Abbott v. Banner Health Network

Jackie Abbott and other patients (plaintiffs) were Medicaid recipients who were treated at various Arizona hospitals, including Banner Health Network, (defendants) for injuries resulting from third parties. Arizona Health Care Cost Containment System (AHCCCS), Arizona’s Medicaid agency, had negotiated reduced rates with the hospitals. Seeking to recoup the full value of the hospitals’ services, the hospitals recorded liens against the patients pursuant to Arizona’s medical-lien law. The liens were for recovery of the difference between the amount typically charged for the patients’ treatment and the reduced amount paid by AHCCCS. To receive funds from personal-injury settlements with the third parties who injured the patients, the patients entered into accord-and-satisfaction agreements with the hospitals by paying negotiated amounts to release the liens. Federal Medicaid law, which preempts state law, prohibits balance billing, i.e., collecting directly from the patient hospital charges that exceed what was paid by Medicaid. Accordingly, patients who had entered into accord-and-satisfaction agreements sued seeking to have the agreements set aside and recover the amounts they paid to the hospital to release the liens. The hospital moved to dismiss the complaint for failure to state a claim because the parties had reached an accord and satisfaction. The trial court dismissed the complaint, finding that the agreements were final and binding regardless of the validity of the underlying claims. The court of appeals reversed, reasoning that the agreements lacked a proper subject matter and consideration because there was no good-faith dispute about the enforceability of the liens, which were void under federal law. The Arizona Supreme Court granted review.