Illinois Health Care Lien Act Explained

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Received a Medical Lien or unpaid bill from your accident? Here’s an intro guide to the Illinois Lien Act.

If you suffered injuries as a result of a driver’s negligence, you probably found yourself in the hospital and having to follow up with your primary care doctor or a physical therapist.

Many times, an injured person will receive a notice or paperwork in the mail telling them their bill has not been paid and that the provider is asserting a hospital or physician lien against your case. You will find yourself asking many questions such as: what does this mean? What are my health care providers asking for? Why didn’t my health insurance pay for this? What do I do now? To help you better understand a situation like this, here are some helpful answers frequently asked questions.

A Guide to the Illinois Lien Act Infographic


What is a medical lien?

Put simply, a medical lien is a security interest that medical providers place against any recovery you may receive in your claim. It “attaches to,” or claims, a portion of a settlement, verdict, award, or whatever compromise you or your attorneys may have secured.

Why do hospitals and doctors place liens?

Medical providers will place liens on personal injury claims in order to protect their interest in the settlement recovery. With lien holders, they will often provide or render medical treatment to the claimant and allow them to defer payment until the conclusion of the case. The providers may assert a lien because a bigger portion of the medical bills may be paid through the personal injury case than the contractually agreed-upon rate the facility may have with a health insurance company.

The Health Care Services Lien Act (“Lien Act”), codified as 770 ILCS 23/1, et seq., is the law that spells out what a lien is, how it is created, and how the treater is to be reimbursed. First, one of the most important things to take note of is that the Lien Act caps what all the lien holders are entitled to. The law explicitly states that “the total amount of all liens under this 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.” 770 ILCS 23/10(a).

Did I receive a lien?

First, the notice of lien, which must be in writing, must contain:

  • the name and address of the injured person,
  • the date of the injury or when the injury was sustained,
  • the name and address of the healthcare professionals or health care provider, and
  • the name of the party who was allegedly negligent and would be liable to make compensation to the injured person. 770 ILCS 23/10(b).

The notice of lien, containing all of the above information, must be served on both the allegedly negligent party and the party who was injured as a result of the negligent act. Service of the lien shall be made by certified mail or by personal delivery.

It is important to note that there are other types of liens that can encumber a settlement. They are liens that are prescribed by statute or by other means.

What is MedPay?

MedPay is a benefit that may or may not be included in an individual’s automobile insurance coverage. The benefit is there to help pay your (or your passenger’s) medical expenses if there is a car accident. It is important to note that, if MedPay is available, it can be paid out to an individual regardless of fault. This type of coverage is optional and can be used to pay deductibles, co-pays, hospital visits, or other types of medical treatment.

When MedPay is paid out, a lien is created and asserted against any claims for bodily injury that may arise from that date of accident. Sometimes, insurance companies will communicate with one another and the at-fault carrier will pay the MedPay lien. This will release the lien against the bodily injury claim, but the at-fault carrier will be entitled to a setoff.

An example of Med Pay in a personal injury case:

Plaintiff has Insurance Company A. Company A pays $10,000 in MedPay. Insurance Company B, the insurer for Defendant, pays A back the $10,000.

Later, Plaintiff files a claim for bodily injury against Defendant and B. The case is valued at $100,000, but B will only pay $90,000 because it paid $10,000 already to A.

It is very important to note that MedPay does not face the same limitations as hospital or physician liens. They do not need to reduce their lien based on other liens. This is why it is important to have competent attorneys. If the MedPay lien is still present at the conclusion of the case, the attorneys at The Kryder Law Group can get that lien reduced.

Let’s take our sample above. Company B never repaid Company A the lien. The case settles for the $100,000 and there is now a $10,000 MedPay lien on the case. A scrupulous attorney will engage in discussions with Company A and get that $10,000 MedPay lien reduced. If the attorney settles the MedPay lien for $5,000, that creates a $5,000 savings for the Plaintiff in this scenario.

How much can Medicaid take from a settlement in Illinois?

Like Med Pay, Medicaid and Medicare are not subject to the Illinois Health Care Services Lien Act. They are statutory liens and need not proper service of their liens on interested parties as required under the law. Their status as lienholders is superior to other liens that may be present on the case.

