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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Lorena Weston v AKHappytime, LLC, d/b/a Alex Hotel & Suites (8/2/2019) sp-7391

Lorena Weston v AKHappytime, LLC, d/b/a Alex Hotel & Suites (8/2/2019) sp-7391

           Notice:   This opinion is subject to correction before publication in the P                      ACIFIC  REPORTER.  

           Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,  

                                                                                                                           

           303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email  

                                                                                                                             

           corrections@akcourts.us.  



                       THE SUPREME COURT OF THE STATE OF ALASKA                                        



LORENA  WESTON,                                                   )  

                                                                  )     Supreme  Court  No.  S-16529  

                                 Petitioner,                      )  

                                                                                                                                    

                                                                  )     Superior Court No. 3AN-16-04995 CI  

           v.                                                     )  

                                                                                             

                                                                  )     O P I N I O N  

                                                    

AKHAPPYTIME, LLC, d/b/a ALEX                                      )  

                                                                                                             

                    

HOTEL & SUITES,                                                   )    No. 7391 - August 2, 2019  

                                                                  )  

                                 Respondent.                      )  

                                                                  )  



                                                                                                                      

                                     

                      Petition for Review from the Superior Court of the State of
  

                                                                                                              

                      Alaska, Third Judicial District, Anchorage, Andrew Guidi,
  

                      Judge.
  



                                                                                                                  

                      Appearances: Anthony N. Banker, Banker Law Group, P.C.,
  

                                                                                                                      

                      Anchorage, for Petitioner. Gregory R. Henrikson, Walker &
  

                                                                                                            

                      Eakes,  Anchorage,  for  Respondent.                           Kenneth  M.  Gutsch,
  

                                                                                                           

                      Richmond & Quinn, Anchorage, for Amicus Curiae Property
  

                                                                               

                      Casualty Insurers' Association of America.
  



                                                                                                             

                      Before: Stowers, Chief Justice, Winfree, Maassen, Bolger,
  

                                            

                      and Carney, Justices.
  



                                             

                      MAASSEN, Justice.
  

                                                                                                                  

                      BOLGER, Justice, concurring in part and dissenting in part.
  

                                                                   

                      STOWERS, Chief Justice, dissenting.
  


----------------------- Page 2-----------------------

I.        INTRODUCTION
  



                    A woman was seriously injured when she slipped and fell on ice in a hotel  

                                                                                                                            



parking lot.  Medicare covered her medical expenses, settling the providers' bills by  

                                                                                                                               



paying less than one-fifth of the amounts billed.  When the woman later sued the hotel  

                                                                                                                           



for negligence, the hotel sought to bar her from introducing her original medical bills as  

                                                                                                                                



evidence of her damages, arguing that only the amount Medicare actually paid was  

                                                                                                                             



relevant and admissible.  The superior court agreed and excluded the evidence.  

                                                                                                         



                    We granted the woman's petition for review, which asked us to decide the  

                                                                                                                              



following questions: (1) whether evidence of medical expenses is properly limited to the  

                                                                                                                               



amounts actually paid, or whether the amounts billed by the providers - even if later  

                                                                                                                            



discounted - are relevant evidence of damages; and (2) whether the difference between  

                                                                                                                      



the amounts billed by the providers and the amounts actually paid is a benefit from a  

                                                                                                                                 



collateral source, subject to the collateral source rule.  

                                                                          



                    We conclude that the amounts billed by the providers are relevant evidence  

                                                                                                                      



of the medical services' reasonable value.   We further conclude that the difference  

                                                                                                                   



between the amounts billed and the amounts paid is a benefit to the injured party that is  

                                                                                                                                



subject to the collateral source rule; as such, evidence of the amounts paid is excluded  

                                                                                       



from the jury's consideration but is subject to post-trial proceedings under AS 09.17.070  

                                                                                                                    



for possible reduction of the damages award.  We therefore reverse the superior court's  

                                                                                                                        



decision to exclude evidence of the undiscounted medical bills.  

                                                                                         



II.       FACTS AND PROCEEDINGS  

                                 



                    Lorena Weston was injured when she slipped and fell on ice in the parking  

                                                                                                                       



lot of a hotel owned by AKHappytime, LLC.  She fractured her right wrist and her right  

                                                                                                                            



leg  and  was  taken  to  the  Alaska  Native  Medical  Center,  where  she  underwent  a  

                                                                                                                                



                                                               -2-                                                        7391
  


----------------------- Page 3-----------------------

complicated surgery.                                                      The hospital billed her over $135,000, but Medicare settled the                                                                                                                                                   



bills in full by the payment of $24,247.45.                                                            



                                              WestonlatersuedAKHappytimefor                                                                                            negligence. AKHappytimemoved                                                                                          for  



a pretrial ruling excluding evidence of Weston's medical bills other than "the adjusted,                                                                                                                                                                                



preferred rates accepted by her providers as full and final payment for medical services                                                                                                                                                                                   



rendered."     AKHappytime   argued   that   the   medical   bills   should   be   excluded  from  



evidence because they were "inflated" and did "not reflect the 'reasonable value' of the                                                                                                                                                                                                    



services rendered,                                                 nor  was this amount ever incurred or owed by [Weston]."                                                                                                                                                            The  



superior court granted the motion, ruling that Weston could "only recover the adjusted                                                                                                                                                                                    



medical rates accepted by her providers as full and final payment for medical services     



rendered, and only such adjusted medical rates may be admitted at trial."                                                                                                                                                            



                                              Weston filed a petition for review, which we granted.                                                                                                                                   



III.                   STANDARD OF REvIEW                                             

                                                                                                                                                                                                                                                                1       We "will  

                                              We review the superior court's conclusions of law de novo.                                                                                                                                                                             

adopt the rule of law that is most persuasive in light of precedent, reason, and policy."2  

                                                                                                                                                                                                                                                                         



Iv.                    DISCUSSION  



                                              Weston's petition for review presents essentially two issues.  First, was it  

                                                                                                                                                                                                                                                                                                   



error to exclude evidence of her full, undiscounted medical bills after her medical care  

                                                                                                                                                                                                                                                                                         



providers accepted less from Medicare as payment in full? Second, if Weston's medical  

                                                                                                                                                                                                                                                                             



bills are admissible, should the difference between those bills and what Medicare paid  

                                                                                                                                                                                                   



be viewed as a benefit to Weston from a collateral source - meaning that evidence of  

                                                                                                                                                                                                                                                



it should be kept from the jury and presented only after trial, when the court determines  

                                                                                                                                                                                                                                                                 



pursuant to AS 09.17.070 whether some or all of the collateral source benefits should  

                                                                                                                                                                                                                                                                                



                       1                     Loncar v. Gray                                        , 28 P.3d 928, 930 (Alaska 2001).                                                            



                       2                      State v. United Cook Inlet Drift Ass'n, 895 P.2d 947, 950 (Alaska 1995).  

                                                                                                                                                                                                                                                                               



                                                                                                                                               -3-                                                                                                                                                   7391  


----------------------- Page 4-----------------------

reduce the damages award?                                                          Our superior courts have reached conflicting decisions on                                                                                                        



                                              3                                                                                                                       4  

these questions,                                                                                                                 

                                                  as have the courts of other jurisdictions. 



                    3                  Compare McCleod v. Spenard Builders Supply, LLC                                                                                                          , No. 3PA-14-01198     



CI (Alaska Super., June 16, 2016) ("Plaintiffs are only entitled to recover what they                                                                                                                                                         

actually spent."),                                Domer v. Bre Select Hotels Properties, LLC                                                                                       , No. 3AN-15-06668 CI,                                         

(AlaskaSuper.,                               May 17, 2016) (limiting recoveryto                                                                    "theMedicaidand/or Medicarerates                                                           

accepted by . . . providers"),                                                   Suyarkov v. Lutton                                     , No. 3AN-13-06084 CI (Alaska Super.,                                                         

May 19, 2016) (adopting evidentiary rule for "adjusted medical rates"),                                                                                                                                        and Wagner v.                          

