September 8, 2022

Kevin James, Esq.

Who can be a defendant in an action brought under Section 502(a)(3) of ERISA?

ERISA self-funded plans are becoming more and more aggressive about asserting their reimbursement rights when one of their members has settled a personal injury claim.  These subrogation vendors are always on the look out for a chance to stake a claim on a client’s tort settlement.  They are paid bounty hunters and as subrogation bounty hunters they require bounties to hunt. 

Since the pandemic, the vendors have shown a trend of increasingly hardline behavior.  As one can imagine, the vendors invariably took a hit to their revenue stream when the nation went into lockdown due to the COVID-19 pandemic. Because there were fewer people on the roads, there were less car accidents. Because there were fewer elective surgeries, less chances for instances of medical malpractice. As subrogation vendors searched claim data of their insurance company clients, they saw less and less traumatic treatment that they could pursue for possible subrogation. In addition, as experienced by plaintiff attorneys, with courts closed due to the pandemic, certain cases became harder to settle without the hammer of a trial.

For the last few years, the opportunities these vendors have had to drive their revenue and profits have been curtailed and many are trying to squeeze every dollar they can out of the opportunities left to them.   Unfortunately, this leaves injured persons and their advocates in the position of having to contend with these aggressive lienholders.

The risks of not dealing with ERISA self-funded liens is becoming an ever more crowded minefield for injured parties and their attorneys.  A recent case out of the Western District of North Carolina illustrates the risk that attorneys and their firms can bear if they fail to properly resolve ERISA self-funded liens.


An individual, who was covered under an ERISA self-funded plan, was injured in a motor vehicle accident. The Plan paid $18,295.88 in total medical benefits. The injured person hired a law firm to represent him in his tort claim. Prior to settlement of the of the injured party’s claim, the Plan placed the injured party’s attorney on notice that the benefits were paid by a self-funded ERISA qualified Plan and the Plan would be seeking reimbursement.

The plan language had two important provisions. First, it required full reimbursement under its terms; and second, it forbade the injured party from settling for less than an amount that would fully reimburse the plan, absent explicit written consent from the Plan.

While it’s unclear if there were any attempts at resolving the lien around the time of the settlement, the attorney eventually settled the tort claim without the Plan’s consent.  The attorney sent a letter to the Plan indicating that the case had been settled and all available funds had been proportionally distributed among the various lien holders as this was what had been requested by the injured party.  The letter also contained a check in the amount of $8,146.13 or approximately $10,000 less than the benefits expended by the Plan.   The letter went on to acknowledge that the check did not fully compensate the Plan’s lien but stated that any further obligation rested with the injured party alone and they had complied with the limited obligations the Firm had to the Plan.

The Plan not fully satisfied with this, continued its attempt for further reimbursement from the attorney.  The attorney responded to these attempts with a letter which stated, “We have closed the file and will not engage with any lien holder in any fashion or represent our client in this matter.” This second letter also indicated at least $4,603.87 had been allocated for payment to other lien holders.

The Plan filed suit against the injured party and the Firm for a constructive trust or equitable lien on the settlement proceeds with interest, a declaration of the Plan’s ownership of the settlement dollars equal to its payments, an order to turnover such proceeds and attorney’s fees and costs.  The Firm filed a motion to dismiss for failure to state a claim which resulted in the instant opinion.  


The question presented by this case is essentially which parties can be a defendant in an action that arises under Section 502(a)(3) of ERISA.

The Firm relied on a series of opinions from a sister district court, the Eastern District of North Carolina, the most notable of which was Great-West Life & Annuity Ins. Co. v. Bullock, 202 F. Supp. 2d 461, 465 (E.D.N.C. 2002).  In Bullock, which contained similar facts, it was found that ERISA was silent to the issue of who can be a defendant in a Section 502(a)(3) action and turned to North Carolina state law to fill the gap.  After a review of North Carolina state law and absent bad faith or negligence on the part of the attorney, the Court found that the attorney could not be a defendant. The Bullock court rested its view on the theory that an attorney could not be sued because there exists no privity of contract between the attorney and a Plan fiduciary.

The Western District in the instant case found that the U.S. Supreme Court had resolved the question of who could be sued two years before Bullock in its decision in Harris Trust & Sav. Bank v. Salomon Smith, Inc., 530 U.S. 238, 246 (2000)Harris was notably not cited by the Eastern District.  

The Western District found that the Eastern District’s attempt to gap fill from state law was unnecessary as ERISA, is in fact, not silent on the question who can be sued. The Western District quoted Harris andfound that Section 502(a)(3) “admits of no limit … on the universe of, possible defendants.” The only real limitation under the section is that the ERISA fiduciary is “seeking appropriate equitable relief”.   If the fiduciary is seeking appropriate equitable relief than “anyone” including an attorney or firm could be a defendant.

Finding that the Plan was seeking a constructive trust or equitable lien (thus the Plan was seeking an equitable and not a legal remedy), the Western District made four findings when denying the Firm’s motion to dismiss:

  1. The Plan had shown that it was plausibly entitled to full reimbursement;
  2. The settlement funds were identifiable and in possession of the Firm;
  3. The Firm was aware of the Plan’s right to full reimbursement;
  4. Reimbursement was not made to the Plan.

While this case arguably shows a split within the Fourth Circuit, it is within the weight of authority on ERISA cases. When an attorney has notice or arguably has reason to know an ERISA self-funded plan has an equitable lien or constructive trust, an attorney cannot simply wash their hands of the lien without potentially exposing themselves or the Firm to liability. 

This case also illustrates that an attorney’s duty to lien holders, under any relevant state law, will not serve as a defense when an ERISA qualified self-funded health plan pursues an action under Section 502(a)(3).

Synergy can assist you and your firm in resolving ERISA self-funded liens and avoid adverse results as such was found here.   This is especially true in the current environment as ERISA self-funded plans and their vendors are looking for opportunities to further extend the rights of these plans. The case is Mann+Hummel Filtration Technology US LLC v. Demayo Law Offices, LLP, Stephen Patterson.  CIVIL ACTION NO. 3:21-CV-00374-GCM-DSC.

August 1, 2022

By Jason D. Lazarus, J.D., LL.M., MSCC

You might ask yourself, why hire experts to assist with lien resolution when I can do it myself.  You also might ask whether it is ethically permissible to outsource lien resolution to a lien resolution company.  The first question is quite simple to answer and the second one requires a little more examination of the rules regulating lawyers.

