Uspenskaya v. Meline

*999 Opinion

Defendant Clare Meline appeals from the entry of judgment on a jury verdict finding her negligent and awarding plaintiff Anna Uspenskaya $261,713.71 in past medical expenses.

This case raises an issue in the evolving body of case law on the calculation of reasonable medical expenses in economic damages awards. Plaintiff lacked medical insurance and contracted with her medical providers to treat her in exchange for a lien on whatever she might recover from defendant in this lawsuit. A third party assignee, MedFin Managers, LLC (MedFin), purchased the lien from the medical providers for a discounted amount. Plaintiff remained liable on the total bill. Defendant contends that the trial court erred in denying her motion to admit evidence of the amounts MedFin paid to purchase the right to recover the full amounts plaintiff’s medical providers billed plaintiff. Defendant argues that the trial court should have allowed her to introduce evidence of the amounts MedFin paid to the medical providers (the MedFin payments) as evidence of the reasonable cost of treatment provided plaintiff, particularly since the court denied defendant’s motion to exclude evidence of the billed amounts.

In the published portion of this opinion, we conclude that because defendant proffered no evidence to show that the MedFin payments represented the reasonable value of plaintiff’s treatment, the probative value of that evidence was substantially outweighed by the probability that it would create a substantial danger of undue prejudice as well as a danger of confusing and misleading the jury. Consequently, the trial court’s Evidence Code section 352 1 ruling precluding evidence of the MedFin payments was not an abuse of discretion. 2

We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Defendant’s vehicle collided into plaintiff’s vehicle at a busy intersection. Plaintiff sustained spinal injuries in the accident and filed suit against defendant. Eventually, plaintiff had surgery to repair a herniated lumbar disc.

*1000 The jury found defendant negligent and awarded plaintiff a total of $429,773.71 in damages, including $261,773.71 in past medical expenses, which was the full amount of her medical bills. 3 The trial court then entered judgment on the verdict.

DISCUSSION

I. Additional Background and Defendant’s Contentions *

II. Analysis

A. Offer of Proof *

B. Exclusion of Evidence Under Evidence Code Section 352

Section 352 provides: “The court in its discretion may exclude evidence if its probative value is substantially outweighed by the probability that its admission will (a) necessitate undue consumption of time or (b) create substantial danger of undue prejudice, of confusing the issues, or of misleading the jury.” “Under Evidence Code section 352, the trial court enjoys broad discretion in assessing whether the probative value of particular evidence is outweighed by concerns of undue prejudice, confusion or consumption of time. [Citation.]” (People v. Rodrigues (1994) 8 Cal.4th 1060, 1124 [36 Cal.Rptr.2d 235, 885 P.2d 1].) We review a challenge to a trial court’s decision to admit or exclude evidence for abuse of discretion. (People v. Vieira (2005) 35 Cal.4th 264, 292 [25 Cal.Rptr.3d 337, 106 P.3d 990].) We will not disturb a trial court’s exercise of discretion “ ‘except on a showing the trial court exercised its discretion in an arbitrary, capricious, or patently absurd manner that resulted in a manifest miscarriage of justice.’ [Citation.]” (People v. Holford (2012) 203 Cal.App.4th 155, 168 [136 Cal.Rptr.3d 713].) “While the concept ‘abuse of discretion’ is not easily susceptible to precise definition, the appropriate test has been enunciated in terms of whether or not *1001 the trial court exceeded ‘ “the bounds of reason, all of the circumstances before it being considered. . . .” ’ [Citations.]” (Troxell v. Troxell (1965) 237 Cal.App.2d 147, 152 [46 Cal.Rptr. 723].) “A decision will not be reversed merely because reasonable people might disagree.” (People v. Preyer (1985) 164 Cal.App.3d 568, 573 [210 Cal.Rptr. 807].)

The purpose of an award of economic damages, such as medical expenses, is to compensate the plaintiff for the loss or injury sustained as a result of the tortfeasor’s action; the object is to restore the plaintiff as nearly as possible to his or her former position, without placing the plaintiff in a better position than he or she would have been in had the wrong not occurred. 5 (See Civ. Code, § 1431.2, subd. (b)(1); Hanif v. Housing Authority (1988) 200 Cal.App.3d 635, 641 [246 Cal.Rptr, 192].) “A person who undergoes necessary medical treatment for tortiously caused injuries suffers an economic loss by taking on liability for the costs of treatment. Hence, any reasonable charges for treatment the injured person has paid or, having incurred, still owes the medical provider are recoverable as economic damages.” (Howell, supra, 52 Cal.4th at p. 551.) However, a plaintiff “cannot recover more than the amount of medical expenses he or she paid or incurred, even if the reasonable value of those services might be a greater sum.” (Katiuzhinsky v. Perry (2007) 152 Cal.App.4th 1288, 1290 [62 Cal.Rptr.3d 309] (Katiuzhinsky).) Additionally, an injured plaintiff with insurance may not recover more than the amount actually paid by her insurer on her behalf. (Howell, at p. 566.) However, “[t]he intervention of a third party in purchasing a medical lien does not prevent a plaintiff from recovering the amounts billed by the medical provider for care and treatment, as long as the plaintiff legitimately incurs those expenses and remains liable for their payment.” (Katiuzhinsky, at p. 1291.) The result is different when a plaintiff has been relieved of having to pay the full cost of treatment as in Howell, *1002 where reduction of economic damages was appropriate because the defendant established by affidavit from both medical providers that the plaintiff had no remaining liability, that the negotiated rate differential was “ ‘written off’ ” or “waived,” and that the providers would not pursue collection of the written-off amounts. (Howell, at p. 550.)

