Stanley ruling extends to government medical reimbursements

October 21, 2016

The Indiana Supreme Court on Friday extended the admission of evidence of reduced health care payments in personal injury suits to include reimbursements from government payers. Meanwhile, two justices who concurred with the result wrote separately that they believed the underlying precedential case was wrongly decided.

Justices ruled in a closely watched case that drew amicus briefs from Defense Trial Counsel of Indiana, Indiana Trial Lawyers Association, Indiana Health Care Association, American Tort Reform Association and Indiana Legal Foundation. The ruling extends the effect of Stanley v. Walker, 906 N.E.2d 852 (Ind. 2009), that allowed evidence of discounted payments to health care providers made under private insurance.

In this case, Ashley N. Lee was injured in a car wreck caused when Mary Patchett drove negligently into oncoming traffic in 2012, according to the record. Lee suffered injuries and her medical bills totaled $87,706.36. But because Lee was enrolled in Healthy Indiana Plan, the health care provider accepted payment of $12,051, an 86 percent discount, as payment in full.

Lee moved to prevent the jury in her personal injury suit from hearing evidence of the reduced payment from HIP, and Hamilton Superior Judge Steven R. Nation granted the motion over Patchett’s objection. The Court of Appeals affirmed on interlocutory appeal, but justices Friday reversed.

“Today, we hold the rationale of Stanley v. Walker applies equally to reimbursements by government payers,” Justice Geoffrey Slaughter wrote in the majority opinion joined by Justice Mark Massa and Chief Justice Loretta Rush. “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.

“We reverse and remand with instructions to allow Patchett to introduce evidence of the reduced HIP rates accepted by Lee’s medical providers so long as Patchett can do so without referencing their source,” the court ruled in Mary K. Patchett v. Ashley N. Lee, 29S04-1610-CT-549.

Slaughter wrote that the trial court misinterpreted Stanley by construing it only to apply to discounts negotiated at arm’s length between a provider and an insurer. The majority also held that the court abused its discretion by excluding the reduced HIP reimbursements under Evidence Rule 403.

The main opinion notes Indiana continues to chart a middle ground in this area, and that since Stanley was decided, six states have precluded the admission of discounted reimbursements altogether, while two states have held that only the discounted amount paid for services be admitted. Two other states have followed Indiana’s path of allowing both into evidence.

“We continue to believe this middle ground not only represents the ‘fairest approach’ … but also honors our deep, abiding faith in the jury system,” Slaughter wrote.

Meanwhile, Justice Robert Rucker wrote a concurrence joined by Justice Steven David that aligned with the rationale of the outcome but expressed his continued disagreement with the ruling in Stanley.

“I write separately however because I continue to believe Stanley was wrongly decided,” he wrote, citing a dissent he joined written by retired Justice Brent Dickson. “More to the point, Indiana’s collateral source statute [I.C. § 34-44-1-2(c)] could not be any clearer. It precludes admission into evidence of, among other things, ‘payments made by: i) the state or the United States; or ii) any agency, instrumentality, or subdivision of the state or the United States ...' Payments made by HIP — a federal/state government program — unquestionably fall within this prohibition. A contrary reading endorsed by Stanley and reaffirmed today simply cannot be reconciled with the collateral source statute.”

But Rucker noted neither party nor multiple amici aligned with either side in this case asked the court to reconsider Stanley, and that the Legislature has not amended the collateral source statute in a way that disapproves of the court’s interpretation.



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