                                                                 Nov 19 2015, 9:08 am




ATTORNEYS FOR APPELLANT                                   ATTORNEY FOR APPELLEE
Robert F. Ahlgrim, Jr.                                    Daniel G. Foote
State Farm Litigation Counsel                             Tabor Law Firm, LLP
Indianapolis, Indiana                                     Indianapolis, Indiana
Karl L. Mulvaney
Jessica Whelan
Bingham Greenebaum Doll LLP
Indianapolis, Indiana
ATTORNEY FOR AMICUS CURIAE
INDIANA TRIAL LAWYERS
ASSOCIATION
Joseph N. Williams
Price Waicukauski & Riley, LLC
Indianapolis, Indiana



                                           IN THE
    COURT OF APPEALS OF INDIANA

Mary K. Patchett,                                         November 19, 2015
Appellant-Defendant,                                      Court of Appeals Case No.
                                                          29A04-1501-CT-1
        v.                                                Appeal from the Hamilton
                                                          Superior Court
Ashley N. Lee,                                            The Honorable Steven R. Nation,
Appellee-Plaintiff.                                       Judge
                                                          Trial Court Cause No.
                                                          29D01-1305-CT-4116



Brown, Judge.


Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015               Page 1 of 26
[1]   In this interlocutory appeal, Mary K. Patchett appeals the trial court’s order

      granting a motion in limine filed by Ashley N. Lee, and ordering that evidence

      of payments made by the Healthy Indiana Plan (“HIP”) to reimburse Lee’s

      medical providers in full satisfaction of Lee’s hospital bills, was barred by the

      collateral source statute, Ind. Code § 34-44-1-2, and is not admissible under

      Indiana caselaw. Patchett raises one issue, which we revise and restate as

      whether the court abused its discretion in ruling that such evidence was

      inadmissible. We affirm.1


                                       Facts and Procedural History

[2]   On July 5, 2012, Lee was operating her motor vehicle in Noblesville, Indiana,

      when Patchett negligently operated her vehicle into the opposing lane and

      crashed into Lee. Lee sustained “disfiguring and permanent injuries, including,

      but not limited to, multiple orthopedic injuries, fractures, including a fracture of

      the right calcaneus, and contusions.” Appellant’s Appendix at 18. Lee was

      billed a total of $87,706.36 for the treatment of her injuries by medical

      providers. At the time of the accident, Lee was a member of HIP, which was a

      “program sponsored by the state of Indiana that provided a more affordable

      healthcare choice to thousands of otherwise uninsured individuals throughout

      Indiana” in which “[p]articipants are required to make monthly contributions




      1
       On October 13, 2015, we held oral argument in Indianapolis. We thank counsel for their well-prepared
      advocacy.

      Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015                    Page 2 of 26
      toward coverage.” Id. at 55. HIP paid Lee’s medical providers a total of

      $12,051.48 in full satisfaction of her medical bills.


[3]   On May 2, 2013, Lee filed a complaint for damages against Patchett, Patchett

      admitted negligence and conceded that most of the medical services provided to

      Lee were necessary, and the court scheduled the matter for a jury trial on

      damages. On September 11, 2014, Lee filed a motion in limine regarding the

      HIP payments, seeking to prevent Patchett from “eliciting testimony

      concerning or introducing evidence regarding” those payments. Id. at 40.

      Patchett filed her objection to the motion on September 22, 2014, and the court

      held a pretrial conference on September 24, 2014, and addressed Lee’s motion.


[4]   On October 16, 2014, the court issued the order from which this appeal arises

      and which made findings consistent with the foregoing, stating in relevant part:


              4. That the legal issues to be determined by the Court concerning
              the Motion in Limine are: 1) does the Collateral Source Rule
              apply; and 2) if the Rule applies, is the amount reimbursed by
              HIP admissible under the holding of Stanley[v. Walker, 906
              N.E.2d 852 (Ind. 2009), reh’g denied].


              5. [] established at common law, the Collateral Source Rule
              prohibited defendants from introducing evidence of
              compensation received by Plaintiffs from collateral sources.


              6. [] Justice Sullivan found the common law Collateral Source
              Rule was abrogated by enacting the Collateral Source Statute,
              Ind. Code § 34-44-1-2. Shirley v. Russell, 663 N.E.2d 532, 534
              (Ind. 1996)[.] This precedent was followed in Stanley. Justice
              Dickson, although concurring in the result in Shirley, vehemently

      Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 3 of 26
        dissented in Stanely [sic] finding that the legislature did not intend
        to abrogate the Common Law Rule concerning collateral source.
        Stanley v. Walker at 862. Justice Dickson found that the statute
        only created a “limited exception to the common law rule, which
        is otherwise left intact.” Id. Unless revisited by the Indiana
        Supreme Court, this Court must follow the majority opinions of
        both cases that found that the common law rule was abrogated.
        Therefore, this Court will determine the above stated legal issues
        based on a statutory analysis and not on a common law analysis.


