential liability settlement or the date of discharge. 19 Therefore,

under federal statutory and regulatory laws, Medicare is a secondary payer in


      17
        H.R. Rep. No. 96-1167, § 825, at 389 (1980), as reprinted in 1980
U.S.C.C.A.N. 5526, 5752.
      18
       42 U.S.C. § 1395y(b)(2)(A) (2001) (current version at 42 U.S.C.
§ 1395y(b)(2)(A), (B) (Supp. 2009)).
      19
            42 C.F.R. § 411.50(b) (2001).

                                        8
situations where a Medicare beneficiary’s hospital bill is covered by liability

insurance, and Medicare is prohibited from paying during the 120-day

“promptly” period. 20

      With respect to the rights of providers after the expiration of the

“promptly” period, the HCFA issued a 1995 memorandum providing that the

provider or supplier “may, but is not required to bill Medicare for conditional

payment if the liability insurance claim is not finally resolved.” 21    HCFA’s

successor entity, the Centers for Medicare & Medicaid Services (CMS), has

published this same construction in Chapter 2 of its Medicare Secondary Payer

Manual (MSPM). 22       Section 40.2 of the MSPM is entitled “Billing in MSP

Liability Insurance Situations” and provides, in pertinent part:

      Generally, providers . . . must bill liability insurance prior to the
      expiration of the promptly period rather than bill Medicare. . . .



      20
           The HCFA regulations provide that “Medicare benefits are secondary
to benefits payable by a third party payer even if State law or the third party
payer states that its benefits are secondary to Medicare benefits or otherwise
limits its payments to Medicare beneficiaries.” 42 C.F.R. § 411.32(a)(1) (2001)
(emphasis added).
      21
        Joiner v. Med. Ctr. E., Inc., 709 So. 2d 1209, 1220 (Ala. 1998)
(emphasis added) (quoting an August 21, 1995 HCFA memorandum, which
was in turn quoted in a March 12, 1996 HCFA memorandum).
      22
         U.S. Dep’t of Health & Human Servs., Ctrs. for Medicare & Medicaid
Servs., Medicare Secondary Payer (MSP) Manual, ch. 2, § 40.2 (2009),
http://www.cms.hhs.gov/manuals/downloads/msp105c02.pdf.

                                       9
      Following expiration of the promptly period . . . a provider . . . may
      either:

               •    bill Medicare for payment and withdraw all claims/liens
                    against the liability insurance/beneficiary’s liability
                    insurance settlement . . . ; or

               •    maintain all claims/liens against the liability
                    insurance/beneficiary’s liability insurance settlement.
      ....

      The following applies to providers who participate in Medicare . . . :

               •    if the provider bills Medicare, the provider must accept
                    the Medicare approved amount as payment in full and
                    may charge beneficiaries only deductibles and
                    coinsurance.[sic]

               •    if the provider pursues liability insurance, the provider
                    may charge beneficiaries actual charges, up to the
                    amount of the proceeds of the liability insurance less
                    applicable procurement costs but may not collect
                    payment from the beneficiary until after the proceeds
                    of the liability insurance are available to the
                    beneficiary. 23

      Therefore, under HCFA and CMS regulations, after the 120-day

“promptly” period ends, whenever services provided to a Medicare beneficiary

are also covered by a liability insurance policy, providers have the right either

to bill Medicare or to maintain a lien against a potential liability insurance

settlement.




      23
            Id. (emphasis added).

                                        10
      An agency’s construction of its own regulations is entitled to substantial

deference. 24 We, therefore, defer to the appropriate agency’s construction of

federal Medicare law granting appellees a federal right to maintain their lien

against Speegle’s liability insurance settlement in lieu of billing Medicare. 25

Accordingly, we hold that the Hospital is entitled to recover the $142,915.01

amount of the lien from Speegle. 26 We overrule the portion of Speegle’s first


      24
         Lyng v. Payne, 476 U.S. 926, 939, 106 S. Ct. 2333, 2341 (1986);
see Legend Airlines, Inc. v. City of Fort Worth, 23 S.W.3d 83, 95 (Tex.
App.—Fort Worth 2000, pet. denied); see also United States ex rel. Thompson
v. Columbia/HCA Healthcare Corp., 20 F. Supp. 2d 1017, 1046 (S.D. Tex.
1998) (“As the agency charged with enforcing regulations . . . HHS’ and its
subdivision’s, HCFA’s, interpretation of those regulations is entitled to
deference.”).
      25
         Our holding does not address the validity of a hospital lien in
situations where the patient is the beneficiary of private medical insurance
rather than Medicare.
      26
         Speegle cites Linnstaedter, 226 S.W.3d at 411, for the proposition
that appellees may not file a lien against Speegle’s tort claim because a hospital
cannot sue a patient for the difference between its normal rate and an
applicable discounted rate. Id. However, that case involved a patient covered
under workers’ compensation insurance, and the court expressly grounded its
holding on the Texas Labor Code’s prohibition of claims against workers’
compensation patients. Id. (citing Tex. Lab. Code Ann. § 413.042(a) (Vernon
2006) (providing that hospitals “may not pursue a private claim against a
workers’ compensation claimant” for all or part of the costs of treatment)).
Speegle also cites federal case law prohibiting a hospital lien when the provider
had already received payment from a third party payer yet still sought to
enforce its lien to collect the difference between its normal charges and the
discounted reimbursement rate; those cases likewise do not apply here because
the Hospital has not been paid by Medicare. See Rybicki v. Hartley, 792 F.2d
260, 261 (1st Cir. 1986) (lien holder had been paid by Medicare); Satsky v.

