PAID AND INCURRED AFTER HAYGOOD: DEFENSE PERSPECTIVE

Transcription

1 PAID AND INCURRED AFTER HAYGOOD: DEFENSE PERSPECTIVE ROSS PRINGLE Wright & Greenhill, PC 221 West 6th Street, Suite 1800 PO Box 2166 Austin, Texas (512) State Bar of Texas 25 TH ANNUAL ADVANCED EVIDENCE AND DISCOVERY COURSE 2012 Dallas - April San Antonio May CHAPTER 22.1

2

3 TABLE OF CONTENTS I. INTRODUCTION... 1 II. STIPULATION OF MEDICAL DAMAGES... 2 III. PARTIAL OR SEGMENTED STIPULATIONS... 3 IV. REIMBURSEMENT RATES AS DEFENSIVE EVIDENCE... 3 V. LIEN AND SUBROGATION INTEREST ADJUDICATION... 3 VI. PENDING ISSUES... 4 A. Is a Cap on Damages or a Limitation on an Element of Recovery?... 4 B. Burden of Proof Issues... 4 C. Providers Who Refuse to Bill... 4 D. Future Medical Expenses... 5 i

4

5 PAID AND INCURRED AFTER HAYGOOD: DEFENSE PERSPECTIVE I. INTRODUCTION In addition to any other limitation under law, recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant. Tex. Civ. Prac. & Rem. Code (2003) This sentence of 32 words fundamentally altered the development, evaluation, settlement, trial, and appeal of personal injury cases seeking recovery of medical expenses as a result of a defendant s negligent acts or omissions. A patchwork of conflicting, inconsistent, intensely local practices, customs and procedures evolved in the almost eight years between enactment of this statute and the Texas Supreme Court opinion in Haygood v. de Escabedo, 356 S.W.3d 390 (Tex. 2012). Although Haygood clarified much of the confusion and uncertainty in applying , the effect of the statute continues to be debated across the state. In Haygood v. Escabedo, 356 S.W.3d 390 (Tex. 2012), plaintiff Haygood sued defendant Escabedo for injuries sustained in an automobile accident. Haygood underwent multiple surgeries to his neck and shoulder as a result of the accident. His healthcare providers billed in excess of $110,000 for treatment resulting from the accident. Because Haygood was a Medicare patient, his healthcare bills were discounted by adjustments or credits in the amount of about $82,000. Of the $27,000 balance remaining after adjustments and write-offs, about $13,000 was paid and $14,000 remained due and owing to Haygood s providers. At trial, the defendant moved to exclude evidence of any medical expenses over and above the $27,000 either paid by Medicare or owed by plaintiff, while the plaintiff moved to exclude evidence of any amounts other than those billed. The court held that the claimant s recovery and the evidence at trial must be limited to those expenses that the healthcare provider has a legal right to be paid. Haygood, 356 S.W.3d at 391. In so holding, the court rejected the common trial court practice of admitting evidence of the full bill 1 charges and reducing the amount recoverable by a post-trial, post-verdict evidentiary hearing to determine what amount of the sticker price was actually paid or incurred. 1 This paper will refer to original, undiscounted medical expenses as full bill charges or sticker price. 1 The fundamental problem behind paid or incurred issues lies in the fact that the sticker prices for medical services rendered are inflated because of the provider s third-party medical reimbursement model. The Haygood court explains: Few patients today ever pay a hospital s full charges, due to the prevalence of Medicare, Medicaid, HMOs, and private insurers who pay discounted rates. Hospitals, like healthcare providers in general, feel financial pressures to set their full charges as high as possible, because the higher the full charge, the greater the reimbursement amount the hospital receives since reimbursement rates are often set as a percentage of the hospital s full charge. Haygood, 390 S.W.3d at 393, citing Daughters of Charity Health Services of Waco v. Linnstaedter, 226 S.W.3d 409, 410 (Tex. 2007) This constant upward pressure of the full bill charges occurs because the most third party reimbursement 2 of medical expenses are calculated and paid as a fraction of the sticker price. The provider sets prices high to increase or increase reimbursement (or at least maintain it at an acceptable level). As Emerson explained, we aim above the mark to hit the mark. At the same time providers are raising sticker prices, third party reimbursers seek to control reimbursement expenses for medical services. The perception that medical costs are increasing may be used to justify reduced reimbursement rates to control claim expenses and keep premiums low (or at least slow the inevitable increase in premiums). These two dynamics operate to stretch the gap between reimbursement amounts (what the provider is almost always ultimately paid for services) and full bill charges which are charged only in the absence of any third party health insurance. 3 Full bill charges are essentially fictional. As explained in Haygood and well known to trial lawyers, the plaintiff seeks to introduce evidence of the elevated full bill or sticker price for medical expenses 2 Third party reimbursement of medical expenses occurs when an entity other than the patient, such as a private health insurer, HMO or government program such as Medicare or Medicaid reimburses the provider for services rendered or products provided to the patient. 3 Ironically, full bill charges are sent only to patients with no health benefits of any kind. Presumably, these patients are those least able to pay a substantial medical bill, much less undiscounted sticker price charges.

