How many settled cases in your office are waiting on a lien right now before you can disburse? For most personal injury firms, the number is higher than anyone would like. Cases resolve, releases get signed, and then the matter sits while someone chases a conditional payment letter, waits on a recovery vendor, or tries to find out whether a Medicare Advantage plan paid for anything at all. The client doesn’t understand it is a lien problem. Instead, the client sees their check that hasn’t arrived.
The problem starts earlier than most firms think. From the day a case is accepted, a law firm must track every lien asserted against the client’s recovery, and in some instances it has an affirmative duty to investigate and identify liens that no one has asserted yet. Medicare and Medicare Advantage plans are the clearest examples. The firm must then decide whether each claim has merit and is legally valid, which means sustained contact with lien holders and recovery vendors, and at the end of the case it frequently means protracted negotiation. Firms that wait until settlement to start that work are the firms with a backlog in November.
Key Takeaway: Lien work begins at intake, not at settlement. Firms that identify, verify and track liens early are the ones that can generally disburse on time. Firms that start at settlement typically experience delay, and in the fourth quarter that delay runs straight into the new year.
What an Open Lien Costs the Firm
First, time. Every hour a paralegal or attorney spends on hold with the Benefits Coordination & Recovery Center, or trading letters with Optum or Conduent, is an hour not spent moving another case toward settlement or trial. Recovery vendors are large corporations whose only business is collecting from personal injury recoveries. They have deep pockets and large staff devoted to nothing else, which makes for a lopsided fight when the other side is a case manager with forty other matters on his or her desk.
Second, client satisfaction. A client who waits months for a disbursement, or who pays back more than necessary because of an inflated claim, remembers that at the end of the case more than anything that came before it. That impression is lasting. It impacts future referrals and reviews, and it potentially impacts the firm’s reputation.
Third, liability. ABA Model Rule 1.15 requires a lawyer to safeguard funds a third party has a lawful claim to, and many states read the rule to require holding disputed funds until the claim is resolved. Model Rule 1.1 requires the knowledge, skill and preparation to handle the matter competently. Pay a lien holder who has no valid claim, or overpay one who does, and exposure is created for the firm. Medicare adds an additional risk. Under the Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b)(2), the government can recover conditional payments from the attorney personally and seek double damages, and once a final demand issues it must be paid within 60 days or interest accrues, whether or not a compromise or waiver request is pending.
Key Takeaway: An open lien is not a passive item on a to-do list. It consumes staff time, it impacts client experience with the firm, and under Model Rules 1.1 and 1.15 and the Medicare Secondary Payer Act it carries liability that sits with the firm.
Which Liens to Outsource First
Not every lien belongs with a specialist. The decision turns on how much specialized knowledge the lien requires and how much negotiation it will take.
The liens that most often make sense to outsource are the ones governed by their own body of federal or state law. Medicare conditional payments, where a real reduction usually requires a compromise or waiver on a fixed timeline. Medicare Advantage liens, where CMS provides no notice and the double damages exposure is real. Medicaid third-party liability claims, which turn on an Ahlborn analysis that varies from state to state. ERISA plan liens, where the reduction lives in the plan documents and the questions are which documents to demand and what to look for in them. FEHBA and military plan liens, each with its own federal framework. Hospital and provider liens, where a firm negotiating without knowing the true cost of care is rarely on equal footing. And any case with treatment in more than one state.
Liens that often make sense to keep in-house are the small ones, roughly $2,000 or less, where the administrative cost of handing off can outweigh the reduction. Liens from local providers the firm has a working relationship with. Workers’ compensation liens, which in many states aren’t negotiable at all.
Practice Tip: a year-end lien audit.
- Pull every settled case with an unpaid disbursement and list each open lien by type.
- Flag anything Medicare-related and note whether a final demand has issued, and when.
- Separate the liens that turn on specialized law from the ones a staff member can close with a phone call.
Key Takeaway: The liens worth handing off are the ones governed by their own statutes and worked by their own recovery vendors. Medicare, Medicare Advantage, Medicaid, ERISA, FEHBA, military plans, and hospital claims negotiated from billed charges all fit that description. Keep the small, local and non-negotiable ones. Sort the backlog on that line and the year-end list gets shorter fast.
Outsourcing Without Handing Off Responsibility
Personal injury firms already bring in outside help for the probate, guardianship, benefit preservation, tax and bankruptcy issues that arise out of an injury case. Lien resolution is no different. The ethics rules support outsourcing it.
ABA Formal Opinion 08-451 permits a lawyer to outsource legal and nonlegal support services as long as the lawyer remains responsible for competent representation under Rule 1.1, supervises the work under Rules 5.1 and 5.3, protects confidential information under Rule 1.6, discloses the arrangement to the client, and keeps fees reasonable under Rule 1.5. States that have addressed lien resolution directly, including New York, Ohio and Utah, have reached the same conclusion. A firm may retain a lien resolution specialist and, with the client’s informed consent in the retainer agreement, pass the fee through as a case cost, provided the fee is reasonable, carries no surcharge, and produces a net benefit to the client on each lien.
Under those opinions, the first step is the fee agreement. If it doesn’t provide for outsourcing lien resolution, it should get amended. The remaining conditions are usually met without much effort.
Key Takeaway: Outsourcing lien resolution is ethically permitted under ABA Formal Opinion 08-451 and the state opinions that have followed it. The lawyer stays responsible for the work, the client consents in writing, and the fee is reasonable and passed through at cost. Handled that way, the firm takes the workload off its desk without taking its hands off the matter.
Conclusion
The next question for any PI firm heading into the last eight weeks of the year is which liens to keep in-house. The ones with their own statutes, their own deadlines and their own recovery vendors cost the most to keep. Synergy resolves Medicare, Medicaid, ERISA, FEHBA, military, hospital and private health plan liens for thousands of personal injury firms, with a team of attorneys and lien specialists and a fee that is based upon how much we save the client. If the goal is a clear desk on January 2, the Lien Resolution Best Practices Guide is the place to start, and a 15-minute call is the place to finish.