               IN THE COURT OF APPEALS OF NORTH CAROLINA

                                     No. COA18-525

                                  Filed: 18 June 2019

Nash County, No. 16-CVS-744

DERRICK SYKES, Plaintiff,

              v.

EMMANUEL VIXAMAR and PROGRESSIVE                          UNIVERSAL         INSURANCE
COMPANY, Defendant-Intervenor, Defendants.


       Appeal by defendant from judgment entered 5 February 2018 by Judge Walter

H. Godwin, Jr. in Nash County Superior Court. Heard in the Court of Appeals 30

January 2019.


       Ricci Law Firm, P.A., by Meredith S. Hinton, for plaintiff-appellee.

       Teague, Rotenstreich, Stanaland, Fox & Holt, PLLC, by Camilla F. DeBoard
       and Kara V. Bordman, for defendant-appellant.

       Christopher R. Nichols; Kluttz, Reamer, Hayes, Adkins & Carter, by Michael S.
       Adkins; and The Law Offices of James Scott Farrin, by J. Gabe Talton, for
       amicus curiae North Carolina Advocates for Justice.


       DIETZ, Judge.


       Derrick Sykes was injured in a car accident and sought care at Nash Hospital.

After learning that another driver likely was liable for Sykes’s injuries, the hospital

made a choice that is the heart of this appeal: it chose not to bill Sykes’s health insurer

for his medical care and instead to rely on a statutory medical lien on any payments

Sykes received from the other driver.
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                                   Opinion of the Court



      That choice matters because there is a statute prohibiting hospitals from

billing patients for charges that would have been covered by health insurance if the

hospital had timely submitted a claim. See N.C. Gen. Stat. § 131E-91(c). The issue in

this case is whether Section 131E-91(c) prevents a hospital from choosing to rely

solely on a medical lien on a future liability judgment, rather than also billing the

patient’s health insurer.

      As explained below, we hold that hospitals may make this choice without

abandoning their medical liens. First, the text of the applicable statutes permits it.

Second, a contrary interpretation would frustrate the purpose of Section 131E-91(c)

by forcing patients to pay unnecessary deductibles and other charges upfront—even

though the hospital would have been content to wait and recover those costs from a

court judgment or settlement later.

      Accordingly, the trial court did not err by permitting Sykes to introduce

evidence of the hospital’s lien and underlying medical charges, and by rejecting

counter-evidence seeking to show that Section 131E-91(c) barred the hospital from

billing Sykes directly for those charges.

                            Facts and Procedural History

      In September 2015, Plaintiff Derrick Sykes and Defendant Emmanuel

Vixamar were involved in a motor vehicle accident when Vixamar failed to stop at a

red light and collided with the rear of Sykes’s vehicle. Following the accident, Sykes



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sought medical treatment at Nash Hospital. The charges for Sykes’s treatment at the

hospital totaled $6,463.

       Two months later, the hospital sent Sykes a letter and accompanying notice of

medical lien informing Sykes that the hospital asserted a lien on any liability

recovery, medical payments, or uninsured/underinsured motorist coverage. Sykes

had health insurance through Blue Cross Blue Shield but the hospital did not submit

the charges to Sykes’s health insurer and did not seek to collect the charges directly

from Sykes.

       On 20 May 2016, Sykes filed this negligence action against Vixamar.

Progressive Universal Insurance Company, who insured the owner of the vehicle that

Vixamar was driving, later intervened as a defendant.

       During discovery, the parties deposed Demetrius Hagins, a billing clerk at

Nash Hospital. Progressive asked Hagins a series of questions concerning the

hospital’s decision to rely on the medical lien to recover for its medical services, rather

than billing Sykes’s health insurer:

              Q. With that lien, it means you will obtain funds based on
              the outcome of any lawsuit that he has or settlement,
              correct?

              A. Correct.
              ...
              Q. Okay. In the event that his recovery is less than the
              amount you have in this lien, which is $6,463, what
              happens to the remainder of the balance?



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A. If it’s less, we accept a pro rata share at settlement, and
we adjust it off.

Q. Adjust it off in full?

A. No, we adjust the balance after the payment from the
pro rata share.
...
Q. The outstanding balance, or the remainder of the bill,
okay, what happens to the remainder of the bill for Mr.
Sykes?

