Can Chiropractors Claim Physicians Liens?

How Are Physicians Liens Calculated?

Once you have received your proceeds from a personal injury settlement or judgment, any medical providers holding “perfected” liens must be paid. Luckily, North Carolina has established a cap on the amount a medical provider can claim from your recovery proceeds. Under North Carolina law, you will only have to pay up to one half of your recovery after attorney’s fees are deducted (50% of net proceeds). You will likely be entitled to keep the remaining portion of the proceeds. Please be aware, however, that you will likely be obligated to pay all physician lien amounts not covered by your recovery proceeds.

For example, let’s say Steve received a $60,000 settlement from an accident. Also, Steve owed his attorney $20,000 for working on his case. Steve has several physicians liens that are perfected on the proceeds of the accident. In this example, Steve would have $20,000 available to pay any medical liens. See math below:

Settlement: 60k 
– minus 
Attorney Fees: 20k 
40k net amount 
40k x 50% = 20k available to pay medical liens 
20k Steve’s share (remaining balance of 40k)

Adding in Advancements 
Generally speaking, advancements occur when the attorney pays for court fees or costs. These advancements are deducted from the injured party’s share. For instance, using the example above, if Steve’s attorney paid $500 for court fees and costs, then that amount would be deducted from Steve’s share; thus, bringing Steve’s share down to $19,500. See math below:

20k Steve’s share (remaining balance of 40k) – $500 advancement for court costs and fees = $19,500 for Steve’s share.

How Are Proceeds Disbursed Among Lien Holders?

Once the proceeds of a personal injury case are received and calculated (see above), the proceeds must then be paid to the medical providers holding a “perfected” lien. How the proceeds are distributed amongst the lien holders depends on whether the liens were established before or after October 1, 2003.

Disbursement of Liens Established Prior to October 1, 2003

Proceeds can be distributed to medical providers whose liens were established prior to October 1, 2003, however the injured party sees fit. In other words, the 50% of the net proceeds available to pay medical liens can be distributed in unequal percentages and values.

For example, using the illustration from the previous section, we found that Steve has $20,000 available to pay towards any medical liens. Now, let’s say that Steve’s accident occurred before 2003 and four medical liens arising from the accident were established before 2003. Furthermore, let’s say that each medical lien was worth:

Physician lien 1: $16,000 
Physician lien 2: $8,000 
Physician lien 3: $4,000 
Physician lien 4: $2,000

In this example, because the liens were established before October 1, 2003, Steve could use the $20,000 however he wishes to pay the four physicians liens, so long as all of the $20,000 is used. Thus, Steve could decide to pay all of physicians liens 1 and 3, and not pay any of liens 2 or 4. Please note that Steve may still be obligated to pay the remaining balance of any medical liens not paid. Therefore, in this example Steve will still be obligated to pay physicians liens 2 and 4.

Disbursement of Liens Established After October 1, 2003

Medical liens established after October 1, 2003 must be distributed per the lien holder’s pro-rata share. In other words, the injured party may not disburse the 50% of net profits however they see fit. Each lien holder will receive a certain percentage. Due to the law changing 13 years ago, almost all lien holders will be paid per their pro-rata share. Determining the pro-rata share for each lien holder can be confusing; however, an easy three-step process can help minimize the confusion and will establish the correct pro-rata share amount every time.

STEP 1: Add together all physicians liens to find a total amount.

STEP 2: Divide each individual lien by the total amount found in step 1 to find a percentage.

STEP 3: Multiply each percentage found in step 2 by the 50% net recovery amount available to pay physicians liens.

*Step 3 will provide the dollar amount owed to each lien holder per their pro-rata share.

