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Personal Injury, Letters of Protection and Mediation

February 21, 2013

“Letters of Protection”, commonly referred to in the personal injury practice as “LOP’s”, are a long-time fixture of this specialized practice of law.   Simply defined, such a letter-contract addressed to a specific healthcare provider formally agrees to pay for a specified healthcare service directly from monies derived from some future legal recovery.

Although originally serving a laudable purpose for necessary healthcare, LOP’s, in lieu of healthcare insurance,  are on the increase.  More important to this discussion, they are posing increasing difficulties with negotiation of injury cases.  And as the most successful forum of injury negotiation, mediation success is one of the current victims.

Like any other contract, the terms of such “letters”, the parties to them and their intended purpose have greatly evolved over decades of use.  And, some such changes can be tracked directly to changes in healthcare delivery, simple insurance availability, the economy and claims tactics of the personal injury practice.  Further, change will undoubtedly continue as changes in each of these inherent factors, and others, also change.

Lawyers on both sides of the practice, and insurance professionals have long relied upon the billing of an injured person as a direct indicator of their actual personal injury.  Simply stated, the greater the amount of the billing, it was presumed, the more injured the person.  It was also accepted, therefore, that any future trier of fact, jury or judge, would rely upon the amount of those bills in making their judgment about monies to be awarded in “fair compensation” for any personal injury.  Rumors, myths, and some truths thus evolved that individual personal injury cases had a dollar-value, to be sought, or to be paid by insurers, simply based upon some pre-determined multiple of the medical bills.

Of course, that use and evaluation using medical bills pre-supposed the validity of the treatment, the cost of that treatment and the treater.  Thus, changes in each of these factors have entered the debate about the use, and abuse, of LOP’s.

How reliable were (or now are) LOP’s as comparable medical billing to other forms of billing?

Letters of protection arose historically and still arise currently, when an injured person has either no insurance or insufficient insurance coverage to pay for all necessary medical care allegedly arising from a negligent injury.  Physicians and healthcare facilities then and now were and are faced with offering either no medical treatment or trying to find some acceptable method of deferred payment that seems reasonable under the circumstances.

Such an altruistic goal by the medical profession seems unassailable.  But, increasingly, what started as a really good idea has taken on problems never envisioned.

How did we get here?  What changed from a “good idea” to allegedly even severe abuse?

In “olden times” few physicians or hospitals would think of turning away any person needing healthcare, whether they could pay or not.  A bill was delivered, whether to be paid or not.  Times changed.  (Doctors stopped coming to patient’s homes,  every healthcare provider or facility turned to specialization, etc.  i.e., Lots of other reasons, but not for this article.)

In “olden times” commonly available medical service costs were well within the income ability of the average worker.  But, medicine and medical services also evolved.  Times changed. And the average worker increasingly wanted only “the best” available, regardless of need.  And, the best of anything always costs much more money.

All healthcare  increasingly required substantial wealth, and most of all, healthcare insurance became commonplace to everyone!

Few, today, dare go without some form of healthcare insurance.  And thus, today, just try to obtain any major medical service without presenting evidence of some kind of healthcare insurance, regardless of your personal wealth!

In “olden times”, the cost of insurance was such that anyone could carry reasonable healthcare coverage and even specialized additional coverages.  Times changed.  The combination of increased cost of medical services and an increased demand for services and thus, the increased insurance cost to pay for the services demanded spiraled into a growing problem for a larger segment of the public:  the uninsured, or under-insured public.

And, of course, inflation has paid a monster role.  Coverage (and Tort) limits that were “fair” years ago, by time alone, have ceased to be relevant to the realities of today’s prices.

And, increasingly, this cost of health insurance became another perk of and then burden of the employer, not the employee.  Specialized personal insurance disappeared or became cost-prohibitive.

Now increasingly Americans find ourselves embroiled over whether any employer can carry the cost of such obviously necessary insurance.  Many employers cannot and many do not.  Still more public without insurance.

