California’s Sea of Uncertainty
Admissibility of “As-Billed” Medical Specials
By Peter S. Doody
Current law California concerning the trial admissibility of as-billed medical specials is contradictory and uncertain. The recently decided case of Olsen v. Reid (2008) 164 Cal. App. 4th 200 has contributed to this confusion and presents more questions than answers due to the split decision by the California Court of Appeal.
The Issue of Medical Bill Set-Off
The present confusion arises in every single personal injury case in California where plaintiff has either private health insurance or is covered by Medicare. Typically, the hospital, doctor or health care provider issues a bill for treatment which far exceeds the amount actually paid by the health insurer or Medicare. Oftentimes, the amount actually paid to the health care provider is less than 50% of the amount billed by the hospitals and doctors. By law, the health care provider is precluded from pursuing the insured patient for the difference between what was billed and what was actually paid.
Only a few years ago, the prevailing method in California trial courts was to allow the plaintiff only to “black-board” before the jury as past medical specials the amount actually paid by the plaintiff’s health insurer. Any amount over the amount actually paid would constitute a windfall or double-recovery for the plaintiff. Hanif v. Housing Authority (1988) 200 Cal. App. 3d 635 and Nishihama v. City and County of San Francisco (2001) 93 Cal. App. 4th 298. In the parlance of California trial lawyers, the amounts of medical bills actually paid by the plaintiff’s health insurer were commonly referred to as the “Hanif numbers.” In the past, most trial judges would only permit plaintiff’s counsel to admit as evidence the medical bills actually paid by the health insurer, HMO or Medicare. As most trial lawyers will agree, jurors (subconsciously or consciously) tend to use the amount of past medical specials as a vague yardstick to calculate pain and suffering damages. The “Hanif” rule only compensated plaintiff for medical specials actually incurred. Hanif was beneficial to personal injury defendants since it reduced the amount of medical specials which ultimately influenced general damages.
The California trial landscape changed two years ago with the appellate court’s decision in Greer v. Buzgheia (2006) 141 Cal. App. 4th 1150. Greer rejected the Hanif approach and permitted plaintiff to black-board her full medical specials as charged by the hospital and doctors. Defense counsel was suddenly not permitted to introduce any evidence of medical bills actually paid. Thus, the Greer jury never learned the medical bills presented before them were actually substantially reduced by plaintiff’s health insurer. The Greer jury was lead to believe plaintiff was responsible for paying back the exorbitant medical bills as billed by the hospital and surgeons.
The Greer court’s backward logic was based on a coupling of the collateral source rule and an evidentiary finding that the full amount of medical bills is relevant to the nature and extent of injury. In deference to long standing California case law prohibiting double-recovery, the Greer court stated it would entertain a post-trial hearing and possibly allow a reduction of the medical specials to the amount actually paid by plaintiff’s health insurer. Defense counsel in Greer, however, made a critical error and allowed plaintiff’s counsel to fashion a special verdict form which purposefully blended past medical bills with lost wages. The post-verdict motion for set-off was denied because the court could not differentiate between past medical bills and lost earnings.
The ruling in Greer started a stampede of personal injury plaintiff’s lawyers arguing plaintiff’s trial entitlement for full as-billed medical specials and a prohibition against any post-verdict reduction. One of the standard arguments against a post-trial reduction hearing is an absence of any California civil statue empowering the trial court to make a finding of fact after a jury’s decision. The Greer case has led to chaos amongst the California trial courts as to the proper way to handle as-billed medical specials. Some judges allow full medical specials to be presented before the jury with a post-verdict set-off hearing. Other judges, by misapplication of the collateral source rule, simply allow the plaintiff to black-board the full medical specials without any post-verdict reduction. A few trial judges revert back to the Hanif rule and disallow any reference of the full amount of past as-billed medical specials. The Hanif case has never been overturned and remains good law.
