A TTORNEY FOR A PPELLANT A TTORNEYS FOR A PPELLEE

Mark A. Holloway David W. Stone, IV Indianapolis, Indiana Anderson, Indiana

A TTORNEYS FOR AMICUS CURIAE Michael Phelps D EFENSE T RIAL C OUNSEL OF I NDIANA Bloomington, Indiana Donald B . Kite, Sr. Kelly R. Eskew Indianapolis, Indiana

James D. Johnson Evansville, Indiana

A TTORNEYS FOR A MICUS C URIAE I NSURANCE I NSTITUTE OF I NDIANA , I NC

. Bryan H. Babb Kelly M. Scanlan Indianapolis, Indiana

_____________________________ _________________________________________________ 

# In the 

# Indiana Supreme Court

_________________________________ No. 41S01

- 0810

- CV

- 539

B RANDON S TANLEY , Appellant (Defendant below)
,

v.

D ANNY W ALKER , Appellee (Plaintiff below)

.

_______________________ __________ Appeal from the Johnson Superior Court, No. 41D01

- 0510

- CT

- 00078

The Honorable Kevin M. Barton, Judge

_________________________________ On Petition to Transfer from the Indiana Court of Appeals, No. 41A01

- 0610

- CV

- 462

___________________________ ______

May 27, 2009
Sullivan, Justice.2

The amount of medical expenses actually paid by the plaintiff in this personal injury case was discounted from the amount originally billed because of arrangements between the plai ntiff‘s health insurance company a nd the medical service providers. The defendant sought to i ntroduce evidence of the discounted amount actually paid over the plaintiff‘s objection that Ind iana‘s ―collateral source‖ statute bars evidence of insurance benefits. To the extent the di scounte d amounts may be introduced without referencing insurance, they may be used to dete rmine the reasonable value of medical services.

Background

Brandon Stanley and Danny Walker were involved in an automobile accident in 2004. As a result of the accident, Walker sustained injuries and received treatment from eleven diffe rent medical providers. Walker filed a complaint against Stanley, arguing that as a result of Sta nley‘s negligence, Walker incurred medical expenses, lost wages, and experienced pain and s u ffering. Before trial, Stanley admitted negligence; this case proceeded on the issue of damages only.

During the trial, Walker, the plaintiff, introduced redacted medical bills totaling $11,570 showing the amounts medical service providers originally billed him. Stanley, the defendant, made no objection to the introduction of the medical bills into evidence. These bills, to repeat, showed the amounts originally billed but not the amounts totaling $4,750 that were discounted as a result of negotiatio ns between the medical service providers and Walker‘s health insurance company. Neither Walker nor his insurance company is financially responsible for the amount of the discounts. Walker‘s medical providers accepted payment from his insurance company of $6,820 ($11,570 minus $4,750) in satisfaction of the medical bills occasioned by Stanley‘s ne gligence.

At the close of Walker‘s testimony, Stanley asked the trial court to admit Walker‘s di scounted medical bills totaling $6,820 into evidence, complete with an offer of proof. Walker o bjected on grounds that evidence of the discounted bills violated Indiana‘s collateral source st atute, Ind. Code § 34

- 44

- 1

- 2, which in part prohibits the introduction of evidence of ―insurance3

benefits‖ in personal injury cases. The court sustained Walker‘s objection . It determined that insurance and ―anything flowing from the insurance benefit purch ased by the plaintiff . . . . ‖ 1 would thus be prohibited under the collateral source statute. The court found , in other wor ds,
that the discounts constituted ― insurance benefit s‖ paid for by the plaintiff.

The jury returned a $70,000 general verdict in favor of Walker. Stanley appealed, asser ting that the trial court erred when it barred introduction of Walker‘s discounted m edical bills into evidence. The Court of Appeals affirmed. Stanley v. Walker , 888 N.E.2d 222, 230 (Ind. Ct. App. 2008).

Stanley then sought, and we granted, transfer. Stanley v. Walker , 898 N.E.2d 1226 (Ind. 2008) (table).

Discussion

I

As set for th above, both the trial court and the Court of Appeals held that it would have violated Indiana‘s ―collateral source‖ statute for defendant Stanley to present evidence to the jury that plaintiff Walker‘s medical providers had accepted $4,750 less than the amount they had originally billed in satisfaction of the medical bills occasioned by Stanley‘s negligence. As such, we begin with a consideration of the ―collateral source‖ statute and its common law predecessor,
the ―collateral source‖ rule.

At common law, the collateral source rule prohibited defendants from introducing ev idence of compensation received by plaintiffs from collateral sources, that is, sources other than the defendant, to reduce damage awards. This rule held tortfeasors accountable for the full e xtent of the consequences of their conduct, ―regardless of any aid or compensation acquired by plaintiffs through first

- party insurance, employment agreements, or gratuitous assistance.‖ Shi r-

1 App. 71.4

ley v. Russell , 663 N.E.2d 532, 534 (Ind. 1996) ( quoti ng Shirley v. Russell , 69 F.3d 839, 842 (7th Cir. 1995)).

