• Looking Beyond the Bills: California Court of Appeal Decision Attacks Reduction of Plaintiff's Medical Specials Based on Insurance Write-offs Noted in Billing Records
  • August 29, 2008 | Authors: Daniel P. Lyons; Shane M. Cahill
  • Law Firm: McCormick, Barstow, Sheppard, Wayte & Carruth LLP - Fresno Office
  • In personal injury cases parties have routinely viewed the amounts paid by private insurers as evidence of the "reasonable" value of medical expenses incurred by a Plaintiff, thus establishing a ceiling on the Plaintiff's right of recovery. Where amounts were discounted or written off as evidenced by the medical bills, it was generally accepted that those amounts were not recoverable. Usually this could be determined by a review of the medical bills themselves and notations indicating a write-off. A recent Court of Appeal opinion, however, challenges this method of establishing the "reasonableness" of medical expenses, suggesting that much more evidence is required, and even calling into question this practice in its entirety. 

    It is a well settled rule in California that in a personal injury action, plaintiffs are entitled to recover past medical expenses provided, among other things, that each of the charged expenses was “reasonable.” (See, Calhoun v. Hildebrandt (1964) 230 Cal.App.2nd 70, 73.) This well known rule was reaffirmed in the well known case of Hanif v. Housing Authority of Yolo County (1988) 200 Cal.App.3rd 635, 640, wherein the court held that “a person injured by another’s tortious conduct is entitled to recover the reasonable value of medical care and services reasonably required and attributable to the tort.” When a matter proceeds to trial, juries are given specific instructions about recovery of medical expenses under California Civil Jury Instructions (“CACI”) Section 3903A, which states that “to recover damages for past medical expenses, the plaintiff must prove the reasonable cost of reasonably necessary medical care that he/she has received.”

    The issue that commonly arises in personal injury cases is what is the "reasonable" amount of the medical expenses to which plaintiff is entitled to recover. Of course, to maximize recovery, plaintiffs typically assert that the amount charged by each provider in connection with any case is “reasonable.” For some time, however, this position has been challenged by defense counsel under the Hanif and Nishihama cases. (See, Hanif v. Housing Authority of Yolo County (1988) 200 Cal.App.3rd 635 [involving Medi-Cal payments and writeoffs]; Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298.) Generally speaking, defendants have typically relied upon these two cases “for the principle that it is error for the plaintiff to recover medical expenses in excess of the amount paid or incurred.” (See, Greer v. Buzgheia (2006) 141 Cal.App.4th 1150.) Relying on these cases, defendants routinely seek to offset, or reduce the amount of medical special damages by any amount “written off” by a plaintiff’s private insurance carrier.

    In Greer v. Buzgheia, the court seemingly outlined a procedure for seeking such a reduction beyond the settlement arena. While the court opined that it was not error to introduce into evidence the full amount charged to the plaintiff at the time of trial, as “such evidence gives the jury a more complete picture of the extent of a plaintiff’s injuries," the court indicated that a post verdict reduction of the jury’s award of medical expenses might be justified upon presentation of proper evidence and with use of a special jury verdict form. (See, Greer v. Buzgheia, supra, 141 Cal.App.4th at p.1158). However, because of defense counsel’s failure to prepare a special jury verdict form in Greer, the issue of the propriety of the write-offs had been waived on appeal, and thus the Greer court provided no discussion procedurally or from an evidentiary perspective as to how the Hanif/Nishihama reductions were to be applied in future matters, or as to their underlying validity in the context or private insurance write-offs. (See, id. at 1159.)

    These issues came before the court in the recent matter of Olsen v. Reid (2008) 164 Cal.App.4th 200 . The plaintiff Margaret Olsen was appealing a post-trial order reducing the amount of the jury’s verdict in her personal injury case. Specifically, the trial court had reduced the amount of medical expenses awarded by the jury. While the evidence showed that the plaintiff had been actually billed $62,475.81 for her past medical care, medical bills from plaintiff’s health care provider indicated that the amount had been reduced, or written off, by $57,394.24. During post-trial motions, the court reduced the plaintiff's medical expenses to just over $5,000.00, a significant reduction.

