A letter of protection (LOP) is a contract between a medical provider and a plaintiff's attorney, and typically the plaintiff, under which the provider agrees to treat the plaintiff on a deferred-payment basis. In exchange, the attorney commits that if the case settles or results in a verdict, the provider will be paid from the proceeds before the client receives the balance. LOPs are a practical solution to a real problem: many PI clients are uninsured, underinsured, or treated by providers whose services are not covered by the plaintiff's existing insurance, and the plaintiff cannot afford to pay out-of-pocket for the treatment necessary to document and support the damages claim.
How the LOP Works in Practice
The LOP is typically prepared by the attorney or the provider and signed by the plaintiff and the attorney. The document designates the attorney as a party who acknowledges the provider's lien and commits to notify the provider before disbursing settlement funds and to honor the lien from proceeds. The provider agrees to defer collection and to not send the account to collections while the case is pending.
Most LOPs are silent on the amount the provider will accept at the time of settlement. The face amount of the lien is the full billed charge for treatment. When the case resolves, the LOP lien negotiation determines whether the provider accepts a reduced amount or demands full payment. The attorney who defers this negotiation until after the settlement is accepted has less leverage than the attorney who begins lien reduction discussions as part of the settlement process.
The Inflated Billing Problem
LOP billing is frequently set at the provider's full chargemaster rate rather than a negotiated, contracted, or customary rate. A plaintiff treated at an LOP orthopedic surgery center for a surgical procedure may have an LOP balance several times the amount Medicare or a commercial insurer would have paid for the same service. Defense counsel regularly attacks LOP billing amounts at trial on the grounds that they do not represent the reasonable value of the services rendered in the market, and some jurisdictions permit the defense to present evidence of the contracted rate or the Medicare rate as the proper measure of the plaintiff's medical damages.
The collateral source rule is the plaintiff's defense to this attack: the rule generally prohibits the defendant from reducing the damages award by the amount of benefits the plaintiff received from independent sources. California, Florida, and most other states apply the collateral source rule to prevent the defendant from introducing health insurance write-off amounts to reduce the damages verdict. However, the rule's application to LOP billing varies by jurisdiction. Some courts have held that LOP billing is not a collateral source benefit and that the defendant may introduce evidence of the actual amount paid or accepted by the provider. Know your jurisdiction's specific position before committing to an LOP billing amount as the primary damages figure.
Negotiating the LOP Balance at Settlement
The primary negotiating lever for LOP lien reduction is the common fund doctrine: the provider's recovery from the settlement was made possible by the attorney's legal work, and the provider should contribute to the cost of that recovery by accepting a reduction. A provider who would have received nothing without the attorney's litigation effort has an incentive to accept a proportional reduction rather than receive zero.
The negotiation framework for LOP reduction typically works as follows:
- Identify the total gross settlement and the total of all liens and case costs that must be satisfied before the client receives any net proceeds
- Calculate the percentage of the gross settlement represented by the LOP balance at full face value, and present that percentage to the provider as the practical argument for reduction
- Propose a reduced balance that leaves the client with a reasonable net recovery and offers the provider a fair return considering the risk the provider took in treating on a deferred basis
- Document the negotiation in writing so that any agreed reduction is memorialized before any settlement funds are distributed
Providers who operate LOP practices at high volume often have a standard reduction protocol they apply to all their cases. Knowing that protocol in advance, from prior cases with the same provider, gives you a starting point for the negotiation. Some providers will reduce to 50 percent of the face balance without extended negotiation. Others insist on a specific floor. The leverage increases when: the settlement amount is low relative to the lien, the client's net after full lien payment would be inadequate, or the attorney has an established relationship with the provider that involves ongoing case referrals.
The Risk Position if the Case Does Not Settle
LOPs are commitments of the attorney as well as the client. If the case does not resolve and the attorney withdraws or the client terminates the representation, the LOP obligation may survive, and both the attorney and the client may have personal exposure to the provider's claim. Review LOP agreements at intake for provisions that create joint and several liability or that permit the provider to bring a direct action against the attorney if the lien is not honored. Provisions that extend the lien to any future recovery by the client, including a recovery through a different attorney, should be flagged and, if possible, negotiated at the time the LOP is executed.
For the complete settlement accounting and disbursement workflow, including how LOP liens are ordered relative to Medicare, Medicaid, hospital liens, and ERISA plan reimbursements, see liens and settlement practice coverage. For how LOP billing affects the case valuation and settlement demand strategy, see the practice development guidance in practice operations. For workers' compensation cases where LOP and comp lien coexist, the subrogation ordering rules in workers' compensation practice address the priority framework.