Rose v. via Christi Health System, Inc.

78 P.3d 798, 276 Kan. 539, 2003 Kan. LEXIS 586

Opinions

The opinion of the court was delivered by

Gernon, J.:

Aldena M. Rose and Marilyn A. Corr, executor of the Estate of Lyle Rose, Deceased, (hereinafter jointly referred to as Rose) appeal the trial court’s order allowing Via Christi Health System, Inc., (Via Christi) to offset its share of the judgment against medical expenses that were written off pursuant to a Medicare payment. Via Christi cross-appeals the trial court’s admission of evidence regarding medical expenses.

Lyle Rose was admitted to Via Christi’s St. Francis campus for a coronary arteriogram. Later that night, Lyle fell out of the bed and hit his head, causing two lacerations to the back of his head. A few hours later, Lyle developed a subdural hematoma, which caused him to collapse. He received medical treatment for his head injury in Via Christi’s intensive care unit for over 1 month. However, before the coronary arteriogram could be performed, Lyle died as a result of the subdural hematoma and other complications caused by his fall.

Rather than provide Lyle’s treatment for the complications resulting from his fall gratuitously, Via Christi elected to bill Lyle and his insurer, Medicare, for the full cost of Lyle’s treatment. Medicare fully paid for Lyle’s medical expenses in accordance with its payment contract with Via Christi, which required Via Christi to write off $154,193.24 of the §242,104.84 that it billed.

Rose sued Via Christi for negligence. Prior to trial, Via Christi filed a motion in limine seeking to limit evidence of medical expenses to the amount actually paid by Medicare. The trial court denied Via Christi’s motion, finding that the collateral source rule applied.

A jury found Via Christi to be 36 percent at fault and awarded total damages of $582,186.01, including $261,422.46 in medical expenses. Via Christi’s portion of the judgment totaled $209,586.96.

Thereafter, Via Christi filed a motion to offset the $209,586.96 judgment by the medical expenses it wrote off. Following a hearing, the court granted Via Christi’s motion, allowing Via Christi to offset the award by $94,112.09, its pro rata share of the medical expense damage award. This appeal followed, and the matter was transferred to this court pursuant to K.S.A. 20-3018(c).

Rose raises three arguments in support of her claim that the trial court erred when it granted Via Christi’s motion to offset the judgment. First, Rose argues that the district court’s decision has no legal support. Second, Rose argues that the decision abrogates Medicare’s right of subrogation. Third, Rose argues that the offset violates federal law.

Rose and Via Christi agree that the issue raises a question of law requiring the application of a de novo standard of review. Neither party, however, has cited any authority to support this standard of review, and both parties are wrong. A decision to offset a damage award is within the trial court’s discretion. When reviewing such a decision, an appellate court must determine whether the trial court abused its discretion. Mynatt v. Collis, 274 Kan. 850, Syl. ¶ 1, 57 P.3d 513 (2002); Carson v. Chevron Chemical Co., 6 Kan. App. 2d 776, 793, 635 P.2d 1248 (1981). “ ‘An abuse of discretion occurs where the district court clearly erred or ventured beyond the limits of permissible choice under the circumstances.’ ” Unwitting Victim v. C.S., 273 Kan. 937, 944, 47 P.3d 392 (2002) (quoting Wright ex rel. Trust Co. of Kansas v. Abbott Labs., 259 F.3d 1226, 1233 [10th Cir. 2001]).

Rose first argues that the trial court erred because there is no law to support its decision. Rose correctly notes the trial court’s failure to cite to any authority. However, such a failure does not make a decision reversible. Rose fails to point to any authority that contradicts the trial court’s decision. In fact, Rose’s argument cites no legal authority whatsoever. Issues raised by an appellant with no supporting authority are not addressed by appellate courts. Enlow v. Sears, Roebuck & Co., 249 Kan. 732, 744, 822 P.2d 617 (1991).

