Letter of Protection (LOP) in Medical Billing: How It Works, Benefits and Risks
In personal injury and liability cases, medical billing often becomes complicated long before treatment is complete. Insurance companies may delay or deny payment when another party is considered responsible for the injury, leaving patients unsure how to pay for necessary care. This is where a Letter of Protection (LOP) becomes relevant in medical billing.
A Letter of Protection allows injured patients to receive medical treatment without paying upfront, while healthcare providers agree to wait for payment until the injury claim is resolved. For medical practices, billing teams, and patients alike, LOPs act as a temporary financial bridge during settlement or litigation delays.
LOPs are most commonly used in personal injury medical billing, such as car accidents, slip-and-fall incidents, and other negligence-related cases. They are especially important when patients are uninsured, underinsured, or unable to cover out-of-pocket costs while waiting for compensation.
However, while Letters of Protection can improve access to care, they also introduce billing, collections, and compliance considerations for providers. Understanding how LOPs work—and when they make sense—is essential for making informed medical billing decisions.
Blog Outline
- What Is a Letter of Protection (LOP)?
- Who Is Involved in a Letter of Protection Arrangement
- Why Letters of Protection Are Used in Medical Billing
- How a Letter of Protection Works in the Medical Billing Process
- Common Medical Services Billed Under a Letter of Protection
- Benefits and Risks of Using a Letter of Protection
- Legal and Billing Considerations Providers Should Know
- When a Letter of Protection May Not Be the Right Choice
- Conclusion
- Frequently Asked Questions
What Is a Letter of Protection (LOP)?
A Letter of Protection (LOP) is a written agreement in which a healthcare provider agrees to treat an injured patient without upfront payment, and a personal injury attorney agrees that the provider will be paid from the future settlement or judgment of the injury claim. LOPs are commonly used when insurance delays or denies payment due to third-party liability.
In simple terms, a Letter of Protection shifts medical payment from the present to the end of the legal case. Instead of billing health insurance or collecting from the patient immediately, the provider relies on the outcome of the injury claim for reimbursement.
From a medical billing perspective, an LOP is not insurance, not a payment plan, and not a guarantee of payment. It is a settlement-based billing arrangement tied to a legal claim. The provider delivers care, documents services rendered, and waits to be paid once the case resolves. Unlike a medical lien, a Letter of Protection does not automatically attach to settlement funds unless payment terms are met, making it a more flexible but higher-risk billing arrangement.
LOPs are most often used in personal injury medical billing, including auto accidents, premises liability cases, and other negligence-related injuries. They are typically arranged by the patient’s attorney after evaluating the likelihood of recovering compensation.
Because payment depends on a settlement, Letters of Protection require careful consideration by both providers and billing teams. Understanding who is involved—and how responsibilities are divided—is the next critical step.
Although Letters of Protection and medical liens are sometimes confused, they are not the same. A medical lien may attach directly to settlement proceeds depending on state law, while a Letter of Protection relies on a contractual agreement between the provider and the attorney. An LOP offers more flexibility but carries higher payment risk because reimbursement depends on settlement outcomes rather than statutory lien rights.
Who Is Involved in a Letter of Protection Arrangement
A Letter of Protection involves three primary parties, each with a specific role in the medical billing and payment process. Understanding these roles helps clarify expectations and reduce confusion later in the case.
The Injured Patient
The injured patient is the individual receiving medical care. The patient agrees to treatment under a Letter of Protection when they cannot afford upfront payment and are pursuing compensation through a personal injury claim. Although payment is deferred, the patient ultimately remains responsible for the medical charges if the case does not result in a settlement.
The Healthcare Provider
The healthcare provider delivers medical services based on the assurance provided in the LOP. This may include diagnostic testing, specialist visits, therapy, or surgical care. From a billing standpoint, the provider agrees to postpone collections while the injury claim is active, relying on future settlement proceeds for payment.
The Personal Injury Attorney
The personal injury attorney issues the Letter of Protection and manages the legal claim. The attorney agrees to pay the healthcare provider from the settlement or judgment before distributing remaining funds to the patient. However, the attorney does not personally guarantee payment beyond the terms of the agreement.
In simple terms, the LOP connects medical treatment to the legal outcome of the case. Because payment depends on coordination between all three parties, clear communication and proper documentation are essential for successful medical billing under a Letter of Protection.
