In a stunning reversal of what appeared to be the trend towards discounted medical damages in personal-injury cases, the Tennessee Supreme Court ruled on Friday, November 17, 2017, that the Collateral Source Rule reigns supreme. Under it, the high court held, “plaintiffs may submit evidence of the injured party’s full, undiscounted medical bills as proof of reasonable medical expenses.” “[D]efendants,” on the other hand, “are precluded from submitting evidence of discounted rates accepted by medical providers from the insurer to rebut the plaintiffs’ proof.” West v. Shelby County Healthcare Corp., where the court held in 2014 that “the amount of the full, undiscounted charges billed to the patient is ‘unreasonable,’” “was not intended to apply in personal injury cases.” Instead, “West was intended only to construe the phrase ‘reasonable charges’ in the context of determining the maximum amount of a . . . [Hospital Lien Act] lien.”
So compelling was the language of West that fully six Tennessee federal district courts had held since 2014 that the discounted amounts accepted by a medical provider—and not the undiscounted amounts billed to patients—“were, as a matter of law, the reasonable medical expenses.” Several, recognizing the unduly persuasive force of collateral sources, acknowledged the importance of the Collateral Source Rule but concluded that it “does not expand the scope of economic damages to include expenses the plaintiff never incurred.” These courts, like the Dedmon trial court, saw wisdom in West’s exposure of “the subterfuge that the medical community uses with regard to insurance and expenses.” And like the trial court, they “could not imagine that [the Tennessee Supreme Court] would use any other logic than [it] had used in [West].”
But the Collateral Source Rule was not implicated in West. Tennessee has abrogated the rule by statute in workers’ compensation and health care liability cases. Not so in the personal-injury context. There, “the [C]ollateral [S]ource [R]ule has been firmly entrenched . . . for over a century.” And it avoids the injustice that would allow a defendant who injures an insured plaintiff to pay less in medical expenses than a defendant who similarly injures an uninsured one.
More importantly, “[f]rom its inception, . . . the most basic application of the [C]ollateral [S]ource [R]ule has been to prevent the plaintiff’s recovery from being reduced by benefits that are collateral to the defendant, such as insurance benefits.” Any difference between amounts billed and amounts paid to a medical provider due to insurance is a benefit for which the plaintiff paid consideration by securing insurance in the first place. “Consequently, to adopt the ‘actual amount paid’ approach . . . would . . . reject or abrogate the [C]ollateral [S]ource [R]ule.”
“Certainly,” the court went on, “there is some overlap in that the word ‘reasonable’ is used in connection with the valuation of medical expenses in many types of cases.” But personal-injury cases, medical malpractice claims, and workers’ compensation each “involve different public policies than the policies underlying the HLA, and they are governed by different statutory schemes and common-law rules.” West, which expressly limited its holding to determining reasonable costs “for the purposes of [the Hospital Lien Act],” “interpreted the HLA in a manner consistent with the Legislature’s purpose for that statute.” “Application of the West holding to personal injury cases would transform what would be a factual finding on damages into a legal holding by the court.” In the personal-injury context, what amount constitutes a plaintiff’s reasonable medical expenses “is a fact question to be decided by the trier of fact, based on the evidence submitted by both parties.”
For these reasons, the court “declined to alter existing law in Tennessee regarding the [C]ollateral [S]ource [R]ule.” The rule, according to the court, “continues to further substantial public policies.” As well, the court concluded, it “ha[d] no assurance that adoption of any of the alternative approaches would result in a more just and accurate assessment of the reasonable value of medical services received by plaintiffs in personal injury cases.” Defendants remain free to submit rebuttal evidence that does not contravene the Collateral Source Rule—such as evidence regarding necessity and whether a claimed service actually was rendered. But they may not adduce evidence of discounted amounts accepted by health care providers due to insurance.
Pundits and litigants alike now have the answer for which we have been waiting: The destiny of reasonable medical expenses in Tennessee is what it always was. Plaintiffs may put forward the full amount of their medical expenses, and defendants may rebut it. But the discounted amounts accepted by medical providers to satisfy the bills are off limits. The Collateral Source Rule is here to stay.
 See Tenn. Code Ann. § 29-26-119 (“In a health care liability action . . . the damages [may be] awarded . . . only to the extent that . . . such losses are not replaced, or indemnified in whole or in part, by insurance.”); State Auto Mut. Ins. v. Hurley, 31 S.W.3d 562, 566 (Tenn. Sp. Workers’ Comp. App. Panel 2000) (“[W]e cannot find any authority in this state for the adoption of the collateral source rule in workers’ compensation cases . . . . [T]he collateral source rule would conflict with Tenn. Code Ann. § 50-6-204(a)(1) and would require legislative action to implement.”)