For her second argument, Rose claims that the trial court’s decision is wrong because it abrogates Medicare’s right to subrogation. This argument is also without merit. Rose fails to explain how the court’s order abrogates Medicare’s rights when nothing in the district court’s decision addresses Medicare’s right to subrogation. The reduction of Rose’s judgment only affects the amount available for Medicare’s subrogation claim, it does not abrogate Medicare’s right of subrogation.

For her final argument, Rose contends that the trial court’s decision violates federal law. Rose relies on 42 U.S.C. § 1395cc(a)(l)(A)(i) (2000), which makes payment eligibility under Medicare dependent on a medical provider’s agreement not to charge any individual for items or services for which he or she is entitled to have payment made from Medicare. Via Christi fails to address this issue other than in a footnote that summarily dismisses it without any argument or citation to authority.

The Supremacy Clause of the United States Constitution provides that federal law is the supreme law of the land. U.S. Const, art. VI, cl. 2. State laws that conflict with federal laws are without effect. Jenkins v. Amchem Products, Inc., 256 Kan. 602, 607, 886 (1994). The same rule applies to state common law. 256 Kan. at 616-17 (holding that common-law actions based on inadequate labeling or failure to warn are preempted by FIFRA).

42 U.S.C. § 1395cc(a)(l)(A)(i) provides in pertinent part:

“Any provider of services . . . shall be qualified to participate under this sub-chapter and shall be eligible for payments under this subchapter if it files with the Secretary an agreement — not to charge, except as provided in paragraph (2), any individual or any other person for items or services for which such individual is entitled to have payment made under this subchapter . . . .”

If a provider violates the agreement not to charge patients, the Secretary of Health and Human Services may terminate or refuse to renew the provider’s Medicare contract. 42 U.S.C. § 1395cc(b).

In Holle v. Moline Public Hosp., 598 F. Supp. 1017, 1021 (C.D. Ill. 1984), the court applied 42 U.S.C. § 1395cc(a)(l)(A) to void a hospital’s lien, holding that the hospital was bound by its agreement with Medicare not to charge any other person for the items or services for which a person is entitled to Medicare payment. In Hollé, the plaintiff was injured in an automobile accident and settled with the tortfeasor’s insurance company. Subsequently, the plaintiff filed an action to establish the amounts that he had to pay from the settlement for medical service provider’s liens. Medicare paid the hospital in full for the plaintiff s Medicare-covered expenses, but the hospital filed a lien seeking payment for the amount written off after the Medicare payment. The Hollé court stated that if the hospital were allowed to enforce its lien, it “would violate 42 U.S.C. § 1395cc(a)(l)(A) and the duties it assumed by contract and would flaunt Medicare regulation and public policy aimed at protecting beneficiaries of the Medicare program.” 598 F. Supp. at 1021.

We agree with the Hollé court and conclude that the Medicare statute prohibits health care providers from charging Medicare-qualified patients for items or services that are covered by Medicare. With the exception of the items specified in 42 U.S.C. § 1395cc(a)(2) that may apply to Mr. Rose’s hospitalization, 42 U.S.C. § 1395cc(a)(l)(A)(i) is in direct conflict with the trial court’s decision granting Via Christi’s motion to offset the written-off medical expenses. We conclude that the Medicare statute preempts the trial court’s ruling. See Jenkins, 256 Kan. at 611. Thus, the trial court ventured beyond the limits of permissible choice and abused its discretion. See Unwitting Victim, 273 Kan. at 944. As a result, we reverse the district court’s order granting Via Christi a general offset against the written-off medical expenses.

Cross-Appeal

In the event we reversed the trial court’s decision regarding Via Christi’s motion to offset, Via Christi cross-appealed, arguing that the trial court should have limited the evidence of medical expenses to those amounts actually paid, without including the amounts it wrote off. The admission or exclusion of evidence lies within the sound discretion of the trial court. Subject to exclusionary rules, a trial court’s decision is reviewed using an abuse of discretion standard. State v. Lumley, 266 Kan. 939, 950, 976 P.2d 486 (1999).

