When medical providers performed spinal surgery on a man who had been involved in a traffic accident they promised to defer collecting their fees until a personal injury lawsuit was settled.
Known as “letters of protection,” these agreements allow an uninsured person to receive treatment. Critics say they also allow plaintiffs to hide the actual costs of care and can increase damages in litigation.
The Texas Supreme Court eyed the agreements during oral arguments earlier this month. The case, in re K&L Auto Crushers, has the medical community on the side of plaintiffs regarding discovery requests to providers on the reasonableness of fees charged.
Kevin Walker and Latunija Johnson sued for injuries they suffered in a South Dallas collision with the driver of an 18-wheeler for K&L Auto Crushers. It is disputed who caused the accident when both vehicles attempted right hand turns from adjacent lanes at a stop sign. No injuries were reported or treated at the scene, and both vehicles were driven away.
Walker sought treatment four days after the accident and received 34 cervical implants several months later. He also underwent shoulder surgery. The lawsuit claims $1.2 million in medical services.
The trucking company sought documents from two hospitals and a surgeon about the amounts it charges for the same services to private and federal insurance programs.
Judge Aiesha Redmond of Dallas County’s 160th District Court quashed the subpoenas in a ruling upheld by the Dallas Court of Appeals in 2019. Neither the trial court nor the court of appeals offered any explanation for their rulings.
A key issue before the Supreme Court is the applicability of its 2018 ruling in in re North Cypress Medical Center Operating Co. In that case — a dispute between a patient and hospital over the reasonableness of medical charges – the court held that similar discovery was relevant.
Wade Crosnoe, who represents K&L Auto Crushers, said the same issue of reasonableness is relevant in defending a personal injury suit when there could be incentives to set medical rates as high as possible.
“Discovery is essential in this context to prevent the jury from receiving a misleading and distorted picture of the plaintiffs’ $1.2 million in medical expenses in a case arising from a minor traffic accident,” said Crosnoe, an Austin partner at Thompson Coe.
Justice Jane Bland asked about the deference accorded to trial judges in deciding discovery issues. She noted that Redmond had denied the request compared to the North Cypress dispute where the trial judge allowed discovery.
“Trial courts have no discretion in determining what the law is or applying the facts,” said Crosnoe, arguing that the case is an issue of applying the law as set out in North Cypress.
Justice Brett Busby asked about a new federal regulation requiring hospitals to make public the prices they negotiate with insurers.
“It undermines any claim that the information is a trade secret or confidential,” said Crosnoe. “The rule is supportive of our argument.”
Dallas area appellate lawyers Rosalyn Tippett and Morgan McPheeters argued for Walker. They said experts for the trucking company could give their opinions about whether the charged rates are reasonable without burdening the medical providers with extensive discovery requests.
“Defendants have asked for the ultimate fishing expedition,” said McPheeters. “A chargemaster list of various rates . . . has no bearing on the question at issue, which is: Were the charges incurred by this patient reasonable?”
The Texas Medical Association and Texas Hospital Association, in an amicus filing by Donald Wilcox, said allowing the discovery may deter physicians and medical providers from providing services to patients involved in personal injury lawsuits.
The Texas Civil Justice League, in an amicus filing by George Christian, said denying the discovery would allow plaintiffs to make an end run around the “paid or incurred rule” that is a cornerstone of 2003 tort reform legislation.
Associations representing insurers also urged the court to hold that North Cypress should apply in the injury case.
Justice Jimmy Blacklock asked McPheeters whether letters of protection encourage medical providers to hike their rates because they have a financial interest in the underlying litigation.
“The likelihood of collecting is one of many factors taken into account in setting these rates,” she said. “All of those factors come together to account for why a cash pay patient might be charged more than a Medicare patient or a private health insurance patient.”
Watch the arguments here.