Last year we examined plaintiffs in personal injury cases having their medical treatment funded by litigation finance companies and whether such arrangements can be excluded from evidence. As a brief recap, litigation finance companies typically become involved in lawsuits when the plaintiff is neither Medicare/Medicaid eligible nor insured. In the absence of any available insurance coverage or wherewithal to pay for treatment out of pocket, the injured person can utilize a third party finance company to fund the treatment.
Last year we examined plaintiffs in personal injury cases having their medical treatment funded by litigation finance companies and whether such arrangements can be excluded from evidence. As a brief recap, litigation finance companies typically become involved in lawsuits when the plaintiff is neither Medicare/Medicaid eligible nor insured. In the absence of any available insurance coverage or wherewithal to pay for treatment out of pocket, the injured person can utilize a third party finance company to fund the treatment.
These finance companies have pre-negotiated rates with certain providers to pay a reduced rate for a variety of medical treatments. The finance companies derive their profit from the margin between what the plaintiff alleges are his/her special damages at trial (i.e. the billed amount) and the actual payment the funding company made to the provider (i.e. the pre-negotiated amount), which is significantly less than what is represented on the provider’s bill. The method in which finance companies fund treatment is similar in theory to how insurance companies pay providers. Thus, finance companies operate under the guise that they are a “collateral source”, and as such, argue that their involvement in funding a lawsuit should be excluded from evidence at trial.
Since last year’s article, Georgia’s appellate courts have still not been confronted with the issue of whether or not finance companies are a collateral source. The Georgia Supreme Court, however, has impliedly recognized since last year’s article that documents related to their involvement in a lawsuit is discoverable.
One of the primary Court of Appeals’ decisions litigation finance companies have historically relied upon in challenging the discoverability of their involvement in litigation is Med. Ctr., Inc. v. Bowden, 327 Ga. App. 714, 761 S.E.2d 116 (2014).
In Bowden, the plaintiff was injured in a car wreck and received treatment at The Medical Center (“TMC”). In a subsequent lawsuit, the plaintiff sought to invalidate a lien TMC had filed, claiming the charges were excessive. During discovery, the plaintiff requested documents from TMC including the amounts the hospital actually charged patients for care similar to what the plaintiff had received. Specifically, the plaintiff requested the following: 1.) medical records and bills related to [the plaintiff’s] treatment and the hospital lien; 2.) TMC’s pricing agreements with other providers; 3.) itemized charges that the plaintiff would have incurred if she were covered by certain insurers or government programs; 4.) TMC’s total gross revenues from services billed at varying rates; 5.) information related to which patients paid certain percentages of rates; and 6.) how many uninsured patients TMC had treated and how many of those patients TMC had billed for their treatment. TMC objected to producing the above information on the grounds that it was not discoverable. The trial court disagreed, found the information was discoverable and granted the plaintiff’s Motion to Compel.
TMC filed a petition for immediate review to the Court of Appeals (the decision on which finance companies have previously relied upon), and the appellate court found that the trial court abused its discretion in granting the Motion to Compel.
The Georgia Supreme Court subsequently granted certiorari, and on June 15, 2015, reversed the Court of Appeals’ decision. See Bowden v. The Med. Ctr., Inc., 297 Ga. 285, 773 S.E.2d 692 (2015). In its reversal, the Georgia Supreme Court began its analysis by observing that, “in the discovery context, courts should and ordinarily do interpret ‘relevant’ very broadly to mean matter that is relevant to anything that is or may become an issue in the litigation.” Id. at 291 (citations omitted). The Supreme Court further “cautioned trial courts that in exercising their discretion to determine the permissible scope of discovery, they should keep in mind that the discovery procedure is to be construed liberally in favor of supplying a party with the fact.” Id. (quotations and citations omitted).
