Find Legal Information

In this case we must determine whether an injured plaintiff mayrecover as damages the entire amount billed for medical services, orif she is limited to the discounted amount paid by her insurancecarrier. We find that the rationale underlying the collateral sourcerule supports allowing recovery of the full amount billed.

Plaintiff Joyce Arthur alleged in her complaint that shefractured her leg after stepping in a hole on a farm owned bydefendant Laurie Catour. Plaintiff was attending an auction at thefarm which was conducted by Stenzel Brothers Auction Services, Inc. Plaintiff incurred $19,355.25 in medical bills for treatment of herinjuries. Plaintiff had group medical insurance with Blue Cross/BlueShield through her husband's employer. Because of the insurer'scontractual agreements with the healthcare provider, only $13,577.97was required to pay off the medical bills. Defendants thereafterfiled a motion for partial summary judgment seeking to limitplaintiff's claim for medical expenses to the amount paid rather thanthe amount billed. The trial court granted defendant's motion,finding that allowing plaintiff to recover the larger amount "wouldonly serve to punish the defendants *** and provide a windfall forthe plaintiff." We allowed plaintiff's application for leave toappeal pursuant to Supreme Court Rule 308 (155 Ill. 2d R. 308) and wenow reverse and remand.

Because of the importance of the issue presented by this case,we allowed the Illinois Association of Defense Trial Counsel(hereinafter "amicus") to present an amicus brief in support of thedefendants. That brief, and those of the defendants, present variousarguments for affirming the trial court's order, all of which we haveconsidered. Two primary themes underlie defendants' position: (1)plaintiff is not entitled to damages greater than the amount she wasobligated to pay and any additional sums would be a windfall; and (2)the difference between the amount charged and the amount paid is"illusory" and is not subject to the collateral source rule.

With respect to the first contention, it is of course true that"[t]he purpose of compensatory tort damages is to compensate theplaintiff for [her] injuries, not to punish defendants or bestow awindfall upon plaintiffs." Wilson v. Hoffman Group, Inc., 131 Ill.2d 308, 321, 546 N.E.2d 524, 530 (1989). Defendants maintain thatbecause plaintiff was never obligated to pay the full amount billed,the amount paid by her insurer is the true measure of her damages. We disagree. Although "discounting" of medical bills is a commonpractice in modern healthcare (Mitchell v. Hayes, 72 F. Supp. 2d 635,637 (W.D. Va. 1999); see M. Beard, The Impact of Changes in HealthCare Provider Reimbursements Systems on the Recovery of Damages forMedical Expenses in Personal Injury Suits (hereinafter Impact), 21Am. J. Trial Advoc. 453 (1998)), it is a consequence of the powerwielded by those entities, such as insurance companies, employers andgovernmental bodies, who pay the bills. See M. Beard, Impact, 21 Am.J. Trial Advoc. 453. While large "consumers" of healthcare such asinsurance companies can negotiate favorable rates, those who areuninsured are often charged the full, undiscounted price. See B.Hewitt, M. Harrington & C. Clark, Target: Medical Bills, People, Oct.6, 2003, at 159, 159-60. In other words, simply because medicalbills are often discounted does not mean that the plaintiff is notobligated to pay the billed amount. Defendants may, if they choose,dispute the amount billed as unreasonable, but it does not become somerely because plaintiff's insurance company was able to negotiate alesser charge. For the same reasons, plaintiff receives no"windfall" when she is compensated for her reasonable medicalexpenses. To the extent that she receives an amount greater thanthat paid by her insurer in satisfaction of the bill, that differenceis a benefit of her contract with the insurer, not one bestowed onher by defendants.

