Admissibility of Medical Write-Offs

Posted in Healthcare

            In Patchett v. Lee, the Indiana Supreme Court addressed the admissibility of evidence of the actual amount paid for medical expenses by government-sponsored healthcare programs. See Patchett v. Lee, 60 N.E.3d 1025 (Ind. 2016).  In Patchett, the court held that defendants are permitted to introduce evidence to the jury of actual amounts paid by government payers as full payment for services rendered to rebut arguments by plaintiffs that billed amounts are fair and reasonable. Id.

            Statements of charges for medical expenses are routinely used at trial by plaintiffs to establish the cost of obtaining a diagnosis or treatment of an alleged injury.  Under the Indiana Rules of Evidence, such billing records are prima facie evidence that the charges contained in the bills are reasonable. Ind. R. Evid. 413.  However, billing records are often not indicative of the actual amounts paid for services, such as when a plaintiff has private or government health insurance.  Due to contractual obligations between the medical providers and the insurance carriers, providers often “write-off” or reduce the amount billed for services.  The Indiana Supreme Court originally addressed this issue in 2009, holding that defendants can combat plaintiff’s medical billing records with evidence of amounts actually paid by private health insurance carriers for services rendered. Stanley v. Walker, 906 N.E.2d 852, 859 (Ind. 2009).  The result allowed each side to present evidence to the jury of the costs incurred as a result of the alleged injuries, leaving the jury to decide what is, in fact, reasonable.

            In Patchett, the Defendant admitted liability for driving her vehicle into oncoming traffic and striking Plaintiff’s vehicle, resulting in personal injuries to Plaintiff.  However, the Defendant contested the reasonable value of Plaintiff’s medical care, so the case moved forward to trial on damages. Patchett, at 1027.  The parties agreed Plaintiff was entitled under Indiana Rule of Evidence 413 to introduce her accident-related medical bills totaling $87,706.36 as evidence the charges were reasonable. Id. at 1028.  However, Defendant sought to introduce evidence Plaintiff’s healthcare providers accepted a reduced amount as payment in full due to Plaintiff’s enrollment in a government-sponsored healthcare program, the Healthy Indiana Plan (“HIP”). Id.  Due to Plaintiff’s enrollment in the HIP, her providers accepted $12,051.48 in full satisfaction of her billed amount of $87,706.36, a “write-off” or discount of 86-percent. Id.

            The trial court granted, and the Court of Appeals affirmed, plaintiff’s motion to bar any evidence of the reduced payments made under HIP. Id.  The Indiana Supreme Court accepted transfer, and reversed the trial court’s decision. Id.  The Indiana Supreme Court held its prior holding in Stanley, was not just limited to discounts negotiated at arms-length, as with private insurance companies. Id. at 1029-31.  Rather, it also allowed defendants to introduce evidence of reduced amounts accepted by providers from government healthcare payers, including Medicaid, Medicare and HIP. Id. at 1031-33.  The Court noted government plans are “voluntary program[s] for healthcare providers” to which they are not “indentured; they are free to leave these programs at any time.” Id. at 1031.  As providers accept the amounts as full payment for services rendered, the reduced amounts are probative of the reasonable value of the medical services provided. Id.  The Court noted that while there may be cases where such evidence will be inadmissible due to its ability to confuse jurors under Indiana Rule of Evidence 403, the Court characterized such cases as “few and far between”. Id. at 1033.

            Practitioners should be aware of how Stanley and Patchett apply to Indiana cases, as well as how the arguments are received by other states.  While the Court in Patchett noted Indiana took the “middle course” by allowing evidence of both amounts billed and amounts paid, other states vary.  For example, Illinois, West Virginia, Maryland, Colorado, Massachusetts, Minnesota, and Oregon only permit evidence of the amount billed, while Texas and Delaware only permit evidence of the amount paid.  While this list is not exhaustive, it provides a framework of rationale for practitioners to consider and use in evaluating overall case values, including settlement and verdict values.  As Patchett illustrates, the billed and paid amounts can vary significantly, with such evidence creating a far different picture of damages for the jury.

Matthew Brandabur

Matthew Brandabur

Matthew Brandabur is an associate in the firm's Crown Point, Indiana office. A magna cum laude graduate of Valparaiso University School of Law, Mr. Brandabur was the recipient of Heritage Law Scholarship and the Jack Hiller Endowment. He served on the Executive Board as the Executive Editor of Symposia and Lectures for the Valparaiso University Law Review, developing the Law Review sponsored Symposium honoring the retirement of Indiana Supreme Court Chief Justice Randall T. Shepard and publishing the Note, “Getting Back to Our Roots: Increasing the Age of Child Support Termination to Twenty-one.” 47 Val. U. L. Rev. 169 (Fall 2012).

While attending Valparaiso, Mr. Brandabur served in mentoring roles as a teaching assistant in legal writing and a Dean’s Fellow Tutor in property law. He also worked as an Extern for Judge Rudy Lozano and Magistrate Judge Andrew Rodovich in the United States District Court for the Northern District of Indiana.

Mr. Brandabur is admitted to practice law in Indiana and in the United States District Court for both the Northern and Southern Districts.