A. It is adjusted off. . . . We don’t bill the patient.

Q. Okay. So the amount will be reduced to zero?

A. Yes.

Q. Okay. And if Mr. – if Mr. Sykes does not recover in this
lawsuit, what happens – so a judgment or settlement of
zero, what amount would be necessary to satisfy this
September 15, 2015, bill?
...
Q. If he receives nothing from this –
...
A. We receive nothing.
...
Q. Okay. And so the amount is written off?

A. Yes.
...
Q. Okay. Why would it have to be adjusted off?

A. Timely filing.

Q. Because you can’t bill the insured, correct?

A. Correct.




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      Before trial, the court heard the parties’ evidentiary motions. Sykes moved to

exclude “any and all testimony and hypotheticals from the Nash County billing clerk

regarding potential negotiations of bills as speculative.” Progressive moved to exclude

any evidence about medical costs because, as a matter of law, the amount Sykes owes

the hospital is “zero.” Progressive asserted that the hospital never submitted the

claim to Sykes’s health insurer, which in turn meant that Sykes “cannot be billed

directly” because of the patient protection provision in N.C. Gen. Stat. § 131E-91(c).

Therefore, Progressive argued, “there is no valid lien.”

      Progressive also argued that “in the alternative let us provide testimony by

Nash Hospital’s representative.” Progressive told the trial court that it would ask

that representative whether it would be unlawful for the hospital to bill Sykes under

N.C. Gen. Stat. § 131E-91 and “that would be [the] only question.” Sykes’s counsel

responded, “If she asks that one question, we’ve got to ask him 50 other ones to get

us back to the heart of the whole issue.”

      After reviewing a copy of Hagins’s deposition, the hospital billing records, and

the notice of lien, the trial court ruled that the Nash Hospital lien of $6,463 was

admissible because “the notice of the medical lien [was] filed in a timely manner” and

“therefore, the medical lien of $6,640 - $6,643 is what is due and owed.” The trial

court then ruled that “[a]ny testimony by the Nash Hospitals billing clerk is not going

to be allowed,” noting that “[i]t’s a double-edged sword that’s for sure.”



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        At trial, Sykes introduced the statement of charges and the lien from Nash

Hospital over Progressive’s objection. Progressive sought to introduce portions of

Hagins’s deposition testimony to rebut the reasonableness of the lien amount, but the

trial court reaffirmed its earlier ruling to exclude that evidence. During the jury

charge, the trial court instructed the jury using the pattern jury instruction

applicable where no evidence is offered to rebut the presumption that medical

expenses are reasonable. Progressive again noted its objection to that instruction

based on “not being allowed to put on rebuttal evidence.”

        The jury returned a verdict in favor of Sykes for $7,778, the total amount of

the medical expenses presented at trial. The trial court entered judgment on the

jury’s verdict and Progressive timely appealed.

                                       Analysis

   I.      Admissibility of Hospital Bill

        Progressive first argues that the trial court erred by admitting evidence of the

medical bills Sykes incurred at Nash Hospital for treatment resulting from the

accident. Progressive contends that the hospital was barred by law from billing Sykes

for that medical treatment, which in turn meant Sykes could not recover those costs

in the lawsuit. Thus, Progressive argues, evidence concerning the hospital’s medical

lien and corresponding bills was irrelevant and inadmissible as a matter of law.




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       Progressive’s argument relies on the interactions between two statutes

governing the payment and recovery of medical expenses. We briefly summarize

these statutes for ease of understanding.

       First, our State’s medical lien statute creates a lien on any personal injury

recovery “in favor of any person. . . to whom the person so recovering . . . may be

indebted” for medical care “rendered in connection with the injury in compensation

for which the damages have been recovered.” N.C. Gen. Stat. § 44-49(a). Medical

providers routinely use this statutory lien in personal injury cases to recover the

amount owed for medical care from the judgment against the tortfeasor responsible

for the injury.

       Second, our State’s fair medical billing statute provides that a hospital “shall

not bill insured patients for charges that would have been covered by their insurance

had the hospital or ambulatory surgical facility submitted the claim or other

information required to process the claim within the allotted time requirements of

the insurer.” N.C. Gen. Stat. § 131E-91(c). This provision protects patients from being

billed for charges that should have been covered by their health insurance.