Royal   Hyway   Tours,   Inc.,   No.   3AN-13-09055   CI,   (Alaska   Super.,   Feb.   11,   2015)  

(granting partial summary judgment on amount of treatment paid by insurance "[u]nder                                                                                                                                               

those contracts"),                                 with Rodgers v. Bistro It, LLC                                                       , No. 3AN-16-04158 CI, (Alaska Super.,                                                         

 Sept. 28, 2016) (denying defendant's motion for order that plaintiff "may not recover                                                                                                                                               

medical expenses in                                            excess of rates paid by                                                  Medicare to                           medical  providers on                                              his  

behalf"),  and Norman v. Plaza Inn Hotels, Inc.                                                                                       , No. 3AN-15-08838 CI, (Alaska Super.,                                                           

Aug. 23, 2016) (denying defendant's "Motion for Rule of Law that Plaintiff May Not                                                                                                                                              

Recover Medical Expenses in Excess of Those Rates Paid by Medicare and Medicaid").                                                                                                                                                                            



                    4                  Compare Howell v. Hamilton Meats & Provisions, Inc., 257 P.3d 1130,  

                                                                                                                                                                                                                          

 1145 (Cal. 2011) ("[A]n injured plaintiff whose medical expenses are paid through  

                                                                                                                                                                                                                                   

private insurance may recover as economic damages no more than the amounts paid by  

                                                                                                                                                                                                                                                    

the plaintiff or his or her insurer for the medical services received or still owing at the  

                                                                                                                                                                                                                                                  

time of trial."), and Dyet v. McKinley, 81 P.3d 1236, 1239 (Idaho 2003), abrogated on  

                                                                                                                                                                                                                                                    

other grounds by verska v. Saint Alphonsus Reg'l Med. Ctr., 265 P.3d 502, 508 (Idaho  

                                                                                                                                                                                                                                        

2011) (holding that plaintiff could not recover expenses covered by Medicare write-off  

                                                                                                                                                                                                                                 

under Idaho law because plaintiff was never obligated to pay that amount and allowing  

                                                                                                                                                                                                                                  

recovery could result in "double payment"), with Bynum v. Magno, 101 P.3d 1149, 1160  

                                                                                                                                                                                                                                             

(Haw. 2004), as amended (Dec. 2, 2004) ("[A] plaintiff, injured by the tortious conduct  

                                                                                                                                                                                                                                    

of a defendant, is entitled to recover the reasonable value of medical services and is not  

                                                                                                                                                                                                                                                  

limited  to  the expenditures actually  paid by  Medicaid/Medicare."),  and  Dedmon  v.  

                                                                                                                                                                                                                                                     

Steelman, 535 S.W.3d 431, 467 (Tenn. 2017) ("[T]he Plaintiffs may submit evidence of  

                                                                                                                                                                                                                                                     

Mrs. Dedmon's full, undiscounted medical bills as proof of her 'reasonable medical  

                                                                                                                                                                                                                                   

expenses,' and the Defendants are precluded from submitting evidence of discounted  

                                                                                                                                                                                                                           

rates for medical services.").  

                                                   



                                                                                                                          -4-                                                                                                                7391
  


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            A.	         Background: Tort Damages, The Collateral Source Rule, And Alaska                                                        

                        Case Law   



                        1.	         Tort damages   



                        The general rule in tort cases is that "the injured party is entitled to be                                                     



placed as nearly as possible in the position he [or she] would have occupied had it not   

                                                       5   The injured party may recover both economic and non- 

been for the tortious conduct."                                                                                                                      



economic damages. "Economic damages include past medical expenses, future medical  

                                                                                                                                               

expenses, lost wages, and lost earning potential."6                                             Non-economic damages provide  

                                                                                                                                               



compensation for "pain, suffering, inconvenience, physical impairment, disfigurement,  

                                                                                                                                   

loss of enjoyment of life, loss of consortium, and other nonpecuniary damage."7  

                                                                                                                               



                        Weston's damages claims included a claim for her past medical expenses.  

                                                                                                                                                               

To recover on this claimshe had to show that the medical care was reasonably necessary8  

                                                                                                                                          

and that it was necessary because of AKHappytime's negligence.9                                                             She also had "the  

                                                                                                                                                     



burden of providing 'some reasonable basis upon which a jury [could] estimate with a  

                                                                                                                    



fair degree of certainty the probable loss which [she sustained] in order to enable it to  

                                                                                                                                                          

make an intelligent determination of the extent of this loss.' "10  

                                                                                                              



            5           ERA  Helicopters,  Inc.   v.  Digicon  Alaska,  Inc.,   518   P.2d   1057,   1059-60  



(Alaska   1974).  



            6           Dedmon,  535  S.W.3d  at  437.  



            7           AS  09.17.010(a).  



            8           Turner v. Municipality of Anchorage, 171 P.3d 180, 185 (Alaska 2007).  

                                                                                                                                                



            9           Pugliese  v.  Perdue,  988  P.2d  577,  580  (Alaska  1999)  (discussing  causation  



in  the  context  of  medical  bills).  



            10          Alexander  v.  State,  Dep't  of  Corr.,  221  P.3d  321,  324  (Alaska  2009)  

                                                                                                                                                  

(quoting City of Fairbanks v. Nesbett, 432 P.2d 607, 616 (Alaska 1967)).  

                                                                                                                        



                                                                            -5-	                                                                   7391
  


----------------------- Page 6-----------------------

                            2.           The collateral source rule                      



                            Damagesfor personalinjury                                 aresubject tothecollateral                           sourcerule,             "which  



provides that damages may not be diminished or mitigated on account of payments                                                                               



                                                                                                                           11  

received by plaintiff from a source other than the defendant."                                                                  The rule "is based on the                    



                                                                                                                                                                    

principle that a tort-feasor is not entitled to have his [or her] liability reduced merely  



                                                                                                                                                                          

because plaintiff was fortunate enough to have received compensation for his [or her]  

injuries or expenses from a collateral source."                                                12                                                              

                                                                                                    Evidence of payments from collateral  



                                                                                                                                                          13  

                                                                                                                                                              exclusion  

sources is thus generally excluded at trial as more prejudicial than probative; 



                                                                                                                                                                    

is based on the assumption that if the jury knows that the plaintiff has been or will be  



                                                                                                                                                                         

compensated for the injuries by someone other than the defendant, this information "will  



                                                                                                                                                                           

more likely than not influence the jury against the plaintiff on the issues of liability and  

damages."14  



                                                                                                                                                                               15  

                                                                                                                                                                                    

                           AlaskaStatute09.17.070modifiesthecommon-lawcollateral sourcerule. 



It creates a post-verdict procedure for reducing a damage award if the plaintiff has  

                                                                                                                                                                           



received amounts "as compensation for the same injury from collateral sources that do  

                                                                                                                                                                             



              11           Beaulieu v. Elliott                   , 434 P.2d 665, 673 (Alaska 1967).                         



              12           Ridgeway   v.   N.   Star   Terminal   & Stevedoring                                                Co.,   378   P.2d   647,   650  



(Alaska 1963).  A collateral source is one that is independent of the tortfeasor - such   

as the "victim's own insurance or a charity" - as distinguished from the tortfeasor or  

                                                                                                                                                                              

the tortfeasor's insurer.                           Chenega Corp. v. Exxon Corp.                                      , 991 P.2d 769, 790 (Alaska                 

 1999).  



              13           Jones v. Bowie Indus., Inc., 282 P.3d 316, 326 (Alaska 2012); see also  

                                                                                                                                                                          

Tolan v. ERA Helicopters, Inc., 699 P.2d 1265, 1267 (Alaska 1985).  

                                                                                                                                



              14           Ridgeway, 378 P.2d at 650.  

                                                                            



              15            Chenega Corp., 991 P.2d at 791.  

                                                                                                  



                                                                                      -6-                                                                               7391
  


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                                                                                                                                                               16  

not have a right of subrogation by law or contract."                                                                                                                  "After the fact finder has rendered                                             

 an award," the defendant is allowed to introduce evidence of collateral source benefits;                                                                                                                                                                                    17  



the plaintiff may respond with "evidence of (1) the amount that the actual attorney fees  

                                                                                                                                                                                                                                                                     



incurred . . . in obtaining the award exceed the amount of attorney fees awarded . . . by  

                                                                                                                                                                                                                                                                    



the court; and (2) the amount that the claimant has paid or contributed to secure the right  

                                                                                                                                                                                                                                                                   

to an insurance benefit introduced by the defendant as evidence."18   "If the total amount  

                                                                                                                                                                                                                                                         



 of collateral benefits introduced as evidence [by the defendant] exceeds the total amount  

                                                                                                                                                                                                                                                          



that the [plaintiff] introduced as evidence" of the attorney's fees and the costs of securing  

                                                                                                                                                                                                                                                       

the benefits, the court is required to deduct the difference from the damages award.19  

                                                                                                                                                                                                                                                                                   



This process "limits the circumstances in which a victim can receive double recovery,  

                                                                                                                                                                                                   



                      16                  AS 09.17.070(a).                                            We have explained what subrogation means in this                                                                                                               



 context:    

                                          When an insurer pays expenses on behalf of an insured it is                                                                                                                       

                                           subrogated to the insured's claim.                                                                              The insurer effectively                   

                                          receives an assignment of its expenditure by operation of law                                                                                                                     

                                           and contract.                             If the insurer does not object, the insured may                                                                                      

                                           include the subrogated claim in its claim against a third-party                                                                                         

                                          tortfeasor.     Any   proceeds   recovered   must   be   paid   to   the  

                                           insurer, less pro rata costs and fees incurred by the insured in                                                                                                                      

                                          prosecuting and collecting the claim.                                                                                       But the subrogated   

                                           claim belongs to the insurer. The insurer may pursue a direct                                                                                                           

                                           action against the tortfeasor, discount and settle its claim, or                                                                                                                      

                                           determine that the claim should not be pursued.                                                                           



Dixon v. Blackwell                                            , 298 P.3d 185, 193 n.38 (Alaska 2013) (quoting                                                                                                                  Ruggles ex rel.                        