The problem really starts with the responsibilities a law firm has at the beginning of each new case as it pertains to liens.  I use lien synonymously with subrogation, reimbursement, and debts here even though there are differences.  Given the law, a law firm must track liens that are asserted against their client’s personal injury claim and in some instances will have an affirmative duty to investigate and identify possible liens (Medicare & Medicare Advantage plans are good examples). 

The law firm must determine whether a lien holder’s claim has merit and is legally valid.  To reach resolution, this requires a law firm to have significant contact and interaction with a variety of lien holders along with recovery vendors.  At the conclusion of the case, it frequently requires protracted negotiations to reach an agreement to resolve the claims made by a lien holder or recovery vendor against a settlement, judgment, or verdict.  The bigger issue, given the distractions it creates, is that law firms frequently wait too long to begin to negotiate a reimbursement to a lien holder which can delay disbursement to the injury victim.  All the foregoing creates pressure on law firms to outsource lien resolution functions.   

Why Outsource?

As to the question of why outsource, it really comes down to efficiency and results.  When resolving a lien on behalf of an injury victim, you typically are either dealing with a government benefit health plan or an aggressive recovery vendor on behalf of a plan.  Dealing with Medicare, Medicaid, FEHBA on the government side can be time consuming and ineffective.  Having to negotiate with and against recovery contractor groups for Medicare Advantage plans and Rawlings, Equian, Optum and Conduent can be equally difficult if not more so.  Recovery contractors are massive corporations whose sole reason for existence is to take dollars from a personal injury victim’s recovery.  They do this by relying upon the efforts of talented trial lawyers who secure settlements and receive verdicts.  These recovery contractors have very deep pockets and large staffs to pursue nothing but liens which makes for lopsided battles. 

So, to sum up succinctly why you may want to hire an expert lien resolution group to help you and your client:  

  1. To make your law firm more efficient by reducing operating expenses
  2. Give you a deep team of experts to fight the massive recovery vendors and
  3. Most importantly, get the best possible resolution for the injury victim when it comes to what must be paid back to a lien holder

Before moving on to ethics, let’s unpack a little bit more about the reasons to partner with an experienced lien resolution provider.  While the idea of subrogation and reimbursement may seem quite simple, the task of resolving these demands made against a personal injury settlement can become very time consuming as well as very complex.  “Lien law” is a dynamic and evolving area of the law with each type of lien having nuances and peculiarities along with resolution challenges. 

This is so much so that the health insurance industry has for decades recognized these complexities and turned to lien resolution/recovery contractor vendors themselves to make sure they get paid back after an injury is sustained.  Frequently, an attorney representing an injury victim is left to fight these vendors with one hand tied behind their backs due to a lack of resources, time, and specialized knowledge.  The recovery vendors business model relies upon this to make it much more difficult than it needs to be for trial lawyers. They know it can be overwhelming and they exploit that to their own advantage. So, the first question to ask yourself is do you want to take on large well-funded recovery vendors or partner with a lien resolution group who has the requisite expertise to fight fire with fire? 

Partnering with a well-qualified lien resolution group minimizes a law firm’s operating expenses. Every business seeks to decrease operating costs and increase efficiency. This can be accomplished by outsourcing all the time-consuming lien resolution functions. The large amount of time and effort a personal injury law firm devotes to post-settlement lien resolution issues typically creates a loss to the firm’s bottom line. Alternatively, outsourcing lien resolution functions allows the lawyer or firm to pass on the cost to the client, in most states, similar to the cost of retaining an expert. A trial lawyer’s valuable time is better spent on moving cases toward settlement or trial and not on cutting through government/private health plan red tape. Which, as stated above, are designed specifically to be difficult or frustrating to navigate.

Hiring a lien resolution group provides your law firm with a powerful partner in the lien resolution process. By partnering with lien resolution professionals, you gain a knowledgeable partner and resource for the lien resolution issues plaguing law firms. Without knowing every potential lien resolution argument and the latest rules/processes associated with health plan liens, attorneys and their staff are prone to inefficiency or worse yet mistakes.

A lien resolution group will have the necessary expertise to accelerate the lien resolution process as well as to get the best possible reduction.  Before moving on the last point, it is important to explore some examples.  Dealing with multiple lien types in a single case can pose significant challenges for even the most experienced trial lawyers as they all will have unique rights of recovery, recovery departments and differing practices related to notice, perfecting, and compromising claims.

For example, someone covered by an employer-based ERISA plan might move to a Medicare plan after losing their job due to the injuries they suffered.  These plans will have different processes to resolve.  You can have a client who is dual eligible meaning you have both Medicaid and Medicare liens.  Both Medicaid and Medicare lien resolution issues are quite complex by themselves – understanding Ahlborn/Gallardo for Medicaid and Medicare compromise/waiver processes for Medicare.  Another problematic area can be ERISA lien resolution and the impact on applicable lifetime coverage limits and future care denials. 

Given the ever-shifting legal landscape of lien resolution, lawyers must keep up to date in a variety of ways from Medicare-to-Medicare Advantage and Medicaid.  Add in ERISA, FEHBA, military, hospitals, provider, and private health insurance liens and you have a tremendous amount of law to keep up with and necessary analysis of the issues to get it all correct.  For a lawyer handling a personal injury case, there are a multitude of questions to answer related to each lien such as:

  • What are my legal obligations as plaintiff’s counsel and am I personally liable?
  • When looking at the client’s net recovery, are they made whole and is full reimbursement to the lien holder proper?
  • Is there a lien?  Reimbursement obligation?  Just a debt?
  • What standard reductions are provided by state or federal statutes for the applicable lien?
  • What other reductions of a lien or reimbursement obligation may be available to the client such as legal defenses, compromise/waivers or offsets?
  • Is the reimbursement obligation owed limited to past payments or does it also include future payments? 
  • Are there any state specific laws peculiar to the jurisdiction that impact lien resolution for the client?
  • For non-government benefit plans, what law applies?  State or federal?  Is it governed by ERISA, FEHBA, FMCRA or state law?  Combination of laws?
  • Who is the plan administrator and recovery vendor for non-government plans? 
  • Can the Plan or vendor actually prove it is the type of plan it claims to be? And its recovery rights under the law?

