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“Medical Funding” Serious Threat to Your Product Liability Settlement

Medical Funding Can Reduce Your Product Liability Settlement Proceeds

I received a court filing from the Depuy ASR multidistrict litigation last week, and it reminded me to caution you about the serious financial threat you can face when dealing with artificial hip failures and hip litigation (and of course, other medical device failures like artificial knees and transvaginal mesh). Sadly, this threat comes from third-party companies that appear legitimate, even helpful, but mainly have a naked profit motive for getting involved in your case. These companies often cash in unfairly from all the suffering you endured from you failed artificial hip or failed medical device.

What is Medical Funding?

Think of it as a lawsuit loan, or a loan against your future settlement recovery.  Medical Funding is a medical care financial assistance “service,” and occurs when a third-party company offers to pay the medical bills of a person who is injured by the negligence of others. This could be a car crash case, a failed medical device like a hip, or any other situation where the negligence of someone else caused the injury. If you accept the offer, the company will pay the medical care provider—the surgeon, the hospital, etc.—a percentage of the provider’s billed charges, but usually more than the provider would have been paid by private health insurance, Medicare, or Medicaid. The company then receives an “assignment” from the medical provider that allows the company (potentially) to receive the full amount of the billed charges, which are often much higher than what the company paid for the medical care and higher than what private insurance would have paid. The third-party company will then file a medical expense “lien” on the proceeds of the person’s settlement or jury award.

This is How it Works

Let’s say “Andrea” had hip replacement surgery in 2010, and fourteen months later the artificial hip components failed. Her doctors advised her to undergo revision surgery, but in the past year Andrea lost her job and her health insurance. She simply could not afford the new—and necessary—revision surgery. Enter “Trust-Us Medical Funder, Inc.,” a third-party medical funding company. Andrea meets with “Brad,” a vice-president at Trust Us, and he explains that his company is there to help. Brad says that Trust Us will pay for Andrea’s revision surgery, and will even pay for Andrea to spend three nights in a hotel near the hospital where the revision surgery is to be performed.

Andrea accepts. The revision surgery is a success. Trust Us advances costs for the medical care to the surgeon and to the hospital. A year later, Andrea’s attorney files suit against the manufacturer of the artificial hip. Her claim qualifies under the settlement agreement, and she accepts the terms of the settlement offer. However, she then learns that Trust Us has filed a medical lien for $68,000.00. This figure is larger than the amount Trust Us actually paid for Andrea’s medical care. (In fact, the difference between what Trust Us paid the actual medical providers and the amount of the medical lien is the profit Trust Us stands to make by advancing the medical costs—it is the only reason Brad showed up at Andrea’s house in the first place.)

Medical Funding Can Severely Reduce the Money an Injured Person Receives

In many cases, the large medical lien will be paid from the proceeds of the settlement or jury award. For example, if Andrea settles her case for $200,000.00, she may have to pay the $68,000.00 out of her share of the settlement funds. After legal fees and hard-cost expenses are paid, Andrea will be left with a net amount much less than $100,000.00, which is less than half the gross settlement amount. Let’s say that Trust Us paid half of the $68,000.00 lien to actual medical providers for Andrea’s care; this means that Trust Us will walk away with a cool $34,000.00 profit for advancing costs of the revision surgery. (It should come as no surprise that a backlash on medical funders has occurred, and several lawsuits have been filed against medical funding companies.)

In some master settlement agreements, the defendant-manufacturer agrees to resolve the medical liens for the injured plaintiffs, meaning that the settlement amounts to the injured person will not be reduced by the medical lien payments. In these cases, medical funding companies like Trust Us can threaten the settlement for the person or jeopardize the entire global settlement agreement. At the very least it could delay the injured person’s recovery of needed funds (a speedy recovery is important for most people, but especially “Andrea,” who as you’ll recall lost her job through this period).

That’s where last week’s court document came in. In that case Depuy filed a “motion to compel” against one medical funding company, asking the court to compel the company “to produce information necessary for Depuy to review the company’s lien demands.” Depuy alleges that the medical funding company failed to provide key information in the litigation for Depuy to determine if the medical liens are reasonable. It is just one of many battles that take place in any failed medical product litigation, but the skirmish highlights the financial pitfalls that individuals can fall victim to when moving through a products liability case.

The Takeaway for You

The takeaway is simple: if at all possible do not engage the services of a medical funding company in your products liability case (or any personal injury case). Exhaust every other funding source possible first: private health insurance, Medicare, Medicaid, a kind and generous uncle, even a small loan. If you do not have insurance, or access to Medicare or Medicaid, and no other ability for pay for the necessary corrective surgery, and you are forced to engage the services of a medical funding company, please review the contract carefully (even two or three times), understand the terms of repayment, ask questions, and shop around.

 

Note:  The information provided in this post is not intended to be legal advice and should not be misconstrued as legal advice.  No attorney-client relationship has been created through the presentation of this information. The information provided is publicly available.