Olsen v. Reid
The present situation in California begs for appellate clarity. However, the very recent case of Olsen v. Reid (2008) 164 Cal. App. 4th 200 cast the issue into even murkier waters since the three judge appellate panel rendered separate concurring opinions with contradictory holdings. The underlying facts in Olsen are typical to any personal injury case. Plaintiff, a pedestrian, was injured when an electric scooter ran into her. Ms. Olsen sustained injury and medical expenses. Her medical bills as billed by her health care providers totaled $62,000. However, her health insurer paid the bills at a substantially reduced contractual rate and extinguished any debt owed by plaintiff to her health care providers. The total amount written-off by the hospital and doctors was $57,000. Following Greer, the trial court allowed plaintiff to blackboard the as-billed medical specials of $62,000.
The defense was not permitted to introduce any evidence of the amount of medical bills actually incurred. However, over plaintiff’s objection, the trial court did entertain a post-verdict hearing and reduced the past medical specials by $57,000. The reduction was allowed despite the fact defense counsel’s authentication of the reduced medical bills was flimsy and weak.
The appellate court in Olsen arrived at a majority decision on the issue that it was not prejudicial error to allow plaintiff to evidence the full amount of her as-billed medical specials. The appellate court ruled defense counsel did not properly authenticate the reduced medical bills and held the trial court committed prejudicial error by allowing a reduction. Thus, plaintiff received a wind-fall in the amount of $57,000 for medical bills she never incurred.
The appellate justices disagreed however on the issue of whether a post-verdict set-off hearing should even be permitted. One justice held the collateral source rule trumps any reduction notwithstanding a wind-fall to plaintiff at the expense of the defendant. Another justice stated a post trial hearing is appropriate given the inherent procedural powers of a trial judge and is necessary to prevent a double-recovery. This same justice also placed the burden of proving the amount of set-off squarely on the shoulders of defense counsel.
Given the already uncertain nature of the law on this issue, the Olsen court’s split decision creates more questions than guidance. As such, several civil litigation defense attorney organizations petitioned the California Supreme Court for depublication of the Olsen case. Unfortunately, on September 17, 2008, Chief Justice George denied the request for depublication. Thus, whatever holding which can be deciphered from the Olsen decision remains law.
Where the unpredictability caused by the Greer and Olsen decisions hits home the hardest is pre-trial case evaluation. It makes a tremendous difference in case value if plaintiff is relegated to merely being able to request before the jury the true amount of medical bills actually paid and incurred. This figure is always substantially less than the amount billed by the hospitals and doctors. Generally speaking, if plaintiff is only permitted to blackboard the amount of medical bills actually paid the amount awarded by a jury for general damages i.e. pain and suffering will be less. Simply stated, the smaller the medical specials the smaller the yard stick to calculate general damages.
The Olsen case is especially troubling since it validates plaintiff’s ability to set forth the full amount of as-billed medical specials on the faulty logic that it is evidence of the nature and extent of injury. The attempt at rationalization is the collateral source rule. However, the collateral source rule by definition cannot apply to benefits a plaintiff has never received. The Oslen case is equally problematic since it does not clarify whether a defendant is even entitled to a post-verdict set-off to the amount actually paid by plaintiff’s medical insurer.
Until a better case comes before the California Supreme Court, defense counsel and their clients will have to continue to grapple with this recurring issue. The best way to defend such an action is to bring a motion in limine at the start of trial asserting that California case law prohibits a double recovery, and that plaintiff is attempting to mislead the jury into believing that he or she actually incurred the full amount of the medical specials.
The Olsen case has also created more responsibility for the defense since it clearly places the burden of proof on the defense to prove the actual amount of the set-off. It is now important in discovery to get all the insurance payment information and history. However, like the situation in Olsen, the computerized adjustments found on the bills are cryptic, difficult to interpret and often incomplete. Thus, defense counsel has to properly authenticate the billing set-offs by taking the appropriate depositions of financial service officers of either the health care provider or insurer. If this isn’t done, then the fate of the defense counsel in Olsen will befall future defense attorneys. In Olsen, the court avoided the issue of having to decide whether a post-trial hearing is proper by ruling the reduced medical bills were not properly authenticated. This trial preparation mistake ended up costing the client $57,000 and continued uncertainty for all defendants.
Originally published in ALFA International Transportation Update, Volume 2008 Issue 4 (Fall)