Date: 07-20-2010

Case Style: Joanne Law v. Daniel Griffith

Case Number: SJC-10463

Judge: Botford

Court: Supreme Court of Massachusetts

Plaintiff's Attorney: Kathy Jo Cook for the plaintiff.

Defendant's Attorney: Ralph C. Sullivan for the defendant. Andre A. Sansoucy & Michael J. Mazurczak for Property Casualty Insurers Association of America & another.

Mary Jane McKenna, J. Michael Conley, & Michael C. Najjar for Massachusetts Academy of Trial Attorneys.

Emily G. Coughlin & Kevin J. O'Leary for Massachusetts Defense Lawyers Association.

Description: General Laws c. 233, § 79G (§ 79G), concerns, in part, the admissibility of medical bills "as evidence of the fair and reasonable charge" for medical services provided. [FN1] In this negligence action in which the plaintiff sought to recover damages for personal injuries, a Superior Court judge determined that the plaintiff's medical bills could be excluded from evidence under § 79G because the amounts actually paid by the plaintiff's medical insurer, and accepted by her medical providers, were significantly lower than the amounts the providers had billed. We conclude that the statute does not authorize exclusion of such evidence. However, we conclude further that evidence concerning the possibility of payments made by third parties, and the range of payments accepted by medical providers as payment in full, is also admissible under § 79G on the question of the reasonable charge for and value of those medical services. [FN2]

1. Background and prior proceedings. The plaintiff was injured in an automobile accident when the defendant's vehicle struck her vehicle. The plaintiff's injuries required surgery and physical therapy. Subsequently, she filed a negligence action in the Superior Court.

Pursuant to § 79G, the plaintiff filed, prior to trial, a notice of her intention to offer copies of her medical bills in evidence. The defendant filed a motion in limine to exclude those bills (totaling $112,269.94) from evidence because the plaintiff, a participant in MassHealth, the Massachusetts Medicaid program (Medicaid), [FN3] had not paid the amounts billed. Rather, the plaintiff's medical providers had accepted from Medicaid substantially smaller amounts as negotiated under the terms of the providers' agreements with Medicaid. A Superior Court judge allowed the defendant's motion on the ground that the bills were not relevant to establish the value of the medical services the plaintiff had received because those amounts had not been paid, and were not expected to be paid, by either the plaintiff or her insurer. Following the judge's decision, the parties stipulated that $16,387.14 for medical services had been paid by the plaintiff or on her behalf, and this stipulation was introduced at trial.

The jury determined that the defendant was seventy-five per cent liable for the plaintiff's injuries and, in a general verdict, awarded the plaintiff $48,500. The judge reduced that award by $12,125 to account for the plaintiff's twenty-five per cent responsibility for her injuries. See G.L. c. 231, § 85. After further reductions for the amount of personal injury benefits ($7,818.50) that the plaintiff had already received, judgment entered for the plaintiff in the amount of $28,556.50.

The plaintiff appealed from the jury's award of damages, challenging the trial judge's exclusion of her medical bills. [FN4] In a decision issued pursuant to its rule 1:28, the Appeals Court determined that the judge erred in declining to admit the medical bills as evidence of the value of the plaintiff's medical services, and, therefore, that a new trial on damages was required. Law v. Griffith, 73 Mass.App.Ct. 1127 (2009). We granted the defendant's application for further appellate review.

