The Connecticut State Legislature recently passed a public act that has clarified the manner in which contractual adjustments and write offs of charges in medical bills must be considered by juries in personal injury cases.  Please find enclosed herein a copy of the legislation, Public Act. No. 12-142 (“the Act”).  Briefly, the Act requires a jury to consider the entire amount of charges in the personal injury plaintiff’s medical bills, irrespective of the amount of contractual adjustments or voluntary write offs of those charges.  That is, the plaintiff is permitted to “blackboard” to the jury the entire amount of medicals billed before adjustments.  However, the Act permits the court to consider the contractual adjustments (and apparently “write offs”) at a collateral source hearing after a plaintiff’s verdict.  This bulletin discusses the change in the law and the effects of those changes on current and future cases.

I.    Contractual Adjustment vs. Write Off
Connecticut Courts have recognized a distinction between voluntary and involuntary forgiveness of a charge on a medical bill to hold that involuntary forgiveness of a charge is a collateral source payment (e.g.: health insurance payment of a medical bill) for the purposes of calculating a reduction in economic damages.  See, e.g., Bonsanti v. Newman, Superior Court, 2006 WL 41301 (Feb. 3, 2006, Gilardi, J.).  Those courts have characterized contractual adjustments as “involuntary forgiveness” of a charge because the adjustments are made by medical providers as a condition of their contract with a health care insurer.  See, e.g., Cima v. Sciaretta, Superior Court, 2011 WL 4509917 (Sept. 14, 2011, Ozalis, J.).  Typically, contractual adjustments lower the actual amount paid to medical providers significantly, up to 80% in the case of Medicare.

A “write off” is different from a contractual adjustment in that it is a decrease in a charge on a medical bill merely based on, for example, the doctor’s beneficence and not any insurance arrangement.  See Smallridge v. Tramantozzi, Superior Court, 2006 WL 3290398 (Oct. 25, 2006, Beach, J.).  The Connecticut Appellate Court affirmed the Superior Court’s holding in Hassett v. New Haven, 49 Conn. Supp. 7 (2004) that voluntary forgiveness of a charge on a medical bill is not a collateral source payment for the purposes of calculating a reduction in economic damages.  Hassett v. New Haven, 91 Conn. App. 245, 247 (2005).  In so doing, the Appellate Court also implicitly endorsed the view that contractual adjustments were “collateral sources” subject to post-verdict reduction.

II.    Before Passage of Public Act No. 12-142
During the eight year period before the passage of Public Act No. 12-142, some Connecticut Superior Courts, in the absence of appellate authority, have held that a plaintiff was not permitted to present to the jury charges for medical treatment that were billed, but then contractually adjusted or written off.  See Ozga v. Federowicz, HHB-CV-04-4000341-S, Trans. Of Oral Arg. at *13 (Conn. Super. Ct. Apr. 13, 2005) (Advising counsel that the medical bills submitted to the jury should reflect that actual charge.  “If the doctor agreed to reduce the cost of the visit and has not only accepted a lesser amount from the insurance company but has also released your client from the difference, then we do have, in fact, a new charge for the visit.”); Bonin v. Bar B. Corp., No. X04-CV-05-4004267S, Ruling on Pretrial Issues at *4 (Conn. Super. Ct June 26, 2007) (Ruling that the “bill presented to the jury shall presumptively be the ‘adjusted’ amount. If the plaintiff, who has the burden as to economic damages, wishes to introduce some higher amount, she shall have the burden to make some showing that the provider, or a subrogee, has the potential ability to collect a greater amount from the plaintiff. Once a showing is made, the court shall determine what amount will be presented to the jury.”); Owens v. HNS, No: CV-08-5016542S, Trans. of Oral Arg. at *4-5 (Conn. Super. Ct. Nov. 3, 2011) (“[U]nderstanding that collateral sources should be determined post verdict, I do believe that a jury should be faced with the real number, and not some number that has no basis in reality.”).

