Q: I am a physiatrist and so I see a lot of patients who were in car accidents. More than a few of them are involved in lawsuits over their injuries. I recently reluctantly told a patient – actually a very nice lady who is trying hard to recover – with a large unpaid balance that I would have to stop seeing her and put her into collections if we could not resolve the bill. Instead, she brought me a Letter of Protection from her lawyer. It says that if I forebear on the bill for now that the lawyer will pay me from the proceeds of the case. Is this legitimate?
A: It is.
Patients who have been in a motor vehicle accident can be caught in the middle because their health insurance carrier will not pay for care because the vehicle insurance carrier is supposed to cover those costs but they will not pay until the patient has paid the doctor and submitted a bill for reimbursement.
A Letter of Protection intervenes in this to offer the doctor the assurance that a share of the proceeds of the case, taken off the top before any funds are released to the patient, will be used to satisfy the bill.
This is not at the patient’s discretion – even if they subsequently become displeased with the doctor or leave the practice the outstanding balance will still be paid. This is not, though, an agreement with the attorney to pay the doctor themselves. The lawyer’s role is solely the dispersal of the eventual funds to a party with a claim on such. Think of it as similar to an executor distributing legacies from an estate to beneficiaries.
If the lawyer fails to do so, the doctor can sue the patient who received money that should have gone to them, or can sue the lawyer for a breach of their own agreement with the doctor to make sure that the doctor was paid first.
Of course, if the plaintiff loses there will be no funds to pay the bill with. In that case the doctor would be in the same situation as they were originally in of either considering the bill a bad debt or putting the patient into collections.
Using a Letter of Protection has the advantage of avoiding the collections process, which, even if successful, is often only partial and is reduced by the collection agency’s fee.
Some doctors confuse a Letter of Protection with referral scams in which a lawyer will pay a doctor to do work or order tests just to run a bill. A payment under a Letter of Protection, though, is not from a deal to generate business. It is just the deferred payment of a fee that the doctor could have collected directly from the patient.
If you do want to keep treating the patient (as it seems that you do) and suspect that collections may not yield much, then using a Letter of Protection can solve both of your problems.