California Court Of Appeal Limits The Application Of Howell In Cases Involving Medical Finance Companies – Moore v. Mercer (2016) 4 Cal.App.5th 424

May 25 2017

By: Ashley H. Verdon and Katherine J. Flores
May 25, 2017

In a plaintiff friendly decision, the Third District California Court of Appeal held that an uninsured plaintiff may present evidence of the full billed amount for medical treatment where a healthcare provider has sold its accounts receivable and medical liens to a medical finance company.

In Moore v. Mercer, an uninsured plaintiff executed medical lien agreements with her doctors in order to obtain medical treatment following an automobile collision. At trial, plaintiff filed a motion in limine to exclude evidence of the medical finance company’s involvement on the grounds that it was irrelevant and prejudicial. The trial court granted the motion in limine under Evidence Code §352. Defendant appealed.

Generally, a hospital “chargemaster” is a hospital’s schedule of charges for a given service. Typically, insurers and healthcare providers negotiate rates that are less than the chargemaster rates and, on behalf of the patient, the insurer pays less than the amount billed. Because of this disparity, in Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 567, the California Supreme Court held that an insured plaintiff may not recover more than the amounts actually paid for the treatment.

Like everyone, an uninsured patient is charged the chargemaster rates. However, because they have not pre-negotiated a discounted rate, uninsured plaintiffs often obtain medical treatment by executing a lien agreement with their healthcare providers. Medical finance companies then purchase these liens from the providers at an amount that is often less than the chargemaster rate based on an evaluation of the complexity of the underlying case and of the plaintiff’s chance of prevailing.

Critically, in Moore v. Mercer, the Court of Appeal held that Howell does not cap a plaintiff’s damages to the amount a medical finance company pays providers for medical liens. Distinguishing Howell and Katiuzhinksy v. Perry (2007) 152 Cal.App.4th 1288, the Court emphasized that an uninsured plaintiff remains liable for the full amount charged.

In light of this, the Court of Appeal held that it was within the trial court’s discretion to exclude evidence of the agreements between the medical finance company and healthcare providers as well as evidence of the amount paid by the finance company for the liens. Noting that this evidence may be relevant to certain aspects of the case (e.g., whether the plaintiff is in fact fully liable for the entire billed amount, whether the amount billed represents a reasonable value of the doctor’s services, etc.), the Court found that the probative value in this particular matter was minimal. In the Court’s view, “introduction of the evidence opens a Pandora’s box of collateral issues” and the trial court did not abuse its discretion by excluding the evidence.

Moore constitutes the second published post-Howell opinion of the Third Appellate District to affirm the exclusion of evidence concerning a medical finance company’s acquisition of doctors’ liens under Evidence Code §352. Importantly, however, Moore confirms that the lien-sale agreement and information regarding the payment amount and terms of the sale are nonetheless discoverable in medical finance company cases, as such information is relevant to the reasonable value of the medical services regardless of whether the evidence is later admissible at trial. Accordingly, Moore reminds defendants not to rely solely on the amount for which the medical lien was sold to exclusively establish the reasonable value of the services and to cap the plaintiff’s medical damages. Instead, defendants should seek to develop additional evidence in discovery (i.e., via doctor depositions regarding the amounts typically accepted as payment for the medical services) and present expert analysis showing that the amount paid by the medical finance company reflects the reasonable/market value of the medical services.