The Legislature abrogated the common law collateral source rule by enacting the coll ateral source statute. Shirley , 663 N.E.2d at 534. 2 Pursuant to our collateral source statute, ev idence of co llateral source payments may not be prohibited except for specified exceptions. See
id. The statute provides the following:

In a personal injury or wrongful death action, the court shall allow the a dmission into evidence of: (1) proof of collateral source payments other than: (A) payments of life insurance or other death benefits; (B) insurance benefits for which the plaintiff or members of the plai ntiff‘s family have paid for directly; or (C) payments made by: (i) the state or the United States; or (ii) any agency, instrumenta lity, or subdivision of the state or the United States; that have been made before trial to a plaintiff as compensation for the loss or injury for which the action is brought[.]

I.C. § 34

- 44

- 1

- 2.

The purpose of the collateral source statute is to deter mine the actual amount of the pr evailing party‘s pecuniary loss and to preclude that party from recovering more than once from all applicable sources for each item of loss sustained in a personal injury or wrongful death action. I.C. § 34

- 44

- 1

- 1(1)

- (2). At the same time, it retains the common law principle that collateral source payments should not reduce a damage award if they resulted from the victim‘s own for esight

– both insurance purchased by the victim and also government benefits

– presumably b ecau se the victim has paid for those benefits through taxes.

A n injured plaintiff is entitled to recover damages for medical expenses that were both necessary and reasonable. See Cook v. Whitsell

- Sherman , 796 N.E.2d 271, 277 (Ind. 2003).

2 The colla teral source statute referenced in Shirley , I.C. § 34

- 4

- 36

- 1 ( repealed by Pub. L. No. 1

- 1988, § 221), is now codified at I.C. § 34

- 44

- 1

- 2.5

Thus we are confro nted with the question of how to determine the reasonable value of medical services when an injured plaintiff‘s medical treatment is paid from a collateral source at a di scounted rate.

Other jurisdictions have considered this issue with varying results. In one approach, courts apply the collateral source rule to negotiated discounts on the plaintiff‘s medical care for which the plaintiff paid consideration. See Arthur v. Catour , 833 N.E.2d 847, 853

- 54 (Ill. 2005) (holding that plaintiffs may present e vidence of the billed amount of their medical services and defendants may challenge the reasonableness of the billed amount without specifying what ev idence the defendant could introduce to challenge the billed amount); Mitchell v. Haldar , 883 A.2d 32, 40 (Del. 2005) (holding that the plaintiff can present evidence of the billed amount as representing the reasonable value of the medical services without addressing whether the defe ndant was barred from introducing evidence of the discount).

Two states cou rts have held that the medical discounts were a collateral source, but that they were compelled to set off the collateral source amount against an award of compensatory damages under their respective state statutes. See Goble v. Frohman , 901 So. 2d 830, 8 32

- 33 (Fla. 2005); Slack v . Kelleher , 104 P.3d 958, 967 (Idaho 2004).

In another approach, the Ohio Supreme Court has allowed both the amount paid and the amount billed into evidence to prove the reasonable value of medical services. See Robinson v.
Ba tes , 857 N.E.2d 1195, 1200 (Ohio 2006) (holding that the jury may determine that the reaso nable value of medical services is the amount originally billed, the amount accepted as payment, or some amount in between).

I I

Indiana Evidence Rule 413 provides one method of proving the reasonable value of me dical expenses. It reads as follows: ―[s]tatements of charges for medical, hospital or other health care expenses for diagnosis or treatment occasioned by an injury are admissible into evidence.
Such state ments shall constitute prima facie evidence that the charges are reasonable.‖ Evid. R.6

413. By its terms, Rule 413 allows actual past medical charges to serve as prima facie evidence that the charges are reasonable.

The purpose of Rule 413 is to provide a simpler method of proving amount of medical expenses when there is no substantial issue that they are reasonable and were caused by the tort. If there is a dispute, of course the party opposing them may offer evidence to the contrary, including expert opinion. By permitting me dical bills to serve as prima facie proof that the expenses are reasonable, the rule eliminates the need for testimony on that often uncontested issue. Finally, the fact that a statement was submitted is at least some evidence th at the charge is normal for the treatment involved, and it was necessary to be performed.

Cook , 796 N.E.2d at 277

- 78. Thus, medical bills can be introduced to prove the amount of me dical expenses when there is no substantial issue that the medical expe nses are reasonable.

However, in cases where the reasonable value of medical services is disputed, the method outlined in Rule 413 is not the end of the story. See Cook , 796 N.E.2d at 277. The opposing party may produce contradictory evidence to chall enge the reasonableness of the proffered med ical bills, including expert testimony. See id. Additionally, reasonableness of medical expenses can be proven, in part, by demonstrating that the plaintiff paid the actual amounts incurred. Smith v. Syd‘s, I nc. , 598 N.E.2d 1065, 1066 (Ind. 1992). This is premised on the notion that a plaintiff would not pay an unreasonable bill. Id. The paid bill certainly may constitute evidence of the reasonable value of services, but it is not dispositive. See id.

T he law of Indiana will allow a plaintiff to recover neither the actual amount of medical bills charged to him nor the amount of medical bills paid by him, but r ather, the reasonable and fair value of medical expenses necessarily incurred by him. The actua l amount charged to the plaintiff or the amount actually paid by him may tend to prove the reasonable and fair value of the services rendered to him but are not conclusive on the issue

.
Chemco Transp. , Inc. v. Conn , 506 N.E.2d 1111, 1115 (Ind. Ct. App. 1987) ( quoting Herrick v. Sayler , 160 F.Supp. 25, 29 (N.D. Ind. 1958)), rev‘d on other grounds , 527 N.E.2d 179 (Ind. 1988).7

In sum, the proper measure of medical expenses in Indiana is the reasonable value of such expenses. This measure of damages cannot be read as permitting only full recovery of

me d ical expenses billed to a plaintiff. Id. Nor can the proper measure of medical expenses be read as permitting only the recovery of the amount actually paid. Id. The focus is on the reaso nable value, not the actual charge. This is especially true given the current state of health care pricing.

