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Physicians Liens under §44-49

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IMPORTANT: This article assumes that you have read the Liens and Subrogation Overview or that you have a firm understanding of how subrogation relates to North Carolina personal injury claims and settlements.

As you know, there is nothing simple or convenient about being involved in a motor vehicle accident in North Carolina. From seeking treatment to dealing with lost wages, everything about being a victim of a car accident is complicated. Possibly the most thorny issue related to seeking compensation for your car accident is understanding and dealing with medical liens arising from your accident-related treatment. Unfortunately, a gross majority of individuals are surprised to learn that they have medical liens or subrogation interests attached to their North Carolina personal injury settlement. Medical liens and subrogation rights are complex legal concepts created by statute or contract that affect close to all personal injury claims in North Carolina.

In general, physicians liens, under N.C.G.S. §44-49, are the right of a medical provider to secure an interest in the proceeds from a personal injury settlement or judgment, and are governed by North Carolina General Statutes 44-49, 44-50, and 44-50.1. This interest means that a portion of your personal injury settlement must be paid to the medical providers who have properly “perfected” their medical liens against you. However, if the physician lien is not properly “perfected,” you may not be required to pay the medical provider from the proceeds of your settlement. For more information on how medical liens are perfected under N.C.G.S. §44-49, see the “How are medical liens perfected?” section below.

Can Chiropractors Claim Physicians Liens?

In general, any person who provides medical services can claim a physician lien under N.C.G.S. §44-49. This includes but is not limited to physicians, dentists, nurses, and hospitals. North Carolina has never directly addressed whether a chiropractor can establish a medical lien under N.C.G.S. §44-49. While North Carolina law has never directly contemplated whether a North Carolina chiropractor has the right to assert a medical lien under N.C.G.S. §44-49, most medical providers have begun to include “assignment of benefits” and medical liens in their service contracts. An assignment of benefits should be treated the same as a medical lien under N.C.G.S §44-49. Therefore, it is typically fruitless to argue that a chiropractor may not claim subrogation against your personal injury settlement considering that an assignment of benefits and a medical lien are effectively the same under the law.

How Are Medical Liens Perfected?

As previously mentioned, a medical provider must properly perfect their lien in order to receive a portion of the plaintiff’s proceeds from a settlement or judgment. In order to perfect, a medical provider must do three things: (1) The medical provider must furnish all medical record requests to the plaintiff or plaintiff’s attorney free of charge; (2) The medical provider must furnish all medical bill requests to the plaintiff or plaintiff’s attorney free of charge; and (3) The medical provider must give an affirmative written notice of the lien to either the plaintiff or the plaintiff’s attorney. If a medical provider fails to comply with any of the three listed items, then the plaintiff’s attorney is not required to pay the medical bill out of the proceeds of any settlement or judgment.

Let’s look at an illustration of a perfected lien in which portions of the proceeds will have to be used and an invalid lien in which portions of the proceeds will not have to be used. Imagine Steve was in a car accident with James and James was at fault. Steve was injured in the accident and had to go to the hospital for his injuries. While checking out of the hospital, Steve did not have to pay for any of his hospital bills, nor did he have to use his insurance. Two weeks later, Steve’s attorney contacts the hospital and requests both the medical bills and medical records for Steve. The hospital sends Steve’s bill and medical records to the attorney free of charge, along with an affirmative letter stating that the hospital has taken a lien on any proceeds Steve may receive from the accident. In this illustration, the hospital properly “perfected” their lien (they did not charge for medical bills or records and sent an affirmative letter confirming their lien).

Now, suppose when Steve’s attorney requests the medical bills and records, the hospital sent the bill free of charge, but charged $15.00 for Steve’s medical records. Also, the hospital never sent an affirmative written letter confirming a lien on any proceeds received by Steve from a settlement or judgment related to the accident. Here, the hospital has failed to “perfect” their lien for two reasons: (1) the hospital charged for Steve’s medical records, and (2) the hospital failed to send Steve or his attorney an affirmative notice of the lien. In this example, due to the hospital’s “unperfected” lien, Steve’s attorney would not be required to disburse any portion of settlement or judgment proceeds to the hospital.

