Medical liens in California personal injury cases

What is a medical lien?

A medical lien is a provider's claim to be paid for treatment out of the injured person's recovery, instead of at the time of care. A client who cannot pay up front, or whose health plan will not cover accident care, can still be treated: the provider agrees to wait, and the attorney agrees to pay the provider from the settlement or judgment before the client receives the rest.

For most treating providers in an auto accident case, such as chiropractors, physical therapists, imaging centers, orthopedic surgeons and pain management doctors, the lien is a written agreement signed by the patient and acknowledged by the attorney. Its terms come from the document, not from a statute. "Doctors on lien" means providers who treat on these terms.

Three kinds of lien or recovery right are set by California statute instead, each with its own rules: a licensed hospital's lien for emergency and ongoing care, a health care service plan's or disability insurer's lien for care it paid for, and Medi-Cal's right to recover what it paid. Those are covered below; they are not what a contractual provider lien is.

How a lien gets paid from a settlement

When the case settles, the settlement funds are deposited into the attorney's client trust account. Before the client is paid, the attorney accounts for the fees and costs and for every lien and claim against the recovery, pays each lienholder the amount agreed, and distributes the balance to the client. An attorney who has acknowledged a provider's lien is expected to honor it from the funds.

A lienholder's claim attaches to the recovery, not to the client's other property, and it is paid in the order and amount the agreement or statute provides. Where several providers treated the client, the attorney usually settles each bill separately, which is why the reduction step below matters.

This is the step medical lien management through LHG Medical Network handles on one page: every provider on the case, each bill, each reduction request and each payment.

Liens and recovery rights set by statute

Hospitals. Under the Hospital Lien Act (Civil Code §§3045.1 to 3045.6), a licensed hospital that furnishes emergency and ongoing care to a person injured by an accident or wrongful act has a lien on the damages that person recovers, for its reasonable and necessary charges (§3045.1). The lien applies whether the damages come by judgment, settlement or compromise (§3045.2). It is not effective unless the hospital delivers or sends by registered mail a written notice with the required details to each person alleged to be liable, before any payment to the injured person (§3045.3). A payer who pays the injured person after receiving that notice without paying the hospital's lien, or as much of it as can be satisfied out of 50 percent of the moneys due under the judgment, compromise or settlement after prior liens, is liable to the hospital for the amount it was entitled to receive (§3045.4). The hospital may sue to enforce the lien within one year after the payment (§3045.5).

Health plans and insurers. Civil Code §3040 limits a lien asserted by a health care service plan, a disability insurer, a medical group or an independent practice association for the recovery of money it paid or owes for an enrollee's or insured's care. Among its limits: when the enrollee or insured engaged an attorney, the lien may not exceed one-third of the moneys due under any final judgment, compromise or settlement agreement (§3040(c)); without an attorney, one-half (§3040(d)); it is reduced by the enrollee's comparative fault where a judgment finds it (§3040(e)); and it is subject to pro rata reduction for the enrollee's reasonable attorney's fees and costs under the common fund doctrine (§3040(f)). Section 3040 does not apply to workers' compensation claims, Medi-Cal liens or hospital liens under §3045.1 (§3040(g)).

Medi-Cal. When Medi-Cal paid for treatment of an injury another party is liable for, the Department of Health Care Services has a right to recover the reasonable value of the benefits it provided (Welfare and Institutions Code §14124.71). No settlement, judgment or award in the beneficiary's claim is deemed final or satisfied without first giving the director notice and a reasonable opportunity to perfect and satisfy the lien, and recovery is limited to the portion of the settlement that represents payment for medical expenses or medical care provided on the beneficiary's behalf (§14124.76(a)). Medicare has its own federal recovery rules, outside this guide.

None of these statutes governs a private treating provider's contractual lien. That lien is what its agreement says, read with the general rules on contracts.

How reductions are requested

A provider lien is usually for the full billed charges, while the settlement is a fixed amount that also has to cover attorney's fees, costs and the client's own recovery. In practice the attorney asks each provider, after settlement, to accept less than the full bill so the client is left with a reasonable share. Nothing in the contractual lien requires the provider to agree; the reduction is a negotiation.

A reduction request states the settlement amount, the provider's bill and the amount the attorney asks the provider to accept. The provider accepts, declines or counters with an amount. Attorneys commonly put the request in writing with the itemized bill attached, so that what was asked and what was agreed is clear when the trust account is disbursed.

Through LHG Medical Network the attorney enters the settlement amount and what each provider is asked to accept; every provider on the case is asked at once, answers online (accept or counter), and the attorney pays the agreed amount on the platform, straight to the provider. The request, the answer and the payment are recorded on the case. See medical lien management for PI attorneys.

Liens vs. letters of protection

A letter of protection is a letter from the attorney to a provider promising to protect the provider's bill from the proceeds of the case, in exchange for treatment now. A medical lien, in the contractual sense, is an agreement signed by the patient that gives the provider a claim against the recovery. Both do the same job for a treating provider: treatment now, payment from the settlement later.

The practical difference is who signs and what it says. A lien agreement is typically signed by the patient and acknowledged by the attorney; a letter of protection is the attorney's own undertaking. Which one a provider uses is the provider's choice, and some use both. In either case the attorney should keep the document with the file, because it is what determines what is owed at disbursement.

Neither is a statutory lien. The hospital, health plan and Medi-Cal rights described above arise from the statutes whether or not any letter was written.

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