California Expands Howell and Limits Damages Again

Author: Robert Tyson

Jury Must Hear Evidence of “Paid” Amounts When Determining Reasonable Value of Medical Treatment

 

Children’s Hospital Central California v. Blue Cross of California
2014 WL 2590823 (June 10, 2014)

FACTUAL BACKGROUND
A California Appeals Court has just ordered a re-trial on damages, including additional discovery, based on the trial court’s erroneous and prejudicial rulings regarding reasonable value of medical services rendered. At trial, Children’s Hospital Central California (“Children’s Hospital”) and Blue Cross of California Partnership Plan, Inc. (“Blue Cross”) disputed the reasonable value of medical services provided by Children’s Hospital to Medi-Cal patients enrolled in Blue Cross’s Medi-Cal plan. At the time Children’s Hospital rendered these services, the hospital and Blue Cross did not have a written contract covering these patients. Accordingly, California law provides Children’s Hospital was entitled to reimbursement for the “reasonable value” of its services rendered to the Medi-Cal patients.

Children’s Hospital demanded payment of $10.8 million, the full amount the hospital billed for these services. Prior to trial, Blue Cross paid about $4.2 million as “reasonable value” of Children’s’ services based on the government’s Medi-Cal reimbursement rates. However, the trial court restricted discovery and only allowed the parties to present the jury with full billed amounts for the services. Accordingly, the jury found Children’s Hospital was entitled to the full billed amount and awarded Children’s Hospital the difference of $6.6 million.

REASONING
The Appellate Court held the trial court erred in its discovery and evidentiary rulings based on a strict interpretation of California law governing reimbursement of these claims, Code of Regulations, title 28, section 1300.71, subdivision (a)(3)(b). As applicable in this case, subdivision (a)(3)(b) provides “Reimbursement of a Claim” is “the reasonable and customary value for the health care services rendered.” (2014 WL 2590823 at *1, emphasis added.)

At trial, Children’s Hospital bore the burden of proof regarding the reasonable care of specific services it provided. The Appellate Court cited Howell v. Hamilton Meats & Provisions, Inc. and explained a “medical care provider’s billed price for particular services is not necessarily representative of either the cost of providing those services or their market value.” (2014 WL 2590823 at *8.) Instead, “[r]easonable value is market value” – what Children’s Hospital receives in payment for its services. (2014 WL 2590823 at *10.) “All rates that are the result of contract or negotiation, including rates paid by government payors, are relevant to the determination of reasonable value.” (Ibid.)

HOLDING
The Appellate Court found the trial court erred by only permitting the jury to consider Children’s Hospital’s full billed charges. “The jury should have been permitted to hear and consider evidence on the full range of fees that [Children’s] Hospital charges and accepts as payment for similar services in determining the reasonable value[.]” (2014 WL 2590823 at *11.) The Court further found the jury would likely have rendered a more favorable verdict for Blue Cross had it been educated on the true reasonable value of the services at issue, i.e. what Children’s Hospital accepts as payment in full for the services it provides. Hence, Blue Cross is entitled to a new trial on damages, including additional discovery.

SIGNIFICANCE OF HOLDING
This case further supports the holding in Howell that payment amounts providers accept in full satisfaction of medical bills represents the reasonable value of medical services rendered. Howell and its progeny, including Children’s Hospital, continue to support the position that plaintiffs may only recover the reasonable value of all alleged medical damages, past and future.

For example, if plaintiff forgoes available medical benefits such as private health insurance or available government benefits and instead chooses to receive past medical treatment on an inflated lien basis, this holding continues to support the argument plaintiff is entitled to recover only the reasonable value of past medical treatment and not the inflated lien amount. Additionally, if plaintiff claims alleged future medical treatment based on full billed amounts, this holding supports the argument that plaintiff should be limited to recovering the reasonable value of alleged future medical care. “Reasonable value is market value,” and “[a]ll rates that are the result of contract or negotiation, including rates paid by government payors, are relevant to the determination of reasonable value.” (2014 WL 2590823 at *10.)

As courts continue to delineate the applicability and scope of Howell, the Howell case remains the medical damages measure in California.

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Children’s Hospital also cited Dodd v. Cruz in its analysis regarding relevant discovery. See Tyson and Mendes’ breakdown of Dodd v. Cruz and 3 Takeaways for Defense Counsel here.

 

ABOUT THE AUTHOR: Cayce E. Greiner is an associate at Tyson & Mendes LLP. She specializes in personal injury, insurance coverage, and bad faith litigation. Contact Cayce at 858.263.4121 or cgreiner@tysonmendes.com.

 

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