A generation ago, subrogation professionals were almost unheard of. Over the years, however, as prudent businesses and insurance companies began to insist on their statutory and contractual rights of subrogation, the profession has grown. On February 8, 2018, the Texas Supreme Court issued an opinion that grants subrogation adjusters and claims handlers the ability to sign medical expense affidavits under § 18.001 of the Texas Civil Practice and Remedies Code. Gunn v. McCoy, 2018 WL 3014984 (Tex. 2018). Their affidavit “testimony” as to the amount of medical expenses paid will be admissible into evidence and conclusive of that amount, unless controverted by affidavit as provided in the statute. This ruling constitutes a significant step toward streamlining litigation in light of Texas law which provides that the plaintiff’s recovery of medical expenses is limited to those “actually paid or incurred.”
Section 18.001 governs proving medical expenses by affidavit. Tex. Civ. Prac. & Rem. Code § 18.001. It is common to use § 18.001 affidavits as evidence of the reasonableness and necessity of past medical expenses. Haygood v. De Escabedo, 356 S.W.3d 390 (Tex. 2011). The statute provides:
Unless a controverting affidavit is served as provided by this section, an affidavit that the amount a person charged for a service was reasonable at the time and place that the service was provided and that the service was necessary is sufficient evidence to support a finding of fact by judge or jury that the amount charged was reasonable or that the service was necessary.
Up until now, in order to comply with this section, a medical expense affidavit had to be made by “(A) the person who provided the service; or (B) the person in charge of records showing the service provided and the charge made.” This usually meant either a doctor or a custodian of medical records. However, in 2011, the Texas Supreme Court announced that a plaintiff could only submit evidence of what was “paid” by the insurance company, as opposed to the amounts actually “billed” by the provider. Haygood v. De Escabedo, 356 S.W.3d 390 (Tex. 2011). The Court held that a plaintiff can only recover up to the amount paid, and he or she gets no off-set for premiums paid.
The significant change announced in Haygood meant that the operative number for purposes of proving medical expenses was no longer the amount charged – but rather, the amount actually paid -in many cases the amount paid by the insurance company. Because § 18.001 is “purely procedural, providing for the use of affidavits to streamline proof of the reasonableness and necessity of medical expenses,” the affidavits are not conclusive. The statute expressly provides that they can be controverted by a competing affidavit.
The Court noted that the Legislature’s intent in enacting § 18.001 was “to streamline proof of the reasonableness and necessity of medical expenses.” Noting that the statute does not require that affidavits be made by a records custodian for a medical provider, it held that if the amount “billed” was of paramount importance, an affidavit as to the amounts charged would be irrelevant (and perhaps even inadmissible) in a litigated case. Hospitals have developed a two-tier pricing system: (1) the “list price,” which serves as a starting point for negotiations, similar to the sticker price one might find when purchasing a vehicle; and (2) the “actual price,” which is what private insurers, Medicaid and Medicare, and other groups actually pay after negotiations. The Court further noted that a given medical provider may have no basis for knowing what is a “reasonable” fee for a specific service.
In determining the necessity of medical expenses, the Court said it was beyond argument that medical providers (doctors) are in the best position to determine what treatments or procedures and resulting expenses are “necessary.” Ideally, medical providers themselves would testify to the necessity of medical expenses. However, by drafting § 18.001 to allow “the person who provided the service” or the “person in charge of records” to testify to reasonableness and necessity, the Legislature specifically acknowledged and made allowance for the reality that the ideal paradigm does not reflect today’s complex health care system. What is “necessary” is often heavily influenced by insurance companies and by what treatments and procedures they are willing to cover. The Supreme Court announced that subrogation agents could sign affidavits which comply with § 18.001.
Subrogation has come a long way. When cooperating with a plaintiff’s counsel during litigation and while protecting one’s subrogation interest, a subrogation professional and/or subrogation counsel in Texas now have the ability to negotiate with plaintiff’s counsel to prove up the reasonable and necessary amount incurred by the insured. This alone could be an incentive for plaintiff’s counsel to cooperate and/or stipulate with the carrier, protecting its lien in the process.
For more information on subrogating in Texas following the Gunn decision, contact Gary Wickert at [email protected].