Key Decisions

July 2013 – A Hospital Must Prove Services Were Reasonable And Necessary

(filed under: Key Decisions | July 22, 2013)

A Hospital Must Prove Services Were Reasonable And Necessary

State Farm Mutual Automobile Insurance Company v. Huff
(Cal. Ct. of App., 4th Dist.), filed June 11, 2013, published June 11, 2013

KEY FACTS

Michael Huff sustained serious injuries in a motor vehicle collision involving Steven and Matthew Wilkins.  Huff was taken to Pioneers Memorial Hospital.  Huff received treatment for his injuries over the course of seven days.  At the time of discharge, Huff owed the hospital $34,320.86 for medical services.  The hospital never received payment for these services.

Huff sued the Wilkinses and was awarded $356,587.92 in damages.  The jury found that Huff’s past medical expenses totaled $232,708.80.

Shortly after entry of judgment, a collection agency acting on behalf of the hospital sent the Wilkinses’ insurer, State Farm, a written notice pursuant to the Hospital Lien Act that the hospital was claiming a lien in the amount of $34,320.86 on any damages State Farm might pay Huff.  Huff disputed the amount of the lien and demanded that State Farm pay the entire judgment amount to him and his attorneys.

State Farm filed an interpleader action to see who was entitled to the disputed funds.  The trial court ruled in favor of the hospital.

HOLDING & REASONING

The Court of Appeal reversed.

The court observed that the Hospital Lien Act does not specify who has the burden of proving what services were reasonable and necessary.  However, relying on basic principles of law, it ruled that the hospital was required to prove the charges for the services it provided Huff were reasonable and necessary.

The court held that putting the burden on a hospital would not impair its lien rights.  It noted that “[w]ith ready access to the injured person’s medical records and to health care professionals and others competent to assess the need for and cost of medical treatment (and in some cases to evidence on these matters introduced in a related personal injury action), the hospital should have little difficulty meeting that burden.”

Since the hospital submitted no evidence to establish the reasonableness or necessity of its charges, it had not met its burden and was not entitled to payment.

ANALYSIS

This case may make it more costly for medical providers to recover for services.  It could also give personal injury plaintiffs added leverage in negotiating lien claims.