The complexities of health care pricing structures make it difficult to determine whether the amount paid, the amount billed, or an amount in between represents the reasonable value of medical services. One authority reports that hospitals historically billed insured and uninsured patients similarly. Mark A. Hall & Carl E. Schneider, Patients As Consumers: Courts, Contracts, and the New Medical Marketplace , 106 Mich. L. Rev. 643, 663 (2008). With the advent of m anaged care, some insurers began demanding deep discounts, and hospitals shifted costs to less influential patients. Id. This authority reports that insurers generally pay about forty cents per
dollar o f billed charges and that hospitals accept such amounts in full satisfaction of the billed charges. Id.

As more medical providers are paid under fixed payment arrangements, another authority reports, hospital charge structures have become less correlat ed to hospital operations and actual payments. The Lewin Group, A Study of Hospital Charge Setting Practices i (2005). Currently, the relationship between charges and costs is ―tenuous at best.‖ Id. at 7. In fact, hospital exec utives reportedly admit t hat most charges have ―no relation to anything, and certainly not to cost.‖ Hall, Patients As Consumers at 665. 3 Thus, based on the realities of health care finance, we are unconvinced that the reasonable value of medical services is necessarily represen ted by either the amount actually paid or the amount stated in the original medical bill.

When dealing with a similar issue, our sister court in Ohio declared that, ―[t]he jury may decide that the reasonable value of medical care is the amount originall y billed, the amount the medical provider accepted as payment, or some amount in between . . . . both the original bill

3 Indeed, amicus in this case, the Insurance Institute of Indiana, I nc. , flatly says ―charges billed by health care providers are effectively irrelevant to the value of the services provided . . . .‖ (Amicus Br. at 8.)8

and the amount accepted are evidence relevant to the reasonable value of medical expenses.‖
Robinson , 857 N.E.2d at 1200

- 01. 4 We adopt this approach.

At issue in Robinson was the application of Ohio‘s common law ―collateral source rule‖ in a personal injury action. Id. at 1196. Ohio courts had recognized the collateral source rule
since 1970. Id. at 1199. The rule prohibited a jur y from being told about a plaintiff‘s receipt of payment for the plaintiff‘s injury from a source other than the defendant. Id. The court held that the collateral source rule was not applicable to the discounts to the medical bills because they

were not payments made by a third party to the plaintiff. Id. at 1200

- 01. The court did not ide ntify either the amount billed or the discounted amount paid as the appropriate evidence to be submitted to a jury as the reasonable value of medical expenses. Instead , the court determined that both values were relevant evidence that should be submitted to a jury to determine the re asonable value of medical services. Id. at 1200. The court recognized that, ―[b]ecause no one pays the negotiated reduction, admitting e vidence of [discounts] does not violate the purpose b ehind the collateral

- source rule. The tortfeasor does not obtain a credit because of payments made by a third party on behalf of the plaintiff.‖ Id.

The reasonable value of medical services is the m easure used to determine damages to an injured party in a personal injury matter. This value is not exclusively based on the actual amount paid or the amount originally billed, though these figures certainly may constitute ev idence as to the reasonable va lue of medical services. A defendant is liable for the reasonable value of the services. We find this to be the fairest approach; to do otherwise would create sep arate categories of plaintiffs based on the method used to finance medical expenses. See Ro bi nson , 857 N.E.2d at 1200 (discussing how its rule avoided the creation of separate categories of plaintiffs based on individ ual insurance coverage).

4 During the time at issue in Robinson
, Ohio‘s collateral source rule excluded evidence of benefit s paid by a collateral source. 857 N.E.2d at 1199

- 1200. Thus, the Ohio Supreme C ourt‘s decision was rendered under a collateral source rule different from our collateral source statute . However , we find nothing in its ruling inconsistent with the operation of our collateral source statute.9

Given the current state of the health care pricing system where, to repeat, authorities su ggest that a m edical provider‘s billed charges do not equate to cost , the jury may well need the amount of the payments, amounts billed by medical service providers, and other relevant and
admissible evidence to be able to determine the amount of reasonable medical expe nses. To a ssist the jury in this regard , a defendant may cross

- examine any witness called by the plaintiff to establish reasonableness. The defendant may also introduce its own witnesses to testify that the billed amounts do not represent the reasonable value of services. Additionally, the defendant may introduce the discounted amounts into evidence to rebut the reasonableness of charges i ntroduced by the plaintiff. W e recognize that the discount of a particular provider generally ari ses out of a contr actual relationship with health insurers or government agencies and reflects a
number of fac tors

– not just the reasonable value of the medical services . However, we believe
that this evidence is of value in the fact

- finding process leading to the determi nation of the re asonable value of medical services.

The collateral source statute does not bar evidence of discounted amounts in order to d etermine the reasonable value of medical services. To the extent the adjustments or accepted charges for medical services may be introduced into evidence without referencing insurance, they are allowed.