        7. [] [I]n review of the first legal issue concerning whether the
        Collateral Source Statute should apply, the Court must first look
        to the clear language of the Statute. The Supreme Court found
        concerning the issue in Stanley, “. . . evidence of collateral source
        payments may not be prohibited except for specified exceptions.”
        Id. at 855. One of the specified exceptions is the Statute does not
        allow evidence of collateral source payments made by:


                 Any agency, instrumentality, or subdivision of the state or
                 the United States; that have been made before trial to a
                 Plaintiff as compensation for the loss or injury for which
                 the action is brought . . .


        Ind. Code §34-44-1-2(1)(c)(ii). There was nothing in the
        pleadings or in the arguments that contended that this exception
        does not apply to our factual situation in this case. Therefore, the
        Statute applies and the reimbursements made by HIP are
        excluded and are not to be presented to the jury.


                                              *****


        13. [] [T]here was nothing in the pleadings or in the arguments
        which contended that the payments made under HIP are based
        on the “reasonable value” of the medical services but that such


Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015    Page 4 of 26
              payments are based upon political and budget concerns as set
              forth in the statutes.


              14. [] Stanley was based upon the underlying principle that the
              focus of the jury is to determine the “reasonable value” of the
              medical services that were provided. Based upon this principle,
              the Supreme Court found that the jury should be allowed to see
              the full amount billed and the amount paid after a negotiated
              discount by the insurance.


              15. [] [T]his Court cannot find that the Supreme Court ever
              intended Stanley to be interpreted to include situations presented
              by this case where the reimbursement rate has no relation to the
              “reasonable value” of the services provided. This Court finds
              [the] reimbursed rate would provide no value and/or guidance to
              the jury in the determination of the “reasonable value” of the
              medical service provided.


              16. The Court further finds, under Ind. Rules of Evidence 403,
              that the introduction of such evidence would only cause
              confusion to the jury on how such amounts should be used or
              considered.


              17. The Court finds that reimbursements made by HIP are
              subject to the Collateral Source Statue [sic] and are not permitted
              by Stanley. Therefore, such evidence should not be presented to
              the Jury, and the Motion in Limine should be and is hereby
              GRANTED.


      Id. at 10, 13-14.


[5]   On November 14, 2014, Patchett filed a Motion for Reconsideration or

      Alternative Request for Certification of Order in Limine for Interlocutory


      Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 5 of 26
      Appeal, and on December 5, 2014, the court issued an order certifying its

      October 15 Order for interlocutory appeal. On January 30, 2015, this court

      granted Patchett’s request to accept jurisdiction under Ind. Appellate Rule

      14(B)(1).


                                                   Discussion

[6]   The issue is whether the trial court abused its discretion in ruling that evidence

      of the amount HIP paid to reimburse Lee’s medical providers was inadmissible

      under the collateral source statute and caselaw. Evidentiary rulings such as in

      this case lie within the discretion of the trial court, and we may reverse such

      decisions only if a trial court abuses its discretion. State Auto. Ins. Co. v. DMY

      Realty Co., LLP, 977 N.E.2d 411, 422 (Ind. Ct. App. 2012). “A trial court

      abuses its discretion if its decision clearly contravenes the logic and effect of the

      facts and circumstances or if the trial court has misinterpreted the law.” Wagler

      v. West Boggs Sewer Dist., Inc., 980 N.E.2d 363, 383 (Ind. Ct. App. 2012), reh’g

      denied, trans. denied, cert. denied, 134 S. Ct. 952 (2014).


[7]   The parties agree that both the collateral source statute and the Indiana

      Supreme Court’s 2009 decision in Stanley v. Walker, 906 N.E.2d 852 (Ind. 2009)

      largely govern the outcome of this case. Accordingly, we begin by discussing

      them.


[8]   The collateral source statute, codified at Ind. Code § 34-44-1-2, provides:

              In a personal injury or wrongful death action, the court shall
              allow the admission into evidence of:

      Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 6 of 26
                 (1) proof of collateral source payments other than:


                          (A) payments of life insurance or other death
                          benefits;


                          (B) insurance benefits that[2] the plaintiff or members
                          of the plaintiff’s family have paid for directly; or


                          (C) payments made by:


                                   (i) the state or the United States; or


                                   (ii) any agency, instrumentality, or
                                   subdivision of the state or the United States;


                 that have been made before trial to a plaintiff as
                 compensation for the loss or injury for which the action is
                 brought;


                 (2) proof of the amount of money that the plaintiff is
                 required to repay, including worker’s compensation
                 benefits, as a result of the collateral benefits received; and


                 (3) proof of the cost to the plaintiff or to members of the
                 plaintiff’s family of collateral benefits received by the
                 plaintiff or the plaintiff’s family.




2
 The version of the collateral source statute in Stanley contained wording which was slightly different, in
which the words “for which” were substituted for the word “that” appearing in the current version. I.C. § 34-
44-1-2 (subsequently amended by Pub. L. No. 1-2010, § 139 (eff. March 12, 2010)).

Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015                       Page 7 of 26
[9]    In Stanley, Danny Walker sustained injuries in an automobile accident when he

       collided with a vehicle operated by Brandon Stanley, in which Stanley was at

       fault for the accident. 906 N.E.2d at 853-854. Walker’s medical providers

       billed him a total of $11,570, but his health insurer negotiated a discount with

       his providers totaling $4,750, and the medical providers accepted payment from

       the insurer of $6,820 in satisfaction of Walker’s medical bills. Id. at 854.

       Walker filed a complaint against Stanley for his injuries, Stanley admitted

       negligence for the accident, and the case proceeded on the issue of damages. Id.

       at 853-854. At trial, Walker introduced his bills showing the amounts medical

       service providers originally billed him totaling $11,570, and, at the close of

       Walker’s testimony, Stanley sought to admit Walker’s discounted medical bills

       and made an offer of proof. Id. at 854. Walker objected on grounds that

       evidence of the discounted bills violated the collateral source statute, and the

       trial court sustained the objection, ruling that the discounts constituted

       insurance benefits paid for by Walker and “insurance and ‘anything flowing

       from the insurance benefit purchased by the plaintiff . . . .’ would thus be

       prohibited under the collateral source statute.” Id. (footnote omitted). The jury

       returned a $70,000 general verdict in favor of Walker. Id.


[10]   The Court first considered the collateral source statute “and its common law

       predecessor, the ‘collateral source’ rule.” Id. It observed that:


               At common law, the collateral source rule prohibited defendants
               from introducing evidence of compensation received by plaintiffs
               from collateral sources, that is, sources other than the defendant,
               to reduce damage awards. This rule held tortfeasors accountable

       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015    Page 8 of 26
               for the full extent of the consequences of their conduct,
               “regardless of any aid or compensation acquired by plaintiffs
               through first-party insurance, employment agreements, or
               gratuitous assistance.”


       Id. (quoting Shirley v. Russell, 663 N.E.2d 532, 534 (Ind. 1996) (quoting Shirley v.

       Russell, 69 F.3d 839, 842 (7th Cir. 1995))). It noted that “[t]he Legislature

       abrogated the common law collateral source rule by enacting the collateral

       source statute,” which allows for “evidence of collateral source payments . . .

       except for specified exceptions.” Id. at 855. The Court stated that


               [t]he purpose of the collateral source statute is to determine the
               actual amount of the prevailing party’s pecuniary loss and to
               preclude that party from recovering more than once from all
               applicable sources for each item of loss sustained in a personal
               injury or wrongful death action. I.C. § 34-44-1-1(1)-(2). At the
               same time, it retains the common law principle that collateral
               source payments should not reduce a damage award if they
               resulted from the victim’s own foresight—both insurance
               purchased by the victim and also government benefits—
               presumably because the victim has paid for those benefits
               through taxes.


       Id.


[11]   With this in mind, the Court turned to the issue presented, observing that an

       injured plaintiff “is entitled to recover damages for medical expenses that were

       both necessary and reasonable” and that the question presented was “how to

       determine the reasonable value of medical services when an injured plaintiff’s

       medical treatment is paid from a collateral source at a discounted rate.” Id.


       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015    Page 9 of 26
       (citing Cook v. Whitsell-Sherman, 796 N.E.2d 271, 277 (Ind. 2003)). It identified

       three different approaches other jurisdictions have used to analyze whether to

       allow such evidence. Some states “apply the collateral source rule to negotiated

       discounts on the plaintiff’s medical care for which the plaintiff paid

       consideration.” Id. Two states have held that such medical discounts were a

       collateral source “but that they were compelled to set off the collateral source

       amount against an award of compensatory damages under their respective state

       statutes.” Id. Finally, “[i]n another approach, the Ohio Supreme Court has

       allowed both the amount paid and the amount billed into evidence to prove the

       reasonable value of medical services.” Id. at 855-856 (citing Robinson v. Bates,

       857 N.E.2d 1195, 1200 (Ohio 2006) (holding that the jury may determine that

       the reasonable value of medical services is the amount originally billed, the

       amount accepted as payment, or some amount in between)).


[12]   The Court next turned to Ind. Evidence Rule 413, which provides one method

       for proving the reasonable value of medical expenses and states: “[s]tatements

       of charges for medical, hospital or other health care expenses for diagnosis or

       treatment occasioned by an injury are admissible into evidence. Such

       statements shall constitute prima facie evidence that the charges are

       reasonable.” Id. at 856 (quoting Evid.R 413). The Court then discussed its

       previous statements in Cook and observed that although “medical bills can be

       introduced to prove the amount of medical expenses when there is no

       substantial issue that the medical expenses are reasonable. . . . in cases where

       the reasonable value of medical services is disputed, the method outlined in


       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 10 of 26
       Rule 413 is not the end of the story.” Id. (citing Cook, 796 N.E.2d at 277-278).