Let’s look at an illustration using similar facts from the previous section to better understand how lien holders’ pro-rata shares are determined. We previously found that Steve has $20,000 to pay his physicians liens. Furthermore, we stated that Steve has four physicians liens attached to his recovery. Using the same four lien amounts, we will determine each lien holder’s pro rata share and the amount each lien holder will receive from the $20,000, using the simple three-step process. The four physicians liens were as follows:

Physician lien 1: $16,000 
Physician lien 2: $8,000 
Physician lien 3: $4,000 
Physician lien 4: $2,000

STEP 1: Add together all physicians liens to find a total amount.

16,000 
8,000 
4,000 
+ 2,000 
30,000

STEP 2: Divide each individual lien by the total amount found in step 1 to find a percentage.

Physician lien 1: $16,000 ÷ 30,000 = .533 
Physician lien 2: $8,000 ÷ 30,000 = .267 
Physician lien 3: $4,000 ÷ 30,000 = .133 
Physician lien 4: $2,000 ÷ 30,000 = .066

STEP 3: Multiply each percentage found in step 2 by the 50% net recovery of available to pay physicians liens to find the amount each lien holder should be paid.

Physician lien 1: .533 x 20,000 = $10,660 
Physician lien 2: .267 x 20,000 = $5,340 
Physician lien 3: .133 x 20,000 = $2,660 
Physician lien 4: .066 x 20,000 = $1,340

The amounts found in Step 3 are the dollar amounts each lien holder will receive from Steve’s $20,000, per their pro-rata share. Again, please remember that any amount of a physician lien not fully covered by the recovery proceeds will still be owed, unless negotiated. For more information about negotiating with lien holders, read our article titled, Negotiating Your Medical Liens.

What Happens When Medicare Liens Are Attached to Your Recovery Proceeds?

While most liens attached to the recovery of personal injury cases are medical provider liens, there are other liens that may be present. One important type of lien that needs to be taken into consideration is a Medicare lien. Medicare liens will greatly affect the disbursement of recovery proceeds, as they take precedent over all other liens. In other words, if there is a Medicare lien attached to your recovery proceeds, those liens must be paid first before all other liens. Therefore, if the Medicare lien is worth 50% or more of your net proceeds (after attorney’s fees) then no other lien will be entitled to payment from the proceeds. Let’s look at the following example to help illustrate how Medicare liens affect disbursement.

Earlier, we established that $20,000 of Steve’s settlement will be used to pay any lien attached to his recovery (50% of his net recovery). We also stated that Steve had four physicians liens attached to his recovery (listed below). Now let’s add that Steve also has a $21,000 Medicare lien attached to the same proceeds. If this was the case, the Medicare lien would receive the entire $20,000 (50% of Steve’s net recovery) and the remaining four physicians liens would receive nothing. Again, this is because Medicare liens must be paid before any other liens. Also, it is important to reiterate that Steve will still be personally liable for the other four unpaid liens.

Physician lien 1: $16,000 
Physician lien 2: $8,000 
Physician lien 3: $4,000 
Physician lien 4: $2,000 
Medicare lien: $21,000

What Happens When Medicaid Liens Are Attached to Your Recovery?

When you are injured in an accident and Medicaid helps pay for your medical expenses, Medicaid will likely have a lien on your settlement or judgment proceeds. Medicaid liens, unlike physicians liens, are capped at 1/3 of the net amount of proceeds. North Carolina requires Medicaid to be reimbursed per pro-rata share with all physicians liens. Therefore, the three-step process (listed above) for calculating the pro-rata share for reimbursement is used. Read our article on Medicaid liens for more information.

What is the Difference Between Assignments and Physicians Liens?

It is important to understand that liens are not the only way in which someone can receive an interest in your personal injury case. Anyone can receive an interest in your settlement or judgment proceeds through an assignment. Generally, a medical provider will receive assignment rights by having you sign an agreement either before or after your treatment. The agreement generally provides that you agree to assign your rights to any or all proceeds received through settlement or judgment as it pertains to the medical treatment received. An assignment of rights to a personal injury case is treated the same as a lien. Therefore, when a physician receives assignment rights to your recovery proceeds, North Carolina will treat the right like it is a lien.