UPDATED: Hospital Liens

Hospital liens are the mechanism by which a hospital debt attaches to a personal injury settlement and are typically governed by state statute and interpreted through case law, which varies significantly from state to state. Although the variations are subtle, the basic premise is the same: a hospital files a lien to recover a portion of the medical expenses incurred if the medical treatment was conducted due to a third party’s negligence. A typical situation is when a person is injured in a motor vehicle accident and then seeks treatment at a hospital for the injuries and incurs medical expenses. The hospital adhering to the statute files a lien on the cause of action against the tortfeasor. 

A majority of states have adopted lien statutes. For example, to protect a hospital lien in Georgia per O.C.G.A.§ 44-14-470, hospitals have specific notice requirements that must be satisfied for a lien to be perfected. Similarly, N.C.G.S. §44-50 in North Carolina has a particular notice requirement; however, the statute also allows for a lien cap at 50% of a recovery after deducting attorney fees. Another example of the difference in state statutes can be found in Illinois. Illinois hospital liens are created by 770ILCS 23-10, also known as the Healthcare Services Lien Act. The Act establishes a notice of service requirement and prescribes a formula for the judge to utilize when allocating the determined amounts to the parties. From these different state examples, it is critical to know the state law where the hospital is located and the facts of the case to determine whether the hospital has a valid, perfected lien or it isn’t a lien and instead an unsecured debt.

Lien Debt Dichotomy – Liens vs. Debts and why it matters

Understanding the difference between a lien and debt is essential to the effective resolution of hospital liens. Liens can be created through several modes, such as statute or contract, and secure a debt to settlement proceeds, effectively requiring the amount of the lien to be protected in trust. Conversely, a debt exists when one has received medical care that has not been paid and attaches to the person instead of attaching it to the settlement proceeds. In the instance of a debt, the hospital would function as a creditor with unsecured debt.

The relationship between a mortgage and a home loan help explain this concept. A mortgage is a secured interest of the bank which attaches a debt to real property. If a bank loaned money without creating a mortgage, the same amount would be owed just as the amount owed in the mortgage; however, the difference is that the homeowner with the mere loan could sell the house and pay the bank $0 from the proceeds of the sale of the house. The same applies to hospital liens and non-liens or debt. Accordingly, knowing the difference between a lien and a debt is imperative, as the path to negotiating and resolving both are different. If you have questions or concerns about the hospital lien in your case, please speak with the experts at ZipLiens. Your time is valuable.

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