Estate of Mayer v. Grow                                                        , 984 P.2d 509, 512 (Alaska 1999)).                                                       



                      17                  AS 09.17.070(a).  

                                                      



                      18                  AS 09.17.070(b).  

                                                      



                      19                  AS 09.17.070(c).  

                                                      



                                                                                                                                     -7-                                                                                                                          7391
  


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while enhancing the chances that a tortfeasor may not be held fully accountable."                                                                           20  



                                                                                                                                                                  

                          In Loncar v. Gray we recognized that the collateral source rule applied to  



                                                                                                                                 

evidence of the plaintiff's Medicaid coverage, which "the superior court appropriately  

                                                                                        21     After  one  of  the  plaintiff's  doctors  

                                                                                                                                  

                                                                             

excluded  .  .  .  at  the  beginning  of  the  trial." 



mentionedMedicaid on cross-examination,thesuperior court gaveacurativeinstruction:  

                                                                                                                                                                       



it  advised  the  jury  to  "award  the  full  amount  of  necessary  medical  expenses  .  .  .  

                                                                                                                                                                   



regardless of whether they have been paid or who actually paid the bill.  Following the  

                                                                                                                                                                

trial, the law provides procedures to ensure that this issue is properly addressed."22                                                                         We  

                                                                                                                                                               

saw"no abuse ofdiscretion inthe superior court's treatment of the Medicaid evidence."23  

                                                                                                                                               



                          3.          Luther v. Lander and the dissent in Lucier v. Steiner Corporation  

                                                                                                                                              

                          Weston relies on our recent decision in Luther v. Lander24  to argue that we  

                                                                                                                                                                 



have already decided the issue of whether her "full medical billings are admissible at  

                                                                                                                                                                  

trial."  Luther was injured in a car accident and sued Lander for negligence.25                                                                        At trial  

                                                                                                                                                              



Luther  sought  to  introduce  evidence  of  the  medical  expenses  paid  by  her  insurer,  

                                                                                                                                                       



GEICO, as proof of her damages, but the superior court granted Lander's request that the  

                                                                                                                                                                 

evidence be excluded.26                           Although the superior court did not explain its ruling, we  

                                                                                                                                                                



presumed that it was based on the rule that a plaintiff cannot present a subrogated claim  

                                                                                                                                                           



             20           Chenega Corp.                , 991 P.2d at 791.
         



             21           28 P.3d 928, 933 (Alaska 2001).
                  



             22          Id. at 934.
  

                                     



             23          Id.
  



             24           373 P.3d 495 (Alaska 2016).                



             25  

                                     

                         Id. at 497-98.  



             26          Id. at 498.  

                                     



                                                                                -8-                                                                         7391
  


----------------------- Page 9-----------------------

                                                                                                                                                                            27  

for medical expenses if the insurer has asserted its right to pursue the claim itself.                                                                                           We  



reversed the superior court's ruling, holding that the medical expenses paid by GEICO                                                                                    



were relevant to the severity of Luther's injury even if she could not recover them as                                                                                               

                                          28   We reasoned that "[j]ust as photographic evidence and testimony  

economic damages.                                                                                                                                                    



about the lack of serious damage to Luther's and Lander's vehicles [were] relevant as  

                                                                                                                                                                                     



potentially  reflecting  the  severity  of  the  accident,  so  too  is  the  amount  of  medical  

                                                                                                                                                                        

payments," and it is "for the jury to determine the weight to be given that evidence."29  

                                                                                                                                                                                           



We also noted the "anomalous result" if different plaintiffs' ability to present such  

                                                                                                                                                                               

evidenceturned on whether their insurers had elected to pursue their subrogatedclaims.30  

                                                                                                                                                                        



                             Weston asserts that Luther is controlling authority because, when holding  

                                                                                                                                                                         



that the plaintiff's evidence should have been admitted, we did not distinguish "between  

                                                                                                                                                                      



amounts billed and amounts paid ." But the issue in Luther was framed as involving only  

                                                                                                                                                                                

medical costs paid by GEICO;31 we did not expressly consider the significance of any  

                                                



difference between undiscounted medical bills and the amounts paid.  Nonetheless, in  

                                                                                                                                                                                     



holding that evidence of the amounts charged was admissible, we recognized medical  

                                                                                                                                                                        



              27            Id.  at 500-01 (citing                     Ruggles ex rel. Estate of Mayer v. Grow                                            , 984 P.2d 509,        



512 (Alaska 1999)).         



              28            Id.  at  501-02.  



              29            Id .  at  501.  



              30            Id.  at  502.  



              31             See   id.   at 498   (describing   superior   court's   order   as   excluding   evidence  



revealing  that  GEICO  "paid  some  of  Luther's  medical  expenses  after  the  accident"  and  

"all evidence of the costs of the  various treatment charges paid for by GEICO");  id. at  

499   (framing   claim   of   error   as   court's   exclusion   of   "evidence   of   $10,000   in  medical  

expenses  paid  by  .  .  .  GEICO");  id.  at  503  (summarizing  holding  as  concluding  "that  the  

superior  court  erred  by  excluding  the  evidence  of  the  cost  of  Luther's  medical  treatment  

covered  by  GEICO").  



                                                                                          -9-                                                                                 7391
  


----------------------- Page 10-----------------------

bills' relevance to the nature and severity of a plaintiff's injuries.                                    32  



                                                                                                              

                      The issue presented now was before us on another petition for review,  

                                                                                                                              33  Justice  

                                                                                                                                   

                                                                                                         

which we denied as improvidently granted in Lucier v. Steiner Corporation. 

                                                                                                                           34   Lucier's  

Fabe, joined by Justice Carpeneti, dissented from the order denying review.                                                      

                                                                                                                



injuries were covered by Medicaid, which "paid her medical providers only a small  

                                                                                                                                     

fraction of the amount they billed."35                         She sued in tort, and at trial the court "ruled that  

                                                                                                                                        



in proving the value of her past medical expenses, Lucier [would] be limited to the actual  

                                                                                                                                     



amount paid  by  Medicaid,  rather  than  the  value that her  providers placed on  their  

                                                                                                                                      

services."36  

                      



                      According to the dissent, it was legal error to exclude from evidence the  

                                                                                                                                         



undiscounted amounts billed by Lucier's providers:   "The medical care that Lucier  

                                                                                                                                   



received at Medicaid's expense was a collateral source benefit and its value [could] not  

                                                                                                                                         



be used to reduce her damages award, except under the conditions and procedures laid  

                                                                                                                                        

                                     37   The dissent noted the decisions of other courts that "when a  

out in AS 09.17.070."                                                                                                                        

                  



medical provider accepts payment of less than the value of the care and writes off the  

                                                                                                                                         

rest, thecollateral source rule covers the entire value, includingtheamount written off."38  

                                                                                                                                                



           32         Id.  at  501-02.  



           33         93  P.3d   1052  (Alaska  2004).  



           34         Id.  at   1052-55  (Fabe,  J.,  dissenting).  



           35         Id.  at   1053.  



           36         Id.  



           37         Id.  



           38         Id.  (citing  Olariu  v.  Marrero,  549  S.E.2d  121,  123  (Ga.  App.  2001);  Acuar  



v.  Letourneau,  531  S.E.2d  316,  322  (va.  2000)).  



                                                                    -10-                                                              7391
  


----------------------- Page 11-----------------------

It proposed that there was "no reason to distinguish between cases where the provider  



writes off part of the care's value out of charity, because it has no hope of collecting, and  

                                                                                                                                       



cases where the payment is coming from an insurer - governmental or private - with  

                                                                                                                                     

                               39  In either case, "[t]he amount discounted out of a medical bill is part  

bargaining power."                                                                                                                     

                   

of the value of that collateral benefit and should not accrue to the defendant."40  

                                                                                                                                  



                      The  Lucier  dissent  also  argued  that  the  trial  court's  exclusion  of  the  

                                                                                                                                       

evidence violated AS 09.17.070, the statutory collateral source rule.41  Under the rule,  



it is only "[a]fter the fact finder has rendered an award to a claimant" that the defendant  

                                                                                                                             



may present evidence of amounts the plaintiff received "from collateral sources that do  

                                                                                                                                         

not have a right of subrogation by law or contract."42                                     The dissent argued that if the  

                                                                                                                                       



statutory post-verdict procedure is not followed - and billings for medical care are  

                                                                                                                                       



already reduced as collateral source benefits when presented to the jury - the jury will  

                                                                                                                                      



receive "an artificially low value" of the medical expenses, which could impact its view  

                                                                                                                                     



not only of past medical damages but also of the seriousness of the plaintiff's claims for  

                                                                                                                                        

                                        43   And if the plaintiff explains to the jury why the medical  

non-economic damages.                                                                                                          

                         



expenses appear low - because they were covered in whole or in part by a collateral  

                                                                                                                              

source - this risks "irreparably prejudic[ing]" the plaintiff's case.44  

                                                                                                                    



           39        Id.  at 1053-54.   



           40        Id. at 1054.  

                                



           41        Id.  



           42         AS 09.17.070(a).   



           43  

                                                    

                     Lucier, 93 P.3d at 1054.  



