A case involving the application of a central provision of the 2003 medical liability reforms has reached the Texas Supreme Court. Columbia Valley Health Care System, L.P. d/b/a Valley Regional Medical Center v. A.M.A., A Minor, By and Through His Mother, Ana Ramirez, as Next Friend and Ana Ramirez, Individually (No. 20-0681) offers the Court to provide additional clarity to the trial and appellate courts regarding the proper application of §74.503, CPRC, which requires, upon request of a defendant physician, health care provider, or claimant, the trial court to “order that medical, health care, or custodial services awarded in a health care liability claim be paid in whole or in part in periodic payments rather than by lump-sum payment.” The purpose of the statute—and the reason it is so important to Chapter 74 in its totality—is to prevent the potential windfall from unused future damages awards that are paid in a lump sum up front. Consistent with other provisions in Chapter 74, §74.503 aims to assure that claimants are made whole for their economic damages, while introducing much needed predictability into medical liability litigation. This predictability allows health care providers and liability insurers to measure their risk accordingly, lowering the cost of liability and thereby expanding access to health care.

In this case, however, the Corpus Christi Court of Appeals affirmed a trial court judgment that thoroughly undermines and defeats the purpose of the statute. The facts are tragic, involving an infant born with the umbilical cord wrapped around its neck who developed cerebral palsy. The plaintiffs sued the hospital alleging negligence by the nursing staff, which the plaintiffs claim delayed calling the mother’s OB/GYN during the infant’s birth, resulting in hypoxia that caused the infant’s brain injury. The jury awarded damages in excess of $10.2 million, of which just over $9 million were for future damages before the minor turned 18, and about $1.2 million for future damages after the minor turned 18. The trial judge refused the hospital’s request for a jury charge on the minor’s life expectancy and annualized future medical expenses. When the jury came back with a verdict of 15-plus years of future medical expenses, the trial court limited periodic payments for the future damages to only five years ($604,000 per year) and 30% of the total verdict, leaving more than $7 million, which the trial court ordered to be paid immediately in cash to the plaintiffs and to the plaintiffs’ attorneys (despite the lack of evidence of a present or imminent need for that award). When the hospital moved for findings of fact and conclusions of law to support the judgment, the trial court refused.

The Corpus Christi Court of Appeals found no error in the jury charge, the trial court’s judgment, or the trial court’s refusal to make findings of fact and conclusions of law. The court’s holding turned largely on a construction of §74.503 that appears to ignore the plain language of the statute. Specifically, the statute provides that “the court shall make a specific finding of the dollar amount of periodic payments that will compensate the claimant for the future damages.” §74.503(c). Further, the “court shall specify in its judgment ordering the payment of future damages by periodic payments the: (1) recipient of the payments; (2) dollar amount of the payments; (3) interval between payments; and (4) number of payments or the period of time over which payments must be made.” §74.503(d). Here the trial court plainly changed the verdict, ordering periodic payments of only about $3 million to “compensate the claimant for the future damages” (emphasis added). What about the other $7 million, which the jury designated as part of the future damages? The trial court thus manufactured the windfall the statute was specifically designed to prevent. (Moreover, making the hospital pay it to the plaintiffs’ attorneys, who are not parties to the lawsuit, seems improper on its face.)

As the hospital’s brief on the merits argues, the plaintiffs in this case had their cake and ate it, too:

The intent to thwart the statute with these conflicting machinations is undisguised. After plying the jury with evidence to secure a $10 million-plus jury verdict covering over fifteen years of future medical expenses, Plaintiffs pulled a bait-and-switch. They petitioned the trial court to enter new findings and a judgment limiting A.M.A.’s life expectancy to five years and future medical to $3.020,000 for the limited purpose of evading the statute. In other words, Plaintiffs sought to maximize the jury’s award of future healthcare expenses, but then petitioned the trial court to set aside their sought-after jury findings to avoid the statute’s application. As a result, the trial court exempted over 70% of the jury’s $10,268,000 future healthcare verdict from the termination provision of the statute. Petitioner’s Brief on the Merits at 37-8.

The upshot of the court of appeals’ decision to allow the trial court this kind of latitude is to gut §74.503 and give plaintiffs’ lawyers, in the words of the hospital’s brief, a “roadmap” to convert future medicals that should be paid periodically into up front lump sum payments that will not terminate upon the death of the injured person, as the Legislature intended. It strikes us that another effect of the court of appeals’ decision is to provide access to a much larger amount of “actual” damages than the Legislature meant to grant in §74.503. One might see this strategy as a way to circumvent the cap on non-economic damages and significantly increase settlement values (which the cap and provisions such as §74.503 were meant to rationalize in the first place). In any event, we are pleased that SCOTX has granted review—§74.503 is indispensable to the 2003 reforms and must be properly applied. We look forward to SCOTX’s guidance.

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