Bynum v. Magno

• Decision Date: 18 November 2004
• Docket Number: No. 25834.,25834.
• Citation: 106 Haw. 81,101 P.3d 1149
• Parties: Joseph BYNUM and Lila Bynum, Plaintiffs-Appellees v. Joanna H. MAGNO, M.D., Defendant-Appellant.
• Court: Hawaii Supreme Court

101 P.3d 1149

106 Haw. 81

Joseph BYNUM and Lila Bynum, Plaintiffs-Appellees v. Joanna H. MAGNO, M.D., Defendant-Appellant.

No. 25834.

Supreme Court of Hawai'i.

November 18, 2004.

As Amended December 2, 2004.

Howard F. McPheeters, Honolulu, (Orly Degani of Horvitz & Levy and Jan M. Tamura and John Reyes-Burke of Burke Sakai McPheeters Bordner Iwanaga & Estes with him on the briefs) for defendant-appellant.

Thomas Benedict (David J. Dezzani and Anne T. Horiuchi, Honolulu, of Goodsill Anderson Quinn & Stifel with him on the brief) for plaintiffs-appellees.

Thomas R. Grande, Honolulu, (Davis Levin Livingston Grande) on the brief for amicus curiae AARP.

ACOBA, J., Circuit Judge POLLACK, in Place of NAKAYAMA, J., Recused, and Circuit Judge DEL ROSARIO, Assigned by Reason of Vacancy; and MOON, C.J., Dissenting, With Whom LEVINSON, J., Joins.

Opinion of the Court by ACOBA, J.

We have jurisdiction pursuant to Hawai'i Revised Statutes (HRS) § 602-5(2) (1993) and Hawai'i Rules of Appellate Procedure (HRAP) Rule 13(a) (2000)¹ to answer the following certified questions by the United States District Court for the District of Hawai'i (the district court)² to this court:

Where a plaintiff's healthcare expenses are paid by Medicare and/or Medical, does the discounted amount paid to a healthcare provider by [Medicare³] and Medi-Cal constitute the amount that should be awarded as medical special damages to a plaintiff in a negligence action? In this circumstance, is evidence of amounts billed in excess of the amount[ ]paid irrelevant and inadmissible?

For the reasons set forth herein, the answer to both questions is "no."

I.

The questions posed arise out of a medical malpractice action in which Plaintiffs-Appellees Joseph Bynum (Joseph) and his wife Lila Bynum (Lila) (collectively the Bynums), sued to recover damages for injuries Joseph allegedly suffered in connection with coronary artery bypass grafting surgery.

While vacationing on the Big Island of Hawai'i in July of 1998, Joseph experienced chest pains. Initially, Joseph went to North Hawai'i Community Hospital for treatment, and was later transferred to the Queen's Medical Center (Queen's) in Honolulu, for further treatment. Dr. Joana Magno (Magno), a cardiologist at Queen's, assumed responsibility for coordinating Joseph's care as his attending physician. Magno consulted with Dr. Michael Dang (Dang), a cardiovascular surgeon, and Dr. John Callan (Callan), a pulmonologist, and recommended that Joseph undergo bypass surgery on an urgent basis. Magno did not advise the Bynums that Joseph could try alternate treatments, such as medical therapy or angioplasty, but presented surgery as his only option. At the time Magno recommended bypass surgery, she knew Joseph had experienced respiratory failure two years earlier, and recognized that his history of lung disease was a "red flag" to bypass surgery.

During the bypass surgery performed by Dang, Joseph suffered respiratory distress, which required him to be placed on mechanical ventilation for the remainder of his life. After spending three months in Queen's, Joseph was transferred to six different intensive care facilities in California.

From the time of the surgery, Joseph was eligible for Medicare, which initially paid for his medical bills. However, to allow Joseph to become eligible for Medi-Cal, California's Medicaid program, and to protect their life savings from the costs of Joseph's ongoing hospitalization, the Bynums legally divorced on February 11, 1999.⁴

Joseph lived in intensive care facilities for over 1,314 days after the surgery, and was dependent upon the ventilator for the rest of his life, passing away on February 21, 2002.

II.

The Bynums filed a lawsuit against Magno, Dang, Callan, and Queen's (hereinafter, collectively, Defendants), on December 30, 1999, prior to Joseph's death.⁵ During discovery, the Bynums produced medical bills, which reflected the "standard" or "customary" charges (hereinafter "standard rates") for the services provided by the medical facilities in which Joseph had resided. Prior to trial, the parties entered into a stipulation regarding those bills,⁶ in which they agreed, inter alia, that the medical bills "reflect[ed] medical treatment for [Joseph] that was necessary for medical conditions that existed during the time of treatment[,]" and were for amounts "similar to charges made by similar or comparable health care providers for like services in the same geographical area."

