Why did my doctor’s office file a lien against me?

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Not every personal injury plaintiff has health insurance. Those who are involved in automobile accidents sometimes have have “PIP” (personal injury protection) or “Med Pay” (Medical Payments) coverage to pay medical bills, but these benefits are often not enough to cover all of the necessary medical treatment. These plaintiffs are presented with a catch-22: they could pay for the medical care they need if their lawsuit settles, but they can’t prove their case without first getting medical care. The liability insurance company is not going to pay for the medical bills as they accrue, and will only settle a claim for a signed full and final settlement release.

This problem can often be solved by the medical provider filing a lien to make sure they get paid out of any insurance settlement or verdict. This is called “treatment on a lien-basis.” Other providers will do this through a “letter of protection” (LOP), which is not actually a letter at all, but rather a contract between you, your lawyer and your medical provider which allows you to get the treatment you need in exchange for a promise to pay your provider directly from your settlement funds.

How Treating on a “lien-basis” Works

The doctor’s office agrees to treat you, and then usually immediately files a lien in the county clerk. You can search for a lien on your case in Oklahoma County here: https://www.okcc.online/.

A lot of medical offices will file a lien for the anticipated bill, but then file an updated lien once the treatment is completed.

How a Letter of Protection Works

  1. The language of a letter of protection will vary, but the basic terms will provide that:
  2. Your medical provider will provide treatment while your case is pending.
  3. Your medical provider will not require immediate payment of the bills, and will not send your account to collections or otherwise hurt your credit while the letter of protection is in effect.
  4. You instruct your lawyer to pay the medical provider directly from the settlement of your personal injury claim.
  5. Your lawyer agrees to pay the medical provider directly from his trust account when he receives your settlement funds.

Not all medical providers will provide treatment under a letter of protection. Most medical providers that market towards car accident victims such as Accident Care & Treatment and The Broadway Clinic will treat on a “lien-basis.”  Some surgeons and MRI facilities will, but, surprisingly, most general family doctors (or primary care physicians) will not do this. It’s surprising, because a patient can go to their family doctor for a decade, but once they’re in a car wreck, “sorry, we’re not treating you because we don’t want to deal with the other driver’s insurance.”

If your current treating doctor(s) will not treat on a “lien-basis” or accept a letter of protection, and you do not have health insurance, or are unable to pay the medical bills as you go, your lawyer may be able to direct you to someone who will. The two mentioned above seem to get referrals from a lot of emergency rooms.

To understand how a lien/letter of protection works, you need some basic information about how settlement funds are handled. When your case settles, your lawyer will receive a check from the insurance company (which most often will require both yours and your lawyer’s signatures to deposit). The check or checks will also include any lien-holders on the check, such as the emergency room hospital that filed a lien. This check is deposited into the lawyer’s “trust account,” which is a special type of bank account that is regulated by the state bar. After the check clears, and your lawyer obtains your approval of how the settlement funds will be disbursed, he writes checks from the trust account to himself (for fees and costs), to your health insurance company (if they are owed anything), to any medical providers who provided treatment under a letter of protection, and finally, to you (whatever is left).

The letter of protection protects the doctor from having to collect his bill directly from you, a/k/a the patient who couldn’t afford to pay up front. Without treating on a “lien-basis” or a letter of protection, a plaintiff could receive her settlement money, spend it all, and place the doctor in the unenviable position of trying to collect his money from a person who is likely insolvent, and therefore, “judgment proof.” With a lien or letter of protection, if your lawyer fails to pay the doctor directly from the settlement, and gives the money to you instead, the doctor can then sue the lawyer for breach of contract in the event you fail to pay the bill. Medicare/Medicaid and lien holders can also go after the liability insurance company that had notice of the lien, but failed to include them on the check.

What a Letter of Protection Does Not Do

A letter of protection, unlike a “lawsuit loan,” does not relieve you of your obligation to pay the medical provider if you lose your lawsuit. You have to pay the medical bills regardless of your recovery. This also means that if you settle for a low amount, you may wind up still owing part of the medical bills even after you (if you’re handling the claim on your own) or your lawyer pays the provider from the settlement.

