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Logo Icon LIEN BASED MEDICAL DAMAGES: THE EVOLVING CASE LAW

In the context of personal injury lawsuits, a medical lien is a contract between a medical provider and a plaintiff in which the medical provider’s services are satisfied directly from a court award or out-of-court settlement. As larger verdicts and settlements put both the plaintiff’s attorney and lien-based provider in a position for larger financial gain, lien based medical treatment incentivizes over treatment and overcharging for services. This is particularly true in jurisdictions such as California where the determination of non-economic damages is greatly influenced by the amount of actual economic damages.

In the context of transportation/trucking cases, many have attributed the exponential growth in verdict value to the increased prevalence of lien-based treatment. For example, in 2006, there were only 4 published trucking verdicts exceeding $1,000,000. Fast forward to 2019 where there were 265 trucking verdicts of exceeding the $1,000,000 mark—a 66 times increase over a thirteen-year period. Though cases like Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 566 have attempted to curb the practice of introducing inflated medical bills, subsequent case law has opened the door for plaintiff’s attorneys to generate excessive damages.

Howell and Its Progeny

In Howell, supra, a plaintiff injured in an auto accident sought medical damages based on the amount billed by her treating physicians and hospital, less the amount paid by her insurance. The Howell court held that a plaintiff is only entitled to the lesser of (a) the actual amount paid or incurred, or (b) what is reasonable. The Howell decision was premised on the market rate values driving the actual cost of medical services. Subsequent cases such as Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308 and Ochoa v. Dorado (2014) 228 Cal.App.4th 120 supported the ruling in Howell that for an insured plaintiff, the full amount billed for past medical services is irrelevant and inadmissible to prove past or future medical expenses or noneconomic damages. However, the cases above never addressed the question of an uninsured plaintiff.

In Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311 revisited the Howell decision in the context of an uninsured plaintiff. The Bermudez court held that billed medical expenses are relevant and admissible when the plaintiff is uninsured. The effect of Bermudez allows a “wide ranging inquiry” into the plaintiffs billed medical expenses and does not require a showing by plaintiff’s billing experts that the amount billed is related to what will actually be paid or expected to be paid on market conditions.

Pebley Decision and Lien-Based Treatment

In 2018, Pebley v. Santa Clara Organics (2018) 22 Cal.App.5th 1266, held that an insured plaintiff who chooses to receive out of network lien-based medical treatment are treated as uninsured plaintiffs for evaluating medical damages. The effect of Pebley allows plaintiffs to introduce into evidence the full amounts billed for lien-based treatment. As stated, this poses grave concerns given the financial incentive of plaintiff’s attorneys and lien-based providers to generate excessive amounts of billed medical treatment.

The California Supreme Court has declined to review the propriety of the Pebley decision incentivizing plaintiff’s attorneys to refer their clients to lien-based medical treatment rather than plaintiffs using their health insurance coverage. While defendants still have the right to argue the reasonableness of medical damages, pursuant to Bermudez the plaintiffs do not have to demonstrate the amount billed is related to the what will actually be paid or expected to be paid on market conditions in their given locality (i.e. the amount plaintiff’s insurance would have paid).

Combatting Pebley

Defense counsel will need to attack all issues related to lien-based charges as early and frequently as possible. Further, it is vital for the jury to hear and understand that lien-based charges are always negotiable. In the discovery phase, it is important for defense counsel to send specific discovery requests regarding the relationship between plaintiff’s counsel’s office and the lien-based provider. These early discovery responses can be used as an effective tool when deposing the billing manager at the lien-based medical provider’s office regarding the differences in charges between the lien and private health insurance. Lastly, early retention of defense billing experts to challenge the medical charges line by line is essential to prevent the phantom charges present in lien-based medical treatment.

The attorneys at Poole Shaffery & Koegle, LLP remain ready to litigate the challenges posed by the evolving case law in relation to lien-based medical treatment.