770 ILCS 23/10 Illinois Healthcare Lien Act

One invaluable tool in Illinois for resolving outstanding liens in low settlement cases is the Health Care Lien Act (“the act”). Put simply, the act reduces all outstanding liens from healthcare providers to no more than 40% of the total settlement or award amount in an injury case.

As insurance companies continue to clamp down on settlement offers in all but the most egregious injuries (especially soft tissue), lawyers and clients are frequently left with a settlement that is equal to, or less than the total of all outstanding bills. Whether this is fair is an entirely separate article. None the less, in Illinois, even low settlements guarantee victims walk away with some cash in their pocket.

Below is part of the statute. A summarization follows.

 

770 ILCS 23/10

Sec. 10. Lien created; limitation.

(a)   Every health care professional and health care provider that renders any service in the treatment, care, or maintenance of an injured person, except services rendered under the provisions of the Workers' Compensation Act or the Workers' Occupational Diseases Act, shall have a lien upon all claims and causes of action of the injured person for the amount of the health care professional's or health care provider's reasonable charges up to the date of payment of damages to the injured person. The total amount of all liens under this Act, however, 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.

(b)   (omitted)

(c)   All health care professionals and health care providers holding liens under this Act with respect to a particular injured person shall share proportionate amounts within the statutory limitation set forth in subsection (a). The statutory limitations under this Section may be waived or otherwise reduced only by the lien holder. No individual licensed category of health care professional (such as physicians) or health care provider (such as hospitals) as set forth in Section 5, however, may receive more than one-third 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. If the total amount of all liens under this Act meets or exceeds 40% of the verdict, judgment, award, settlement, or compromise, then:

(1) all the liens of health care professionals shall not exceed 20% of the verdict, judgment, award, settlement, or compromise; and

(2) all the liens of health care providers shall not exceed 20% of the verdict, judgment, award, settlement, or compromise;

provided, however, that health care services liens shall be satisfied to the extent possible for all health care professionals and health care providers by reallocating the amount unused within the aggregate total limitation of 40% for all health care services liens under this Act; and provided further that the amounts of liens under paragraphs (1) and (2) are subject to the one-third limitation under this subsection.

If the total amount of all liens under this Act meets or exceeds 40% of the verdict, judgment, award, settlement, or compromise, the total amount of all the liens of attorneys under the Attorneys Lien Act shall not exceed 30% of the verdict, judgment, award, settlement, or compromise. If an appeal is taken by any party to a suit based on the claim or cause of action, however, the attorney's lien shall not be affected or limited by the provisions of this Act.

(d)   (omitted)

(e)   (omitted)

 

THE HEALTH CARE LIEN ACT IN LAYMAN’S TERMS

So, what does the above mean? First, as mentioned above, it states that providers with perfected liens will get no more than 40% of the settlement. It achieves this by reducing all liens by the same amount, such that they add up to 40% of the overall settlement. Second, it divides all providers into one of two categories:

Facilities

  • Hospital Liens (not including any emergency room physician bills)

  • Ambulance/Emergency Response Liens

  • Surgical Center

Physicians

  • Emergency Room Physician Liens

  • Radiology Liens

  • Physical Therapy Liens

  • Chiropractor Liens

  • Family Physician Liens

  • Specialist Liens

Third, it notes that no one provider can receive more than 1/3 of the settlement amount.

 

Example

After a car accident person X is taken to the hospital where they undergo minor surgery and stay overnight. The bills might breakdown something like this:

  • Ambulance Bill — $500

  • Hospital Bill — $10,000

  • Attending Physician’s Bill — $500

  • Surgeon’s Bill — $500

  • Anesthesiologist’s Bill—$500

  • Radiology Bill—$100

Note that in the above scenario, when the hospital performed X-rays and CT Scans, the facility (the hospital itself) includes those services in their overall bill. They use a separate facility to process the negatives. The same is true of the surgery. The hospital probably has a set price for performing various surgeries whose cost is included in their bill. The surgeon that performed the operation bills separately for his or her time.

