Reasonableness and Necessity of Medical Specials After the Recent Amendment to Wis. Stat. § 908.03

WDC Journal Edition: Winter 2010
By: Nathan J. Bayer, Crivello Carlson, S.C.

Over the last two years, Wisconsin’s state budget has contained proposals that were, to put it mildly, alarming to liability insurance carriers and those of us who work in insurance defense. Some of the more radical proposals failed. For example, a proposal to make any party with equal or greater fault than the plaintiff jointly and severally liable for all damages was defeated. A similar proposal that would have made a defendant who was less at fault than the plaintiff still liable, as long as the plaintiff was less at fault than all the defendants collectively, likewise failed. Finally, a proposal that would have required courts to inform the jury of how their findings affected responsibility for damages did not pass.

However, other provisions did slip through. For example, the Omnibus Insurance Statute, Wis. Stat. § 632.32, was amended to prohibit anti-stacking clauses with respect to underinsured and uninsured coverage, altering what constitutes “underinsured” status. The statute now allows coverage to potentially be tripled, as the coverage on up to three autos owned by the policy holder may be “stacked.”

This article focuses on another change that came wrapped in an amendment to the hearsay statute. Specifically, Wis. Stat. § 908.03 was amended to include a presumption that invoices demonstrating care provided to a plaintiff are “presumed to state the reasonable value of the health care services provided and the health care services provided are presumed to be reasonable and necessary to the care of the patient.”[i] While this provision has been generally written about as nothing more than a codification of recent case law, I believe it goes further and affects the way defense counsel should approach the question of “necessity.” I also believe that an opportunity to contest “reasonableness” still exists, and given the right set of facts, reasonableness should be challenged.

The pertinent portion of the amended hearsay statute now reads as follows:

(bm) Presumption. Billing statements or invoices that are patient health care records are presumed to state the reasonable value of the health care services provided and the health care services provided are presumed to be reasonable and necessary to the care of the patient. Any party attempting to rebut the presumption of the reasonable value of the health care services provided may not present evidence of payments made or benefits conferred by collateral sources.

Wis. Stat. § 908.03(6m)(bm).

At first glance, this provision seems to be a codification of the supreme court’s holding in Leitinger v. DBart.[ii] In Leitinger, the parties disputed the reasonable value of plaintiff Joseph Leitinger’s medical treatment. The healthcare provider billed Leitinger $154,818.51 for treatment rendered, but as a result of negotiated provider discounts, the plaintiff’s healthcare provider accepted $111,394.73 from his health insurance company. Thus, there was a significant difference between the amount billed and the amount paid by Leitinger’s health insurer, totaling $43,424.78.

In reality, the “amounts billed” for a particular service have no relation to what the healthcare provider actually accepts for payment nearly 100% of the time. The only patients that are actually expected to pay the full amount billed are those that are uninsured, assuming a particular provider actually provides treatment to uninsured patients at all. Thus, the amount ultimately paid actually represents the amount that the healthcare provider routinely accepts as payment for a particular service.

Upon examination, the circuit court ruling overturned in Leitinger hardly seems controversial or radical. The court merely ruled that the amount accepted by the provider was one piece of admissible evidence that a jury could consider in attempting to ascertain the reasonable value for a particular medical service. The court did not rule definitively that the amount paid constituted the reasonable value of the medical services rendered. That was still left to the jury. The judge noted in his decision:

So, the reasonable value of the services provided to be determined, given that the reasonable value of the services has to be determined by the jury, seems to me that one thing they can consider was in fact what was paid and accepted by the medical provider as a potential, not binding, not final, but a potential measure of the reasonable value of the services.[iii]

When the circuit court’s decision is viewed in its proper context, the language seems rather benign. However, the court of appeals and Wisconsin Supreme Court disagreed. The supreme court framed the issue as "whether, in light of the Collateral Source rule, evidence of the amount actually paid by a plaintiff’s health insurance company for the plaintiff’s medical treatment is admissible in a personal injury action for the purpose of establishing the reasonable value of the medical treatment rendered."[iv]