As a result of the foregoing, it became possible with certain judges to significantly lower the amount of a plaintiff’s medical bills that a jury could consider and, thus, lower the amount of any plaintiff’s verdict.  For example, say a plaintiff wished to submit a medical bill totaling $60,000, where the medical provider actually collected only $30,000 of his charges on the bill.  The remaining $30,000 of the bill constituted contractual adjustments.  Citing the above reasons, some courts would then permit the jury to consider only the $30,000 of the bill that the medical provider actually collected.

Juries’ consideration of only the amount of the charge on a medical bill actually collected by medical providers had the effect of not only curtailing the amount of plaintiffs’ past medical special damages, but also future medical special damages.  To claim future medical special damages, plaintiffs were able to submit evidence to the jury of the cost and frequency of past medical treatment as a “yardstick” for future medical expenses, if it could have been inferred that the plaintiff would continue to seek the same form of treatment in the future.  See Marchetti v. Ramirez, 240 Conn. 49, 56 (1997).  If, for example, contractual adjustments decreased a plaintiff’s past medical expenses for certain treatment from $1,000 to $500, then the yardstick rule here would dictate that the jury could award, at a maximum, only $500 for the same treatment in the future.

Additionally, juries’ consideration of only the amount of the charge on a medical bill actually collected by medical providers had a tendency to curtail the amount of plaintiffs’ non-economic damages.  As common sense suggests, juries often look to the amount of special damages, or economic damages, as a basis for the amount of non-economic damages awarded.

The recent passage of the Act will overrule cases holding that juries in personal injury cases may consider in medical bills only the amount of the charge actually collected by the medical provider.

III.    Public Act No. 12-142

The Act, in part, amended Connecticut General Statutes § 52-174 (b) to bar a jury from subtracting the amount of any contractual adjustments or write offs when awarding medical special damages.  The amended § 52-174 (b) provides, in pertinent part:

In all actions for the recovery of damages for personal injuries or death…[t]he calculation of the total amount of the [medical] bill shall not be reduced because [the] [medical provider]…  accepts less than the total amount of the bill or because an insurer pays less than the total amount of the bill.

Id.

However, the Act also amended Connecticut General Statutes § 52-225a (b) as to post-verdict collateral source reductions as follows:

[E]vidence that [the] [medical provider]…accepted an amount less than the total amount of any bill generated by such [medical provider]…or evidence that an insurer paid less than the total amount of any bill generated by such [medical provider]…shall be admissible as evidence of the total amount of collateral sources which have been paid for the benefit of the claimant as of the date the court enters judgment.

Id.  As a result, the amended § 52-225a (b) arguably permits the court to consider the contractual adjustments, and apparently write offs, at the collateral source hearing1 after a plaintiff’s verdict.

However, the Act offers no guidance as to whether contractual adjustments or write offs are collateral sources for the purposes of calculating a reduction in economic damages.  Superior Courts have varied as to as whether contractual adjustments or write offs are collateral sources.  Some of those courts have held that a contractual adjustment is an involuntary forgiveness of a charge constituting a payment to the patient, which payment can then be deducted as a qualified collateral source payment.  See Bonsanti, supra.  Following Hassett, supra, those courts have held that a write off is a voluntary forgiveness of a charge not constituting a payment to the patient and, thus, the debt does not qualify as a collateral source payment.  Id.  How courts treat non-contractual write offs going forward is difficult to predict.

IV.    The Effect of Public Act No. 12-142 on Current and Future Cases

The Act becomes effective on October 1, 2012 to all actions pending on or filed on or after said date.

The result of the Act is that the jury is required to consider the entire amount of charges in the personal injury plaintiff’s medical bills, irrespective of the amount of contractual adjustments or write offs of those charges.  In personal injury cases with significant contractual adjustments and write offs, the Act will, for example, amplify the plaintiff’s future medical special damages and non-economic damages.  All future personal injury cases must be evaluated in light of the Act, including pending personal injury cases not to be tried until on or after October 1, 2012.  This means considering the Act in evaluations of verdict potential and settlement range and aggressively pursuing a reduction in the amount of economic damages by the amount of contractual adjustments and/or write offs at collateral source hearings.

1 At collateral source hearings, the law generally requires courts to reduce economic damages by the amount paid to the claimant by collateral sources, less the amount paid, contributed, or forfeited by the plaintiff to secure the collateral source benefit.