Written by: Emily Joswiak • November 18, 2022• Finance

What’s a Medical Lien and How Does It Work?

For many people, emergency visits to the hospital end up costing more than they can afford. Discover how a medical lien helps with medical finances.

In car accident cases and other such emergencies, the victim gets rushed to the emergency room for treatment. In ERs, every patient receives treatment, even if they can’t afford it. However, the medical bills attributed to serious injuries are usually very high. As a result, medical liens are often issued to doctors and medical care providers to ensure they’re paid for their services. To further explain the process, we break down what a medical lien is and how it works.

A Medical IOU

In simple terms, a medical lien is a fancy form of an IOU. In the case of a car accident, a lien is your agreement to pay the doctors for the care they provided. There are different lien funding options for varying circumstances and the individuals involved.

For example, let’s say you get rear-ended and have to go to the hospital to treat a neck injury. Nobody asks you for payment or insurance, and the doctors treat your injuries. From there, the hospital puts a medical lien on your account. The doctors who treated you are the lien holders, and the document guarantees their future payment.

Maybe you work with your lawyer and win a settlement against the person who rear-ended you. You can use the proceeds to pay off the medical lien. That way, the doctors receive the compensation they’re owed for treating your injuries.

Who Receives Liens?

For personal injury claims—mainly car accidents—there are a few types of lien holders. They can include:

Doctors and hospitals
Health care providers
Veterans Affairs
Workers’ compensation insurers
Health insurance companies
Auto insurance companies

In your car accident claim, any one of these people or organizations could be your lien holder. In other words, they’re the people you’ll owe in the future for treating you and providing their services.

Perfecting Your Lien

All right, so once your trial is over and you have your settlement, you need to “perfect” your lien, or fulfill it. Look up your state laws to see how to perfect a lien where you live. In a nutshell, you pay off the debt and send a written notice. This written notice must include the following information:

Acknowledgment of the debt and your responsibility to pay
Agreement for the attorney of the injured party to pay the lien holder from the proceeds of the settlement
Agreement from you that your proceeds will go toward the lien
The amount of debt and a description of the care or services you received

If you include all this information in your notice along with your payment, the lien will become perfected.

Now that we’ve covered what medical liens are and how they work, you’ll know what to do should you need one.

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Last modified: November 18, 2022