                                       11
issue challenging the trial court’s judgment in favor of appellees on their

hospital lien.27

       V.      Federal Medicare Law Preempts Section 146.002(c) of the
                     Texas Civil Practice and Remedies Code

    In his second issue, Speegle argues that the trial court erred by denying his

summary judgment motion to invalidate the hospital lien because appellees

failed to comply with Texas Civil Practice and Remedies Code section

146.002(c)’s requirement that health care service providers timely bill third

party payers, including Medicare, whenever they are “authorized” to do so. 28

      Civil practice and remedies code section 146.002(c) provides:

      If the health care service provider is required or authorized to
      directly bill a third party payor operating under federal or state law,
      including Medicare and the state Medicaid program, the health care
      service provider shall bill the third party payor not later than:

              (1) the date required under any contract between the health
              care service provider and the third party payor or the date
              required by federal regulation or state rule, as applicable; or




United States, 993 F. Supp. 1027, 1028–29 (S.D. Tex. 1998) (lien holder paid
by private prepaid insurance plan); Holle v. Moline Pub. Hosp., 598 F. Supp.
1017, 1019 (C.D. Ill. 1984) (lien holder paid by Medicare).
      27
         Based on our holding regarding appellees’ recovery under the hospital
lien, we need not reach, and express no opinion regarding, the portion of
appellant’s first issue challenging the trial court’s judgment granting appellees’
breach of contract claim. See Tex. R. App. P. 47.1.
      28
            See Tex. Civ. Prac. & Rem. Code Ann. § 146.002 (Vernon 2005).

                                        12
               (2) if there is no contract between the health care service
               provider and the third party payor and there is no applicable
               federal regulation or state rule, the first day of the 11th
               month after the date the services are provided. 29

      Under section 146.003(a), a health care service provider who violates

section 146.002‘s prompt billing requirements “may not recover from the

patient any amount that the patient would have been entitled to receive as

payment or reimbursement under a health benefit plan or that the patient would

not otherwise have been obligated to pay had the provider complied with

Section 146.002.” 30 Thus, chapter 146 requires medical care providers to bill

Medicare for services received by Medicare-eligible patients when providers are

permitted—such as after the 120-day “promptly” period. 31                In such a

circumstance, section 146.002(c) conflicts with federal law requiring Medicare

to be regarded as a secondary payer and granting hospitals the option of

maintaining a hospital lien, even if they are authorized to bill Medicare instead. 32




      29
            Id. § 146.002(c) (emphasis added).
      30
            Id. § 146.003(a) (Vernon 2005) (emphasis added).
      31
            Id. § 146.002(c); see 42 U.S.C. § 1395y(b)(1) (2001).
      32
         See 42 C.F.R. § 411.32 (2001); Joiner, 709 So. 2d at 1220–21
(applying Medicare secondary payer statutes and HCFA policies); Parkview
Hosp., Inc. v. Roese, 750 N.E.2d 384, 390–91 (Ind. Ct. App. 2001) (same).
Appellees elected to maintain the hospital lien rather than bill Medicare.

                                         13
      When state and federal law conflict, we look to federal preemption

principles   derived   from   the   Supremacy   Clause   of the   United   States