We also disagree with defendants' contention that thecollateral source rule does not apply to the "illusory" differencebetween the amount billed and the amount paid. The nature andpurpose of the collateral source rule was explained in Wilson:

"Under the collateral source rule,benefits received by the injured party from asource wholly independent of, and collateralto, the tortfeasor will not diminish damagesotherwise recoverable from the tortfeasor. [Citations.] A situation in which thecollateral source rule is frequently applied isone in which the injured plaintiff has beenpartly or wholly indemnified for the loss byproceeds from his accident insurance. In sucha situation, the damages recovered by theplaintiff from the tortfeasor are not decreasedby the amounts received from insuranceproceeds. The justification for this rule isthat the wrongdoer should not benefit from theexpenditures made by the injured party or takeadvantage of contracts or other relations thatmay exist between the injured party and thirdpersons." Wilson, 131 Ill. 2d at 320, 546N.E.2d at 530.

The defendants do not dispute that the collateral source ruleis applicable to the $13,577.97 which was paid to satisfy plaintiff'smedical bills. They maintain, however, that the rule does not applyto the "illusory" $5,777.28 difference between the billed amount andthe amount paid because no one paid or was liable for that amount. We disagree. Plaintiff was billed over $19,000 and, but for herinsurance coverage, she was liable for that amount. Limitingplaintiff's damages to the amount paid by her insurer confers asignificant benefit of that coverage on the defendants. This resultis directly contrary to the collateral source rule's goal of ensuring"that the wrongdoer should not benefit from the expenditures made bythe injured party or take advantage of contracts or other relationsthat may exist between the injured party and third persons." Wilson,131 Ill. 2d at 320, 546 N.E.2d at 530.

Amicus contends that the defendants are not seeking to takeadvantage of plaintiff's contract with her insurer, but instead seekthe benefit of the relationship between two third parties -- thehealthcare provider and the insurer. We believe that this argumentincorporates an overly narrow view of plaintiff's relationship withher insurer. In Acuar v. Letourneau, the Supreme Court of Virginiaheld that a plaintiff was entitled to recover the full amount of hismedical expenses, including the amounts "written off" pursuant tocontractual agreements between the healthcare providers and theinsurance carrier. The court stated: "Those amounts written off areas much of a benefit for which [plaintiff] paid consideration as arethe actual cash payments made by his health insurance carrier to thehealthcare providers." Acuar, 260 Va. 180, 192, 531 S.E.2d 316, 322(2000). Similarly in this case, the lower charges negotiated byplaintiff's insurance company are as much a benefit of the insurancecontract as the payments themselves. Under the collateral sourcerule, that benefit should inure to plaintiff, not to the defendanttortfeasors.

Nor is Acuar the only case to hold that a plaintiff is entitledto receive full payment for medical expenses, despite the fact thatthe bills were settled for a reduced amount. Similar conclusionswere reached in Calva-Cerqueira v. United States, 281 F. Supp. 2d 279(D.D.C. 2003), Hardi v. Mezzanotte, 818 A. 2d 974 (D.C. 2003), andKoffman v. Leichtfuss, 246 Wis. 2d 31, 630 N.W.2d 201 (2001). (Cf.Haselden v. Davis, 353 S.C. 481, 579 S.E.2d 293 (2003) (finding thatboth the amount billed and the lower amount paid by Medicaid wereadmissible to establish damages); First Midwest Trust Co. v. Rogers,296 Ill. App. 3d 416, 701 N.E.2d 1107 (1998) (applying collateralsource rule to payments made by HMO)).

On the other hand, defendants have cited cases from otherjurisdictions supporting their position. See Moorhead v. CrozerChester Medical Center, 564 Pa. 156, 765 A. 2d 786 (2001)(plaintiff's damages were limited to amount paid by Medicare andsupplemental insurance rather than reasonable value of medicalservices); McAmis v. Wallace, 980 F. Supp. 181 (W.D. Va. 1997)(plaintiff was not entitled to recover amounts "written off" byhealthcare provider pursuant to Medicaid contracts); Bates v. Hogg,22 Kan. App. 2d 702, 921 P. 2d 249 (1996) (damages limited to amountspaid by Medicaid); Hanif v. Housing Authority, 200 Cal. App. 3d 635,246 Cal. Rptr. 192 (1988) (plaintiff's damages limited to amount paidby Medi-Cal). We note that many of these cases involve payments madeby public programs such as Medicare or Medicaid, rather than privateinsurance carriers. In such cases the rationale that plaintiff isbeing denied the "benefit of her bargain" is less compelling. SeePeterson v. Lou Bachrodt Chevrolet Co., 76 Ill. 2d 353, 392 N.E.2d 1(1979) (collateral source rule did not permit plaintiff to recovervalue of free medical services rendered by Shriner's Hospital forCrippled Children). In any event, decisions from other jurisdictionsare merely persuasive, at best. Our decision is based not on therulings of other courts, but on our own judgment of how to bestharmonize the law of compensatory damages with the principlesunderlying the collateral source rule. Accordingly, we hold thatplaintiff's damages are not limited to the amount paid by herinsurer, but may extend to the entire amount billed, provided thosecharges are reasonable expenses of necessary medical care.