The letter of protection is not an agreement by your lawyer to pay your medical bills from his own money (that’s an ethics violation) in the event you lose your case or don’t recover enough to pay your bills. The only way your lawyer would possibly be liable for your medical bills is if he or she fails to honor the letter of protection and pays the money to you instead. Even in this scenario, you are still liable for the bills — but it also puts your lawyer on the hook.

Negotiating Down Medical Bills Owed Under a Lien or Letter of Protection

Unless you get a full recovery in your lawsuit (which is pretty rare, as most cases settle), most of the time your lawyer will try to get your medical providers to reduce the bills you owe. Doctors and hospitals of course hate this, but most of them who have been through this process know that it is a possibility. They also know that it’s better to recover 85% of their bill than to potentially have to litigate a billing dispute, or considerably worse, to wait another year for the case to go to trial, with the chance that the verdict is less than the full amount to cover all of the medical bills.

If your lawyer successfully negotiates your medical bill down after settlement, you won’t be responsible for paying the difference between the full bill and the negotiated amount. You will be free and clear from the bill. Your lawyer will get the doctor to approve the reduction in writing, and you should ask for copies of these reduction agreements for your own records when your case ends (usually referred to as a Settlement Statement).

If your lawyer and your doctor cannot come to an agreement on how much your doctor should be paid from the settlement, the settlement funds can be held up until this is resolved. Your lawyer will have to hold back at least as much as is needed to cover the full amount claimed by your doctor in his trust account (but he or she can immediately pay you the rest of the settlement funds, if there are any). However, in a lot of cases, the insurance company will include all of the lien holders on the check, so the check can’t be deposited into the trust account. This protects the insurance company from failing to pay a lienholder.

If the patient’s medical bills are more than the liability coverage for the at-fault defendant, than a lawyer can file an “Interpleader” action, or if the case is already pending, a “Motion to Disburse Settlement Funds.” Each lienholder (the hospitals, doctors, etc) will need to be served (provided notice) of the motion, and the hearing will usually be set about 30 days out. The judge will then divvy up the settlement. As an example, a case that settles for the “policy limits” of $25k, but has $50k in medical bills will oftentimes need a judge to rule on how the settlement is disbursed. The judge will generally deduct for the lawyer’s case costs and attorney fees, and then pay the lien holders a pro-rata share of the remaining settlement. For example, after subtracting the case costs/fees, the total remaining on the settlement is $20k. A hospital that has $5k in bills out of the total $50k, would get 10% of the remaining disbursement. Note that the remaining bill is still a debt, as it wasn’t a negotiated bill with the hospital.

Most of the time, your lawyer and your doctor will be able to work something out. Obviously, the billing department for a hospital or doctor’s office will know the percentage they’ll obtain if a court has to divvy up the settlement, and they would prefer to get paid something.

If medical providers can’t agree, they both know that the only option left is for your lawyer to pay these disputed funds into the court in what is known as an “interpleader” action. Basically, your lawyer says to the court, “I have money which belongs to either the medical provider or my client. You hold it and make the decision as to who gets how much.” Because of the time and expense involved in dealing with an interpleader, neither your doctor nor your lawyer prefer for this to happen. However, keep this in mind as a possibility when settling your case. Unless the medical provider with the lien or letter of protection agrees in writing before your settlement to accept less than their full bill, there is no guarantee that they will take less after settlement.

Treating on a lien-basis and letters of protection are a godsend to plaintiffs who can’t otherwise afford medical treatment. One common problem on negotiating medical bills is that a provider will generally not agree to a reduction until the case is settled, so this can draw out the process in getting the case resolved. Some providers take forever to respond to a bill reduction request, and daily phone calls/emails/faxes (surprisingly faxes are still common) can take weeks to get a response. Sometimes, only one billing person has authority to review reduction requests as well.

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