This framing of the issue was essentially outcome determinative, as it presumed that the health insurer that negotiated a price for a service was somehow a “collateral source.” Thus, it is not surprising that the court held "that the collateral source rule prohibits parties in a personal injury action from introducing evidence of the amount actually paid by the injured person’s health insurance company, a collateral source, for medical treatment rendered to prove the reasonable value of the medical treatment."[v]

This is an example of taking a relatively straightforward legal concept and stretching it beyond its original intent. The collateral source rule is a concept that most non-lawyers could easily grasp and one that most people would find fair and just. If a philanthropic individual or organization pays for medical care or treatment of a plaintiff, a tortfeasor should not be let off the hook and be able to deduct those payments from the damages he or she owes. If you took a poll on the street, however, it seems unlikely that most anyone would call the difference between the amount billed by a doctor, and the price actually paid for a particular medical service negotiated in a free market between an insurer and a doctor, a “collateral source.” Of course, that was the case even before Leitinger. The difference now is that the amount accepted by the health care provider cannot be offered as evidence at all, and this has been codified.

But Wis. Stat. § 908.03(6m)(bm) goes beyond Leitinger to create a presumption that was not part of the holding in that case. In addition to stating that “billing statements or invoices” are “presumed to be reasonable,” the “health care services provided” are also presumed to be “necessary to the care of the patient.” As Leitinger only addresses reasonableness, where did the “necessary” language come from? Leitinger does not hold that, if a bill or invoice exists demonstrating that a plaintiff received treatment, that treatment was “medically necessary.” Necessity is a distinct question from reasonableness.

Under the new Wis. Stat. § 908.03(6m)(bm), how does one counter the reasonableness and necessity of medical bills? Is it even possible to argue “reasonableness” of bills anymore? With the right set of facts, and the appropriate experts, both reasonableness and necessity can be challenged. Approaches to the problem are discussed below.

We have all encountered cases involving excessive chiropractic care, instances where there is extensive pain management care provided by a clinic that the plaintiff was sent to by his or her attorney, and other instances of “overtreatment.” In some cases, payment by chiropractors is held in abeyance until resolution of a lawsuit. But now, instead of placing the burden on the plaintiff to establish that such care was medically necessary, the burden has essentially shifted to the defense to disprove necessity. Given the presumption under the new Wis. Stat. § 908.03(6m)(bm), without an expert, defense counsel might be precluded from arguing the plaintiff has failed to meet the burden on “necessity.”

However, you should not underestimate the concessions that can potentially be gained from the plaintiff’s very own physician. To start with, when reviewing medical records, look for the establishment of new patient/provider relationships that began after the plaintiff started the lawsuit or after he or she consulted a lawyer. Sometimes, the referral was made by plaintiff’s counsel. Ask the primary care physician that was treating the plaintiff pre-accident if he or she knows who recommended this treatment, or who made the referral. While many treating physicians are uncomfortable being deposed and stay non-committal on whether certain treatment is related to a particular accident, they generally do not want to feel like they are being used as pawns in a lawsuit. I have had cases where treating physicians told me that additional treatments had been useless because the plaintiff had already reached a healing plateau.

The natural tension between physicians and chiropractors can also sometimes lead to valuable testimony. Many physicians will testify that, at best, chiropractic care should be used in the acute phase of an injury to treat symptoms but should not be relied upon long term.

If testimony can be elicited as in the above scenarios, you may not even need your own expert. However, in most cases you will need to conduct an independent medical evaluation. Given the new presumption regarding the “necessity” of any treatment, an IME becomes that much more critical. If written reports are required, make sure you have the physician conducting the IME (or records review) address “necessity” specifically, if that is an issue in your case.

Finally, the “necessity” presumption is mitigated somewhat by the fact that it does not also create the presumption that particular care was “related” to the accident in question. Even if you do not have an expert, it remains the plaintiff’s burden to relate all claimed treatment to the accident in question as opposed to some other cause.