2. Discussion. Our established common-law rule provides that a plaintiff injured by a defendant's negligence is entitled to recover the value of reasonable medical services required to treat the injury. See Scott v. Garfield, 454 Mass. 790, 800 (2009), quoting Rodgers v. Boynton, 315 Mass. 279, 280 (1943). The plaintiff argues that the language of § 79G mandates the admission of the bills she received from her medical providers as evidence of the reasonable and necessary value of the medical services rendered; the judge erred in declining to allow her to introduce those bills; and the judge's decision to allow evidence of the amounts paid was error because the introduction of evidence of Medicaid "write-offs" [FN5] was a violation of the collateral source rule. The defendant asserts that the judge decided correctly that the amounts billed were not relevant, and therefore not admissible, because those amounts were not paid, nor expected to be paid, by the plaintiff or her insurer.

a. Admission of amounts billed under § 79G. Pursuant to § 79G, itemized medical bills, "including hospital medical records, relating to medical, dental, hospital services, prescriptions, or orthopedic appliances rendered to or prescribed for a person injured, or any report of any examination of said injured person, ... shall be admissible as evidence of the fair and reasonable charge for such services or the necessity of such services or treatments." The statute creates an exception to the hearsay rule, see, e.g., Phelps v. MacIntyre, 397 Mass. 459, 462 (1986); O'Malley v. Soske, 76 Mass.App.Ct. 495, 497-498 (2010), and, as it states, permits the introduction in evidence of itemized medical bills for two distinct purposes: to serve in the calculation of damages as evidence of the reasonable value of the services incurred, see Victum v. Martin, 367 Mass. 404, 408 (1975), and to show the necessity of the medical services provided. See id. at 408-410; Gompers v. Finnell, 35 Mass.App.Ct. 91, 93-94 (1993).

A statute is to be interpreted "according to the intent of the Legislature ascertained from all its words construed by the ordinary and approved usage of the language, considered in connection with the cause of its enactment, the mischief or imperfection to be remedied and the main object to be accomplished, to the end that the purpose of its framers may be effectuated." Triplett v. Oxford, 439 Mass. 720, 723 (2003), quoting Board of Educ. v. Assessor of Worcester, 368 Mass. 511, 513 (1975). "Ordinarily, if the language of a statute is plain and unambiguous it is conclusive as to the legislative intent." Sterilite Corp. v. Continental Cas. Co., 397 Mass. 837, 839 (1986), citing Local 589, Amalgamated Transit Union v. Massachusetts Bay Transp. Auth., 392 Mass. 407, 415 (1984). Where, as here, the language of the statute is clear, it must be interpreted according to the ordinary meaning of the language used. See, e.g., Milford v. Boyd, 434 Mass. 754, 756 (2001).

Section 79G states unambiguously that medical bills are admissible to establish the reasonable value of services rendered where the services are related to the injury for which the claim is made. The plaintiff signed a routinely required contract with her providers at the time services were rendered in which she agreed that she would be personally liable for the costs of treatment regardless whether her insurer paid for any portion of it. Although the agreement was ultimately unenforceable in the plaintiff's case because she was a Medicaid recipient and the agreement was preempted by the requirements of the Medicaid program (see note 3, supra ), in other circumstances, injured parties could be liable under the terms of such agreements. In any event, the Legislature has declared that a medical provider's bill is admissible on the question of the reasonable value of medical care, and we are not free to override that lawful determination. The judge's ruling that the plaintiff's medical bills were inadmissible was error.

b. Admission of evidence of amounts paid to medical providers. Having concluded that § 79G required the admission of the plaintiff's medical bills, we must decide whether the defendant's proffered evidence of the amounts paid to the plaintiff's medical providers was admissible as well--that is, in addition to her medical bills rather than in lieu of them. The answer to this question requires consideration of § 79G as well as our common-law collateral source rule. We briefly review each of these sources separately, and then discuss them together. We conclude that evidence of amounts actually paid to the plaintiff's medical providers is not admissible, but evidence may be introduced concerning the range of payments that the providers accept for the types of medical services that the plaintiff received.

