The Supreme Court has issued its opinion in Stanley v. Walker (pdf) which is sure to loom large in personal injury litigation. The case had to do with what kind of evidence can be given to a jury for purposes of determining the reasonable cost of a plaintiff’s medical treatment.
Currently, it’s common for a plaintiff’s medical bills to be used as the cost of the treatment. This isn’t especially fair because almost nobody pays sticker price for medical services. So, it doesn’t really bear much relationship to the “reasonable cost” for those services. However, defendants who would like to challenge the sticker price were stuck. The rules of evidence state flat out that a billing statement constitutes prima facie evidence that the listed price is reasonable.
There is another statutory rule of evidence known as the collateral source statute that says defendants can’t introduce evidence of, among other things, benefits from insurance paid for by the plaintiff. This makes some sense: why should the guy who hit me get a benefit from the fact that I planned ahead and paid my insurance premiums? But, this collateral source doctrine was used to prohibit introduction of evidence that a medical provider accepted not only payment from an insurance company, but also “wrote off” a chunk of the bill based on its agreement with the insurer. (For it to be a “write off,” one has to start from the premise that the starting price was something other than a fiction in the first place. A dubious proposition.)
So, what the case boils down to, as I read it, is whether the “write off” is properly characterized as a benefit purchased by the plaintiff/insured or as simply a more accurate reflection of what the “reasonable cost” of the service was in the first place. The Supreme Court, in a 3-2 decision, decided that the write-offs could be introduced as evidence of the reasonable value of the medical services — if the hospital agreed to accept the reduced amount as payment in full (regardless of whether the paid portion originated as insurance money or elsewhere), then that is evidence a jury should be able to consider along side the sticker price. The jury can then make its own decision about what the reasonable value is.
This is a bigger deal than it appears on its face because the amount of medical expenses incurred are often used as an aid to calculating the proper measure of general damages (pain and suffering, etc.)
The Plaintiff’s bar can’t be too happy about this. For some time now, they have been able to talk to the jury (or an insurance adjuster) about the sticker price, get a verdict or settlement based on that, turn around and pay back insurers for the lesser amount they actually paid, and then (along with their clients, of course) pocket the difference.
For this particular case, the court held that the trial court should simply reduce the judgment by the amount of the medical provider’s write off. Justice Dickson dissents with a number of cogent points, but then suggests that if the court is going down this path, trial courts should reduce judgments post-verdict. But, I’m fairly sure that’s not what the majority has required for future cases — juries, not just judges, can consider the reduction. This is important because it has an impact on the amount of general damages, so there is a multiplier effect involved.
As I said, Justice Dickson raised a number of valid concerns — not least of which is the notion that the General Assembly should be the one to fix this mess. Perhaps it should revisit the issue. But, until it does, it looks like the Supreme Court has done what it could to wrestle with the fundamental problem that health care prices are opaque and, all too frequently, the sticker price on a medical bill is essentially fictional.