Howell v. Hamilton Meats & Provisions Continues To Deliver Justice For California
Consistent with its mission to deliver justice for all, Tyson & Mendes served justice when it argued and won Howell v. Hamilton Meats & Provisions, the most impactful California Supreme Court decision of the twenty-first century and arguably the last fifty years.[i] The 2011 landmark California Supreme Court opinion held plaintiffs may only recover as past medical expenses the lesser of the amount actually paid/incurred or the reasonable value of medical treatment and services provided. As shown below, the impact of the Howell decision’s “paid rule” on damages was far-reaching, with appellate courts applying its reasoning beyond the private health insurance context to include Medicare, Medi-Cal, and workers’ compensation. Howell’s impact on reducing jury verdicts is not just limited to past medical expenses however, as courts expanded Howell’s reasoning to future medical care, and even non-economic damages. Below are highlights and lessons learned from Howell’s first decade of damages jurisprudence.
One of the first decisions to apply the Howell “paid rule” was Sanchez v. Strickland (“Sanchez 2011”), a partially published opinion.[ii] In the unpublished portion of the opinion, The Sanchez 2011 court addressed payments by Medicare. It stated applying Howell’s “paid rule” upheld the trial court’s reduction of damages to the amount actually paid by Medicare and accepted by the provider to satisfy plaintiff’s medical bills.[iii] The published portion of the Sanchez 2011 opinion held Howell’s paid rule does not apply to gratuitous “write-offs.”[iv]
After being reimbursed by Medicare pursuant to a contract, a hospital attempted to bill $7k in charges to Medi-Cal which the hospital eventually “wrote-off” because it did not have a contract with Medi-Cal. The Sanchez 2011 decision essentially distinguished the negotiated rate differential based on the Medicare contract, to which Howell’s paid rule certainly applied, from the charitable “write-off” by the hospital which had no market value economic component.[v]
In 2013, the First District Court of appeal issued a partially published opinion in which the published portion applied Howell’s paid rule to Medicare and Medi-Cal:
Here, Medicare and Medi–Cal had pre-existing contractual relationships with Luttrell’s medical providers, by which the providers agreed to accept a sum less than their usual and customary charges as payment in full for their services. Those providers may not seek reimbursement over the amount that Medicare and Medi–Cal was contractually obligated to pay.[vi]
2. Workers’ Compensation Statutory Fee Schedule
In 2012, Sanchez v. Brooke (“Sanchez 2012”) applied Howell’s paid rule to workers’ compensation benefits.[vii] The Sanchez 2012 case was pending appeal when the Howell opinion came down in 2011, causing the appellate court to apply Howell’s reasoning even though it had not been briefed by the parties:
Applying the court’s reasoning in Howell to this case, we conclude that where an employer is required under the workers’ compensation laws to pay in full an injured employee’s medical expenses, the injured employee may not recover, as economic damages from a third-party tortfeasor, medical fees that the provider is precluded, either by agreement or by law (including the statutory fee schedule), from collecting from the employer. Because fees that the provider may not collect from the employer under the workers’ compensation law do not represent an economic loss for the employee, they are not recoverable in the first instance.[viii]
3. Future Medical Expenses and Non-Economic Damages
A significant opinion from 2013, Corenbaum v. Lampkin, applied Howell’s reasoning to critical evidentiary issues involving future medical expenses and non-economic damages.[ix] “Evidence of the full amount billed for past medical services provided to plaintiffs … cannot support an expert opinion on the reasonable value of future medical services.”[x] Similarly, the Corenbaum court held, full billed amounts are not relevant to a jury when determining the value of plaintiff’s pain and suffering:
[E]vidence of the full amount billed is not admissible for the purpose of providing plaintiff’s counsel an argumentative construct to assist a jury in its difficult task of determining the amount of noneconomic damages and is inadmissible for the purpose of proving noneconomic damages.[xi]
The Corenbaum opinion illustrates the importance of filing defense motions in limine on plaintiff’s experts. These motions should attempt to exclude plaintiff’s experts from relying on billed amounts to support their life care plans and exclude any evidence or reference to billed amounts including argument so as to not prejudice the jury.
