Maximize Recovery for Liability Accounts under Illinois' Health Care Services Lien Act
may 18, 2015
By: Jana Brady
The Health Care Services Lien Act1 confers lien rights upon healthcare professionals and providers with respect to liability accounts. The Act outlines what healthcare professionals and providers must do in order to create and perfect a lien, and further prescribes a formula for the judge to apply in determining who gets what. Familiarity with the Act and how it has been interpreted will allow healthcare professionals, healthcare providers and their attorneys to use the Act as a sword and shield in optimizing recovery for liability accounts – whether by way of negotiating an out-of-court agreement or litigating the lien. It is a worthwhile investment to retain counsel and pursue and protect liens considering that statistics from 2010-2011 demonstrate that there were an estimated 3.9 million annual average emergency department visits for motor vehicle traffic injuries,2 and that healthcare insurers rarely provide reimbursement for the entire amount of a medical bill and patients do not have the financial means to pay their medical bills out-of-pocket.
The Act provides that "healthcare professionals" and "healthcare providers" – such as hospitals – that render any service in the treatment, care, or maintenance of an injured person "shall have a lien upon all claims and causes of action3 of the injured person for the amount of the healthcare professional's or healthcare provider's reasonable charges up to the date of payment of damages to the injured person."4 The total amount of liens under the Act "shall not exceed 40% of the verdict, judgment, award, settlement, or compromise secured by or on behalf of the injured person on his or her claim or right of action."5 The Act further creates a structure to divide the liens between healthcare professionals and healthcare providers, dictating that if the total amount of liens under the Act meets or exceeds 40% of the "verdict, judgment, award, settlement, or compromise" then neither the liens of the healthcare professionals nor the liens of the healthcare providers shall exceed 20% of the "verdict, judgment, award, settlement, or compromise."6 No individual healthcare professional or healthcare provider may receive more than one-third of the "verdict, judgment, award, settlement, or compromise."7 However, the Act also provides:
[H]ealthcare services liens shall be satisfied to the extent possible for all healthcare professionals and healthcare providers by reallocating the amount unused within the aggregate total limitation of 40% for all healthcare services liens under this Act; and provided further that the amounts of liens under paragraphs (1) and (2) are subject to the one-third limitation under this subsection.8
Oftentimes plaintiffs' attorneys will attempt to reduce a healthcare provider or professional's recovery by lumping all of the lien holders together and suggesting a pro-rata distribution on 40% of the settlement, or even 30% of the settlement in some cases, and tacking on subrogation liens and medical bills for which no lien notice was issued. Familiarity with the Act will allow the lien holder to call-out the attorney on this tactic and advocate a literal – and proper – application of the Act.
The statutory limitations under the Act may be waived or otherwise reduced only by the lien holder.9 Although plaintiffs' attorneys frequently ask the judge to extinguish healthcare providers and professionals liens and reduce the medical bill balance to zero, the court does not have subject matter jurisdiction to do the latter. The Act specifically preserves the right of the healthcare provider and professional to recover the balance of any unpaid bills from the patient directly even after the lien is resolved.10 This provision provides healthcare providers and professionals with leverage in reaching out-of-court agreements. The patient, for example, may be willing to pay the healthcare provider or professional more out of the settlement or recovery than what is provided for under the Act if the healthcare provider or professional agrees to accept the sum as payment in full for all outstanding bills.
