Healthcare providers who treat patients on a letter of protection (LOP) or medical lien often underestimate the true costs associated with providing services this way. And, some providers may assume that collecting a higher percentage of the bill charged means that their LOP and lien business is more profitable than commercial payers, i.e. health insurance companies. But this is not always the case.
Fact: 46 percent of Americans are uninsured or underinsured. Treating patients on an LOP or a lien enables providers to treat personal injury patients – 84.2 million of which are uninsured or underinsured. But, the business aspects of servicing the treatment of patients on LOPs and medical liens are more complex and costly than most realize.
One solution for providers is to sell their LOP receivables and medical liens.
What is a Medical Lien?
A lien is a document that states you, as the medical provider, will be paid from the proceeds of your patient’s personal injury case. The lien is signed by your patient and his or her attorney. The patient instructs the attorney to pay for your services out of the proceeds of their personal injury case settlement. The attorney signs, acknowledges instructions of his or her client and promises to repay you at the conclusion of the personal injury case. A lien is necessary in the event that there is no insurance to pay for medical services.
What is a Letter of Protection?
An LOP is very similar to a lien; it is a letter from the attorney requesting that you, the medical provider, treat the patient with payment deferred until the successful resolution of the personal injury claim. Sometimes the attorney will put the amount he or she is willing to repay you at the conclusion of the personal injury case. Therefore, you may not get paid for treatment you provide in excess of that amount.
How to Sell LOP Receivables and Medical Liens
If your practice already treats personal injury case patients, you likely have an existing portfolio of medical liens and LOPs against personal injury cases. Accepting medical lien or LOP cases is a necessary part of treating personal injury accident patients. There are many benefits to this, of course, which include the steady inflow of patients who you would not otherwise treat and the subsequent revenue that is generated by providing treatment to this population.
But, LOP and lien practice management has its challenges:
- Staff must manage, track, collect and negotiate LOPs and liens
- Services have been provided for which you hope to get paid on in the future
- The practice loses value against inflation (as you are not charging interest on LOPs or liens)
- In most circumstances, each personal injury case has not been evaluated to determine if there is a strong likelihood the case will bear a financial recovery, which means the practice may not get paid
- Your practice is likely not trained or skilled to negotiate with lawyers, all of whom have a vested interest in reducing the LOP or lien
The solution to this is to present your portfolio of medical liens and LOPs for analysis to a servicing company, like Gain Servicing. The servicing company will do a full review and analysis of the portfolio and present you with a purchase offer. When the sale is complete, the practice will receive a lump sum of money, which can be infused back into the practice. Subsequently, the practice is also relieved of all risk associated with those medical liens and LOPs, and all of the angst and work associated with managing and collecting on them.
Another option is to sell individual lien or LOP cases as they occur, instead of selling them off in bulk. This increases revenues more immediately without any additional risk or cost. This is best when the practice treats a patient who has been involved in an accident where there is a pending claim for damages for the injuries sustained. When there is no insurance to pay for the necessary medical services caused by an accident, either treatment is not provided or you agree to perform the treatment on a lien or LOP against your patient’s personal injury case. Either scenario poses challenges for the practice:
- Scenario 1: No treatment is given.
- The patient is unable to get much needed treatment.
- The practice is unable to generate the revenues which could have been generated from providing treatment.
- Scenario 2: You treat the patient on a medical lien or LOP.
- The practice does not know if the personal injury case is viable, which means payment may never be received.
- If there is payment, it may not come for several years. This, in essence, functions as an interest-free loan, of which the practice loses money on due to inflation every year.
- If there is payment, the practice will likely be asked to reduce the amount of the lien or LOP.
- The practice must invest in time and money to track the status of all medical liens and LOPs.
Why Sell LOP Receivables and Medical Liens
The biggest benefits of selling LOP receivables and medical liens include:
- Substantially increase revenues by providing medical services that otherwise may not have been provided.
- Get paid immediately for the services provided.
- Gain more patients when attorneys and other medical providers know they can refer the practice lien or LOP cases.
- Reduce employee time spent billing, following up and tracking liens and LOPs and trying to collect on them.
- Eliminate the risk of a case being lost or of the practice not getting paid.
- No longer deal with lawyers negotiating liens down as cases settle.
- Remove high risk case files that a servicing company evaluates and determines will likely not settle for the initially anticipated amount.
- Strengthen trial testimony as the practice is able to testify that there is no financial interest in the outcome of the trial.
In short, if there is a viable personal injury case, a servicing company, like Gain Servicing, will work out an LOP or medical lien with the patient and his or her lawyer, wherein you, as the medical provider, will be paid for services rendered with no risk or cost to you. The servicing company will evaluate the underlying personal injury case to see if the case is viable to enter into a lien agreement or LOP with the patient and his or her attorney. If the servicing company feels the case is viable, the practice will be paid for the cost of the medical services. Whereby, the servicing company will get paid back at the conclusion of the personal injury case.
With a servicing company partner, the only thing the medical service provider has to do is determine if medical services are necessary and related to the accident. Once the servicing company is called and the medical service provider gives the servicing company a breakdown of fees for services to be approved, the servicing company will then determine if it is a viable case. If the case is approved, payment will be sent upon confirmation that medical services were rendered; and then they handle the rest.
Selling lien and LOP cases is a great solution for most medical providers. Not only does it increase immediate cash flow, but the practice is able to treat a new group of patients they might not otherwise have been able to provide services for. It’s a win, win, win – for the medical service provider, the personal injury patient and the servicing company.