In re N. Cypress Med. Ctr. Operating Co.

• Decision Date: 27 April 2018
• Docket Number: No. 16–0851,16–0851
• Citation: 559 S.W.3d 128
• Parties: IN RE NORTH CYPRESS MEDICAL CENTER OPERATING CO., LTD., Relator
• Court: Texas Supreme Court

559 S.W.3d 128

IN RE NORTH CYPRESS MEDICAL CENTER OPERATING CO., LTD., Relator

No. 16–0851

Supreme Court of Texas.

Argued November 9, 2017

OPINION DELIVERED: April 27, 2018

Rehearing Denied November 16, 2018

R. James Amaro Jr., The Amaro Law Firm, Houston, for Real Party in Interest.

Shelli M.J. Morrison, Byron L. Kelley, The Morrison Law Firm, Athens, Chad M. Ruback, The Ruback Law Firm, Dallas, for Relator.

Diana L. Faust, R. Brent Cooper, Cooper & Scully, P.C., Dallas, for Amicus Curiae CHRISTUS Health and Texas Health Resources.

Amy Kogan, Douglas D. Turek, Erin Ruth Hartung, The Turek Law Firm, PC, The Woodlands, for Amicus Curiae Dallas County Hospital District d/b/a Amici Health and Hospital System and Hunt Memorial Hospital District d/b/a Hunt Regional Medical Center.

Geoffrey A. Gannaway, Beck Redden, LLP, Houston, for Amicus Curiae Memorial Hermann Health System.

David King, Matthew B. Baumgartner, P. M. Schenkkan, Graves, Dougherty, Hearon & Moody P.C., Austin, for Amicus Curiae Research & Planning Consultants, LP.

Charles W. Bailey Jr., Law Offices of Charles Bailey, Austin, George Nation III, LEHIGH UNIVERSITY, College of Business and Economics, Bethlehem, PA, for Amicus Curiae The Alliance of Claims Assistance Professionals.

Juan Roberto Fuentes, The Fuentes Firm, P.C., Spring, for Amicus Curiae The Fuentes Firm, P.C.

Justice Lehrmann delivered the opinion of the Court, in which Justice Johnson, Justice Boyd, Justice Devine, Justice Brown, and Justice Blacklock joined.

Our procedural rules allow broad discovery of unprivileged information that is "relevant to the subject matter of the pending action." TEX. R. CIV. P. 192.3(a). This includes information that may ultimately be inadmissible at trial so long as it "appears reasonably calculated to lead to the discovery of admissible evidence." Id. The "subject matter" of the underlying action, which involves the enforceability of a hospital lien securing payment of charges for services rendered to an uninsured patient, encompasses the reasonableness of those charges.

The trial court's order at issue in this mandamus proceeding requires the defendant hospital to produce information regarding its reimbursement rates from private insurers and public payers for the services it provided to the plaintiff. The hospital argues those reimbursement rates are irrelevant to whether its charges to the uninsured plaintiff were reasonable and that the trial court therefore abused its discretion in ordering production of that information. We disagree. The reimbursement rates sought, taken together, reflect the amounts the hospital is willing to accept from the vast majority of its patients as payment in full for such services. While not dispositive, such amounts are at least relevant to what constitutes a reasonable charge. Accordingly, we deny the hospital's petition for writ of mandamus.

I. Background

Crystal Roberts was involved in an automobile accident on June 9, 2015, and was taken by ambulance to the emergency room at North Cypress Medical Center. North Cypress released Roberts approximately three hours later after performing a series of x-rays, CT scans

, lab tests, and other emergency services. Because Roberts was uninsured, North Cypress billed her for the services at its full "chargemaster" prices, which totaled $11,037.35. North Cypress also filed a hospital lien in the amount of the cost of its services, minus payments and adjustments credited to Roberts’ account. See TEX. PROP. CODE § 55.002(a) ("A hospital has a lien on a cause of action or claim of an individual who receives hospital services for injuries caused by an accident that is attributed to the negligence of another person.").

The liability insurer of the driver at fault offered to settle the case for $17,380, attributing $9,404 to medical expenses stemming from North Cypress’s services. Roberts sought reduction of North Cypress's bill, and the parties negotiated but could not reach an agreement on the bill's amount.¹ Roberts sued, seeking a declaratory judgment that North Cypress's charges were unreasonable and its lien invalid to the extent it exceeds a reasonable and regular rate for services rendered.² North Cypress counterclaimed on a sworn account for $8,278.31, the amount to which it had previously offered to reduce its bill.

Roberts served requests for production and interrogatories on North Cypress, including the following:

• Please produce all contracts regarding negotiated or reduced rates for the hospital services provided to Plaintiff in which Defendant is a party, including those with Aetna, First Care, United Healthcare, Blue Cross Blue Shield, Medicare, and Medicaid.

