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Ohio court to decide what damages are reasonable

A column analyzing the impact of recent court decisions on physicians

By Amy Lynn Sorrel covered legal, antitrust, fraud and liability issues from 2005 to 2010, and has also written the "In the Courts" column. Posted Jan. 4, 2010.

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Jackpot jury awards continue to be a source of frustration for physicians, and a case before Ohio's Supreme Court offers some insight into how doctors are trying to prevent those awards from mounting unfairly.

The case stems from a personal injury lawsuit after a car crash in 2005, when Patricia A. Manton's car failed to yield at a stop sign and collided with Richard Jaques' vehicle.

The case went to trial in 2008, and because liability was undisputed, the main issue before the court was the extent and amount of damages Manton owed to Jaques, according to court records.

As evidence of those damages, Jaques asked to present to the jury his total medical bills for treatment he received from December 2005 to February 2007 for injuries from the crash. Those bills reflected only the charges billed by various health care facilities, which came to $21,874.80.

But Manton challenged the reasonableness of those amounts. She said she should be able to present evidence showing that the facilities got paid only $7,483.91 for their services by Jaques' health insurance company.

The Lucas County Court of Common Pleas disagreed and permitted the jury only to consider the full amount of Jaques' bills. He was awarded $25,000.

The court sided with plaintiff lawyers' arguments that a 2005 state law, known as the collateral source rule, precluded defendants from introducing evidence of reduced medical bills when the patient is covered by health insurance. The rule applies to a broad range of personal injury cases, including medical liability actions.

The trial court later denied Manton's request for a new trial, which she appealed. She argued to the 6th District Court of Appeals that the trial court ignored a 2006 Supreme Court precedent in Robinson v. Bates, stating that "both an original medical bill rendered and the amount accepted as full payment are admissible to prove the reasonableness and necessity of the charges rendered for medical and hospital care."

But in a March 20, 2009, ruling, appellate judges said the collateral source rule superseded the Robinson decision, because it took effect after the case began.

They also pointed to an exception in the statute cited by the trial court. Taking a strict interpretation of the exception, judges said it prevented defendants from presenting documentation of any medical cost reductions when plaintiffs have a contract allowing a third-party insurer, including health insurers, to collect any covered expenses that plaintiffs may recover in litigation.

Manton appealed again, this time to the Ohio Supreme Court. At this article's deadline, oral arguments had not been scheduled.

Because the high court's interpretation of the collateral source rule has broad implications for medical liability judgments, the case has garnered significant attention from the physician community.

Keeping jury awards in check

Doctors say the appeals court interpreted the statute too broadly, and the ruling essentially prohibits evidence of any amount a physician accepts as a contractual payment from a health insurer.

The interpretation ignores the reality of the way the medical system works, said Martin T. Galvin, a medical liability defense lawyer and partner with Reminger law firm in Cleveland. He represents the Academy of Medicine of Cleveland & Northern Ohio, which filed a friend-of-the-court brief in the case.

"We have a dual system," he said. "Insurance companies have ways of negotiating discounts, so why should the plaintiff get to say I have $1,000 in bills when the doctor only got paid $300? The jury should get to hear that."

Martin said the Robinson ruling goes hand in hand with the statute. The collateral source rule was meant to protect plaintiffs from having their compensation reduced, because they may owe some of that money to an insurer, he said. But even if an insurance company has a right to collect payment from a plaintiff, it only has the right to collect what it actually paid.

Admitting evidence of reduced medical bills, or so-called "write-offs" -- the difference between an original charge and the amount accepted as full payment -- does not violate the collateral source rule, because nobody pays that money in the first place, Martin said.

Indeed, the Robinson court recognized that "because different insurance arrangements exist, the fairest approach is to make the defendant liable for the reasonable value of plaintiff's medical treatment. Due to the realities of today's insurance and reimbursement system, in any given case, that determination is not necessarily the amount of the original bill or the amount paid." Therefore, both should be admissible to prove the reasonableness of the medical costs at issue, the court said.

Justices also noted that at least 20 states had similar requirements, though some jurisdictions have been less restrictive.

"Robinson is saying this is a balancing act. It's not that you can't see the [full billed charges]. It's that you can see both" that number and any reductions, so a jury can make a fully informed decision, Martin said.

Because medical bills typically are used as a multiplier to calculate future economic and noneconomic damages awards, plaintiffs can receive a windfall if only billed charges are accepted as evidence, said Nancy Gillette. She is general counsel to the Ohio State Medical Assn., which also filed a friend-of-the-court brief in the case. The OSMA was joined by the Ohio Osteopathic Assn. and Ohio Hospital Assn.

If allowed to stand, the appeals court's narrow interpretation would lead to higher court judgments and ultimately higher medical liability costs for physicians because plaintiffs could recover for costs that are higher than they truly were, Gillette said.

Fair market value?

But plaintiff lawyers say the wrongdoer ends up benefiting when discounted medical bills are introduced -- an advantage the collateral source rule was intended to prevent.

If physicians choose to accept from a health insurer less than what they consider to be reasonable charges for their services, those dealings should not impact patients' ability to recover the full value of compensation for their injury, said Frank E. Todaro, a personal injury lawyer and partner with Todaro & Wagoner LPA in Columbus, Ohio. He was not involved in the case.

"From a fairness perspective, what it boils down to is, a defendant who causes damage should be responsible for the fair market value of the injury he caused. ... Medical providers aren't going to discount to me what they discount to [health insurers]," he said.

Todaro also suggested that physicians' fears are misplaced, and they stand to gain from the collateral source rule. "The more money [injured plaintiffs] have at the end of a settlement, the more money we can pay back to medical providers who have outstanding balances. Frequently, we have to propose compromises based on the distribution of money left over."

Rather than making judgments more reasonable, plaintiff lawyers argue that the Robinson ruling ends up penalizing patients who do the right thing by purchasing health insurance coverage.

"That fully insured person would recover less money than the person who had no health insurance coverage and no reduction" in medical bills, said Todaro, past president of the Ohio Assn. for Justice, a state trade group for trial lawyers.

While not involved in the pending Supreme Court case, the OAJ helped introduce legislation that trial lawyers contend would correct the purported inequity created by the Robinson decision.

Under the bill, introduced in the House on Nov. 10, any original billed charges for medical treatment would be presumed to be the reasonable value of those services. Evidence of any reductions to or waivers of those fees would not be admissible in court.

At this article's deadline, the bill was pending in the House Committee on Civil and Commercial Law. The Ohio State Medical Assn. is opposed to the proposal.

Amy Lynn Sorrel covered legal, antitrust, fraud and liability issues from 2005 to 2010, and has also written the "In the Courts" column.

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