Texas Supreme Ct. Approves Discovery for Documents Related to Medical Charges

Claims Journal, June 2, 2021

By Jim Sams

The Texas Supreme Court ruled that a defendant in a personal-injury suit has a right to review documents regarding medical providers’ negotiated rates and costs even though the providers were not parties to the suit.

The high court on Friday overturned a decision by Dallas County judge to quash a subpoena by K&L Auto Crushers that sought extensive information related to billing practices and rates charged by medical providers, finding the discovery request overly broad. The court said the case presented the same issues as a similar dispute that it decided three years ago, but in a different context.

“As we held in North Cypress and reaffirm today, the rates healthcare providers charge to private insurers and public payors and their costs for providing services to a patient constitute relevant facts and data,” the Supreme Court said. “The trial court could certainly limit discovery by excluding information K & L Auto could obtain elsewhere, but it could not simply deny all access to the relevant facts and information because some of it might be available elsewhere or because K & L Auto hired experts to argue the reasonableness of the rates.”

K & L’s appeal was closely watched by medical providers, the insurance industry and tort-reform advocates. The latter argue that a lack of transparency about medical providers’ charges contribute to fast-rising medical costs. Texans for Lawsuit Reform, the Texas Medical Association, the Texas Civil Justice League, the American Property Casualty Insurance Association and the US Chamber of Commerce were among the 13 organizations that submitted amicus briefs.

Kevin Walker sued K & L for injuries he allegedly suffered when a tractor trailer driven by one of its employees struck his car while the two vehicles were negotiating a right turn in side-by-side lanes. The K & L truck’s wheels caught the side of Walker’s car, tearing the sheet metal along the driver’s side.

Walker and the truck driver, Thomas Gothard Jr., both drove away from the accident after exchanging insurance information and taking photographs. But Walker sought medical treatment four days later. He underwent surgery to his cervical spine and shoulder to repair injuries he claimed he sustained in the accident.

Walker’s medical providers billed him about $1.2 million, according to the opinion. His attorney’s sent the medical providers “letters of protection” that promised they would attempt to recover payment for “reasonable and necessary medical charges’ when they settled Walker’s claims.

K&L challenged the costs as unreasonable. He filed subpoenas that “included multiple requests, some with multiple sub-requests” for a “wide array of information,” according to the opinion.

St. Camillus Medical Center, Pine Creek Medical Center, and Dr. Andrew Indresano filed a motion to quash the motion as overly broad. Judge James R. Jordan, with the 160th District Court, granted the motion without discussion.

K & L narrowed its discovery request so that it fell within the scope that was outlined in the North Cypress case and filed a motion for reconsideration, but the medical providers contended the request was still overly broad, “unduly burdensome and harassing.” Jordan denied the company’s motion. The Texas 5th Court of Appeals refused to hear the case, but the Supreme Court granted review.

The Supreme Court said it decided in North Cypress that the costs a hospital incurred to provide services has some bearing on whether its charges are reasonable. The healthcare industry has a two-tiered billing structure — with a chargemaster rate for uninsured patients and lower rates for private and public insurers. The Supreme Court said it held in the North Cypress case that chargemaster rates are “increasingly arbitrary” and “frequently uncollected.”

The court said under Texas law, there are limits to what a claimant may recover from a torfeaser for medical expenses. Firstly, the amount awarded by a court cannot exceed what was actually paid. Secondly, the amount must be reasonable.

K & L has not conceded that it is liable for Walker’s injuries, but if the lawsuit goes to trial it will need to present evidence about the extent of damages. The Supreme Court said the company’s request for documents would provide “concrete evidence” rather than “speculative evidence” based on witness testimony.

The opinion says that doesn’t mean discovery requests can have unlimited scope. The amount of information requested must be proportional to the likely benefit. The opinion notes that while the medical providers are not parties to Walker’s lawsuit, they do have an interest in the outcome because of the letters of protection that Walker’s attorneys provided them.

“We conclude that the information sought through K & L Auto’s narrowed requests is relevant and the trial court abused its discretion by completely denying discovery of that information,” the Supreme Court said.

Justices Rebeca Aizpuru, Jane Bland and Eva Guzman wrote a concurring opinion. While they agreed with the majority’s decision, Huddle said he wrote separately to emphasize that “nonparty discovery will not be appropriate in every personal-injury case.”

The Supreme Court remanded the case to the 160th District with instructions to vacate its order denying K & L’s motion for reconsideration. It said that the trial court retains discretion to issue a protective order to shield confidential information or trade secrets from public disclosure and set reasonable limits on the information requested.

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