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Collateral source rule barred testimony regarding reasonableness of medical bills.

Defendants could not introduce evidence to rebut the presumption that plaintiff’s medical bills were reasonable when that evidence violated the collateral source rule. In Doty v. City of Johnson City, No. E2020-00054-R3-CV (Tenn. Ct. App. July 7, 2021), plaintiff was riding in a car when she was hit by a tractor being driving by an employee of defendant. Defendant admitted liability, so the only issue was the amount of damages.

The accident caused plaintiff to need shoulder surgery (she had previously had two other shoulder surgeries), and she was under a doctor’s care for nine months following the accident.

Plaintiff’s complaint sought $300,000 in damages for “her medical bills and subsequent recovery.” Plaintiff provided an itemization of her medical and hospital bills, pursuant to Tenn. Code Ann. § 24-5-113(b), which created a “rebuttable presumption of the reasonableness of such bills.” While defendant stipulated to the necessity of the bills, it “objected to the reasonableness of the computation as reflected in the undiscounted medical bills provided by plaintiff.” To support its objection to the reasonableness of the bills, defendant sought to use two witnesses, Dr. Stewart and Mr. Chapman. The trial court did not allow the testimony, finding that “Dr. Stewart’s testimony violated the collateral source rule and that Mr. Chapman’s methodology had not been proven or tested,” and it found in favor of plaintiff and awarded her “compensatory damages and additional damages for her pain and suffering.” The Court of Appeals affirmed this ruling.

Defendant’s first witness, Dr. Stewart, testified during his deposition about the difference between what medical providers bill and what is actually paid. He stated that he did not know how the billed amounts were set and discussed “contractual agreements with different entities” to pay less. The Court of Appeals affirmed exclusion of his testimony, explaining:

In sum, the City offered Dr. Stewart’s testimony to establish that the amount billed is not the amount paid due, in part, to private contracts between the hospital and third parties. The proffered testimony is the very type of evidence prohibited by the collateral source rule, which provides that ‘payments made to or benefits conferred on the injured party from other sources are not credited against the tortfeasor’s liability, although they cover all or a part of the harm for which the tortfeasor is liable.’

(quoting Dedmon v. Steelman, 535 S.W.3d 431 (Tenn. 2017)).

Defendant’s second witness, Mr. Chapman, had designed a computer program that analyzed medical providers’ billings versus actual payments and true costs, which showed that billed amounts had risen disproportionately compared to the cost of care. Using this program, he sought to testify that the “reasonable rate for Plaintiff’s charges was $39,952.46 as opposed to the $204,196 in undiscounted medical bills submitted.” While the Court stated that Mr. Chapman “possessed exemplary qualifications and presented an impressive methodology,” it noted that his testimony must satisfy Tennessee Rules of Evidence 702 and 703 to be admissible. The Court stated that the Tennessee Supreme Court has listed factors to be considered when determining the reliability of scientific testimony. (internal citation omitted). Here, there was no proof in the record concerning those factors. The Court reasoned:

The record is devoid of information establishing whether Mr. Chapman’s methodology has been tested or has been subjected to peer review. A potential rate of error was also not submitted and there is no indication that his methodology has been accepted in the scientific community. Further, his methodology was largely based upon what the hospital billed versus what it regularly received as payment, a clear violation of the collateral source rule when applied to Plaintiff’s hospital billings in the report.

Accordingly, exclusion of Mr. Chapman’s testimony was also affirmed.

This was the correct decision here, as the testimony offered by defendant clearly ran afoul of the collateral source rule and the holding in Dedmon.

NOTE: This opinion was released one month after oral arguments in this case.

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