On February 6, 2001, Magno and Callan filed a motion in limine to limit Joseph's recovery of his medical expenses to only those fees actually paid to his healthcare providers as full and final payment for the services. In this regard, Defendants sought to preclude the Bynums from introducing, as evidence of special damages, the standard rates for Bynum's medical care that might have been billed to other patients for comparable treatment. Additionally, Defendants asserted that "a patient cannot be held liable for any medical expenses that exceed the amount approved by Medicare or actually paid by Medicare and Medi-Cal payments to a healthcare provider."

The district court denied the motion, and did not limit the evidence of special damages to the amount charged by Medicare/Medicaid. Accordingly, when the jury trial commenced on March 13, 2001, the medical bills introduced reflected amounts similar to charges made by comparable health care providers for like services in the same geographical area.

The jury returned it's verdict on April 4, 2001, and on May 2, 2001, the district court entered judgment against Magno in the amount of $2,063,750.00 for Joseph ($1,462,500.00 in special damages and $601,250 in general damages), and $107,250 for Lila (in general damages). Additionally, the district court dismissed with prejudice all claims against Callan, Dang, and Queen's, pursuant to a stipulation for partial dismissal.

Magno appealed the judgment to the United States Ninth Circuit Court of Appeals (the Ninth Circuit), asserting, inter alia, that "the district court erred by submitting the amount of the medical expenses billed by [Joseph's] healthcare providers to the jury as the reasonable value of their services, instead of the lesser amount negotiated by [Medicare/Medicaid]." The Ninth Circuit reversed the district court's judgment and remanded the case for a new trial.⁷ Declining to resolve the issue of special damages, the Ninth Circuit posited that

the novel question under Hawai'i law whether the discounted amount paid to a healthcare provider by Medicaid[⁸] and Medi-Cal reflects the amount that should be awarded to a plaintiff in a negligence action might well be a suitable candidate for certification.

Accordingly, the district court, upon remand, submitted its certified questions to this court.

III.

Joseph's healthcare providers, as required of provider participants in the Medicare⁹ and/or Medicaid¹⁰ (hereinafter Medicare/Medicaid) programs, agreed in advance to accept the Medicare/Medicaid approved payments as full and final payment for their services. Such payments are set at rates lower than the standard rates that providers might charge other patients who did not participate in these programs. These payments then, by definition and as posed by the Ninth Circuit, are "discounted" from the standard rates otherwise charged for comparable medical treatment. Joseph's healthcare providers, as participants in these programs, were statutorily prohibited from "balance billing" Joseph or any other source for amounts above the Medicare/Medicaid approved charges.

IV.

In response to the certified questions presented, the parties raise several arguments. Magno argues that a plaintiff whose health care expenses are covered by Medicare/Medicaid, is entitled to recover the amount of the Medicare/Medicaid approved payments, and nothing more, because (1) principles of compensatory damages do not permit recovery for more than the actual costs incurred for medical services; (2) the collateral source rule does not entitle a plaintiff to recover amounts in excess of the Medicare/Medicaid approved payments, inasmuch as (a) the amount of the Medicare/Medicaid "discount" is not a "benefit" belonging to the plaintiff under the collateral source rule, (b) limiting a plaintiff's recovery to the amount of the approved payments does not result in a windfall to the defendant, and (c) unlike private insurance arrangements where the collateral source rule has been applied, this case does not involve the payment of premiums by the plaintiff; and (3) amounts billed in excess of the Medicare/Medicaid approved payments are irrelevant and inadmissible in a tort action.

The Bynums, on the other hand, assert that Joseph's recoverable medical expenses should be based upon the standard rates, because (1) the policies behind the recovery of damages for personal injury tort victims are not analagous to the principles of "compensatory damages" in property damage cases; (2) the collateral source rule applies, inasmuch as (a) the "`discount [s]' created by the lower fee schedules" are "unquestionably a benefit to Medicare/Medicaid recipients[,]" (b) the programs "benefitted" Joseph by preventing the providers from "balance billing" him for the full amount, (c) if Joseph was not eligible for Medicare/Medicaid, "he would have been liable for the full amount of his medical bills," and thus, (d) "allowing [Magno] to reduce her liability by virtue of [Joseph's] participation in Medicare/Medicaid would indeed result in a windfall for [Magno], which is exactly what Hawai'i collateral source rule prohibits"; and (3) because the collateral source rule applies to all Medicare/Medicaid benefits, evidence of standard rates is relevant and admissible for (a) determining the reasonable value of medical services, (b) understanding the extent of the plaintiff's injuries, and (c) providing a foundation for future medical care and expenses.

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