Why Letters of Protection Are Used in Medical Billing
Letters of Protection are commonly used when traditional insurance billing is delayed or unavailable due to liability issues. In many injury-related cases, health insurance companies may refuse to pay for treatment if another party is considered responsible for the injury. At the same time, the at-fault party’s insurance may not immediately accept responsibility. In many cases, providers also encounter contractual adjustment denials during liability disputes, similar to issues explained in our guide on CO 45 denial code, where reimbursement responsibility is shifted due to payer rules.
This gap creates a billing problem. Patients often need medical care right away, but cannot afford out-of-pocket costs while insurers and attorneys determine who should pay. A Letter of Protection helps bridge this gap by allowing treatment to proceed while payment is deferred until the legal case is resolved.
LOPs are most frequently used in personal injury medical billing, including car accidents, slip-and-fall incidents, workplace injuries outside of workers’ compensation, and other negligence-related claims. They are especially important for uninsured or underinsured patients who would otherwise delay or avoid care.
From a provider’s perspective, an LOP offers a way to treat injured patients without sending bills to collections during an active legal case. However, it also shifts reimbursement from an insurance timeline to a settlement-based timeline, which can take months or longer.
In short, Letters of Protection exist because injury claims complicate the normal flow of medical billing. They provide access to care, but they also require careful consideration of billing risk and follow-up.
How a Letter of Protection Works in the Medical Billing Process
A Letter of Protection changes when and how medical services are billed, but it does not eliminate the obligation to pay. Understanding the basic workflow helps clarify what happens behind the scenes.
The process usually begins after an injury occurs and the patient hires a personal injury attorney. If insurance is not paying for care, the attorney issues a Letter of Protection to the healthcare provider. The provider then agrees to deliver medical services without collecting payment upfront.
From a medical billing standpoint, charges are documented but not immediately billed to insurance or the patient. Instead, the account is tracked separately as a deferred or settlement-based balance. No collections activity typically occurs while the injury claim is active.
Once the legal case is resolved through a settlement or judgment, payment is issued. The attorney pays the provider from the settlement proceeds before distributing the remaining funds to the patient. If the settlement is delayed, billing remains open. If the case fails or settles for less than expected, payment may be reduced or disputed. From a revenue cycle management (RCM) perspective, Letters of Protection require separate tracking and longer accounts receivable timelines.
In simple terms, an LOP pauses the billing timeline while medical care continues. This approach can support patient access to treatment, but it also extends accounts receivable and introduces financial risk that providers must manage carefully.
Common Medical Services Billed Under a Letter of Protection
A Letter of Protection can apply to a wide range of injury-related medical services, particularly when treatment is directly connected to a personal injury claim. Providers who accept LOPs often deliver services that are essential for diagnosis, treatment, and recovery, but may be difficult for patients to afford upfront.
Common services billed under a Letter of Protection include diagnostic imaging such as MRIs, CT scans, and X-rays. These services are frequently required to objectively document injuries and support the legal claim. Specialist consultations—including orthopedic, neurological, and pain management visits—are also commonly provided under LOP arrangements.
Physical therapy and rehabilitation services are often billed under a Letter of Protection, especially when ongoing treatment is required over several weeks or months. In more complex or severe cases, surgical procedures or interventional pain treatments may also be performed using an LOP-based billing structure. These services are frequently managed through specialized workflows used in personal injury and mental health medical billing, where settlement-based reimbursement and extended follow-up are common.
From a medical billing perspective, all services billed under a Letter of Protection must be clearly documented and directly related to the injury. Charges should remain reasonable, well-itemized, and consistent with the services provided, as medical bills are often reviewed or negotiated during settlement.
In simple terms, Letters of Protection are most often used for medically necessary, injury-related care that cannot be delayed, even when immediate payment is not available.
Benefits and Risks of Using a Letter of Protection
A Letter of Protection can be helpful in injury-related medical billing, but it comes with both advantages and risks. Understanding both sides is important for patients and healthcare providers.
Benefits of a Letter of Protection
For patients, the biggest benefit is access to medical care without upfront payment. An LOP allows treatment to continue while a legal claim is pending, reducing the pressure to delay care due to financial concerns. It can also prevent medical bills from being sent to collections during an active injury case.
