Indiana Supreme Court Broadens Application of Statutory Collateral Source Rule By “Charting a Middle Course”

March 3, 2017 / Writing and Speaking

In Stanley v. Walker, 906 N.E.2d 852 (2009), the Indiana Supreme Court interpreted the state’s collateral source statute to permit a defendant in a personal injury action to introduce evidence of discounted medical payments negotiated between the plaintiff’s medical providers and his private health insurer to prove the reasonable value of medical services, as long as insurance is not referenced.  The statute abrogates the common law rule which makes evidence of collateral source payments inadmissible.  In Patchett v. Lee, 60 N.E.3d 1025 (Oct. 21, 2016), the Court shut down the frequent argument of plaintiffs’ lawyers that Stanley applies only to amounts paid by private health insurance companies, not government programs such as Medicare and Medicaid.

Facts

In Patchett, the plaintiff was insured under the Healthy Indiana Plan (HIP), a government sponsored healthcare program under which HIP medical providers accepted $12,051.48 in full satisfaction of the plaintiff’s accident related medical bills totaling $87,706.36 based on maximum allowable reimbursement rates.

Analysis

The Indiana Supreme Court rejected the reasoning of the lower courts that HIP’s maximum allowable rates did not reflect the reasonable value of medical services provided because they were not negotiated at “arm’s length between a medical provider and an insurance company,” but rather “political and budget concerns” underlying the government program.  The Court concluded that, in determining relevance of collateral source evidence, “[t]he salient fact is not whether (or to what extent) the reimbursement rates were negotiated.  What counts is that the participating provider has agreed to accept the lower rates as payment in full.”  It noted that the participation of medical providers in the government program was entirely voluntary and their agreement to accept the reduced rates required by the program is “relevant, probative evidence of the reasonable value of medical services,” which is the measure for recovery of medical expenses under Indiana tort law.

The Court noted that, since it decided Stanley in 2009, six states (West Virginia, Maryland, Colorado, Massachusetts, Minnesota and Oregon) have precluded the admission of discounted reimbursements in determining the reasonable value of medical services.  Two states (Delaware and Texas), limit recovery to the discounted amount actually paid for medical services.  Two states (California and Kansas), follow Indiana’s “middle ground” course which Patchett found to be the “fairest approach.”  The “middle ground” approach adopted in Stanley and reaffirmed in Patchett permits the fact finder to consider both the amount originally billed and the reduced amount actually paid and accepted, “along with any other relevant measures of the reasonable value of medical care,” in determining the amount of damages that will make a plaintiff whole.

Learning Point:  Patchett suggests that any relevant evidence of the reasonable value of medical care is admissible on the issue of fair value of medical treatment, as long as the evidence is not substantially outweighed by the danger of unfair prejudice, confusion or needlessly presenting cumulative evidence.  Patchett also instructs that the admissibility of evidence is usually left to the sound discretion of the trial court but, when admissibility depends on the proper interpretation of a statute, a trial court’s decision will be reviewed de novo on appeal.  Thus, appellate challenge to the introduction of evidence under a statute may be governed by the most favorable standard of review.  Litigants should keep that in mind when erroneous admission of evidence significantly impacts the potential or actual judgment value of the case.

  • Chicago

    Illinois 60603

    10 South LaSalle Street

    Chicago, Illinois 60603

    T: 312.855.1010 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Dennis D. Fitzpatrick

  • New York

    New York 10005

    28 Liberty Street 39th Floor

    New York, New York 10005

    T: 212.805.3900 TF: 800.826.3505 F: 212.805.3939 Office Managing Partner: Tyler Jay Lory

  • Irvine

    California 92614

    17901 Von Karman Avenue

    Suite 650

    Irvine, California 92614

    T: 949.260.3100 TF: 800.826.3505 F: 949.260.3190 Office Managing Partner: Ian R. Feldman

  • Florham Park

    New Jersey 07932

    100 Campus Drive

    Florham Park, New Jersey 07932

    T: 973.410.4130 TF: 800.826.3505 F: 973.410.4169 Office Managing Partner: Carl M. Perri

  • Michigan City

    Indiana 46360

    200 Commerce Square

    Michigan City, Indiana 46360

    T: 219.262.6106 TF: 800.826.3505 F: 312.606.7777 Office Managing Partners: Paige M. Neel, Kimbley A. Kearney

  • Appleton

    Wisconsin 54914

    4650 W. Spencer Street

    Appleton, Wisconsin 54914

    T: 920.560.4658 TF: 800.826.3505 F: 920.968.4650 Office Managing Partner: Patrick L. Breen

  • Stamford

    Connecticut 06902

    68 Southfield Avenue

    2 Stamford Landing Suite 100

    Stamford, Connecticut 06902

    T: 203.921.0303 TF: 800.826.3505 F: 212.805.3939 Office Managing Partner: Matthew J. Van Dusen

  • Tampa

    Florida 33609

    4830 West Kennedy Boulevard

    Suite 600

    Tampa, Florida 33609

    T: 813.509.2578 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Anne E. Kevlin

  • Orlando

    Florida 32801

    618 E. South Street

    Suite 500

    Orlando, Florida 32801

    T: 813.509.2578 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Anne E. Kevlin

  • San Francisco

    California 94111

    100 Pine Street

    Suite 1250

    San Francisco, California 94111

    T: 415.745.3598 TF: 800.826.3505 F: 949.260.3190 Office Managing Partner: Ian R. Feldman