What to make of Hoffman?

An October 2, 2015 opinion of Louisiana’s Supreme Court confirms that health provider attorney discounts are not collateral source benefits. Reduced cost health care may not be assessed against tortfeasors at a non-discounted rate. Hoffman v. 21st Century North Amer. Ins. Co., 14-2279 (La. 10/2/2015). An application for rehearing was recently denied and the judgment is now final.

Jim Nieset in the firm’s New Orleans office joined trial counsel, Rick Roniger in achieving this important defensive stand against plaintiff double recovery.

From trial before 19th Judicial District Court Judge Michael Caldwell through the First Circuit court of appeal and up to the state’s highest court, the answer remained unchanged, the plaintiff was only entitled to amounts actually billed by a radiologist for MRI examinations. Plaintiff’s counsel argued that the discount was a benefit purchased by his client through association of the law firm.

The attorney discount issue has two parallels handled differently from each other under existing Louisiana law. Medicaid write-offs are passed on to defendants in the form of reduced liability. The difference between a provider’s stated cost for services and the lesser amount paid by Medicaid to the provider in satisfaction of the plaintiff’s obligation – the Medicaid discount – is not owed by the tortfeasor. Bozeman v. State, 03-1016 (La. 7/2/04), 879 So.2d 692. Contrast with private health care insurance. Medical costs are paid under contract purchased by or as an employment benefit to the plaintiff. Tortfeasors owe to the plaintiff her medical costs even if she never pays anything, or pays very little directly to the health care provider.  Louisiana’s collateral source rule denies defendants the right to claim a credit or offset for the costs of medical care by paid by a private health insurer. But the rule has been applied as going one step further. Not only has the defendant owed the full amount paid by health insurance for related medical care, but the defendant also has not received a credit for the insurer’s discounted rate with the provider – the private health insurer discount. Hoffman calls into question whether that will continue to be the case.

Under Hoffman, The Supreme Court appears to have declared that it does not treat an attorney discount the same way it has treated private health insurer discounts for collateral source purposes. But Justice Guidry’s opinion hints that the Court has actually done something more substantial. Is the Court saying that all discounts, that is to say, all amounts not actually owed to the provider, will be off-limits to recovery by the plaintiff?

Reasons for adopting a “bright-line rule that such attorney-negotiated discounts do not fall within the ambit of the collateral source rule” include concern about a “variety of evidentiary and ethical dilemmas for counsel.” Hoffman p. 8. Whether the “discount” is or is not a part of the plaintiff’s “patrimony” derived from the attorney-client relationship opens details of that relationship up to discovery. The Court also expressed concern for the plaintiff’s attorney whose professional obligations demand “Truthfulness in Statements to Others” in the name of Rule 4.1. Bright attorneys will conjure full throated endorsements or condemnations of the Court’s reasoning. There are also reasons to treat attorney discounts differently from private health insurer discounts. But reading Justice Guidry’s opinion, one wonders whether those reasons would prevail.

Referring to an opinion out of California, Justice Guidry describes a rule by which tortfeasors are not liable for private health insurer discounts.  As we explained above, private health insurance payments are a collateral source and defendants have not been permitted to challenge any part of a providers “billed” amount for medical services based on a private insurer’s payment of the obligation. But in California, according to Justice Guidry’s description of Howell v. Hamilton Meats & Provisions, Inc., 52 Cal.4th 541, 548-49, 129 Cal.Rptr.3d 325, 257 P.3d 1130 (2011), the insurer’s network discount from the provider’s billed amount is not a collateral source. As anyone familiar with insurer contract rates can attest, that difference is often substantial. Has Justice Guidry just declared support for limiting tort medical expense recovery to the contract rate actually paid by private insurers? Did Justice Clark’s concurrence “based on the bare-bones record before us” draw a line beyond which he will not go? Justice Guidry’s stated preference for a “bright line rule” would be advanced by treating attorney discounts, Medicaid discounts and private health insurer discounts exactly the same. For that matter, why should Medicare discounts be any different? Stay tuned.

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