In the meantime, life goes on.  People still are being injured by negligence.  However, even more such people increasingly have no insurance!  And, the cost of care is not within the means of most who have even some insurance.

And the pool of healthcare providers willing to work for free has simply vanished.

Naturally, years ago some forward-thinking attorney, somewhere and taking the good-idea of the “contingent fee” for the medical profession, came up with the idea of getting their client to agree to pay a given healthcare provider for services today with monies likely to come from a legal recovery in the future, but only if such a recovery was made.  It then only became necessary to find a healthcare provider who preferred performing the service for some future possibility of a fee than provide no service.  (Or, perhaps have little then to do?)

As you might expect, the latter, the agreeable healthcare provider’s acceptances, also evolved.

Originally, well-qualified and busy healthcare providers, of course, usually declined.  They had no need to accept anything but full payment, and with a guarantee of payment before they would perform the service.  Fortunately, there was and always will be an abundance of less-busy (hopefully equally qualified or soon will be) such providers who prefer to gain some future income (and experience?) and at the same time fill an obvious need.

However, even these sources fade with time.  Every attorney has experienced the welcoming arms of the new practitioner only to observe the inevitable change of that same practitioner to become increasingly less welcome as that practitioner’s practice and income grows!

But, the original participants to the LOP also evolved.

Early LOP’s required only the client’s signature.  Increasingly, (and with some serious ethical questions), some healthcare providers will demand the co-signature of the client’s lawyer.  (Another full segment for another day.)  Obviously, becoming a signatory to a contract totally removes the ability of the attorney to assist in controlling the reasonableness of the contract!

And, now many acceptors of LOP’s are increasingly alleged to have questionable credentials to provide necessary, much less qualified services that should be provided for injury cases.  And, many seem to be providing services in excess of any reasonable need or at charges far beyond reasonable for the alleged care they purport to offer.

But, as “qualified” healthcare providers are unavailable, such lesser providers seem to fill a healthcare need of the public.  The legal problem is they become suspect in eyes of the legal community as “necessary” and thus become an impediment to resolution inclusive of their payment.

And, of course, terms of the original LOP’s have changed.

An alarming current trend is for some accepting healthcare providers to now require a contractual stipulation term that they will not take health insurance payments, even if available. Why? Certainly a red flag? Some have raised the issue that the billings of such LOP’s are always higher than if other forms of payments are accepted.

And, with no outside review of medical charges, as you would expect, some users of LOP’s are apparently charging amounts “obscenely” in excess of the usual and customary charges.

There is little that either side of the legal system can seemingly do about this last mis-use of what began as a laudatory practice of providing services for those who could not otherwise afford them.  Patients often obtain care before seeing an attorney.  Some areas have no other sources of healthcare even available as an option!

And thus  the increasing LOP’s is becoming the most current “villan” in a personal injury mediation.

Rather than an indicator of an injury, increased billing because of LOP’s has become a symbol of overreaching, at best, and fraud, at worst.  As such, rather than an aid to resolution, it often becomes an obstruction.

The more “defensible” a case, the more likely a trial.

Long the subject of useful cross-examination, the LOP has been a veritable major “weapon” of the defense.  What better way to question the true motives of a healthcare provider than to suggest his/her testimony is “tainted” because they remain hopeful for a recovery so their own bill can be paid!  And, of course, if any billing is suspect, is not the injured party also suspect?

Now, however, if those usual reasonable medical billings are challenged as inflated, added to the other issues, it only adds more fodder to the defense. “Unreasonableness” is the major weapon of any attorney.  And, it can contaminate an otherwise valid claim.

Worse, for the sake of mediation, it is clearly tainting the evaluations of the defense for any attempt at resolution.  In short, if they do not “believe” the bill or the provider, (and they already don’t believe the claimant), it is going to be a very rough mediation (or any other negotiation).

Now you see the impediment for mediation.  Or, for that matter, any mutual effort at any negotiation of any kind.  Too much un-believability and too much unreasonableness equals a sure trial.

