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Moore v. Mercer

California Court of Appeals, Third District

October 21, 2016

LILLIE MOORE, Plaintiff and Respondent,
v.
RICHARD MERCER, Defendant and Appellant

          APPEAL from a judgment of the Superior Court of Sacramento County, No. 34201000081045CUPAGDS, David De Alba, Judge.

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         COUNSEL

         Grant, Genovese & Baratta and Lance D. Orloff for Defendant and Appellant.

         Greines, Martin, Stein & Richland, Robert A. Olson; and Don Willenburg for Association of Southern California Defense Counsel and Association of Defense Counsel of Northern California and Nevada as Amici Curiae on behalf of Defendant and Appellant.

         Leslie M. Mitchell; Piering Law Firm and Robert A. Piering for Plaintiff and Respondent.

         Jay-Allen Eisen Law Corporation and Jay-Allen Eisen for MedFinManager as Amicus Curiae on behalf of Plaintiff and Respondent.

         Opinion by Raye, P. J., with Blease and Murray, JJ., concurring.

          OPINION

          [209 Cal.Rptr.3d 103] RAYE, P. J.

          To resolve this defense appeal, we descend down a rabbit hole into the upside-down [209 Cal.Rptr.3d 104] world of health care billing, where different payers pay different prices for the same services and those least equipped to pay, pay the most; yet an injured, uninsured plaintiff, Lillie Moore, must somehow prove the reasonable value of the medical services she incurred following a motor vehicle collision. Defendant Richard Mercer, who admits liability, misinterprets Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541');">52 Cal.4th 541 [129 Cal.Rptr.3d 325, 257 P.3d 1130] ( Howell ), asks us to expand its logic far beyond the facts and rationale presented, and insists we must overrule our holding in Katiuzhinsky v. Perry (2007) 152 Cal.App.4th 1288 [62 Cal.Rptr.3d 309] ( Katiuzhinsky ) that the full amount of a provider's bill can be relevant to prove the reasonable value of the services. We disagree with defendant and amici curiae Association of Southern California Defense Counsel and Association of Defense Counsel of Northern California and Nevada that this case compels such an unprecedented expansion of Howell, a rebuke of Katiuzhinsky, and the pronouncement of a new rule that the total amount a medical finance company pays for a plaintiff's account receivable and medical lien caps the plaintiff's damages and must be admitted as evidence of reasonable value.

         Based on the record before us and the arguments advanced at trial, we conclude (1) Howell does not cap a plaintiff's damages to the amount a

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medical finance company pays health care providers for their accounts receivable and medical liens, and the reasoning of Katiuzhinsky remains sound; (2) Howell does not limit the trial court's discretion pursuant to Evidence Code section 352 to exclude evidence of the amount a medical finance company pays if the court decides, as it did here, that the evidence was minimally probative, if at all, and would necessitate an undue consumption of time to try collateral issues; (3) the terms of the agreement between a medical finance company and the plaintiff's providers may be relevant and discoverable, and therefore the sanctions imposed on the defendant must be reversed; and (4) the trial court properly entered a directed verdict on causation. The sanctions order is reversed, and in all other respect, the judgment is affirmed.

         FACTUAL BACKGROUND

         Paying for Medical Services in the World of Chargemasters, Negotiated Rate Differentials, and Medical Finance Companies for the Uninsured

         In order to appreciate the onerous burden a personal injury plaintiff faces in proving damages for past medical expenses, we must first understand the various methods by which medical providers bill for their services, negotiate discounts for certain groups of payers and not for others, and sporadically sell their receivables and liens to medical finance companies. A brief glossary is helpful. " A hospital charge description master, or chargemaster, is 'a uniform schedule of charges represented by the hospital as its gross billed charge for a given service or item, regardless of payer type.' (Health & Saf. Code, § 1339.51, subd. (b)(1).) California hospitals are required to make their chargemasters public and to file them with the Office of Statewide Health Planning and Development. [Citations.]" ( Howell, supra, 52 Cal.4th at p. 561, fn. 7.) The negotiated rate differential " [i]s the difference between the providers' full billings and the amounts they have agreed to accept from a patient's insurer as full payment." ( Id. at p. 555.) A medical finance company " purchases medical bills, and the liens securing them, from health care providers." ( Katiuzhinsky, [209 Cal.Rptr.3d 105] supra, 152 Cal.App.4th at p. 1291.)

