Contesting Damages Involving Medical Lien Funding


By: Jason A. Kamp

Medical Lien Funding is a distinct flavor of litigation financing. Medical Lien Funding companies refer personal injury plaintiffs to medical providers for treatment, which is provided pursuant to a medical lien. Lien rates are higher than rates charged to regular payors like Medicare or an insurance company. The company then purchases the lien from the provider at a negotiated discount. The company’s profit is made by collecting the higher lien rate from the plaintiff’s recovery. Part of why such profit is available is because the unpaid lien rate is used to measure the plaintiff’s damages, rather than the paid discount rate. The company takes on the risk of non-payment and the positive rate differential. The provider gets guaranteed payment and the prospect of repeat referrals.

While these arrangements arguably enable personal injury plaintiffs to receive care that would otherwise be unavailable, they do so by creating a perverse incentive structure. The arrangement inherently rewards costly over-treatment and creates a credibility problem for providers. Until recently, it was difficult to combat this incentive structure in Georgia because the collateral source rule made it impossible for the party paying the bill to explore or use it in litigation.

However, two recent federal cases have taken these agreements out of the collateral source rule’s protection. In Houston v. Publix Supermarkets, Inc. No. 1:13-CV-206-TWT, 2015 U.S. Dist LEXIS 102093, 2015 WL 4581541 (N.D. Ga. July 29, 2015) and Rangel v. Anderson, 202 F. Supp. 3d 1361 (S.D. Ga., Nov. 7, 2016), federal courts in Georgia note the inherent differences between Medical Lien Funding arrangements and classic collateral sources. The latter decision also provides a framework for admitting and using them. The door is now open for discovering and using the details of these arrangements to probe the credibility of medical providers, as well as attack the reasonableness of damages. These rulings provide a useful tool advocates for personal injury defendants would be wise to incorporate into their repertoire.

If you have any questions or would like more information, please contact Jason A. Kamp at [email protected].