Proper expertise and a team to issue spot these kinds of problems along with powerful negotiation strategies can make sure the end result is the best possible outcome and is in the injury victim’s best interests. 

Lastly, the importance of an outstanding resolution result for a lien can’t be overstated.  Getting outstanding results when it comes to lien resolution leaves the client with a positive, lasting impression at settlement. Clients who are not properly educated about lien resolution, don’t understand these obligations, and have to pay back too much are often frustrated and discontent with the end result. A client’s poor impressions post settlement can affect a lawyer or law firm’s reputation in the community. Ultimately, client satisfaction with regard to the resolution of lien obligations may produce repeat business or boost new client referrals for a lawyer or law firm.

Ethics of Outsourcing Lien Resolution

Given the fact that litigating trial lawyers focus on personal injury law (proving causation, liability & damages), they may require outside assistance with certain areas beyond their scope of representation.  Historically, personal injury law firms have sought the help of outside legal counsel along with non-attorney specialists to professionally and efficiently deal with a variety of complex issues that arise at settlement.  Lien resolution is no different than when an attorney seeks the assistance of experts in other complex areas of law that he or she may be unfamiliar with.

For example, such outsourcing occurs regularly when an attorney is faced with dealing with probate, guardianship, government benefit preservation, tax, or bankruptcy situations that can and often do arise out of an underlying personal injury matter.  Personal injury attorneys also frequently engage experts to help with accident reconstruction, valuation of economic damages and Medicare experts.  Subrogation experts are just one more type of expert that a personal injury lawyer can turn to that will enhance the bottom-line net recovery while helping to navigate the pitfalls commonly encountered during the resolution process. 

The law governing health insurance subrogation claims are often litigated and are complicated as well as extensive.  ERISA, the Medicare Secondary Payer Act, Medicaid, FEHBA and other types of private insurance liens are specialties unto themselves; each rest on their own statutory and regulatory authority, can be governed by different state regulations and can often exist in concert with each other on the same case.  Additionally, the fact that oftentimes a personal injury victim will have multiple different types of liens asserted against their recovery, significantly complicates the lien resolution function.  A good example of this is Medicare where Parts A/B will have a conditional payment obligation to be satisfied, a Part C Advantage Plan lien (which Medicare itself doesn’t provide information about) and then a Part D prescription plan which could have a claim as well.  All stemming from one accident.  If a client has treated over the course of years post injury, they could have jumped between these plans each year.  

Therefore, it makes sense to ethically allow trial lawyers to outsource this function.  This is especially so to get the best possible outcome for the client and because liability falls on the trial lawyer to make sure that all subrogation claims, reimbursement obligations and liens are resolved in accordance with the law. 

Before moving away from the point of liability, it is important to realize that as a trial lawyer you can expose your client to litigation and possibly loss of health care coverage by failing to pay a valid lien holder.  In addition, a personal injury lawyer might be guilty of legal malpractice by paying a lien holder who doesn’t have a valid claim or by reimbursing a lien holder too much.  And worse yet, in the case of Medicare conditional payments or Medicare Advantage liens, you could be held personally liable for double the lien amount under the Medicare Secondary Payer Act’s double damages provision.  To further reinforce the point, ABA Model Rule 1.15, in the comment (4) states: 

“Paragraph (e) also recognizes that third parties may have lawful claims against specific funds or other property in a lawyer’s custody, such as a client’s creditor who has a lien on funds recovered in a personal injury action. A lawyer may have a duty under applicable law to protect such third-party claims against wrongful interference by the client. In such cases, when the third-party claim is not frivolous under applicable law, the lawyer must refuse to surrender the property to the client until the claims are resolved. A lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party, but, when there are substantial grounds for dispute as to the person entitled to the funds, the lawyer may file an action to have a court resolve the dispute.”

Many states have ethical rules or opinions which mirrors Model Rule 1.15 which can be read to impose a duty upon trial lawyers to safeguard disputed funds, for example, when a lien holder claims more than they are entitled to from a settlement, judgment, or award.  Making this area even more treacherous for personal injury law firms.  In addition, Model Rule 1.1 requires a lawyer to have the requisite knowledge, skill, thoroughness, and preparation necessary for lien resolution if they undertake the responsibility.  Under my reading of 1.1’s comments, if a lawyer lacks the necessary expertise to resolve liens, then they must ensure competent representation through other means, such as by retaining other experts. 

Since resolving health care liens is complex from a procedural and legal perspective, a personal injury lawyer who lacks necessary knowledge, experience, and expertise to effectively resolve health care liens potentially jeopardizes the client’s interests in their settlement and creates professional liability for himself/herself as well as the firm. 

That brings us to the question at hand, what are the ethical rules guiding the outsourcing of lien resolution services to experts?  The ABA’s Formal Ethics Opinion 08-451 is a great starting point for the analysis.  While it does not address lien resolution directly, it does give the guiding framework for outsourcing.  The operative provisions of the ethics opinion state:

“A lawyer may outsource legal or nonlegal support services provided the lawyer remains ultimately responsible for rendering competent legal services to the client under Model Rule 1.1. In complying with her Rule 1.1 obligations, a lawyer who engages lawyers or nonlawyers to provide outsourced legal or nonlegal services is required to comply with Rules 5.1 and 5.3. She should make reasonable efforts to ensure that the conduct of the lawyers or nonlawyers to whom tasks are outsourced is compatible with her own professional obligations as a lawyer with “direct supervisory authority” over them.

In addition, appropriate disclosures should be made to the client regarding the use of lawyers or nonlawyers outside of the lawyer’s firm, and client consent should be obtained if those lawyers or nonlawyers will be receiving information protected by Rule 1.6. The fees charged must be reasonable and otherwise in compliance with Rule 1.5, and the outsourcing lawyer must avoid assisting the unauthorized practice of law under Rule 5.5.”

To summarize, if you are going to outsource you must remain ultimately responsible for the work and provide “direct supervisory authority” over those to whom you outsource to.  You must protect confidential information and ensure that the provider who will be outsourced to is competent and suitably trained.  Disclosure and informed consent of the outsourcing should be obtained from the client. 

