Appellate Reports and Cases in Brief

Uspenskaya v. Meline — The amount a factoring company pays to purchase a medical lien is not evidence of the reasonable value of the debt

2015 December

Uspenskaya v. Meline

(2015) __ Cal. App.4th __ (3rd Dist.)

Who needs to know about this case? Lawyers handling cases where the plaintiff’s medical care was provided on a lien basis.

Why it’s important: The case holds that, because a factoring company’s decision to buy a medical lien is based on the collectability of the debt, and not necessarily the reasonable value of the underlying medical services, evidence of the factor’s purchase of the lien should be excluded from evidence under Evidence Code section 352.

Synopsis: Meline’s vehicle collided with Uspenskaya’s vehicle at a busy intersection. Uspenskaya sustained spinal injuries, and eventually had surgery to repair a herniated lumbar disc. She did not have health insurance, and obtained the surgery and other post-accident medical services on a lien basis. A medical factoring company, MedFinManager, LLC, purchased the lien from the treating medical providers. But the purchase did not affect Uspenskaya’s obligation to pay the full amount of the lien. At trial, Meline sought to introduce evidence of the amount of the MedFin purchase as evidence of the reasonable value of the medical services (and hence of Uspenskaya’s damages). The trial court excluded the evidence. The jury awarded Uspenskaya past medical damages of $261,713. Meline appealed, arguing that the trial judge erred in excluding evidence that the lien had been purchased by MedFin. She argued that the amount that MedFin purchased the lien for established the market value of the lien, and hence of the reasonable value of the medical services. Affirmed.

The Court of Appeal concluded that, because Meline proffered no evidence to show that the MedFin payments represented the reasonable value of plaintiff’s treatment, the probative value of that evidence (the amount paid by Medfin for the lien) was substantially outweighed by the probability that it would create a substantial danger of undue prejudice as well as a danger of confusing and misleading the jury. Consequently, the trial court’s Evidence Code section 352 ruling precluding evidence of the MedFin payments was not an abuse of discretion.

Specifically, the court held that the MedFin payments are relevant because they have a tendency in reason to prove reasonable value. But without evidence that those payments represented a reasonable value for the treatment, the probative value of that evidence as to reasonable value was minimal. On the other side of the section 352 balancing analysis, there was a substantial danger of undue prejudice and that the evidence of the MedFin payments would confuse or mislead the jury. These dangers substantially outweighed any probative value that evidence of the payments may have had.

In explaining its conclusion, the court noted that, “The problem in cases involving MedFin, or similar companies purchasing accounts receivable (sometimes referred to as factors), is that MedFin’s purchase price represents a reasonable approximation of the collectability of the debt rather than a reasonable approximation of the value of the plaintiff’s medical services.” (Emphasis in original.)

The court further noted, “In deciding what price to offer medical providers for the right to recover full payment from an injured person, MedFin evaluates the risk of collectability and bets on whether and how much the person will receive in a pending lawsuit. Given these reasons for selling and purchasing the right to collect the debt, the probative value of the MedFin payments on the question of the reasonable value of the treatment provided to plaintiff is at best limited without some evidence tending to show a nexus between the purchase price for the right to collect the debt and the reasonable market value of the medical services . . . . Indeed, the danger of prejudice is even greater here, where the injured plaintiff remains liable for the entire amount billed for the medical services she received. There is a substantial danger of prejudice because a jury could rely solely on a third-party payment to fashion its award, which might not represent the reasonable value of a plaintiff’s treatment and result in a situation where the plaintiff is not made whole, but rather remains liable to the third party for the entire debt, including the difference between the billed amounts and the amounts paid to the providers to purchase the debt.”