Statute of Limitations

The statute of limitations for a medical provider to enforce a lien can be tricky (See general explanation of the statute of limitations here) [LINK]. In general, the statute of limitations for medical providers to collect an unpaid debt is 3 years from the date of the last continuous treatment. However, the statute of limitations for a medical provider to collect on a lien may be longer than 3 years. The statute of limitations likely begins to run once the injured person receives the proceeds from a settlement or judgment and then fails to pay the medical provider out of those proceeds. Thus, the medical provider will likely have 3 years from the time the injured person receives the proceeds from a settlement or judgment to collect on that lien.

For example, say Steve was in an accident on January 1st, 2015 and went to the hospital. After being released from the hospital, Steve did not seek any other medical treatment for his injuries sustained in the accident.

The hospital properly “perfected” (see explanation above) a medical provider lien on any proceeds Steve received from the accident. Steve litigated the accident and did not receive payment for his damages until 2019 (4 years later). He then failed to pay the hospital out of the proceeds. If the lien had not been “perfected,” then the hospital would only have until 2018 to sue on debt for the medical services provided to Steve after the accident. In this example, however, because the lien was perfected, the hospital will likely have until 2022 (3 years after Steve received payment from his accident) to sue for the debt due under the lien. This is a result of the violation of the lien not occurring until 2019, when Steve failed to pay the hospital’s lien with the money he received from his accident.

How Are Physicians Liens Calculated?

Once you have received your proceeds from a personal injury settlement or judgment, any medical providers holding “perfected” liens must be paid. Luckily, North Carolina has established a cap on the amount a medical provider can claim from your recovery proceeds. Under North Carolina law, you will only have to pay up to one half of your recovery after attorney’s fees are deducted (50% of net proceeds). You will likely be entitled to keep the remaining portion of the proceeds. Please be aware, however, that you will likely be obligated to pay all physician lien amounts not covered by your recovery proceeds.

For example, let’s say Steve received a $60,000 settlement from an accident. Also, Steve owed his attorney $20,000 for working on his case. Steve has several physicians liens that are perfected on the proceeds of the accident. In this example, Steve would have $20,000 available to pay any medical liens. See math below:

Settlement: 60k
– minus
Attorney Fees: 20k
40k net amount
40k x 50% = 20k available to pay medical liens
20k Steve’s share (remaining balance of 40k)

Adding in Advancements
Generally speaking, advancements occur when the attorney pays for court fees or costs. These advancements are deducted from the injured party’s share. For instance, using the example above, if Steve’s attorney paid $500 for court fees and costs, then that amount would be deducted from Steve’s share; thus, bringing Steve’s share down to $19,500. See math below:

20k Steve’s share (remaining balance of 40k) – $500 advancement for court costs and fees = $19,500 for Steve’s share.

How Are Proceeds Disbursed Among Lien Holders?

Once the proceeds of a personal injury case are received and calculated (see above), the proceeds must then be paid to the medical providers holding a “perfected” lien. How the proceeds are distributed amongst the lien holders depends on whether the liens were established before or after October 1, 2003.

Disbursement of Liens Established Prior to October 1, 2003

Proceeds can be distributed to medical providers whose liens were established prior to October 1, 2003, however the injured party sees fit. In other words, the 50% of the net proceeds available to pay medical liens can be distributed in unequal percentages and values.

For example, using the illustration from the previous section, we found that Steve has $20,000 available to pay towards any medical liens. Now, let’s say that Steve’s accident occurred before 2003 and four medical liens arising from the accident were established before 2003. Furthermore, let’s say that each medical lien was worth:

Physician lien 1: $16,000
Physician lien 2: $8,000
Physician lien 3: $4,000
Physician lien 4: $2,000

In this example, because the liens were established before October 1, 2003, Steve could use the $20,000 however he wishes to pay the four physicians liens, so long as all of the $20,000 is used. Thus, Steve could decide to pay all of physicians liens 1 and 3, and not pay any of liens 2 or 4. Please note that Steve may still be obligated to pay the remaining balance of any medical liens not paid. Therefore, in this example Steve will still be obligated to pay physicians liens 2 and 4.

Disbursement of Liens Established After October 1, 2003

Medical liens established after October 1, 2003 must be distributed per the lien holder’s pro-rata share. In other words, the injured party may not disburse the 50% of net profits however they see fit. Each lien holder will receive a certain percentage. Due to the law changing 13 years ago, almost all lien holders will be paid per their pro-rata share. Determining the pro-rata share for each lien holder can be confusing; however, an easy three-step process can help minimize the confusion and will establish the correct pro-rata share amount every time.

