California hospitals can no longer recover from insured patients the difference between a hospital's actual costs and what insurance companies pay for medical services, the state Supreme Court (search) ruled Monday.

The court ruled unanimously in favor of Joel Parnell (search), 32, who was injured in a car crash while riding in a taxi in 1997. He spent about a week in San Joaquin Community Hospital in Bakersfield, generating a $20,000 bill from back injuries.

Parnell's insurance company and Adventist Health System/West (search), the hospital's owner, agreed to accept $5,000 as "payment in full" for services Parnell received. But the hospital went after Parnell when he sued the motorist who smashed into the taxi. Parnell won $15,000 from his personal injury case, and the hospital put a lien on it.

Parnell then sued the hospital, saying such a lien could only be placed on his damages award if he was not insured and didn't pay his bill.

Parnell's attorneys argued the hospital had abused a 44-year-old state law that allows hospitals the right to sue or take other measures against uninsured patients who don't pay their medical bills.

"The hospitals have taken a well-intentioned law and tortured and twisted it to prey on the insured by extorting and extracting from them," attorney Ralph Wegis said.

Representatives of the San Joaquin hospital did not return repeated phone calls seeking comment.

Dozens of hospitals urged the court to side with the hospital's billing practice. Their attorney, Barry Landsberg, said the disputed practice was lawful and that such liens are put in place because hospitals "are confronting severe challenges to their very existence."