Texas Supreme Court Rejects Common Practice of Prohibiting Defendants from Challenging Inflated Medical Bills

On May 7, 2021, the Texas Supreme Court issued a major decision that addresses the all-too-common practice whereby state court judges prevent defendants from putting on evidence to expose inflated medical bills.

The problems with the astronomical costs of Texas personal injury actions have gotten national attention. Texas companies and, particularly trucking companies, face staggering increases in insurance premiums. The single biggest factor in the rising cost of claims and losses pertains to egregiously inflated medical bills, which are at the heart of most personal injury lawsuits in Texas.

The amounts “charged” by medical providers participating in the litigation system have gone from excessive to astronomical.

One problem defendants have faced in trying to expose the inflated nature of medical bills is that certain state court judges routinely exclude qualified defense medical billing experts and prevent defendants from challenging inflated medical bills at trial. This has contributed to the increasingly inflated nature of medical bills submitted in lawsuit claims, which are often 10 to 20 times the actual cost for the same medical services outside the litigation context. With defendants routinely denied an opportunity to challenge inflated medical bills, the amounts “charged” by medical providers participating in the litigation system have gone from excessive to astronomical. Enter the Texas Supreme Court’s most recent decision.

In the matter of In Re Allstate Indemnity Company, the Texas Supreme Court addressed Section 18.001 of the Texas Civil Practice & Remedies Code. This procedure was created to simplify the requirements for a plaintiff to prove up medical expenses. It makes no mention of preventing a defendant from putting on a defense at trial. Yet, certain state courts have routinely interpreted Section 18.001 to support a practice of eliminating a defendant’s ability to put on evidence to challenge inflated medical bills at trial.

Specifically, Section 18.001 allows a plaintiff to submit an affidavit from a medical provider to establish that the amounts stated in the affidavit are both reasonable and necessary, two legal elements required to be proven to support an award for medical expenses. This tool can relieve plaintiffs from having to bring a doctor to testify at trial to prove up the medical bills. The affidavit does not need to be signed by the physician that treated the patient, nor anyone qualified to give opinions as to medical bills. They are often completed by the records custodian for the medical practice.

Section 18.001 allows defendants to challenge these affidavits. Under the law, a proper challenge would merely render the affidavit ineffective and require testimony to prove the reasonable amount of medical bills. To properly challenge the affidavit, a defendant must obtain an affidavit of its own from a medical billing expert. That affidavit is referred to as a Controverting Affidavit.

However, this procedural tool – which was merely meant to simplify a plaintiff’s evidentiary requirements, was turned on its head to require defendants to jump through excessive hoops just to be able to put on a defense at trial. First, many courts were requiring defendants to challenge the affidavits through experts in order to challenge any medical bills that were submitted by affidavit. Second, the courts were placing exceedingly high restrictions on defense experts and excluding them as a matter of course in many instances. This meant that plaintiffs were proving up medical bills through unqualified persons and at the same time the defendants were being denied the opportunity to challenge those bills with experts who were, in fact, qualified.

The defense expert in the Allstate case was a licensed registered nurse with 21 years’ experience in healthcare, including 12 years reviewing medical bills and coding, and experience using a nationwide database that compiled the amounts charged for the same medical services or devices as plaintiff. The expert itemized each charge and explained in detail the bases on which the reasonableness of those charges would be challenged at trial. The defense expert stated in her Controverting Affidavit that she used the CPT Code system to compare the charges being challenged with the median charges for those same services during the same timeframe and in the same zip code, which she obtained from a national database. What happened in this case at the trial court level whereby this expert was stricken is common in Texas personal injury lawsuits. The Texas Supreme Court found that it was improper to exclude this defense expert from testifying at trial.

Most importantly, the Texas Supreme Court rejected the practice employed by many courts of preventing defendants from challenging inflated medical bills whenever a Controverting Affidavit was not used or otherwise struck down by the trial court. The Supreme Court held that in either case, defendants can still cross-examine plaintiff’s experts, present evidence of their own, and advance arguments to the jury to address the reasonable value of plaintiff’s medical expenses.

This holding represents a significant step forward in Texas tort reform. It is expected to aid in the defense bar’s efforts against lawsuit abuse by helping to expose unfair and dishonest practices in medical billing.