Defendant frames this appeal as a question of first impression in California courts related to the aforementioned established principles: “whether the amounts a medical provider accepts from a non-insurer third-party are admissible as evidence of the reasonable value of the service.” While this is an interesting question and one that this court expressly left open in Katiuzhinsky, 6 the trial court did not rule that the MedFin payments are categorically inadmissible evidence on the question of the reasonable value of medical expenses. Rather, the trial court found the evidence was relevant to the question of reasonable value. Flowever, the court ruled that without any evidence tending to show that the MedFin payments represented a reasonable value of the treatment provided, evidence of those amounts was likely to confuse the jury and cause the jury to speculate. The court explained that it would have admitted the testimony about the amount MedFin paid if defendant could present some evidence that that amount reflected a reasonable valuation of plaintiff’s medical services.

We agree with the trial court’s ruling, although for slightly different reasons. 7 The MedFin payments are relevant because they have a tendency in reason to prove reasonable value. 8 However, without evidence that those payments represented a reasonable value for the treatment, the probative value of that evidence as to reasonable value was minimal. On the other side of the section 352 balancing analysis, there was a substantial danger of undue prejudice and that the evidence of the MedFin payments would confuse or mislead the jury. These dangers substantially outweighed any probative value that evidence of the payments may have had. (§ 352.)

*1003 In Katiuzhinsky, MedFin purchased the right to collect on the debts injured plaintiffs owed their health care providers (Katiuzhinsky; supra, 152 Cal.App.4th at p. 1291), just as it did in the instant case. This court explained the mechanics of how MedFin works: “Prior to treatment, the medical provider asks MedFin to evaluate the case to determine whether it is willing to purchase the medical account after the rendition of services. MedFin will then contact the plaintiff’s attorney and gather information about the case to ascertain whether the plaintiff’s claim against the tortfeasor is worth its investment. [¶] If the claim meets with MedFin’s approval, it notifies the medical provider that it is willing to purchase the account and the lien rights. . . . [¶] MedFin does not negotiate with the plaintiff or the medical provider how much the provider charges for medical services. These sums are based on a standard fee schedule registered with the state, and are the same as any patient would incur in the ordinary course of business.” (Id. at p. 1292.)

The problem in cases involving MedFin, or similar companies purchasing accounts receivable (sometimes referred to as factors), is that MedFin’s purchase price represents a reasonable approximation of the collectability of the debt rather than a reasonable approximation of the value of the plaintiff’s medical services. In other words, the health care providers evaluate the risk of collectability and make a decision to settle for some amount that may or may not reflect the actual value for those services. As this court noted in Katiuzhinsky, “when the provider decides to sell its bill to MedFin and write off the balance, each party receives something of value: The provider obtains immediate payment and transfers the expense of collection and the risk of nonpayment onto someone else; MedFin, in turn, acquires the medical bill as well as the lien securing it, and will make a profit if it is successful in its collection efforts. [¶] The fact that a hospital or doctor, for administrative or economic convenience, decides to sell a debt to a third party at a discount does not reduce the value of the services provided in the first place.” (Katiuzhinsky, supra, 152 Cal.App.4th at p. 1298.) In deciding what price to offer medical providers for the right to recover full payment from an injured person, MedFin evaluates the risk of collectability and bets on whether and how much the person will receive in a pending lawsuit. Given these reasons for selling and purchasing the right to collect the debt, the probative value of the MedFin payments on the question of the reasonable value of the treatment provided to plaintiff is at best limited without some evidence tending to show a nexus between the purchase price for the right to collect the debt and the reasonable market value of the medical services. As our Supreme Court held in Howell, even if evidence of payments is relevant, “under Evidence Code section 352 the probative value of a collateral payment must be ‘carefully weighted] .. . against the inevitable prejudicial impact such evidence is likely to have on the jury’s deliberations.’ ” (Howell, supra, 52 Cal.4th at p. 552, *1004 quoting Hrnjak v. Graymar, Inc. (1971) 4 Cal.3d 725, 732 [94 Cal.Rptr. 623, 484 P.2d 599].) While the potential prejudice in the context of this case is different from that in Howell and Hrnjak, section 352 nevertheless applies. Indeed, the danger of prejudice is even greater here, where the injured plaintiff remains liable for the entire amount billed for the medical services she received. There is a substantial danger of prejudice because a jury could rely solely on a third party payment to fashion its award, which might not represent the reasonable value of a plaintiff’s treatment and result in a situation where the plaintiff is not made whole, but rather remains liable to the third party for the entire debt, including the difference between the billed amounts and the amounts paid to the providers to purchase the debt.