While the injured person has one obligation under the Act, i.e., to provide written notice of a recovery to the health care professional or provider that holds a lien,11 healthcare professionals and providers are inundated with many burdens and obligations under the Act. Healthcare professionals and providers must serve – by registered or certified mail or in person – the injured person and the party against whom the claim exists a notice of lien that contains the name and address of the injured person, the date of the injury, the name and address of the healthcare professional or healthcare provider and the name of the party alleged to be liable to make compensation to the injured person for the injuries received.12
Healthcare professionals and providers must also respond to Section 23/25 requests for information and records concerning the nature and extent of the patient's injuries, the history given by the patient and the treatment provided to the patient within 20 days. If the lien holder does not respond within 20 days, the lien holder forfeits its lien.13
If an out-of-court agreement cannot be reached and the lien proceeds to be litigated by way of an evidentiary hearing or otherwise, the healthcare professional or provider has the burden of establishing that the medical bills are reasonable and that the treatment provided relates to the accident which forms the basis for the patient's settlement or recovery. Plaintiffs' lawyers frequently try to force healthcare providers and professionals to accept less than what they are entitled to under the Act by arguing that the doctors and other medical treatment providers involved in the patient's care must testify in court to prove up and perfect the lien.
Years of experience in protecting the lien interests of healthcare professionals and providers has allowed this firm to develop strategies to counter these tactics. For example, to prove-up reasonableness and relatedness, and to avoid inconveniencing doctors and other medical providers, we routinely conduct limited discovery before the evidentiary hearing which requests the plaintiff/patient's written discovery responses and deposition testimony in the underlying liability case. More often than not, the plaintiff/patient makes representations in his/her discovery responses and deposition testimony that may be used as judicial admissions or as a form of judicial estoppel in proving up the lien. This may eliminate the need for live testimony by medical professionals.
Another tactic implored by plaintiffs' lawyers to reduce the recovery by healthcare professionals and providers is to ask that their attorneys' fees and costs be deducted from the settlement or recovery before the healthcare liens are adjudicated and satisfied pursuant to a Fifth District ruling in 2012.14 This firm has successfully argued that doing so is improper and contrary to the language of the Act, the Illinois Supreme Court's decision in Wendling v. S. Illinois Hosp. Services, 242 Ill. 2d 261, 950 N.E.2d 646 (2011), reh'g denied (May 23, 2011), and the First District's 2014 ruling in Wolf v. Toolie, 2014 IL App (1st) 132243 (September 30, 2014) – thereby increasing the health care providers' recoveries.
In our experience, plaintiffs' attorneys dislike nothing more than adjudicating healthcare services liens after a settlement is reached or a favorable verdict is entered. They are becoming increasingly aggressive in putting pressure on healthcare professionals and providers to accept less than what they are entitled to under the Act to resolve their liens. In 2012, an attorney posted a form letter on the Illinois State Bar Association's website for plaintiffs' attorneys to use which threatens a civil suit against healthcare professionals and providers if they do not bill the patient's health insurer and accept a reduced amount in lieu of standing on their lien rights.15 While a lien holder may waive its lien by accepting payment from a health insurer with whom it has a contract with, the civil claims threatened in this form letter are unprecedented and, by the author's own admission, have not been "court tested." This firm has developed lawful, professional and compassionate ways to respond to these threatening letters – all the while increasing healthcare provider and professional's recovery.
The Act is not fully understood by most attorneys and some judges. It is an under-utilized tool that should play a significant role in your facility's revenue cycle. This firm's Healthcare Practice Group is available to assist you in making that happen. Please contact our Healthcare Practice Group in the event you receive notice of a petition to adjudicate liens or in a proactive manner so that we may discuss a reimbursement strategy tailored to your facility.
1 770 ILCS 23/1, et seq.
2 NCHS Data Brief, Number 185, January 2015, Emergency Department Visits for Motor Vehicle Traffic Injuries: United States, 2010–2011.
3 The Act excludes claims under the Workers' Compensation Act or the Workers' Occupational Disease Act. 770 ILCS 23/10(a).
4 770 ILCS 23/10(a).
6 770 ILCS 23/10(c).
9 770 ILCS 23/10(c).
10 770 ILCS 23/45.
11 770 ILCS 23/15.
12 770 ILCS 23/10(b).
13 770 ILCS 23/25.
14 Stanton v. Rea, 978 N.E.2d 1146 (5th Dist. 2012).
15 A strategy for dealing with medical providers who refuse to submit their bills to health insurance, ISBA's Tort Trends, February 2012, vol. 47, no. 2.