         Hospital chargemasters throughout the state vary considerably and are extremely complex. ( Howell, supra, 52 Cal.4th at p. 560.) The Supreme Court noted the extreme disparities in its Howell opinion: " The rise of managed care organizations, which typically restrict payments for services to their members, has reportedly led to increases in the prices charged to uninsured patients, who do not benefit from providers' contracts with the plans [negotiated rate differentials]. As one article explains: 'Before managed care, hospitals billed insured and uninsured patients similarly. In 1960, " there were no discounts; everyone paid the same rates" --usually cost plus ten

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percent. But as some insurers demanded deep discounting, hospitals vigorously shifted costs to patients with less clout.' [Citation.] As a consequence, 'only uninsured, self-paying U.S. patients have been billed the full charges listed in hospitals' inflated chargemasters ... ,' so that a family might find itself 'paying off over many years a hospital bill of, say, $30,000 for a procedure that Medicaid would have reimbursed at only $6,000 and commercial insurers somewhere in between.' [Citation.] Some physicians, too, have reportedly shifted costs to the uninsured, resulting in significant disparities between charges to uninsured patients and those with private insurance or public medical benefits." ( Howell, at pp. 560-561, fn. omitted.)

         While recognizing that some patients were expected to pay chargemaster rates while others did not, the Supreme Court declared: " We do not suggest hospital bills always exceed the reasonable value of the services provided. Chargemaster prices for a given service can vary tremendously, sometimes by a factor of five or more, from hospital to hospital in California. [Citation.] With so much variation, making any broad generalization about the relationship between the value or cost of medical services and the amounts providers bill for them--other than that the relationship is not always a close one--would be perilous." ( Howell, supra, 52 Cal.4th at pp. 561-562, fn. omitted.)

         Since the uninsured have no one to negotiate on their behalf to obtain a rate differential and, in the absence of qualifying for a governmentally subsidized program, have no means to access medical care, medical finance companies have emerged to buy the liens providers obtained against personal injury judgments as a viable means of financing an uninsured's medical expenses. MedFinManager California, L.L.C. (MedFin), the medical finance company that bought plaintiff's liens in this case, was the central figure in Katiuzhinsky, from which we extract the following description of the typical contractual relationship between MedFin and the medical providers.

         " MedFin is a financial service company that purchases medical bills, and the liens securing them, from health care providers. It is not an insurance company. MedFin works with plaintiff personal injury law firms and with doctors and hospitals. Typically, MedFin becomes involved in a situation where a plaintiff sustains injuries in a traffic accident and needs medical treatment, but has no health insurance.

         " Prior to treatment, the medical provider asks MedFin to evaluate the case to determine whether it is willing to purchase the medical account after the rendition of services. MedFin will then contact the plaintiff's attorney and gather information about the case to ascertain whether the plaintiff's claim against the tortfeasor is worth its investment.

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          [209 Cal.Rptr.3d 106] " If the claim meets with MedFin's approval, it notifies the medical provider that it is willing to purchase the account and the lien rights. MedFin and the medical provider have their own agreement that governs their rights and obligations. The contract usually stipulates that MedFin will purchase the bill for about 50 cents on the dollar. Before the plaintiff receives services, the plaintiff and his attorney execute a consensual lien in favor of the medical provider. After services are rendered, the medical provider notifies the parties to the lawsuit of its medical lien. (Civ. Code, § § 3045.1-3045.6.)

         " MedFin does not negotiate with the plaintiff or the medical provider how much the provider charges for medical services. These sums are based on a standard fee schedule registered with the state, and are the same as any patient would incur in the ordinary course of business.

         " MedFin's agreement with the medical provider does not require the provider to sell its bill to MedFin. After the rendition of medical services, the provider decides whether or not to sell its account to MedFin. In some cases, a medical provider will retain the account for itself, in which case it can enforce its lien and collect the full amount due from the plaintiff.

         " If the medical provider does sell its account to MedFin, it executes a formal 'Notice of Sale and Assignment,' which is sent to the plaintiff. Having sold the bill and lien, the provider closes its book on the account. At that point, MedFin owns the account and assumes the entire expense and risk of collection. The plaintiff remains liable for the bill and owes MedFin the full amount of what has been charged. Once the plaintiff's case is resolved, MedFin typically gets paid quickly, since the plaintiff's attorney will ordinarily pay the lien from the recovery." ( Katiuzhinsky, supra, 152 Cal.App.4th at pp. 1291-1292.)

         The Collision

         Defendant Mercer admits that he negligently collided with plaintiff's car. The impact had major consequences for her health and lifestyle. Plaintiff describes feeling " a major impact" when defendant's car struck plaintiff's car on the front driver's side. She was thrown back into her seat " and then just jerked." The car in which she was riding was " kind of spun around" about 45 degrees. She testified she had no physical limitations before the accident. An employee who worked for her at the time of the collision described plaintiff as the " queen bee." She told the jury, " Everything I learned about serving was from Lillie, and she was always in five places at once it seemed like, with also what seemed like six plates on each arm and running around and takin' orders, just doin' everything there was to do." A good friend testified that before the collision plaintiff was " very, very full of life." According to

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this witness, plaintiff was " [a]lways a lot of fun, full of energy, um, kind of really the social butterfly of the group." She was also uninsured.

