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Posted on Jun 18, 2020 in Articles

A medical funding company (“MFC”) is an entity which pays for the medical treatment of injured plaintiffs. They are typically paid back when those plaintiffs settle or obtain a verdict in their favor. MFCs make their money by contracting with doctors in advance of the treatment provided to pay less than the amount the doctors charged the plaintiffs. For example, an MFC will agree to send patients to a surgery center and pay the surgery center less than 20% of the surgery center’s charged amount. The surgery center then releases any further claims it has for payments, although the patient is bound to pay the MFC the full “charged” amount. While MFCs take the position that they serve a legitimate and helpful purpose, an incentive exists to steer plaintiffs towards doctors who will provide unnecessary treatment at inflated prices with the intention of maximizing the MFC’s profit. The result is increased costs passed along to consumers in the form of higher insurance premiums, doctor’s bills, and legal fees. At present, there are no regulations or laws specifically relating to MFCs. Furthermore, MFCs have taken the position that the Georgia collateral source rule provides a blanket opportunity to hide the details of the involvement of MFCs in litigation. However, the collateral source rule does not necessarily shield evidence of MFC involvement from discovery.

One does not have to think too hard to see why the relationship between doctors and an MFCs are ripe for abuse. MFCs’ profits depend on the amount and total cost of treatment rendered. Similarly, doctors have incentive to overtreat or overcharge – giving the MFCs increased profits. In turn, the MFCs continue to funnel patients to the doctor’s office. Justice and fairness require that evidence of improper MFC influence should be admissible during trial. At the very least, evidence of MFC involvement should be discoverable so that defendants have an opportunity to evaluate potential abuse. Recent case law shows that the collateral source rule does not absolve MFCs from the responsibility to disclose the details of their arrangements during the discovery process.

The collateral source rule is intended to ensure that plaintiffs recover the full value of their injuries without a jury being improperly influenced by the fact that a plaintiff‘s insurance paid for a portion of the bills. In Georgia, the collateral source rule “bars the defendant from presenting any evidence as to payments of expenses of a tortious injury paid for by a third party and taking any credit toward the defendant’s liability and damages for such payments.”1 (emphasis added). The purpose for which evidence of third-party payments is offered is crucial. Indeed, the Georgia Supreme Court has long held that evidence of third-party payments is inadmissible “if the only proposition for which it is offered is in reduction of damages . . . .” 2 However, there may be another issue in a case to which evidence of collateral source benefits [a third-party payment] is material.”3 An MFC or doctor cannot simply cite the collateral source rule and refuse to respond to discovery.

WellStar Kennestone Hospital v. Roman, 344 Ga. App. 375 (2018) is a Georgia case showing that the collateral source rule alone is not a sufficient excuse to dodge discovery. The case stems from a defendant suspecting a hospital was charging patients differently depending on whether patients were insured, received Medicare/Medicaid, and other factors. The defendant sought to take the deposition of a hospital representative regarding differences in how patients were charged. The hospital tried to prevent the defendant from asking about these discrepancies during the deposition. The hospital reasoned that the collateral source rule rendered information about how much a hospital would “write-off” inadmissible and, therefore, non-discoverable. The Georgia Court of Appeals, in upholding the trial court’s denial of the hospital’s motion, held that the “. . .wide latitude given to make complete discovery possible, [placed] the burden on WellStar ‘to show more than that the materials would not themselves be admissible at trial. . .’” 4 In other words, the collateral source rule was not enough by itself to make information non-discoverable. The Georgia Court of Appeals was clear that it was not deciding the issue of whether information regarding the hospital’s billing practices was admissible at trial. Georgia state courts have yet to decide whether information like this and information about MFCs is admissible during a trial. However, a recent federal case holds that certain information about MFC practice is admissible.

ML Healthcare Services, LLC v. Publix Super Markets, Inc., 881 F.3d 1293, (11th Cir. 2018) 5 is a federal case originating in Georgia holding that a trial court did not commit error by allowing a defendant to introduce evidence of a contractual relationship between a treating physician and an MFC. Particularly, the defendant introduced evidence of MFC involvement to demonstrate that (1) the plaintiff’s doctors were biased in their testimony and (2) plaintiff’s medical bills were not reasonable. The familiar argument against allowing the evidence was that collateral source rule bars all mention of these payments. The U.S. Court of Appeals upheld the district court’s decision to admit the evidence for the limited purposes not inconsistent with the collateral source rule. Specifically, the court upheld the trial court’s admission of evidence of the doctor’s potential bias. 6

Without getting bogged down in a choice of laws discussion and asking whether this federal precedent extends to Georgia law, it should suffice to say that ML Healthcare bolsters existing Georgia case law showing that the collateral source rule is not an absolute bar to the admission of evidence.
When a defendant asks about the involvement of a MFC, most plaintiffs will object, cite the collateral source rule, and fail to respond. Their argument being that third-party payments are never admissible and therefore non-discoverable. Georgia courts have held otherwise in Wellstar v. Roman.

Medical Funding Company Article (2020)