Constitution. 33 When a state law conflicts with valid federal law, the state law

is preempted and has no effect. 34 A federal agency acting within the scope of

its congressionally delegated authority may similarly preempt state law. 35 A

state law conflicts with federal law and is thus preempted when the state law

stands as an “obstacle to the accomplishment and execution of the full

purposes and objectives of Congress.” 36 In determining whether a state statute

is an obstacle to the accomplishment and execution of the full purposes and




      33
        U.S. Const., art. VI, cl. 2 (“This Constitution, and the Laws of the
United States which shall be made in Pursuance thereof . . . shall be the
supreme Law of the Land; and the Judges in every State shall be bound
thereby, any Thing in the Constitution or Laws of any State to the Contrary
notwithstanding.”).
      34
        City of New York v. Fed. Commc’ns Comm’n, 486 U.S. 57, 63–64,
108 S. Ct. 1637, 1642 (1988); see also BIC Pen Corp. v. Carter, 251 S.W.3d
500, 504 (Tex. 2008).
      35
        City of New York, 486 U.S. at 63–64, 108 S. Ct. at 1642; La. Pub.
Serv. Comm’n v. Fed. Commc’ns Comm’n, 476 U.S. 355, 368–69, 106 S. Ct.
1890, 1898–99 (1986).
      36
         Wyeth v. Levine, ---- U.S. ----, 129 S. Ct. 1187, 1193–94 (2009)
(quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 404 (1941));
see also BIC Pen Corp., 251 S.W.3d at 504.

                                        14
objectives of Congress in passing a federal statute, we look to the language of

the statute and Congress’s intent. 37

      We have held that 42 U.S.C. § 1395y(b)(1) and HCFA regulations provide

that Medicare is the secondary source of payment when other funds are

available to pay a Medicare-eligible patient’s hospital charges. 38           The

requirement in section 146.002 that health care providers must bill Medicare

whenever authorized to do so presents an obstacle to accomplishing this

objective. Therefore, we hold that section 146.002(c) is preempted to the

extent it requires a hospital to bill Medicare as a primary source of payment

when other funds are available to pay the hospital charges. 39       We overrule

Speegle’s second issue.

                 VI.   Segregation of Appellees’ Attorney’s Fees

      In his third issue, Speegle argues that the trial court erred by awarding

appellees’ attorney’s fees based on the jury’s verdict because appellees were



      37
        See Wyeth, ---- U.S. ----, 129 S. Ct. at 1194–95 (holding that “the
purpose of Congress is the ultimate touchstone in every pre-emption case” and
determining intent through statutory language and legislative history).
      38
            See 42 U.S.C. § 1395y(b)(1) (2001); 42 C.F.R. § 411.32 (2001).
      39
          See, e.g., BIC Pen Corp., 251 S.W.3d at 504 (holding that “state law
is impliedly preempted if it ‘actually conflicts with federal law or regulations,’
because . . . state law obstructs accomplishing and executing Congress’ full
purposes and objectives”).

                                        15
not entitled to recover attorney’s fees on their claim to enforce the lien 40 and

the recoverable fees were not segregated from the non-recoverable fees. 41

      As a general rule, fee claimants have always been required to segregate

attorney’s fees between claims for which they are recoverable and claims for

which they are not. 42 Only when a claimant establishes that the same “discrete

legal services advance both a recoverable and unrecoverable claim” are the fees

“so intertwined that they need not be segregated.” 43

      The Hospital pleaded for recovery of attorney’s fees under sections

37.009 and 38.001 of the Texas Civil Practice and Remedies Code. 44 The



      40
           Hermann Hosp. v. Vardeman, 775 S.W.2d 866, 868 (Tex.
App.—Houston [1st Dist.] 1989, no writ) (holding that “the hospital lien statute
. . . clearly does not provide for the recovery of attorney’s fees for enforcement
of the lien”).
      41
         Speegle does not challenge the reasonableness or necessity of the
attorney’s fees apart from his claim that they should not be awarded because
they are not segregated.
      42
            Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 313 (Tex.
2006).
      43
        Id. at 313–14; see Hong Kong Dev., Inc. v. Nguyen, 229 S.W.3d
415, 455 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (op. on reh’g).
Speegle’s contention that Chapa demands segregation of recoverable and non-
recoverable fees in all cases is incorrect. See Chapa, 212 S.W.3d at 313–14.
      44
         See Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (Vernon 2008)
(authorizing award of attorney’s fees to any party to declaratory judgment
action); Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (Vernon 2008)
(authorizing award of attorney’s fees on breach of contract and other claims).

                                       16
Hospital’s defense of Speegle’s declaratory judgment action and its action to

recover on the lien both depended on establishing the validity of the hospital

lien. Because discrete legal services advanced both the declaratory judgment

action and the action to recover on the lien, the resulting legal fees were so

intertwined that they need not be segregated. 45 Thus, the trial court did not err

by failing to segregate attorney’s fees. We overrule Speegle’s third issue.

                               VII.   Conclusion

      We affirm the trial court’s final judgment decreeing that appellant take

nothing, that the Hospital’s lien be fixed at the sum of $142,915.01, and that

the Hospital recover that amount under the lien, in addition to interest and

attorney’s fees.




                                                   PER CURIAM




PANEL: CAYCE, C.J.; DAUPHINOT and WALKER, JJ.

DELIVERED: December 17, 2009




      45
            See Chapa, 212 S.W.3d at 313–14.

                                       17
