Supreme Court Issues Decision in Patchett v. Lee

I. Summary

The Indiana Supreme Court holds that evidence of write-offs and reductions to medical bills is admissible in personal injury cases regardless of whether the plaintiff’s bills were paid by a government program or a private insurance company.

II. Discussion of Opinion

• A. Patchett’s procedural history and underlying facts

On October 21, 2016, the Indiana Supreme Court issued its long-awaited decision in Patchett v. Lee, No. 29A04-1501-CT-00001, --- N.E.3d --- (Ind. 2016). The Supreme Court reversed the Court of Appeals’ opinion, and held that the holding announced by the Supreme Court in Stanley v. Walker, 906 N.E.2d 952 (Ind. 2009), “applies equally to reimbursements by government payers.” Patchett, Slip Op. p. 2.

In Patchett, the plaintiff, Ashley Lee, incurred medical bills as the result of an automobile accident that were initially billed at $87,706.36. Lee was enrolled in the Healthy Indiana Plan (HIP), a government-sponsored healthcare program, which paid $12,051.48 in full satisfaction of Lee’s medical bills pursuant to HIP’s reimbursement rates. Id. at 3. The trial court issued an order precluding Patchett from telling the jury what HIP paid for Lee’s medical care on the basis that the payments would confuse the jury and that the evidence was, therefore, inadmissible under Indiana Rule of Evidence 403. The Court of Appeals affirmed the trial court’s decision. The Supreme Court heard oral argument in June 2016, but did not grant transfer until it issued the October 21 opinion.

The measure of damage for medical care is the “reasonable value” of such care. Id. p. 4. A billing statement is evidence of reasonable value, and is, in fact, prima facie proof that the charges are reasonable. See id. p. 4-5. As the Supreme Court held in Stanley, if the parties dispute whether the billed amount is reasonable, a defendant may introduce evidence of discounted amounts. See id. at 5 (citing Stanley, 906 N.E.2d at 858). The Court of Appeals held that Stanley did not apply if the payor was a government-sponsored healthcare plan. The Supreme Court disagreed with the trial court and the Court of Appeals.

• Patchett’s holding

The plaintiff in Patchett argued that Stanley should not apply when a government-sponsored program pays a plaintiff’s bills, as the government sets its rates and does not negotiate with individual providers. The Supreme Court rejected the position that the identity of the payor should determine whether reduced amounts are admissible, explaining, “The salient fact is not whether (or to what extent) the reimbursement rates were negotiated. What counts is that the participating provider has agreed to accept the lower rates as payment in full.” Id. at 7 (quoting Stanley, 906 N.E.2d 859 (Boehm, J., concurring)). The Court also noted that healthcare providers are not obligated to participate in government-sponsored programs such as Medicaid, Medicare, or HIP, and that, by participating in the programs, the providers are agreeing to accept the rates identified by the programs. See id. at 7-8. The Court explained that “[b]ecause participating providers accept these reduced rates in full satisfaction of services rendered, we hold such rates are relevant, probative evidence of the reasonable value of medical services.” Id. at 8.

• Patchett and Stanley represent the “middle course”

After announcing its holding, the Court compared Indiana’s approach to that of other states, finding that “Indiana continues to chart a middle course.” Id. at 9. The Court surveyed national case law and noted that, after the Indiana Supreme Court decided Stanley, six states (West Virginia, Maryland, Colorado, Massachusetts, Minnesota, and Oregon) found that only the billed amount is admissible, two states (Delaware and Texas) found that only the paid amount is admissible, and two states (California and Kansas) followed the Indiana approach and found both amounts are admissible. The Supreme Court stated that the middle ground, allowing both amounts into evidence, “honors our deep, abiding faith in the jury system.” Id. The Court explained that its holding placed its “trust in juries to consider these metrics, along with any other relevant measures of the reasonable value of medical care, in determining what damages are warranted in a particular case to make the plaintiff whole.” Id.

• The Patchett/Stanley rule will almost always prevail but does not completely close the door for a court to exclude evidence of write-offs

The Court left the door open for the exclusion of evidence of discounted amounts under Rule of Evidence 403, which allows a trial court to exclude evidence if the evidence’s relevance is substantially outweighed by the danger of unfair prejudice, confusion, misleading the jury, delay, or the presentation of cumulative evidence. However, the Court stated that “the permissible circumstances for excluding such evidence under Rule 403 will be few and far between.”

• Any future challenge to Patchett/Stanley will likely come in the General Assembly

An interesting aspect of the Patchett decision is the Court’s repeated recognition that the parties did not ask the Court to reconsider Stanley. Justice Rucker, joined by Justice David, wrote a concurring opinion stating that, although he agreed with the result reached in Justice Slaughter’s opinion,[1] he continued to believe that Stanley was wrongly decided. However, given the lack of legislative action in response to Stanley, the fact that no party had asked the Court to reconsider Stanley, and his respect for stare decisis, Justice Rucker concurred in the result reached in Justice Slaughter’s majority opinion. Justice Rucker’s concurring opinion, signed on to by only Justice David, suggests that the current Supreme Court would affirm Stanley if questions as to its ongoing validity directly reached the Court, and implies that the only way for Indiana law to change on this issue at any time in the near future would be through the General Assembly.

[1]Patchett is the first opinion authored by the Supreme Court’s newest Justice.