6 in order to ratchet and leverage non-economic damages. It is commonly believed that evidence of full bill charges admitted before a jury, even if later reduced or adjusted post-verdict, is generates a larger overall verdict: A few courts in other jurisdictions have expressed concern that limiting the evidence to amounts that have been paid or must be paid provides the jury an unfairly low benchmark with which to gauge the seriousness of the plaintiff s injuries in awarding non-economic damages, such as for physical pain and mental anguish. Haygood, 356 S.W.3d at 398. See also Henderson v. Spann, S.W.3d, 2012 WL , slip op at 2-3 (Tex. App. Amarillo, February 22, 2012) (not yet published). As pointed out by the plaintiff in Haygood, the claimant with the foresight to purchase health insurance is at a distinct disadvantage from the uninsured claimant, as the uninsured claimant may introduce evidence of the full bill charges, thereby increasing damages. Haygood, 356 S.W.3d at 398 (if Haygood were uninsured, his medical expenses would not be subject to adjustments or credits, and evidence of more expensive treatment would suggest to the jury that his injuries were more serious). It is troublesome that uninsured claimants enjoy an advantage over those with insurance. It is clear from Haygood that the Supreme Court has expressly disapproved the procedure whereby a plaintiff may introduce evidence of full bill charges and engage in post-verdict reduction and adjustment to the amounts actually paid or incurred. See Haygood, 356 S.W.3d at 399. See also Henderson v. Spann, supra at slip opinion p. 3. Haygood explained that permitting the trial court to adjust recoverable medical expenses post-verdict violates the constitutional right to trial by jury. If the jury awards less that the total of all charges, the trial court may have no way of knowing which charges the jury found reasonable and which it did not. In all of these situations, a requirement that the trial court resolved disputed facts in determining the damages to be awarded violates the constitutional right to trial by jury. Haygood, 356 S.W.3d at 399. An example demonstrates how the trial court submitting only full bill charges may be forced to guess its way from verdict to judgment. Assume the plaintiff sees two providers, both of which are reimbursed by his health insurer. Provider A sees plaintiff five times. The sticker price of each office visit is $100 and is reimbursed at 50%. Provider B provides physical therapy 20 times with each therapy visit charged at $50 but only reimbursed at 20%. Only the full bill charges are admitted before the jury, which finds the reasonable and necessary medical expenses are $750. Without more specific findings, the trial court cannot engage in the post-verdict adjustment because it is unclear exactly which combination of treatment the jury found was necessary. In this example, possible combinations could include: all five visits to Provider A and five visits to Provider B ($300 paid and incurred), 2 visits to A and 11 visits to B ($210 paid and incurred), one visit to A and 13 visits to B ($180 paid and incurred), etc. Clearly, then, the practice of admitting full bill charges with a post-trial reduction constitutes reversal error. See, e.g., Henderson v. Spann, supra, slip opinion p. 3. Haygood clearly holds that only evidence of recoverable medical expenses is admissible at trial and the plaintiff s evidence should be limited to the amount actually paid or incurred by the plaintiff or on his behalf. Nevertheless, some trial courts continue to resist limiting the plaintiff s evidence to only those amounts actually paid or incurred by or on behalf of the plaintiff. In those situations, several options or arrangements should be contemplated. II. STIPULATION OF MEDICAL DAMAGES In many cases, defendant may not contest the nature or extent of the treatment claimed to have resulted from the accident and concedes the adjustments are as reflected in documents produced or obtained in discovery. For example, assume Plaintiff suffered a broken arm in an accident and sought objectively reasonable and appropriate treatment as a result. In such a case, plaintiff and defendant should stipulate to the amount of the adjusted, paid or incurred medical such that there is no disputed issue for jury consideration. A full or blanket stipulation as to the plaintiff s prior medical would be appropriate unless: (1) defendant contests any part of the plaintiff s treatment as excessive, unrelated, or unnecessary as a result of the occurrence; or (2) the defendant contests the adjusted amount as excessive. The parties may stipulate to the adjusted medical expenses even if defendant contends that the treatment or services were not caused by his acts or omissions. For example, a plaintiff may seek recover of damages for a neck surgery defendant contends results solely from a pre-existing condition. Defendant may concede the medical expenses are reasonable and necessary 2

