Gratuitously written off medical bills are recoverable as special damages under collateral source rule

Posted in: Collateral Source Rule by Steven Vartabedian on

As discussed in the August 23, 2011 blog, the California Supreme Court in Howell v. Hamilton Meats & Provisions, Inc. 92011) 52 Cal.4th 541, held that a plaintiff may not recover for reasonably incurred medical billings to the extent they are discounted under a plaintiff’s private insurer’s contract with the medical provider. In dicta, the court commented it recognized the gratuitous-services exception to the rule limiting recovery to plaintiff’s economic loss; that the exception’s policy is to provide an incentive to charitable aid. (Id. at p. 559.)

In Sanchez v. Strickland (filed November 4, 2011) 2011 DJDAR 16230, the Court of Appeal, Fifth Appellate District, was presented with the precise issue of recoverability of medical charges gratuitously written off by the medical provider. Plaintiff Hueso had $7,020 of his medical bills written off by Vibra Healthcare. Vibra had charged $113,989 for treatment, billed Medicare as primary payor from whom it received $66,704 in payment with a $40,265 contract allowance. The balance of $7,020 was billed to Medi-Cal, but denied payment because Vibra had no contract with Medi-Cal.

Relying upon the previously stated dicta from Howell, an appellate court case cited in Howell, Arambula v. Wells (1999) 72 Cal.App.4th 1006, and the Restatement of Second of Torts, the Sanchez court ruled that the amount written off gratuitously by the medical provider constitutes a benefit that may be recovered by the plaintiff under the collateral source rule.

I have no squabble with the correctness of this opinion and the resulting rule it states. What is curious is the way the law has developed leading to this rule. The cited Arambula case involved the recoverability of lost wages where plaintiff’s brother’s company gratuitously paid him his salary during the time he was unable to work. The line of cases on one’s ability to recover for a loss gratuitously mitigated goes back to Kimball v. Northern Electric Co. (1911) 159 Cal. 225. In Kimball, plaintiff was awarded the reasonable value of nursing services provided by his mother, a registered nurse. These two cases clearly involve charitable assistance provided by others having a personal relationship with a plaintiff. Consequently, the defendant should not as a matter of policy benefit from the beneficence of the gratuitous provider and should have to pay for the value provided to make the plaintiff whole.

By comparison, it would appear that Vibra Healthcare hardly had charitable intent when it wrote off what it likely considered an uncollectable debt. And it would also appear that its decision to write off the balance makes this plaintiff no more worthy of recovery than the plaintiff who benefits from a discount negotiated by his health insurer (to whom plaintiff has paid insurance premiums) with the medical provider who essentially writes of the balance of its customary and usual charges.

I suppose a new litigation battlefield has been created: plaintiffs categorizing a medical expense write-off as charity, and defendants presenting the write-off as a bargained-for discount. Somehow that seems backwards to me–that the bargained-for discount is logically entitled to recovery and the charitably written off amount is not. But whoever said the development of law is logical.

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