           44        Id.  



                                                                   -11-                                                             7391
  


----------------------- Page 12-----------------------

                  B.                Other Jurisdictions' Case Law                                              



                                    Other state courts have taken essentially three approaches to the issue of                                                                                                                   



whether to admit undiscounted medical bills into evidence when the bills have been                                                                                                                                        



 satisfied for less.                           These are (1) the "actual amount paid" approach, which allows into                                                                                                            



evidence only the actual amount paid for medical care; (2) the "benefit of the bargain"                                                                                                                         



approach, which allows the undiscounted medical bills into evidence if the plaintiff paid                                                                                                                                   



meaningful   consideration  for   the   insurance   or   other   collateral   source   from   which  



payment was made; and (3) the "reasonable value" approach, which allows admission  



of undiscounted medical bills without restriction as at least some evidence of the medical                                                                                                                         

 services' value.                         45  



                                                                                                                                   

                                    1.                The "actual amount paid" approach  



                                                                                                                                                                                                                      

                                    Ahandfulofstates followthe"actual amount paid"approach, which "limits  



                                                                                                                                                                                                                                

a plaintiff's recovery to the amount actually paid to the medical provider, either by  



                                                                  46  

                                                                                                                                                                                                                                          

insurance or otherwise."                                                 The rationale for this rule is that the plaintiff would receive  



                  45                See Dedmon v. Steelman                                           , 535 S.W.3d 431, 454-58 (Tenn. 2017). Our own                                                                         



analysis has been greatly aided by the Tennessee Supreme Court's recent and thorough                                                                                                                           

discussion of the various approaches to this issue.                                                                                    



                  46                Id. at 454; see, e.g., Howell v. Hamilton Meats &Provisions, Inc., 257 P.3d  

                                                                                                                                                                                                                            

 1130, 1135-46 (Cal. 2011) (holding that "a plaintiff may recover as economic damages  

                                                                                                                                                                                                                

no more than the reasonable value of the medical services received and is not entitled to  

                                                                                                                                                                                                                                  

recover the reasonable value if his or her actual loss was less" (emphasis in original));  

                                                                                                                                                                                                                                 

Dyet v. McKinley, 81 P.3d 1236, 1239 (Idaho 2003), abrogated on other grounds by  

                                                                                                                                                                                                        

 verska v. Saint Alphonsus Reg'l Med. Ctr., 265 P.3d 502, 508 (Idaho 2011) (concluding  

                                                                                                                                                                                                                   

that the write-off amount "is not an item of damages for which plaintiff may recover  

                                                                                                                                                                                                                                 

because plaintiff has incurred no liability therefor" (quoting Kastick v. U-Haul Co. of W.  

                                                                                                                                                                                                                  

Mich., 740 N.Y.S.2d 167, 169 (N.Y. App. Div. 2002))); Moorhead v. Crozer Chester  

                                                                                                                                                                                                        

Med. Ctr., 765 A.2d 786, 789 (Pa. 2001), abrogated on other grounds by Northbrook  

                                                                                                                                                                                                                            

Life Ins. Co. v. Commonwealth, 949 A.2d 333 (Pa. 2008) (holding that "the amount paid  

                                                                                                                                                                                                                   

and accepted by [the provider] as payment in full for the medical services is the amount  

                                                                                                                                                                                                    (continued...)  



                                                                                                              -12-                                                                                                        7391
  


----------------------- Page 13-----------------------

a windfall if allowed to recover the total amount billed "because the plaintiff did not                                                                

incur the 'write-off' amount."                        47  



                        Today's dissent advocates for this approach.  AKHappytime also urges us  

                                                                                                                                                         



to follow this rule, arguing that it follows from the Restatement of Torts, which we often  

                                                                                                                                                    

cite when clarifying the common law.48                                      Section 924 of the Restatement (Second) of  

                                                                                                                                                         



Torts provides that "[o]ne whose interests of personality [sic] have been tortiously  

                                                                                                                                           



invaded is entitled to recover damages for past or prospective . . . reasonable medical and  

                                                                                                                                                       

other expenses."49   Comment f to section 924 explains that an "injured person is entitled  

                                                                                                                                                



to damages for all expenses and for the value of services reasonably made necessary by  

                                                                                                                                                         

the  harm."50              AKHappytime  points  out  that  "value"  is  defined  in  section  911  as  

                                                                                                                                                        

"exchange value or the value to the owner if this is greater than the exchange value";51  

                                                                                                                                             



and comment h to that section provides that "[i]f . . . the injured person paid less than the  

                                                                                                                                                        



            46          (...continued)  



                                                                                                                                          

 [a victim] is entitled to recover as compensatory damages"); Haygood v. De Escabedo,  

                                                                                                                                                 

356 S.W.3d 390, 395-96 (Tex. 2011) (holding that "the common-law collateral source  

                                                                                                                 

rule does not allow recovery as damages of medical expenses a health care provider is  

                           

not entitled to charge").  



            47          Bozeman  v. State, 879 So. 2d 692, 702 (La. 2004); see Dedmon, 535  

                                                                                                                                                      

S.W.3d at 454-55.  

                    



            48          See, e.g., Schack v. Schack, 414 P.3d 639, 643 (Alaska 2018) (discussing  

                                                                                                                                         

limits on recovery for negligent infliction ofemotional distress); Burton v. Fountainhead  

                                                                                                                                    

Dev.,  Inc.,  393  P.3d  387,  398-99  (Alaska  2017)  (discussing  damages  available  in  

                                                                                                                                                         

defamation cases); Burnett v. Gov't Emps. Ins. Co., 389 P.3d 27, 32 (Alaska 2017)  

                                                                                                                                                  

(discussing circumstances under which duty arises to protect another's property).  

                                                                                                                                  



            49          RESTATEMENT  (SECOND) OF  TORTS     924  (AM.  LAW  INST .   1979).  



            50          Id.  cmt.  f  (emphasis  added).  



            51          Id.    911(1).  



                                                                           -13-                                                                    7391
  


----------------------- Page 14-----------------------

exchange rate, he [or she] can recover no more than the amount paid, except when the                                                                         

low rate was intended as a gift to him [or her]."                                        52  



                         The California Supreme Court has adopted this approach, ruling "that a  

                                                                                                                                                                 



plaintiff's expenses,  to  be recoverable, must be both incurred  and  reasonable" and  

                                                                                                                                                            

relying in part on Restatement section 911, comment h.53  But the Tennessee Supreme  



Court has questioned whether comment h was ever "intended to apply to cases involving  

                                                                                                                                                 

physical harm."54                   "Instead, it is intended to apply in cases where a plaintiff sues to  

                                                                                                                                                               



recover the value of property or services the plaintiff rendered to the defendant," while  

                                                                                                                                                         



"[i]n contrast, section 920A applies to 'Harm to the Person,' that is, personal injury  

                                                                                                                                                       

cases."55            Section  920A  addresses  the  collateral  source  rule  explicitly,  stating  that  

                                                                                                                                                           



"[p]ayments made to or benefits conferred on the injured party from other sources are  

                                                                                                                                                             



not credited against the tortfeasor's liability, although they cover all or a part of the harm  

                                                                                                                                                          

for which the tortfeasor is liable."56                                And a comment explains that "[t]he law does not  

                                                                                                                                                             



differentiate between the nature of the benefits, so long as they did not come from the  

                                                                                                                                                             

defendant or a person acting for him [or her]."57  

                                                                             



                         The  Supreme  Judicial  Court  of  Massachusetts  explained  the  inherent  

                                                                                                                                                  



weakness in relying on the amounts paid as presumptive proof of reasonableness:  

                                                                                                                            



             52          Id.  cmt. h.   



             53          Howell v. Hamilton Meats & Provisions, Inc.                                          , 257 P.3d 1130, 1138 (Cal.  



2011) (emphasis in original).         



             54          Dedmon v. Steelman, 535 S.W.3d 431, 457 (Tenn. 2017).  

                                                                                                                          



             55          Id. (emphasis in original) (citing Wills v. Foster, 892 N.E.2d 1018, 1027  

                                                                                                                                                         

(Ill. 2008)).  

         



             56          RESTATEMENT  (SECOND) OF  TORTS   920A.   



             57          Id. cmt. b.  

                                         



                                                                             -14-                                                                        7391
  


----------------------- Page 15-----------------------

                             [T]he actual amounts paid by an insurer to the provider may                                                             

                             confound rather than mitigate the problems posed by medical                                                      

                             bills,   because   the   amounts   paid,   like   the   bills   or   charges  

                             themselves, may not have more than a tenuous relationship to                                                                  

                             the reasonable value of the provider's medical services. This                                                           

                             is so because the discount from charges that the provider                                                      

                             accepts is likely a function of a variety of factors, including  

                                                                                                                                                         

                             the bargaining power of the insurer, or, as here, limited by  

                                                                                                                                              

                             Federal  or  State  law  -  factors  that  relate  to  the  injured  

                                                                                                                                                       

                             plaintiff's relationship with a collateral third-party payor and  

                                                                                                                [58]  

                                                                                          

                             have nothing to do with the tortfeasor. 