The trial court denied Via Christi’s motion to limit the admission of the evidence under the common-law collateral source rule which provides that “ ‘benefits received by the plaintiff from a source wholly independent of and collateral to the wrongdoer will not diminish the damages otherwise recoverable from the wrongdoer.’ ” Farley v. Engelken, 241 Kan. 663, 666, 740 P.2d 1058 (1987).

The purpose for the collateral source rule is to prevent the tort-feasor from escaping from the full liability resulting from his or her actions by requiring the tortfeasor to compensate the injured party for all of the harm he or she causes, not just the injured party’s net loss. Bates v. Hogg, 22 Kan. App. 2d 702, 709, 921 P.2d 249, rev. denied 260 Kan. 991 (1996) (dissenting opinion citing 2 Minzer, Nates, Kimball, Axelrod, and Goldstein, Damages in Tort Actions § 9.60, p. 9-88 [1991]); Restatement (Second) Torts § 920A, comment b (1977). A benefit secured by the injured party either through insurance contracts, advantageous employment arrangements, or gratuity from family or friends should not benefit the tortfeasor by reducing his or her liability for damages. If there is to be a windfall, it should benefit the injured party rather than the tortfeasor. Bates, 22 Kan. App. 2d at 709.

Via Christi relies on Bates to support its proposition. In Bates, the plaintiff was injured in a car accident. The plaintiff s medical bills were paid by Medicaid. At trial, the court prohibited the plaintiff from presenting evidence of the full value of her medical treatment and limited the evidence to the actual amounts paid by Medicaid. The majority of the panel for the Court of Appeals determined that the collateral source rule did not apply under the circumstances. Noting that the medical provider could not charge Medicaid patients for the difference between their customary charge and the amount paid by Medicaid, the Bates court held that the amount paid by Medicaid becomes the customary charge. 22 Kan. App. 2d at 705. The Bates court limited the holding to the facts of the case, specifically noting that “ ‘[i]t would be unconscionable to permit the taxpayers to bear the expense of providing free medical care to a person and then allow that person to recover damages for medical services from a tortfeasor and pocket the windfall.’ ” 22 Kan. App. 2d at 706 (quoting Gordon v. Forsyth County Hospital Authority, Inc., 409 F. Supp. 708, 719 [M.D.N.C. 1976]).

Rose, on the other hand, urges us to limit the application of the Bates holding to Medicaid cases, pointing to the fact that Medicare benefits are purchased by payroll deductions and Medicaid benefits are free to all who qualify.

Pursuant to 42 U.S.C. § 1395i(a) (2000), the Medicare trust is funded by deductions from wages. Medicaid, on the other hand, is funded by payments from the federal government and contributions from state government. See 42 U.S.C. § 1396a(a)(2) (2000); U.S.C. § 1396b (2000). With the exception of charging a nominal fee to certain individuals who meet limited qualifications, a Medicaid plan cannot generally charge an enrollment fee, premium, or deductible. 42 U.S.C. § 1396o (2000).

In Hodge v. Middletown Hosp. Assn., 62 Ohio St. 3d 236, 240, 581 N.E.2d 529 (1991), the Ohio Supreme Court held that Medicare benefits are insurance paid for by the employee and the employer for the benefit of the employee even though participation is involuntary. The Hodge court specifically distinguished Medicare benefits from Medicaid benefits based on the participant’s payment of premiums for Medicare and the lack of contribution to Medicaid. 62 Ohio St. 3d at 240. We agree.

In Manko v. United States, 830 F.2d 831, 836 (8th Cir. 1987), the United States, as the defendant in a personal injury action, argued that amounts paid by Medicare should be offset against the plaintiff s damage award because they were not from a wholly independent source. The court held that the collateral source rule applies to amounts paid by Medicare because the plaintiff had contributed to Medicare, and, thus contracted for his recovery from Medicare. 830 F.2d at 837. Relying heavily on the plaintiff s contributions to Medicare, the Manko court distinguished Overton v. United States, 619 F.2d 1299 (8th Cir. 1980), which denied application of the collateral source rule in a similar situation because the Medicare beneficiary was over 65 years old before the Medicare law took effect and had not contributed to Medicare.

