Tennessee Supreme Court Unanimously Holds the Only Admissible Evidence of Medical Expenses in Tort Suits is the Amount Billed

Posted on November 28th, 2017 by sutteroconnell

In any case involving personal injuries, medical expenses are an important consideration. This is true not only because they are their own category of damages, but because juries tend to see them as indicative of the severity of the injury suffered. The Tennessee Supreme Court just made it much harder to limit the amount of medical expenses presented to the finder of fact.

Last year, in a post you can read here, this blog discussed the emerging law regarding medical billing evidence in Tennessee. At the time, the issue was before the Tennessee Court of Appeals in Dedmon v. Steelman, and the fundamental problem with evidence regarding medical billing was best described in Judge Joe Riley’s concurring opinion: “The so-called actual charges or non-discounted charges today are fictional and no longer represent reasonable charges. Neither the injured party nor the insurer pays the non-discounted charges nor are benefits conferred upon the injured party based upon the non-discounted charges.”

Everyone is familiar with this phenomenon, because everyone receives “explanation of benefit” statements showing inflated medical bills accompanied by huge write-offs. Judge Riley, and this blog, expressed hope that the Tennessee Supreme Court would rationalize evidence regarding medical billing by holding that the amount paid, which is often far lower than the amount billed, is the proper measure of medical expenses and the only admissible evidence in personal injury cases.

As decided by the Court of Appeals, Dedmon permitted introduction of both billed medicals and the amounts accepted as payment, with the finder of fact to determine which number (or some number in between) constituted “reasonable medical expenses.” In a recent opinion which you can read here, the Tennessee Supreme Court disagreed, ultimately holding defendants are “precluded from submitting evidence of discounted rates accepted by medical providers from the insurer to rebut the plaintiffs’ proof that the full, undiscounted charges are reasonable.”

The Court reasoned that even though contracts between insurers and providers are voluntary transactions, the amount of money accepted as payment by providers is not a truly accurate reasonable value of medical services. The Court stated “it is evident that medical expenses cannot be valued in the same way one would value a house or a car, pegging the ‘reasonable value’ at the fair market value, that is, the amount a buyer is willing to pay. Health care services are highly regulated and rates are skewed by countless factors, only one of which is insurance.” The Court also noted that allowing introduction of the actual amounts paid would skew recoveries in cases involving different facts, including those where the Plaintiff received Medicaid or Tenncare coverage. The Court rejected even the hybrid approach endorsed by the Court of Appeals, in which both amounts billed and paid are presented to the jury, reasoning introduction of such evidence “would lead the jury to infer the existence of insurance.” Introducing evidence of the amounts paid for medical services, even if insurance is not mentioned, is now impermissible in Tennessee.

This decision is troubling.     Even the Court admitted the defense bar “ably pointed out the shortcomings of the collateral source rule in the current health care environment.” However, the Court concluded there is no better alternative. The Court noted that “defendants are free to submit any competent evidence in rebuttal that does not run afoul of the collateral source rule.” It’s unclear how this can be accomplished. Perhaps, in certain circumstances, defendants could introduce expert testimony that the amounts billed are unreasonable. But it will be exceedingly difficult for an expert to credibly testify as to the amounts that are reasonable without mentioning insurance, which is the primary payer in the United States. The eyes of the defense bar will now turn to the Tennessee legislature, where a reform bill addressing admission of unreasonable medical billing will almost certainly be introduced next session.