4. Mitigation and the Affordable Care Act
A 2017 opinion explored the other side of the future medical coin in the context of a medical malpractice case. Corenbaum held billed amounts were inadmissible to prove future medical costs but did not address whether health insurance rates could be used in computing future medical benefits. In Cuevas v. Contra Costa County, the First District Court of Appeal held a jury could consider benefits available under the Affordable Care Act (more commonly referred to as Obamacare.)[xii] Medical malpractice cases in California are regulated by the Medical Injury Compensation Reform Act (“MICRA”). Section 3333.1 of MICRA allows juries in medical malpractice cases to consider medical benefits when assessing future medical damages.
In theory, under the ACA, there should no longer be any uninsured plaintiffs. Although the Cuevas holding is limited to medical malpractice cases, the policy informing Section 3333.1 and the rationale of Howell can be applied to any case by arguing an uninsured plaintiff has a duty to mitigate damages. The ACA requires most Americans to purchase qualifying health insurance coverage or face a tax penalty. The ACA makes health insurance available to everyone regardless of any pre-existing conditions.
At Tyson & Mendes, we raise the ACA mitigation issue as an affirmative defense in every personal injury case for this reason. We argue future medical care should never cost more than the discounted rates negotiated between providers and healthcare plans.
5. Offers to Compromise (Code of Civil Procedure § 998)
California Code of Civil Procedure § 998 is a cost-shifting statute designed to encourage pre-trial settlements. Under CCP § 998, a party who is able to beat an unaccepted pre-trial offer may recover certain litigation fees and costs. In 2015’s Lee v. Silveira, the Fifth District Court of Appeal was asked to address the implication of a Howell reduction of damages in determining whether a party was successful in defeating the pre-trial offer to compromise.[xiii] The Lee court held the Howell reduction is applied first such that the amount actually paid is used when comparing a judgment to a CCP § 998 pre-trial offer to compromise.
The most difficult and divisive issue faced by the appellate courts following the Howell decision occurs in cases where the plaintiff is either not insured or intentionally tries to circumvent Howell’s “paid rule.” Plaintiffs will instead choose medical treatment provided by attorney-referred providers on a lien basis to maximize recovery. Per Howell, in these cases, the plaintiff is entitled to recover the “reasonable value” of medical treatment and services.[xiv]
In the Howell opinion, the Supreme Court defined “reasonable value” as market value, the amount for which property or services could be exchanged.[xv] In these cases, there is no pre-negotiated contract rate to determine the reasonable value of the medical services and treatment provided. Thus, it becomes an evidentiary dispute to determine reasonable value. Despite the Supreme Court’s admonition that “[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,”[xvi] personal injury as well as medical provider plaintiffs continue to try and introduce billed amounts as evidence of reasonable value with varying degrees of success.
In 2017, the Fourth District appellate court was confronted with the issue of whether to grant class action certification to class of self-pay (i.e., uninsured) patients who claimed they were billed based on “Charge Master” rates rather than the reasonable value of the medical services provided by the hospital.[xvii] The court explained “Charge Master” is a uniform schedule of charges based on the gross billed charge for a given service of item. The Court determined the issue was too complex to categorically conclude all Charge Master rates were unreasonable. Therefore, the Court held the reasonable value of medical services should be handled on a case-by-case basis and is not a common question appropriate for class certification.[xviii]
In Children’s Hospital Central California v. Blue Cross, the Fifth District Court of Appeal held it was error for the trial court to only allow the jury to consider full billed charges.[xix] The court reasoned evidence of what a medical provider accepts as payment should be considered as evidence of reasonable value because the billed price is not determinative of the true cost or market value of the services provided.[xx] In Ochoa v. Dorado, the defense stipulated to the amounts billed, but plaintiffs did not put on any evidence of the reasonableness of past expenses. A new trial was ordered because the full amount billed but not paid for past medical expenses is not relevant to the reasonable value of the service provided and cannot support an award of damages for medical expenses.[xxi]
The Second District Court of Appeal reviewed the evidentiary value of billed rates compared to what is generally accepted was explored recently in Long Beach Memorial Hospital Center et. al. v. Kaiser Foundation Health Plan.[xxii] At issue was whether a non-Kaiser hospital which provides emergency care to Kaiser members could sue when Kaiser only reimbursed the hospital 53% of the full billed rate. Under the Knox-Keene Act of 1975, healthcare plans are required to reimburse hospitals for providing emergency services based on existing contract or reasonable and customary value. The Court held the hospitals could not sue in tort for underpayment reasoning hospitals collect their full billed rate only 1-10% of the time and on average agreed to accept as payment for emergency services 27% of the full billed rate.[xxiii]
However, Howell did not specifically address the measure of damages for uninsured plaintiffs with unpaid medical bills. Because of this, some appellate courts have been more inclined to allow evidence of unpaid medical bills and treatment on a lien basis as evidence of the reasonable value of the treatment.