Based upon the payment of premiums by Medicare participants, we find that Medicare is akin to private insurance and can be distinguished from Medicaid in that regard. Accordingly, we hold that the Bates decision is limited to cases involving Medicaid.

Via Christi also relies on Jackson v. City of Kansas City, 263 Kan. 143, 947 P.2d 31 (1997), for the proposition that a plaintiff s recovery should be limited to the amount actually paid. Jackson, however, does not support this contention. In Jackson, the defendant sought to have the damage award for medical expenses reduced to the amount that had actually been paid by the plaintiff and a charity on his behalf. Finding no evidence to support the defendant’s request for remittitur, the Jackson court refused to reduce the plaintiffs damage award. 263 Kan. at 151-52. However, the Jackson court did not address the application of the collateral source rule, so it is inapposite to the issue in this case.

With no other Kansas cases to help decide this issue of first impression, we turn to other jurisdictions to see how they have resolved it. Few jurisdictions have addressed the issue of whether the collateral source rule applies to Medicare write-offs. Three jurisdictions that have addressed the issue have determined that the collateral source rule applies. See Candler Hosp. v. Dent, 228 Ga. App. 421, 491 S.E.2d 868 (1997); Wal-Mart Stores, Inc. v. Frierson, 818 So. 2d 1135, 1140 (Miss. 2002); Brown v. Van Noy, 879 S.W.2d 667 (Mo. App. 1994).

The Candler Hosp. case is directly on point with the facts in this case. A decedent’s spouse and estate sued Candler Hospital, Inc., for wrongful death. The decedent’s medical expenses were paid by Medicare, with a substantial portion of the expenses being written off by the hospital. The hospital filed a motion in limine to exclude the written-off expenses, but the trial court denied the motion, finding that the collateral source rule applied. On an interlocutory appeal, the Georgia Court of Appeals affirmed the trial court but held that the hospital would be entitled to a set-off for the amounts wiitten off against a special damage award for medical expenses. As demonstrated by the analysis of the appellant’s issue here, the Georgia Court of Appeals incorrectly determined that the hospital is entitled to a set-off because such a set-off violates federal law. Nevertheless, the Candler Hosp. court did not make the application of the collateral source rule dependent on the hospital’s entitlement to a set-off. The Candler Hosp. court specifically stated that the hospital would not be entitled to a set-off of general damages. 228 Ga. App. at 422.

The Brown court focused on the plaintiff s contributions to Medicare and found that expenses paid by Medicare are not materially different than expenses paid by insurance with part of the expenses being written off pursuant to a contract. 879 S.W.2d at 676. Likewise, the Mississippi Supreme Court found no reason to distinguish between private insurance and Medicare or Medicaid when it concluded that the collateral source rule applies to the written-off portion of the plaintiff s medical bills. Wal-Mart Stores, Inc., 818 So. 2d at 1140 (relying on Brandon HMA, Inc. v. Bradshaw, 809 So. 2d 611, 618 [Miss. 2001], which applied the collateral source rule to Medicaid write-offs).

Via Christi relies on Mitchell v. Hayes, 72 F. Supp. 2d 635 (W.D. Va. 1999), Hanif v. Housing Authority, 200 Cal. App. 3d 635, 246 Cal. Rptr. 192 (1988), and Moorhead v. Crozer Chester Med. Center, 564 Pa. 156, 765 A.2d 786 (2001), for its proposition that plaintiffs are not entitled to damages for amounts that are written off by health care providers. However, its reliance on these cases is misplaced.

