For the second time in just four months, a California appellate court has dealt insurance companies a significant setback in the fight against juries considering inflated medical bills. The California Court of Appeal recently issued another partially published decision interpreting and applying Howell to an uninsured plaintiff’s claim for past medical damages in Uspenskaya v. Meline (Oct 28, 2015, C071647) __ Cal.Rptr.3d __ [2015 WL 6510915]. On the heels of Bermudez v. Ciolek published in June 2015, Uspenskaya held plaintiff’s full medical bills are admissible to determine the reasonable value of an uninsured plaintiff’s medical treatment received pursuant to a lien agreement. Below we also discuss how defendants should arm themselves to combat both of these adverse rulings.
Third-Party Medical Finance Company Purchased Uninsured Plaintiff’s Liens
In this appeal from a jury trial and judgment of the Superior Court of Sacramento County, defendant’s vehicle collided with plaintiff’s vehicle at an intersection. Plaintiff sustained injury in the accident and ultimately underwent surgery to repair a herniated disc in her lumbar spine. Plaintiff was uninsured and entered into contracts with her medical providers to receive treatment on a lien basis based on her potential recovery in the lawsuit. The lien agreements provided plaintiff was “DIRECTLY, PERSONALLY, AND FULLY responsible to make payment in full” to the medical providers or their assignees, regardless if she prevails in the lawsuit.
In an unpublished section of the opinion, the Court explained MedFin Managers, LLC (MedFin), a third party medical finance company or “factor,” subsequently purchased plaintiff’s lien from the medical providers for less than the full amount of plaintiff’s medical liens.
Trial Court Denied Defendant’s Howell Motion in Limine
Defendant filed a pre-trial motion in limine citing Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541 to exclude the higher, full billed amounts of plaintiff’s past medical treatment. Defendant argued the lower amounts MedFin paid to purchase plaintiff’s liens were the only admissible evidence of the reasonable value of plaintiff’s medical treatment. Defendant requested “an order that plaintiff shall not introduce or reference in any fashion the billing statements or amounts for medical care provided beyond those amounts that were accepted by the providers as payment in full.” (Uspenskaya, supra, 2015 WL 6510915 at *2.)
Plaintiff opposed defendant’s motion by distinguishing Howell, which involved an insured plaintiff. Citing a pre-Howell decision in Katiuzhinsky v. Perry (2007) 152 Cal.App.4th 1288, plaintiff argued she remained liable for the full medical bills under her lien agreements. Plaintiff asserted MedFin simply assumed the right to receive lien payments by purchasing her liens from the medical providers for cash.
Ultimately, after taking defendant’s motion in limine under submission, the trial court denied the motion, citing Katiuzhinsky.
Jury Awarded Plaintiff the Full Amount of Past Medical Bills
Throughout the trial, defendant moved to admit evidence of the amounts MedFin paid to purchase plaintiff’s liens through testimony of plaintiff’s medical providers’ billing administrators. Defendant admitted it had no other evidence, such as medical billing records or expert testimony, to establish MedFin’s lien purchase price was the reasonable value of plaintiff’s medical treatment.
Plaintiff opposed defendant’s request to admit evidence of lower paid amounts, arguing MedFin’s payments were inadmissible under the collateral source rule. In oral argument, the parties informed the court they entered into a stipulation after the court’s first motion in limine ruling that plaintiff’s full medical bills were “reasonable in amount and were incurred by plaintiff.” The defense explained it stipulated to this issue with the understanding it could file a motion to reduce the verdict to the amount paid and accepted for plaintiff’s past medical expenses if warranted after entry of the jury’s verdict.
The trial court denied defendant’s request to admit evidence of MedFin’s lien purchase payments on the basis the amounts alone, without any expert testimony to support them, would lead the jury to speculate whether those payments are the reasonable value of plaintiff’s medical treatment. The jury ultimately found defendant liable and awarded plaintiff a total of $429,773.71 in damages, including the full amount of her past medical bills of $261,773.71. Defendant did not file a post-trial motion to reduce the verdict.
