Client Alert: Sale of Medical Liens Discoverable

In Dodd v. Cruz, – Cal.Rptr.3d -, 2014 WL 461158 (Cal. App. Feb, 5 2014), the California Court of Appeal for the Second District held that business records from a third party medical financing company concerning the purchase price of liens and accounts receivable pertaining to a plaintiff’s treatment were discoverable. Plaintiff was involved in a motor vehicle accident and suffered injuries. Plaintiff treated with a medical provider who performed surgery on plaintiff’s shoulder on a “lien basis.” The same day of plaintiff’s surgery, the surgery provider sold its account receivable and lien against plaintiff for payment of its charges. The third party medical financing company who purchased the account receivable and lien related to plaintiff’s care, MedFi, claimed it was in the “business of purchasing accounts receivable from businesses, including health care providers, ‘at a discount.’”

Defendant subpoenaed business records from MedFi, seeking an array of documents concerning the purchase price of the account receivable and lien related to plaintiff’s care. MedFi refused to produce documents related to the contracts it had with plaintiff’s medical provider, including documentation of how much it paid for its lien on plaintiff’s recovery, on the grounds that the documents were confidential, proprietary, and irrelevant. MedFi eventually filed a motion to quash the subpoena, which was granted at the trial court.

On appeal, the court reversed for abuse of discretion. The court analyzed the California Supreme Court’s holding in Howell v. Hamilton Meats & Provisions, Inc., 52 Cal.4th 541 (2011), which held that “the amount a health care provider bills a plaintiff for its medical services is not relevant to the amount of the plaintiff’s economic damages for past medical services.” In overruling the trial court’s order, the court held that the amount MedFi paid for the account receivable and lien was reasonably calculated to lead to the discovery of admissible evidence relating to the reasonable value of the treatment plaintiff received, which is all plaintiff was entitled to recover. Moreover, the court held that regardless of whether this evidence would ultimately be admissible, it could be relied on by the parties’ experts. The court declined to rule on the issue of whether evidence of this nature would ultimately be admissible.

After Dodd, defense counsel are be able to affirmatively argue that the amount a plaintiff’s liens are purchased for is discoverable. Accordingly, litigators are well advised to consider adding to their discovery repertoire questions pertaining to whether providers who treated plaintiff on a lien basis subsequently sold their liens to a third party. While the admissibility of such evidence will be determined on a case-by-case basis, it will provide defendants and their experts a better insight into the reasonable value of plaintiff’s treatment.

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February 6, 2014