Lindholm v. Hassan

• Citation: 369 F.Supp.2d 1104
• Decision Date: 05 May 2005
• Docket Number: No. Civ. 04-4025.,Civ. 04-4025.
• Parties: Michael N. LINDHOLM, Plaintiff, v. Adel A.F. HASSAN, M.D., Defendant.
• Court: U.S. District Court — District of South Dakota

369 F.Supp.2d 1104

Michael N. LINDHOLM, Plaintiff, v. Adel A.F. HASSAN, M.D., Defendant.

No. Civ. 04-4025.

United States District Court, D. South Dakota, Southern Division.

May 5, 2005.

A. Russell Janklow, Matthew T. Tobin, Sioux Falls, SD, for Plaintiff.

Lonnie R. Braun, Rapid City, SD, for Defendant.

MEMORANDUM OPINION AND ORDER

PIERSOL, Chief Judge.

In this diversity medical malpractice action, Defendant, Adal A.F. Hassan, M.D., has filed a document entitled "Motion Re Medical Expenses." Doc. 15. In his motion, Defendant has requested that this Court issue an order prohibiting Plaintiff, Michael N. Lindholm, from presenting evidence at trial of the amount billed for medical services rendered to Plaintiff but "written off" by his medical providers pursuant to requirements of Medicare. Plaintiff has submitted his brief opposing the motion. Doc. 17.After considering the briefs, argument of counsel, and all applicable law, this Court is denying the motion.

DISCUSSION

Plaintiff alleges in his complaint that Defendant, a physician who is now a resident of Kentucky, cut or otherwise injured Plaintiff's common hepatic duct while performing a laparoscopic cholecystectomy. Plaintiff alleges that his damages include extensive past medical expenses and future medical expenses. Plaintiff's total claim for medical expenses exceeds $102,000. This claim for medical expenses represents the medical expenses billed by Plaintiff's providers. Plaintiff, however, at all times material, has qualified for Medicare benefits. Medicare. the federally funded medical insurance program for the elderly and disabled, was established as part of the Social Security Act, and is funded and administered by the federal government. 42 U.S.C. §§ 1395. et seq.

When a healthcare provider contracts to provide medical services to patients covered under Medicare it agrees to certain fee schedules and agrees to accept as full payment less than the amount billed to the patient. It is by operation of law that the healthcare provider must write off the remaining balance and cannot collect any further payment on the remaining amount. See 42 U.S.C. § 1395cc and 42 C.F.R. § 489.21(a). A wage earner such as Plaintiff does contribute monetarily toward the cost of Medicare.

At the time of the pretrial hearing, counsel for Plaintiff had not ascertained the amount of the write-offs. It is undisputed that a portion of the medical bills was "written off" and a substantially lower amount was paid by Medicare to satisfy payment of the medical bills. Plaintiff contends that the collateral source rule precludes the relief Defendant is requesting in the motion in issue. Defendant contends that the collateral source rule is inapplicable to this case.

In a diversity action alleging negligence, a federal court applies the law of the forum state. Jordan v. NUCOR Corp., 295 F.3d 828, 834 (8th Cir.2002). Normally, questions of relevance and admissibility of evidence are determined by federal law. Clark v. Martinez, 295 F.3d 809, 814 (8th Cir.2002). However, if the evidentiary issue is intertwined with a state's substantive policy, as it is in a matter involving the collateral source rule, state law governs. See Wolfe v. Gilmour Mfg. Co., 143 F.3d 1122 (8th Cir.1998) (applying Nebraska collateral source rule in diversity action). This Court must then apply South Dakota law in deciding Defendant's Motion.

The Collateral Source Rule

The collateral source rule was recognized and adopted by the South Dakota Supreme Court in Moore v. Kluthe & Lane Ins. Agency, Inc., 89 S.D. 419, 234 N.W.2d 260 (1975), a case in which the plaintiff prevailed on a negligent misrepresentation claim for a defendant's misrepresentation that an insurance policy provided flood coverage. In that case, the South Dakota Supreme Court defined the collateral source rule as follows." `Total or partial compensation received by an injured party from a collateral source, wholly independent of the wrongdoer, does not operate to reduce the damages recoverable from the wrongdoer.'" Id. at 269 (quoting Gersick v. Shilling, 97 Cal.App.2d 641, 218 P.2d 583, 589 (1950)). The South Dakota Supreme Court explained the purpose of the collateral source rule as follows:

"No reason in law, equity or good conscience can be advanced why a wrongdoer should benefit from part payment from a collateral source of damages caused by his wrongful act. if there must be a windfall certainly its is more just that the injured person shall profit therefrom, rather than the wrongdoer shall be relieved of his full responsibility for his wrongdoing."

