You might ask yourself why a law firm would have their client pay someone else to resolve a lien it is perfectly capable of resolving on its own. It is a fair question, and the honest answer has less to do with capability than with economics, specialization, and the obligations that attach to a firm the moment it accepts a case.
The Obligation Starts at Case Acceptance
Given the law, a firm must track liens asserted against a client’s personal injury claim, and in some instances has an affirmative duty to investigate and identify possible liens. Medicare and Medicare Advantage plans are the clearest examples. The firm then must determine whether a lien holder claim has merit and is legally valid, which requires sustained contact with lien holders and recovery vendors through the life of the case. At the conclusion, resolution frequently requires protracted negotiation before any agreement is reached.
The larger problem, given the distraction it creates, is that firms often wait too long to begin negotiating reimbursement. That delay pushes back disbursement to the injury victim, and the injury victim is the person least equipped to absorb the wait.
Know Who You Are Actually Negotiating Against
When you resolve a lien, you are either dealing with a government benefit health plan or with an aggressive recovery vendor acting on behalf of a plan. Medicare, Medicaid, and FEHBA can be time consuming and slow on the government side. Negotiating against recovery contractors, including Machinify (formerly Rawlings), Katch (formerly Equian), Optum, and Conduent, is frequently harder.
These are large corporations whose SOLE reason for existence is to recover dollars from an injury victim. They have deep pockets and large staffs pursuing nothing but lien reimbursement, which makes for lopsided battles. Their business model relies on the fact that a trial lawyer is fighting them with one hand tied behind their back, short on time and short on specialized knowledge. The health insurance industry recognized this asymmetry decades ago and hired specialists. Plaintiff firms largely did not.
The Questions Every Lien File Raises
Subrogation law is a dynamic and evolving area, and each lien type carries its own nuances. Add Medicare, Medicare Advantage, Medicaid, ERISA, FEHBA, military, hospital, provider, and private health insurance claims together and the volume of law a single firm has to track becomes overwhelming. For any one case, the questions include the following.
- Is there an actual lien, a reimbursement obligation, or only a debt?
- What standard reductions do state or federal statutes provide for this lien type?
- What other reductions may be available, including legal defenses, compromise, waiver, or offsets?
- Is the obligation limited to past payments, or does it reach future payments as well?
- For non-government plans, does state or federal law apply, and is it ERISA, FEHBA, FMCRA, or some combination?
- Can the plan or the vendor actually prove it is the type of plan it claims to be, and prove its recovery rights under the law?
A single file can raise all of them. A dual-eligible client brings both Medicaid and Medicare obligations, each complex on its own. Someone covered by an employer ERISA plan who loses that job because of the injury may move onto Medicare mid-case, leaving two plans with two different resolution processes.
The Ethical Layer
What are the ethical rules that govern this work? ABA Model Rule 1.1 requires a lawyer to bring the knowledge, skill, thoroughness, and preparation necessary to the representation, and lien resolution falls inside that duty. ABA Model Rule 1.15 can be read to impose a duty to safeguard disputed funds when a lien holder claims an interest in a settlement.
Neither rule requires a firm to develop in-house subrogation expertise. Both require the firm to make sure the work is handled competently, whether by the firm or by a qualified partner.
The Economics Most Firms Never Price Out
Every business seeks to decrease operating costs and increase efficiency. Personal injury firms are no different. The large amount of time a personal injury firm devotes to post-settlement lien resolution typically creates a loss at the firm’s bottom line, because that time is absorbed rather than billed as a client expense. Outsourcing changes all of that. In most states, the cost can be passed on to the client the same way the cost of retaining an expert is passed on.
There is a second economic effect that shows up later. Clients who were never properly educated about their lien obligations, and who end up paying back more than they should have, tend to leave the representation with a bad taste in their mouth. Post-settlement impressions impact reviews. Satisfaction with how a lien was resolved is often what produces the 5 star Google review, referral or the repeat matter.
The Bottom Line
Outsourcing lien resolution is not simply delegation. It is a decision about where a firm spends its time and how it protects the net the client actually takes home. The law is complex, it changes, and the parties on the other side are organized specifically to make resolution difficult. A trial lawyer time is better spent moving cases toward settlement or trial.
The next question for any firm is which liens to keep and which to send out.
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