# FILED
Au gust 8, 1996 Cecil Crowson, Jr . App ellate C ou rt Clerk IN THE COURT OF APPEALS OF TENNESSEE WESTERN SECTION AT JACKSON

________________________________________________ CASSANDRA HUGHLETT, Plaintiff-Appellee, Vs. C.A. No. 02A01-9505-CV-00118 Shelby Circuit No. 40395 T.D. SHELBY COUNTY HEALTH CARE CORPORATION, REGIONAL MEDICAL CENTER AT MEMPHIS a/k/a THE MED, ET AL, Defend ant-App ellant.

___________________________________________________________________________

FROM THE CIRCUIT COURT OF SHELBY COUNTY THE HONORABLE ROBERT L. CHILDERS, JUDGE

Gavin M. G

entry of Memphis For Defendant-Appellant Louis P. Chio zza, Jr ., of Memphis For Plaintiff-Appellee

AFFIRMED AND R

EMANDED Opinion fi led:

W. FRANK CRAWFORD,

PRESIDING J

UDGE, W.S.

CONCUR:
DAVID R.FARMER,

JUDGE HOLLY KIRBY L ILLARD, JU DGE
The sole iss ue in this case is whether a plaintiff in a medical malpractice a ction may recover from a defendant he alth care provider the amount of plaintiff’s medical expenses paid by the Te nnessee Medicai d progra

m which is a

part of th e feder al socia l securit y progra m.1 The Unive rsity of T ennesse e Medica l Group, I nc., wasinitially n amed as a defenda nt, but was la

ter dismis sed and isnot involve d in this ap peal. 2 On April 9, 1991, plaintiff Cassandra Hughlett u

nderwe nt a cesa rean se ction to a

id in the birth of her child. Her

complain t against defenda nts, Shelby

County Health Care Corporation, Regional Me dical Cent er at Memphis, a/k/a “The Med,” and the University of Te nnessee Medical Group, Inc., alleges that at some point during the course of the surgery, a surgical sponge and/or “ lap pack

” was pla ced in the plaintiff ’s abdome

n and wasn ot r emoved at the conclusion of the surgical procedure. The comp laint ave rs that sub sequent t

o her discharge from the hospital, the plaintiff

experienced severe pain asa result of the sponge and/or lap pack, and that she was readmitted to the hospital to remove the “foreign body.” Plaintiff alleges that the defenda nts 1 were negligent

i n their provision of medical treatment to her and that such negligence was a proximate cause of the h er injuries. The defendant’s answer denies any negligence and jo ins issue o n the mate rial alle gations of

the compl aint. “The Med” filed a moti on in limine to exclude evidence of the plaintiff’s medical expenses paid for

by social security benefit s. At the hearing on the motion in limine , counsel for the parties a

nnounce d that a se

ttlement h ad been

reache d betwee

n the par ties, and that the o nly issue remaining for decision was the question of whether the plaintiff could recover $6,777.17, the amount

of the Me dicaid pa

yments, f rom the de

fendant s. The tri al court

held that the amount of the Medi caid payments made to, or on behalf of, plaintiff as a re sult of her injuries wer e
recove rable from the d

efenda nts, and by

order e ntered M arch 2, 1 995, the c ourt en tered judgment for the plaintiff in the amount of $6,777. 17. Shelby County Health Care Corporation has appeale d and pre sents the following

issue for review: Whether or not social security

benefit s are included in Tennessee Code Annotate d § 29-26- 119 as a c ollateral source? Or, stated another way: Whether or

not the pla

intiff in a medical malpractice
case can r ecover from the defendant the amount of plaintiff’ s medical e xpenses p aid for b y social s ecurity benefit s.

The issue in this case requires an interpretation of T.C.A. § 29-2 6-119 (1980 ), which3

provides : 29-26-119. Damages. - In a malpractice action in which lia bility is admitted or established, the damages awarde d may incl ude (in addition to other elements of damages authorized by law) a ctual eco nomic l osses suffered by the claimant by reason of the personal inju ry, i ncluding, but not limited to cost of reasona ble and necessary medical care, rehabilitation services, and custodial care, loss of services and loss of earned income, bu t o nly to the extent that such costs are not paid or payable and such losses are notrepl aced, or indemnified in whole or in part, by insurance provided by a n empl oyer either governmental or private, by social security benefits, servi ce benefit programs, unemployment benefit s, or any other source except the assets of the claimants or of the members of

the claimants’ imme diate fa mily and insurance purchased in whole or part, privately and individually. The medical expense payments were made pursuant to Tennessee’s “Medical Assistance Act of 1968" codified as T.C.A. § 71-5-101, et seq. (1995). The 1968 Act is intended “to make possible medical assistance to those recipients determined to be eligible unde r this chap ter to receive medical a ssistance that conf orms to the

