In a closely-watched case of major significance to the defense of claims involving medical expenses, the Texas Supreme Court has ruled that a trial court abused its discretion when it struck the defendant’s counteraffidavit challenging the reasonableness of medical expenses submitted by the plaintiff under §18.001, CPRC, and prohibited the defendant from challenging the reasonableness of the charges at trial. In Re Allstate Indemnity Company (No. 20-0071) squarely rejects the increasing use of §18.001 as an exclusionary rule that allows plaintiffs carte blanche to submit chargemaster rates as “reasonable” if the medical provider does not submit its bills to a third-party payer.

The facts of the case are straightforward. Plaintiff was injured in an auto accident and sued her insurer, Allstate, for breaching its policy by failing to pay UIM benefits. Plaintiff submitted $41,000 in medical expenses supported by §18.001 affidavits from several medical providers, including EMS, the hospital and other clinics that treated plaintiff, radiologists, an orthopedist, two physical-therapy practices, and a pharmacy. Allstate served a counteraffidavit challenging the reasonableness of the charges of the hospital, orthopedist, and one of the physical therapy practices. The counteraffidavit was signed by a registered nurse who is also a Certified Professional Coder and Professional Medical Auditor. The affiant further has 21 years to experience in health care, including 12 years of medical billing review, coding, and auditor certification with a demonstrated knowledge of the CPT coding system. The counteraffidavit goes on to explain the affiant’s methodology and conclusion that based her analysis the providers charged excessive rates for the procedures they performed. The counteraffidavit was likewise backed with a seven-page expert report and 10 pages of spreadsheets reflecting the details of the billing data.

As has become far too common in trial courts across the state, a Nueces County trial judge, on the plaintiff’s motion, struck the counteraffidavit on the basis that the affiant was not qualified to offer her opinion as to the charges, that her opinion was unreliable, and that the counteraffidavit did not give reasonable notice of the basis of its conclusions. In addition to striking the counteraffidavit, the trial judge further prohibited both the affiant from testifying at trial for any reason and Allstate from questioning witnesses, offering evidence, or arguing to the jury the reasonableness of the plaintiff’s medical bills. Again, this type of ruling, which deprives a defendant of the opportunity to contest damages, happens every day in courtrooms across the state. Allstate filed a writ of mandamus, which was rejected by the Corpus Christi Court of Appeals. Allstate then appealed to SCOTX.

In an opinion by Justice Rebecca Huddle, SCOTX reversed the trial court’s order in all respects and issued a conditional writ of mandamus. The Court held the following:

  • A person giving a counteraffidavit need only be qualified by knowledge, skill experience, training, or education, not someone who is in the same field of medicine. Given the complexity of and lack of transparency in health care pricing and billing, the Court noted, a medical provider may be the last person who has any idea about the reasonableness of the charges (necessity of the treatment is a separate issue). The Court found that the affiant in this case was amply qualified. Moreover, nothing in §18.001 relieves the plaintiff of the requirement to produce legally sufficient evidence of the reasonableness of medical charges to begin with. §18.001 is only designed to “streamline” proof of reasonableness, not to settle the issue without further inquiry.
  • The Court likewise rejected plaintiff’s argument that the counteraffidavit failed to give reasonable notice of the basis of Allstate’s objection to the charges. The trial court further ruled that the counteraffidavit was conclusory in that it used the median charge for particular services in a geographical area as a “litmus test” for an opinion of reasonableness. SCOTX, however, pointed out that an §18.001 counteraffidavit does not “charge trial courts with determining the admissibility of an affiant’s opinions, and a trial court’s doubts about admissibility are not a proper basis for striking a section 18.001 counteraffidavit.” All that is required of a counteraffidavit is that it provide the opposing party “sufficient information to enable that party to prepare a defense or a response.” The Court ruled that the counteraffidavit more than met the fair notice requirement.
  • The trial court agreed with the plaintiff’s argument that the opinions given by a counteraffiant must meet the standard for admissibility at trial under §18.001(f). SCOTX flatly rejected this argument, pointing out that “whether a witness is qualified to provide expert testimony and whether the expert’s testimony is reliable are distinct inquiries.” Here the trial court erred by “importing a reliability requirement into its section 18.001 analysis,” and that it abused its discretion by importing such a requirement and then striking the counteraffidavit based upon it.
  • SCOTX went on to say that even if the trial court’s order striking the counteraffadavit had been appropriate, it still abused its discretion by prohibiting the counteraffiant from testifying at trial and Allstate from questioning witnesses, offering evidence, or arguing to the jury the reasonableness of the bills. According to SCOTX, the only thing §18.001 does is to provide the plaintiff with a streamlined way to submit evidence of medical charges that, if not challenged, could be sufficient to support a finding of fact that the charges were reasonable and necessary. Regardless of whether it serves a counteraffidavit under §18.001, it can still challenge the charges through evidence and testimony at trial. To quote Justice Huddle, “the opposing party’s failure to serve a compliant counteraffidavit has no impact on its ability to challenge reasonableness or necessity at trial.” Consequently, SCOTX expressly overruled several intermediate appellate decisions holding that §18.001 operated as an exclusionary rule or “death penalty on the issue of past medical expenses.”
  • Finally, SCOTX found mandamus appropriate because the trial court’s order denied Allstate the ability to present its own evidence of reasonableness and necessity and prohibited Allstate from challenging the plaintiff’s claims through cross-examination or jury argument. Because the order would “preclude Allstate from engaging in meaningful adversarial adjudication of [plaintiff’s] claim for payment of medical expenses, vitiating or severely compromising Allstate’s defense,” no adequate remedy exists and mandamus must issue.

SCOTX’s decision goes a long way toward eliminating some of the most egregious abuses of §18.001. Several other cases remain before the Court regarding the appropriate scope of §41.0105, CPRC (the “paid or incurred rule”). Plaintiffs have long argued, and many trial courts have agreed, that “incurred” means only the billed amount, regardless of whether the provider sought third-party payment. SCOTX could clarify this within the next few weeks.

Needless to say, but TCJL, which has submitted several amicus briefs on these issues, is pleased with the Court’s decision in In Re Allstate. It gets the law right and, we hope, will give trial judges, who don’t generally like to be mandamused, clear guidance when faced with plaintiff objections to §18.001 counteraffidavits. Just as importantly, SCOTX has emphatically scotched the idea that §18.001 does anything more than what the Legislature originally intended.

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