Discounted Amount Paid by a Third Party for an Uninsured Plaintiff's Medical Lien Is Not Admissible Without Evidence to Show it Represented the Reasonable Value for Treatment

On October 28, 2015, the California Court of Appeal for the Third District issued a decision, addressing the ongoing issue of admissibility of evidence of economic damages for an uninsured plaintiff's past medical expenses.  The Court of Appeal held that evidence of the discounted amount that a third-party lien holder paid to the plaintiff's medical providers for the lien from medical services rendered was properly withheld from presentation to the jury because the defendant failed to proffer evidence to show the discounted amount represented the reasonable value of plaintiff's medical treatment.  Pursuant to Evidence Code ยง 352, the Court of Appeal found that the third party lien-holder's payments are relevant because they have a tendency in reason to prove reasonable value.  But, without evidence that the payments indeed represented a reasonable value for treatment, the probative value was outweighed by the substantial danger of prejudice and confusion that would mislead the jury.
 
The underlying action arose out of a motor vehicle accident in which Plaintiff sustained injuries that required surgery.  Plaintiff was uninsured and entered into agreements with her medical providers to repay the full amount of her medical bills, secured by liens on her claims against Defendant.  MedFin, a third party, purchased the liens against Plaintiff from Plaintiff's medical providers.  The trial court denied Defendant's request to exclude evidence of the amount billed to Plaintiff by medical providers and introduce evidence of the amount paid by MedFin. Defendant appealed the trial court's rulings.  
 
Although the Court of Appeal acknowledged that there is some basis to argue that the reasonable value of the medical providers' service is what the physician or hospital agreed to be paid for it (the "market rate"), the Court concluded that MedFin was not purchasing medical services but rather the potential collectability of the debt.  The Court concluded that "the inquiry into reasonable value for the medical services provided to an uninsured plaintiff is not necessarily limited to the billed amounts where a defendant seeks to introduce evidence that a lesser payment has been made to the provider by a [third-party] such as MedFin.  In such cases, the inquiry requires some additional evidence showing a nexus between the amount paid by the [third-party] and the reasonable value of the medical services.
 
This decision affirms that defendants need to present evidence in support of the argument that plaintiff's medical bills, when not insured, are unreasonable or do not reflect the market rate of the medical services rendered.  It is apparent that trial courts are unwilling to allow the defendant to argue the reasonable or unreasonable cost of plaintiff's medical bills without contemporaneously supplying adequate admissible evidence in support of those arguments.