Court of Appeal Delivers a Blow to Civil Defendants in Personal Injury Cases Where Plaintiff’s Medical Providers Sell Their Liens to Factoring Companies as a Discount
The landmark case of Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, held, quite simply, that evidence of the amount billed for treatment of a plaintiff was not admissible where the care provider accepted a lesser amount in full payment. What is admissible as evidence of “reasonable value” of the treatment is the amount of the payment, typically made by an insurance provider or a governmental agency such as Medicare.
However, what happens when the medical provider extends care to the plaintiff-patient on a strictly lien basis, then sells that lien to a financial services company, often known as a factor? Would Howell limit the evidence to the amount paid by the factor, or, can plaintiff recover the whole amount of the billing for medical services without reduction?
That was the question in Uspenskaya v. Meline 2015 Cal. App. LEXIS 963 (Cal. App. 3d Dist. Oct. 28, 2015). Following an auto accident, uninsured driver Anna Uspenskaya obtained medical care by giving her providers a lien on any recovery from her lawsuit against Meline. Then, a third party assignee, MedFin Managers LLC, (MedFin) bought the lien from the providers for a discounted amount. Key in that transaction was that plaintiff would remain liable for the full amount of the medicals bills.
Relying on Howell and expecting the court to limit the evidence of the billing to the discounted amount paid by MedFin, the defense stipulated that the billed amounts were reasonably incurred by plaintiff. The defense had no expert testimony that the bills charged were not reasonable. Still, the defense sought to introduce the reduced amount paid by MedFin. The court refused. The jury ultimately found negligence and, as part of the award, gave plaintiff the full $261,713.71 charged by plaintiff’s medical providers.
The Court of Appeal affirmed. The court noted that the amount paid by companies such as MedFin rely on perceived collectability of the lien, and not a consideration of whether the services provided of the amount of the billing was reasonable or necessary. Without expert testimony from the defense, introducing the purchase price of the lien would tend to confuse the jury and lead to speculation on the reasoning for that price. The court held under Evidence Code section 352, the evidentiary value of the collateral payment (money paid by the factor) must be weighed against the “inevitable prejudicial impact such evidence is likely to have on the jury’s deliberations,” and that it was correctly excluded from evidence at trial.
Medical providers taking a case on a lien have been thought to inflate the cost for services. This may be the result when it is understood by the provider that they may be asked to wait long periods of time to be paid or take less than the full amount to settle the case. When a factor purchases the lien, and if the case is tried, the defendant runs the risk of being on the hook for the entirety of an inflated amount without regard for how much the medical providers were paid.
In cases where it appears the medical costs are inflated or unreasonable, expert testimony from a medical billing professional is required to attack the unreasonable costs. The defense does not have to stipulate to the reasonableness of the medical billing, and thereby force plaintiff to call their own expert in support. While experts may be costly, those fees need to be evaluated against the reduction value, not only of the raw medical costs, but how the inflated medical billing may impact other elements of the jury award such as general damages and pre-trial interest. As always, being prepared at trial to address damages is the best way to avoid an inappropriately high jury award.