Patchett v. Lee

• Court: Indiana Supreme Court
• Writing for the Court: SLAUGHTER, Justice.
• Citation: Patchett v. Lee, 60 N.E.3d 1025 (Ind. 2016)
• Decision Date: 21 October 2016
• Docket Number: No. 29S04–1610–CT–549.,29S04–1610–CT–549.
• Parties: Mary K. PATCHETT, Appellant (Defendant Below), v. Ashley N. LEE, Appellee (Plaintiff Below).

60 N.E.3d 1025

Mary K. PATCHETT, Appellant (Defendant Below),

v.Ashley N. LEE, Appellee (Plaintiff Below).

No. 29S04–1610–CT–549.

Supreme Court of Indiana.

Oct. 21, 2016.

Karl Mulvaney, Jessica Whelan, Bingham Greenebaum Doll LLP, Robert F. Ahlgrim, Jr., State Farm Mutual Automobile, Insurance Company, Indianapolis, IN, Attorneys for Appellant.

Lucy R. Dollens, Edward L. Holloran, Grant R. Krevda, Quarles & Brady LLP, Indianapolis, IN, Attorneys for Amicus Curiae Indiana Health Care Association.

Jon M. Pinnick, Angela J. Della Rocco, Michael F. Mullen, Schultz & Pogue, LLP, Donald B. Kite, Sr., Of Counsel, Wuertz Law Office, LLC, Indianapolis, IN, Attorneys for Amicus Curiae Defense Trial Counsel of Indiana.

Bradley J. Buchheit, Tucker Hester Baker & Krebs, LLC, Indianapolis, IN, Attorney for Amicus Curiae American Tort Reform Association.

Mary Nold Larimore, Jenny R. Buchheit, Derek R. Molter, Ice Miller LLP, Indianapolis, IN, Attorneys for Amicus Curiae Indiana Legal Foundation.

Daniel G. Foote, Tabor Law Firm, LLP, Indianapolis, IN, Attorneys for Appellee.

Joseph N. Williams, Riley Williams & Piatt, LLC, Indianapolis, IN, Attorneys for Amicus Curiae Indiana Trial Lawyer Association.

On Petition to Transfer from the Indiana Court of Appeals, No. 29A04–1501–CT–00001

SLAUGHTER, Justice.

In Stanley v. Walker, 906 N.E.2d 852 (Ind.2009), we interpreted Indiana's collateral-source statute to permit a defendant in a personal-injury suit to introduce discounted reimbursements negotiated between the plaintiff's medical providers and his private health insurer, so long as insurance is not referenced. Today, we hold the rationale of Stanley v. Walker applies equally to reimbursements by government payers. The animating principle in both cases is that the medical provider has agreed to accept the reduced reimbursement as full payment for services rendered. The reduced amount is thus a probative, relevant measure of the reasonable value of the plaintiff's medical care that the factfinder should consider.

Factual and Procedural Background

Mary Patchett admits she drove her car negligently into oncoming traffic in 2012, striking Ashley Lee's vehicle and causing Lee injuries that required medical treatment.

Lee sued and sought damages that would “fully and fairly compensate her”. Patchett admitted she was liable for the accident and generally agreed Lee received necessary medical treatment for her resulting injuries. But Patchett contested the reasonable value of Lee's medical care, so the parties prepared for a trial on damages.

The parties agreed that Indiana Evidence Rule 413 allowed Lee to introduce her accident-related medical bills totaling $87,706.36 as evidence those charges were reasonable. The parties disagreed, however, whether Patchett could introduce evidence that Lee's providers accepted a reduced amount as payment in full. Specifically, because Lee was enrolled in the Healthy Indiana Plan (HIP), a government-sponsored healthcare program, her providers, as HIP participants, accepted HIP's prevailing reimbursement rates of $12,051.48 in full satisfaction of those charges—an 86–percent discount from the amounts billed.

Lee moved before trial to prevent the jury from hearing the reduced HIP rates. Patchett objected, but the trial court granted Lee's motion. In addition to finding that the HIP payments are subject to the collateral-source statute and not permitted by Stanley, the court excluded the HIP amounts under Evidence Rule 403, because it found HIP's reduced rates would only confuse the jury. The court certified its order for interlocutory appeal, observing that “whether [Patchett] may prove the reasonable value of [Lee's] medical expenses by introducing evidence of the discounted payments made to her medical providers through HIP is of critical importance to the jury's determination of damages.”

The Court of Appeals accepted jurisdiction and affirmed. Patchett v. Lee, 46 N.E.3d 476 (Ind.Ct.App.2015). The court concluded Stanley was limited to “evidence of ‘discounted amounts' arrived at as the result of negotiation between the provider and an insurer”. Id. at 487. Because the reduced HIP amounts “were not calculated based upon market negotiation”, the court held they are “not probative of reasonable value” and were properly excluded. Id. Patchett then sought transfer, arguing the courts below erred in finding Stanley v. Walker inapplicable to HIP discounts. We grant transfer, thus vacating the Court of Appeals opinion, and reverse.