Courts have also rejected the "actual amount paid" approach on grounds that it makes  



irrational distinctions among plaintiffs depending on whether they have insurance and  

                                                                                                             



how much it covers.  In effect, a "tortfeasor's liability is reduced when the victim is  

                                                                                                                                                                                       

prudent and buys insurance, but it is increased when the victim has no insurance."59  

                                                                                                                                                                                 This  



not only creates a disparity in damages, it also allows a tortfeasor to derive a benefit from  

                                                                                                                                                                                 



"compensation or indemnity that an injured party has received from a collateral source,"  

                                                                                                                                                                          

seemingly in direct contravention of the collateral source rule.60  

                                                                                                                                            



               58            Law  v.  Griffith,  930  N.E.2d   126,   133-34  (Mass.  2010).  



               59            Dedmon,  535  S.W.3d  at  456.  



               60            Id.   (quoting   Acuar   v.   Letourneau,   531   S.E.2d   316,   322   (va.   2000))  



(criticizing  Howell  v.  Hamilton  Meats  &  Provisions,  Inc., 257 P.3d   1130 (Cal.  2011));  

see  also  McConnell  v.  Wal-Mart  Stores,  Inc.,  995  F.  Supp.  2d  1164,  1171  (D.  Nev.  2014)  

("The  Howell  case  is  .  .  .  squarely  at  odds  with  the  collateral  source  rule,  which  utterly  

disregards   the   amount   of   money   a   tort   victim   is   actually   made   to  pay   to  remedy  his  

injuries,   in   favor   of   awarding   the   reasonable   cost   of   ameliorating   the   injuries,  

notwithstanding   any  potential   'double  recovery'  by  the  tort  victim.").    It   is   for  these  

reasons   that   one   federal   district   court  judge,  predicting   Alaska   law,   decided   that   we  

would  reject  Howell  and follow  instead  the  dissent  in  Lucier  v. Steiner  Corp.,  93  P.3d  

 1052,  1053-55  (Alaska  2004)  (Fabe,  J.,  dissenting  from dismissal  of  petition  for  review).   

Rupp  v.  Wal-Mart  Stores,  Inc.,  No.  3:11-cv-00052  JWS,  2012  WL  1951829,  at  *1-3  (D.  

                                                                                                                                                              (continued...)  



                                                                                         -15-                                                                                   7391
  


----------------------- Page 16-----------------------

                             2.            The "benefit of the bargain" approach                                                     



                             A few states have adopted an alternative sometimes called the "benefit of                                                                               



the bargain" approach, which "permits recovery of full, undiscounted medical bills,                                                                                           



including the negotiated rate differential, only where the plaintiff paid consideration for                                                                                         



                                                  61  

the insurance benefits."                                                                                                                                                        

                                                       The plaintiff who has purchased insurance is assumed to have  



                                                                                                                                                                                

paid consideration for the "negotiated rate differential" as much as for "the actual cash  



                                                                                                                                  62  

                                                                                                                                                                                

payments" made by the insurer to the medical care providers.                                                                            But plaintiffs who "did  



                                                                                                                                                                                     

not pay for the benefit of discounted rates and write-offs" - such as beneficiaries of  



                                                                                                                                                          63  

                                                                                                                                                                              

Medicare and Medicaid - may not introduce their undiscounted billings;                                                                                        in such cases  



                                                                                                                                                                                  

the court "treat[s] the amount paid by Medicare [or Medicaid] as dispositive of the  



                                                                                                           64  

                                                                                       

reasonable value of healthcare provider services." 



                             Criticisms ofthe"benefitofthebargain"approach includethat it "protect[s]  

                                                                                                                                                                   



the rich and hurt[s] the poor, since persons who have the ability to pay for insurance are  

                                                                                                                                                                                   



              60             (...continued)  



                                                                                                                                                                                 

Alaska May 30, 2012); Dunkin v. Dorel Asia SRL, No. 5:10-cv-00004 JWS, 2012 WL  

                                                                                               

896270, at *1-3 (D. Alaska Mar. 15, 2012).  



              61            Dedmon, 535 S.W.3d at 456. As examples of courts following the "benefit  

                                                                                                                                                                         

of the bargain" approach, Dedmon cites Stayton v. Delaware Health Corp., 117 A.3d  

                                                                                                                                                                               

521, 531 (Del. 2015) (noting that the collateral source rule applies to "provider write- 

                                                                                                                                                                             

offs" but declining to extend it to Medicare write-offs, which are not "gratuities" to  

                                                                                                                                                                                     

injured parties but rather bargains made "out of consideration for the taxpayers"), and  

                                                                                                                                                      

Bozeman v. State, 879 So. 2d 692, 705 (La. 2004) ("[W]here the plaintiff pays no  

                                                                                                                                                                                   

enrollment fee, has no wages deducted, and otherwise provides no consideration for the  

                                                                                                                                                                                   

collateral source benefits he receives, we hold that the plaintiff is unable to recover the  

                                                                                                                                                                                   

 'write-off' amount.").  

                         



              62            Dedmon, 535 S.W.3d at 456.  

                                                                                  



              63            Id.  



              64             Stayton, 117 A.3d at 533.  

                                                                          



                                                                                        -16-                                                                                  7391
  


----------------------- Page 17-----------------------

the only personal injury plaintiffs who may recover the negotiated rate differential"; and                                                                                                                  



"that it 'undermines the collateral source rule by using the plaintiff's relationship with                                        

a third party to measure the tortfeasor's liability.' "                                                               65  



                                                                                                           

                               3.              The "reasonable value" approach  



                                                                                                                                                                                                  

                               The  final  approach,  the  "reasonable  value"  approach,  is  used  by  the  



                                                                                                                                                                           

majority of courts to have addressed this issue; it allows the admission of undiscounted  



                                                                                                                                                                                     66  

                                                                                                                                                                                           

medical bills at trial, without restriction, as evidence of medical services' value.                                                                                                      Courts  



                                                                                                                                                                                                     

following this approach "adhere to the traditional collateral source rule, as outlined in  



                                                                                                                                                                                          

 Section 920A of the Restatement, that tortfeasors should be responsible for all  the  



                                                                                                                                                                                  

damage they cause and that plaintiffs, not tortfeasors, should benefit fromany negotiated  



                        67  

                                                                                                                                                                                       

discount."                      Some of these courts also emphasize that because the value of medical  



                                                                                                                                                                                     

servicesis afact-intensivequestion, juriesshould receiveallrelevant evidence,including  



                65             Dedmon, 535 S.W.3d at 456-57 (quoting                                                         Wills v. Foster                  , 892 N.E.2d 1018,                            



 1027 (Ill. 2008));                       see Wills            , 892 N.E.2d at 1030 ("Courts employing [the benefit of the                                                                         

bargain] approach discriminate amongst plaintiffs, holding that only the sick or disabled                                                                                              

plaintiff whose expenses are covered by Medicaid may not seek to recover the full billed                                                                                                     

amount of medical expenses.").                



                66             See Bynum v. Magno, 101 P.3d 1149, 1160 (Haw. 2004), as amended (Dec.  

                                                                                                                                                                                              

2, 2004); Arthur v. Catour , 833 N.E.2d 847, 849 (Ill. 2005); Stanley v. Walker, 906  

                                                                                                                                                                                                 

N.E.2d 852, 858 (Ind. 2009); Rose v. via Christi Health Sys., Inc., 78 P.3d 798, 806  

                                                                                                                                                                                                 

(Kan. 2003), opinion modified on reh'g sub nom. Rose v. via Christi Health Sys., Inc./St.  

                                                                                                                                                                                          

Francis Campus, 113 P.3d 241 (Kan. 2005); Baptist Healthcare Sys., Inc. v. Miller, 177  

                                                                                                                                                                                                 

 S.W.3d 676, 682-83 (Ky. 2005); Meek v. Montana Eighth Judicial Dist. Court, 349 P.3d  

                                                                                                                                                                                                

493, 496 (Mont. 2015); Robinson v. Bates, 857 N.E.2d 1195, 1197 (Ohio 2006); White  

                                                                                                                                                                                             

v. Jubitz Corp., 219 P.3d 566, 579 (Or. 2009); Haselden v. Davis, 579 S.E.2d 293, 295  

                                                                                                                                                                                                 

(S.C. 2003); Papke v. Harbert, 738 N.W.2d 510, 535-36 (S.D. 2007); Dedmon, 535  

                                                                                                                                                                                                 

 S.W.3d at 466; Kenney v. Liston, 760 S.E.2d 434, 444-46 (W. va. 2014); Koffman v.  

                                                                                                                                                                                                      

Leichtfuss, 630 N.W.2d 201, 210 (Wis. 2001).  