III

In accordance with Rule 413, Walker introduced his original medical bills as prima facie evidence of the reasonable value of medical services. He presented b illing statements showing gross charges of $11,570. 5 Stanley attempted to introduce evidence representing that ―other amounts of money actually represent the reasonable amount [for the medical expenses] . . . .‖ (App. 69.) Stanley argues that he was enti tled to demonstrate that the amounts paid and accepted by Walker‘s medical providers contradicted Walker‘s prima facie evidence of reasonable med i-

5 This Court has previously decided that ―statements‖ are equivalent to ―bills‖ or ―charges.‖ Cook , 796 N.E.2d at 277 . By one definition, a ―statement‖ shows the balance due. Id. ―[Rule 413‘s] refer ence to  ̳statements of charges‘ is in this sense.‖ Id.10

cal expenses. As discussed above, when there is a dispute as to the prima facie evidence of the
reasonable co st of medical expenses, the opponent may introduce contradictory evidence.

Stanley conceded that he ―[could not] ask Mr. Walker the amount of the expenses that were paid by [Anthem], that‘s the collateral source.‖ (App. 66.) Instead, Stanley contends that he wanted to enter into evidence the amount that two parties have agreed to as ―reasonable‖ as evidenced by the discounts. Stanley wanted to submit evidence to the jury that would show that the amount accepted in satisfaction of the medical charges t otaled $6,820, that is, $4,750 less
than the $11,570 originally billed. Because Stanley sought to do so without referencing insu rance, his evidence should have been admitted. The jury was instructed that:

The proper measure of damages for medical servi ces is the reasonable and fair value of medical expenses necessarily incurred by a Plaintiff. As such, the proper measure of damages for medical services is not the actual amount of med ical bills charged to a Plaintiff nor the amount of medical bills paid by a Plaintiff.
Statements of charges for medical, hospital or other health care expenses for diagnosis or treatment occasioned by an injury constitute prima [facie] ev idence that the charges are reasonable and fair.

App. 132.

The first two sente nces of this instruction were perfectly proper. But the third sentence was not. As just noted, the trial court should have allowed Stanley‘s evidence of the discounted amount actually paid. To the extent that the trial court included in the instruction reference to the amount initially billed as evidence of reasonable and fair value, it should also have referred to the discounted amount actually paid (after having earlier allowed that amount to have been a dmitted into evidence)

.

Conclusion

Because the amount at issue constitutes such a small percentage of the overall damages award, w e affirm the judgment and remand this case to the trial court with orders to reduce the11

damage award by $4,750

. If Walker will not ac cept this remittitur, he is free to ret ry the issue of damages before another jury.

Boehm, J., concurs with a separate opinion in which Shepard, C.J., joins.

Dickson, J., dissents with a separate opin ion in which Rucker, J., concurs

.12Boehm, Justice, concurring.

I concur in the majority opinion. I write separately to respond to some points that Justice
Dickson makes.

First, and obviously, we hold today only that the discounted price actually paid for med ical services is admissible evidence as to the reasonable value of those services. We do not hold that it is conclusive. Evidence Rule 413 provides that the bills for a medical service are admiss ible and are ―prima facie evidence‖ of the reasonable price for the service. Prima facie evidence is not conclusive and may be rebutted by other evidence. The issue thus is simply whether the discounted prices from sticker prices for to day‘s medical services are relevant under the Rules of
Evidence. I think it is obvious that they are, because they reflect the amounts that the providers are willing to accept for their services. As we all know, most but not all Americans have some
form of employer or group based health insurance

. See Carmen DeNavas

- Walt, Bernadette D. Proctor & Jessica C. Smith, U.S. Census Bureau, Income, Poverty, and Health Insurance Cove rage in the United States: 2007 at 19 (2008), available at http://www.census.gov/

prod/2008pubs/p60

- 235.pdf (―The percentage of people covered by e mployment

- based health insurance [was] 59.3 in 2007 . . . .‖). And, as the majority opinion e xplains, many of these plans include prices that are not trivially discounted from the stated pri ce that is rarely collected. Transactions at these discounted prices presumably constitute the major ity in the market for any service provided by physicians or hospitals, and in any case constitute a
sizable share of all transactions. Because these disco unted prices are the bulk of all pricing for a given service, I cannot conclude that they are irrelevant to determining the reasonable price of
that service.

Second, some managed health care programs confer some or all of the benefits to health care provi ders that Justice Dickson identifies as hidden additions to the discounted price to reach the real reasonable value of the services provided. But some of these

— prompt payment and avoiding collection costs

— are provided by credit card companies for relative ly insignificant charges compared to the discounts from sticker price for many health care services. I do not b elieve the most important of these

— access to a large population

— is properly considered as a be nefit conferred by the third party on the health c are provider. Rather, it is something the insured2

and the insurer have arranged to pool their bargaining power against the provider, and the pr ovider has agreed to sell at that bargained price. Moreover, many, including many of the largest insurers, do n ot control the insured‘s selection of the provider. By obtaining reduced prices for their insureds, they encourage the insureds to choose a participating provider, and by presenting this large pooled bargaining power, they obtain lower prices from the pro viders. But that does not suggest that these prices are not reasonable. To the contrary, because the majority of transa ctions occur at those prices, unless the providers are mispricing their services, these prices should be those that provide a reasonabl e compensation to the provider.

