In June 2008, the Fourth District Court of Appeal, Division 3, issued an opinion overruling a trial court that had reduced a plaintiff’s verdict for past medical expenses to the amount actually paid.  The Court of Appeal unanimously held that the evidence was insufficient to support the trial court’s ruling.  This sounds like a simple and straightforward opinion; it is not.

Justice Moore who drafted the majority opinion writes a concurrence arguing that Hanif/Nishihama go too far and bury the collateral source rule without “…the dignity of any services or parting words.”  And without the proper authority from the legislature or California Supreme Court, Justice Moore is reluctant to jump onto the Hanif/Nishihama bandwagon.  This opinion wisely points out that the plaintiff who has insurance is compensated less for her injuries then the uninsured plaintiff, meanwhile “…the defendant benefits from the plaintiff’s prudence.”  But our story doesn’t end there.

Justice Fybel writes a second concurring opinion agreeing with the analysis and holdings of Nishihama and Hanif and asserts that the collateral source rule was properly applied in those cases.  Justice Fybel also suggests that a post verdict hearing would be necessary and appropriate to determine the correct amount that should be awarded if a reduction in the verdict is needed.  This concurrence does not address whose burden it is at such a hearing or the extent of the evidence necessary to carry that burden.

It is uncertain how the California Supreme Court will ultimately resolve this issue.  It is clear, however, that Justice Moore presents the more rational approach but for reasons not stated in her opinion.

First, every healthcare provider that accepts payments from insurers has extensive agreements and contracts that dictate the terms for those payments.  Insurers, in order to obtain reductions to the amount they are charged, provide standard in-kind non-cash benefits to healthcare providers.  This is why medical bills reflect a charged or billed price and a contract price.  The value of the in-kind benefits plus the contract price paid by insurers equals the full amount charged by the healthcare providers.  To ignore this fact and the value of these in-kind benefits is tantamount to ignoring the value of a used car when someone trades it in for a new car.  Second, if an individual does not have insurance and is treated, the provider will wright off (for tax purposes) the amount of the services as charged.  These realities of the healthcare industry clearly support the position that the reasonable value of the medical services rendered to the plaintiff is the full amount charged.

Nevertheless, there is one incidental, but important, point that can be gleaned from both concurrences in Olsen v. Reid.  While I disagree with Justice Fybel and do not believe that a court has jurisdiction to hold a reduction hearing, any evidence used to support a reduction would necessarily be introduced post verdict at the hearing.  Neither Justice Fybel nor Justice Moore present or even imply that anything other than trial testimony and the full amounts charged for medical services should be introduced to the jury at trial.  Thus, while it remains unclear what the standard for the reasonable value of medical services should be, it is clear that the decision as to what the reasonable value of medical services is, at trial, is still within the purview of the jury.  And it is also clear that the jury will be allowed to make that determination based upon trial testimony and evidence of the full charges for those services.

Therefore, Plaintiff’s counsel should be prepared and well armed to oppose any motion in limine by the defense, based upon Olsen or other cases, attempting to prevent the introduction of the full amount of the medical specials at trial.

The full opinion can be read here: Olsen v. Reid