How to Identify and Resolve Hospital and Insurer Liens Before Paying Out Settlement Funds

Disclaimer: This article is for educational purposes only and does not constitute legal advice. Always consult a qualified attorney for advice on your specific situation.

Detailed Answer

Step 1: Identify Potential Liens

After you reach a settlement, begin by surveying all medical providers and insurers involved. In Delaware, hospitals may assert a lien against settlement proceeds for a patient’s unpaid hospital bill under 18 Del. C. § 6803. Insurers often have subrogation or reimbursement rights based on the patient’s health plan or ERISA-governed plan. You should:

Review medical records and billing statements for any outstanding balances.
Check with the claimant’s health insurer(s) for subrogation or reimbursement claims.
Contact any government health programs (e.g., Medicaid) to see if they have a repayment claim.

Step 2: Request Written Lien Statements and Validations

Request formal statements of lien from each provider or insurer. A valid hospital lien under 18 Del. C. § 6803(b) must include the patient’s name, billing period, amount due, and a description of services. For insurance subrogation, ask for a copy of the plan document and a demand letter stating the basis and amount of the lien.

Step 3: Review and Challenge Invalid or Excessive Claims

Thoroughly examine each statement for errors:

Verify dates of service, billed amounts, and insurance payments received.
Ensure the hospital lien was timely filed (within six months after discharge per 18 Del. C. § 6803(c)).
Confirm insurer subrogation claims follow plan terms and federal law (e.g., the Medicare Secondary Payer Act). If a lien lacks statutory or contractual support, send a written challenge.

Step 4: Negotiate Reductions and Payoff Amounts

Healthcare providers and insurers often accept less than the full billed amount:

Submit a settlement worksheet showing your offer and reasons for reduction.
Negotiate lump-sum payoffs or percentage reductions.
Get any agreement in writing, specifying the exact amount the provider or insurer will accept as full satisfaction.

Step 5: Secure Releases and Clear Title Before Disbursement

Before distributing funds to your client, obtain a signed lien release or satisfaction document from each claimant:

Record releases in court or county land records if required under 18 Del. C. § 6803(e).
Confirm there are no further claims by requesting a clearance letter from government programs.
Maintain copies of all releases and payoff statements for your client’s file.

Helpful Hints

Act promptly. Statutory filing deadlines may bar a lien if missed.
Keep detailed records of all correspondence and payments.
Communicate in writing to create an audit trail.
Consider hiring a medical-billing expert to audit large claims.
Always confirm the final payoff amount in writing before disbursing settlement funds.