require ments of title

XIX of th

e Social Security Act [codified in 42 U.S.C. 1396 et seq. (1992 & Supp. 1996)] and the regulations promulgated pursuant thereto.” T.C.A. § 71-5-102 (1995). T.C.A. § 71 -5-117 pr

ovides in p art, per

tinent to th

e issue be fore us: 71-5-117. Recovery of benefits - State’s right of subrogation - Assignment

of insuranc

e benefit rights - Co mmissioner authorized to requir

e cert ain inform ation ident

ifying per

sons covered by third parties - State’s right of action. - (a) Medical assistance paid to, or

on behalf

of, any r

ecipien t c ann ot be recovered from a beneficiary unless such assistan ce has been incorre ctly paid, or, unless the recipient or beneficiary recovers or is entitled to recover

from a thi

rd party reimburs ement fo

r all or part of the costs of care or treatment for the injury or illness for which the medical assistance is paid. To the exte nt of paym

ents of medical assistanc e, the sta te shall be subrogat ed to all rights of recovery, for the cost of care or treatment

for the in jury or ill ness for which med

ical assi st ance is provided, contractual or otherwise, of the recipients against any person
. Medicai d payments to the provi der of the medical services shall not be withdrawn or reduced to recover funds obtained by the recipient fro m third parties for medical services render ed by the prov ide r if these fund s were obtained without the knowledge or direct assistance of the provider of medical assistance. When the state asserts its right to subrogation, the state sha ll notify the

recipie nts in language understandable to all recipients, of rec ipient’s rights of recovery against third parties and that recipient should seek the advice of an att

orney re garding t

hose righ ts of recovery to which recipient may be entitled. 42 U.S.C. § 1 396a (Sup

p. 1996) s tates in pe

rtinent pa rt:4 1396a. State plans for medical assistance (a) Contents A state plan for medical assistance must --

* * * (25) provide -- (A) that the Sta

te or loc al agency administe ring such plan will take all reas onable me asures t o ascer tainthe legal liability of third parties (including health

insurer s, group health plans (as defined in s ectio n 607(1) o f the Empl oyee Ret irement I ncome Sec

urity Act of 1974 [29 U.S.C.A. § 1167(1)]), service benefit plans, and health maintenance organizations) to pay for car e and ser vices available under the plan, including-- (i) the collection of sufficient information (including the use of information collected by the M edicare and Medic aid Coverage Data Bank

under section 1320b-14 of this title and any additional information as specified by the S ecreta ry in regulat ions) to enable

the State to pursue claims against such third parties, with such information being collected at thetime of any de termination or rede

terminat ion of elig ibility for

medic a l assistance, and (ii) t he sub mission to the Secre tary of a plan (sub ject to the approva

l by the Secretary) for pursuing claims against such third parties, . . . .

* * * (B) that in any case where such a legal li ability is f

ound to exist after medical a ssistance

has been made ava ilable on behalf of the individual and where the amount of reimbursement the State can reasona bly expect to recover excee ds the costs of such recovery, the State or local agency will seek r eimbur sement for such assistance to the extent of such legal liability . . . . The Med assert s that Medicaid payments are a part of social sec urity benefits and that “the wording of the statute [T.C.A. § 29-26-119] is clear that plaintiff cannot recover medical expenses paid for by social security benefits.” Our Supreme court

was faced with a similar issuein Nance by Nance v. Westside Hosp. , 750 S.W.2d 740 (Tenn. 1988). In Nance , the Court considered the question of whether worker’ s compensation benefits wereincluded within the scope of T.C.A. § 29-26-119. Plaintiff Nance sustained a back injury during the course of his employment with Stauffer Chemical Company. Durin g surgery

to repair a damaged disc, he

suffer ed an ad verse r eaction to an ane sthetic resulting in serious permanent injuries. The plaintiff’s guardian brought a medical malpractice suit against the hospital and other health care providers. Stauffe r Chemical interve

ned in the suit in order to assert its statutory subrogation lien for worker ’s compe

nsation be

nefits pa id to and5

for Nance. The defendants asserte d that under T.C.A. § 29-26-119, the worker’s compensation benefits “paid or payable” to the plaintiff constituted

collater al sourc e benef

its that we

re not recovera

ble against the defendant s. The Courtdetermined that although worker’s compensa tion benefits are

not speci fically provided for in T.C.A. § 29-2 6-119, such benefits are included in the genera l wording “any other source,” because worker’ s compensation benefits are within the same c lassificat ion of benefit s specified in the statute. The Court held that the plaintiff could recover f ro m t he defenda nts the amount of

worker ’s compe

nsation be

nefits pa id to, or on

behalf of, the plaintiff. The Court stated:

