## Facts

- Hospitals treated Medicaid (AHCCCS) patients injured by third parties and accepted AHCCCS’s reduced payments.
- After payment, hospitals recorded statutory medical liens against patients under A.R.S. §§ 33-931 and 36-2903.01(G) for the difference between customary charges and AHCCCS reimbursement.
- Patients pursued tort claims against third parties and obtained settlements tied to the same injuries.
- To obtain settlement funds, patients negotiated payments to hospitals in exchange for releases of the liens, entering “accord and satisfaction” agreements.
- Patients later sued, alleging the liens constituted prohibited “balance billing” under federal Medicaid law, asserting federal preemption of the state lien statutes, and seeking to set aside the accord and satisfaction agreements.

## Issues

1. Whether accord and satisfaction agreements resolving hospitals’ lien claims against AHCCCS patients’ third-party recoveries are enforceable, even assuming federal Medicaid law preempts the lien statutes and would make the liens unenforceable.
2. Whether a bona fide, good-faith dispute existed at the time of contracting sufficient to supply proper subject matter and consideration for accord and satisfaction.

## Decision

- The Arizona Supreme Court reversed the court of appeals and affirmed the trial court’s dismissal of the complaint.
- The court assumed without deciding that federal Medicaid law preempts the Arizona lien statutes as applied to these liens.
- Even on that assumption, the accord and satisfaction agreements were enforceable because the parties settled a bona fide, good-faith dispute about lien enforceability.
- The hospitals’ agreement to release and forgo pursuit of the recorded liens supplied adequate consideration and proper subject matter for the settlements.

## Legal Principles

- Accord and satisfaction is enforceable when parties compromise a bona fide, good-faith dispute regarding liability or claim enforceability, supported by consideration.
- A settlement’s enforceability does not depend on whether the compromised claim would ultimately prevail; it depends on whether the dispute was honest and colorable when the agreement was made.
- An agreement is not void as against public policy merely because it settles a disputed claim that might later be determined invalid, absent clear illegality or indisputable statutory prohibition at the time of settlement.
- Courts favor finality of negotiated settlements resolving contested legal questions, particularly where the parties bargain for releases and forbearance of asserted rights.

## Conclusion

The court enforced patients’ negotiated payments for lien releases as valid accord and satisfaction because the liens’ legality was genuinely contested when the settlements were made, so the compromises had proper subject matter and consideration even if the lien statutes were federally preempted.


Abbott v. Banner Health Network, 239 Ariz. 409, 372 P.3d 933 (Ariz. 2016)