Third, Justice Dickson identifies a number of complexities he sees in establishing the re asonable price for the service if we do not take the sticker price as conclusive by holding ina dmissible evidence of the discounted pri ce. But if we were to choose between the sticker price that most people do not pay and the discounted price that most people do pay, we should hold that the sticker price is to be excluded from evidence as the less realistic evidence of the reaso nable val ue of these service s that the real market for them reflects. Cf. James McGrath, Ove rcharging the Uninsured in Hospitals: Shifting a Greater Share of Uncompensated Medical Care
Costs to the Federal Government , 26 Quinnipiac L. Rev. 173, 185 (2007) (noting that health care payment systems have rendered hospitals‘ list prices ―relatively meaningless‖).

Shepard, C.J., joins.1

Dickson, Justice, dissenting.

The majority holds that defendants in personal injury cases may introduce evidence of
reduced amounts actually paid and accepted to satisfy accounts for medical services under a rrangements between a plaintiff's insurer and the medical service providers "[t]o the extent the discounted amounts may be introduced without referencing insurance." I believe t his new rule

c ontra venes the express requirements of the collateral source statute, Ind. Code § 34

- 44

- 1

- 2 , and
is also unfair and undesirable judicial policy

.

Although only four thousand or so dollars is actually at stake in this appeal , t he majority's
de cision impacts more than just the calculation of medical expense damages that an injured plaintiff is entitled to receive from a defendant whose wrongful acts caused the injury . T he amount of reasonable medical expenses incurred by a plaintiff is an impor tant factor that infl uences juries in their assessment of additional general damages . As a plaintiff's medical expenses increase or decrease, a corresponding effect on the award of general damages is often observed. 1
It is thus not surprising that the am ici curiae Defense Trial Counsel of Indiana and Indiana Trial Lawyers Association are strongly asserting opposing views.

The Collateral Source Statute

The new rule established today, in my opinion, contravenes the express provisions of the
collateral so urce statute, which should control this case. The collateral source statute states: Sec. 2. In a personal injury or wrongful death action, the court shall allow the admission into evidence of: (1) proof of collateral source payments other than : ( A) payments of life insurance or other death benefits; (B) insurance benefits for which the plaintiff o r members of the plaintiff's family have paid for directly; or (C) payments made by: (i) the state or the United States; or (ii) any agency, instrumenta lity, or subdivision of the state or the

1 This practical reality finds additional confirmation from the defendant's assertion that "it's likely the jury's verdict of $70,000 was influenced by the level of medical expenses it erroneously believed Walker had incurred." Br. of Appellant at 8.2 United States; that have been made before trial to a plaintiff as compensation for the loss or injury for which the action is brought; (2) proof of the amount of money that the plaintiff is required to repay, incl uding worker's compensation benefits, as a result of the collateral benefits received; and (3) proof of the cost to the plaintiff or to members of the plaintiff's family of co llateral benefits received by the plaintiff or the plaintiff's family.

Ind. Code § 34

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- 1

- 2 (emphasis added). Creating an exclusion from the common law collateral source rule, the statute expressly allows evidence of certain collateral source payments, b ut e xplicitly declines to extend this admissibility to payments in the form of " insurance benefits for which the plaintiff or members of the plaintiff's family have paid for directly." Id. § 34

- 44

- 1

- 2(1)(B).

The defendant's appellate claim is that the trial court erred in excluding his evidence o ffered to show the "adjustments to t he [plaintiff's] medical bills." Br. of Appellant at 9. The r efused evidence consisted of an assortment of hospital and medical bills and statements of account revealing the amount of contractual write

- offs resulting from the plaintiff's insurance covera ge (Anthem Blue Cross Blue Shield) and the amounts actually paid in full satisfaction of the med ical bills by Anthem. Appellant's App'x at 73

- 86. The plaintiff testified that he had paid the A nthem insurance premiums. Id. at 56.

The collateral sourc e statute expressly declines to authorize the admission of evidence of payments in the form of "insurance benefits for which the plaintiff or members of the plaintiff's family have paid for directly." Ind. Code § 34

- 44

- 1

- 2 (1)(B). The trial court's exclus ion of the defendant's evidence in this case was thus consistent with the statutory requirements. T he rule pronounced by today's opinion, which invites admission of "discounted amount[s] actually paid," Maj. slip op. at 2 , seems diametrically opposed to t he statute's c lear and unequivocal language. Statutory modification or nullification is best left to the General Assembly.

I also dissent to express my disagreement with the majority's statement that the collateral source statute abrogate d the common la w collateral source rule. Supra at 4. The statute contains no words expressly abrogating the common law collateral source rule. Rather , the statute's pr ecise language appears to create a limited exception to the common law rule, which is otherwise3

left intact. From the statute's "the court shall allow" and "other than" language, I understand t he statute merely to modify the c ommon law rule to allow the admission of some collateral source payments but to deny this admission to life insurance, other death benefits, insurance benefits paid for by the plaintiff and the plaintiff's family, and government payments, thus leaving the common law rule in place as to these. The statute establishes a carefully crafted exception to the rule that narrowly allows only collateral source payments "other than" payments of benefits co nferred from a plaintiff's own insurance or from government payments.

