A medical lien basically reflects an agreement between the injured party and others, such as the health care providers, to defer payment until settlement with an insurance company or a court judgment. Upon completion of specified procedures (called "perfection"), this lien can become legally effective to require that the injured party keep the promise and pay the outstanding debt out of the proceeds of the settlement or lawsuit, often before the injured party receives such funds.

 

Without perfection, the health care provider may still pursue collection against the injured party, but may not be able to force payment from those particular proceeds, which could be spent by the injured party. Statutory procedures and requirements must generally be met in order to perfect the lien. These requirements and procedures are usually created and regulated by state law and include proper "perfection" and "notice" procedures, which can vary significantly. A local attorney may thus be advisable when creating, evaluating, and handling medical liens. An attorney may also be able to negotiate a reduction in the medical expenses subject to the lien.

 

Perfecting by Written Notice

A common way of perfecting a medical lien in some jurisdictions is sending a written notice of the debt to all parties, their attorneys, and/or the insurance company for the injuring party, which will pay the settlement or judgment. Who must receive notice and what information the notice must contain varies from state to state. Generally, however, notices must include some or all of the following information:

Filing a Notice of Lien

In some states, the medical lien must be filed with a designated public agency, such as a county clerk. This can be in addition to or as an alternative to giving the above-described notice. Where filing is required, there may be specifications as to the size of the paper, margins, whether the signatures must be notarized, etc.

 

Requirements specifying the content of the filed lien also vary from state to state, but generally include:

Proper perfection determines the enforceability of the medical lien. In two cases, U.S. Bankruptcy Courts have held that if proper filing and notice requirements have not been satisfied and the injured party files for bankruptcy, the lien holder is not entitled to enforce payment of the debt directly from the proceeds of the lawsuit. The medical lien became an ordinary debt payable from the assets of the bankruptcy estate. The result in both cases was that the lien holder (health care provider) was only able to recover a small portion of the debt.