234 N.W.2d at 269 (quoting Grayson v. Williams, 256 F.2d 61, 65 (10th Cir.1958)).

In Degen v. Bayman, 90 S.D. 400, 241 N.W.2d 703 (1976), the South Dakota Supreme Court examined the collateral source rule in the context of a personal injury action in which a portion of the Plaintiff's medical services was rendered free of charge by the Shriners Hospital for Crippled Children. In the Degen case, the South Dakota Supreme Court elaborated on the collateral source rule as follows:

"The general rule is that a plaintiff who has been injured by the tortious conduct of the defendant is entitled to recover the reasonable value of medical and nursing services reasonably required by the injury. This is a recovery for their value and not for the expenditures actually made or obligations incurred. Thus, under this general rule, the fact that the medical and nursing services were rendered gratuitously to the one who was injured will not preclude the injured party from recovering the value of those services as a part of his compensatory damages. Accordingly, the plaintiff's recovery will not be reduced by the fact that the medical expenses were paid by some source collateral to the defendant, such as by a beneficial society, by members of the plaintiff's family, by the plaintiff's employer, or by an insurance company."

Id. at 708 (quoting 22 AM.JUR.2d, Damages, § 207).

The South Dakota Supreme Court has continued to apply the collateral source rule and has so far declined to apply an exception¹ to the collateral source rule. See Jurgensen v. Smith, 611 N.W.2d 439 (S.D.2000)(mere fact that defendant motorist's financial status was introduced at trial did not open the door for plaintiff to introduce evidence that defendant received financial benefits from collateral source). The South Dakota Legislature has also established limitations regarding the admissibility of evidence of insurance. See S.D.C.L. § 19-12-13.²

Although the South Dakota Supreme Court has not yet determined whether the collateral source rule applies when Medicare pays a plaintiff's medical bills, the Restatement (Second) of Torts § 920A, comment c, includes social legislation benefits as those benefits to which the collateral benefits rule applies.³ The Court concludes that the South Dakota Supreme Court would follow the position of the Restatement (Second) of Torts in this matter.⁴ Defendant does not challenge that conclusion, and, in fact, is not seeking to preclude evidence of the amount of medical expenses actually paid for by Medicare. Defendant is seeking only to preclude evidence of the "write-offs" that were never paid by any entity.

Whether Medicare Write-Offs Fall Within the Scope of the Collateral Source Rule?

Defendant relies on cases from other jurisdictions that hold that a plaintiff's damages are limited to the amount of medical expense actually paid and that amounts that are "written off" should be excluded. See. e.g., Wildermuth v. Staton, 2002 WL 922137 (D.Kan.)(not reported in F.Supp.2d)(court rules that collateral source rule, by its express terms, does not apply to Medicare write-offs that are never paid); Moorhead v. Crozer Chester Medical Center, 564 Pa. 156, 765 A.2d 786 (2001)(court rules that Plaintiff is not entitled to "illusory" medical charges that neither Medicare nor her "Blue Cross 65" supplemental plan actually paid); Bates v. Hogg, 22 Kan.App.2d 702, 921 P.2d 249 (1996)(plaintiff could not apply collateral source rule to include as damages amounts that were written off by healthcare provider in conjunction with Medicaid contract), rev'd on other grounds by Frans v. Gausman, 27 Kan.App.2d 518, 6 P.3d 432 (2000); Terrell v. Nanda, 759 So.2d 1026, 1031 (La.App.2000)(plaintiffs could not recover portion of medical expenses contractually adjusted pursuant to the requirements of the Medicaid program);⁵ Hanif v. Housing Auth., 200 Cal.App.3d 635, 643, 246 Cal.Rptr. 192 (1988)(plaintiff could recover as special damages for medical care only the amount actually paid by Medi-Cal on plaintiff's behalf).

Defendant also cites to Jackson v. Lee's Travelers Lodge, Inc., 563 N.W.2d 858 (S.D.1997), as case in which "the South Dakota Supreme Court refused to apply the collateral source rule to allow a plaintiff to collect medical expense damages which were never incurred by him but were instead paid by the State of South Dakota." The Jackson case, however, is not applicable because it involves a workers' compensation claim, not a tort cause of action. In briefly discussing the collateral source rule, the South Dakota Supreme Court noted the defendant "was not found to be a torfeasor, only an employer." Id. at 868 n. 11.

In addition, Defendant cites to SDCL § 21-3-1, which provides that in a tort action, the measure of damages is "the amount which will compensate for all the detriment proximately caused" by the conduct of the tortfeasor. Defendant cites South Dakota law which provides that "the sole objective of compensatory damages is to make the injured party whole." See Hulstein v. Meilman Food Industries, Inc., 293 N.W.2d 889, 891 (S.D.1980). Defendant argues that given that the purpose behind compensatory damages is making the Plaintiff whole, the reasonableness of Plaintiff's medical expenses is determined with reference to the amount actually paid for those services, i.e., the amount actually...