 

HOW TO COMPUTE A HEALTH CARE LIEN ANALYSIS

 

Step 1

Using the above example, the first step is to divide all lien holders into their respective categories. In most cases, Facilities will be limited to ambulance bill(s), emergency room bill(s) (from the facility), and hospital bill(s) if surgery is performed. Virtually everything else falls under the Physicians category.

Facilities

  • Ambulance Bill — $500

  • Hospital Bill — $10,000

Physicians

  • Attending Physician’s Bill — $500

  • Surgeon’s Bill — $500

  • Anesthesiologist’s Bill—$500

  • Radiology Bill—$100

 

Step 2

Determine whether the total of all the liens is greater than 40% of the settlement. Assume the above case settled for $10,000.

  • 40% of $10,000 = $4,000

  • Total liens = $12,100

  • $12,100 is greater than $4,000

Thus, we can utilize the healthcare lien act.

 

Step 3

Determine each lien holder's pro-rata share. Looking back at the statute, subsection (c) states that when there are lien holders in both categories, each section is entitled to half of that 40% we have been discussing (or 20% of the settlement). If the total of either section (Facility or Physician) does not add up to 20% of the settlement, the remaining money is added to the other section.

Using the above, the Facility section and the Physician section are each allotted 20% of the $10,000 settlement, or $2,000.

Physicians:

Notice that the total of the Physician liens is $1,600. Because this is less than $2,000, each provider will be paid 100% of their lien. The remaining $400 is added to the Facilities section.

Attending Physician Bill

  • Owed: $500

  • Paid: $500

Surgeon Bill

  • Owed $500

  • Paid $500

Anesthesiologist’s Bill

  • Owed $500

  • Paid $500

Radiology Bill

  • Owed $100

  • Paid $100

 

Facilities:

If the Physician liens added up to an amount greater than $2,000, the Facilities section would only share $2000. But, because the Physicians section added up to $1,600, we must add the $400 to the Facilities section. Thus, the Facilities will share $2,400.

Determine the total liens owned for all Facilities lien holders.

$500 (ambulance bill) + $10,000 (hospital bill) = $10,500 (total Facility liens

Divide the individual lien by the total Facility liens to determine the pro-rata number (by going to the 8th decimal place you guarantee you won’t end up with a few missing cents)

                        Ambulance Bill: 500 / 10,500 = 0.04761905

                        Hospital Bill: 10,000 / 10,500 = 0.95238095

Multiply the pro-rata number by the amount allotted to the Facilities section to determine the pro-rata share

Ambulance gets: 0.04761905 x $2,400 = $114.29

Hospital gets: 0.95238095 x $2,400 = $2,285.71

Total (check our math): $114.29 + $2,285.71 = $2,400

 

THINGS TO CONSIDER

 

Liens from health and car insurance companies are not included in this analysis. In the above example, the victim would have walked away with around $3,000 minus expenses (the other $3,000 would go to his or her attorney). If the victim’s health insurance and/or car insurance company paid for treater bills, they will seek reimbursement as well. These liens can be reduced under the Common Fund Doctrine. However, when added to the 40% that is already being paid out under the Health Care Lien Act, there may be no settlement money left for the injured party.

Thus, it is important (when possible) to plan who is going to pay what bills in advance. Best option: it is generally good policy to try and get health insurance to pay for everything. They pay bargain basement prices and will automatically reduce their subrogation interest by 1/3 (often more) per the Common Fund Doctrine.

Second best option: if there is enough Med Pay to cover all the bills, utilize it. Again, they will automatically accept a 1/3 reduction on their lien per the Common Fund Doctrine. Unlike health insurance, however, they generally pay dollar for dollar to treating facilities. This translates to less settlement money for the client.

Otherwise, injured parties are often better off making minimum monthly installments to keep bills from going to the creditors (when providers will not hold the bills in abeyance) and negotiating down the liens once the case has settled.