(i) Section 79G. The first paragraph of § 79G has two sentences, and they read in pertinent part as follows:

"[1] In any proceeding commenced in any court ... an itemized bill and reports, including hospital medical records, relating to medical, dental, hospital services, prescriptions, or orthopedic appliances rendered or prescribed for a person injured ... subscribed and sworn to under the penalties of perjury by the physician, dentist, authorized agent of a hospital or health maintenance organization rendering such services or by the pharmacist or retailer of orthopedic appliances, shall be admissible as evidence of the fair and reasonable charge for such services or the necessity of such services or treatments.... [2] Nothing contained in this section shall be construed to limit the right of any party to the action to summon, at his own expense, such physician, dentist, pharmacist, retailer of orthopedic appliances or agent of such hospital or health maintenance organization or the records of such hospital or health maintenance organization for the purpose of cross examination with respect to such bill, record and report or to rebut the contents thereof, or for any other purpose, nor to limit the right of any party to the action or proceeding to summon any other person to testify in respect to such bill, record or report or for any other purpose."

Since its enactment in 1958, see St.1958, c. 323, § 79G, has contained the language in its first sentence providing explicitly for the admission in evidence of certified records of medical bills "as evidence of the fair and reasonable charge for such services." [FN6] The second sentence of § 79G, however, clearly bears on the issue of fair and reasonable charges as well. It affirms, in general terms, the right of any party to call witnesses and to summons other medical records for purposes of conducting cross-examination and offering rebuttal evidence with respect to the plaintiff's proffered medical bills.

(ii) Collateral source rule. Under the common-law collateral source rule, the value of reasonable medical expenses that an injured plaintiff would be entitled to recover from the tortfeasor as a component of her compensatory damages, see Rodgers v. Boynton, 315 Mass. 279, 280 (1943), is not to be reduced by any insurance payments or other compensation received from third parties by or on behalf of the injured person. See Goldstein v. Gontarz, 364 Mass. 800, 808-809 (1974), and cases cited; Restatement (Second) of Torts § 920A (1979). [FN7] See also Jones v. Wayland, 374 Mass. 249, 262 (1978). In terms of operation, the collateral source rule has both a substantive aspect that relates to the law of damages, and an evidentiary component that governs what types of evidence may be admitted in evidence at trial. See Goldstein v. Gontarz, supra at 809 (information about plaintiff's receipt of insurance or other compensation for his injury is legally irrelevant because, under collateral source rule, "outside source" compensation does not reduce defendant's liability; evidence of such compensation not admissible because "jurors might be led by the irrelevancy" to reduce or deny recovery). See also Scott v. Garfield, 454 Mass. at 803 (Cordy, J., concurring), citing Leitinger v. DBart, Inc., 302 Wis.2d 110, 149-150 (2007).

The purpose of the collateral source rule is tort deterrence. The tortfeasor is required to compensate the injured party for the fair value of the harm caused, and is not to benefit from either contractual arrangements of the injured party with insurers or from any gifts from others intended for the injured party. See Jones v. Wayland, supra; Goldstein v. Gontarz, 364 Mass. at 809-810. See also Shea v. Rettie, 287 Mass. 454, 457-458 (1934) (disability insurance payments received by tort plaintiffs could not be considered as offset against plaintiffs' claims for loss of earning capacity). According to the collateral source rule, avoiding a windfall to a tortfeasor is preferable even if a plaintiff thereby receives an excessive recovery in some circumstances. See Restatement (Second) of Torts, supra at § 920A comment b (excluding both "payments made" and "benefits conferred by other sources" from amounts that may be subtracted from plaintiff's recovery, because "it is the position of the law that a benefit that is directed to the injured party should not be shifted so as to become a windfall for the tortfeasor"). Comment c to § 920A identifies a number of "collateral benefits," including insurance policies; employment benefits, such as workers' compensation; "[g]ratuities," whether cash or "rendering of services"; and "[s]ocial legislation benefits," such as "welfare payments" or pensions.

