The Amendment to the Illinois Health Care Services Lien Act: To Lien or Not to Lien

House Bill 5823 (“HB5823”) became law on January 1, 2013. This amendment to the Illinois Health Care Services Lien Act (“Act”), 770 ILCS 23/1 et seq., made significant changes to the Act. It established a new process for medical providers who are lien holders on personal injury judgments. The amended Act now limits the amount of money that healthcare providers and professionals can recover. The most significant change from this amendment is that the court can reduce the amount of a lienholder’s claim when the plaintiff’s recovery is diminished due to limited insurance or comparative fault.

A medical lien can be asserted for medical bills to be paid from funds recovered for a personal injury. When a medical provider treats a patient with a potential personal injury claim, the medical provider may opt to issue a lien on a possible judgment for medical services provided instead of billing the patient’s private or public insurance through which it might receive compensation at greatly reduced rates. If the personal injury claim is successful, the medical providers hope to recover the full amount of their bill without deduction. Failure to assert liens can deny a medical provider reimbursement from any funds upon judgment or settlement.

Under the law that was in effect prior to 2013, the main restriction placed on the recovery of lienholders was that the total amount of all liens was limited to 40% of the verdict or settlement. Before the amendment became the law, Illinois courts attempted to further limit the recovery available to medical providers. For instance, a relatively recent appellate case from the Fifth District held that for purposes of the Health Care Services Lien Act, the calculation of the health care liens arising from a personal injury action, including the provision limiting the total amount of all such liens to 40% of the verdict, should be made only after the verdict has been reduced by attorney fees and costs. Stanton v. Rea, No. 5-11-0187, 2012 IL App (5th Dist. Nov. 2, 2012). In Stanton, the appellate court explained that where the total liens filed under the Act amount to 40% of the judgment or settlement, the total amount of attorneys’ liens under the Attorneys Lien Act is limited to 30% of the judgment or settlement, thereby specifically limiting the liens upon a judgment or settlement to 70%. Id. at *5 (citing 770 ILCS 5/1 and 770 ILCS 23/10(c)(2)). The appellate court reasoned that the plaintiff otherwise would receive no money due to the high costs it took to secure a judgment, and that the intent of the Act was that plaintiff receive 30% of the amount of settlement or verdict for her injuries after all liens, expenses, and medical bills have been paid. Id.

The new legislation adds complexity to the legal maze of recovery on such liens. It restricts medical providers’ recovery on the liens by establishing the following rules:

  • subrogation claims or other claims of right of reimbursement for medical expenses must be reduced in the same proportion that the claimant’s recovery is reduced because of comparative fault or uncollectability of the full claim because of limited liability insurance or from any other cause (770 ILCS 23/45); and
  • a party asserting a subrogation claim or other right of reimbursement is required to bear the pro rata share of the claimant’s attorney’s fees and litigation expenses (770 ILCS 23/50).

The most prominent change in law deals with subrogation claims. When a plaintiff is underinsured, or when the plaintiff shares fault for her injury, the amendment provides a mechanism for reducing the subrogor’s claim. The amendment requires that the subrogation interest be “diminished in the same proportion” as the injured person’s claim. The amendment allows for the reduction of healthcare provider’s and/or professional’s recovery by the percent of comparative fault or uncollectibility of the full claim of the plaintiff. For example, if a jury finds a plaintiff to be 20% at fault for an automobile accident, the liens of healthcare professionals and providers will be reduced 20% to reflect this comparative fault and the plaintiff’s inability to collect on the full claim.

The same math applies when the case is settled before trial. To diminish lienholder’s claim, the plaintiff can request that the court conduct a hearing to determine the full value of the plaintiff’s claim or to find that the plaintiff accepted a reduced amount due to comparative fault. This additional step, however, will likely increase plaintiff’s litigation costs. Ultimately, the court will have to conduct a mini-trial within the underlying litigation in order to determine the appropriate value of the plaintiff’s case for purposes of diminishing lienholder’s claim on the settlement.

In addition, the amended Act requires that the lienholder’s claim be further reduced to share in the attorney fees and costs. It shifts a pro rata share of the attorneys’ fees and litigation expenses in obtaining the settlement or jury verdict onto the lienholders.

Lastly, the new law also makes it easier for a plaintiff to dispute the lien by allowing the plaintiff to notify lienholders of a petition to adjudicate rights by registered or certified mail. Under the old law, the plaintiff was required to serve the medical provider with a summons just as in a new lawsuit.

In sum, the amendment to the Act now shifts the burden of uncollectibility of a claim and litigation expenses onto the lienholders.

Victoria Shoemaker

Victoria Shoemaker

Victoria Shoemaker is an associate attorney in the firm's Chicago Office. She practices civil litigation, with an emphasis on medical malpractice, product and premises liability defense, and general healthcare law.