STEP 1: Add together all physicians liens to find a total amount.

STEP 2: Divide each individual lien by the total amount found in step 1 to find a percentage.

STEP 3: Multiply each percentage found in step 2 by the 50% net recovery amount available to pay physicians liens.

*Step 3 will provide the dollar amount owed to each lien holder per their pro-rata share.

Let’s look at an illustration using similar facts from the previous section to better understand how lien holders’ pro-rata shares are determined. We previously found that Steve has $20,000 to pay his physicians liens. Furthermore, we stated that Steve has four physicians liens attached to his recovery. Using the same four lien amounts, we will determine each lien holder’s pro rata share and the amount each lien holder will receive from the $20,000, using the simple three-step process. The four physicians liens were as follows:

Physician lien 1: $16,000
Physician lien 2: $8,000
Physician lien 3: $4,000
Physician lien 4: $2,000

STEP 1: Add together all physicians liens to find a total amount.

16,000
8,000
4,000
+ 2,000
30,000

STEP 2: Divide each individual lien by the total amount found in step 1 to find a percentage.

Physician lien 1: $16,000 ÷ 30,000 = .533
Physician lien 2: $8,000 ÷ 30,000 = .267
Physician lien 3: $4,000 ÷ 30,000 = .133
Physician lien 4: $2,000 ÷ 30,000 = .066

STEP 3: Multiply each percentage found in step 2 by the 50% net recovery of available to pay physicians liens to find the amount each lien holder should be paid.

Physician lien 1: .533 x 20,000 = $10,660
Physician lien 2: .267 x 20,000 = $5,340
Physician lien 3: .133 x 20,000 = $2,660
Physician lien 4: .066 x 20,000 = $1,340

The amounts found in Step 3 are the dollar amounts each lien holder will receive from Steve’s $20,000, per their pro-rata share. Again, please remember that any amount of a physician lien not fully covered by the recovery proceeds will still be owed, unless negotiated. For more information about negotiating with lien holders, read our article titled, Negotiating Your Medical Liens.

How Will the Recovery from a Personal Injury Case Be Disbursed?

Reaching a settlement or judgment in a personal injury case can be liberating and exciting; however, clients often fail to recognize that the amount recovered is not the amount they will receive. The attorney still has to pay his or her own legal fees, any liens, and any advancements for trial costs. The attorney will take his fee first out of the recovery. Generally, the attorney will then ask his or her client for an authorization to pay any liens. The attorney, however, will not need authorization from his or her client if there is a court order to disburse the funds. Furthermore, an attorney may pay a medical provider over the objection of his or her client if the medical provider has a perfected lien, and the amount is liquidated (clear and certain). Also, if medical bills are in dispute, the attorney will likely keep the disputed amount in a trust account until the conflict is resolved. Usually, the injured party does not receive their share of the recovery until all other interested parties are paid.

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Negotiating and Release of Physicians Liens

Before paying a physician lien, always try to negotiate the lien amount, especially if the recovery does not cover the amount due. It is entirely possible to convince the lien holder to accept a lesser amount as full and final payment. After all, you have nothing to lose and everything to gain.

Listed below are some tactics that may be helpful in negotiating medical liens.

1. If the lien was attached before October 1, 2003, use non-payment as a bargaining chip.

Again, proceeds can be distributed to medical providers whose liens were established prior to October 1, 2003, however the injured party sees fit. Thus, lien holders are not guaranteed a pro-rata share. A lien holder may be willing to accept their pro-rata share as payment in full if there is a chance that they may not receive any money from the recovery.

2. If the lien was attached after October 1, 2003, try to negotiate the lien holder’s pro-rata share as payment in full.

While you will not have the leverage of “no payment at all” as you have with liens attached before October 1, 2003, you still have nothing to lose. Also, some medical providers may find it advantageous to forgo further litigation and merely accept their pro-rata share as payment in full.

3. Offer a little more than the lien holder’s pro-rata share as payment is full.

While this tactic may cause you to use some of your portion of the recovery, the medical provider may be inclined to accept the amount and forgo further legal remedies.