Court of Appeal Affirms Judgment and Holds Full Billed Amounts Relevant to Determining Reasonable Value of Uninsured Plaintiff’s Medical Treatment When Medical Liens Sold to Third Party Factor
The Court of Appeal upheld the trial court’s evidentiary rulings, noting the trial court did not rule MedFin’s payments were “categorically inadmissible” to establish reasonable value of plaintiff’s medical expenses. (Uspenskaya, supra, 2015 WL 6510915 at *5.) Instead, the appellate court confirmed the “MedFin payments are relevant because they have a tendency in reason to prove reasonable value.” (Id. at *6.) However, without expert testimony to explain and support the defense argument MedFin’s payment amounts are the reasonable value of plaintiff’s past medical treatment, the probative value of the payment amounts alone were substantially outweighed by the likelihood they would confuse the jury and cause the jurors to speculate. The Court cited Howell to explain even if evidence of payment amounts are relevant, “under Evidence Code section 352 the probative value of a collateral payment must be carefully weighed against the inevitable prejudicial impact such evidence is likely to have on the jury’s deliberations.” (Id. (citing Howell, supra, 52 Cal.4th at p. 552) (internal quotations and citations omitted).)
The Court further distinguished Howell and Corenbaum. (See Howell, supra, 52 Cal.4th 541; Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308). The Court explained MedFin’s purchase of plaintiff’s liens was a purchase of an asset, not a transaction for health care treatment between a patient (or their health insurer) and a medical provider. Accordingly, the amount MedFin paid plaintiff’s medical providers for plaintiff’s lien “is not necessarily based on the reasonable value of the health care, but rather on collectability factors that are unrelated to reasonable value.” (Uspenskaya, supra, 2015 WL 6510915 at *8.)
Furthermore, the Court accepted as fact that, unlike the insured plaintiffs in Howell and Corenbaum whose medical providers accepted insurance payments in full satisfaction of plaintiffs’ medical bills, this plaintiff remained liable for her medical providers’ full medical bills regardless of her recovery in the lawsuit. Accordingly, plaintiff was in danger of prejudice if the jury was “misled” and awarded plaintiff the lower amount paid by MedFin to purchase the “asset – the right to collect plaintiff’s total debt – based on the unsubstantiated notion that such payment reflects the reasonable value of the medical services provided to plaintiff.” (Uspenskaya, supra, 2015 WL 6510915 at *8.)
The Court acknowledged the defense’s argument, citing the recent case of Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311 and Howell, the reasonable value of medical treatment is the “market or exchange value,” i.e. what consumers on the open market pay for medical services. (Uspenskaya, supra, 2015 WL 6510915 at *8.) However, the Court reinforced plaintiff’s medical providers sold an asset to MedFin, of which the purchase price was based on “collectability factors,” and not necessarily the value of plaintiff’s medical treatment. (Id.)
The Court further cited Bermudez to support its conclusion the reasonable value of an uninsured plaintiff’s medical treatment is not limited to the full billed amounts of plaintiff’s liens when a third party factor has purchased plaintiff’s liens from the medical provider for a lesser amount. In these instances, defendant must proffer additional evidence beyond the lower paid amount “showing the nexus between the amount paid by the factor and the reasonable value of the medical services.” (Id.) As additional evidence regarding reasonable value was not offered at trial, the Court affirmed the trial court judgement.
What Does This Mean For Defendants?
In the wake of Bermudez and Uspenskaya, how should defendants combat plaintiffs’ exorbitant liens at trial?
- Bermudez and Uspenskaya confirm expert opinion is essential for establishing the reasonable value of medical treatment. Designate a medical billing expert to establish the amount accepted by medical providers as payment in full is the reasonable value of medical treatment.
- Subpoena medical billing records and deposition testimony from medical providers and their billing administrators regarding payments accepted from private health insurance, government benefits, uninsured individuals, and factoring companies in full satisfaction of medical bills for the same treatment at issue in the case.
- File motions in limine to exclude plaintiff’s full medical bills at trial. Object to admission or mention of the amount of plaintiff’s full medical bills at trial to preserve issues for appeal. If necessary, file post-trial motions to reduce a verdict based on full billed amount of plaintiff’s past (or future) medical treatment.
- Use caution when stipulating plaintiff’s medical bills are either reasonable or incurred when plaintiff aims to admit the full amount of past medical bills at trial.
As this area of law continues to develop, defendants must vigilantly argue and establish plaintiff is entitled to recover no more than amounts accepted by his or her medical provider as payment for plaintiff’s medical treatment, even when plaintiff receives treatment on a lien basis.
ABOUT THE AUTHORS
Cayce E. Greiner is Special Counsel at Tyson & Mendes LLP. She specializes in personal injury, insurance coverage, and bad faith litigation. Contact Cayce at 858.263.4136 or email@example.com.
Robert F. Tyson, Jr. is the managing partner of Tyson & Mendes LLP. He specializes in business, insurance litigation, employment law, products liability, environmental litigation, professional liability, and personal injury. Contact Mr. Tyson at 858.459.1476 or firstname.lastname@example.org.
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