[W]e think the Legislature intended to exclude worker’s compensation benefits from the scope of T.C.A. § 29-26-119 by the inclusion of the modifying phrase “and such losses are not replaced, or indemnified.” Inorder to mitigate the damages, the statute require s th at the benefit s be paid o r payabl e and als o indemnify or replacethe tort victim’s losses. That phrase avoids a double recovery by tort victims and also remov es from the statute any collateral source that has subrog ation rights. Where benefit s carry a right of subrogation and a legal obligation on the part of the tor

t victim to r

epay the colla teral source, the tort victim’s losses have not been replaced or indemnified. Nance , 750 S.W.2d at 743. We view the decision in Nance as dispositive of the issue before us. The Med, however, contends that Nance is distinguishable because worker’s compensation be nefits ar e not specified in the statut

e, while s ocial se curity be nefits are so specified. This distinction is tenuous at best. T he Nance Court held that the specifically listed benefits in T.C.A. § 29-26-119 are in the classification of “collateral source benefits,” a nd that worker’s compensation benefits are in the
sameclassification. Thus, the statutory language “any other source” includes worker’s compensation benefits. Defend ant also

asserts t hat pursu ant to T.C. A. § 71-5- 117, the st ate has o nly a right of subrogation, and, therefo re, if the re cipient o f the med ical assi stance c annot re cover, t he state cannot recover. We must

respectfully disagree. The Nance Court held that where there is a right of subrogation, or a legal obligation on the part of the tort victim to repay the collateral source,2 For similar results, see Lusby by and through Nichols v. Hitchner , 642 A.2d 1055 (N.J
. Super. Ct. App. Div. 1994), Marmorino v . Housing Author

ity of the C

ity of Ne wark , 461 A.2d 171 (N.J. Super. Ct. LawDiv. 1983).
6 the victim’s losses have not been “replaced or indemnified,” and, there fore, the bene

fits so pai d
are recove

rable by the pla

intiff. W e fail to find a meaningful distinction between the nature of the benefits paid in Nance and the benefits paid in the case at bar. Defendant

argues that

the right to recover theamount of the Medicaid payments is based solelyon subrogation pursuant to T.C.A. § 71 -5-117, a nd that since the r

ecipien t’s claim is barred by T.C.A. § 29-26-119, there ca n be no claim by the subrogee. Defendant may have overlookedthe provi sio ns of 42 U .S.C. 1396a (a) 25(A) which

mandate s that Med

icaid payments to a tort victim should be b orne by the tor tfeasor when possible. The effect of 42 U.S.C. § 1396a (a) 25(A) was considered in Harlow v. Chi n , 545 N.E.2d 60 2 (Mass. 1989), where the plain

tiff brou ght a medi cal malpr actice action a gainst a doctor based

on the doctor’s failure to diagno se a her niated di sc in the p laintiff ’s back. Plaintiff

had rec eived Me dicaid benefit s and defendant argued that the Medic aid payme

nts constit

uted coll ateral s ource be

nefits under the Massachusetts medical malpractice statute, and, therefore, plaintiff could not recover the amount of the Medicaid payments from the defendant. In holding that the amount of th e Medicaid payments were recovera ble, the Supreme Judicial Court of Massachusetts stated: A Federal

s tatu te requires that States receiving Federal funds must pursue r ecover y of the f

unds from

legall y liable third pa rt ies. 42 U.S.C. § 1396a (25) (1982). A Federal regulation requires the State

to reimbur se the Fed

eral gov ernment

a proportion of such recovery. A State statute d uly prov ides for recovery from thir

d parties and subrogation of the plaintiff’s claim. The defendants argue with regard to Medicaid benefits that there is no right of sub rogatio n “based in any federal law” within the meaning of G.L. c. 231, § 60G(c). We disagree . The Federal statute implementing partial rei mbu rsement o f State Me dicaid program s mandates that any State r eceiv ing these funds must pursue reimbursement from legally liable third parties. The fact that technic ally a Sta

te st atu te provid

es for the subroga

tion is irrelevant
. Because

the Co mmonwealth’s pursuit of reimbursement

is required by Federal law, the r ight o f subrogation is “based in” Federal law. 545 N.E.2d at 610 (citations and footnotes omitted). 27 At issue is whether the Medicaid program or the defenda nthealth care pr ovider sh ould bear the costs of Medicaid payments made to the injured tor t victim . Both federal law and T.C.A. § 71-5-117 requi re reimburs ement of Medicai d payment s by respo nsible thir d partie s. In Nance , the worker ’s compe nsation sta

tute accomplished the same purpose. In the case a t bar,
as in Nance , the plaintiff’s “losses are not replaced or indemnified in whole or in part.” Nance removes any doubt that benefits falling in this category are rec overable. The judgment of the trial court is affir med, and the case is remanded for such fur ther procee dings as ma

y be nec essary. Costs of the appeal a re asse ssed aga

inst the ap

pellant.

_________________________________ W. FRANK CRAWFORD, PRESIDING J

UDGE, W.S. CONCUR:

_________________________________ DAVID R.FARMER,

JUDGE

_________________________________ HOLLY KIRBY L ILLARD, JU DGE