4. Try to negotiate liens before you reach a settlement or judgment when your medical bills are in dispute.

This is when you have all the leverage, so do not waste the opportunity. A medical provider will likely negotiate their lien amount if they see that their unwillingness to compromise will inhibit a settlement.

With this being said, please be aware of North Carolina’s statutory requirement that entitles all lien holders to a lien certification upon their request. Essentially, the lien certification allows the lien holder to audit the settlement agreement or judgment to ensure they are receiving their pro-rata share. The certification must include the total distribution to lien holders, the amount of each lien claimed, the percentage of each lien paid, and the total attorney’s fees. Therefore, when medical costs are not in dispute, forgo this tactic.

5. Argue for actual medical costs.

Medical providers often include charges that are not purely related to treatment. For example, hospitals may charge for room and board and other service fees. Try to negotiate these costs as they are usually overpriced. Furthermore, these costs may not be included in the settlement or judgment; therefore, you should argue that they should not be included in the lien.

6. Be aware of the statute of limitations.

The statute of limitations provides a time limit as to when a party can bring a claim. If the statute of limitations has run (generally 3 years from the payment of medical expenses) on the underlying debt, a medical provider will likely accept their pro-rata share as payment in full.

7. Hire an attorney.

The tactics listed above are by no means exhaustive, and an experienced personal injury attorney will ensure that you receive the maximum net amount from your recovery. Negotiating with a medical provider can be difficult and stressful. Thus, hiring a personal injury attorney may help alleviate such stress and ensure that your recovery reaches its fullest potential.

Once a physician lien has been negotiated and paid, a release should be given. A release establishes that a lien no longer exists and that the medical provider has been paid their share of the recovery proceeds. Furthermore, when a lien is negotiated for a lesser amount, a release for the remaining balance should be sought. This ensures that the injured party will not be liable for the balance in the future.

What Happens When Medicare Liens Are Attached to Your Recovery Proceeds?

While most liens attached to the recovery of personal injury cases are medical provider liens, there are other liens that may be present. One important type of lien that needs to be taken into consideration is a Medicare lien. Medicare liens will greatly affect the disbursement of recovery proceeds, as they take precedent over all other liens. In other words, if there is a Medicare lien attached to your recovery proceeds, those liens must be paid first before all other liens. Therefore, if the Medicare lien is worth 50% or more of your net proceeds (after attorney’s fees) then no other lien will be entitled to payment from the proceeds. Let’s look at the following example to help illustrate how Medicare liens affect disbursement.

Earlier, we established that $20,000 of Steve’s settlement will be used to pay any lien attached to his recovery (50% of his net recovery). We also stated that Steve had four physicians liens attached to his recovery (listed below). Now let’s add that Steve also has a $21,000 Medicare lien attached to the same proceeds. If this was the case, the Medicare lien would receive the entire $20,000 (50% of Steve’s net recovery) and the remaining four physicians liens would receive nothing. Again, this is because Medicare liens must be paid before any other liens. Also, it is important to reiterate that Steve will still be personally liable for the other four unpaid liens.

Physician lien 1: $16,000
Physician lien 2: $8,000
Physician lien 3: $4,000
Physician lien 4: $2,000
Medicare lien: $21,000

What Happens When Medicaid Liens Are Attached to Your Recovery?

When you are injured in an accident and Medicaid helps pay for your medical expenses, Medicaid will likely have a lien on your settlement or judgment proceeds. Medicaid liens, unlike physicians liens, are capped at 1/3 of the net amount of proceeds. North Carolina requires Medicaid to be reimbursed per pro-rata share with all physicians liens. Therefore, the three-step process (listed above) for calculating the pro-rata share for reimbursement is used. Read our article on Medicaid liens for more information.

What is the Difference Between Assignments and Physicians Liens?

It is important to understand that liens are not the only way in which someone can receive an interest in your personal injury case. Anyone can receive an interest in your settlement or judgment proceeds through an assignment. Generally, a medical provider will receive assignment rights by having you sign an agreement either before or after your treatment. The agreement generally provides that you agree to assign your rights to any or all proceeds received through settlement or judgment as it pertains to the medical treatment received. An assignment of rights to a personal injury case is treated the same as a lien. Therefore, when a physician receives assignment rights to your recovery proceeds, North Carolina will treat the right like it is a lien.

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