Howell Is Eroded by Recent California Appellate Cases: Fully Priced Medical Expense Liens are Admissible

A California appellate court has eroded the defense bar’s recently acquired “win” in the fight against juries’ considering inflated medical bills. The California Court of Appeal issued another partially published decision interpreting and applying Howell v. Hamilton Meats & Provisions Inc. to an uninsured plaintiff’s claim for past medical damages. Uspenskaya v. Meline (Oct. 28, 2015, C071647). The Uspenskaya Court held that a plaintiff’s full medical bills are admissible to determine the reasonable value of an uninsured plaintiff’s medical treatment received pursuant to lien agreements, even if the liens had been sold to “factors” for less than the full face value.

This area of the law will be fraught with ever-morphing permutations of plaintiff’s attorneys, medical providers, and even hospitals trying to circumvent Howell’s truth: that only the true market value of medical services are compensable.

Medical Finance “Factor” Purchased Medical Liens at a Discount

First, the facts of this case. The defendant’s vehicle collided with the plaintiff’s vehicle at an intersection. The injured plaintiff ultimately underwent surgery to repair a herniated lumbar disc. The uninsured plaintiff entered into contracts with her medical providers for treatment provided on liens which were based upon her potential recovery in the lawsuit. The lien agreements provided that the plaintiff was “DIRECTLY, PERSONALLY AND FULLY responsible to make payment in full” to the medical providers or their assignees, regardless of whether she prevailed in the lawsuit. The liens were then sold by the medical providers for less than the full amount to MedFin Managers LLC, a third-party medical finance company or “factor”. A factor purchases the lien at less than face value on the premise that the factor is purchasing a lien with some risk of recovery.

Trial Court Denied Defendant’s Howell Motion in Limine

The Uspenskaya defendant filed a motion in limine citing Howell v. Hamilton Meats & Provisions Inc. (2011) 52 Cal.4th 541 to exclude the fully billed amounts of the plaintiff’s past medical treatment. The defendant argued the lower amounts MedFin paid to purchase the plaintiff’s liens were the only admissible evidence of the reasonable value of the plaintiff’s medical treatment. Fatally, this argument was unsupported by expert testimony of reasonable value. The plaintiff opposed the defendant’s motion by distinguishing Howell, which involved an insured plaintiff. The plaintiff argued she remained liable for the full medical bills under her lien agreements. Katiuzhinsky v. Perry (2007) 152 Cal.App.4th 1288. The plaintiff asserted that MedFin simply assumed the right to receive lien payments by purchasing her liens from the medical providers for cash. The trial court denied the defendant’s motion, citing Katiuzhinsky.

In the Absence of a Substantive Rebuttal, the Jury Awarded to the Plaintiff the Full Amount of Past Medical Bills

The defendant attempted to establish that MedFin’s purchase price was the true value of medical expenses. However, the defendant lacked medical billing records or expert testimony to establish the reasonable value of the services. The trial court denied the defendant’s request to admit evidence of MedFin’s lien purchase payments on the basis that amounts alone, without any expert testimony to support them, would lead the jury to speculate. The jury ultimately found the defendant liable and awarded the plaintiff a total of $429,773 in damages, including the full amount of her past medical bills of $261,773.

Court of Appeal Affirms Fully Billed Amounts Relevant to Determining Reasonable Value of Uninsured’s Medical Treatment Despite Discounted Sale to a Factor

The Court of Appeal upheld the trial court’s evidentiary rulings, noting the trial court did not rule on whether MedFin’s payments were “categorically inadmissible” to establish reasonable value of the plaintiff’s medical expenses. Uspenskaya at 6. Instead, the appellate court confirmed the “MedFin payments are relevant because they have a tendency in reason to prove reasonable value.” Id. However, without expert testimony to explain and support the defense argument that MedFin’s payment amounts are the reasonable value of the plaintiff’s past medical treatment, the probative value of the MedFin payment amounts standing alone was substantially outweighed by the likelihood they would confuse the jury and lead to speculation.

The court explained MedFin’s purchase of the plaintiff’s liens was an asset purchase, not a transaction for treatment between a patient (or their health insurer) and a medical provider. Accordingly, the amount MedFin paid the plaintiff’s medical providers for the lien “is not necessarily based on the reasonable value of the health care, but rather on collectability factors that are unrelated to reasonable value.” Id.

Furthermore, the court accepted as fact that this plaintiff remained liable for her medical providers’ full medical bills regardless of her recovery in the lawsuit. Accordingly, the plaintiff was in danger of prejudice if the jury was “misled” and awarded the plaintiff the lower amount paid by MedFin to purchase the “asset — the right to collect the plaintiff’s total debt — based on the unsubstantiated notion that such payment reflects the reasonable value of the medical services provided to the plaintiff.” Id. Ultimately, in these instances, the defendant must proffer additional evidence beyond the lower paid amount “showing the nexus between the amounts paid by the factor and the reasonable value of the medical services.” Id. In the absence of that evidence at trial, the Court of Appeals affirmed the trial court judgment.

What Can Defendants Do?

In the wake of Uspenskaya, how should defendants combat exorbitant liens?

Since health care insurers frequently drive the market value of services by setting rates, the insurers are often unwittingly the arbiter of market value. Thus the lien becomes an attractive tool for uninsured plaintiffs to increase their recovery. The defense should be on the look-out for the insured (privately or publically) plaintiff who submits to a lien for the full value of the invoice in order to drive up the figure presented to the jury. In that instance, the defense should argue that the plaintiff has failed to mitigate her damages, and should be limited to the medical provider’s “contract” rate with the plaintiff’s health care insurer.

Subpoena medical billing records, contracts, and deposition testimony from medical providers regarding payments accepted from private health insurance, government benefits, uninsured individuals and factoring companies in full satisfaction of medical bills. Be prepared for a dispute over the confidentiality of the agreed to amounts that medical providers will accept from insurers.

Medical expense and medical billing expert opinion is required for establishing the reasonable value of medical treatment and the amount accepted as payment in full. This is especially needed in cases with hospital, multi-service or extensive bills. Yes, a new type of expert has now been anointed. However, if the medical expenses are simpler and your defense medical expert can testify regarding the actual market value of the services in the plaintiff’s provider area, this type of old-school testimony may be sufficient.

In most cases, counsel should consider moving the court in limine to exclude the plaintiff’s full medical bills at trial, and support the motion with the proper expert declarations regarding reasonable value. Counsel may also object to admission or mention of the amount of the plaintiff’s full medical bills at trial to preserve issues for appeal. Finally, filing post-trial motions to reduce a verdict based on the full billed amount of the plaintiff’s past (or future) medical treatment may also be necessary.


Blog by: Nelse Miller, Partner, California and New Mexico