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All too often, injured or ill clients lack the insurance and personal resources to pay necessary health care treatment.  In the instance where the injury or illness was caused by a potential actionable claim, medical professionals and health care providers may render services in the event that the professional or provider can obtain payment for those services as a result of any money recovered by the patient-client in latter lawsuit.  However, some professionals and providers are not legally-savvy and, thus, are unfamiliar or uncomfortable with tying services to some uncertain future benefit, especially with the amount of time and hassle that may come about in dealing with a litigious patient-client.  Conflict can arise over the providing of medical services or even in the production of medical records or assistance at trial.
This is where the medical lien comes in.  A medical lien provides a medical care professional or provider with an enforceable lien on any money recovered by a patient from any party held legally liable for causing the treated injury or illness.  A well-drafted lien agreement offers the health care provider a lien on the client’s recovery in exchange for allowing the client to defer payment until the claim is resolved. The agreement assures the health care provider that full payment will be made on successful termination of the process and thereby may encourage the provider’s cooperation with items such as reports, depositions, or trial. The agreement allows the client, and by extension the attorney, to proceed without conflict with the health care provider over payment of fees.
In drafting the agreement, the attorney must take care to make a number of items extremely clear:

  1. Obtain the attorney lien first.  The attorney should secure his or her attorney fees and costs by a lien on the client’s recovery before any liens are given to health care providers. Liens are ordinarily honored in the order of their creation.  (Civil Code § 2897; Cetenko v United Cal. Bank(1982) 30 Cal.3d 528.)  Thus, the attorney whose client has given liens to health care providers but not to the attorney may discover that the liens have not left sufficient proceeds to pay the attorney fees and costs. The best approach is to include the attorney’s lien in a fee agreement executed before the client enters into any lien agreements with health care providers.
  2. The client remains personally liable for the full amount of the health care expenses. If there is no recovery, or if the recovery is insufficient to pay the fees in full, it is important for the attorney to ensure that the potential for conflict between the client and the health care provider does not rope the attorney in.  Make sure the lien is clear as to where the professional or provider must turn to recover additional funds.
  3. Attorney’s duty to honor.  An attorney with notice of the lien agreement is bound to honor it by making direct payment of the health care provider’s fees out of the recovery and could be personally liable to the health care provider for failure to do so. (See Weiss v Marcus (1975) 51 Cal.App.3d 590.)  So, it is important that the attorney communicate to the client his obligation to honor the payment of the lien and if there is a conflict over the amount owed, how the attorney will handle.  The State Bar of California recommends in the event of a conflict, the attorney should place in a trust account a sum sufficient to pay the amount to which the health care provider is ultimately determined to be entitled. In the absence of specific direction, and the attorney fails to obtain client’s or the professional/provider’s agreement, the attorney should commence an action in interpleader. (See California State Bar Formal Opinion No. 1988-101; see also Los Angeles County Bar Association, Professional Responsibility and Ethics Committee, Formal Opinion 1994-478; but cf. State Bar of California’s Communications Director was recently quoted by the Selma Enterprise as indicating, “we don’t condone an attorney not paying his /her debts; however, sorting out such disputes is a matter for the courts, not the State Bar…which enforces specific rules that govern attorney conduct. Fraud and moral turpitude are misconduct violations. Intent to deceive must be proven by clear and convincing evidence. Absent this, there is no basis for the State Bar to act…debtor/creditor issues are addressed in civil actions, where the terms of the debt obligation are the issue, not the licensing status of the individual.“)
  4. Reasonableness of fees charged.  The formation of the lien is also as a good of time as any to discuss the reasonableness of the medical fees to be charged.  That is because in the event the insurer, settlement, or  judge decide to reduce the medical fees as being excessive, that reduction alone might not address the client’s obligation to fulfill the lien to the professional/provider.  Specifically, a trial judge’s conclusion that a provider has “run up” medical costs by overtreating is not, by itself, and absent a contrary statutory provision, an adequate basis for the judge to order reduction of a private medical lien.  (See Lovett v Carrasco (1998) 63 Cal.App.4th 48, 57; see also Nager v Allstate Ins. Co. (2000) 83 Cal.App.4th 284 (automobile insurer does not necessarily act in bad faith by declining to pay, under medical payment coverage, portions of provider’s charges that are not both reasonable and necessary).)