Texas Supreme Court Holds Medicare, Insurance Rates Discoverable

By: Robert Fuentes &  David Helmey

Links to the full opinion here and the amicus brief filed by The Fuentes Firm here.

One of the biggest problems facing trucking companies and their liability insurers in personal injury suits is outrageously inflated medical bills. The rates “charged” by hospitals and doctors are generally several times more than the amounts these providers are actually paid. This problem is especially troublesome in tort claims, where our firm sees plaintiffs presenting medical bills as much as 20 times the amount the medical providers actually receive outside of litigation for the services provided.

Personal injury plaintiffs and their attorneys routinely sidestep legal restrictions on insurance-adjusted bills by intentionally not giving medical providers the plaintiff’s health insurance information, or by entering separate agreements instructing medical providers not to bill the plaintiff’s health insurance. Plaintiffs and their doctors attempt to avoid discovery of the providers’ lower contractual insurance rates by claiming that, because the plaintiff did not use health insurance, these lower rates are not relevant. This has allowed plaintiffs to present inflated medical bills (with amounts the provider is never paid), and prevented litigants from presenting to jurors and the courts the usual and customary amounts paid by the vast majority of patients for medical services.

In the In re North Cypress Medical Center case, the Texas Supreme Court took an important step towards exposing the grossly excessive medical bills at the center of this practice. Crystal Roberts sued North Cypress Medical Center claiming that her bill was unreasonably high. Ms. Roberts requested North Cypress’ contracts and reimbursement rates with all the major health insurance carriers and Medicare/Medicaid. After the trial court ordered North Cypress to comply, they appealed, claiming that because Ms. Roberts does not have health insurance and is not a Medicare/Medicaid recipient, its reimbursement rates with these payers are not relevant.

The Texas Supreme Court disagreed, concluding that:

“[T]he charges themselves are not dispositive of what is reasonable, irrespective of whether the patient being charged has insurance. By contrast, a hospital’s reimbursements from private insurers and public payers comprise the vast majority of its payments for services rendered. We fail to see how the amounts a hospital accepts as payment from most of its patients are wholly irrelevant to the reasonableness of its charges to other patients for the same services.”

The Court also noted that “[w]e disagree that rates a hospital does not expect to collect are more relevant than amounts they accept.”

The Fuentes Firm filed an amicus brief for the Supreme Court’s consideration in this case (see link above), providing information on cases in Georgia, Indiana, California, Pennsylvania and Florida in which a medical provider’s contractual rates were found to be relevant to the reasonableness of their charges. The majority opinion in North Cypress addressed each of the cases presented by The Fuentes Firm in support of its holding.

Why is the North Cypress opinion important? As an example, suppose an uninsured plaintiff has a neck surgery for which a hospital bills $150,000. The hospital has agreements with several health insurance companies to accept an average of $15,000 for that same surgery. The jury would be presented with a $150,000 bill and testimony or an affidavit from the hospital saying that $150,000 is a reasonable charge.

The primary method of attacking this would be through a doctor retained by the defense to testify that $150,000 is excessive and $15,000 is reasonable. However, because that doctor is being paid by the defendants, it is easy for plaintiff’s counsel to undermine his credibility even though his testimony is true. Before, it would have been very difficult for defendants to even find out that the hospital routinely accepts $15,000. The North Cypress opinion opens the door to discovery of documents and testimony showing that the hospital regularly accepts $15,000 for that surgery under rate contracts negotiated and agreed to by the hospital itself.

As noted by the Texas Supreme Court in two prior opinions, 95% of hospital patients never pay their full billed charges, which are regularly 2 to 8 times what hospitals regularly accept as payment in full.[1]  In a very real sense, when juries are given full, unadjusted medical bills, they are being shown amounts that the medical provider almost never receives as evidence of the reasonable charges for medical services.

The vast majority of medical providers have agreed insurance rates, and these agreed rates are almost universally significantly less than the providers’ billed charges. According to a 2013 study by the Kaiser Family Foundation[2], 99 percent of general surgeons and 98 percent of orthopedic surgeons accept Medicare patients. Medicare rates are usually substantially lower than the providers’ billed charges, and most private insurers use Medicare rates as a baseline for their contractual reimbursement rates. In the litigation context, it is also generally known (but never told to jurors) that medical providers agree to reduce their bills after the case settles or goes to trial.

Gaining access to contractual agreements and rates will provide defendants with powerful tools to cross-examine medical providers on the real value, and actual reasonable cost, of medical treatment. This should allow defendants to obtain evidence from the providers themselves, rather than from a defense-retained expert, that the provider is almost always paid an amount far less than their billed charge. This in turn could be used to show juries the full extent of the providers’ bill inflation, how much less the providers accept for the same services outside the context of litigation, and what the true reasonable cost is for the medical services at issue.


[1] Haygood v. De Escabedo, 356 S.W.3d 390, fn. 17 (Tex. 2011) and Daughters of Charity Health Servs. of Waco v. Linnstaedter, 226 S.W.3d 409, 410 (Tex. 2007)

[2] https://www.kff.org/medicare/issue-brief/medicare-patients-access-to-physicians-a-synthesis-of-the-evidence