Medical Lien Finance Companies/Civil Proceeding Advance Payment Contracts
On April 20, 2023, Indiana Governor Eric Holcomb Signed H.B. 1124 which goes into effect on July 1, 2023. Under this regime, the existence of medical lien finance companies and medical networks is now discoverable and in fact, a required disclosure to the parties in a civil action and insurers.
What are Medical Lien Finance Companies?
Medical lien finance companies provide funding on behalf of the plaintiff and collect funds once the case settles. Often, a plaintiff’s attorney will treat medical lien finance as insurance by referring Plaintiffs to pro-plaintiff providers who participate in a medical lien program where the lien company pays the medical expenses at a reduced rate in exchange for a lien to inflate the billed value in the civil suit. However, there is a difference between traditional collateral sources (i.e. insurance) and a medical lien finance arrangement. In Ortiviz v. Follin (D. Colo. 2017) the court held that a medical lien company “does not compensate [its client]” and “steps into the shoes of the medical providers and becomes [its client’s] creditor.”
Practically speaking, a dispute can arise during a civil suit regarding the discoverability of the actual amounts paid by the medical lien finance company. Defendants often advocate for the discovery of this information citing relevancy grounds under the standard measure of damages for medical expenses requiring that they be necessary and reasonable in value. Indiana, along with other states, has maintained that both the amounts paid, and the amounts billed is discoverable and may be produced as evidence to help determine the reasonable value of medical expenses that the plaintiff is entitled to recover. The amount paid by the litigation funding company may be a frame of reference as a “paid” value to determine the reasonable value of the plaintiff’s medical expenses.
What Does H.B. 1124 Provide?
Indiana H.B. 1124 amends the law concerning civil proceeding advance payment (“CPAP”) transactions. A CPAP is a nonrecourse transaction in which a CPAP provider provides a funded amount to a consumer claimant. A CPAP is offered for limited purpose and cannot be used to prosecute the consumer claimant’s civil claim and is to be sourced from the proceeds obtained by settlement, judgement, or other resolution. The substance of the agreement prevails over form and allows for agreements identified as purchases or an assignment of an interest in the civil proceeding. The critical component is that the agreement allows the CPAP provider a contingent right to recover from the proceeds of the civil proceeding.
Under the new authority of H.B. 1124, codified at Indiana Code § 24-12-4-2, a claimant (or the claimant’s attorney) is required to provide written notice within in a reasonable time after entry into a CPAP agreement to:
- Each of the other parties in the civil proceeding; and
- Each insurer that has a duty to defend another party in the civil proceeding; written notice that the consumer claimant has entered into a CPAP contract with a CPAP provider.
The written notice is required even where the parties in the civil proceeding are aware of the existence or contents of the CPAP agreement.
Now, in a civil proceeding in which a consumer claimant is a party, the existence and contents of the CPAP contract are subject to discovery under the Indiana Rules of Trial Procedure by: (a) A party other than the consumer claimant, or (b) an insurer that has a duty to defend another party in the civil proceeding.
There are caveats to the pending regime. Despite mandatory disclosure, the written notice disclosing the CPAP agreement is not admissible as evidence in court proceedings. See Ind. Code 24-12-4-2(e). Consumer Claimants with CPAP agreements are also permitted to seek an order from the court in which the civil proceeding is pending excusing the consumer claimant from the duty to disclose the CPAP agreement.
For more information or questions on how this pertains to cases you are handling please contact an attorney at Kopka Pinkus Dolin.