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Feb 2014: Dodd v. Cruz: Discovery allowed to determine amount paid by factoring company for medical liens
By Robert M. Tessier

This week the Second Appellate District, Division Three handed down a published decision in the case of Dodd v. Cruz, B27493 (filed 2/5/14). The case tackles the issue of whether a defendant can discover evidence regarding a factor's contractual relationship with a health care provider treating an injured plaintiff in a personal injury case, including documents disclosing what the factor paid for the medical lien.

The court held that in this case, because, under Howell, "a plaintiff may recover as economic damages no more than the reasonable value of the medical services rendered and is not entitled to recover the reasonable value if his or her actual loss was less, the trial court abused its discretion in not allowing the sought after evidence from the factoring company in discovery. The decision also quoted the recentCorenbaum decision (215 Cal. App. 4th 1308, 1318, 1330) for the proposition that "the amount a health care provider bills a plaintiff for its medical services is not relevant to the amount of the plaintiff's economic damages for past medical services."

Thus, going forward, in cases where a factoring company has purchased all or part of a medical providers bills for medical services rendered to injured plaintiffs in personal injury cases, one would expect discovery to ensue by way of subpoena to the factoring company regarding, among other things, the amount it paid to the providers for the medical liens. This decision sets the stage for a later battle concerning the interplay between the rationale of Howell and Corenbaum on the one hand, and the pre-Howell case of Katiuzhinksy v. Perry (2007) 152 Cal. App. 4th 1288 on the other, when it comes to what evidence is admissible at trial on the issue and ultimately recoverable by the plaintiff by way of a judgement.

In Katiuzhinksy, a factoring company purchased the medical liens from plaintiff's providers. At trial the testimony was that the plaintiff remained contractually obligated to pay the full amount of the liens, even though the providers accepted a discounted amount for the medical services rendered. The court held that the full amount of the lien (billed amount) could be admitted into evidence and recovered by the injured plaintiff under these circumstances.

While in one footnote, the Dodd court expressly states that it expresses no opinion whether the amount the doctor accepts by agreement with the factoring company as full payment is relevant and admissible at trial, in a later footnote, the Dodd opinion "disagree[s] with Katiuzhinsky to the extent it held that the amount the plaintiffs' health care providers 'billed' or 'charged' was admissible to prove the reasonable value of the medical services provided." Thus, the future battle is foreshadowed in the footnotes of this decision.

Practitioners in personal injury cases involving medical services provided on a lien basis, and factoring companies whose business involves these issues, must pay close attention to this decision and its implications. In the short term, we will see more subpoenas to the factoring company. Before issuing or responding to such subpoenas, it would be wise to review the Dodd decision. In the long term, we will see a challenge mounted to the reasoning of the Katiuzhinsky court at trial in an effort to reduce the amount a jury may award for past medical bills to the amount the factoring company paid for the medical liens. The courts in Howell and Corenbaum did not specifically address the situation faced by the court in Katiuzhinsky. Eventually, this issue will make its way to the Supreme Court. Barring some major sea change in the way that court has framed and analyzed the issue, there could be more changes coming concerning this issue and how civil trial court deal with this issue consistent with the Howell decision.

Regardless of your personal opinion regarding factoring companies and the providing of medical services to injured plaintiffs on a lien basis, one thing is certain: there are interesting times ahead for the personal injury practitioners regarding this aspect of their case.


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