N.E. Physical Therapy Plus, Inc. v. Liberty Mut. Ins. Co.

• Decision Date: 10 September 2013
• Docket Number: SJC–11284.
• Citation: 466 Mass. 358,995 N.E.2d 57
• Parties: N.E. PHYSICAL THERAPY PLUS, INC. v. LIBERTY MUTUAL INSURANCE COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

466 Mass. 358

995 N.E.2d 57

N.E. PHYSICAL THERAPY PLUS, INC.

v.LIBERTY MUTUAL INSURANCE COMPANY.

SJC–11284.

Supreme Judicial Court of Massachusetts,

Essex.

Submitted May 7, 2013.

Decided Sept. 10, 2013.

Daniel P. Tighe (Douglas R. Tillberg with him), Boston, for the defendant.

Francis A. Gaimari, Needham, (Stephen B. Byers with him) for the plaintiff.

The following submitted briefs for amici curiae:

E. Michael Sloman for Automobile Insurers Bureau.

Peter A. Biagetti, Needham, & Andrew Nathanson for Fair Health, Inc.

Paul R.Q. Wolfson, Shirley Cassin Woodward, & Dina B. Mishra, of the District of Columbia, & John J. Regan & Mark C. Fleming, Boston, for American Insurance Association & others.

David L. Arrington & Jodi L. Howick, of Utah, & Todd S. Holbrook & Jeffrey D. Adams, Boston, for Mitchell International, Inc.

Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, DUFFLY, & LENK, JJ.

LENK, J.

After being billed by the plaintiff, N.E. Physical Therapy Plus, Inc. (NEPT), for certain medically necessary chiropractic services provided to the passenger of its insured, the defendant, Liberty Mutual Insurance Company (Liberty Mutual), maintained that the cost of those services was unreasonably high and thus refused to pay the full amount invoiced.¹ At the ensuing trial on the dispute, Liberty Mutual sought to introduce statistical evidence from a commercial database to show that NEPT's charges exceeded the eightieth percentile of reported charges for the same procedures and were thus unreasonable. Liberty Mutual claimed that the statistical evidence was admissible pursuant to G.L. c. 233, § 79B ( § 79B), which creates a limited exception to the hearsay rule for factual statements contained in commercial publications. Citing a decision of the Appellate Division of the District Court that concluded the same database was unreliable, a District Court judge denied Liberty Mutual's motion to admit the database evidence.

We are asked to determine whether a trial judge has discretion to consider the reliability of evidence offered under § 79B where the evidence otherwise satisfies the requirements of § 79B, and, if so, whether the judge here abused such discretion in excluding the database. Based on the explicit language of § 79B, and the gatekeeper role of a trial judge, we conclude that it is within a judge's discretion to consider the reliability of evidence offered pursuant to § 79B. Because the judge's conclusion that the evidence was not sufficiently reliablefinds support in the record, we conclude also that the judge did not abuse his discretion in excluding its admission.

1. Background. a. Facts. Prior to trial, the parties stipulated to the following facts. On August 2, 2003, Gitane Dalencourt was injured in a motor vehicle accident while a passenger in a vehicle insured by Liberty Mutual. The policy provided $8,000 in personal injury protection (PIP) coverage, as required by G.L. c. 90, § 34A. On October 10, 2003, Liberty Mutual received a PIP claim application from Dalencourt.

Liberty Mutual received bills totaling $4,465 from NEPT, for chiropractic treatment provided to Dalencourt from September 16, 2003 to December 17, 2003. It is undisputed that all treatment given by NEPT to Dalencourt was medically necessary to treat the injuries he sustained in the motor vehicle accident. Liberty Mutual paid a total of $3,730,68, leaving an unpaid balance of $734.32. In a letter to NEPT dated July 21, 2004, Liberty Mutual denied NEPT's request that it pay the remaining balance.

On June 17, 2008, NEPT filed an action against Liberty Mutual in the District Court, seeking payment of the outstanding balance pursuant to G.L. c. 90, § 34M, and damages pursuant to G.L. c. 93A and G.L. c. 93, § 12. The only disputed issue at the jury-waived trial was whether the amount charged for the treatment by NEPT was reasonable.

b. Prior proceedings. Prior to trial, Liberty Mutual filed a motion in limine to admit in evidence, pursuant to the hearsay exception contained in § 79B, statistical summaries prepared by Ingenix, Inc. (Ingenix) of billing patterns in NEPT's geographical area for similar medical procedures. Liberty Mutual intended to introduce the Ingenix data at trial to rebut the reasonableness of NEPT's medical service charges by showing that NEPT's charges exceeded the average amount billed by providers in the area.