Mitchell is no longer good law. In Mitchell, the court held that the collateral source rule does not apply to medical bills that were written off pursuant to private health care agreements. 72 F. Supp. 2d at 636. Applying Virginia substantive law, the federal district court predicted that the Virginia Supreme Court would not apply the collateral source rule because the plaintiff had not incurred the written-oif expenses. 72 F. Supp. 2d at 637. Subsequently, the Virginia Supreme Court determined the question oppositely from the Mitchell court’s prediction. In Acuar v. Letourneau, 260 Va. 180, 192, 531 S.E.2d 316 (2000), the Virginia Supreme Court held that the tortfeasor could not benefit from write-offs that resulted from contractual arrangements between the injured party’s private health care insurers and the health care providers. Noting the injured party’s payment of premiums for the insurance, the Acuar court found the write-offs to be as much of a bargained-for benefit to the injured party as the actual cash payments made by the health insurance carrier. 260 Va. at 192.

Hanif can be distinguished both legally and factually from this case. In Hanif, the California Court of Appeals held that the reasonable value of medical expenses is limited to the amount incurred by the plaintiff or on the plaintiff s behalf. 200 Cal. App. 3d at 640. Kansas law, however, does not limit recovery to the amounts paid for medical services. Instead, Kansas values damages based on the reasonable expense of treatment, which permits recovery for gratuitous services. Shirley v. Smith, 261 Kan. 685, 693-94, 933 P.2d 651 (1997) (allowing plaintiff to recover damages for self-catheter-ization treatment). Hanif is also distinguishable because it applies to payments made by Medi-Cal, which is the equivalent of Medicaid in Kansas. We have previously distinguished Medicaid and Medicare based on the recipient’s payroll contribution to Medicare.

Although the Moorhead case cited by Via Christi is more factually on point with this case, it fails to distinguish between Medicare and Medicaid as we have here. In Moorhead, a decedent’s estate sued a hospital for wrongful death. The decedent’s hospital bills were paid by Medicare with certain portions being written off pursuant to the hospital’s contractual adjustment with Medicare. The hospital sought to limit the plaintiffs’ recovery to the amounts actually paid by Medicare. Relying on Bates and Hanif, the Pennsylvania Supreme Court held that the plaintiff could not recover the amounts written off by the hospital because she did not incur the expenses and such payment would provide the plaintiff with a windfall in violation of the fundamental tenets of just compensation. 564 Pa. at 162-63.

One justice on the Pennsylvania Supreme Court dissented in Moorhead, stating:

“[T]he majority' carves out a broad exception to the established rule of law in this Commonwealth that personal injuiy plaintiffs are allowed to recover the reasonable value of the medical services made necessary by the wrongdoer’s tortious conduct. Contrary' to the majority's holding, it is the value, and not the ultimate cost, of medical services made necessary by the tortfeasor’s negligence that determines the proper measure of compensatory damages for past medical expenses.” 564 Pa. at 169.

Although not cited by Via Christi, two Louisiana cases support its position. The first case is Williamson v. St. Francis Medical Center, Inc., 559 So. 2d 929 (La. App. 1990), from the Second Circuit of the Louisiana Court of Appeals. In Williamson, the plaintiff was injured by a nurse while in the hospital. In a lawsuit against the hospital, the plaintiff sought damages for the amounts written off after Medicare paid the hospital’s expenses. The Williamson court held that the benefits from the Medicare write-off resulted from the hospital’s contribution and denied recovery of the written-off amounts. 559 So. 2d at 934.

The second case is Suhor v. Lagasse, 770 So. 2d 422 (La. App. 2000), from the Fourth Circuit of the Louisiana Court of Appeals. The Suhor court determined that a personal injury victim was not entitled to recover for the medical expenses that were written off pursuant to a Medicare payment because no one was financially obligated to pay the written-off amounts. 770 So. 2d at 427. The court determined that the injured party was not required to reduce her patrimony to receive the benefit of the write-offs, which are required by operation of law, and should not recover from a nonexistent debt. 770 So. 2d at 427.