While that is the general framework, some states have further defined what is ethically required when outsourcing lien resolution.  One great example of this is New York.  In an opinion issued in July of 2008, the NYCLA Professional Ethics Committee permitted New York lawyers to retain an outside lien resolution law firm and charge its fee as an expense of litigation paid by the client.  According to the opinion, NYCLA, Ethics Op. 739 (7/7/2008), with the client’s informed consent, a personal injury law firm may contract with a lien resolution firm and asses its fee as a cost in a contingency fee arrangement as long as the fee was reasonable. 

The definition of the fee being reasonable was analyzed in terms of “net benefit to the client”.  The example was given that a “lawyer who outsources a complex lien problem to another attorney who, in turn, resolves it for a fraction of the lien amount, gains a net benefit to her client.”  The general parameters of outsourcing in New York were laid out as: 

“It is ethically permissible for a plaintiff’s personal injury attorney to retain a specialty firm to handle the resolution of a Medicare, Medicaid or private healthcare lien on a settled lawsuit. Under the following conditions, the fee for said outside service may be charged as a disbursement against the total proceeds of the settlement: (a) at the outset of the representation, the Retainer Agreement with the client provides that the attorney may do so, and the client has given informed consent thereto; (b) the actual charges are passed on to the client at cost (without any overage or surcharge) and must be reasonable; (c) the transaction results in a net benefit to the client on each lien negotiated; ( d) the transaction complies with all principles of substantive law, including the fee limitations on contingent fees in the New York Judiciary Law and Appellate Division rules; and ( e) the referring attorney remains responsible for the overall work product. If counsel cannot comply with all of the above conditions, the fee for said services should be charged against the attorney contingency fee.”

Another great example is Ohio.  The Ohio Opinion 2009-9 (12/4/09) stated:

“If a plaintiff’s personal injury lawyer retains an outside law firm to provide health care lien resolution services in a settled matter, the plaintiff’s lawyer may use professional judgment as to whether to charge the client for the service as part of the contingent fee or as an expense of litigation. Either way, the client’s consent to the outsourcing and the fee arrangement must be obtained prior to outsourcing the service. Either way, the fees and expenses must be reasonable, not excessive. Either way, the nature and basis of the fee arrangement must be communicated to the client and pursuant to Rule l .5(c) a contingency fee agreement must be in writing. If the outsourced legal fee is included as part of a contingency fee, there is a division of fee among lawyers not in the same firm and that triggers the requirements of Rule 1.S(e). If the outsourced service is charged to the client as a litigation expense, the contingency fee rate must be appropriately set to not result in a duplicative and excessive legal fee charged to a client for a service that is billed separately as an expense.”

Similarly, Utah has directly addressed the outsourcing of lien resolution by personal injury lawyers to lien resolution specialists.  The Utah opinion, 14-01 (2/3/14), addressed two questions.  First, can a lawyer ethically and appropriately outsource lien resolution?  Second, should the fees associated with lien resolution be treated as a “cost” to the client?  The opinion addressed both those questions and found that the answers to both questions were yes.  The opinion stated:

“It is ethical for a personal injury lawyer to engage the services of a lien resolution company that can provide expert advice or to associate with a law firm providing this service.  If properly disclosed in the retention agreement, fee resolution services may be included as “costs” to the client provided the resolution services are professional services equivalent to accountants or appraisers.”

While most states have not directly addressed the outsourcing of lien resolution, the New York, Ohio, and Utah opinions give a general framework to use when deciding to outsource then passing along the fee as a case “cost”.  These opinions all find that it is permissible to outsource and pass along the fee as a case cost  if: (a) the personal injury lawyer’s retainer agreement with the client provides that the attorney may do so and the client has given their informed consent; (b) the fees charged are reasonable and are passed on without any surcharge; (c) the lien resolution service results in a net benefit to the client on each lien negotiated; (d) the outsourcing transaction complies with state specific bar rules and substantive law, including fee limitations for contingent fees; and (e) the referring attorney maintains ultimate responsibility for the work product. 

Therefore, if you desire to outsource lien resolution services the first step is amending your fee contract and providing information to the client about outsourcing these functions thereby securing informed consent.  The remainder of the parameters outlined in these opinions are typically easily met. 


There are strong reasons for outsourcing lien resolution to a team of experts with deep subrogation experience.  First, it makes your law firm more efficient by reducing operating expenses as well as removing the burden on a firm’s staff in terms of time spent on liens.  Second, since health insurance plans and government employ recovery vendors who are their experts a law firm should have its own team of experts to help fight and resolve liens.  Third, and probably most importantly, to make sure that the client’s net proceeds are protected by negotiating the deepest reduction of the amount claimed by a lien holder. 

The Utah ethics opinion mentioned above recognized that in complicated injury cases, with multiple liens, plaintiff counsel bears much responsibility to resolve these liens which can require “substantial expertise”.  The retention and assistance of lien resolution experts serves the “laudable goal” of fair resolution to both the client and lien holder.  The lien resolution services offered, according to the Utah ethics opinion, “are often a significant value enhancement for the client” since many plaintiffs personal injury lawyers may lack the necessary competence to evaluate medical billing.  These services allow a personal injury lawyer the ability to negotiate liens on equal terms with the lienholder’s lawyer by providing expert advice coupled with specialized legal resources for the personal injury attorney. 

In terms of the ethical issues surrounding outsourcing of lien resolution, the burgeoning complexities around lien resolution, potential impact to the client’s net proceeds as well as law firm liability related to liens, leads to the conclusion that outsourcing may be in everyone’s best interest. 

The question then turns to how to make sure outsourcing is done in compliance with applicable rules.  As discussed above, the ABA’s model rules certainly contemplate outsourcing of certain functions by lawyers.  The survey of states that have directly addressed the outsourcing of lien resolution have concluded that it is permissible but with protections put into place to address client confidentiality along with informed consent.  An outsourcing attorney must make sure that the lien resolution firm it hires has the competence, expertise, and suitable training to provide those services. 

Passing along lien resolution fees to the client requires that the client agree to the outsourcing as part of the retainer agreement and that the lawyer obtains informed consent for the outsourcing of lien resolution functions.  The use of a lien resolution group must produce a net positive outcome for the client with the fees being reasonable and no surcharge added on to the fees.  

The health insurance industry has known for decades the benefits of hiring subrogation experts.  A knowledgeable lien resolution partner can help even the playing field to protect your hard work and at the end of the day your client’s recovery.  It makes sense to outsource for all of the reasons enumerated herein and ethically it can be done by adhering to the principles outlined above. 