For providers, LOPs make it possible to treat injured patients who might otherwise be unable to pay. In some cases, reimbursement may be higher than standard insurance rates because there is no contracted fee schedule.
Risks of a Letter of Protection
The primary risk is payment uncertainty. Settlement timelines can be long, and there is no guarantee that a case will resolve successfully. If the claim is denied or settles for less than expected, the provider may receive reduced payment or none at all.
From a billing perspective, LOP accounts often result in extended accounts receivable, delayed cash flow, and potential collection challenges. Patients should also understand that they may still be responsible for medical bills if the case does not result in compensation.
In short, LOPs offer flexibility—but they require careful evaluation and clear expectations.
Legal and Billing Considerations Providers Should Know
A Letter of Protection is a legal agreement, but it is not the same as a guaranteed payment. Its enforceability depends on state laws, the specific language used in the agreement, and the final outcome of the injury case. For this reason, healthcare providers should approach Letters of Protection with clearly defined billing policies, realistic expectations, and thorough documentation practices.
From a medical billing perspective, LOP accounts should always be handled separately from traditional insurance claims. Providers should avoid billing health insurance while simultaneously relying on a Letter of Protection for the same services, as this can create compliance risks and payer conflicts. All services billed under an LOP must be directly related to the injury and clearly supported within the medical record.
Liability-related billing complications can also result in payer denials when another entity is considered responsible for payment—a situation commonly addressed under the CO 197 denial code. These denials further highlight why careful LOP documentation, injury linkage, and payer coordination are essential when managing settlement-based accounts.
Charges billed under a Letter of Protection must remain reasonable and defensible. During settlement negotiations, medical bills are often reviewed closely by insurers and attorneys, and excessive, poorly itemized, or inaccurately coded charges can lead to disputes or delayed reimbursement. Clear itemization and accurate coding help reduce these risks and support timely resolution.
In simple terms, providers should view Letters of Protection as a higher-risk billing arrangement that requires disciplined tracking, documentation, and follow-up. Understanding these legal and billing considerations helps protect both compliance and revenue when accepting LOP cases.
When a Letter of Protection May Not Be the Right Choice
While a Letter of Protection can be useful in many injury-related cases, it is not always the best option. Both patients and healthcare providers should consider the potential risks before relying on an LOP for medical billing.
- An LOP may not be appropriate when the injury claim is weak or liability is unclear. If there is a low likelihood of settlement or compensation, providers face a higher risk of delayed or non-payment. In these situations, relying on traditional insurance billing or alternative payment arrangements may be more practical.
- Providers with limited cash flow may also find LOPs challenging. Because payment is tied to the resolution of a legal case, accounts receivable can remain open for long periods. This extended billing cycle can strain operations, especially for smaller practices.
- Patients should also be cautious when using a Letter of Protection. If the case does not result in compensation, the patient may still be responsible for the medical bills. This can lead to unexpected financial obligations after treatment is complete.
In some cases, traditional health insurance billing or workers’ compensation coverage may be more appropriate than a Letter of Protection, particularly when coverage is available and liability disputes are minimal or clearly defined. In short, Letters of Protection work best when there is a reasonable expectation of settlement and clear communication between all parties. Evaluating the case upfront helps avoid unnecessary billing and financial complications later.
Conclusion
A Letter of Protection plays an important role in medical billing when injuries involve liability disputes and delayed insurance payments. It allows patients to receive necessary medical care without immediate financial burden, while providers agree to defer payment until a legal claim is resolved.
At the same time, Letters of Protection are not risk-free. For healthcare providers, they introduce longer payment timelines, potential collection challenges, and added compliance responsibilities. For patients, they require a clear understanding that payment is tied to the outcome of a settlement and may still be owed if compensation is not recovered.
When used thoughtfully, a Letter of Protection can support continuity of care and fair reimbursement. The key is clear communication, proper documentation, and realistic expectations from all parties involved. Letters of Protection require careful coordination between legal and billing workflows, and LOP cases should be tracked separately from insurance-based accounts with reasonable charge structures and defined follow-up procedures.
Providers managing liability-based cases often benefit from working with experienced medical billing specialists who understand the risks, documentation requirements, and settlement-based billing complexities associated with Letters of Protection. By approaching LOP arrangements strategically, providers and patients can protect access to care while managing financial risk responsibly.