Louisiana appellate courts have not consistently addressed whether the collateral source rule applies to medical expense write-offs. The First Circuit Court of Appeals held that the collateral source rule applies to amounts written off due to payments by private insurers. Griffin v. Louisiana Sheriff's Auto Risk, 802 So. 2d 691, 714-15 (La. App. 2001). The Griffin court distinguished private insurance from Medicare and Medicaid based on the application of federal law to Medicare and Medicaid cases. Griffin, 802 So. 2d at 714. The Second Circuit Court of Appeals held that the collateral source rule does not allow recovery of Medicaid write-offs. Terrell v. Nanda, 759 So. 2d 1026, 1030 (La. App. 2000). The Third Circuit Court of Appeals applied the collateral source rule to amounts written off due to the plaintiff s Medicaid eligibility. Brannon v. Shelter Mut. Ins. Co., 520 So. 2d 984, 986 (La. App. 1987). The Terrell court distinguished the Brannon decision by noting that the plaintiff s medical expenses in Brannon were paid by a private insurer rather than Medicaid. Terrell, 759 So. 2d at 1029.

Like the California courts, the Louisiana courts measure medical damages by the amount incurred as a result of the injury rather than the reasonable value of treatment. See Hanif, 200 Cal. App. 3d at 640; Suhor, 770 So. 2d at 426-27; Terrell, 759 So. 2d at 1030-31. We have distinguished Hanif from Kansas law on this basis and can distinguish the Louisiana cases in the same manner.

Although they did not address the application of the collateral source rule specifically to Medicare write-offs, other courts have applied the rule to amounts written off as a result of contracts between health care providers and private insurers. See Hardi v. Mezzanotte, 818 A.2d 974 (D.C. 2003); Olariu v. Marrero, 248 Ga. App. 824, 549 S.E.2d 121 (2001); Radvany v. Davis, 262 Va. 308, 310, 551 S.E.2d 347 (2001); Acuar, 260 Va. at 192; Koffman v. Leichtfuss, 246 Wis. 2d 31, 630 N.W.2d 201 (2001). The Hardi court relied on the Acuar court’s contractual benefit analysis, holding that the injured party should be able to receive the benefit of his or her bargain with the insurance company. 818 A.2d at 984. The Olariu and Kojfman courts both relied on the public policy purposes of the collateral source rule, refusing to allow tortfeasors to benefit from any assistance provided by the injured parties’ sources. Olariu, 248 Ga. App. at 826; Koffman, 246 Wis. 2d at 44-46. The Kojfman court stated that “[ajpplying the collateral source rule to payments that have been reduced by contractual arrangements between insurers and health care providers assures that the liability of similarly situated defendants is not dependent on the relative fortuity of the manner in which each plaintiff s medical expenses are financed.” 246 Wis. 2d at 49.

As previously stated, we distinguish Medicaid and Medicare cases based on the recipient’s contribution for Medicare coverage and find Medicare to be akin to private insurance. Accordingly, we find the cases that apply the collateral source rule to amounts written off due to private insurance to be persuasive. Likewise, we are persuaded by the reasoning of the Brown and Wal-Mart courts which apply the collateral source rule to amounts written off pursuant to Medicare payments. Because health care providers voluntarily contract with Medicare in the same manner as they contract with other private insurers for reduced rates, the benefit of the write-offs should be attributed to the Medicare participant rather than the health care provider.

Public policy in Kansas supports the theory that any windfall from the injured party’s collateral sources should benefit the injured party rather than the tortfeasor, who should bear the full liability of his or her tortious actions without regard to the injured parties’ method of financing his or her medical treatment. Applying these concepts to this case, we hold that the trial court did not err when it applied the collateral source rule to the portion of the hospital’s medical bills that was written off pursuant to Via Christi’s contract with Medicare and affirm on this issue.

Issue raised in appeal reversed; issue raised in cross-appeal affirmed.

Abbott, J., not participating.

Brazil, S.J., assigned.