The biggest issue with Medicaid and Medicare liens is that their liens usually take some time to resolve. However, generally, the lien amounts are more modest than hospital and physician bills. When your attorney receives a ledger of paid benefits from Medicaid or Medicare, there is a column itemizing the charges submitted to Medicaid or Medicare and the benefits paid out. The treating facility has a contracted rate that Medicaid pays and the remaining balance is often written off or closed.

For example, your emergency room bill is $10,000. The emergency room submits the bill to Medicaid and Medicaid pays the emergency room $2,000. Medicaid now has a lien for $2,000 (not the $10,000 that was submitted to it). Again, like with our Med Pay example, your attorney can work to reduce Medicaid down. Though Medicaid is not confined by the health care services act, it does take into consideration other liens. It is not unreasonable that Medicaid would reduce its lien to $1,500 in this circumstance. Depending on other liens involved, sometimes it is more beneficial for the Plaintiff to deal with a Medicaid lien rather than unpaid hospital bills.

The Lien Act in Practice

As stated above, the total amount of the liens shall not exceed 40% of the recovery amount. Should the liens exceed the common fund set aside for liens, the Lien Act breaks the liens into two separate and distinct categories:

  • the health care professionals and
  • the health care providers.

According to the Lien act, a health care professional is any individual “in any of the following license categories: licensed physician, licensed dentist, licensed optometrist, licensed clinical psychologist, or licensed physical therapist.” 770 ILCS 23/5.

A health care provider applies to any entity in the following categories:

  • licensed hospital,
  • licensed home health agency,
  • licensed ambulatory surgical treatment center,
  • licensed long term care facilities, and
  • licensed emergency medical services personnel. 770 ILCS 23/5.

Put simply, a health care professional includes physicians, therapists, and other doctors. A health care provider applies to hospitals, emergency rooms, and the like. The common fund (again, the 40% of the settlement, verdict, or judgment set aside to satisfy lien holders) is split evenly between the health care professionals and providers. The amount that each medical provider receives is proportionate to the medical bills it charged and is subject to the common fund limits.

For example, let’s say that an injured person was awarded $25,000 at arbitration. The amount in medical liens total $15,000 and are as follows:

Health Care Providers – $8,000
Emergency Room Lien of $8,000

Health Care Professionals – $11,000
Chiropractor Lien: $8,500
Diagnostic Imaging Lien: $2,500

Here, the common fund would be $10,000 (40% of the $25,000 arbitration award), and because the total amount of liens exceed the statutory limit of 40%, we must reduce the liens to no more than the $10,000 lien limit. Based on the lien act, the final lien numbers will look closer to this

Common Fund: $10,000

Health Care Providers: $5,000
Emergency Room Lien: $5,000

Health Care Professionals: $5,000
Chiropractor Lien: $3,863.63
Diagnostic Imaging Lien: $1,136.36

The Emergency Room is entitled to the entire $5,000 of the healthcare provider portion of the common fund because it is the only lien present. The healthcare professional liens are calculated and reduced to their pro-rata share based on the bills incurred.

It is equally important to note that the Lien Act’s intent is to help facilitate settlement discussions and disbursement of funds, and it does not extinguish the healthcare provider’s right to pursue the remaining balance of the injured party’s account.

What if there is one big hospital lien?

Lets say your case settles for $50,000 and there is a hospital lien for $30,000. This is the only lien there is. The common fund would be $20,000: $10,000 for the hospitals and $10,000 for the physicians.

The hospital that is the lien holder may try to argue that it is entitled to the full common fund because there are no physician liens. Because there are no physician liens, the hospital argues, it is entitled to the physician funds as well.

This is only partly true. 770 ILCS 23/10(c) states that no individual licensed healthcare professional may receive more than one-third of the verdict, judgment, award, settlement, or compromise given to Plaintiff. Under this rule, your attorneys would not agree to pay the hospital $20,000. The hospital would only be entitled to $16,666.67, saving the client nearly $3,400.00.

I still don’t understand medical liens, who can help me?

If you have any questions about medical liens, or if you were injured due to someone’s negligence, do not hesitate to speak with the experienced personal injury attorneys at The Kryder Law Group. Let’s talk about your case. Call us, it’s free!

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