A related section 352 concern is implicated here. Defendant proposed to admit the amount MedFin paid as her only evidence of the reasonable value of plaintiff’s medical services. As the trial court ruled, this was the type of evidence that could lead the jurors astray and cause them to speculate about whether the MedFin payments represent the reasonable value of treatment without any foundational basis for doing so. Thus, the evidence of the MedFin payments, without additional testimony, presented a substantial danger of misleading the jury to conclude that the MedFin payments were a reasonable valuation of the medical services rather than a reasonable valuation of plaintiff’s likelihood to pay her debt. (Cf. Geffcken v. D’Andrea (2006) 137 Cal.App.4th 1298, 1307-1309 [41 Cal.Rptr.3d 80] [upholding trial court’s exclusion of mold spore data as more prejudicial than probative and likely to confuse the jury where there was no evidence linking the data to the issue of whether the plaintiffs were exposed to mycotoxins in the mold].)

In arguing that the MedFin payments should have been admitted as evidence of the reasonable value of plaintiff’s treatment, defendant relies on Howell, supra, 52 Cal.4th 541, Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308 [156 Cal.Rptr.3d 347] (Corenbaum), and Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311 [188 Cal.Rptr.3d 820] (Bermudez). As we explain, these cases do not help defendant.

In Howell, pursuant to a preexisting agreement, the provider of the plaintiff’s medical treatment accepted from the plaintiff’s health care insurer as payment in full an amount less than the amount the provider had billed. (Howell, supra, 52 Cal.4th at p. 548.) Our high court held that the plaintiff’s economic damages did not include the undiscounted sum stated in the provider’s bill but never paid by her or on her behalf. The court reasoned that the plaintiff suffered no economic loss since the discounted payment was accepted as payment in full. (Ibid.) Unlike the plaintiff in Howell, plaintiff *1005 here has sustained economic loss beyond the amount MedFin paid because she is still liable for the total amount of her debt. Of particular note is the following observation the Howell court made concerning the admissibility of evidence of payments accepted by a medical provider from an insurer; “when a medical care provider has, by agreement with the plaintiff’s private health insurer, accepted as full payment for the plaintiff’s care an amount less than the provider’s full bill, evidence of that amount is relevant to prove the plaintiff’s damages for past medical expenses and, assuming it satisfies other rules of evidence, is admissible at trial.” {Id. at p. 567, italics added.) Thus, even in the health care insurance context, where the amount paid is accepted as payment in full, our high court recognizes that the amount accepted by the medical provider, while relevant, may still not be admissible for other evidentiary reasons.

In Corenbaum, like in Howell, the plaintiffs’ medical providers accepted from the plaintiffs’ health care insurers, pursuant to prior agreements, less than the full amount of their medical billings as payment in full for their services. (Corenbaum, supra, 215 Cal.App.4th at pp. 1318-1319.) The Corenbaum court held that evidence of the full amounts billed for the plaintiffs’ medical care was not relevant to the amount of damages for past medical services, because such amounts do not necessarily reflect the reasonable value of the medical services. (Id. at pp. 1319, 1330-1331.) The Corenbaum court went on to read Howell to state “that the negotiated rate may be the best indication of the reasonable value of the services provided and that it is unclear how any other ‘market value’ could be determined.” (Corenbaum, at p. 1326, italics added.) 9 Apparently relying on this language, appellate counsel for defendant asserted at oral argument that the Corenbaum court interpreted Howell “to state that the amounts actually accepted by a medical provider are quote the best evidence of the value of a medical service.” Counsel also asserted that Bermudez, supra, 237 Cal.App.4th 1311, interpreted Howell in the same way. Thus, according to defendant, the trial court here excluded the best evidence of reasonable value. Neither the opinion in Corenbaum nor Bermudez contain the asserted quotation or use the words “best evidence.” Rather, the Corenbaum court stated that discounted payments negotiated by health insurers “may be the best indication” of reasonable value. (Corenbaum, at p. 1326, italics added.)