If the defense, defendant, attorney or insurance carrier, simply will not accept the credibility of any healthcare provider, than it is almost as bad as having no healthcare provider.

Maybe worse, because now a trial that could have been averted with reasonable billing may be required because of the LOP.

What can be done?

To the extent possible, it begins with the Plaintiff’s Bar.  Each attorney must consider carefully before “sending” any client for treatment where LOP’s are required.  Particularly, if such treatment becomes any “team-approach”; a chain of referrals set in motion by the first.  Equally important, if you must participate in such a referral to obtain necessary healthcare, try to select your LOP professionals with great care and use only those who use the process only to collect a fair fee for services actually necessary for the treatment necessary.

Avoid becoming a party to any LOP.  Retain your equitable ability to question any excessive bill.

For those of your clients who have already entered into such agreements before retaining you, counsel your clients with similar cautions about continuing with any unnecessary care or with any professional who might be perceived as abusive to the process.  Let them know of the legal issues that unnecessary or unreasonable care or costs of care raise.

Monitor excessive treatment.  And, beware of any “treatment” consisting of very expensive non-surgical modalities.   Suggest second opinions if unsure.

And avoid the temptation of simply “running up the bills” for any tactical purpose.  It is becoming a distinct disadvantage, not an advantage.  If your bills are so high that a reasonable offer will not allow resolution, you have created a problem of a mandatory trial for yourself and your client.

For the Defense Bar, you must begin to segregate clearly abusive LOP’s, from those who necessity and use arose solely from the lack of insurance.  Penalizing fair use will backfire at trial.  Too many on most juries are going to be uninsured themselves!

Give fair, advance warning to your opposition of those providers or those billings that you know will pose an impediment to resolution.  Many attorneys will cooperate if they can assist in a fair recovery for their clients.

And be careful of lumping all LOP-services in one category.  There still are those well-meaning physicians and medical facilities who treat only persons who really need treatment and charge only the customary rate for their valid services.  And, then, they also wait patiently to be paid.  If they ever are.

The public needs these healthcare professionals.  They may be younger or new-in-town, but they perform a critical service to us all.

There is no easy solution.  Clients will continue to require treatment, whether insured or not.  But, prudence in guiding the proper choice and/or evaluation of LOP treatment and treaters may help to reverse this recent and unhealthy trend.  No one is profiting by it for now.

In the meantime, keep this LOP issue in mind for your next mediation.  Your mediator is already suffering with the issue with both sides.

Dan, from Walt Disney World, Orlando-Kissimmee, Florida

4 Comments leave one →
  1. March 5, 2013 1:13 pm

    Great article, Dan! This is definitely an issue that has become a real problem. So, what are your thoughts in relation to physicians that accept LOP’s and their above-normal charges in light of the contingency nature of the charges? Much like the Lodestar method for attorney’s fees, where the courts specifically allow a multiplier given the contingent nature of an attorney’s fee, so shouldn’t a doctor be allowed to charge a higher than normal rate due to the possibility that they may never see a single dollar for any given patient, or the possibility, and many times a reality, that they may have to take a significantly-reduced amount on their bill? (This doesn’t happen to the doctors on any of my cases, of course! 🙂

    • March 5, 2013 2:07 pm

      Jed, Thanks. You make a good point. However, some would argue that the “usual fee”, when paid by a governmental or private insurer, is always heavily discounted. Therefore, if LOP’s charged only the “usual fee” and were paid, fully, then they would be well rewarded for their LOP accommodation. The larger issue for trial lawyers, for insurers and the public, is the appearance of “over-charging” and the resultant loss of other credibility of the provider.
      Thanks for your input! Dan

    • March 5, 2013 2:10 pm

      Thanks for the input. You make a great point. I replied by an additional comment for others to see.
      And, thanks for following my blog.
      Dan H. Honeywell
      Honeywell Mediation
      407-647-5122 (fax)
      Mediation, Inc.


  1. Personal Injury Mediation: Healthcare Billings Are Forcing Unnecessary Trials | Honeywell Mediation

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