Lien against future settlements one collection remedy

A column examining the ins and outs of contract issues

By — Posted April 2, 2007.

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Understandably, physicians often don't want to seem too aggressive about collecting outstanding bills from patients. Sometimes a patient has a legitimate reason for falling behind on bills, or the physician doesn't want to risk word-of-mouth from that patient calling the doctor a cheapskate or somehow uncaring.

But if a patient isn't paying because he tells you he is suing someone for causing him the injury or illness that brought him in for his latest visit, a physician doesn't have to be so demure when it comes to collections.

In many states, a physician is allowed to put a lien against any future settlement that comes out of that lawsuit. Or, a physician might be able to enter into a contract with a patient allowing the doctor to put a lien on whoever is responsible for his payment after the case is settled or decided.

The lien, which can be sent to the defendant, the defendant's attorney and the plaintiff's attorney, would include the amount of reasonable charges for services rendered. The lien ensures that your name is on the settlement check, or that a check is cut once a settlement is made. A physician's lien increases the chances that you will get payment at some point for your work.

It is imperative to first check with a lawyer to determine whether your state recognizes physicians' liens, through a statute, common law or by contract. Once you have determined that your state has such a statute, you must strictly follow the statute's requirements. Or if your state allows physicians to enter into contracts with patients, you must ensure to include all appropriate contractual provisions so that you have a valid, enforceable lien in the proceeds of the personal injury action.

Some common requirements for physician liens include:

Written notice of claim. The notice usually includes the patient's name and address, date of injury, the physician's name and address, and the name of the party alleged to be liable to the patient.

Service. Notice of the claim served, by registered or certified mail, on both the injured patient and the defendant.

Filing. Some states require the physician to file a copy of the notice of claim in the county clerk's office in the county where the service was performed, or in the court where the personal injury lawsuit was filed.

Time limitations. Often, there is a time period within which the notice of claim must be filed and/or served. For example, some states require the physician to file the notice 20 days after the date of the injury, or at any time before a settlement is entered into with the injured party. Other states simply require notice to be served prior to any good-faith payment to any person other than the physician.

Physician's lien statutes may cover interest, reasonable attorneys' fees and costs. Recovery is usually limited so that it does not exceed a certain percentage, such as 25% or one-third of the sum paid or due to the injured person on the claim or right of action. If there are multiple liens, the percentage may even be less. Recovery on the lien may also be limited to what the court believes constitutes "reasonable charges."

Once the notice of claim has been served, some statutes require physicians to allow the parties in the lawsuit to examine the physician's records relating to the examination and treatment of the injured person. Doctors might also be required to provide a written statement of the nature and extent of the injuries sustained by, and the treatment provided to, the injured person. Physician's lien statutes usually require the patient to notify the physician, in writing, once a judgment, award, settlement or compromise has been secured.

In order to enforce the lien, the statutes usually require the physician to file a simple petition to adjudicate the lien. The statute might also have time limitations requiring the physician to enforce the lien within one year after the notice of claim is filed.

Amounts not recovered through the attachment of the lien can still be sought through a separate action, and physicians are not restricted from pursuing immediate collection actions through all available means. For this reason, among others, physician's liens are viewed as a last resort. Still, it is not likely a patient is going to pay his share of the bill to you if he is in litigation to get someone else to pay it.

Physician's liens are most appropriate when the patient is a self-pay patient who is out of work due to personal injury, lives on a limited budget or has depleted his or her assets prior to the injury, or during the period of injury and/or unemployment. These patients are considered "judgment proof," and traditional means of collecting debts from them, including garnishment of wages and/or bank accounts or execution of their personal property, usually fail.

Even if a patient has insurance, the patient's insurance company might refuse to pay the physician for his or her services and/or refuse to pay the patient for his or her injuries while the personal injury case is pending. In such cases, a physician's lien may be the physician's only hope in ever collecting the past due debt.

Some of the costs associated with the use of a physician's lien include attorney's fees for drafting, serving and/or filing the notice of claim and petition to adjudicate the lien as well as any required filing fees. Once the petition is filed, there are additional attorney's fees required for court appearances and responding to discovery requests.

Contracts with patients

Another collection remedy, particularly in states in which physicians might not be allowed to file liens, is for physicians to contract with their patients. This would be done through the patient's attorney of record by use of a voluntary irrevocable physician's lien contract.

This contract can be a simple one-page agreement setting forth that the physician is given a lien on any settlement, claim, judgment or verdict resulting from the underlying accident or illness. In the contract, the patient should acknowledge that the debt is due, the agreement is for the protection of the physician, and payment is not contingent upon the outcome of the personal injury case. The contract should then be signed by the patient, and oftentimes the patient's attorney, and filed with the court where the personal injury case is filed.

It should be noted that if the patient's attorney signs the contract, the attorney is neither personally guaranteeing the payment of the debt, nor guaranteeing that the patient will pay the debt.

The physician's lien contract merely ensures that if the patient receives an award or settlement in a personal injury case, then the doctor will be in line to share those proceeds.

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