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05/23/97 CARMEN HILLENBRAND AND JAMES G. UZZELL v.

May 23, 1997

CARMEN HILLENBRAND AND JAMES G. UZZELL, PLAINTIFFS-APPELLANTS,
v.
MEYER MEDICAL GROUP, S.C., AND HEALTH COST CONTROLS OF ILLINOIS, INC., DEFENDANTS-APPELLEES,



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE JOHN K. MADDEN, JUDGE PRESIDING.

Rehearing Denied June 25, 1997. Released for Publication July 21, 1997.

The Honorable Justice Hoffman delivered the opinion of the court. Hartman, P.j., and Hourihane, J., concur.

The opinion of the court was delivered by: Hoffman

The Honorable Justice HOFFMAN delivered the opinion of the court:

The plaintiffs, Carmen Hillenbrand and James G. Uzzell, filed this class action against the defendants, Meyer Medical Group, S.C. (Meyer), Health Cost Controls of Illinois, Inc. (HCC), and Chicago HMO, alleging that Meyer and HCC asserted an invalid and unauthorized physician's lien against a third party recovery received by Hillenbrand. Chicago HMO was dismissed from this action and the plaintiffs have not appealed from that order. At the hearing on Meyer and HCC's motions for summary judgment, the trial court concluded that the plaintiffs' action was preempted by federal law and entered judgment in favor of Meyer and HCC. Thereafter, the trial court denied the plaintiffs leave to file an amendment to their complaint. The plaintiffs filed the instant appeal from the summary judgment entered in favor of Meyer and HCC and from the trial court's order denying leave to amend. We reverse and remand.

Hillenbrand, as a federal employee, received comprehensive health care benefits under the Federal Employees Health Benefits Act (FEHBA) (5 U.S.C. sec. 8901 et seq.). Those benefits were administered by the United States Office of Personnel Management (OPM). Pursuant to a contract between OPM and Chicago HMO, Hillenbrand's health care benefits were provided through a Chicago HMO "Prepaid Comprehensive Medical Plan" (Plan). Upon becoming a member of the Plan, Hillenbrand received a brochure from Chicago HMO which contained the following section, entitled "Third Party Actions":

"If a covered person is injured through the act or omission of another, the Plan [Chicago HMO] requires that it be reimbursed for the benefits provided, in an amount not to exceed the amount of the recovery, or that it be subrogated to the person's rights to the extent of the benefits received under this Plan, including the right to bring suit in the person's name."

Since Chicago HMO does not actually provide medical services, it contracts with certain medical groups to perform such services for Chicago HMO Plan members. Chicago HMO and Meyer entered into a medical group service agreement (hereinafter "Service Agreement") under which Meyer receives "capitation fees" from Chicago HMO instead of billing Chicago HMO's Plan members directly for medical services. Paragraph 5 of the section entitled "Duties of the Group" explains the capitation fee arrangement:

"In no event shall GROUP [Meyer] bill, charge, seek compensation or have any recourse against the Member for service provided pursuant to this Agreement. GROUP agrees to accept as full compensation for providing health services the capitation fees under this Agreement and to look only to the Plan for payment, holding all Members harmless against any monetary claims (except for such co-payments as may be authorized by the applicable Certificate of Coverage). ***"

The Service Agreement also includes the following pertinent language in paragraph 8 under "General Provisions":

"The GROUP [Meyer] is responsible for ascertaining whether third parties are liable for health services provided to Members by the GROUP. The GROUP is also responsible for collecting any such amounts due from third parties for professional fees, such collections becoming the property of the GROUP."

In February 1991, Hillenbrand was injured in an accident. She received medical treatment from Meyer through her Chicago HMO Plan. The medical services provided by Meyer totaled $1,779.64. In April 1992, HCC, Meyer's agent, sent Hillenbrand's personal injury attorney, James Uzzell, a notice of physician's lien in the amount of $1,779.64, which stated in pertinent part:

"The health benefit plan provides that Meyer Medical Group is entitled to complete reimbursement of those benefits out of any settlement or judgment received by or on behalf of your client from any payments designed to compensate your client for medical expenses and injuries. *** The terms and conditions of the health benefit plan further provide for a legal and equitable lien on any proceeds received by settlement, judgment or otherwise."

In July 1992, Uzzell negotiated a $6,744 settlement of Hillenbrand's tort claim arising from her accident. The settling party remitted one check in the amount of $4,964.36 payable to Hillenbrand and Uzzell, representing her settlement over medical expenses, and another check in the amount of $1,779.64 payable to Hillenbrand, Uzzell, and HCC, representing the amount claimed for reimbursement of her medical ...


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