       After examining statements from prior cases, the Court declared:

               In sum, the proper measure of medical expenses in Indiana is the
               reasonable value of such expenses. This measure of damages
               cannot be read as permitting only full recovery of medical
               expenses billed to a plaintiff. Nor can the proper measure of
               medical expenses be read as permitting only the recovery of the
               amount actually paid. The focus is on the reasonable value, not
               the actual charge. This is especially true given the current state
               of health care pricing.


       Id. at 856-857 (internal citations omitted).


[13]   The Court also discussed the policy issues involved, in which “[t]he

       complexities of health care pricing structures make it difficult to determine

       whether the amount paid, the amount billed, or an amount in between

       represents the reasonable value of medical services.” Id. at 857. Citing to a law

       review article, the Court observed that although “hospitals historically billed

       insured and uninsured patients similarly,” after “the advent of managed care,

       some insurers began demanding deep discounts, and hospitals shifted costs to

       less influential patients.” Id. (citing Mark A. Hall & Carl E. Schneider, Patients

       As Consumers: Courts, Contracts, and the New Medical Marketplace, 106 MICH. L.

       REV. 643, 663 (2008)). The Court further observed that “insurers generally pay

       about forty cents per dollar of billed charges and that hospitals accept such

       amounts in full satisfaction of the billed charges.” Id. (citing Hall & Schneider,

       supra, at 663). Citing to another authority, the Court also noted that “the

       relationship between charges and costs is ‘tenuous at best,’” and accordingly,

       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 11 of 26
       “based on the realities of health care finance, we are unconvinced that the

       reasonable value of medical services is necessarily represented by either the

       amount actually paid or the amount stated in the original medical bill.” Id.


[14]   Following its policy discussion, the Court returned to the question of how to

       determine the reasonable value of medical services at a damages hearing in a

       personal injury lawsuit, and it adopted the Ohio “hybrid” approach, specifically

       the declaration from the Ohio Supreme Court that, “[t]he jury may decide that

       the reasonable value of medical care is the amount originally billed, the amount

       the medical provider accepted as payment, or some amount in between . . . .”

       Id. (quoting Robinson, 857 N.E.2d at 1200-1201). According to the Ohio court,

       “[b]ecause no one pays the negotiated reduction, admitting evidence of

       [discounts] does not violate the purpose behind the collateral-source rule,” and

       accordingly “both values were relevant evidence that should be submitted to a

       jury to determine the reasonable value of medical services.” Id. (quoting

       Robinson 857 N.E.2d at 1200). The Court, while recognizing “that the discount

       of a particular provider generally arises out of a contractual relationship with

       health insurers or government agencies and reflects a number of factors—not

       just the reasonable value of the medical services,” held that nevertheless “this

       evidence is of value in the fact-finding process leading to the determination of

       the reasonable value of medical services,” that “[t]he collateral source statute

       does not bar evidence of discounted amounts in order to determine the

       reasonable value of medical services,” and that “[t]o the extent the adjustments




       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 12 of 26
       or accepted charges for medical services may be introduced into evidence

       without referencing insurance, they are allowed.” Id. at 858.


[15]   Justice Dickson authored a dissent in Stanley which began by stating that “this

       new rule contravenes the express requirements of the collateral source statute . .

       . and is also unfair and undesirable judicial policy.” Id. at 860.3 He wrote that

       the collateral source statute “explicitly declines to extend” admissibility of

       collateral source payments which are “in the form of ‘insurance benefits for

       which the plaintiff or members of the plaintiff’s family have paid for directly,’”

       that that the majority’s rule “seems diametrically opposed to the statute’s clear

       and unequivocal language,” and that “[s]tatutory modification or nullification

       is best left to the General Assembly.” Id. at 861. He also disagreed with the

       majority’s conclusion that the collateral source statute abrogated the common

       law collateral source rule and stated that “the statute’s precise language appears

       to create a limited exception to the common law rule, which is otherwise left

       intact,” and accordingly the statute should be strictly construed. Id. at 862.

       Justice Dickson also expressed his opposition to the rule “because it is

       incomplete, misleading, and unfair, and will add layers of complexity, time,

       and expense to personal injury litigation, impairing the efficient administration

       of justice.” Id. at 862-863.




       3
        Justice Dickson’s dissent in Stanley was joined by Justice Rucker. 906 N.E.2d at 860. The majority
       consisted of Justices Sullivan, Boehm, and Chief Justice Shepard. Id. at 853, 859.

