Medical Debt Collection: How Letters of Protection Work

Posted by Marilyn Miller on September 30, 2019  /   Posted in Uncategorized

Medical debt collection is hard enough these days due to changes in the law and higher insurance deductibles. Planning in advance can minimize the number of patient files referred for outside collection. In the case of treatment for conditions resulting from an accident, when asked to delay payment pending an insurance or legal settlement, a Letter of Protection often makes sense.

Consider this case from our collection files. Patient came to a chiropractor after an auto accident. Doctor treated the patient for months and patient accrued a large bill. Patient claimed not to the have the money to pay but promised to pay his bill as soon as his case settled. Patients’s attorney requested and received bills from doctor. Years go by without payment, and all patient contact information is no longer valid. Is the doctor out of luck? No, because before treating the patient, he required a letter of protection from the patient’s attorney.

A letter of protection (LOP) is a letter provided by the patient’s attorney that promises to pay you as soon as the case settles, before the patient receives the final disbursement. An LOP is a solid promise to pay. A lawyer would face consequences for jumping a letter of protection.

Some medical practices only require a lien from the patient, which states that the patient will pay when a settlement is reached, but I have seen too many of these liens disregarded, especially if patient does not get a large settlement. One of doctor clients had only a patient lien, and the patient got his settlement and bought a new car and then had nothing left to pay his doctors. He was not employed, so my doctor was out of luck. A letter of protection would have guaranteed payment.

A lawyer cannot provide you a letter or protection without client approval. If an attorney tells you a patient will not agree to a LOP, then you are under no obligation to treat without payment at the time of service.

Here are some additional things to remember:

  1. Ask the attorney to include in the letter that they will let you know immediately if the case is lost, or if their services are terminated.
  2. If the attorney changes, the new attorney must provide a new letter.
  3. Ask the patient to provide a separate lien to you which similarly states that they are responsible for costs and will pay you when settlement is received.
  4. Make certain to include a clause in both the attorney and patient letter that state that payment is NOT contingent on the case prevailing. The patient owes you whether they win their case or not.
  5. Have a system to follow up on LOP’s. Contact the attorney at least quarterly for updates.

Remember, you are not required to accept a letter of protection. You are doing it as a favor, because sometimes people are badly hurt through no fault of their own and you want to help them. That is great, but you must protect yourself. A legal case could take years to settle, so tread lightly and consider each case on its own merits.

If you can, ask the patient to provide you nominal payments at each visit. You can make this a condition of delaying payment. One provider I know charges $5.00 each visit. Payments will keep your statute of limitations from expiring. Payments also get the patient into a good habit of paying you something each time you see them.

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