                                                                                              



                67             Dedmon, 535 S.W.3d at 458.  

                                                                                         



                                                                                                -17-                                                                                          7391
  


----------------------- Page 18-----------------------

undiscounted medical bills.                                       68  Some courts are reluctant to hold as a matter of law that   



providers' medical bills - even if rarely paid in full - are not evidence of the actual                                                                                                         

value of the services.                             69  



                                                                                                                                                                                              

                                The reasonable value approach, like the others, has its critics.  The critics'  



                                                                                                                                                                                                      

main focus is on the "windfall" to the plaintiff, who may recover the negotiated rate  



                                                                                                                                                                                                     

differential even though neither the plaintiff nor the insurer is out of pocket for that  

            70    Such a result "may be viewed as punitive toward the defendant."71  

sum.                                                                                                                                              



                C.	             We Follow The "Reasonable value" Approach, Which Is Consistent                                                                                      

                                With The Collateral Source Rule.                                        



                                1.	             The negotiated rate differential is a collateral source benefit.                                                                       



                                The first step in deciding how to treat evidence of the negotiated rate                                                                                              



differential at trial is to decide what the differential represents:  Is it a part of the benefit  

                                                                                                                                                                                               



the injured party receives from the collateral source?  The dissent in Lucier concluded  

                                                                                                                                                                                      



that it was:   "The amount discounted out of a medical bill is part of the value of that                                                                                                              



                68              See Robinson                    , 857 N.E.2d at 1200;                               Meek, 349 P.3d at 497;                                  Haselden, 579   



S.E.2d at 295.          



                69              See Papke, 738 N.W.2d at 535-36 ("We think it unwise for us to make a  

                                                                                                                                                                                                            

broad declaration that the reasonable value of medical services equals the amount paid,  

                                                                                                                                                                                                   

not the amount billed.  Such decision would create an inference that the actual amount  

                                                                                                                                                                                             

billed  to  patients  by  medical  care  providers  is,  as  a  matter  of  law,  unreasonable."  

                                                                                                                                                                         

(emphasis in original) (citations omitted)); see also Wills, 892 N.E.2d at 1025 ("In  

                                                                                                                                                                                                     

Illinois, a paid bill constitutes prima facie evidence of reasonableness. In a case in which  

                                                                                                                                                                                                

the plaintiff seeks to admit a bill that has not been paid in whole or in part, he or she must  

                                                                                                                                                                                                    

establish reasonableness by other means . . . .").  

                                                                                                        



                70              Dedmon, 535 S.W.3d at 458; see also Wills, 892 N.E.2d at 1029.  

                                                                                                                                                                              



                71              Dedmon, 535 S.W.3d at 458.  

                                                                                           



                                                                                                   -18-	                                                                                           7391
  


----------------------- Page 19-----------------------

                                                                                                                              72  

collateral   benefit   and   should   not   accrue   to   the   defendant."                                                          We   agree   with  this  



reasoning and that of the majority of courts to have considered the issue.                                                              



                           Courts rely on a variety of rationales, all of which have some weight.                                                                                



Courts reason that an injured party benefits as much from the write-off of medical bills                                                                               

                                                                                    73  The injured party would remain responsible  

as frompayment; both reduce the liability.                                                                                                               

for any uncovered amount; a negotiated write-off eliminates that prospect.74                                                                                A federal  

                                                                                                                                                                  



court reasoned that the negotiated rate differential is simply "[a] creditor's forgiveness  

                                                                                                                                                        



of debt" that should be "considered equivalent to payment in other contexts, e.g., income  

                                                                                                                                                                 



tax, credit bids at foreclosure, etc."; therefore, "a creditor's partial forgiveness of a tort  

                                                                                                                                                                        



victim's medical bills via a write-down is properly considered a third-party 'payment,'  

                                                                                                                                                          

evidence of which is barred by the collateral source rule."75                                                             And finally, courts reason  

                                                                                                                                                                  



that failing to recognize the benefit of the negotiated rate differential to the injured party  

                                                                                                                                                                     



would violate "the very purpose of the collateral source rule:  to prevent a defendant  

                                                                                                                                                           



              72           Lucier   v.   Steiner   Corp.,   93  P.3d   1052,   1054   (Alaska   2004)   (Fabe,   J.,  



dissenting from dismissal of petition for review).                                 



              73           Dedmon, 535 S.W.3d at 459-60; Acuar v. Letourneau , 531 S.E.2d 316, 322  

                                                                                                                                                                        

(va. 2000); Kenney v. Liston, 760 S.E.2d 434, 446 (W. va. 2014).  

                                                                                                                                         



              74           McConnell v. Wal-Mart Stores, Inc., 995 F. Supp. 2d 1164, 1170 (D. Nev.  

                                                                                                                                                                      

2014) ("If an insurer ultimately rejects coverage for any reason, or if payment by the  

                                                                                                                                                                         

insurer is otherwise frustrated after treatment, the provider can, and presumably will, still  

                                                                                                                                                                         

charge the full rate to the patient."); Rupp v. Wal-Mart Stores, Inc., No. 3:11-cv-00052  

                                                                                                                                                  

JWS, 2012 WL 1951829, at *3 (D. Alaska May 30, 2012) (concluding that because the  

                                                                                                                                                                          

"[p]laintiff would have been responsible for the higher rates but for Medicaid's contract  

                                                                                                                                                                

with the provider[,] . . . the difference between the negotiated rate and the higher rate  

                                                                                                                                                                        

constitutes an amount received").  

                                              



              75           McConnell, 995 F. Supp. 2d at 1170.  

                                                                                           



                                                                                    -19-                                                                             7391
  


----------------------- Page 20-----------------------

from reaping the benefits of a plaintiff's preparation and protection."                                           76  



                                                                                                                                        

                      2.	        Undiscounted  medical  bills  are  generally  admissible; trial  

                                                                                                                                        

                                 evidence  rebutting  their  reasonableness  must  respect  the  

                                                                

                                 collateral source rule.  



                                                                                                                                     

                      We also follow the majority of courts by adopting the "reasonable value"  



                                                                                                                         

approach,  in  which  an  injured  party  is  allowed  to  introduce  the  full,  undiscounted  



                                                                                                                              

medical bills into evidence at trial. This follows from our conclusion that the negotiated  



                                                                                                                                     

rate differential represents part of the benefit to the injured party.   Both the actual  



                                                                                                                                  

amounts  paid  and  any  amounts  the  provider  wrote  off  are  relevant  to  the  medical  



                                   

services' reasonable value.  



                                                                                                                                        

                      This holding requires us to consider what evidence a defendant may raise  



                                                                                                                                   

to rebut the reasonableness of the dollar amounts in the plaintiff's undiscounted medical  



                                                                                                                                            

bills.  Some states have tried a "hybrid approach" to determining reasonable value, in  



                                                                                                                          

which the tortfeasor is allowed to respond to the injured party's reliance on undiscounted  



                                                                                     77  

                                                                                                                                    

medical bills by showing the amount actually paid.                                        In a nod to the collateral source  



                                                                                                       78  

                                                                                                                                          

rule, mention of insurance is still avoided as much as possible.                                           But this approach has  



           76         Kenney, 760 S.E.2d                  at 446;       see also       Acuar, 531           S.E.2d at 323            ("The  



wrongdoer   cannot   reap  the   benefit   of   a   contract   for   which   the   wrongdoer   paid   no  

compensation.").  



           77	        Dedmon, 535 S.W.3d at 454, 463.  

                                                                        



           78         See id. at 458; Stanley v. Walker, 906 N.E.2d 852, 858 (Ind. 2009) ("The  

                                                                                                                           

collateral  source  statute  does  not  bar  evidence  of  discounted  amounts  in  order  to  

                                                                                                                                           

determine the reasonable value of medical services. To the extent the adjustments or  

                                                                                                                                            

accepted  charges  for  medical  services  may  be  introduced  into  evidence  without  

                                                                                                                                  

referencing insurance, they are allowed."); Martinez v. Milburn Enters., Inc., 233 P.3d  

                                                                                                                                        

205, 207 (Kan. 2010) ("[W]hen a finder of fact is determining the reasonable value of  

                                                                                                                                            

medical services, the collateral source rule bars admission of evidence stating that the  

                                                                                                                                          

expenses were paid by a collateral source.  However, the rule does not . . . bar . . . the  

                                                                                                                                          

                                                                                                                         (continued...)  



                                                                    -20-	                                                             7391
  


----------------------- Page 21-----------------------

                                                                           79  

been criticized as likely to confuse the jury                                  and as permitting the defendant "to do                        



indirectly  what   it   cannot   do   directly,   that   is,   .   .   .   seeking   to   limit   [the   plaintiff's]  

                                                                                                                                       80   We  

award . . . by introducing evidence that payment was made by a collateral source."                                                          



agree that this "hybrid approach" is highly likely to undermine the collateral source rule;  

                                                                                                                                          



therefore, evidence of what was actually paid should not be admitted if offered to rebut  

                                                                                                                                         



the reasonableness of the undiscounted bills.  

                                                                    



                      We recognize that defendants' remaining evidentiary options for rebuttal  

                                                                                                                               



are limited.  But they are limited by the collateral source rule - which we continue to  

                                                                                                                         



observe - and they do exist.   Defendants may "submit any competent evidence in  

                                                                                                                                              

rebuttal  that  does  not  run  afoul  of  the  collateral  source  rule."81                                      They  "are  free  to  

                                                                                                                                              



cross-examine any witnesses that a plaintiff might call to establish reasonableness, and  

                                                                                                                                           



the defense is also free to call its own witnesses to testify that the billed amounts do not  

                                                                                                                                            



           78          (...continued)  



                                                                                                                                           

admission of evidence  indicating  that something less than  the charged  amount has  

                                          

satisfied . . . the amount billed.").  