Jason D. Lazarus, J.D., LL.M., CSSC, MSCC

June 9, 2022

On June 6th, 2022, the United States Supreme Court decided in a 7-2 decision to allow Florida Medicaid, pursuant to Section 409.910 of the Florida Statutes, to recover its lien from all medical damages past and future.  This decision has nothing to do with future eligibility for Medicaid post settlement, that is still protected by special needs trusts, instead, it allows a state Medicaid agency to pursue its lien against all medical damages in the case.  This is a departure from the dictates of Ahlborn which protected a Medicaid recipients’ property right in their settlement as dictated by the federal anti-lien provisions. 

Gallardo argued that the anti-lien provisions in the Medicaid Act prohibited Florida Medicaid from attempting to recover its lien from anything other than the amounts properly allocable to past medical expenses.  The Supreme Court held otherwise finding that it falls within an exception to the anti-lien provisions that served as the pillars of the Ahlborn decision.  Further, the court held that the assignment provisions in the Medicaid Act requires a Medicaid beneficiary, as a condition of eligibility, to assign all rights to payments for medical care from a third party back to the state Medicaid agency.  And states must enact recovery provisions that allow for the state to recover from liability third parties when a Medicaid beneficiary is injured, and Medicaid pays for that care.  While the court upheld the property right and anti-lien prohibitions against recovery from non-medical damages, it held it didn’t protect damages that were for medical care. 

The bottom line of the holding is as follows:

“Under §1396k(a)(1)(A), Florida may seek reimbursement from settlement amounts representing “payment for medical care,” past or future. Thus, because Florida’s assignment statute “is expressly authorized by the terms of . . . [§]1396k(a),” it falls squarely within the “exception to the anti-lien provision” that this Court has recognized. Ahlborn, 547 U. S., at 284.”

Justice Sotomayor’s dissent in Gallardo is right on point about the inequity of the majority’s opinion related to Medicaid liens and from what elements of damages a state agency can recover from: “It holds that States may reimburse themselves for medical care furnished on behalf of a beneficiary not only from the portions of the beneficiary’s settlement representing compensation for Medicaid-furnished care, but also from settlement funds that compensate the Medicaid beneficiary for future medical care for which Medicaid has not paid and might never pay. The Court does so by reading one statutory provision in isolation while giving short shrift to the statutory context, the relationships between the provisions at issue, and the framework set forth in precedent. The Court’s holding is inconsistent with the structure of the Medicaid program and will cause needless unfairness and disruption.”  Justice Sotomayor also recognized that due to the majority’s ruling, many injury victims would have less dollars from their settlement to place into federally-authorized special needs trusts that protect their ability to pay for important expenses Medicaid will not cover.  This is exactly what had been done for the benefit of Gallardo when her case was settled but now she will have less go into that trust since more money will have to go to reimburse Florida Medicaid. 

So, what does Gallardo mean for injury victims? A state Medicaid agency or its recovery contractor can now take the position that the recovery right applies to past and future medicals so when you do an Ahlborn analysis, it would be the appropriate reduction percentage (using a pro-rata formula) applied to the entire value of medical damages to see if there is a reduction in the lien. Pre-Gallardo, some states were already taking that position as well as some recovery contractors. From a practical perspective, in cases with a large life care plan or a lot of future medicals, there may not be a reduction at all in the lien. It is going to be important that the non-economic damages get properly valued with some multiplier times specials to make strong arguments for a reduction. 

In the end, Medicaid beneficiaries will not net out as much from their settlements as they should. Some cases may not be brought, and more injury victims will wind up quickly back on Medicaid post recovery. It is an unfortunate end result and just bad law.

To read the full opinion, click HERE

This decision doesn’t mean though all is lost, but you need experts to help you navigate through the lien resolution minefield. Contact Synergy to help find your way to the best outcome for your client.

To read a whitepaper for a summary of the law pre-Gallardo, click HERE.

June 9, 2022 

Michael Walrath, Esq.

The “reasonable value” of healthcare is an issue that weaves throughout our entire system. Even so, there’s no concrete definition of what exactly is “reasonable value”. Dr. Gerard Anderson of Johns Hopkins University School of Public Health has defined it as 40% to 45% above the cost of care[1]. No-fault insurance statutes in many states define reasonable value in their fee schedules for accident care.[2] Certain TPA’s managing employer-based health plans peg reimbursement at a “reasonable value” defined as a stated percentage above Medicare rates in their plans (often called “Reference Based Pricing” or “RBP Plans”).[3]  Meanwhile, hospital systems and the largest insurers enter into complex Provider Agreements, agreeing in advance to what both parties agree is reasonable reimbursement for hundreds of millions of covered lives in the United States.

Reasonable value of health care also appears, in personal injury actions as evidence of medical special damages caused by a tortfeasor, but under a slightly different definition. The definition of “reasonable medical damages” (the amount owed by a tortfeasor for the medical specials incurred by his or her victim) is arguably distinguishable from the amount owed to a hospital, by a patient. While a certain nexus does obviously exist, other evidentiary issues and considerations exist in tort cases, which do not exist in the simpler, more direct “payer-provider disputes” which are more akin to the hospital lien scenario.   

All States and even Hospitals, are Different

The legal framework around hospital liens is set by statutes and case law interpreting them and varies widely from state to state. Forty states, and the District of Columbia, have enacted hospital lien statues.[4] Because all states are so very different, you must follow the law and the facts of your case, when determining whether a hospital lien is attached to an injury settlement, and in developing the best strategy for reducing hospital liens and debts.

For example, California hospitals enjoy liens against injury recoveries by statute (§3045), which are limited to the lesser of “reasonable hospital charges” or 50% of a limited recovery. The burden is on the hospital to prove the “reasonableness” of its charges when seeking interpleaded funds. Not surprisingly, California law is largely consumer-friendly, in this regard, holding “[t]he full amount billed by medical providers is not an accurate measure of the value of medical services because many patients pay discounted rates, and standard rates for a given service can vary tremendously, sometimes by a factor of five or more, from hospital to hospital in California.” Therefore, the statute requires “that the charges for such services were reasonable.” State Farm Mut. Auto. Ins. Co. v. Huff, 216 Cal. App. 4th 1463, 1464 (2013). Conversely, Ohio is one of the nine states with no statewide lien statute, but the common law is similarly friendly, holding that “[i]t is a settled general rule that a physician or surgeon is, in the absence of an agreement as to the amount of his compensation, entitled to recover the reasonable value of his services. Miami Valley Hosp. v. Middleton, 2011-Ohio-5069, ¶ 1 (Ct. App.); however, the case goes on to cite Supreme Court authority suggesting “customary charges” (i.e., full billed charges) are prima facia evidence of reasonable value absent evidence to the contrary.  

