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Healthcare Provider Liens in Illinois – Who Gets Paid when a Patient is Injured in an Accident?

by Natalie T. Lorenz, Attorney at Law

When an individual is injured in an accident, the Illinois Health Care Services Lien Act (the “Act”) may limit the lien that the healthcare professionals and providers who treated that individual for his injury can have on the patient’s recovery against the at-fault party. When the injured individual obtains a settlement from, or judgment against, the at-fault party, the Act limits the total amount of medical liens to 40% of the settlement or judgment, as applicable. All medical lienholders are to share proportionate amounts, subject to the 40% limit.

The 40% limit is divided into two halves if the total settlement or judgment exceeds the limit: 20% of the settlement or judgment is to be distributed to health care professionals, and 20% is to be distributed to health care providers. In addition, no individual licensed category of health care professionals (e.g., hospitals) or providers (e.g., doctors) may receive more than 1/3 of the settlement or judgment amount. Finally, Medicare and Medicaid are not subject to the Health Care Services Lien Act, and their recovery is not limited and takes priority over medical lienholders.

A health care professional is defined as “any individual in any of the following license categories: licensed physician, licensed dentist, licensed optometrist, licensed naprapath, licensed clinical psychologist, or licensed physical therapist.” A health care provider is defined as “any entity in any of the following license categories: licensed hospital, licensed home health agency, licensed ambulatory surgical treatment center, licensed long-term care facilities, or licensed emergency medical services personnel.”

As an example, assume that an injured patient, who is not on Medicare or Medicaid, received a judgment of $50,000 against the at-fault party, but following entities have a lien against his judgment:

Health Care Providers:
Hospital: $20,000
Ambulance: $2,000
Total Health Care Providers: $22,000

Health Care Professionals:
Physician Group: $5,000
Total Health Care Professionals: $5,000

TOTAL LIEN AMOUNT: $27,000

Because 40% of $50,000 is only $20,000, the total lien amount of $27,000 exceeds the statutory limit. For this reason, the total liens must be reduced to no more than $20,000. To accomplish this, the liens must first be divided into two groups: health care providers and health care professionals, with each group receiving no more than 20% of $50,000 (or $10,000). In this case, the hospital and ambulance are both in the “health care providers” group, and therefore will have to share $10,000, with each taking a proportional share of that amount. This means the hospital would be entitled to approximately $9,090 out of its $20,000 lien, while the ambulance would be entitled to $910 of its $2,000 lien. The physician group would be entitled to its entire $5,000 lien, since it is the only entity in the “health care professionals” group, and its lien is less than the group’s $10,000 share of the total lien cap.

In summary, after the application of the Act to the liens in this case, the liens against the injured patient’s judgment will be changed to the following amounts:

Health Care Providers:
Hospital: $9,090
Ambulance: $910
Total Health Care Providers: $10,000

Health Care Professionals:
Physician Group: $5,000
Total Health Care Professionals: $5,000

TOTAL LIEN AMOUNT: $15,000

One effect of the Act’s reduction of liens is the facilitation of settlement discussions between injured patients and the at-fault parties, since settlements can easily be hindered by the liens on the recovery amount. The Act works to lower the amounts of liens so that excessive liens will not impede settlement.

Note, however, that just because the Act reduces the amount of a provider or professional’s lien on the injured patient’s judgment, that does not mean that the provider or professional has lost its right to otherwise collect on the amount due to it. In other words, even though the provider or professional may not be able to recover by taking its money out of the injured patient’s judgment or settlement award, the provider or professional could still sue the injured patient on a contract claim. The provider or professional could then use other methods to collect, such as wage or bank account garnishment against the injured patient.

If you have questions about medical liens following an accident, the attorneys at Mathis, Marifian & Richter, Ltd. are here to talk to you.

Professional Services Disclaimer: Please note that the information presented here is as an educational service, and while it contains information about legal issues, it is not legal advice. No warranty is made regarding the applicability of the information presented to a particular client situation, and the information set forth is not a substitute for original legal research, analysis and drafting for a particular client situation.

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