       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015                     Page 13 of 26
[16]   Turning to the parties’ arguments, Patchett’s position is that “although Stanley

       involved contractual discounts imposed by a private insurer, its reasoning and

       its language apply with equal force to all types of discounted payments which

       fully satisfy a medical provider’s charges, including discounted payments from

       a state or other governmental authority,” and “[i]t is not the source of the

       discount which determines the admissibility or relevancy of this evidence, but

       the fact that the medical provider was willing to accept the discounted payment

       in full satisfaction of its charges.” Appellant’s Brief at 8. Patchett points out

       that Stanley specifically stated “that the discount of a particular provider

       generally arises out of a contractual relationship with health insurers or

       government agencies, and reflects a number of factors—not just the

       reasonable value of the medical services.” Id. (quoting Stanley, 906 N.E.2d at

       858). She asserts that the trial court’s conclusion that “a governmental

       reimbursement rate was not relevant to determining the reasonable value of a

       provider’s services. . . . is flatly inconsistent with Stanley’s language, and its

       rationale.” Id. She contends that the Indiana Supreme Court indicated that

       Stanley should be interpreted “so as to make all discounted payments

       admissible, irrespective of their source,” as in the case of Butler v. Ind. Dep’t of

       Ins., 904 N.E.2d 198 (Ind. 2009). Id. at 9.


[17]   Lee begins her argument by noting that “it is undisputed that for well over a

       century . . . the measure of damages for medical services in a common law tort

       action is the ‘reasonable value’ of those services.” Appellee’s Brief at 8. She

       argues that “[t]he instant case is distinguished from Stanley in that HIP is not a

       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015    Page 14 of 26
       private, individual, or group health insurance plan, and [] there is no evidence

       that Lee’s medical providers accepted payments that were ‘discounted’ or that

       resulted from negotiation as contemplated by Stanley.” Id. at 9. She states that

       HIP “was a publicly-funded plan that paid providers based on Medicare and

       Medicaid rates” as established by an act of the General Assembly. Id. (citing

       Ind. Code § 12-15-44.2-14(a)). She points out that payments under HIP are not

       negotiated and rather are “dictated by the State of Indiana, based on federal

       Medicare reimbursement guidelines,” which are “established under

       Congressional authority.” Id. at 10.


[18]   Lee’s brief discusses Medicare, observing that although when it “was instituted,

       it paid providers based on their ‘usual and customary’ charges, so long as the

       charges were ‘reasonable,’” due to “escalating Medicare expenditures, Congress

       in 1983 revised Medicare’s reimbursement scheme,” in which “Medicare no

       longer pays based on ‘usual and customary’ charges, and importantly, no longer

       applies a ‘reasonableness’ standard.” Id. She notes that “[p]roviders now

       receive notice of the reimbursement rates, regardless of costs actually incurred,”

       and that the “payment schedule is based on various factors, one of which is

       ‘budget neutrality.’” Id. She asserts that, accordingly, such payments do not

       constitute “evidence of the ‘reasonable value’ of medical care.” Id. at 10-11.

       Lee also argues that Stanley’s reference to payments made by “government

       agencies” should be interpreted as being limited to “arms-length negotiation[s]

       between a private or governmental insurer and a health care provider,” noting

       that “Federal, State and local government entities routinely provide self-funded

       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 15 of 26
       or insurance coverage to their employees and beneficiaries.” Id. at 11. She

       notes that Patchett’s argument to interpret Stanley’s reference to government

       agencies “overlooks the fact that” the rule “applies only where there is evidence

       of 1) a ‘contractual relationship’ . . . 2) negotiation, and 3) a ‘discounted’

       payment.” Id.


[19]   Lee also argues that Patchett’s reliance on Butler is misplaced because that case

       concerned a wrongful death action and thus “was decided not in a common law

       dispute, such as the instant case, but instead in the framework of two statutory

       schemes – the Indiana Medical Malpractice Act and the Indiana Adult

       Wrongful Death Act,” for which damage calculation is different and is

       concerned with the “estate’s ‘reasonable expenses.’” Id. at 12-14. She argues

       that the trial court correctly ruled that “Stanley stands for the proposition that

       evidence of negotiated discounts between providers and insurers may be helpful in

       determining the ‘reasonable value’ of medical services.” Id. at 15. Her position

       is that the court also acted within its discretion when it ruled, independently,

       that evidence of the HIP payments be excluded under Ind. Evidence Rule 403

       because such evidence would confuse the jury as to how the amounts should be

       considered.


[20]   The Indiana Trial Lawyers Association (“ITLA”) filed an amicus brief arguing

       that Medicaid reimbursement rates used by HIP are not relevant to the issue of

       “reasonable value” because they are not negotiated “and medical providers are

       required by law to accept them as payment in full,” and “it is well recognized

       that government programs reimburse at rates below marginal cost.” Amicus
       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 16 of 26
       Brief at 3-4. ITLA acknowledges that “[i]f a provider does not like the

       Medicaid reimbursement rate, then she can choose not to see Medicaid

       patients; but she cannot negotiate a higher reimbursement rate.” Id. at 5. It

       states that this fact distinguishes Stanley, which involved “sophisticated parties

       (a healthcare provider and a commercial insurance plan)” who participated in

       an “arms’ length negotiation” to settle on the final reimbursement rate, noting

       that the holding in that case “was nothing more than a reaffirmation of the

       basic economic principle that fair (or reasonable) value can be found at the price

       a buyer is willing to pay and a seller willing to accept when neither is under any

       compulsion to consummate the transaction.” Id. ITLA argues that government

       insurance reimbursement rates are understood to be below cost and that they

       are “often so much below cost that healthcare providers attempt to make up the

       shortfall through increased receipts from other payers.” Id. at 6. ITLA finally

       asserts that “[a]llowing the admission of government reimbursement rates will

       change our tort system into one that necessarily values the suffering and injuries

       to those served by Medicaid and Medicare—our needy, disabled, and elderly—

       less than those who can afford private insurance.” Id. at 10.