           79         Leitinger v. Dbart, Inc., 736 N.W.2d 1, 14 (Wis. 2007); see also Wills v.  

                                                                                                                                               

Foster, 892 N.E.2d 1018, 1032-33 (Ill. 2008).  

                                                                   



           80         Leitinger, 736 N.W.2d at 14; see also Aumand v. Dartmouth Hitchcock  

                                                                                                                                

Med. Ctr., 611 F. Supp. 2d 78, 91 (D.N.H. 2009) (observing that evidence of amounts  

                                               

paid, even if offered only to rebut reasonableness of undiscounted bills, "strikes the court  

                                                                                                                                         

as an end-run around the collateral sourcerule"); Wills, 892 N.E.2d at 1033 ("Defendants  

                                                                                                                           

may not . . . introduce evidence that the plaintiff's bills were settled for a lesser amount  

                                                                                                                                     

because to do so would undermine the collateral source rule.").  

                                                                                               



           81         Dedmon, 535 S.W.3d at 466; see also Leitinger v. van Buren Mgmt., Inc.,  

                                                                                                                                          

720 N.W.2d 152, 158 (Wis. App. 2006) (holding that "a defendant must produce some  

                                                                                                                                         

competent evidence other than what the insurance company paid upon which to base its  

                                                                                                                                              

argument that the amount billed was not the reasonable value of the services" (emphasis  

                                                                                                                                 

in original)).  

                       



                                                                     -21-                                                               7391
  


----------------------- Page 22-----------------------

                                                                                              82  

reflect the reasonable value of the services."                                                     Such evidence may include, for example,                              



testimony about the range of charges the provider has for the same services or what other                                                                                        



                                                                                                                               83  

providers in the relevant area charge for the same services.                                                                        



                                                                                                                                                                       

                             Finally, to the extent the negotiated rate differential represents a collateral  



                                                                                                                                                                      

benefit for which the collateral source has no "right of subrogation by law or contract,"  



                                                                                                                                              84  

                                                                                                                        

it is subject to the post-verdict procedure set out in AS 09.17.070. 



v.             CONCLUSION  



                             WeREvERSEthesuperiorcourt'sorderexcludingWeston's undiscounted  

                                                                                                                                                               



medical bills from evidence at trial and REMAND for further proceedings consistent  

                                                                                                                                                                      



with this opinion.  

                     



               82            Wills,   892   N.E.2d   at   1033;   see   also   Leitinger,   720   N.W.2d   at   158  



(explaining that defendant "could have offered expert testimony as to the reasonable                                                                                

value of the medical services provided in support of its argument that the amount billed                                                                                       

for the medical services was not the reasonable value of the services").                                                           



               83            See, e.g., Melo v. Allstate Ins. Co., 800 F. Supp. 2d 596, 602 (D. vt. 2011)  

                                                                                                                                                                               

(allowing defense to "introduce any relevant evidence of the reasonable value of medical  

                                                                                                                                                                           

services that is not barred bythecollateralsourcerule[, including],for example, evidence  

                                                                                                                                                                         

as to what the provider usually charges for the services provided, or what other providers  

                                                                                                                                                                       

usually charge"); Nomat v. Mota, No. OP 140102-U, 2015 WL 5257886, at *8 (Ill. App.  

                                                                                                                                                                                 

2015) (holding that defense expert should be allowed to testify about "reasonableness  

                                                                                                                                                        

of  medical  bills  for  office  visits,  treatment,  and  markups  for  the  hardware  used  in  

                                                                                                                                                                                      

plaintiff's surgery" based on database of cost information in relevant geographic area).  

                                                                                                                                                                               



               84            Under  federal  law,  Medicare  has  a  right  to  subrogation  for  the  actual  

                                                                                                                                                                              

amounts paid for medical care. 42 C.F.R.  411.26 (2018). But Medicare does not have  

                                                                                                                                                                                 

a right to subrogation for the negotiated difference between the amounts billed and the  

                                                                                                                                                                                     

amounts paid.  See 42 U.S.C.  1395y(b)(2)(B)(iv) (2018) ("The United States shall be  

                                                                                                                                                                                      

subrogated (to the extent of payment made under this subchapter for such an item or  

                                                                                                                                                                                      

service) to any right under this subsection of an individual or any other entity to payment  

                                                                                                                                                                         

with respect to such item or service under a primary plan.").  

                                                                                                                  



                                                                                         -22-                                                                                   7391
  


----------------------- Page 23-----------------------

BOLGER, Justice, concurring in part and dissenting in part.                                                                                                   



                                      I agree with the court's opinion that an injured party should be allowed to                                                                                                                                



introduce medical bills as evidence of the value of medical services, even when the party                                                                                                                                               



is covered by Medicare. But I also agree with the dissenting opinion that a tort defendant                                                                                                                                



should be able to introduce the actual payments accepted for those services.                                                                                                                   



                                      My opinion is influenced by theIndianaSupremeCourt'sdecisionallowing                                                                                                                    

                                                                                                                                                                                                                                     1  Like  

the admission of similar payments made by the Indiana Health Insurance Program.                                                                                                                                                           



the Indiana program, Medicare is a voluntary program:  healthcare providers need not  

participate, and they can leave the program at any time.2                                                                                                             Providers that remain in the  

                                                                                                                                                                                                                                             

program  agree  to  the  terms  of  participation,  including  the  reimbursement  rates.3  

                                                                                                                                                                                                                                                         



Therefore, the reimbursement rates are probative evidence of the value of the medical  

                                                                                                                                                                                                                               

services provided.4  

                         



                                      I also agree with the court that the defendant should not be allowed to  

                                                                                                                                                                                                                                                



introduce the amount of the payment differential or otherwise refer to the fact that the  

                                                                                                                                                                                                                                             



payment is made by a collateral source.   But there should be no need to refer to the  

                                                                                                                                                                                                                                             

source of the payment in order to show the payments that were actually accepted.5                                                                                                                                                          I do  

                                                                                                                                                                                                                                            



                   1                  Patchett  v.  Lee,  60  N.E.3d   1025  (Ind.  2016).  



                   2                  Compare  id.  at   1031  with  42  U.S.C.     1395cc(a)(1),  (b)  (2018).  



                   3                  Patchett,  60  N.E.3d  at   1031.  



                   4                  Id.  



                   5                  See  id.  at   1029  ("  '[T]he  collateral  source  statute  does  not  bar  evidence  of  



discounted  amounts in order to determine the reasonable value of  medical  services',  if  

insurance   is   not   referenced."   (quoting   Stanley   v.   Walker,   906  N.E.2d   852,   858   (Ind.  

2009));  see  also  Martinez  v. Milburn  Enters.,  Inc.,  233  P.3d  205,  222-23  (Kan.  2009)  

("[T]he  collateral  source  rule  bars  admission  of  evidence  stating  that  the  expenses  were  

                                                                                                                                                                                                                (continued...)  



                                                                                                                     -23-                                                                                                               7391
  


----------------------- Page 24-----------------------

not share the court's concerns that this approach will confuse juries or undermine the                                                            



                                     6  

collateral source rule.                                                                                                                           

                                        The trial court can address both of these concerns by limiting the  



                                                                                                                                     

scope of this evidence to remove any reference to a collateral source and by instructing  



                                                                                                                                   

the jury that this evidence is only to be considered for the limited purpose of determining  



                                                                                              7  

                                                                               

the reasonable value of the medical services provided. 



                        So I would reverse the superior court's order restricting Weston from  

                                                                                                                                              



offering  proof  of  the  hospital's  billings.                               On  the  other  hand,  I  do  not  agree  that  

                                                                                                                                                



AKHappytime should be prevented from showing the payments actually accepted.  

                                                                                                                                 



            5          (...continued)  



                                                                                                                                         

paid by a collateral source.   However, the rule does not address, much less bar, the  

                                                                                                                                                 

admission of  evidence indicating  that something less than  the charged  amount has  

                                                                                                                                             

satisfied . . . the amount billed."); Scott v. Garfield, 912 N.E.2d 1000, 1014 (Mass. 2009)  

                                                                                                                                                  

(Cordy, J., concurring) ("[T]he plaintiff is only entitled to the reasonable value of his  

                                                                                                                                                  

medical expenses, and the price that a medical provider is prepared to accept for the  

                                                                                                                                             

medical services rendered is highly relevant to that determination."); Robinson v. Bates,  

                                                                                                    

857 N.E.2d 1195, 1200 (Ohio 2006) ("[T]he reasonable value of medical services is a  

                                                                                                                                                  

matter for the jury to determine fromall relevant evidence. Both the original medical bill  

                                                                                                                                                 

rendered  and  the  amount  accepted  as  full  payment  are  admissible  to  prove  the  

                                                                                                                 

reasonableness . . . of charges rendered for medical and hospital care.").  



            6          See Op. at 20-21.  

                                           



            7          See Alaska R. Evid. 105 ("When evidence which is admissible . . . for one  

                                                                                                                                                 

purpose but not admissible . . . for another purpose is admitted, the court, upon request,  

                                                                                                                                          

shall restrict the evidence to its proper scope and instruct the jury accordingly."); see also  

                                                                                                                                                

Martinez, 233 P.3d at 225-27.  