....

• Please produce the annual cost report you are required to provide to a Medicare Administrative Contractor Medicare [sic], as a Medicare certified institutional provider for 2011, 2012, 2013, 2014 and 2015.

....

• Please state the Medicare reimbursement rate for x-rays, CT scans

, lab tests and emergency room services, as you performed on the Plaintiff on June 9, 2015.

• Please state the Medicaid reimbursement rate for x-rays, CT scans, lab tests and emergency room services, as you performed on the Plaintiff on June 9, 2015.

North Cypress objected to these discovery requests and moved for a protective order, asserting that they sought irrelevant information and were overly broad. Roberts filed a corresponding motion to compel. In an oral ruling on the record, the trial court ordered North Cypress to produce the requested information, though the court narrowed the scope to include only contracts "that cover the [time] period at issue in this case."

North Cypress moved for reconsideration, reiterating its relevance objection and adding that it would "suffer irreparable harm" from the disclosure of its "confidential and proprietary" negotiated insurance contracts. The trial court denied the motion, prompting North Cypress to file a petition for writ of mandamus in the court of appeals. The court of appeals denied the petition, and North Cypress now seeks mandamus relief in this Court.

II. Analysis

Mandamus is an extraordinary remedy granted only when the relator shows that the trial court abused its discretion and that no adequate appellate remedy exists. In re Prudential Ins. Co. of Am. , 148 S.W.3d 124, 135–36 (Tex. 2004). "The trial court abuses its discretion by ordering discovery that exceeds that permitted by the rules of procedure." In re CSX Corp. , 124 S.W.3d 149, 152 (Tex. 2003). We address North Cypress's two challenges to the discovery order in turn.

A. Relevance

North Cypress first argues that information about reimbursement rates from insurers and government payers is not relevant to Roberts' claims about the enforceability of its hospital lien. See TEX. R. CIV. P. 192.3(a) (parties may obtain discovery of information that is "relevant to the subject matter of the pending action"). Evidence is "relevant" if "it has any tendency to make a fact [of consequence to the action] more or less probable than it would be without the evidence." TEX. R. EVID. 401. And as noted, evidence need not be admissible to be discoverable so long as it "appears reasonably calculated to lead to the discovery of admissible evidence." TEX. R. CIV. P. 192.3(a).

Because the subject matter of this action involves a dispute over a hospital lien, in evaluating the relevance of the requested information we must begin with a discussion of Texas's hospital-lien statute, codified in Texas Property Code chapter 55. This statute provides hospitals an additional method of securing payment from accident victims, encouraging their prompt and adequate treatment. McAllen Hosps., L.P. v. State Farm Cty. Mut. Ins. Co. of Tex. , 433 S.W.3d 535, 537 (Tex. 2014). Subject to certain conditions, a hospital has a lien on the cause of action of a patient "who receives hospital services for injuries caused by an accident that is attributed to the negligence of another person." Id. (quoting TEX. PROP. CODE § 55.002(a) ). The lien also attaches to the proceeds of a settlement of the patient's cause of action. TEX. PROP. CODE § 55.003(a)(3). We have noted that the statute "is replete with language that the hospital recover the full amount of its lien, subject only to the right to question the reasonableness of the charges comprising the lien." Bashara v. Baptist Mem'l Hosp. Sys. , 685 S.W.2d 307, 309 (Tex. 1985) ; see also Daughters of Charity Health Servs. v. Linnstaedter , 226 S.W.3d 409, 411 (Tex. 2007) (noting that the amount of a hospital lien may not exceed "a reasonable and regular rate").³

North Cypress challenges the trial court's order requiring production of (1) its contracts with private insurers regarding the negotiated reimbursement rates it accepts from those insurers for the services provided to Roberts, (2) the reimbursement rates for those services from Medicare and Medicaid, and (3) North Cypress's annual Medicare cost reports for certain years. North Cypress primarily argues that its negotiated reimbursement rates with health insurance carriers are not relevant to its charges to an uninsured patient and therefore are not discoverable. It urges that because Roberts had neither private health insurance nor Medicare or Medicaid coverage when she was treated, she is not entitled to the benefit of those negotiated rates. North Cypress also cites our holding in Haygood v. De Escabedo that any billing adjustment reflected in the negotiated rates belongs to the insurance carrier, not the patient. 356 S.W.3d 390, 394–95 (Tex. 2012). According to North Cypress, this further highlights the distinction between billed charges and reimbursement rates.⁴

Roberts responds that the insurance contracts are necessary to establish whether the amount North Cypress charged Roberts for emergency services is excessive in comparison to the rates for the same services provided to other patients in the same hospital. Roberts avers that the contracts will show that North Cypress is...