Another example of state law diversity can be found in Florida. Florida hospital liens are a creature of County Ordinance, with only nine of the state’s sixty-seven counties enjoying valid, ordinal lien rights. This is after many counties lost their rights pursuant to the Supreme Court of Florida’s opinion in Shands v Mercury[5] which struck down as unconstitutional, all county lien laws created by Special Act of the Florida Legislature, . Consequently, many Florida hospitals (and indeed hospitals in many other states) have elected to simply create hospital liens against third party recoveries, by contract.

Another state with no statewide lien statute is Pennsylvania. The Superior Court of Pennsylvania has held:

Where, as here, there is no express agreement to pay, the law implies a promise to pay a reasonable fee for a health provider’s services. Eagle v. Snyder, 412 Pa. Super. 557, 604 A.2d 253 (Pa. Super. 1992). Thus, in a situation such as this, the defendant should pay for what the services are ordinarily worth in the community. Id. Services are worth what people ordinarily pay for them… Under the law, the Hospital is entitled to the reasonable value of its services, i.e., what people pay for those services, not what the Hospital receives in one to three percent of its cases. Accordingly, the damage award in this unjust enrichment action simply is unwarranted. In light of the applicable law, the Hospital should be awarded its average collection rate for each year in question. This value would be reasonable. 

Temple Univ. Hosp., Inc. v. Healthcare Mgmt. Alts., Inc., 2003 PA Super 332, ¶¶ 26-27, 832 A.2d 501, 508 – 509.

As a final example of lien law diversity, I turn to Maryland and Virginia. Maryland does have a lien statute which limits liens to reasonable charges, but Maryland is the last of the “all payer” states. Accordingly, in simplified terms, all Maryland patients pay essentially the same amount whether insured, on Medicare, or self-pay Hospital charges in Maryland are vetted and approved by a State Commission, making “reasonable value” arguments nearly impossible. Virginia actually has two different hospital lien statues; one for hospitals operated by the Commonwealth, and a second for all other hospitals. Commonwealth hospital liens are not limited to “reasonable charges” in the main section of the statute, but enforcement provisions limit collection to “reasonable charges.” So arguably, reasonableness is required. Unfortunately, the Attorney General’s Office, who collects upon Commonwealth liens in Virginia, does not agree and insists on full billed charges unless an equitable distribution of a limited settlement is required.

As these diverse examples illustrate, it is critically important to follow the law and facts of your case, in the hospital’s jurisdiction, when it comes to determining the validity of a lien against a given recovery, and the legal definition/interpretation of “reasonable value.”

Reduction Strategies – What IS “Reasonable Value,” Anyway?

Over the past fifteen years, I have worked with and presented to hundreds of lawyers and law firms, in Florida and more recently, nationwide. Despite the previously explored legal diversity regarding the validity of liens and the common-law interpretation of reasonable value, lawyers tend to approach hospital lien negotiations in a surprisingly similar way.  This is basically, a “blind” negotiation of the amount allegedly due, seeking a “discount” from full billed charges. Both sides, unfortunately, frame reductions as “discounts,” as if full billed charges are owed merely because the hospital wrote them on the lien. If nothing else, this semantic misstep sets the wrong tone, and hands all the negotiation leverage to the hospital. Under the statutes, ordinances, and the common law of all but a few states, the true power paradigm is the exact opposite. Patients and their attorneys have the money, and the law expressly limits hospitals to “reasonable charges” and saddles the hospital with the burden of proof. The only proof of reasonableness a hospital can ever muster is that they charge everyone the same rates. However, as we know, less than a few percent of patients pay those amounts and overcharging everyone equally isn’t evidence of reasonableness, anyway. Shockingly, personal injury attorneys allow themselves to be lumped in with those few percent and request “discounts” as if the hospitals are granting favors. Simply put, reframe the negotiation; put you and your client properly in the driver’s seat where you belong.

I start most presentations by asking injury firms what their average reductions are. The typical, average responses are, 1) we never accept less than a 20% discount, 2) a thirty percent discount is about average, and 3) a forty percent discount is a homerun, and we’ll recommend accepting it. Understandably, many clients are indeed happy with a 40% reduction in the amount initially shown on the Closing Statement, especially on large billsas that reduction can be a substantial amount of money. And for the avoidance of doubt, these are average results from years of questions, this is normal so if they sound familiar, that is not a bad thing. However, I do want to share why and how there are deeper reductions available.

“Inverting the Argument”

The answer is simple in theory, a bit more complex in practice. Theoretically, reduction results (notice I do not call them “discounts”) are better when you negotiate “up” from reasonable value of care that is due and owing under most state law, rather than down from the unilateral, arbitrary, and unreasonable full billed charges which nobody ever pays.  

In practice, this theoretical shift requires definition and calculation of the reasonable value of the care rendered. While more complex than simply proceeding with negotiations without any data at all, defining reasonable value and calculating it are not impossible. Case law in most states, and leading hospital billing experts suggest that the “cost” of treating patients, is a reasonable benchmark. Accordingly, a workable definition of reasonable value, and in my opinion the easiest definition of “reasonable value” for Judges and lay-people alike to understand, is “cost of care plus a reasonable profit.” And thankfully, cost of care in the hospital setting is calculable.

Every hospital which accepts Medicare patients (which, because hospitals must treat everyone seeking emergency care, effectively means every hospital in the US) submits, annually, a Hospital Cost Report (CMS Form 2552-210). These Reports contain data detailing the costs incurred and charges billed by every department and can be used to estimate the “cost of care” of any given line item of service on any hospital bill. What is the reasonable value of a CT Scan at Jackson Memorial Hospital in Miami? If the total revenue data and total cost data from JMH’s annual Hospital Cost Report are merged for the CT Scan department, a “cost to charge” ratio can be derived and applied to the charges for any single scan, yielding an estimated and defensible “cost of care,” and then, “reasonable value.” This methodology is used by experts not only in testimony before Congress, but also in studies published in highly respected healthcare journals like HEALTH AFFAIRS[6]. Reports can be obtained:

  • From CMS via FOIA Request (or searched via various online websites/portals)
  • From hospitals directly by subpoena or in discovery (if litigating the hospital lien)
  • From various data vendors online (just google “hospital cost report”)

SYNERGY SETTLEMENT SERVICES uses its proprietary database and algorithm to quickly calculate “cost of care” and “reasonable value” of any hospital bill and uses that analysis to negotiate up from reasonable value, nationwide.