    On appeal, the Fourth District reversed the trial court’s order reducing the past medical expenses on the basis that the evidence submitted by the defendants was insufficient to support the trial court’s conclusion. The Court of Appeal stated that the evidence was too unclear and that "the cryptic notations . . . relied upon may reflect payments, or write downs or write offs; we cannot know, and if any evidence revealed the actual facts, they are not present in the record.” (Id. at 204.) While the majority opinion did not seem to offer any guidance as to what would be required beyond the cryptic notes from the billing records offered by the defense, the concurring opinion of Justice Fybel suggested that if defendants have any hope of obtaining a Hanif/Nishihama reduction, several items of important evidence must be in the record, including:

    1. The billing statement to the plaintiff that is fully and properly identified and authenticated, including any handwriting thereon, as well as evidence explaining any printed notations on the statement itself.
    2. The contract between the provider and health plan showing that the provider would accept payments from the health plan in amounts less than its normal rates and charges.
    3. The contract between the plaintiff and the provider showing that the plaintiff was accepted for treatment on contractual terms under which the provider agreed to charge for rates lower than the normal rates.
    4. The contract between plaintiff and the health plan.
    5. An acknowledgment by the provider, health plan, or plaintiff that plaintiff has no further financial responsibility to the provider or health plan.

    Justice Fybel noted that in the Nishihama decision, upon which the argued reduction was made, the court had before it the contract between the provider and the insurer, as well as clear evidence of the amount paid by the insured, evidence of the amount accepted by the provider, and, importantly, an acknowledgment by the plaintiff that the provider accepted that amount as payment in full for its services. Justice Fybel continued that “if the proper application of the collateral source rule includes reducing a verdict to the amount actually paid or incurred by the plaintiff or a collateral source such as a health plan, a hearing is necessary and appropriate to determine the correct amount.” (Id. at 215-218.) What type of hearing he contemplated is not exactly clear.

    Not all the members of the court, however, were satisfied with letting the lack of evidence resolve this issue, as had also occurred in the Greer matter. Presiding Justice Moore separated from the majority’s silent affirmation of the traditional Hanif/Nishihama reduction. While the majority noted in the opening of its discussion that “those cases [hold] that when a plaintiff has medical insurance, damages are limited to the amount actually paid or incurred, not any greater amount a medical provider billed, even if that amount was reasonable,” the court stated that it “need not go that far . . . in order to decide this case.” (Id. at 204.) Rather, its attack and criticism of the trial court’s reduction of the medical expenses was based on insufficient evidence.

    Justice Moore, however, disagreed with the underlying principle at work, finding it adverse to the "collateral source" doctrine. The collateral source rule has long stood for the proposition that “if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such a payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor.” (Helfend v. Southern California Rapid Transit District (1970) 2 Cal.3rd 1, 6, fn. omitted [holding that evidence of insurance billing inadmissible to reduce Plaintiff's damages.].) Behind the collateral source rule is the idea that the court would not punish a Plaintiff that had the foresight to purchase and invest insurance by eliminating or reducing his or her medical special damages based on insurance payments. Justice Moore's concurring opinion clearly views any reductions for private insurance write-offs under Hanif and Nishihama as incompatible with the collateral source rule. (Olsen v. Reid, supra, 164 Cal.App.4th at 205-215.) Whether or not this will become a majority view remains to be seen.

    What is clear, however, is that special efforts are required even get to the Hanif/Nishihama reductions. Much more discovery will be required, discovery that has not been typical in the past. Acquisition of the type of evidence required will demand specifically drafted discovery and subpoenas to medical and health care providers. In certain cases, Hanif/Nishihama reductions may be quite significant and under the Olsen decision it is clear that if the defendants are to have any hope of such post trial reductions or insurance write offs, very specific and special attention must be focused to obtain what is necessary at trial so as to preserve the issue for appeal.