This interpretation of the collateral source statute seems conclusively governed by our
well

- established jurisprudenc e for determining the impact of a statute on existing common law: When the legislature enacts a statute in derogation of the common law, this Court pr esumes that the legislature is aware of the common law, and does not intend to make any change therein b eyond what it declares either in express terms or by unmistakable impl ication. In cases of doubt, a statute is construed as not changing the common law.
Bartrom v. Adjustment Bureau, Inc. , 618 N.E.2d 1, 10 (Ind. 1993) (internal citations omitted). In
l ine with this bedrock principle, this Court consistently construes statutes in derogation of the common law strictly and applies them narrowly in a variety of contexts. See, e.g. , Dunson v.
Dunson , 769 N.E.2d 1120, 1124

- 25 (Ind. 2002); McKnight v. State
, 658 N.E.2d 559, 562 (Ind. 1995); McQuade v. Draw Tite, Inc. , 659 N.E.2d 1016, 1018 (Ind. 1995); Ind. State Highway
Comm'n v. Morris
, 528 N.E.2d 468, 473 (Ind. 1988); Loftus v. State , 222 Ind. 139, 143

- 44, 52 N.E.2d 488, 490 (1944).

Given the controvers ial and significant evidentiary issues involved in the collateral source rule and any modification thereof, I am convinced the General Assembly carefully b alanced strongly asserted competing interests and crafted statutory language to reflect a legisla tiv e intent to delicately modify but not abrogate the common law rule. 2

2 There is unfortunate language in Shirley v. Russell , in which this Court unanimously but gratuitously commented that the collateral source statute "abrogated the common law collateral source rule." 663 N.E.2d 532 , 534 (Ind. 1996). I am now convinced that this statement was both mistaken and unnecessary. Shirley involved a wrongful death action in which there was evidence that a decedent and his widow fore went a substantial portion of their pension in considerati on of a survivor benefit . T his Court f ou nd that the survivor annuity payment, "though perhaps not insurance for tax or regulatory purposes, has sufficient hallmarks of insurance to be deemed such for purposes of the new collateral source rule statute," an d was therefore "not admissible in [the] estate's wrongful death claim." Id. at 536 (citing Ind. Code § 34

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- 1

-4

A s to the defendant's sole appellate claim that the trial court erroneously excluded his evidence of discounted payments for medical services, I believe that the trial court properly fo llowed the collateral source statute and that the resulting judgment should be af firmed.

Unfair and Undesirable Judicial Policy

I also oppose the new rule because it is incomplete, misleading, and unfair, and will add layers of complexity, time, and expense to personal injury litigation, impairing the efficient a dministration of justice.

The majority acknowledges that the proper measure of medical expense damages for a personal injury plaintiff is the reasonable value of such expenses but conclud es that the comple xity currently surrounding the state of health care pricing systems 3 favors giving defendants new tools, namely the evidence of discounted payments for such services, to challenge the plaintiff's evidence of presumptively reasonable medic al expenses under Indiana Evidence Rule 413.

The new rule fails to take into account, however, that these contractual discounts confer significant benefits upon medical service providers in addition to just the cash received in di scounted payments. In exchange for medical services, providers receive not only the insurer's payments, but also the pecuniary value of numerous additional benefits, among which are prompt payment, assured collectability, avoidance of collection costs, increased administrative efficiency, and significant marketing advantages.

2 (1)(B)). Th e application of the statute in Shirley i s thus entirely consistent with the trial court's decision to exclude the discounted insu rance benefit payments in the present case.

3 T he majority opinion , the concurrence, and this dissent discuss information from resources that are not part of the record of proceedings of this case. Indiana Code of Judicial Conduct Rule 2.9(C) declares th at judges "shall not investigate facts in a matter independently, and shall consider only the evidence pr esented and any facts that may properly be judicially noticed." And Comment [6] explains that this proh ibition "extends to information available in al l mediums, including electronic." I understand this Rule's reference to the "facts in a matter" to mean the specific facts relating to the incident upon which a lawsuit is based, but that the Rule does not restrain appellate consideration of other general information helpful to the function of appellate courts in statutory interpretation and the advancement determination of common law.5

It is widely recognized that, by agreeing to reduced rates, providers gain significant a dministrative and marketing advantages, "including a large volume of business, rapid payment, ease of collection, and occasionally advance deposits." Lawrence F. Wolper, Health Care A dministration: Planning, Implementing, and Managing Organized Deli very Systems 553 (4th ed. 2004); s ee also
, e.g. , Arnold Birenbaum, Managed Care: Made in America 22 (1997) ("[Di scounti ng] guarantees the hospital that a certain number of beds will be occupied."); William O. Cleverley & Andrew E. Cameron, Essentials of Health Care Finance 301 (6th ed. 2006) (di scounting attracts new blocks of patients); Steven R. Eastaugh, Health Care Fin ance: Economic Incentives and Productivity Enhancement 97 (2006) ("PPOs [preferred provider organizations] have an intuitive appeal as a mechanism for attracting fixed blocks of business. . . . Taking on PPO patients is analogous to taking credit card busi ness in that you absorb the 3, 6, or 9 percent discounts in hopes of increasing the volume of new users to the hospital. . . . Generating new sources of revenues and new users of the hospital . . . is the desideratum."); Shahram Heshmat,
Framework for Mark et

