The first two parts of this series on mass tort tips discussed the best practices for intake and how to develop an inventory of mass tort cases. Now that all that hard work has paid off, and it’s time for settlement. In any personal injury settlement, the identification, resolution, and payment of medical liens is imperative.
Coming to an agreement on the scope and extent of lien provisions can be a challenge for parties during settlement negotiations. Too often, the spirit of the agreement is lost when poorly crafted settlement provisions result in significant delays and problems down the road. Avoiding pitfalls when drafting settlement agreement lien provisions requires a balancing act – to be as precise as possible on issues, while recognizing areas where built in flexibility works best.
Below are five tips to help find that balance and prevent issues that result in long delays and frustrated clients. The first three of these tips focus on areas where specificity is key.
Be specific on requirements for particular lien types.
Avoid broad language that requires the resolution of “any and all liens”. Instead, specify the type of liens that require attention. For example, if Medicare liens are to be resolved, clearly state if only Medicare Parts A & B are included, or if Medicare Parts C & D are also included, and the respective requirements for each type. If private healthcare liens are to be resolved, this should be explicitly stated in the agreement.
Be specific on responsibilities.
Spell out which party, whether a party to the settlement or a third-party administrator, is responsible for performing lien resolution tasks, including identification, disclosure, certification, production of documents and reports, and approval steps, among others. These procedures should be explicitly addressed and agreed upon, either in the master settlement agreement itself or an addendum. Clarity in these provisions is key to ensuring all parties are on the same page regarding lien resolution.
Be specific on procedures for lien identification.
When specifying the types of liens to be resolved, a settlement agreement should clearly indicate liens for which affirmative resolution efforts are required and the process for disclosing liens that will be self-identified by the client. Generally, a lien resolution administrator will affirmatively identify Medicare Parts A/B and Medicaid for the claimant’s state of residence. For other lien types, settling parties have a wide range of options regarding disclosure, identification, and documentation of these liens. By identifying these responsibilities in the master settlement agreement, the parties will have clearly defined expectations moving through the settlement.
The last two tips for lien resolution provisions cover areas where specificity can do more harm than good by adding rigid requirements that can lead to major problems down the road.
Beware of payment procedure pitfalls.
There are several things to consider when drafting lien payment provisions. First, do not include specific payment requirements, as these may not align with the customary (and reliable) payment processes established by the lienholders and the lien resolution administrator. For example, Medicare requires liens related to large mass tort settlements to be paid in batches on a periodic basis, not as individual liens are resolved. If a settlement agreement requires liens to be paid at the time they are finalized – or before other funds are released – the conflict with Medicare requirements will create headaches and delays for all parties. Second, if working with a lien resolution administrator, the settlement agreement should include provisions that allow for lien “holdbacks”. Lien resolution administrators are often able to obtain recovery caps from lienholders, meaning settlement amounts above those caps can be released while the lien is negotiated and resolved. Finally, ensure the settlement agreement allows for funds to be available to pay lienholders. The settlement must be funded in order for lienholders to be paid. For example, including language that requires liens to be released prior to funding of the settlement will cause serious delays in the finalization of the settlement, as without funding, the liens cannot be paid and therefore cannot be released.
Avoid specific requirements for proof of satisfaction.
Lienholders with statutory recovery rights (i.e. government agencies) do not customarily provide releases in favor of all parties upon satisfaction of a lien. Accordingly, rather than requiring a formal release, the settlement agreement should only require reasonable documentation evidencing satisfaction. Specific releases included in a settlement agreement may not be industry standard, and the lienholder is under no obligation to provide the documentation specified. For example, if the settlement agreement requires a specific release from Medicare, and the settlement agreement may be terminated if that release is not provided, the settlement is at great risk of imploding, as it is unlikely this release will be provided.
If working with a lien resolution administrator, you need to allow that entity to provide proof of satisfaction. This is quicker and easier than placing the burden of producing documentation on the lien holder.
Properly handling lien resolution and payment provisions is an extremely important aspect of completing a master settlement agreement. Without proper provisions, settlements can fall apart or face major delays. An experienced lien resolution administrator can assist in ensuring these provisions are proper and effective.
For more tips on how to build your mass tort case, check out the first two blogs from this series.
Got a Mass Tort Case? Tips for Getting Started
Got a Mass Tort? Tips on Building Your Case