                                                      Decision

[21]   We first turn to the text of the collateral source statute. As noted, the trial court

       found that the HIP payments are inadmissible under Ind. Code § 34-44-1-

       2(1)(C), which precludes the admission into evidence of “payments made by: . .

       . (ii) any agency, instrumentality, or subdivision of the state or the United

       States; that have been made before trial to a plaintiff as compensation for the

       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 17 of 26
       loss or injury for which the action is brought.” The trial court observed that

       neither the pleadings nor the arguments contended that this exception does not

       apply, and moreover, Patchett does not directly challenge its application on

       appeal. Indeed, the lone reference Patchett makes to this subparagraph is in her

       reply brief where she states that “[a]s Stanley permits the defendant to challenge

       the reasonableness of the plaintiff’s medical charges by showing that those bills

       were fully satisfied by a discounted payment, it necessarily resolves Lee’s

       related arguments that the trial court had discretion to exclude this evidence”

       under Ind. Code § 34-44-1-2(1)(C)(ii). Appellant’s Reply Brief at 10-11. Thus,

       Patchett does not challenge the applicability of Ind. Code § 34-44-1-2(1)(C)(ii)

       but instead suggests that Stanley is equally applicable to that subparagraph.


[22]   Also, the parties do not dispute that Lee was a member of HIP, which

       functioned as her health insurer, and that she made monthly contributions

       towards coverage. See also Ind. Code § 12-15-44.2-11 (Supp. 2011) (governing

       an enrollee’s payment amounts, which started at $160 per year). Ind. Code §

       34-44-1-2(1)(B) provides that evidence of “insurance benefits that the plaintiff or

       members of the plaintiff’s family have paid for directly” are inadmissible under

       the collateral source statute.


[23]   Regardless of whether Subparagraph (B) or (C) is the relevant provision of the

       collateral source statute applicable here matters not, however, because we find

       that the rule in Stanley does not apply to these facts. Again, Stanley essentially

       ruled that “[g]iven the current state of the health care pricing system” in which

       “a medical provider’s billed charges do not equate to cost,” evidence of

       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 18 of 26
       “discounted amounts” may be introduced in order to assist in determining the

       reasonable value of medical services so long as no reference to insurance is

       made in admitting those discounted amounts, and that such evidence does not

       violate the collateral source statute. 906 N.E.2d at 858. Accordingly, to the

       extent that Ind. Code § 34-44-1-2(1)(B) provides that evidence of “insurance

       benefits that the plaintiff or members of the plaintiff’s family have paid for

       directly” are inadmissible, merely admitting the discounted amount does not

       violate the statute. Id.


[24]   The policy underlying the rule in Stanley breaks down, though, when the

       amounts actually paid are not the result of arms-length negotiation. The trial

       court made this observation in its order, noting that here, the reimbursement

       rate provides no guidance to the jury in determining “the ‘reasonable value’ of

       the medical service provided.” Appellant’s Appendix at 13. Counsel for ITLA

       at oral argument articulated the assumption in Stanley that the “discounted

       amounts” are a result of negotiation as follows:


               . . . it is a required premise for the conclusion that they reached.
               For any evidence to be admissible, it has to be probative. It has
               to make, or have the tendency to make, some issue of fact more
               or less probable. There is a basic economic principle that the
               amount of money that a buyer is willing to pay and that a seller is
               willing to accept in an open market demonstrates a fair or
               reasonable value. You see that throughout cases in Indiana in all
               sorts of subjects. The only way that a discounted payment is
               probative – has some tendency to make the concept of reasonable
               value apparent to the jury, is if it is negotiated. If it is a willing
               buyer and a willing seller meeting in the middle, which


       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 19 of 26
               demonstrates fair and reasonable value. . . . It is a required
               premise.


       Oral Arg. at 32:45- 33:38, available at https://mycourts.in.gov/arguments/

       default.aspx?&id=1852&view=detail&yr=&when=&page=1&court=app&searc

       h=&direction=%20ASC&future=False&sort=&judge=&county=&admin=Fals

       e&pageSize=20.