Standard of Review

We generally review a trial court's decision to admit or exclude evidence for an abuse of discretion. State Farm Mut. Auto. Ins. Co. v. Earl, 33 N.E.3d 337, 340 (Ind.2015). When a trial court's evidentiary ruling depends on the interpretation of a statute, case law, or a rule of evidence and not an “application [of those] to any particular set of facts”, it presents a legal question we review de novo. See Cook v. Whitsell–Sherman, 796 N.E.2d 271, 277 (Ind.2003) (citing Stahl v. State, 686 N.E.2d 89, 91 (Ind.1997) ). See also Allen v. Allen, 54 N.E.3d 344, 346 (Ind.2016). Here we decide, first, whether the trial court properly interpreted and applied Stanley v. Walker; and, second, whether the court abused its discretion by excluding the reduced HIP rates under Evidence Rule 403.

Discussion and Decision

Indiana tort law seeks to make injured parties whole. “Compensatory tort damages ‘are designed to place [plaintiffs] in a position substantially equivalent in a pecuniary way to that which [they] would have occupied had no tort been committed.’ ” Nichols v. Minnick, 885 N.E.2d 1, 4 (Ind.2008) (quoting Restatement (Second) of Torts § 903 cmt. a (Am. Law Inst.1979)). The compensatory tort damages at issue here are Lee's “special damages” —the tangible, measurable medical-services losses she sustained due to Patchett's negligence. The proper measure of such losses, as we reaffirmed in Stanley, is the “reasonable value” of necessary medical services. 906 N.E.2d at 858. Reasonable value is not measured simply by what the plaintiff spends out of pocket for such services. Even if the services are complimentary, the plaintiff is entitled to recoup their reasonable value. “Whenever it is proper in such a case to prove the services of a physician or surgeon, the fair value of such services is the legal rule, even though they might have been rendered gratuitously.” City of Indianapolis v. Gaston, 58 Ind. 224, 227 (1877).

Reasonable value is the touchstone and may be proved a number of ways. One is to show the amounts billed for healthcare services. By rule, the billing statement is admissible to establish the charges are reasonable. “Statements of charges for medical, hospital or other health care expenses for diagnosis or treatment occasioned by an injury are admissible into evidence. Such statements are prima facie evidence that the charges are reasonable.” Ind. Evidence Rule 413. This approach can be dispositive if the parties agree the medical charges are reasonable. As we explained in Cook, “[b]y permitting medical bills to serve as prima facie proof that the expenses are reasonable, the rule eliminates the need for testimony on that often uncontested issue.” 796 N.E.2d at 277. But if the parties contest the reasonableness of the charges, “the method outlined in Rule 413 is not the end of the story.” Stanley, 906 N.E.2d at 856.

This brings us to our decision in Stanley v. Walker and its discussion of whether an alternative metric—specifically, the reduced amount that represents payment in full to a medical provider for services rendered—also is admissible to prove the reasonable value of those services, consistent with the collateral-source statute. The common-law collateral-source rule barred evidence of compensation plaintiffs received from collateral (non-party) sources. Id. at 854. Indiana's subsequent collateral-source statute abrogated our common-law rule and made evidence of collateral-source payments admissible, “except for specified exceptions.” Id. at 855. In Stanley, we held “[t]he collateral source statute does not bar evidence of discounted amounts in order to determine the reasonable value of medical services”, if insurance is not referenced. Id. at 858. Today, we hold, first, that the trial court misinterpreted Stanley by construing it to apply only to discounts negotiated at arm's length between a medical provider and an insurance company; and, second, that the court abused its discretion by excluding the reduced HIP reimbursements under Evidence Rule 403.

I. Under Stanley v. Walker, reduced reimbursements accepted by healthcare providers are relevant, probative evidence of the reasonable value of medical services.

Indiana's collateral-source statute remains essentially unchanged since our 2009 decision in Stanley v. Walker. In relevant part, the statute provides:

Sec. 2. In a personal injury or wrongful death action, the court shall allow the admission into evidence of:

(1) Proof of collateral source payments other than:

(A) payments of life insurance or other death benefits;

(B) insurance benefits that the plaintiff or members of the plaintiff's family have paid for directly; or

(C) payments made by:

(i) the state or the United States; or(ii) any agency, instrumentality, or subdivision of the state or the United States;

that have been made before trial to a plaintiff as compensation for the loss or injury for which the action is brought.

Ind.Code § 34–44–1–2(1) (2014 Repl.).

Lee argues these statutory provisions (particularly (B) and (C)(ii)) operate to exclude evidence of reduced HIP rates Patchett may seek to introduce. But in Stanley, we held that such reduced rates—whether characterized as “discounted amounts”, “adjustments”, or “accepted charges”—are admissible under the statute if they can be introduced without referencing their source. 906 N.E.2d at 858. Concluding that “it [is] difficult to determine whether the amount paid, the amount billed, or an amount in between...