7 while disputing the damages are recoverable. Defendant should ensure submission of a modified jury issue to inquire if the medical expenses resulted from the occurrence or the defendant s conduct. III. PARTIAL OR SEGMENTED STIPULATIONS In some cases, the parties can fashion partial, segmented, or sequential stipulations. For example, assume the plaintiff seeks recovery of a knee injury, a wrist injury, and a back injury as a result of the incident. Based on the billing and claim records, the parties discern the paid or incurred amount for each of these injuries standing alone. The defendant can enter into a stipulation in that regard and the jury would be asked which injuries resulted from the occurrence. Based on these findings, the trial court can render judgment by applying the stipulated damages to the jury finding. Another variant on the sequential or multiple stipulation protocol is to stipulate as to the paid or incurred expenses by specific medical providers and submit to the jury the dates when the treatment was reasonable and necessary. For example, the plaintiff may claim all treatment through the date of trial is related to the accident and was necessarily incurred as a result of the incident, while the defendant contends that only three months of post-accident treatment through a single provider was reasonable. The parties can frame stipulations such that the jury finding could be applied to the amount of paid or incurred stipulated to between the parties. The partial stipulation may limit the discretion and flexibility of the jury. In the last example, the jury may conclude that two months of treatment from all the providers was reasonable, necessary and related to the accident. Unless the parties have stipulated to all of the medical expenses, there could be a gap between the stipulated facts and the jury findings. An extreme example of a segmented or sequential stipulation would be to enter into an agreed stipulation as to every medical charge incurred in the past. The jury would then be asked as to whether each and every medical charge submitted by the plaintiff was reasonable, necessary, and related to the incident. Applying those myriad findings to the stipulations, the court could fashion a judgment without making any findings of fact on disputed issues. Obviously, this proposal becomes more cumbersome as the number of charges, expenses, and visits increase. 4 IV. REIMBURSEMENT RATES AS DEFENSIVE EVIDENCE In those occasions in which the plaintiff is actually uninsured and there are no adjustments or reductions in the sticker price, the defendant should still be entitled to submit expert testimony or an counter-affidavit based on reasonable reimbursement rates. Haygood acknowledges that full bill rates are not the sole measure of reasonableness; defendant should be entitled to introduce expert testimony from a qualified professional testifying that reasonable reimbursement rates for medical expenses are far below those amounts reflected in original full bill charges and more accurately reflect a reasonable and necessary charge which should be awarded for that medical expense by the jury. Note that such defensive evidence would not limit the plaintiff s recovery but could be offered to reduce the plaintiff s recovery. V. LIEN AND SUBROGATION INTEREST ADJUDICATION The author submits that medical providers with a lien or subrogation interest in a plaintiff s personal injury case should recover only those amounts found by the jury to be reasonable and necessary charges. Currently, an entity with a lien or subrogation interest is entitled to first-dollar reimbursement out of any settlement or judgment. The amount of the subrogation or lien interest is that claimed by or on behalf of the provider. Because of the gross disparity between sticker prices and reimbursement levels, there may be a significant gap between an interest claimed on the one hand and the reasonable settlement value or verdict value on the other. An example illustrates. Plaintiff with no health insurance is in a mild to moderate auto accident and taken by ambulance to a local trauma hospital for tests and examinations. After the standard battery of x-rays, scans, diagnostic tests and observation without admission, he is released with standard discharge instructions for a sprain/strain injury, instructions to see his family doctor (or return if complications arise) and a script for painkillers. His full bill charges for ambulance and emergent care total $3500. He misses a week of work and makes a full recovery. Although the claimant is uninsured, defendant is prepared to offer evidence that the reasonable and necessary 4 Prior to Haygood, trial courts could employ this procedure coupled with the post trial adjustment without resolving disputed facts. The jury would find whether each and every visit, procedure, test, prescription or other service was related and the parties could either agree or put on objective 3 evidence as to the amount actually paid or incurred for each such service. Using the example from p. 2, supra, the jury verdict would reflect one doctor visit and 13 therapy visits as reasonable and necessary, for which the paid or incurred number is $180.