*1006 In Bermudez, the plaintiff was uninsured. (Bermudez, supra, 237 Cal.App.4th at p. 1324.) At trial, the plaintiff testified that his medical providers would be paid out of any recovery he might receive in the case, but he would be responsible for the bills no matter the outcome of the trial. (Ibid.) The plaintiff introduced evidence of his medical providers’ billings and sought to support his claim that the billings reflected the reasonable value of his treatment with expert testimony. (Id. at pp. 1324-1326.) The jury awarded economic damages for the total amount of the medical bills. The defendant contended on appeal that there was insufficient evidence supporting the reasonableness of the billings. (Id. at p. 1316.) The Bermudez court concluded the evidence was sufficient to support the jury’s findings except for a small portion of the billings that was not supported with expert testimony. 10 (237 Cal.App.4th at pp. 1337-1338.)

Neither Howell, Corenbaum, nor Bermudez help defendant here. This case does not involve a transaction between the buyer of health care treatment (the injured party and that person’s health care insurance carrier) and the seller of that treatment (the health care provider). It involves the sale of an asset — -the right to collect the injured person’s debt — to a third party buyer unrelated to the person who has been injured. Unlike a situation involving payments made by a plaintiff’s health care insurer, plaintiff had no agreement or prior relationship with MedFin, and the payments made by MedFin to the providers were not made on plaintiff’s behalf to pay for her treatment. And, as we have discussed, the amount MedFin paid is not necessarily based on the reasonable value of the health care, but rather on collectability factors that are unrelated to reasonable value.

Furthermore, unlike the plaintiffs in Howell and Corenbaum, the injured plaintiff here is still on the hook to pay the entire debt, including the differential between the amount MedFin paid for the provider’s asset and the total billed amounts, which was 60 percent of the original bill in Sutter’s case. Howell cited Katiuzhinsky with approval, and distinguished it on the basis that the payment made by MedFin did not relieve the plaintiff of the obligation to pay the entire amount billed. (Howell, supra, 52 Cal.4th at pp. 554, 557, citing Katiuzhinsky, supra, 152 Cal.App.4th at p. 1291.) And both Bermudez and Corenbaum recognized that distinction. (Bermudez, supra, 237 Cal.App.4th at p. 1334; Corenbaum, supra, 215 Cal.App.4th at p. 1328, *1007 fn. 10.) Defendant asserted at oral argument that this distinction is one without a difference, but there is a difference. In the situation presented here, there is a danger of prejudice if the jury is misled into awarding plaintiff the amount the third party paid to purchase the provider’s asset — the right to collect plaintiff’s total debt — based on the unsubstantiated notion that such payment reflects the reasonable value of the medical services provided plaintiff.

In defendant’s view, the situation presented in this case is not distinguishable because the reasonable value of the medical providers’ service is “what the physician or the hospital agreed to be paid for it.” Reasonable value, defendant asserts, means the market value — what people pay on the open market for a service. To be sure, the Bermudez court observed that our high court in Howell endorsed a “market or exchange value” as the proper way to think about the “ ‘reasonable value’ ” of medical services. (Bermudez, supra, 237 Cal.App.4th at p. 1330.) But defendant overlooks the fact that the providers here did not sell medical services to MedFin nor did MedFin pay for medical services on behalf of plaintiff. As we have said, the providers sold, and MedFin bought, an asset. The value of that asset was based on collectability factors, not necessarily the value of the services previously provided to plaintiff. Furthermore, while recognizing that the Howell court endorsed a market value definition for reasonable value, the Bermudez court also noted that Howell “offered no bright-line rule on how to determine ‘reasonable value’ when uninsured plaintiffs have incurred (but not paid) medical bills.” (Ibid.) The Bermudez court observed, “[i]n practical terms, the measure of damages in insured plaintiff cases will likely be the amount paid to settle the claim in full,” but “the measure of damages for uninsured plaintiffs who have not paid their medical bills will usually turn on a wide-ranging inquiry into the reasonable value of medical services provided, because uninsured plaintiffs will typically incur standard, nondiscounted charges that will be challenged as unreasonable by defendants.” (Id. at pp. 1330-1331, italics added.) As we see it, the inquiry into reasonable value for the medical services provided to an uninsured plaintiff is not necessarily limited to the billed amounts where a defendant seeks to introduce evidence that a lesser payment has been made to the provider by a factor such as MedFin. In such cases, the inquiry requires some additional evidence showing a nexus between the amount paid by the factor and the reasonable value of the medical services. As the trial court observed, such evidence was not offered here.

Thus, the trial court did not abuse its discretion when it excluded evidence of the MedFin payments.

*1008 DISPOSITION

The judgment is affirmed. Defendant shall pay plaintiff’s costs on appeal. (See Cal. Rules of Court, rule 8.278(a)(1) & (5).)