What is a Hospital Lien? - Definition & the Hospital Lien Act

Instructor: Mark Koscinski

Mark has a doctorate from Drew University and teaches accounting classes. He is a writer, editor and has experience in public and private accounting.

In this lesson you will learn about hospital liens and why hospitals and other medical providers impose them. You will also learn what makes a lien valid and about its disadvantages.

The Hospital Lien

You were just in a pretty bad car accident. The other driver was at fault. Without thinking twice, you agree to be transported to the local hospital for assessment and treatment. Hoping nothing is broken your intuition is saying otherwise. It is hard to move and breathe so you know getting medical attention is your only choice. You already know a lawsuit against the other driver needs to be filed but that needs to wait.

Hospital Lien Defined

You have broken ribs, a punctured lung and internal bleeding. You are rushed into surgery and will need to be monitored afterwards. No longer able to fight the sedation, you drift off to sleep. The lawsuit will have to wait right now you just need to get better. After a few weeks of recovering slowly at home, you receive a bill for $50,000 and a lien notification on behalf of the hospital that saved your life. You already secured legal representation in this case hoping to cover all your expenses and lost time at work with a settlement.

A hospital lien is a lien used to recover the costs associated with your hospital stay. Usually emergency facilities place a hospital lien against you if you have been injured in an automobile accident. Looking for the hospital folder with your discharge orders, you come across a lien letter with your signature. This letter granted the hospital permission to submit a claim against your court awarded costs to pay any medical debts you have incurred during treatment. The hospital has a claim to get paid for services rendered at the time of the accident. When the case is settled, the lien ensures the hospital will get paid first.

State Specific

Hospital lien laws vary from state to state. The law usually specifies when and where the lien must be filed. In some states, lien statutes allow for nursing homes, physician practices and other specialty medical facilities to impose a lien. The authorized healthcare provider must file a verified statement in their county and the victim's county of residence.

Usually a lien must be filed within a finite time period after the patient's discharge date. This time period can vary for different healthcare providers. Typically the hospital must provide a written notice of their intent to file a lien. If strict guidelines are not followed, it could nullify the lien request against your future settlement but not relieve you of your medical debt.

Perfection

A lien must be perfected to be enforceable and valid, meaning all legal requirements must be followed exactly. Filing timelines, correct spelling of all names, addresses and services dates among other things must be exact. In other words, the letter of the law must be obeyed and all information must be 100% correct. If there is a mistake on the lien application, does that give you reason to celebrate? Not so fast. An invalid medical lien does not excuse the recipient from paying their medical bills. It only prevents the provider from accessing money from the settlement.

Beware of the Following

Hospitals may prefer to place a lien on your future settlement to recover a higher amount instead of accepting the contractual allowance paid by your insurance provider. The hospital may inflate the bill, hoping to receive close to the actual amount once negotiations have taken place.

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