So what of “reasonableness?” This discussion must begin by observing what the court of appeals and Wisconsin Supreme Court said in Leitinger about experts in such an analysis. Early in the court of appeals decision, the court noted that “neither party produced an expert witness to testify as to the reasonableness of the amounts billed or of the amounts paid. The only evidence before the jury was the amount paid by Leitinger’s health insurance provider.”[vi] Later in the decision, the court wrote:

DBart was not precluded from introducing relevant evidence that the billed amounts were unreasonable. For instance, DBart could have offered expert testimony as to the reasonable value of the medical services provided in support of its argument that the amount billed for the medical services was not the reasonable value of the services. Instead, it chose to rely solely on its assertion that the actual amount paid by an insurance company is admissible evidence of reasonable value.[vii]

This begs the question of how one establishes the standard, appropriate, and industry-accepted rate for a particular medical service without talking about what the provider in question actually accepted as payment for a given service. The supreme court appeared to suggest that this evidence, couched in its proper context, and analyzed for the jury by an appropriate expert, might then be acceptable. The court wrote: "Most important to our review in the instant case, the Koffman court stated that evidence of the amounts actually paid by the plaintiff’s health care insurance company is inadmissible in the absence of a separate basis for the relevance of this collateral source evidence."[viii]

These statements from both decisions lead one to wonder what would have been the outcome in Leitingerif the defendant had hired an expert. (For the want of a nail, the kingdom was lost.) If the rule established by Leitinger were still only part of the common law, there might be room to hire an expert to talk about the fact that a particular provider accepted payment less than the amount billed, if offered in the larger context of “reasonableness.” But now Leitinger has been codified, and Wis. Stat. §908.03(6m)(bm) does not contain an exception that would allow a qualified expert to offer the evidence. So, is it still possible to hire an expert to address “reasonableness” and successfully navigate around the restrictions of the statute? Yes.

If you hire an expert, he or she is only prohibited from offering “evidence of payments made or benefits conferred by collateral sources.” Read literally, the only prohibited evidence is of “payments” or "benefits” that have been quite specifically “conferred” for the benefit of the plaintiff in your individual case. The statute does not appear to prohibit evidence of what a particular physician routinely accepts when performing a specific medical procedure on other patients. Your expert should also be able to testify about the going rate in the industry, which can vary greatly by geographic region.

You can potentially obtain testimony that may be useful for your expert in your depositions of any treating physicians. Ask the treating physicians if they was adequately compensated for the services they provided. Ask if the amount paid for the particular services at issue represents the rate generally charged to other patients. Is the amount accepted as payment in line with what other physicians in this geographic region accept? You may get referred to the billing department, but most physicians will likely give you some favorable responses you can use.

Obviously, on a low impact, soft tissue injury case, with medical specials billed around $10,000 and a subrogation lien of around $6,000, the cost of an expert does not make any sense. It may not even be cost-effective on a case with $100,000 in billed specials where $60,000 was paid by an insurer. However, if you have a case involving hundreds of thousands of dollars in past medical specials, the gap between the amounts paid and amounts billed may be substantial enough to justify the expense of an expert. Even though the amendment to Wis. Stat. § 908.03 creates additional hurdles for defense counsel, with the right expert, the right foundation, and with some concessions from the treating physicians, you should still be able to successfully challenge both the reasonable value of health care services provided to a plaintiff as well as the necessity of care.

[i] Wis. Stat. § 908.03(6m)(bm).

[ii] 2007 WI 84, 302 Wis. 2d 110, 736 N.W.2d 1.

[iii] Id., ¶ 15.

[iv] Id., ¶ 4.

[v] Id., ¶ 7.

[vi] Leitinger v. DBart, 2006 WI App 146, ¶ 6, 295 Wis. 2d 372, 720 N.W.2d 152.

[vii] Id., ¶ 18.

[viii] Leitinger, 302 Wis. 2d 110, ¶ 47.