Not all medical bills resulting from a personal injury can be covered by either health insurance or medical payments coverage. Some folks either cannot afford or elect not to add medical payments coverage to their automobile liability insurance policies and even if they do have this coverage available, medical bills these days can quickly outstrip the amount of med-pay coverage they likely have. And unfortunately, many Americans still do not have health insurance.

In other cases, a personal injury victim may want to choose to receive treatment from a medical provider who isn’t covered by the patient’s health insurance, or they want to receive a form of treatment that is desired isn’t covered under their health insurance. All these situations can result in “liens” by the medical provider against any proceeds from a personal injury claim settlement, award, or verdict. A lien is a security interest that someone has in a piece of property or a fund of money that is used to secure debt. It is similar to “collateral” in a loan situation. In a personal injury claim, it represents a legal right for the medical provider to be repaid out of any eventual settlement funds.

Some of these liens are entirely voluntary – the medical provider and the patient can choose to sign an agreement under which the doctor agrees to provide treatment and defer payment in exchange for the patient’s agreement to grant a lien against his or her eventual personal injury claim settlement. Others of these liens are involuntary – hospital liens for treatment provided on an emergency basis, for example, are automatically granted to the hospital under California law.

However it may be that the lien arises, it’s crucial to an optimal resolution of a personal injury victim’s claim that the lien and the debt it is securing be carefully considered and dealt with.

Hospital Liens The California Hospital Lien Act — included in the Civil Code at sections 3045.1 through 3045.6 — automatically grants a hospital a lien when it “furnishes emergency and ongoing medical or other services to any person injured by reason of an accident or negligent or other wrongful act. . . .” The lien is against any damages recovered by way of “judgment, settlement, or compromise.”

These “hospital liens” can be effective for up to 50 percent of the amount recovered, and they have a somewhat complicated notification process (that the hospitals and their billing agents frequently fail to properly follow).

Hospital liens have a complicated relationship with health insurance. If the personal injury victim reports that they have no health insurance, the hospital will usually automatically try to assert a hospital lien as a way of securing payment. Hospitals will generally bill any health insurance that is identified by the patient; however, they will often also assert a hospital lien as a way of “balance billing” for the difference between what is paid by health insurance and the amount of their total bill. Balance billing is often not legally permitted, but in some specific cases, it may be allowed. Certain health insurance, however, will require that the hospital accept their insurance payments as “payment in full” and not attempt to balance bill.

Very often, hospital billing departments will adopt a “shotgun notification” approach and claim to have a lien under the Hospital Lien Act and every other statutory and non-statutory lien concept possible, just to “see what will stick.”

Medical Provider Lien Agreements

Unlike hospital liens that are automatically granted under the Hospital Lien Act for emergency care, most other medical provider liens are entirely voluntary on the part of both doctor and patient. There are a few common situations where these arise:

• Where the personal injury victim/patient has no health insurance;
• Where the personal injury victim/patient has health insurance that does not cover the treatment being offered;
• Where the personal injury victim/patient wants to receive treatment from a provider who is “out-of-plan” for their health insurance; and/or
• Where the provider does not accept health insurance payments.

Medical provider lien agreements will usually be short agreements of a page or two that are drafted in legal language. For providers who frequently treat “on a lien basis,” it may be part of their routine new patient documentation. Most providers are much more willing to treat a personal injury victim on a lien basis if they know that the patient has a personal injury attorney working on their claim – it gives the medical provider greater assurance that there will eventually be a claim recovery out of which their bills will be paid. Typically, the essential elements of the provider lien agreement are that the medical provider will treat the patient and defer payment in exchange for a lien against the patient’s eventual expected recovery from their personal injury claim.

If for some reason the patient drops their personal injury claim or otherwise does not recover money for their claim, the patient still remains responsible for payment of the medical provider’s bill, even if there is no settlement or verdict against which the lien remains enforceable.

Resolving the Debt

How and when these liens get resolved varies a bit depending upon the nature of the lien and the facts of the personal injury claim. Most hospital liens and direct provider liens are negotiated and resolved at the end of the personal injury case, however, some situations require work much earlier on. An example of this is in the situation of attempted “balance billing” by way of a hospital lien where the hospital has also received payment from a personal injury victim’s health insurance. These situations need to be dealt with much earlier on in a case, usually by demanding some sort of proof by the hospital billing department that their particular contract with the health insurer allows them to balance bill. This is generally not the case — even though as noted above hospitals will often claim balance billing rights automatically — but it definitely needs to be known for certain before a case is settled.

Hospital liens need to be resolved for two reasons – first, the Hospital Lien Act automatically provides them a certain portion out of any personal injury claim settlement, and if they have put the liability insurance company on notice, it may not even be possible to settle the personal injury claim without first resolving the hospital lien. And second – and often even more importantly – the Hospital Lien Act merely states how much the hospital is entitled to receive out of the settlement funds. It does not state that the hospital must accept this payment from the settlement funds as payment in full of the bill and the personal injury victim’s ordinary debt for the services rendered. It is key to the resolution of any hospital lien that the hospital agrees to acceptance of the lien payment as payment in full of the entire bill, otherwise, they may subsequently choose to pursue ordinary debt collection.

Direct provider lien agreements are typically paid at full value to the medical provider out of the proceeds of the settlement, which resolves the lien. Sometimes, however, if there are inadequate proceeds from a settlement, award, or verdict, a provider will agree to accept a negotiated smaller amount as payment in full of their bill. As with hospital liens, getting other medical providers to accept reduced lien payments as payment in full is important so that they don’t later pursue debt collection efforts against the patient.

An experienced personal injury attorney will be able to analyze and resolve hospital liens so as to best benefit their client at the bottom line. They will also be able to advise their clients as to when direct provider liens for services are the most effective way to secure the medical treatment recommended by their doctors.

Click the links below to learn more about insurance companies, their claim tactics.

• Types of Auto Coverage and First-Party vs Third-Party
• Insurance Company Tactics: Dirty Tricks Insurance Companies Play in Accident Claims
• How an Experienced Personal Injury Lawyer Deals with Insurance Company Tactics
• The Insurance Industry and Individual Companies: Huge and Hugely Profitable

Image by Darko Stojanovic from Pixabay 

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