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Plaintiffs in Texas personal injury cases may only recover the reasonable value of the past medical expenses. A previous blog post discussed the definition of reasonable value in legal and economic terms. Plaintiffs most often try to equate reasonable value with the billed charges of their medical providers. However, Texas courts have held that billed charges are largely unrelated to the reasonable value of the services. The negotiated rates of providers and health plans in a medical market or rates set by government are all relevant evidence of reasonable value. This blog post discusses the ability of defendants in personal injury litigation to obtain evidence on the reasonable value of medical services through discovery. [1]
In recent years, the Texas Supreme Court has expanded the ability of parties to discover the rates providers have negotiated with health plans, overriding confidentiality clauses in provider contracts. CMS administrative rules require hospitals to make their negotiated rates public.[2] The No Surprises Act requires health plans to publish their negotiated rates for all providers.[3] The federal requirements were only recently implemented and, in practical terms, access is hindered by the noncompliance of a substantial percentage of hospitals and the size and complexity of the health plan data. Therefore, litigants’ ability to access negotiated rates through discovery will be important for at least the next several years.
In 2018, the North Cypress case helped pave the way for more discovery regarding reasonableness of medical charges by allowing negotiated rates to be discoverable in a medical lien case.[4] Here, the patient was admitted to a hospital emergency department without insurance after a car accident, and the hospital filed a lien for billed charges. After settling with the defendant’s insurance company, the plaintiff tried to discharge the lien by negotiating an amount less than the billed charges.
When they could not agree, the plaintiff requested to see the negotiated rates for patients who received similar services but had private insurance or Medicare/Medicaid. The hospital objected to the discovery requests and refused to produce the information. The SCOTX held that the requested information was discoverable because, (1) under the lien statute, the hospital was entitled to be paid only the reasonable value of its services, and (2) the requested information was relevant to determining the reasonable value of the services.
In K&L Auto Crushers, the SCOTX expanded the ruling in North Cypress to personal injury cases. The plaintiff had a letter of protection with one or more providers, and the medical bills were about $1.2 million for multiple spine and shoulder surgeries.[5] The defendants sought discovery of the plaintiff’s providers’ negotiated rates as evidence of the reasonable value of the services. The SCOTX allowed the defendants to discover the providers’ negotiated rates for similar services with commercial insurers as evidence of what the providers considered the reasonable value of their services.
Another recent case, In re ExxonMobil Corp.,[6] also addressed whether defendants in a personal injury case can discover the negotiated rates that the plaintiff’s medical providers have with insurance providers. The defendants argued that medical providers typically ask for chargemaster rates in letters of protection, but those rates are not the rates the providers negotiated with health plans. The defendants argued that discovery of the provider contracts was necessary to see the rates the providers had agreed to accept as payment in full. The plaintiffs argued that discovery would expose trade secrets and confidential information. The court allowed discovery of the provider contracts.
Before North Cypress, K&L Auto Crushers, and ExxonMobil, defendants were usually denied discovery of medical providers’ charges for certain medical services. These decisions by the SCOTX establish (1) plaintiffs are entitled to recover only reasonable value of past medical expenses, (2) a provider’s negotiated rates with health plans are relevant and admissible evidence to establish reasonable value, and (3) defendants are entitled to reasonable discovery or a provider’s negotiated rates as evidence of what it considers the reasonable value of its services, even when the plaintiff is uninsured and not entitled to those negotiated rates.
A case now before the SCOTX, In re Kuraray America, Inc., is a mandamus action in a personal injury case in which the defendant requested discovery from several medical providers of the amounts the medical providers actually accept as full payment for medical procedures for patients of health plans with which it has a contract and for self-pay patients. Defendants requested corporate representative depositions on the same topics. The trial court and court of appeals denied discovery. The plaintiffs in this case are uninsured, just like the plaintiff in In re North Cypress. Given the three SCOTX decisions, there seems to be no reason for a Texas court to deny discovery of provider contracts or corporate representative depositions on those contracts.
The new issue in this case is whether discovery is permitted of amounts providers accept as payment in full from self-pay patients. To quote the relator’s petition on this point, “It would be entirely illogical to conclude that a defendant is entitled to discover the amounts a provider actually accepts for services from third-party-providers (such as insurance companies) in litigation brought by plaintiffs who disclaim insurance coverage, but is not entitled to discover the amounts those same providers actually accept from self-pay patients who are similarly situated to the plaintiffs. Indeed, one federal court has twice applied K&L in self-pay situations. Zuniga v. Tri-National, Inc., 2022 WL 255427 (W.D. Tex., Jan. 27, 2022); Acuna v. Covenant Transp., Inc., 2022 WL 95241 (W.D. Tex., Jan. 10, 2022).”[7]
However, in the two federal cases, the court ordered the providers to produce contracts and rates with health insurance companies. The court was not asked to order the production of data showing the amounts the providers accepted as payment in full from self-pay patients. Therefore, the court in these two cases did not order production of the self-pay data the defendants seek in In re Kuraray America, Inc. There appears to be no reason the SCOTX should not order production of the self-pay data. It is relevant to establish the reasonable value of the services. It is not available from public sources. Most, if not all, providers could produce claims-level data from their billing systems showing the charges, payments, and write-offs for self-pay patients with no undue burden.
[1] Dana Cottone, LLB, MRes, provided substantial research assistance for this paper, and her help is gratefully acknowledged.
[2] “Hospital Price Transparency Frequently Asked Questions,” CMS, https://www.cms.gov/files/document/hospital-price-transparency-frequently-asked-questions.pdf, accessed February 6, 2023.
[3] “Frequently Asked Questions for Providers About the No Surprises Rules,” CMS, https://www.cms.gov/files/document/faq-providers-no-surprises-rules-april-2022.pdf, April 6, 2022, accessed February 6, 2023.
[4] In re North Cypress Medical Center Operating Co., 559 S.W.3d 128 (Tex. 2018).
[5] In re K & L Auto Crushers, LLC, 627 S.W.3d 239 (Tex. 2021).
[6] In re ExxonMobil Corp., No. 20-0849, 635 S.W.3d 631 (Tex. 2021).
[7] In re Kuraray America, Inc., Relator’s Petition for Writ of Mandamus, August 11, 2022, p. 2.