California Court Expands Roadmap for “Reasonable Value” of Providers’ Services
Health plans generally are obligated to pay out-of-network providers only the “reasonable value” of their services and not their full billed charges, which often are higher. Therefore, disputes over what constitutes the reasonable value of a provider’s services are common in reimbursement litigation between out-of-network providers and health plans. Parties to these lawsuits often spend much time gathering evidence regarding providers’ rates and later litigating what evidence is most relevant. A recent California Court of Appeal opinion, Moore v. Mercer, 4 Cal. App. 5th 424 (2016), from a different context suggests the types of discovery and motion practice regarding “reasonable value” evidence that litigators should keep in mind.
Evidence of Reasonable Value
Courts consider a wide variety of evidence when deciding the reasonable value of a provider’s services. Relevant evidence might include rates charged by other nearby providers for the same services, the rate Medicare would pay for the services, rates accepted by the provider in the past for the same services, and/or rates at which the provider has contracted with other parties. See Children’s Hosp. Cent. California v. Blue Cross of California, 226 Cal. App. 4th 1260 (2014). Litigating parties often conduct discovery to obtain evidence showing these various rates, and trial often focuses on which types of rates best match the health plan’s reimbursement obligation.
Moore v. Mercer
In Moore, Ms. Moore was injured in a car accident that was the other driver’s fault. Later, Moore sought back surgery to cure pain caused by the accident. Moore, who had no health insurance, signed a medical lien document with the surgeon before the procedure, agreeing to pay the surgeon’s full billed charges. The surgeon later sold the account receivable and lien at a discounted rate to a medical finance company for approximately 50 cents on the dollar.
Moore eventually sued the other driver, seeking, among other damages, the reasonable value of the medical services she received as a result of the car accident. The tortfeasor filed a motion to compel production of the agreement between the surgeon and the medical finance company, arguing the rate paid by the finance company was relevant to proving the reasonable value of the surgeon’s services. The trial court disagreed and denied the motion. Later, nearing trial, the court also granted Moore’s motion in limine, barring the tortfeasor from introducing any evidence concerning the amount the surgeon had discounted the bill to the finance company. Following trial, at which Moore prevailed, the tortfeasor appealed.
The Court of Appeal addressed three issues. First, the Court distinguished cases holding that tort victims may not recover more in damages for medical costs than the amount their insurer had contracted with the provider to pay for the services, because those tort victims were never responsible for paying full billed charges. Moore’s responsibility, on the other hand, was not limited to the amount the medical finance company paid to acquire the surgeon’s account receivable; according to evidence, she remained fully liable, and therefore she could recover the reasonable value of the surgeon’s services.
Second, the Court agreed with the trial judge that the discounted amount the finance company paid for the account receivable and lien was not reliable evidence of the reasonable value of the surgeon’s services. The court explained that the finance company could have calculated the discount based upon any number of reasons unrelated to the value of the surgeon’s services. For example, the company might have considered the skill of Moore’s personal injury lawyer or the likelihood of proving the other driver’s liability. Likewise, the rate that the surgeon accepted from the finance company might have been tied to financial pressures to collect on unpaid bills, rather than the value of the medical services. The Court held the rate paid by the finance company was relevant to determine reasonable value, but the Court sustained the trial judge’s ruling that the prejudice of dealing with those collateral issues justified ruling the evidence inadmissible.
Third, the Court reasoned that the trial court erred in denying the tortfeasor’s motion to compel production of the agreement between the surgeon and the company. While the evidence was properly excluded at trial, the Court nevertheless noted that the scope of discovery is broader than evidence admissible at trial, the tortfeasor’s expert could “conceivably” have based an opinion regarding reasonable value in part on the amount accepted by the doctor, and the agreement could inform the issue of whether the patient still remained responsible for 100% of the billed amount.
Conclusion
Moore suggests that litigators should conduct broad discovery into not only the various rates for services identified in cases like Children’s Hospital, but also the reasons behind those rates. Under Moore, courts should allow this type of broad discovery into other payers’ rates. As Moore instructs, if any particular rate is unfavorable, litigators should consider a motion in limine to exclude that rate at trial if it potentially was set for reasons unrelated to the value of the provider’s services. While the Moore court simply sustained a discretionary call by the trial judge, and other courts could rule differently, Moore gives litigators support for bringing a motion to exclude evidence of unfavorable rates at trial. Alternately, if an opposing counsel moves to exclude a favorable rate, Moore also suggests that the rate may nevertheless be entered into evidence as part of an expert’s testimony.