You may be surprised to learn that your healthcare provider has filed a legal claim (lien) against the compensation you may be awarded in a personal injury claim. This can happen when you’re treated for the injury but don’t have insurance or the money to pay for treatment yourself.
In such a case, the hospital or your family doctor’s office may agree to treat in exchange for you signing a lien agreement. The lien says that your healthcare provider will recover their money from the settlement if and when it is awarded. The lien is then filed with the county clerk.
How lien-based treatment works
Unless you have health insurance, treatment after an accident presents a dilemma. You need compensation to pay for treatment, but the insurance company will only settle your claim after you’ve signed a full and final settlement that ends your right to recover any further damages.
This is where treatment on a lien basis comes in. When you go to the hospital or your family doctor for treatment, they will treat you without requiring immediate payment. They expect to get paid in the future when the at-fault party’s insurer pays the settlement money.
Some medical providers use a letter of protection (LOP) instead of a lien. A letter of protection is a contract between your, your lawyer, and your healthcare provider where you promise to pay once you receive the settlement. Unlike a lien, a LOP is not filed with the county clerk.
Understanding how a medical lien works
A lien is a demand for payment. It is a legal claim placed against any compensation you may receive after your personal injury case is settled. The settlement usually comes in the form of a check signed by you and your lawyer, which is then deposited into a special trust account.
The check or checks will also include the names of lien-holders, such as your healthcare provider and, in some cases, insurance companies. With your approval, your lawyer first pays himself and then writes checks from the trust account to your doctor and other lien-holders.
A lien or letter of protection protects the hospital or your doctor’s office from having to collect their bill directly from you, especially since you may not be in a position to pay. Rather than give the money to you, the lawyer first pays all lien before giving you any remaining money.
Some hospitals won’t accept lien-based treatment
Lien-based treatment is a risk for the healthcare provider. If you lose the personal injury claim or the settlement amount isn’t enough to cover your hospital bill, they have to recover their money in some other way.
That’s why many doctor’s offices and some hospitals won’t offer treatment on the basis of a lien. If you can’t find one who does, talk to your attorney. They may be able to direct you to a healthcare provider who will accept a lien or letter of protection.
What if you have health insurance?
If you have health insurance through a private company, they can pay for your treatment without any liens, which means you won’t lose any of your settlement.
However, public healthcare plans such as Medicaid and Medicare are allowed in some states to recover their money through subrogation. This is a process where insurance providers (or other parties) recoup their money from a personal injury settlement.
If you have a government-funded or controlled insurance program (Medicaid, Medicare, the VA), the government may be entitled to recover money. You may be required to pay back the full or a percentage of the coverage, or the government may come for it, sometimes years later.
Subrogation for MedPay plans
Some auto insurance policies allow you to get treatment through your own insurance provider after a vehicle accident. Medical coverage (MedPay) policy providers may also be entitled to recover their costs when the at-fault party’s insurance carrier pays out.
At the same time, government-funded insurance programs may recover their costs from any MedPay compensation you receive from your insurance company.
A lien does not offer full protection from medical bills
A medical lien is a legally binding contract that means your healthcare provider can recover the full amount of the lien from you. Hospital liens filed by doctors and hospitals have no limits, and your bill will become debt if the settlement fails to cover it fully.
For example, if you lose your personal injury claim, you’ll have to find a way to pay your medical bills. If the settlement is not sufficient to cover the lien, the hospital can still come after you to pay the rest of the bills by taking you to court or sending your bill to collections.
The government and any insurers who are entitled to subrogation are usually more understanding. If you have a good personal injury lawyer, you may be able to negotiate the lien down or even have it waived altogether.
How a lawyer can help
Many people don’t know about medical liens, let alone how to navigate them. A good personal injury lawyer can help you negotiate a medical lien before and after you sign the lien agreement. Since many doctors aren’t open to negotiating liens, a lawyer can help you find one that offers fair terms.
We often see plaintiffs who receive a substantial settlement spend it all, only to be hit with a delayed government lien (they can be delayed by up to 6 years).
An attorney with experience in medical liens can help you avoid such problems and save as much of your settlement as possible.
Negotiate down medical bill under lien
After the agreement has been signed, you may be able to change the terms of the lien so long as all parties agree. For example, if you lose your personal injury claim, you may be able to convince the hospital to reduce the lien amount owed or agree to a payment plan.
It is also fairly common to renegotiate the terms of a lien after settlement. For example, if the settlement amount was lower than expected, you can have the lien amount reduced and pay a percentage of what you owe.
Healthcare providers often prefer not to take patients to collections or to court. It is cheaper and more convenient for them to take a 75% of 85% reduced payment rather than go to court, but you have to get them to agree to the reduction in writing.
Have a judge disburse the settlement funds
If the settlement amount is insufficient to cover all liens, your lawyer can have the court help divide the settlement. In this case, a hearing is set, and each lien holder is informed of the motion. A judge shares the available money between the lienholders as best as possible.
However, any outstanding lien amount is still a debt that you have to pay. It is far better to negotiate a reduced lien, but either way, this can complicate and delay the settlement process.
Talk to a personal injury lawyer
Since you fight so hard to win your personal injury claim, don’t let the settlement you’re awarded sink into medical liens. Although hospital liens are incredibly useful and helped you get immediate treatment, they can also become a major problem.
Talk to an experienced personal injury lawyer at Miley Legal before signing lien agreements or negotiating with insurance companies. Your attorney will help you navigate this tough process and get you the best terms possible.