The Lien/Debt Dichotomy

There is a critical difference between a lien and a debt, which dictates not only best practices in reducing/resolving liens, but also the legal and ethical exposure associated with the same. Liens can ONLY be created by statute/ordinance, or by agreement/contract; whereas debts exist whenever a patient has received care which has not been paid for (even if there is no injury case or recovery at all). A “LIEN” is a legal interest in the proceeds being held in Trust; it is merely a security interest in the proceeds (not a legal right to collect money from a patient). Think of a mortgage. When a homeowner borrows money to buy a house, she or he owes a debt to the bank, but the bank also creates a mortgage which attaches that debt to the real property, as security. The bank could loan someone money to buy a house without creating a mortgage, and the person would still owe the bank the same amount as if there was a mortgage. The only difference is the person could sell the house and pay nothing to the bank from the proceeds of that sale. The same is true of hospital debts and liens.

Accordingly, it is important to determine whether a medical bill/account is a LIEN, or a mere DEBT, and if a lien, whether its contractual or statutory, before engaging in negotiations. The steps you take for resolving a lien are different than the steps you take for resolving a debt.

If there is a valid lien against the proceeds, review the language of the statute or contract creating the legal interest in the settlement proceeds (lien). Next, estimate the “reasonable value,” and calculate the “equitable distribution” amount (provider’s pro-rata portion of an equitable share of the settlement – usually 1/3 of settlement, or 50% of NET). Then lastly, negotiate for the better/lower of “equitable amount” or “reasonable value.” And remember, many lien statutes and some contractual liens obviate or codify “equitable distribution” formulae – always follow the applicable law/language.

If there is not a valid lien against the proceeds, the best strategies to employ are different. First, I strongly recommend obtaining written confirmation that the provider is not pursuing a lien against the client’s settlement. Next, determine if your client even wants to resolve the “mere debt” from the settlement proceeds (remember, you have no ethical responsibilities towards ordinary creditors). If not, you may disburse proceeds upon demand, but I do recommend obtaining signed acknowledgment of the debt, from your client. Only if your client does wish to resolve the debt from her or his proceeds (which I recommend you advocate for), should you negotiate for reasonable value or an equitable reduction. But importantly, note that absent an agreement otherwise, equitable reduction merely resolves liens, as a matter of law. Accordingly, be sure to include language that the provider agrees to accept the equitable amount as “payment in full,” to release all debt.

Responsibility to “Discover” Liens?

Generally, it is a lienholder’s responsibility to put you on notice of their lien. However, Ethics Committees often impute some level of due diligence onto Injury Attorneys in these, as in most other, circumstances. To minimize exposure, I always recommend Injury Attorneys ask all known medical providers if they are pursuing lien rights and if so, to provide documentation of the same. If providers confirm they are not pursuing a lien, it is up to the client whether to pay from proceeds, or not. If a provider confirms they are pursuing lien rights (and provide evidence of such rights in the way of a properly filed HOSPITAL CLAIM OF LIEN or a contractual lien signed by the client), you must hold the encumbered proceeds in Trust and either negotiate a release or adjudicate the lien, if negotiations impasse. And lastly, if a provider refuses to respond or refuses to provide documentary evidence of their lien, I recommend sending several written requests, including deadlines for provision of evidence of a lien and a date for distribution. As a rule of thumb, the more evidence of your due diligence, the better. So, I typically conclude my efforts with a NOTICE OF WAIVER OF LIEN RIGHTS, advising again that any alleged rights will be waived, and monies will be disbursed, on a specific date.


In conclusion, it is ultimately YOUR responsibility to determine if a medical bill is a “lien” or a mere “debt.” Liens are third-party “security interests” in the money you are holding in Trust; you must protect them, and you may not be the “sole arbiter” of a lien dispute. If lien amounts are not agreed in advance of care being rendered, your client owes only the “reasonable value” of the care they received. And that “Reasonable Value” is most easily defined and calculated as the “Cost of Care” plus a “Reasonable Profit.” And finally, always remember that SYNERGY SETTLEMENT SERVICES compliantly negotiates hospital and provider liens nationwide, so you don’t have to spend the time doing so. We are your strategic partner, ensuring you avoid all the many ethical and legal pitfalls of hospital lien resolution, while efficiently reducing hospital liens to an objectively reasonable amount,  protecting your clients’ well deserved and hard-earned recoveries.   

[1] GERARD F. ANDERSON, PhD is a professor of health policy and management and professor of international health at the Johns Hopkins University Bloomberg School Public Health, professor of medicine at the Johns Hopkins University School of Medicine, director of the Johns Hopkins Center for Hospital Finance and Management. His work encompasses studies of chronic conditions, comparative insurance systems in developing countries, medical education, health care payment reform, and technology diffusion. He has directed reviews of health systems for the World Bank and USAID in multiple countries. He has authored two books on health care payment policy, published over 250 peer reviewed articles, testified in Congress over 40 times as an individual witness, and serves on multiple editorial committees. Prior to his arrival at Johns Hopkins, Dr. Anderson held various positions in the Office of the Secretary, U.S. Department of Health and Human Services, where he helped to develop Medicare prospective payment legislation. See

[2] In Florida for example, reasonable charges for non-emergency room care are defined as 200% Medicare, while the reasonable value of care rendered in the Emergency Room is 75% of the hospital’s billed charges.

