Indiana Supreme Court Extends the Stanley Doctrine to State-Sponsored Medical Reimbursements

by Reminger Co., LPA

On October 21, 2016, the Indiana Supreme Court weighed-in on a closely watched case that drew much attention from the defense and plaintiff’s bar alike.  Approximately one (1) year ago, I reported that the Indiana Court of Appeals in Patchett v. Lee strayed from the seminal ruling of Stanley v. Walker, in which the Indiana Supreme Court held that a jury may consider two figures to determine an award for the “reasonable value of medical expenses” incurred by an injured plaintiff:  the total amount billed by a health care provider for services rendered, as well as the reduced billings secured by a plaintiff’s insurer and ultimately accepted by the health care provider as full satisfaction. 906 N.E.2d 852 (Ind. 2009).

These reduced billings - whether characterized as “discounted amounts,” “adjustments,” or “accepted charges” – had been considered by Indiana juries to determine their awards since Stanley was issued in 2009.  However in 2015, the Court of Appeals in Patchett held that where the payor was a government-funded insurance plan, reduced billings were not probative of the “reasonable value of medical expenses,” and therefore evidence of such reductions were inadmissible under Indiana’s Collateral Source Statute, Ind.Code § 34-44-1-2. The Court of Appeals reasoned that unlike reduced billings secured through an “arm’s length negotiation” between a health care provider and a private insurer, state-sponsored reductions were mandated by law and therefore do not reflect the “reasonable value” of a plaintiff’s medical expenses.

The Court of Appeals’ decision posed widespread implications to the defense and plaintiff’s bar alike.  With respect to the Healthy Indiana Plan (“HIP”) at issue in Patchett, thousands of primary medical providers participate in HIP, with thousands more specialty providers also participating.  Juries considering the amount of damages to award a state-insured plaintiff would be barred from considering medical billings that are substantially-reduced by HIP, and arguably other government-sponsored plans such as Medicare and Medicaid.

The Supreme Court rejected the Court of Appeals’ decision, holding that the rationale of Stanley applies equally to reimbursements by government payors.  “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.” Where the issue at trial is the reasonable value of medical services, “[t]hese opposing, complementary twin values – billed charges and accepted amounts – are the yin and yang of a personal-injury suit for damages.”  Moving forward, juries will now be instructed to consider these “twin values” when determining their award of medical expenses at trial.

The Supreme Court’s holding in Patchett v. Lee is a significant victory for the defense bar and provides much-needed clarity in valuing personal injury claims that have been plagued by uncertainty over the past year.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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