         Medical Treatment

         Following the collision, however, plaintiff's life changed dramatically. She could no longer roughhouse with her little boy, she could not work full time or run, she minimized her activities, and she suffered chronic pain. But there was no evidence of malingering. To the contrary, although plaintiff experienced pain shortly after the collision, she tried to work that same night at the restaurant she, her husband, and a friend co-owned. But unable to do the work, she was forced to leave early. She sought medical treatment two days later from Dr. Mark Diaz, a family practice and [209 Cal.Rptr.3d 107] occupational medicine specialist. Dr. Diaz initially advised a conservative course of treatment, including medication for pain. Plaintiff also obtained chiropractic treatment she believed was helpful, but her working capacity was " greatly reduced." Dr. Diaz referred her to an orthopedic surgeon, Dr. Philip Orisek.

         Plaintiff appears to have tried everything she could to avoid back surgery. She went to physical therapy and religiously did all the exercises her therapist recommended at home. She tried aquatic therapy. She lost 25 pounds. She moved to the coast, where she has additional family support. She started a new job that provided flexibility on the number of hours she worked. Despite all her efforts, the debilitating pain continued. Yet she was terrified of surgery.

         Dr. Orisek believed that plaintiff, who at the time was in her late 20's and, prior to the collision, did not have chronic problems with her back, was an excellent candidate for disk replacement surgery. But he acknowledged that as far as back surgeries go, disk replacement is " one of the hardest operations," with a risk of catastrophic complications. He left it to his patients to determine if, and when, the pain became so intolerable it was worth the risks attendant to the surgery. In February of 2012 plaintiff reached that point. Unable to engage with her son as she had before the collision, to work full time, or to participate in all the activities she enjoyed, she agreed to disk replacement surgery.

         Dr. Michael Ridgeway, a trauma surgeon, assisted Dr. Orisek. He described the surgery as " a big procedure because we're getting to the spine which is in the back from the front." He explained to the jury the intricacies of his role in assisting in such a high-risk operation. After making a low midline incision, he pulled the erectus muscles apart, went under the intestines and pulled them out of the way, then safely moved the iliac artery and vein that runs over the area where the disk was removed as well as the ureter, and held everything in place to minimize the risk that Dr. Orisek would injure anything as he

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replaced the injured disk with an artificial disk. Dr. Ridgeway emphasized that the primary risk is catastrophic bleeding. If the vessels in the pelvis are injured, a patient can bleed to death in about one minute. Outside of two surgeons in the Kaiser system, there are only five or six surgeons in the Sacramento region who regularly perform these procedures.

         Dr. Orisek was equally emphatic about how difficult disk replacement surgery is. Once Dr. Ridgeway showed him plaintiff's injured disk, he had to clean out the disk and remove the herniated piece, which was way in the back, just in front of the nerves. If he were to go too far and allow spinal fluid to spill out, the damage would be disastrous and the only thing that could be done would be to apply a sealant and instruct the patient to lie in bed flat for three or four days, hoping it would heal. Thus, there is " absolutely zero room for error."

         Once Dr. Orisek removed the damaged disk, he was left with a " giant empty space." He described the most difficult aspect of the surgery--placing the artificial disk right in the middle position. " [W]ith very high precision," he used a big five-pound hammer to pound the disk into place. He informed the jury that around the country many patients suffered " catastrophic vascular injuries because you're putting such a big implant into such a tight space." He successfully implanted the device right against the back of the bone and " dead in the center."

         Discovery

         Before the uninsured plaintiff was able to secure medical treatment, including her [209 Cal.Rptr.3d 108] surgery, she executed medical lien agreements with her health care providers, obligating her to pay the full amount of the fees billed. Her providers subsequently sold their bills and liens to MedFin, the medical finance company described in Katiuzhinsky, supra, 152 Cal.App.4th at pages 1291-1292.

         During discovery, defendant filed a motion to compel Dr. Orisek, a nonparty to the litigation, to produce billing records, payment records, and records evidencing any agreements for the medical care of plaintiff related to her surgery on February 2, 2012. Citing privacy and confidentiality, Dr. Orisek refused to produce his agreement with MedFin. Plaintiff's lawyer made repeated efforts to meet and confer with defense counsel and produced all the documents sought by defendant except the written agreement between Dr. Orisek and MedFin regarding the sale of bills and liens. The ...


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