Finally, amicus asserts that if plaintiff is allowed to submitevidence regarding the billed charges, defendants should be permittedto present evidence that the healthcare providers accepted a reducedamount as full payment. Amicus argues that the amount accepted aspayment is the best indicator of the reasonable value of the medicalservices provided. We do not disagree, but this issue is beyond thescope of the certified question presented on appeal. Accordingly, wedecline to address this matter.

For the reasons stated above, the judgment of the circuit courtis reversed and this is cause is remanded for further proceedings.

Certified question answered; reversed and remanded.

McDADE, J., concurs.

PRESIDING JUSTICE HOLDRIDGE, dissenting:

I respectfully dissent. In order to recover medical orhospital expenses, a plaintiff must prove that he or she has paid orbecame liable to pay the amount claimed. Baretto v. City ofWaukegan, 133 Ill. App. 3d 119, 130 (1985), citing Wicks v. Cuneo-Henneberry Co., 319 Ill. 2d 344, 349 (1925). Medical servicesobtained without expense, obligation or liability to a plaintiff arenot recoverable against a defendant in a personal injury action. Peterson v. Lou Bachrodt Chevrolet, Inc., 76 Ill. 2d 353, 363 (1979). Here, it is undisputed that the plaintiff never paid nor becameliable for the $5,777.28 she seeks from the defendant.

In view of the fact that the plaintiff was never liable for theamount "discounted" by the hospital, I disagree with the majority'sconclusion that the collateral source rule nonetheless entitles herto recover the $5,777.28 that was never a cost incurred as a resultof defendant's negligence.

"Under the collateral source rule, benefits received by theinjured party from a source wholly independent of, and collateral to,the tortfeasor will not diminish damages otherwise recoverable fromthe tortfeasor. (Emphasis added)." Wilson v. Hoffman Group, Inc.,131 Ill. 2d 308, 320 (1989). The purpose of the collateral sourcerule is to preclude the jury from considering the payment of medicalbills by insurance or collateral income when it decides theplaintiff's damages. Boden v. Crawford, 196 Ill. App. 3d 71 (1990). Here, the amount received from the plaintiff's insurance company infull payment of plaintiff's past medical expenses - $13,577.97 - willbe fully protected by the collateral source rule. The additional$5,777.28 needs no such protection, as the plaintiff never incurredor became obligated for that expense.

The majority maintains that the plaintiff is entitled to the$5,777.28 over and above her actually incurred medical expenses asthis represents the benefit of her bargain with her insurancecompany. Had the plaintiff, or more accurately, her husband'semployer, actually contracted for payment of all charges at themaximum rate chargeable by a health care provider, I would agree thatplaintiff is entitled to the disputed amount, as that would have beenthe amount she received from the collateral source. However, thebenefit of the bargain in the plaintiff's group health insurancepolicy was that the insurer would pay her reasonable medicalexpenses, whatever that amount turned out to be. The fact that herinsurance company was able to negotiate with the medical providers toreduce the amount it would have to pay to satisfy its obligation tothe plaintiff was the benefit flowing to the insurance company fromits contract with the providers. In other words, the plaintiff gotthe benefit of her contract when the insurance company paid hermedical bills leaving her no liability.

I see no legal reason to allow the plaintiff to recover forexpenses she never paid nor ever became obligated to pay as a resultof the negligence of the defendant. I therefore respectfullydissent.