Every day another news story is run regarding the increasing cost of health care in the United States. Plaintiffs routinely seek to pass these ever-increasing medical expenses on to Defendants. Despite these efforts, Texas law is clear that the only medical expenses that a Plaintiff can pass on are those that are actually paid or incurred and are reasonable. Defendants have several tools which they can use to fight back against Plaintiffs’ efforts to obtain outrageous judgments.
A. Texas Civil Practice & Remedies Code Section 41.0105
The first tool is Section 41.0105 of the Texas Civil Practice and Remedies Code. Section 41.0105 states that “recovery of medical or health care expenses is limited to the amount actually paid or incurred by or on behalf of the claimant.” The Supreme Court in 2011 again recognized that allowing plaintiffs to recover the full rates charged by health care providers would create an impermissible windfall. In other words, a plaintiff is entitled to compensation for their injuries, not to be enriched at your expense.
Interpreting Section 41.0105, the Court held a plaintiff may recover only “expenses that have been or will be paid, and . . . [cannot recover] . . . the difference between such amounts and charges the service provider bills but has no right to be paid.” The Supreme Court continued to hold that only evidence of the amount which a provider is entitled to be paid is relevant and admissible. In limiting this evidence, the Supreme Court limited the evidence a Plaintiff can use to attempt to artificially inflate their damages.
B. In re K&L Auto Crushers, LLC
In early 2021, the Texas Supreme Court added another tool to combat outrageous claimed medical expenses in In re K&L Auto Crushers, LLC. In K&L Auto Crushers, the Supreme Court re-affirmed its holding in In re North Cypress Medical Center Operating Co, LTD that the amounts a medical provider accepts from other patients, private insurance, and government benefits are relevant to the reasonableness of the charges and extended that holding to all suits in which the recovery of medical expenses are sought. The Supreme Court reiterated that not only is a plaintiff limited to recovery of the amount actually paid or incurred, but that the common-law requires that the amount of recoverable expenses must be reasonable. The Court reasoned that:
that tortfeasors are responsible only for losses caused by their tortious conduct—that is, losses that are the necessary and usual result of the tortious act. Although the reasonableness limitation may in some cases leave a claimant “undercompensated,” it ensures that the tortfeasor is held responsible only for losses naturally resulting from its wrongful act. If a claimant agrees or is required to pay a medical provider more than a reasonable amount, the difference between the amount paid and a reasonable amount is not a necessary and usual result of the tortious act, but of the claimant’s or provider’s conduct.
In other words, Plaintiff’s alleged medical expenses are not the floor for negotiations or damage awards. The Supreme Court acknowledged that a Plaintiff may be “undercompensated” due to the reasonableness analysis.
This has opened a new area of discovery regarding the rates charged to various insurances, the federal insurance programs, and self-pay patients. Based on these charges, Defendants now can argue the amount paid or incurred was not reasonable. This will supplement the commonly used expert counter-affidavits under Chapter 18 of the Civil Practice and Remedies Code and Section 41.0105.
C. Purchasing Medical Liens
Another tool that Defendants can take advantage of is to buyout any medical liens. Often, these liens can be purchased for substantially less than their face value. While this does require expending additional money in defending the claim, the potential savings far outweigh the purchase cost. When it comes time for trial, the amount of the lien is either considered not paid or incurred under Section 41.0501, or it can be deducted from the amount, if any, awarded to the Plaintiff. For example, a $100,000.00 lien may be purchased for $20,000.00 or less. In the event of an adverse judgment, any award to the Plaintiff is reduced by the $100,000.00. This provides a practical tool to mitigate any exposure and partially resolve the dispute at the same time.
D. Identification of Other Credits
Finally, there may be other credits against any judgment that Defendants can claim in specific cases. For example, when analyzing the amount of any uninsured/underinsured motorist benefits, the defendant is entitled to a credit for the amount paid by the tortfeasor or their insurance, if any, as well as any personal injury protection benefits paid. Thus, it is important to account for every penny that the Plaintiff has been paid in relation to his alleged injuries.
The Defendant’s toolbox for contesting alleged medical expenses is powerful when each tool is used correctly. Our team at Murphy Legal has experience using each of these tools to evaluate, mitigate, and resolve your disputes. Contact us to let us guide you through the storm of your pre-litigation or litigation disputes.