                                        



                                                                        -24-                                                                  7391
  


----------------------- Page 25-----------------------

STOWERS, Chief Justice, dissenting.                   



                          I cannot join the court's decision because I disagree both with the court's                                                       



premise and its answer to its analytical first step:                                             "to decide what the [negotiated rate]                           

                                              1   The court's premise assumes (petitio principii ) the answer to  

differential represents."                                                                                                                                             



the question it seeks to resolve:  "Is [the differential] part of the benefit that an injured  

                                                                                                                                                      

party receives from the collateral source?"2   Specifically, the question assumes that there  

                                                                                                                                                                



is a benefit to the plaintiff and that it is from a collateral source.  But this is not so.  "The  

                                                                                                                                                                



benefit of insurance to the insured is the payment of charges owed to the health care  

                                                                                                                                                                 



provider.  An adjustment in the amount of those charges to arrive at the amount owed  

                                                                                                                                   



                                                                                                                                                                        3  

is a benefit to the insurer, one it obtains from the provider for itself, not for the insured." 

                                                                                                                                                                           



Notwithstanding, the court answers its question:   "[t]he amount discounted out of a  

                                                                                                                                                                       



medical bill is part of the value of that collateral benefit and should not accrue to the  

                                                                                                                                                                    

defendant."4               In light of the foregoing, it is evident this answer misses the mark.  

                                                                                                                                                  



                          I  also  disagree  with  the  court's  proposition  that  Medicare  "settled"  

                                                                                                                                                       

                                                                                   5 there was no true "settlement" because both  

Weston's hospital bills for a lower amount;                                                                                                                      

                                                                    



sides had to know that the originally billed amounts bore no relation to the fair market  

                                                                                                                                                            



value of the treatment Weston received. Finally, the court "conclude[s] that the amounts  

                                                                                                                                                         



             1            Op. at 19.     



             2            Id .   



             3            Haygood v. De Escabedo, 356 S.W.3d 390, 395-96 (Tex. 2011) (emphasis  

                                                                                                                                                      

added).  



             4            Op. at 19 (quoting Lucier v. Steiner Corp., 93 P.3d 1052, 1054 (Alaska  

                                                                                                                                                          

2004) (Fabe, J., dissenting)).  

                                 



             5            Id . at 1.  

                                      



                                                                                 -25-                                                                           7391
  


----------------------- Page 26-----------------------

billed by the providers are relevant evidence of the medical services' reasonable value."                                                                            6  



                                                                                                                                                               

As  shown  below,  there  is  nothing  reasonable  about  the  intentionally  inflated  and  



                                                                                                                                                       

knowingly  fictitious  prices  charged  by  the  healthcare  providers,  and  these  inflated  



                                                                                                                              

billings are not relevant to any issue in Weston's personal injury case.  



                                                                                                                                                           

                          Fair market value is the price that a willing buyer and a willing seller would  

                                                             7  In healthcare, prices are set in a different way.  Each  

exchange for a good or service.                                                                                  

hospital  maintains  a  massive  price  list  known  as  a  "chargemaster."8                                                                          "[T]hese  

                                                                                                                                                    



chargemaster list prices are exorbitant. They are not set by the hospital to be paid; rather,  

                                                                                                                                                           



they are set to be discounted in negotiations with insurance companies and to game the  

                                                                                                                                                                 

Medicare reimbursement system."9                                      As a mammoth government insurer, Medicare is a  

                                                                                                                                                                     

"price setter" that can press its payments down toward a hospital's breakeven point.10  

                                                                                                                                                                        



                          Thus, from the start the hospital was only going to receive what Medicare  

                                                                                                                                                     



determined it would pay for Weston's treatment.  The hospital "billed" over $135,000  

                                                                                                                                           



for this treatment, but it likely never intended or expected to collect that amount from  

                                                                                                                                                             



             6            Id . at 2.     



             7            Tomal v. Anderson, 426 P.3d 915, 926 n.31 (Alaska 2018) (citing                                                                 value,  



Fair Market value                   , B   LACK 'S  LAW  DICTIONARY  (10th ed. 2014)).                           



             8            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 B     AYLOR  L. R           Ev. 425, 427 (2013).       



             9            George A. Nation III,                    Hospitals Use the Pernicious Chargemaster Pricing                                     



                                                                                                                                                                  

System to Take Advantage of Accident victims:  Stopping Abusive Hospital Billing, 66  

DRAKE  L. R            Ev. 645, 652-53 (2018) [hereinafter                                   Hospitals].  



             10           Id. at 655, 661.  

                                               



                                                                               -26-                                                                          7391
  


----------------------- Page 27-----------------------

                                                                                      11  

Medicare, Weston, or anyone else.                                                           For example:                       the record contains an itemized list                                            



of   every  good   and   service   Weston   consumed   during   her   hospitalization,   including  



medications such as enoxaparin (40 mg), morphine (30 mg), and ondansetron (2 mg/ml).                                                                                                                                    



For a single dose of these medications the hospital billed Weston $240.95, $1104.00, and                                                                                                                      



$65.40, respectively. As AKHappytime demonstrated to the superior court, these prices                                                                                                                   



are orders of magnitude higher than the median wholesale prices of these drugs on the                                                                                                                          

                                                                                                                                            12 Medicare paid less than one- 

international market. And as historical practice predicted,                                                                                                                                                 

fifth of what the hospital billed for Weston's medical care.13  

                                                                                                                                      



                                 Weston is entitled to pursue compensation for the medical treatment she  

                                                                                                                                                                                                              

received, but she must establish "some reasonable basis" for valuing that care.14                                                                                                                            Her  

                                                                                                                                                                                                            



claims for medical treatment must be based on some reasonable semblance of a fair  

                                                                                                                                                                                                              



market value of the goods and services she received - a market value evidenced by  

                                                                                                                                                                                                                

what is typically paid by Medicare, one of the largest insurers in the healthcare market15  

                                                                                                                                                                                                  



- not on some grossly inflated, fictitious amount billed.  

                                                                                                                                               



                 11              See id.           at 651-52 ("On average, hospitals receive only 33 percent of their                                                                                      



chargemaster prices from all payers."); Mark A. Hall & Carl E. Schneider,                                                                                                                 Patients As   

Consumers:   Courts, Contracts, and the New Medical Marketplace                                                                                                       , 106 M            ICH. L. R            Ev.  

                                                                                                                                                                                                         

643, 664 (2008) ("Undiscounted charges are often three or four times the rates given  

                                                                                                                                                                                                   

insurers, and there are 'contracts where the discount from list price was over [ninety]  

                        

percent.' ").  



                 12              Hospitals, supra note 9, at 652-53.  

                                                                                                     



                 13              The hospital billed Weston over $135,000; Medicare paid those bills in full  

                                                                                                                                                                                                               

for $24,247.45, approximately 18% of the billed amount.  

                                                                                                                          



                 14              Alexander  v.  State,  Dep't  of  Corr. ,  221  P.3d  321,  324  (Alaska  2009)  

                                                                                                                                                                                                       

(quoting City of Fairbanks v. Nesbett, 432 P.2d 607, 616 (Alaska 1967)).  

                                                                                                                                                                    



                 15              Hospitals, supra note 9, at 655, 661.  

                                                                                                                 



                                                                                                      -27-                                                                                                7391
  


----------------------- Page 28-----------------------

                                               Finally, the collateral source rule does not come into play at all with respect                                                                                                                                                          



to   the   negotiated   rate   differential,   because   there   is   no   collateral   source   payment .   



Weston's damages are not being reduced or mitigated on account of                                                                                                                                                                                   payments  from a   



source other than the defendant; Weston's medical bills were paid at the Medicare rate                                                                                                                                                                                                              



and, most importantly, she did not incur any liability for the difference between the rates                                                                                                                                                                                                     



actually paid and the fictitious, inflated rates initially charged. To repeat what was stated                                                                                                                                                                                                



at the outset, "The benefit of insurance to the insured is the payment of charges owed to                                                                                                                                                                                                                 



the health care provider.                                                              An adjustment in the amount of those charges to arrive at the                                                                                                                                                  



amount owed is a benefit to the insurer                                                                                               , one it obtains from the provider for itself,                                                                                                     not for   



                                              16  

the insured                             ."      



                                               I cannot endorse the court's adoption of a known fiction.   The amount  

                                                                                                                                                                                                                                                                                     



originally billed by the healthcare providers has no rational relationship to the economic  

                                                                                                                                                                                                                                                                               



realities of modern healthcare payment practices.  I would affirm the superior court's  

                                                                                                                                                                                                                                                                                        



order limiting Weston to showing "the adjusted medical rates accepted by her providers  

                                                                                                                                                                                                                                                                                



as full and final payment for medical services rendered," and therefore I dissent.  

                                                                                                                                                                                                                                                             



                        16                     Haygood  v.  De  Escabedo,  356  S.W.3d  390,  395-96  (Tex.  2011)  (emphasis  



added).  



                                                                                                                                                  -28-                                                                                                                                                         7391  

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