EVIDENCE OF THIRD-PARTY PAYMENTS IS NOT CATEGORICALLY INADMISSIBLE

Thamara Sordo-Vieira

Cementing its recent published decision in Spectrum Health Hosps v Farm Bureau Mut Ins Co of Mich, the Michigan Court of Appeals recently reiterated that evidence of payments made by third parties for a provider’s charges may be relevant and admissible in reasonableness disputes, holding that a blanket exclusion of such evidence by the circuit court had been an abuse of discretion.

In the unpublished decision of Spectrum Health Hosps v Farm Bureau Mut Ins Co of Mich, the Michigan Court of Appeals vacated the judgment by the Circuit Court in favor of Spectrum, and remanded the matter for a determination of the specific questions of admissibility. Spectrum filed suit against Farm Bureau trying to collect a balance for charges it billed in connection with treatment rendered by Spectrum to Mary Gleason, who had sustained injuries in a motor vehicle accident. While Farm Bureau did not dispute the necessity of the treatment, it contended that Spectrum’s gross charges were unreasonable and so it paid only a portion of those charges. Farm Bureau filed a motion in limine seeking permission to introduce payments made by third-parties (such as health insurers, Medicaid, Medicare, and worker’s compensation) as well as expert opinions relying on that information. The Circuit Court held that this evidence could not be considered, relying on Mercy Mt Clemens Corp v Auto Club Ins Ass’n, 219 Mich App 46; 555 NW2d 871 (1996). Farm Bureau conceded that without this evidence, no questions of fact remained, so the Circuit Court granted summary disposition in Spectrum’s favor, and awarded attorney fees and interest.

On appeal, Spectrum attempted to argue that “payments” and “charges” are different terms, that third-party payments are non-discoverable, and that such payments are irrelevant to the reasonableness of a provider’s charges. The Court of Appeals held that the Circuit Court erred by ruling that evidence of third-party payments was categorically inadmissible. Instead, the admissibility of such evidence must be determined “under the proper legal framework;” that is, by examining the relevance of the specific data with respect to the specific charges and/or the methodologies utilized in the analysis of the data.

The Court of Appeals recognized the published Spectrum decision is currently pending before the Michigan Supreme Court, but found such a filing did not lessen that opinion’s precedential effect. MCR 7.215(C)(2).