8 reimbursement for the hospital and ambulance expenses is around $700. This case may have a settlement or verdict value between 5-10,000, but the $3500 hospital lien interest impedes negotiation and resolution of the case. Even worse, if the case is tried to judgment for $10,000, the lienholder recovers the full $3500 interest, even if the jury awards only $700 for past medical expenses. This siphons off plaintiff s non-medical damages by the lienholder to satisfy the lien amount based on the provider s fictitious sticker prices. A fairer result occurs if the lien or subrogation interest is limited to the damages found by the jury such that the lien interest is reduced to $700. Such a limitation of medical interests to the jury findings would simultaneously reduce the pressure on uninsured plaintiffs to secure jury findings based on sticker prices while encouraging lienholders to negotiate interests based on reimbursement rates rather than sticker prices. VI. PENDING ISSUES Several issues remain to be addressed by the courts of appeals after Haygood. A. Is a Cap on Damages or a Limitation on an Element of Recovery? Some plaintiffs contend that, because the paid and incurred statute is a cap on damages, it should be applied only after a Chapter 33 reduction for proportionate responsibility. For example, assume the plaintiff s full bill charges are $10,000, for which Medicare paid only $2,000. The plaintiff is assessed forty percent responsibility for the accident. The plaintiff would urge the court to apply the forty percent reduction to the full bill charges before applying the cap. Thus, plaintiff s recovery of medical expenses would be reduced by forty percent to $6,000 and then further capped at the paid and incurred amount of $2,000. Although this issue is currently pending in the Corpus Christi Court of Appeals in the case of Davila v. Haas-Anderson Construction, Ltd., Cause No CV, this issue was addressed and rejected by the Supreme Court in Haygood. Haygood, 356 S.W.3d at 399. This argument is untenable because it would permit plaintiff to be fully compensated for his medical damages despite his percentage of responsibility. Moreover, this argument relies upon the admission of full bill charges before the jury, which is expressly rejected by Haygood. B. Burden of Proof Issues Haygood and its progeny suggest that it is the plaintiff s burden to establish the amount of medical expenses paid or incurred. In the cases that have been decided to date, it is clear from the appellate opinions that the plaintiff was protected by some type of thirdparty coverage available to trigger the effect of the statute. However, the defense practitioner should be vigilant to develop an independent record of the amount of medical expenses paid or incurred by the plaintiff. A situation could arise where the plaintiff would put on evidence of medical expenses billed and simply testify that none of the medical expenses have been billed or are covered by insurance. If the defendant has not independently verified the existence and application of insurance coverage protecting the plaintiff, the plaintiff s testimony may be sufficient to submit the full bill charges without evidence of more. In other words, the defendant should be prepared with admissible paid or incurred information to counter the plaintiff s testimony or evidence that there is no coverage, insufficient coverage, or only a small amount of insurance coverage available to reduce or adjust the full bill charges. C. Providers Who Refuse to Bill In some counties and areas, a practice has developed whereby institutional healthcare providers such as hospitals treating emergent or acute care patients as a result of an automobile, construction, or other accident in which third-party claims are prevalent, will refuse or decline to bill the plaintiff s third-party insurance carrier. In so doing, the provider is foregoing the right to recover immediate payment or reasonably prompt payment in exchange for a willingness to seek payment as a result or out of a third-party insurance settlement. In these cases, the provider asserts that the full bill charges have actually been incurred by the plaintiff and are not subject to any reductions, as they have not been submitted to insurance. This tactic may violate the provider agreement between the facility/institution and the third-party insurance carrier. The defendant should determine if amounts billed had not been submitted to any thirdparty insurance carrier. The defendant should urge the court to limit the provider s right of recovery to the amount that the provider would have been paid by the third-party carrier, as there is an agreement in place to limit recovery for those services to the agreed, stipulated, contractually adjusted amount. Further, this practice would be eliminated or reduced by the limitation of medical lien interests to the amount found by the jury as described in IV. 4

9 D. Future Medical Expenses Neither Haygood nor the statute addresses the reduction or amounts of future medical expenses. Although defendants do not have the benefit of a cap or limitation on the recovery of future medical expenses, the defendant should make the argument that future medical expenses would be limited by the reimbursement protocol, schedule, or amounts set forth in the historical data. The defendant will need to introduce expert testimony in that regard from a qualified expert who can testify regarding the reasonable amounts that a third-party health insurer would pay for the future medical services the jury might deem to be reasonable or necessary. This may be a tricky exercise, given the fact that Haygood holds the collateral source rule as intact and that the jury should not be told that medical expenses have been reduced or adjusted by a third-party insurance carrier. Nevertheless, by limiting the testimony to third-party reimbursement generally, without specifying or disclosing the existence of a third-party reimbursement scenario on the instant case, such testimony should be admissible. 5

10