With that framework in mind, the Supreme Court concluded that the information sought from TMC related to the actual amounts that it billed patients was not “entirely irrelevant—particularly in the broad discovery sense—to the reasonableness of the charges for [the plaintiff’s] care.” Id. at 292 (emphasis added). In the context of the discovery sought by the plaintiff in Bowden, the court went on to note that
[t]he fair and reasonable value of goods and services is often determined by considering what similar buyers and sellers have paid and received for the same product in the same market, with adjustments upward or downward made to account for pertinent differences, and we see no reason why the same cannot be true of health care. Id. (emphasis added)
Using a hypothetical scenario, the Supreme Court provided the following reasoning:
Suppose that, as Bowden argued at the motion to compel hearing, 99% of TMC’s patients who received the same care as she did during the same time period had insurance and therefore paid the same much lower sum for their care—say, just $1,000. Under that scenario, a fairminded juror might conclude that the “reasonable charge” for that care was much closer to $1,000 than to the $21,409.59 that TMC billed Bowden. Bowden is entitled to determine if evidence exists to support such an argument. Id. (emphasis added)
Furthermore, the Supreme Court squarely addressed an argument often put forth by litigation finance companies in personal injury cases challenging the discoverability of their involvement in lawsuits: withholding documents related to their investment can be cured because the “[parties are] free to present evidence – whether through an expert, or from other medical providers or consumers – to rebut [a witness’s claim] that its charge was reasonable given the market rate for medical services.” (citing Bowden, 327 Ga. App. at 717)]. In rejecting this rationale, the Supreme Court noted that this argument
seems to acknowledge (correctly) that how much other patients are charged for the same services in the same market is relevant to the issue of reasonableness. If that is so, then more directly applicable information of that type—how much TMC itself charged other patients for the same services—would be even more relevant. The availability of one form of proof does not make other forms of proof irrelevant under. Id. at 8 (emphasis added).
Indeed, the Supreme Court went on to hold that “the general proposition that hospital charges are automatically ‘reasonable’ whenever the patient (or someone authorized to act on her behalf) has signed a contract agreeing to pay those charges is incorrect, because the contract price for goods and services does not necessarily equal their reasonable value.” Id. at 7 (emphasis added). In other words, simply because a plaintiff’s medical providers charged a certain amount for his/her treatment does not necessarily mean those charges were reasonable.
These are precisely the same competing issues outlined in last year’s article, which was admittedly indecisive because of the little guidance from the courts at that time. The Supreme Court’s decision in Bowden, however, seems to tip the scales in favor of discoverability.
Of course, finance companies’ likely response to Bowden is that, while the decision arguably addresses the issue of discoverability, it is silent on whether evidence of funding a plaintiff’s treatment is actually admissible at trial. A federal judge in the Northern District Court answered that question in the affirmative the month after Bowden was decided.
In Houston v. Publix Supermarkets, 1:13-cv-00206-TWT (N.D. Ga July 29, 2015), this identical issue was presented to a federal judge. The defendant in Houston sought in discovery documents related to a litigation finance company’s involvement in the plaintiff’s medical treatment. The judge denied the finance company’s Motion to Quash and ordered that they produce the requested information. The case later went to trial and the finance company filed a Motion in Limine to exclude any evidence of their relationship with the plaintiff’s doctors. The finance company’s primary basis in moving to exclude evidence related to their funding of the plaintiff’s medical treatment was to rely upon the collateral source doctrine. Similar to the rationale used by the Supreme Court in Bowden, the defendant in Houston argued that the information is admissible “not for the purpose of mitigating the damages because of a third-party payment, but rather for the purpose of attacking the credibility of causation testimony given by the plaintiff’s expert witnesses and for showing the reasonable value of medical services.”
In agreeing with the defense and denying the finance company’s Motion in Limine, the District Court determined that “[t]estimony about [the finance company’s] relationship with those doctors [the plaintiff treated with] is admissible for the purpose of attacking the credibility of their opinions.” Citing the Bowden decision, the district judge went on to find that the evidence of the relationship between [the funding company] and the plaintiff’s physicians is relevant for the jury to consider in determining the reasonable value of medical services provided.”
In fact, the federal judge expressly held that the finance company “is not in the nature of a traditional collateral source.” Making a similar argument to the one raised in last year’s article, the federal judge went on to note that, “[u]nlike an insurance company, to which the plaintiff would pay premiums, [the finance company] serves as an investor in the lawsuit and receives no payment from the plaintiff until after the lawsuit.” Consequently, the court ultimately allowed the jury to hear evidence of the finance company’s involvement in the plaintiff’s treatment “to attack the credibility of the plaintiff’s experts and the reasonable value of medical services.”
Nevertheless, uncertainty remains in state courts because Houston is merely persuasive authority. Perhaps another year from now the courts will provide further clarity on this issue. Until then, an argument could certainly be made that a litigation finance company’s funding of a lawsuit is now discoverable based on Bowden and even admissible at trial based on the reasoning provided in Houston.