- Based Hospital Pricing Decisions 10 (1993) ("In return for obtaining pr eferred status (which is designed to increase the volume of business), providers make their servi ces more attractive to payers through means such as discounting . . . ."); Peter R. K ongstvedt, The Managed Health Care Handbook 32 (4th ed. 2001) ("[A] PPO may commit to pay all clean claims submitted by its providers within 15 days of submittal in return for a larger discount from charges."); Rockwell Schulz & Alton C. Johnson, Managemen t of Hospitals and Health Services: Strategic Issues and Performance 40 (2003) ("The advantage to the [provider] in joining a PPO is access to more patients while retaining [a fee

- for

- service payment mechanism]."); Paul B. Gin sburg, The Dynamics of Market

- Level Change , 22 J. Health Pol. Pol'y & L. 363, 371 (1997) ("Managed care plans have pursued a number of strategies," including "to take advantage of scale economies in marketing and administration, and to increase market power in relation to both purchase rs and providers."); Robert J. Kulak, Preferred Provider Organizations: On the Cutting Edge of Medical Delivery System Change , 2 Benefits Q. 4, 4

- 5 (1986) (in return for agreeing to provide services at previously negotiated rates, "providers can expect an increase in their market share, prompt payment and a reduction of administrative detail").

Even the A mic us Defense Trial Counsel of Indiana, which supports the defendant in this6

case, acknowledges that: Discounted fee arrangements between healthcare providers and insurers are for their m utual benefit. Providers "discount" from their "customary rate" for managed care patients for a reason

– to be included on a list of preferred network providers from which the m anaged care plan members are permitted t o obtain healthcare without prior approval from the insurance company. Thus, providers bargain for a large panel of patients who are, to some extent, directed to them by the insurance company in exchange for discounting or writing

- off their "customary" ra tes. The insurance company essentially obtains a bulk discount on medical services for the plan members. The insurers pass their savings onto the plan members in the form of lower premiums, which helps them attract more custo mers, representing even more potential business for providers.

Br. of Amicus Curiae Defense Trial Counsel of Indiana in Supp. of Appellant's Pet. for Transfer
at 9

- 10 (internal cit ation omitted).

As recognized by the Virginia Supreme Court, "amounts written off are as much of a
b enefit for which [the plaintiff] paid consideration as are the actual cash payments made by his health insurance carrier to the health care providers." Acuar v. Letourneau , 531 S.E.2d 316, 322 (Va. 2000)

.

The majority acknowledges that other jurisdict ions "have considered this issue with var ying results." S upra at 5 . Other observers, however, have more precisely recognized "the clear majority view" as that which permits injured plaintiffs "to claim and recover the full amount of [their] reasonable me dical expenses for which [they were] charged, without any reduction for the amounts apparently written off by [their] healthcare providers pursuant to contractually agreed

upon rates with [their] medical insurance carriers." Lopez v. Safeway Stores, Inc.
, 129 P.3d 487, 496 (Ariz. Ct. App. 2006) (emphasis added). Similarly, Professor Dobbs explains, "In line with the basic measure of damages

— the reasonable value of the medical services rendered

— most courts passing on the issue in recent years have made rul ings that permit the plaintiff to prove all of the reasonable medical charges, even though some of those charges were waived by the pr ovider ." 4 2 Dan B. Dobbs, The Law of Torts § 380, at 132

- 33 (2001 & supp. 2005) (emphasis

4 The bulk of courts appear to agree that reduced payments under arrangements between a plaintiff's i nsurer and the me dical service providers are not admissible as evidence of reasonableness of the medical services because they constitute a collateral source. Acuar v. Letourneau , 531 S.E.2d 316, 321

- 23 (Va. 2000); s ee, e.g. , Ba ptist Healthcare Sys., Inc. v. Miller , 177 S .W.3d 676, 683

- 84 (Ky. 2005); Onusko v.7

added). This dominant view com ports with the fundamental purpose of the common law coll ateral source rule: "to prevent a tortfeasor from deriving any benefit from compensation or i ndemnity that an injured party has received from a collateral source." Acuar , 531 S.E.2d at 322. "[T]he focal point of the collateral source rule is not whether an injured party has 'incurred' ce rtain medical expenses. Rather, it is whether a tort victim has received benefits from a collateral source that cannot be used to reduce the amount of damage owed by a tortfeasor." Id.

Thus, i f we authorize consideration of the amount of discounted payments as evidence of the reasonable value of a plaintiff's medical services, juries will receive a distorted, misleading, and incomplete picture unless they are a lso able to consider the pecuniary value of all the ben efits conferred upon health care providers in their symbiotic exchange with medical insurers

. While today's new rule does not foreclose the admission of such essential evidence, its gathering and pre sentation will significantly b urden both injured plaintiffs and efficient judicial administr ation. A new level of discovery w ill be needed to determine and qu antify the value to providers.
Plaintiffs w ill be required to expend considerable resources to m arshal and present such ev idence
, thereby prolonging trials

. N ew appellate issues w ill result. Not the least of these will be the challenge of devising a methodology to implement the majority's caveat that discounted amounts may be introduced only if don e "without referencing insurance." Supra at 2, 9. R egar d less of the technique used , it seems virtually impossible to deceive the common

- sense inference of juries that insurance is the source of any discounted amounts paid to satisfy medical care

accounts

.