(iii) Section 79G and the collateral source rule. The collateral source rule has traditionally operated in conjunction with § 79G with little or no indication of conflict. A recent case, however, reflects the possibility of growing tension between them. See Scott v. Garfield, 454 Mass. at 801 n. 11. In that case, the defendants sought to introduce in evidence the amounts actually paid to and accepted as payment in full by the plaintiff's medical providers--amounts substantially below the providers' bills. We stated in dictum, however, that the trial judge properly excluded the evidence as violative of the collateral source rule. Id. at 801. [FN8] See Wills v. Foster, 229 Ill.2d 393, 419-420 (2008) (plaintiff entitled to recover reasonable value of medical services regardless of whether plaintiff has private insurance or is covered by government program; defendant was not permitted to introduce in evidence amount paid by Medicare or Medicaid, as such evidence would violate collateral source rule, and plaintiff's recovery was not limited to amount actually paid by Medicare or Medicaid in full settlement of bills).

Whether, as Scott v. Garfield suggests, the collateral source rule should limit the types of rebuttal evidence admissible under the second sentence of § 79G is a significant question, because, at the present time, medical bills admissible under the first sentence of § 79G may bear little relationship to the "fair and reasonable" value of medical services rendered. See Scott v. Garfield, supra at 803 (Cordy, J., concurring). With the increasing role played by public and private health insurers in the American health care delivery system, doctors, hospitals, and other medical care providers have developed charge structures that may have little or no relationship to the reasonable value of the medical services at issue, because the providers ultimately negotiate discounts from the listed charges and are reimbursed on the basis of the discounted rates. The only patients actually paying the stated charges are the uninsured, a small fraction of medical bill payors. See Hall, Patients as Consumers: Courts, Contracts, and the New Medical Marketplace, 106 Mich. L.Rev. 643, 661-663 (2008); [FN9] McGrath, Overcharging the Uninsured in Hospitals: Shifting a Greater Share of Uncompensated Medical Care Costs to the Federal Government, 26 Quinnipiac L.Rev. 173, 184-185 (2007) ("The evolution of the nation's health care payment systems ... has evolved into a system where a hospital's list price is relatively meaningless"). [FN10]

At the same time, the actual amounts paid by an insurer to the provider may confound rather than mitigate the problems posed by medical bills, because the amounts paid, like the bills or charges themselves, may not have more than a tenuous relationship to the reasonable value of the provider's medical services. This is so because the discount from charges that the provider accepts is likely a function of a variety of factors, including the bargaining power of the insurer, or, as here, limited by Federal or State law--factors that relate to the injured plaintiff's relationship with a collateral third-party payor and have nothing to do with the tortfeasor. But admission of these amounts, precisely because they reflect what was paid and accepted by the plaintiff's medical providers for the services rendered, may well lead a jury to award the plaintiff exactly that amount for medical damages or, perhaps, no medical damages at all in the belief that the plaintiff did not pay the expenses herself but relied on insurance or another third party to do so. Such a result would run counter to the collateral source rule. Perhaps more importantly, if, for the reasons just stated, the amounts paid do not correspond to the reasonable value of the medical services at issue, such a result would also contravene our established common-law rule of medical damages that has been adopted by and codified in § 79G. [FN11]

Many States have modified the traditional collateral source rule in the last twenty-five years, generally through legislative action. See Benjet, A Review of State Law Modifying the Collateral Source Rule: Seeking Greater Fairness in Economic Damages Awards, 76 Def. Couns. J. 210, 211 (2009) (fifty State survey; forty-two jurisdictions effected modifications by legislation rather than court decision). Following this trend, the Legislature has modified our collateral source rule, but only with respect to awards of medical damages in medical malpractice cases. See G.L. c. 231, § 60G, inserted by St.1986, c. 351, § 25 (establishing postverdict procedure for reduction of awards of medical damages by judge through introduction of evidence of insurance payments and costs of obtaining insurance benefits). The Legislature's enactment of this narrowly tailored restriction to the common-law collateral source rule certainly reflects legislative awareness of the rule, but it also may indicate a determination that the common-law rule should continue to operate without alteration in connection with awards of medical damages outside of the medical malpractice arena--that is, in the types of cases covered by § 79G.

