Fall 2003
DISCHARGED MEDICAL LIENS AND THEIR AFFECT ON THE INTRODUCTION OF EVIDENCE AT TRIAL
Question: If a medical lien has been completely discharged and forgiven by a medical care provider, can a plaintiff nevertheless submit evidence at trial of the lien amount or the “reasonable value” of medical services rendered by that provider?
Answer: No.
Under the ruling in Hanif v. Housing Authority, the most a plaintiff can recover from a defendant tortfeasor in a personal injury action is the sum certain that was actually paid or incurred for the reasonable value of medical services rendered to plaintiff (including amounts paid by a collateral source, such as an insurer). Thus, even if the amount paid or incurred is less than the prevailing market rate, a plaintiff can only introduce evidence of this amount. To do otherwise could be prejudicial and mislead a jury.
In Hanif, the trial court awarded as special damages the reasonable value of medical care and services, even though the award exceeded the amount actually paid by Medi-Cal on plaintiff’s behalf. The court found the reasonable value of physician and hospital services to have been $31,618, when in fact Medi-Cal paid only $19,317. Additionally, there was no evidence that plaintiff was, or would become, liable for the difference (the difference being “written off” by the hospital).
The appellate court reversed. In its analysis, it first made clear that Medi-Cal’s payment for all injury-related medical services did not preclude plaintiff’s recovery from defendant, as that would violate the collateral source rule. Under the collateral source rule, if an injured person receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which plaintiff would otherwise collect from the tortfeasor. (See Helfend v. Southern Cal. Rapid Trans. Dist.)
However, the court of appeal explained that a plaintiff is only entitled to recover “up to, and no more than, the actual amount expended or incurred for past medical services so long as that amount is reasonable.” (Hanif.) The court therefore concluded that it was error to award special damages for past medical care and services based on the reasonable value, when that amount exceeded the actual amount paid, and reduced the amount of the trial court’s judgment.
In Nashihama v. City and County of San Francisco, a jury awarded $99,064 to plaintiff for injuries sustained when she tripped and fell in a pothole in a crosswalk that was maintained by defendant city. Plaintiff’s award included $17,168 in medical costs, but her medical care provider had accepted $3,600 from plaintiff’s health plan as full settlement for its services.
The award of $17,168 was based on the medical care provider’s normal rates. However, plaintiff participated in an employer-sponsored health plan that had contracted with the provider to pay reduced rates for specified services rendered to its members. Additionally, the provider accepted this reduced amount as payment in full for those services pursuant to that agreement. Defendant city argued on appeal that the court erred when it allowed the jury to award damages for medical costs based on the provider’s normal rates, rather than the sum it actually accepted from the insurer.
Plaintiff did not contest that the provider had accepted a reduced rate as payment in full for the services provided. She instead pointed out that, in accordance with California’s Hospital Lien Act (HLA codified as Civil Code §§ 3045.1-3045.6), the provider had filed a lien against the judgment reflecting its normal rates, therefore, she should not be put in the position of having to accept a lesser amount, while risking the possibility that she would have to pay a greater amount to the provider because of its lien.
The court concluded that any claim by a health care provider through the HLA was not independent of, but derived from, the claim of the injured person. Although no state court had previously addressed this precise issue, the court in Nashihama relied on persuasive federal authority in the case of Grauberger v. St. Francis Hospital, holding that the HLA does not give hospitals their own right of action, but only allowed them to place a lien on the patient’s cause of action. The court further ruled that the lien is to be in the amount of the reasonable and necessary charges and that those charges are necessarily the charges made to the patient or his health care insurer.
The court also indicated that even if the HLA contemplated an independent right in a medical care provider, the extent of that right would be defined by the contract between the injured party or her insurer and the health care provider. The court held that the medical care provider’s rights would be limited to those rates it had contracted to accept from plaintiff’s insurer. Therefore, plaintiff’s concern of being responsible to the medical care provider because of its lien was unfounded. Relying on its ruling in Hanif, the court modified the judgment to reduce the amount awarded as costs for medical care.
Based on Hanif and Nashihama, if the entire amount of a lien has been discharged, and no “amount” has been paid for medical services, plaintiff should be barred from introducing any evidence that would tend to suggest there is an amount owed. Moreover, the collateral source rule does not apply, because where a lien is discharged in full, neither plaintiff nor the medical care provider received any compensation from any source. Any evidence that would appear to indicate that plaintiff paid or could be made to pay for such medical care is inadmissible and irrelevant.
These rulings are consistent with fundamental principles underlying tort recovery of compensatory damages and is in harmony with other rules and practices flowing from those principles, such as discounting future damages to present value, the bar against double recovery, and the rule that damages must be mitigated where possible. Therefore, it behooves a defendant to investigate plaintiff’s medical liens, specific amounts paid to the medical provider, and whether or not a lien has been discharged, in part or in full.
SILVIA L. PORTER
Ms. Porter is an Associate in the firm’s litigation group. Email: slp@kpclegal.com.
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