This all seems very unnecessary. Under today's new rule, the existence and extent of any improvement to the accuracy of verdicts seems overwhelmed by the significant probability of incompleteness, confusion, and resulting unfairness, all further compo unded by detrimental e f-

Kerr , 880 A.2d 1022, 1024

- 25 (Del. 2005); Bozeman v. Louisiana , 879 So.2d 692, 70 4

- 0 5 (La. 2004) (embracing this rule "for plaintiffs who have paid some consideration for the collateral source benefits"); Covington v . George , 597 S.E.2d 142, 144 (S.C. 2004); Hardi v. Mezzanotee , 818 A.2d 974, 985 (D.C. 2003); Wal

- Mart Stores, Inc. v. Frierson , 818 So.2d 1135, 1139

- 40 (Miss. 2002); Koffman v. Leichtfuss
, 630 N.W.2d 201, 209

- 10 (Wis. 2001); Montgomery Ward & Co. v. Ande rson , 976 S.W.2d 382, 384

- 85 (Ark. 1998) (addressing gratuitous and discounted medical services); Goble v. Frohman , 848 So.2d 406, 410 (Fla. Dist. Ct. App. 2003); Olariu v. Marrero , 549 S.E.2d 121, 123 (Ga. Ct. App. 2001); Brown v. Van Noy , 879 S.W.2d 667, 676 (Mo. Ct. App. 1994). Cf. Bynum v. Magno , 10 1 P.3d 1149, 1160

- 62 (Haw. 2004).8

fects on the fair and efficient administration of justice. These negative aspects can easily be avoided, without sacrificing fairness and justice, by recognizing that when medical providers agree to accept discounted amounts, the ex tent of the discount presumably reflects the value of the tangible and intangible benefits the providers receive in return

.

For these reasons, I favor adherence to the common law collateral source rule, as narro wly modified by Indiana's collateral sour ce statute, both of which were properly applied by the tr ial court in this case.

The Jury Instruction Correctly Stated the Law

I also disagree with the majority's observation that it was improper to instruct the jury that "[s]tatements of charges for medical, hospital or other health care expenses for diagnosis or treatment occasioned by an injury constitute prima [facie] evidence that the charges are reason able and fair." Supra at 10. This instruction closely tracks Rule 413, which provides: "Stat ements of charges for medical, hospital or other health care expenses for diagnosis or treatment occasioned by an injury are admissible into evidence. Such statements shall constitute prima f acie evidence that the charges are reasonable." Ind. Evid. R. 41 3. I do not think a trial court errs by accurately instructing a jury as to what this Court's own rule establishes, especially when the record reflects no objection at trial by the defendant, when the defendant does not challenge the instruction on appeal , when the defendant agrees that the instruction accurately recited Rule 413, and when the defendant approvingly describes the instruction as "the proper measure of dama ges." See Br. of Appellant at 1, 6, 11.

"Statements of Charges" in Evidence Rule 41 3

Finally, to the extent the majority in its footnote 4 implies that "statements of charges" in Rule 413 are merely equivalent to "a financial account showing a balance due," I disagree. This Court mentioned this "[o]ne definition of 'statement'" only i n passing when deciding that Rule
413 does not allow the admission of "future estimates of costs." Cook v. Whitsell

- Sherman , 796 N.E.2d 271, 277 (Ind. 2003). Cook did not hold that Rule 413 allows admission of statements of9

a remaining balance due after discounted payments, and such a holding would be inconsistent with Rule 413's purpose.

The measure of damages for medical services is not the actual expenses incurred, nor is it the actual amount paid for such services, but is instead the reasonable va lue of the medical se rvices rendered. As we noted in Butler v. Indiana Department of Insurance : Under well

- established principles of Indiana tort law, the extent of recovery by an injured plaintiff for medical expenses depends not upon what the plaintiff paid for such services but rather their reasonable value. Brosnan v. Sweetser , 127 Ind. 1, 9, 26 N.E. 555, 557 (1891); see also Penn. Co. v. Marion , 104 Ind. 239, 3 N.E. 874 (1885) (gratuitous med ical services); City of Indianapolis v. Gaston , 58 Ind. 22 4 (Ind. 1877) (same); Herrick v. Sayler , 160 F. Supp. 25, 27

- 30 (N.D. Ind. 1958) (collecting cases and finding it "apparent that the law of Indiana will allow a plaintiff in a personal injury action to recover . . . the reasonable and fair value of medical expenses").
904 N.E.2d 198, 202 (Ind. 2009). Given that plaintiffs must prove the reasonableness and nece ssity of medical expenses, Rule 413 operates to simplify proof, obviating the expensive and time

consuming practice of calling witnesses to testif y on issues that distract from principal matters at trial and substituting a statement of charges as prima facie proof of the reasonable value of me dical service expenses. Cook , 796 N.E.2d at 277

- 78. I therefore disagree with the majority's i mplication t hat "statements of charges" in Evidence Rule 413 refers to a statement showing the balance due after receipt of an insurer's discounted payment pursuant to a pre

- existing insurer

provider agreement.

Conclusion

For the reasons expressed above, I disse nt. But since the majority has chosen a new path, I find not unreasonable the procedural template implied and approved by the actual holding in today's majority opinion. The discounted medical expenses actually paid by the plaintiff's insu rer are conside red post

- verdict, without the jury's general damage assessment having been cont aminated with such information and the almost inevitable resulting implication that the plaintiff
received insurance benefits. This avoidance of toxic evidence is parallel to t he pro tanto post

verdict adjustment procedure we have approved when a plaintiff has received a pre

- verdict pa rtial settlement. See, e.g. , Morris
, 528 N.E.2d at 473

- 74.10

Rucker, J., concurs.