This issue was addressed in Bermudez v. Ciolek where the Second District Court of Appeal upheld the admission of full billed amounts supported only by testimony from medical experts who concluded the billed amounts were fine without any evidentiary support connecting the billed amounts to market value.[xxiv] The court in Bermudez faulted the defense for not making the proper objections below and refused to order a new trial on damages.[xxv] Following Bermudez, the Second District Court of Appeal extended the Bermudez holding in two more recent opinions involving plaintiffs who intentionally chose to treat outside of their insurance plan, Pebley v. Santa Clara Organics[xxvi] and Qaadir v. Ubalando Gurrola Figueroa et. al.[xxvii] The Qaadir opinion did concede evidence of attorney-referral to a medical provider is admissible to show bias or financial incentive.[xxviii]
A few months after Bermudez, the Third District Court of Appeal issued its opinion in Upenskaya v. Meline, which also held full medical bills are admissible to determine reasonable value even when the provider sells the lien to a third-party financing company (commonly known as a factor) for less than the full billed amount.[xxix] The court accepted as fact that plaintiff remained liable for the full medical bills under the lien agreements which were assigned to the factor. The court reasoned what the factor paid to the provider may not relate to market value as it involves other factors, such as collectability. However, the court in Meline acknowledged what the factoring company paid could have been evidence of reasonable value had the defense had offered expert opinion connecting the amount paid to market value.[xxx]
After more than ten years and despite many challenges, Howell has shown resiliency and is here to stay. In cases where medical bills have been paid by plaintiff’s health insurance—be it private or public or by a workers’ compensation carrier pursuant to the statutory fee schedule—damages for past medical expenses will be capped based on what was actually paid, and evidence of full medical bills and rates will not be admissible as evidence to support future medical or non-economic damages.
In cases where a plaintiff is uninsured and is treating on a lien basis, the measure of damages will be based on market value and full medical bills may be admissible. To be admissible, they should be supported by evidence showing a nexus between the full billed amount and market value. In these cases, it is therefore incumbent on the defense to not only file motions in limine but to also develop evidence of who referred the plaintiff to the provider (bias); what the provider regularly accepts as payment from any source including private health insurance, Medicare, and Medi-Cal; and to present expert medical billing evidence regarding reasonable value coupled with expert life care planning evidence with multiple scenarios based on market value rates for future medical expenses. Howell still applies in cases with uninsured plaintiffs; the defense just needs to take the necessary steps to ensure justice continues to be served for all.
[i] (2011) 52 Cal.4th 541
[ii] (2011) 200 Cal.App.4th 758
[iii] Id. at 760
[iv]Id. at 768
[vi] Luttrell v. Island Pacific Supermarkets, Inc. (2013) 215 Cal.App.4th 196, 206
[vii] (2012) 204 Cal.App.4th 126, 142
[viii] Sanchez v. Brooke, 204 Cal.App.4th 126, 142 (Cal. Ct. App. 2012)
[ix] Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308
[x] Id. at 1331
[xi] Id. at 1333
[xii] (2017) 11 Cal.App.5th 163
[xiii] (2015) 236 Cal.App.4th 1208
[xiv] Howell, supra
[xv] Id. at 556
[xvi] Id. at 564
[xvii] Hefczyc v. Rady’s Children’s Hospital (2017) 17 Cal.App.5th 518
[xviii] Id. at 543-545
[xix] (2014) 226 Cal.App.4th1260
[xx] Id. at 1277
[xxi] (2014) 228 Cal.App.4th 120, 136-138
[xxii] (2021) 71 Cal.App.5th 323
[xxiii] Id. at 330
[xxiv] Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311
[xxv] Id. at 1340
[xxvi] (2018) 22 Cal.App.5th 1266
[xxvii] (2021) 67 Cal.App.5th 790
[xxviii] Id. at 808
[xxix] (2015) 241 Cal.App.4th 996
[xxx] Id. at 1007