       Progressive contends that these two statutes, when combined, eliminate a

hospital’s medical lien any time the hospital fails to timely submit a claim to the

patient’s health insurer. This is so, Progressive asserts, because failing to timely

submit the claim means the hospital cannot bill the patient. And, if the hospital



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cannot bill the patient, the patient cannot be “indebted” to the hospital—a

requirement to assert a medical lien.

      We reject this argument. At the time the hospital provided medical care to

Sykes, it expected to be paid for that care—whether by Sykes himself, by his health

insurer, or by the person who caused Sykes’s injuries. All of these parties are

responsible for paying for that care through some principle of contract or tort law. See

Shelton v. Duke Univ. Health Sys., Inc., 179 N.C. App. 120, 123–26, 633 S.E.2d 113,

115–17 (2006) (holding that the patient is required to pay medical expenses under a

hospital’s contract for medical care); Estate of Bell v. Blue Cross and Blue Shield of

North Carolina, 109 N.C. App. 661, 666, 428 S.E.2d 270, 272 (1993) (holding that a

health insurer’s payment obligations are controlled by contract); Nash Hospitals, Inc.

v. State Farm Mut. Auto. Ins. Co., __ N.C. App. __, __, 803 S.E.2d 256, 260 (2017)

(holding that a medical provider, through a medical lien, is entitled to its pro rata

share of a patient’s settlement with a tortfeasor).

      To be sure, when the hospital submitted a notice of lien to Sykes, and chose

not to submit the claim to Sykes’s health insurer, the hospital narrowed the sources

from which it could be paid—in effect abandoning its ability to seek payment from

Sykes and his health insurer. But we reject Progressive’s argument that, when the

hospital made this choice, the fair medical billing statute wiped away the debt. The

statute protects patients from being billed for care that would have been covered by



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the patient’s health insurer. N.C. Gen. Stat. § 131E-91(c). It is not intended to force

hospitals to bill health insurers when other, alternative sources of payment also are

available to satisfy the debt. Here, because Sykes received services from the hospital

for which the hospital expected to be paid, and because there are sources through

which the hospital lawfully can be paid for those services (without billing Sykes

directly), Sykes remains indebted for the hospital’s services under the plain language

of the medical lien statute. N.C. Gen. Stat. § 44-49(a).

      Moreover, were we to interpret these statutes as Progressive requests, it would

have the perverse effect of requiring hospitals to bill patients and their health

insurers immediately, although there is another potential source of payment through

the medical lien. This, in turn, would mean the fair medical billing statute—a statute

designed to protect patients from unnecessary hospital bills—would instead force

patients to pay deductibles and other charges upfront even though the hospital would

have been content to wait and recover those costs solely from a liability judgment or

settlement in the future. That is not what the text of the fair billing statute requires,

and certainly not what the legislature intended.

      Progressive also asserts that although “this is a case of first impression in

North Carolina, other jurisdictions have specifically addressed the need for an

underlying, continuing debt to maintain a valid lien.” But all of the cases on which

Progressive relies address a separate issue—which we discuss in more detail below—



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concerning a hospital’s attempt to collect more through a medical lien than what the

hospital otherwise would have received for providing that care. See, e.g., Morgan v.

Saint Luke’s Hospital of Kansas City, 403 S.W.3d 115, 119 (Mo. Ct. App. 2013);

Midwest Neurosurgery, P.C. v. State Farm Ins. Co., 686 N.W.2d 572, 577, 579 (Neb.

2004).

         Progressive pays particular attention to Dorr v. Sacred Heart Hospital, 597

N.W.2d 462, 469–71 (Wis. Ct. App. 1999), which it claims “addressed identical facts

to this Appeal.” But Dorr, like the other cases Progressive cites, is readily

distinguishable. As the Wisconsin Court of Appeals later explained in clarifying the

Dorr holding, the contract between the hospital and health maintenance organization

in that case included “a contracted ‘per diem rate’ flat fee arrangement that the

hospital used to charge the HMO for treatment of HMO subscribers.” Laska v. Gen.

