An increasingly frequent trend in personal injury cases is plaintiffs are having their medical treatment “financed” by third parties. The typical
An increasingly frequent trend in personal injury cases is plaintiffs are having their medical treatment “financed” by third parties. The typical scenario is as follows: a person, who is neither Medicare/Medicaid eligible nor insured, is injured in an accident necessitating medical treatment. In the absence of any available insurance coverage or personal financial capability, the injured person, concerned about paying for treatment out of pocket, is referred to a finance company that has a network of approved physicians. The finance company has pre-negotiated rates with these providers to pay a reduced rate for a variety of medical treatments using medical databases and Current Procedural Terminology (“CPT”) codes.
Before referring the injured party to one of these providers, however, the finance company obtains information about the accident giving rise to the person’s injuries. It then determines whether the at-fault party is covered by liability insurance, and if so, identifies the amount of limits in the policy. At the discretion of the finance company, it decides whether to enter into a contractual agreement with the, at this point, claimant/plaintiff. The essence of this agreement is the finance company will agree to pay for the claimant/plaintiff’s medical treatment on the condition that the claimant/plaintiff assigns the finance company a priority right to recover money obtained through a future settlement or judgment against the at-fault party. Quite simply, this arrangement is no different than investing in litigation.
The risk to the fund company is that, if it pays for the medical treatment, it may not get reimbursed if the case does not settle or the at-fault party obtains a defense verdict. On the other hand, the reward to the fund company is that it has a priority right over the plaintiff to collect proceeds from a settlement or judgment. The fund company’s “profit” derives from the margin between the suggested cost of treatment as proscribed by the CPT code (i.e. what the plaintiff will allege are his/her special damages at trial) and the actual payment the fund company made to the provider, which is significantly less than what is represented on the provider’s bill.
By way of example only, if the cost of a medical procedure is $100,000 using a CPT code and medical database, the fund company likely has an existing agreement with the provider to pay only, say, $40,000 for that procedure. At trial, however, the plaintiff will tender as evidence a bill for the procedure he or she underwent, which purports to show that the procedure in fact cost $100,000. Assuming the jury find in favor of the plaintiff in an amount that exceeds $100,000, the fund company, based on the contract in place between it and plaintiff, typically has the right to recover up to the amount of the “billed” surgery (i.e. $100,000) even though the fund company only paid $40,000 for the treatment, and the jury is none the wiser.1
These reduced payments are common place with insurance companies, and as such, litigation finance companies attempt to prohibit the discoverability and/or admissibility of this information using the “collateral source rule.” Under Georgia law, a collateral source is a third party that has voluntarily provided a benefit through a bargained-for agreement, such as insurance or a gratuity. See Olariu v. Marrero, 248 Ga. App. 824, 826 (2001) (emphasis added). The collateral source rule generally prevents inclusion of evidence that a plaintiff received “gratuitous medical care, continued salary or wage payments, proceeds from insurance policies, or welfare and pension benefits. . ..” Bennett v, Haley, 132 Ga. App, 512, 523 (1974) (quoting 22 Am. Jur. 2d Damages § 206) (internal quotations omitted).
The purpose of the collateral source rule is to prevent a tortfeasor from unjustly benefiting from a reduction in the plaintiffs damages “whether [from] insurance companies or beneficent boss or helpful relatives.” Id. at 22. Consequently, Georgia courts do not allow a defendant to introduce evidence to reduce damages based solely on the fact that a plaintiff received a benefit from one these traditional sources.
Arguably though, these fund companies do not fall within any of the categories Georgia courts have recognized as a collateral source, such as insurance coverage, services furnished without charge, compensation for time not actually worked, Social Security or pension benefits, workers’ compensation benefits or Medicaid/Medicare benefits. See Cincinnati v. Hilley, 121 Ga. App. 196,201 (1970); Bennett v. Haley, 132 Ga. App. 512, 525 (1974); Denton v. Conway Express, Inc., 261 Ga. 41,42-43 (1991); Georgia Power Co. v. Flagan, 261 Ga. 41,43 (1991); Warren v, Ballard, 266 Ga. 408,409-10 (1996); Worthy v. Kendall, 222 Ga. App. 324 (1996).
Rather, these fund companies are a real party in interest because they have been assigned a priority right to most, if not all, of a plaintiff’s special damages. See, e.g., Abu-Ghazaleh v. Chaul, 36 So. 3d 691, 694 (Fla. Dist. Ct. App. 2009) (finding that a non-insurer, third party who paid for litigation costs “clearly [has] risen to level of a party”) The collateral source is inapplicable because, unlike all other recognized collateral sources in this state, these fund companies do not provide any benefit to plaintiffs. Unlike an insurance company—which receives premiums from its insureds, thereby providing a contractual right to the insured to file a claim with the insurance company to cover medical expenses— these fund companies do not receive premium payments from plaintiffs. Instead, the fund company has the discretion to decide whether or not it will invest in a case, at which point, treatment is funded on the condition that the plaintiff will reimburse the finance company not only for any amounts that it paid to the providers, but for an amount that could far exceed what the fund company paid. Indeed, the fund company’s reimbursement takes priority over a plaintiff’s ability to collect from his/her own settlement or judgment, which theoretically means the finance company has the ability to reduce that value to zero. Quite simply, these fund companies do not bestow a benefit to plaintiffs, and if anything, they burden them.
Evidence that a fund company has financed a plaintiff’s treatment is also relevant to causation defenses, as well as to bias, credibility, and impeachment evidence. See O.C.G.A. §§ 24-6-620; 24-6-622 (“The state of a witness’s feelings towards the parties and the witness’s relationship to the parties may always be proved for the consideration of the jury.”); see also Waits v. Hardy, 214 Ga. 41, 44 (1958) (noting that arguing to a jury “that the plaintiff in a personal injury suit did not go to a doctor until his lawyer sent him does not charge the lawyer with wrongful conduct”).
Just like fund companies, the treating physicians who are referred patients (i.e. plaintiffs) by the fund companies, likewise have a vested interest in causally relating accidents to a patient’s alleged injuries because the fund company is referral source and revenue stream to these providers. In other words, the providers do not want to bite the proverbial hand that feeds them, thus incentivizing providers to both causally relate an accident and recommend more aggressive (i.e. costly) treatment.
The viability of these fund companies and whether this evidence is admissible at trial have yet to be addressed by Georgia’s appellate courts. Until then, the decision is left to the discretion of trial judges. For the above reasons, however, a fund company’s investment in a case should go to the weight a jury gives that evidence and not its admissibility.
 All of these numbers are not based on any actual case and are completely made up.