[25]   After considering the relevant language in Stanley, we arrive at the same

       conclusion as the trial court. The Stanley Court began its discussion of whether

       to admit collateral source evidence by identifying different approaches

       jurisdictions have used, and at the outset observed that some states “apply the

       collateral source rule to negotiated discounts on the plaintiff’s medical care for

       which the plaintiff paid consideration” and that “[t]wo state courts have held

       that the medical discounts were a collateral source, but that they were compelled

       to set off the collateral source amount . . . under their respective state statutes.”

       906 N.E.2d at 855 (emphases added). The emphasized language demonstrates

       that, indeed, the rule in Stanley is premised on the principle that the discounted

       amounts must be the product of negotiation. Further, the Court later quoted

       from Robinson, which discussed the “hybrid” approach adopted by the Court

       and similarly contemplated negotiated discounts where it stated that “[b]ecause

       no one pays the negotiated reduction, admitting evidence of [discounts] does not

       violate the purpose behind the collateral-source rule.” Id. at 857 (quoting

       Robinson 857 N.E.2d at 1200) (emphasis added). The Court stated that, based



       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 20 of 26
       thereon, “both values were relevant evidence that should be submitted to a jury

       to determine the reasonable value of medical services.” Id.


[26]   There are other statements in Stanley that support this conclusion. The policy

       discussion focused on private insurers that “began demanding deep discounts,”

       noting that “insurers generally pay about forty cents per dollar of billed charges

       and that hospitals accept such amounts in full satisfaction of the billed charges.”

       Id. The HIP payments, by contrast, constituted 13.7 percent of the original

       amount billed to Lee for her medical treatment. Justice Boehm in his

       concurrence wrote that he believed the discounted amounts are relevant

       “because they reflect the amounts that the providers are willing to accept for their

       services.” Id. at 859 (emphasis added). We further find that even the

       description of the lower amount as “discounted amounts” contemplates arms-

       length negotiations. We therefore determine that the rule of Stanley applies

       only to lower paid amounts when those amounts are the result of negotiated

       discounts and therefore are probative of a medical service’s reasonable value.


[27]   Lee and ITLA both cite to authority in their briefs for the proposition that the

       HIP payments are premised on political decisions and are not the product of

       arms-length negotiations – an argument that Patchett does not directly

       challenge in her briefs. For instance, ITLA notes that “[w]hen a provider treats

       a Medicaid patient, that provider must accept as payment in full the

       reimbursement amount set by regulation.” Amicus Brief at 4 (citing 42 C.F.R.

       § 447.15). The Appellant’s Appendix contains documentation from the

       “Healthy Indiana Plan Reimbursement Manual,” which states that “[p]roviders

       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 21 of 26
       bill claims for the HIP program on the Centers for Medicare & Medicaid Services

       (CMS) 1450 form (UB-04),” and “[u]se the Medicare Inpatient Prospective

       Payment System (IPPS) to calculate payment based on diagnosis-related groups

       (DRGs).” Appellant’s Appendix at 57; see also Ind. Code § 12-15-44.2-14

       (Supp. 2011), and 405 Ind. Admin. Code 9-2-23 (2012) (setting the

       reimbursement rate paid to providers); 405 Ind. Admin. Code 9-9-7 (2012)

       (governing the reimbursement process). ITLA further notes that “[t]here is a

       significant body of research suggesting that the reimbursement rates paid by

       government insurers such as Medicare and Medicaid are actually below fully

       allocated cost for most hospitals.” Amicus Brief at 6 (quoting George A.

       Nation, III, Determining the Fair and Reasonable Value of Medical Services: The

       Affordable Care Act, Government Insurers, Private Insurers and Uninsured Patients, 65

       BAYLOR L. REV. 425, 459 (2013)). The article discussed by ITLA further notes

       that “Why more hospitals don’t simply refuse to accept government insured

       patients is an important and complex question” and that “such a refusal carries

       the risk of important negative consequences.” Nation, III, supra, at 459. It

       states that refusal “in certain contexts is simply illegal” and that “very serious

       political consequences, which could include the loss of tax exempt status, could

       result if charitable hospitals attempted to stand up to government intimidation.”

       Id. at 460.


[28]   The Court in Stanley reaffirmed that a successful plaintiff in a personal injury

       suit is entitled to the reasonable value of that person’s medical expenses, and it

       held that evidence of “discounted amounts” arrived at as the result of

       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 22 of 26
       negotiation between the provider and an insurer are probative in determining

       reasonable value and should be admitted. Here, because the HIP payments

       were not calculated based upon market negotiation but instead were set by

       government regulation, such amounts are not probative of the reasonable value

       of the medical expenses. Thus, we conclude that the trial court properly

       excluded the evidence of the HIP payment amounts.4


[29]   To the extent that Patchett argues that Butler v. Ind. Dep’t of Ins. demonstrated

       the Indiana Supreme Court’s intent to make all discounted payments admissible

       regardless of source, we note that the Court in that case held that “under the

       statute governing actions for the wrongful death of unmarried persons with no

       dependents . . . the amount recoverable for reasonable medical and hospital

       expenses necessitated by the alleged wrongful conduct is the total amount

       ultimately accepted after such contractual adjustments, not the total of charges

       billed.” 904 N.E.2d at 199. The plaintiff estate presented two issues on appeal:

       whether “recovery for reasonable and necessary medical expenses under the

       applicable wrongful death statute was erroneously limited to the amounts paid

       and should instead include the total amounts billed,” and second, whether “the




       4
         To the extent that Patchett suggests the Court in Stanley contemplated that amounts such as the HIP
       payments would be admissible where it references “both insurance purchased by the victim and also
       government benefits,” 906 N.E.2d at 855, we disagree. That statement in Stanley specifically referenced that
       the collateral source statute “retains the common law principle that collateral source payments should not
       reduce a damage award if they resulted from the victim’s own foresight—both insurance purchased by the
       victim and also government benefits . . . .” Id. Nothing in this statement contradicts our holding today that,
       absent arms-length negotiation, discounted amounts are not probative of reasonable value and are therefore
       not admissible.

       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015                        Page 23 of 26
       trial court erred in admitting evidence of amounts paid by the decedent’s private

       insurance coverage, Medicare, and Medicaid, contrary to the Indiana Collateral

       Source Statute.” Id. at 201. Regarding the second issue, the Court found that

       issue “moot . . . in light of the parties’ Partial Settlement Agreement declaring

       the parties’ agreement on issues ‘except for any claims for additional medical

       expenses that were not paid but were billed to the decedent and/or Estate,’ . . .

       .” Id. The Court declared that “[t]he Estate’s claim that the trial court

       incorrectly admitted evidence showing the amounts actually paid and accepted

       for the decedent’s medical expenses is therefore irrelevant, and we address only

       the first contention in the Estate’s appeal.” Id. The Court included a footnote

       after this sentence observing that “[i]ssues related to the Collateral Source

       Statute are before this Court in Stanley v. Walker, 888 N.E.2d 222 (Ind. Ct. App.

       2008), in which transfer has been granted.” Id. at 201 n.6.


[30]   The estate in Butler emphasized “the statutory language referring to ‘reasonable’

       expenses and the open-ended phrase ‘but are not limited to,’” and the Court

       observed caselaw holding “that in common law tort actions Indiana has long

       recognized that a plaintiff may recover the reasonable value of medical services,

       regardless of whether the plaintiff is personally liable for them or whether they

       were rendered gratuitously” and that “the extent of recovery by an injured

       plaintiff for medical expenses depends not upon what the plaintiff paid for such

       services but rather their reasonable value.” Id. at 201-202. The Court

       proceeded to note that the facts in that case do “not present a common law

       claim but rather arise[] as a statutory cause of action that the common law did


       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 24 of 26
       not recognize” and that it must construe such statutory provisions narrowly,

       holding that under Indiana’s Adult Wrongful Death Act,


               when medical providers provide statements of charges for health
               care services to the decedent but thereafter accept a reduced
               amount adjusted due to contractual arrangements with the
               insurers or government benefit providers, in full satisfaction [of]
               the charges, the amount recoverable under the statute for the
               “[r]easonable medical . . . expenses necessitated” by the wrongful
               act is the portion of the billed charges ultimately accepted
               pursuant to such contractual adjustments.


       Id. at 202-203.


[31]   We find the facts and reasoning in Butler to be distinguishable, and we do not

       believe that the Court’s mere reference to the collateral source statute in a

       footnote and the pending Stanley decision has an impact on the outcome of this

       case.


[32]   Finally, even if evidence of the HIP payment amounts are admissible under the

       collateral source statute and Stanley, such would not preclude the court, in its

       discretion, from excluding said amounts under Ind. Evidence Rule 403, which

       states that “[t]he court may exclude relevant evidence if its probative value is

       substantially outweighed by a danger of one or more of the following: unfair

       prejudice, confusing the issues, misleading the jury, undue delay, or needlessly

       presenting cumulative evidence.” “A trial court decision regarding whether any

       particular evidence violates Evidence Rule 403 will be accorded a great deal of

       deference on appeal; we review only for an abuse of discretion.” Tompkins v.


       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 25 of 26
       State, 669 N.E.2d 394, 398 (Ind. 1996). Here, the court examined the dollar

       figure associated with the HIP payments and ruled that such amount “would

       only cause confusion to the jury on how such amounts should be used or

       considered.” Appellant’s Appendix at 14. To the extent Patchett suggests that

       the court abused its discretion because it misinterpreted the law in Stanley, we

       disagree. The court invoked Rule 403 in the alternative when it “further” found

       that evidence of the HIP payments would cause confusion, and we cannot say

       that the court abused its discretion in that regard. Id.


                                                    Conclusion

[33]   For the foregoing reasons, we affirm the trial court’s order granting Lee’s

       motion in limine.


[34]   Affirmed.


       Riley, J., and Altice, J., concur.




       Court of Appeals of Indiana | Opinion 29A04-1501-CT-1 | November 19, 2015   Page 26 of 26