Cas. Co. of Wisconsin, 830 N.W.2d 252, 264 (Wis. Ct. App. 2013). “The hospital filed

the lien against the patient’s tort claim in an apparent attempt to recover the

difference between the per diem rate the HMO agreed to reimburse and the price

based on an itemized cost basis.” Id. In other words, as with the other cases cited

above, Dorr involved a hospital seeking to recover more than it had agreed by contract

to charge for those medical services. In North Carolina, as in these other jurisdictions,

defendants may introduce evidence showing that a hospital seeks more through its

lien than it would have otherwise accepted from a patient or health insurer.



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      But that is not what Progressive sought to do in this case. Progressive does not

contend that the lien amount is greater than what Sykes would have paid had

Vixamar not been responsible for the injuries. Instead, Progressive asserts that, by

operation of law, when a hospital provides notice of a statutory medical lien to a

patient but does not timely submit the underlying charges to the patient’s health

insurer, the hospital abandons the medical lien. We reject this argument and hold

that a medical lien remains valid even if the hospital fails to timely submit those

charges to the patient’s health insurer.

      Of course, by choosing not to bill a patient’s health insurer in these

circumstances, the hospital takes the risk that, if the third party is not held liable or

is judgment proof, the hospital will never be paid. But that is the hospital’s choice to

make. Our holding is merely that, when a hospital makes that choice, the interaction

between the medical lien statute and fair billing statute does not eliminate the

hospital’s right to collect payment through a medical lien.

      Finally, Progressive identifies several harmful policy consequences of the

hospital’s billing practices in this case. For example, Progressive argues that federal

regulations stemming from the Affordable Care Act require hospitals to bill

uninsured patients “an average of the amounts billed to patients with health

insurance.” The implication (although Progressive does not state it expressly) is that

hospitals will choose whether to bill a health insurer or to seek recovery solely



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through a medical lien in ways that inflate their average charges to health insurers,

in turn inflating the amount they can bill uninsured patients. Whatever the merit of

this claim, it is directed at the wrong branch of government. “This Court is an error-

correcting body, not a policy-making or law-making one.” Davis v. Craven County

ABC Bd., __ N.C. App. __, __, 814 S.E.2d 602, 605 (2018). Enacting policy rules to

stem rising healthcare costs falls far outside the appropriate role of the courts.

   II.      Exclusion of Progressive’s Billing Evidence

         Progressive next argues that the trial court improperly excluded its evidence

challenging the reasonableness of the hospital’s billing practices. We agree with

Progressive’s general statement of the law in this area. Indeed, to ensure that our

holding above causes no confusion, we restate the long-standing evidentiary rule in

these cases: Evidence that the hospital would accept less than the amount claimed in

a medical lien to satisfy the underlying bill is admissible to challenge the

reasonableness of the bill. See N.C. Gen. Stat. § 8-58.1(b) (the presumption of

reasonableness of medical charges is rebutted by “sworn testimony that the charge

for that provider’s service . . . can be satisfied by a payment of an amount less than

the amount charged”); see also N.C. Gen. Stat. § 8C-1, Rule 414. Defendants in these

cases may seek discovery on this issue and courts should freely admit this evidence

at trial.

         The flaw in Progressive’s argument is that it never sought to admit this sort of



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evidence. The evidence Progressive sought to introduce concerned the hospital’s

failure to timely bill Sykes’s health insurer and the resulting impact of the fair

medical billing statute. Progressive intended to use that evidence to suggest that the

hospital’s actual bill was “zero” because the law prohibited the hospital from ever

charging Sykes for those services. The trial court properly excluded that evidence

because, as explained above, the interaction between the medical lien statute and fair

medical billing statute does not render the bill uncollectible through a lien on Sykes’s

tort judgment.1

                                          Conclusion

       The trial court properly permitted Sykes to introduce evidence of the hospital’s

lien and underlying medical charges, and properly excluded counter-evidence seeking

to show that the hospital was barred by statute from collecting those charges. We

therefore find no error in the trial court’s judgment.

       NO ERROR.

       Judges INMAN and ARROWOOD concur.




       1  Because the trial court properly excluded this evidence, the court also properly used the
pattern jury instruction which applies when no rebuttal evidence is presented, instead of the pattern
instruction requested by Progressive, which applies when evidence is presented to rebut the
reasonableness of the medical charges. See N.C.P.I. Civil 810.04C, 810.04D.

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