The Legislature's enactment of G.L. c. 231, § 60G, while leaving the relevant provisions of § 79G unchanged, persuades us that we should leave any further modifications of the collateral source rule's application to the Legislature. See Restatement (Second) of Torts § 920A comment d (1979) (noting collateral source rule "is of common law origin and can be changed by statute"). Cf. Kerins v. Lima, 425 Mass. 108, 110 (1997), quoting Commercial Wharf E. Condominium Ass'n v. Waterfront Parking Corp., 407 Mass. 123, 129 (1990), S. C., 412 Mass. 309 (1992) (court will not presume Legislature intended "radical change in the common law without a clear expression of such intent"). Consistent with this view of the Legislature's role, but also in recognition of the fact that the system for setting (and paying for) charges for medical services has changed dramatically since § 79G was enacted in 1958, the challenge is to give effect to the second sentence of § 79G in a manner that supports the section's over-all focus on "fair and reasonable" medical expenses but also protects the core of the collateral source rule.

Although the first sentence of § 79G is very specific in its directive that medical bills are admissible in evidence, the second sentence uses more general language, authorizing the summoning of witnesses or records without delineating in any manner the permissible scope of the witnesses' testimony or the use of the records. In the circumstances, we conclude that a reasonable way to implement the second sentence of § 79G is to permit the defendant [FN12] to call a representative of the particular medical provider whose bill the defendant wishes to challenge, and to elicit evidence concerning the provider's stated charges and the range of payments that that provider accepts for the particular type or types of services the plaintiff received. In this context, it would appear appropriate for the witness to acknowledge that the range of payments being testified to reflects amounts paid by both individual, self-paying patients and third-party payors; certainly jurors are aware that health insurance is a present day reality, particularly in the Commonwealth. [FN13] See G.L. c. 111M, § 2 (a ) (establishing mandatory health insurance coverage). But the witness would not be permitted to identify the plaintiff's insurer or third-party payor, or to testify to the amount actually paid on the plaintiff's behalf. [FN14] In other words, the witness would be limited to testimony solely about the amounts in the range that the provider accepted for the services at issue, with no information relating to what was paid by or on behalf of the plaintiff herself. [FN15] With its emphasis on range of payments, such evidence could assist the jury in identifying--as § 79G indicates should be done--what might be a fair and reasonable charge for the services at issue. [FN16] At the same time, the evidence would not undermine the collateral source rule, because it would not touch in any manner on whether, or in what amount, collateral third parties (whether a private insurance company, Medicare, or Medicaid) had paid for the medical treatment the plaintiff received.


(iv) Jury instructions. Jury instructions may need to be modified to be consistent with this opinion. For example, it would be appropriate to include an instruction that acknowledges the existence and widespread use of medical insurance, but explains that whether the plaintiff's medical expenses were paid by her, covered by insurance, or otherwise paid on her behalf, is not relevant to the jury's task, namely, to determine the fair and reasonable value of the necessary medical services that were provided, as well as of any medical services that are likely to be necessary in the future. With respect to giving specific guidance on how to determine "fair and reasonable" value, we defer to the trial judges who are dealing with a particular case and particular set of facts, to fashion an appropriate instruction. [FN17]

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See: http://weblinks.westlaw.com/result/default.aspx?action=Search&cnt=DOC&db=MA-ORSLIP&eq=search&fmqv=c&fn=_top&method=TNC&n=10&origin=Search&query=TO%28ALLSCT+ALLSCTRS+ALLSCTOJ%29&rlt=CLID_QRYRLT111291839728&rltdb=CLID_DB727231739728&rlti=1&rp=%2Fsearch%2Fdefault.wl&rs=MAOR1.0&service=Search&sp=MassOF-1001&srch=TRUE&ss=CNT&sskey=CLID_SSSA437381739728&sv=Split&vr=1.0

Outcome: The judgment of the Superior Court is reversed and the case is remanded for a new trial on the issue of damages.

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Defendant's Experts:

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