A plaintiff injured by a defendant’s negligence may recover the reasonable value of the medical services required to treat the injury. To determine the value of those services, a plaintiff’s medical bills are routinely submitted to the jury as evidence of the fair and reasonable charge for the services rendered. In today’s market for medical services, however, the amount billed for the services seldom equates to the amount actually paid in satisfaction of the charges. The amount actually paid for medical services is often the product of negotiation between the medical providers and health insurers, as well as limitations imposed by federal and state regulated programs, such as Medicare and Medicaid. In addition, medical providers have developed charge structures that inflate the billed amounts in order to offset discounted rates under these agreements and programs, and to recoup losses incurred in caring for patients who are both uninsured and unable to pay. The amounts reflected on medical bills, therefore, are often well-above the fair and reasonable value of the medical treatment provided.
Consequently, a defendant in a personal injury case should look beyond the medical bills for evidence of the reasonable value of medical services. Presenting such rebuttal evidence is constrained, however, by the collateral source rule, which operates to prevent both the reduction of damages by amounts paid from collateral sources and the introduction of evidence of such payments. Jurisdictions vary greatly in the application of the collateral source rule to evidence of medical payments, and some jurisdictions have modified the collateral source rule to permit litigants to offer both the amount billed and the amount paid into evidence to prove the reasonable value of medical services.
In Massachusetts, the Supreme Judicial Court addressed the disparity between charges billed for medical services from the amounts actually paid for those services in Law v. Griffith, 457 Mass. 349 (2010). The court observed that the Legislature had modified the collateral source rule only to a limited extent with respect to medical malpractice cases (i.e., submission of evidence of insurance payments and insurance costs for post-verdict reduction of award of medical damages). Outside the medical malpractice arena, however, the court held that the collateral source rule barred evidence of the amounts paid by third parties to medical providers. Under Massachusetts law, therefore, evidence of the amount actually paid by collateral sources (e.g., health insurance, Medicare, etc.) to a plaintiff’s medical providers is inadmissible as evidence of the value of the medical services provided to the plaintiff.
In reaching its decision, the court recognized that medical bills often do not reflect the reality of present day medical billing or the reasonable value of medical services. Thus, in an attempt to strike a balance between the collateral source rule and the availability of other evidence to prove the value of medical services, the court held that “evidence may be introduced concerning the range of payments that the providers accept for the types of medical services that the plaintiff received.” A defendant challenging the amount reflected on a medical bill may therefore call a representative of the medical provider to elicit evidence of the range of payments the provider actually accepts for the particular services that the plaintiff received. In addition, a defendant may call an expert witness to testify regarding medical billing practices, the system of discounting charges, and the general relationship between the amounts charged and reasonable value. To preserve the collateral source rule against evidence of such third-party payments, however, the witness is not permitted to disclose the identity of the third-party payor or the amount actually paid on the plaintiff’s account.
As a practical matter, developing testimonial evidence as to the range of payments accepted by a medical provider for specific treatment and the basis for such range is more onerous than simply presenting the amount actually paid for the services provided to the plaintiff. In cases involving substantial medical bills, however, such evidence may significantly impact the value of the case. The availability of rebuttal evidence may also be instrumental in negotiating a stipulated value of the medical services provided that is substantially less than the total amount billed, as well as gaining leverage in settlement negotiations. Although medical bills will continue to provide one source of evidence of the value of medical services, the nature of modern medical billing practices calls for careful consideration of alternative evidence of the value of medical services recoverable in personal injury actions.