In support of its motion, Liberty Mutual submitted both an affidavit of Susan Seare, a senior director of legal and government liaisons at Ingenix, and the trial transcript from a trial in the District Court, Davekos vs. Liberty Mutual Ins. Co., Docket No. 0518CV0156, a case involving a nearly identical dispute. At that trial, Carla Gee, a statistician employed by Ingenix, testified to what the Ingenix database is and how Ingenix produces its data. ² In sum, she testified that Ingenix is a wholly-ownedsubsidiary of United Health Group, the owner of United Health Care, one of the largest health insurers in the United States. Ingenix collects data from insurance companies throughout the country on the costs of various medical procedures for which they have been billed. This contribution of data by insurance companies is entirely voluntary and Ingenix relies on its clients to submit complete and accurate data. Ingenix then groups this compiled data according to geographical regions and uses a proprietary “relative value” and “conversion factor” approach to produce the resulting data concerning billing patterns in a given region. The database is thus “based on [Ingenix] methodologies and the data that [it] collect[s].” Gee acknowledged that Ingenix has never verified that the data produced as a result of its methodologies accurately correspond to what providers are actually charging. The judge in that case permitted the introduction of the Ingenix evidence, and Liberty Mutual prevailed at trial.

Here, in opposition to Liberty Mutual's motion, NEPT brought to the judge's attention the subsequent decision of the Appellate Division of the District Court, reversing the judgment in the Davekos trial on the ground that the trial judge erred in admitting the Ingenix evidence. See Michael Davekos, P.C. v.Liberty Mut. Ins. Co., 2008 Mass.App. Div. 32, 36, 2008 WL 241613 ( Davekos ). Although its focus was on the requirements for admissibility under the business records exception, G.L. c. 233, § 78, rather than § 79B, reliability of the information contained in the documents is one of those requirements. Id. at 34. Concluding that the “Ingenix statistical analyses are derivative only, and ... that the Ingenix raw data itself ... lacks the requisite indicia of reliability ³ to be admissible,” the Appellate Division determinedthat the Ingenix documents “do not fall within the broadened business records exception for scientific studies containing primarily factual data.” Id. at 35. NEPT also submitted, in opposition to Liberty Mutual's motion, news articles documenting legal settlements between Ingenix and both the State of New York and the American Medical Association regarding allegations that Ingenix databases reported artificially low charges to justify low insurance payments.⁴

After a hearing on June 18, 2009, a District Court judge denied Liberty Mutual's motion, citing Davekos, supra. The jury-waived trial took place before the same judge on June 24, 2010. Liberty Mutual renewed its motion to introduce Ingenix data,⁵ and the judge affirmed his earlier decision to exclude the data.⁶ Liberty Mutual presented no other evidence to refute the reasonableness of NEPT's charges. Accordingly, the judge found for NEPT on its G.L. c. 90, § 34M, claim for the outstanding balance of the medical charges.⁷

Liberty Mutual appealed to the Appellate Division, contending that the judge erred in excluding the Ingenix data. The Appellate Division affirmed the judgment, and Liberty Mutual appealed to the Appeals Court. The Appeals Court affirmed the judgment, 81 Mass.App.Ct. 1135, 2012 WL 1672475 (2012), and we granted Liberty Mutual's application for further appellate review.

2. Discussion. We review a trial judge's evidentiary decisions under an abuse of discretion standard. See Commonwealth v. Polk, 462 Mass. 23, 32, 965 N.E.2d 815 (2012). In applying that standard, “we look for decisions based on ‘whimsy, caprice, or arbitrary or idiosyncratic notions,’ ” and “do not disturb the judge's ruling ‘simply because [we] might have reached a different result; the standard of review is not substituted judgment.’ ” Cruz v. Commonwealth, 461 Mass. 664, 670, 963 N.E.2d 1172 (2012), quoting Bucchiere v. New England Tel. & Tel. Co., 396 Mass. 639, 641, 642, 488 N.E.2d 1 (1986).

General Laws c. 233, § 79B, provides: ⁸

“Statements of facts of general interest to persons engaged in an occupation contained in a list, register, periodical, book or other compilation, issued to the public, shall, in the discretion of the court, if the court finds that the compilation is published for the use of persons engaged in that occupation and commonly is used and relied upon by them, be admissible in civil cases as evidence of the truth of any fact so stated.”

A party seeking to admit evidence pursuant to § 79B has the burden of “at the minimum, persuading the trial judge to make the preliminary findings that the proposed exhibit is (1) issued to the public, (2) published for persons engaged in the applicable occupation, and (3) commonly used and relied on by such persons.” Mazzaro v. Paull, 372 Mass. 645, 652, 363 N.E.2d 509 (1977)( Mazzaro ).

Two primary rationales give rise to this exception to the hearsay rule. The first is that, as a practical matter, it would be inconvenient, if not impossible, to issue summonses for all of the authors and compilers of any given publication to testify at trial. See id. at 650, 363 N.E.2d 509, citing 6 J. Wigmore, Evidence § 1702 (Chadbourn rev. ed. 1976). The second is that “the trustworthiness of such lists is assured...