[3] See American Hospital Association, Fact Sheet: Reference Based Pricing at

[4] Ala. Code § 35-11-370; Alaska Stat. § 34.35.450; Ariz. Rev. Stat. Ann. § 33-931; Ark. Code Ann. § 18-46-101; Cal. Civ. Code § 3045.1; Colo. Rev. Stat. Ann. § 38-27-101; Conn. Gen. Stat. Ann. § 49-73; Del. Code Ann. tit. 25, § 4301; D.C. Code § 40-201; Ga. Code Ann. § 44-14-470; Haw. Rev. Stat. § 507-4; Idaho Code Ann. § 45-701; 770 Ill. Comp. Stat. Ann. 23/1; Ind. Code Ann. § 32-33-4-1; Iowa Code Ann. § 582; Kan. Stat. Ann. § 65-406; La. Rev. Stat. Ann. § 9:4751; Me. Rev. Stat. tit. 10, § 3411; Md. Code Ann., Com. Law § 16-601; Mass. Gen. Laws Ann. Ch. 111, § 70a; Minn. Stat. § 514.68; Mo. Ann. Stat. § 430.230; Neb. Rev. Stat. Ann. §§52-401 & 52-402; Nev. Rev. Stat. Ann. § 108.590; N.H. Rev. Stat. Ann. § 448-A:1; N.J. Stat. Ann § 2a:44-35; N.M. Stat. Ann. § 48-8-1; N.Y. Lien Law § 189; N.C. Gen. Stat. Ann. § 44-49; N.D. Cent. Code Ann. § 35-18-01; Okla. Stat. Ann. tit. 42 §§43 & 44; Or. Rev. Stat. Ann. § 87.555; R.I. Gen. Laws Ann.§§9-3-4 to 9-3-8; S.D. Codified Laws § 44-12-1; Tenn. Code Ann. § 29-22-101; Tex. Prop. Code Ann. § 55.001; Utah Code Ann. § 38-7-1; Vt. Stat. Ann. tit. 18, § 2253; Va. Code Ann. § 8.01-66.2; Wash. Rev. Code Ann. § 60.44.010; Wis. Stat. Ann. § 779.80

[5] “The Alachua County Lien Law, ch. 88-539, Laws of Fla., is a special law which creates a lien based on a private contract between a hospital and its patient, and is thus unconstitutional under Art. III, § 11(a)(9), Fla. Const.”
Shands Teaching Hosp. & Clinics v. Mercury Ins. Co., 97 So. 3d 204, 207 (Fla. 2012)

[6] See Extreme Markup: The Fifty US Hospitals With The Highest Charge-To-Cost Ratios

April 7, 2022

Jason D. Lazarus, J.D., LL.M., CSSC, MSCC

Some clients, post-accident, may have switched from Medicare Parts A/B over to a Part
C Medicare Advantage Plan. Therefore, even if you have gone through the resolution process
for your client and gotten the Medicare conditional payment related issues dealt with, you might
not be finished. What lurks out there is that a Part C Advantage Plan (hereinafter MAO) may
have paid for some or all of your client’s care. You may wonder how that is possible when you
were told that the client was a Medicare beneficiary and Part A/B was paid back for conditional

For more information, read this excerpt from my book ‘The Art of Settlement‘.

December 6, 2021

By: Teresa Kenyon, Esq.

In HMS Holdings LLC v Ted A Greve & Associates P.A. et al, 2021 WL 5163308, an ERISA self-funded health plan was denied a temporary restraining order (TRO) on settlement funds., The court found that the health plan did not present sufficient evidence to satisfy all necessary requirements to issue a TRO, including that the TRO was required to prevent irreparable harm. This was mostly due to the fact that the health plan delayed in bringing the action and that nine-month delay in bringing suit supported the conclusion that irreparable harm will not be suffered in lieu of a temporary restraining order.

The injured party was in an automobile accident and the ERISA health plan paid over $100,000 in medical benefits. The settlement was limited to $100,000. The injured party notified the health plan of their pursuit of a claim against the tortfeasor and asked the plan to prove its self-funded status as otherwise the plan would not have a right to a recovery under North Carolina law.

The ERISA plan filed the ERISA action asking for the TRO and preliminary injunction to restrain the injured party from “wasting, disbursing, spending, converting or comingling” the settlement funds. The ERISA plan expressed concern that if the injured party dissipated settlement funds on non-traceable items, then the health plan would be deprived on its right of recovery. The ERISA plan cited the US Supreme Court’s Montanile case as its support. Montanile v. Bd. of Trustees of Nat’l Elevator Indus. Health Benefit Plan, 136 S.Ct. 651 (2016).

The court noted that when evaluating a request for a TRO, the plaintiff must demonstrate that: (1) it is likely to succeed on the merits; (2) it will likely suffer irreparable harm absent an injunction; (3) the balance of hardships weighs in its favor; and (4) the injunction is in the public interest. The ERISA plan argued that it would suffer irreparable harm because under Montanile, it can only obtain equitable relief against identifiable proceeds. The ERISA plan argued that if the court did not issue an order preventing the firm / injured party from transferring or comingling funds then their pursuit of a recovery would be out of the reach of an ERISA action.

The court stated that irreparable harm was not apparent because the ERISA plan’s injury could be remedied in the ordinary course of litigation. This was especially the case because the health plan had pled multiple alternative causes of action in its Complaint that did not rely on ERISA and those theories of liability did not appear to be limited to equitable relief.

The court also stated that the ERISA plan’s delay in bringing a lawsuit and/or the TRO may indicate the absence of irreparable harm. Although the ERISA plan claimed that it was doing what the Supreme Court required them to do, they were not immediately suing to enforce its lien as the Court required. The court noted that more than 9 months had passed from when the injured party notified the ERISA plan of the settlement. A long delay in pursuing their claim indicated that speedy action, in the form of a TRO, was not required to protect the health plan’s rights.

Interestingly, the court said that it is hesitant to issue a decision that could be interpreted to require such parties to delay distribution of personal injury lawsuit proceeds for months on end to preserve the viability of potential subrogation/reimbursement claims under ERISA, thereby appearing to have sympathy for the injured party and a delayed disbursement of settlement proceeds. Shortly thereafter, the court expressed sympathy for the health plan because if there is a wrongful double recovery to the injured person then it would be a miscarriage of justice. The court acknowledged that the health plan is in a difficult position with ERISA requiring the request of equitable relief by filing suit immediately or risking loss of the ERISA claim. In the end, the ERISA plan did not obtain the TRO and will be forced to decide whether it pursues its claim in another manner.



The Synergy Settlements team will work diligently to ensure your case gets the attention it deserves. Contact one of our legal experts and get a professional review of your case today.

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