Adapting Billing Practices to Take Advantage of Howell v. Hamilton

For many people, calculating monthly business expenses can be akin to being trapped between two rocks that fell between two even larger rocks (one of which can be considered a hard place) located in a very deep pit. You have some receipts, some handwritten notes, some mental notes, some indecipherable scribbles on a napkin and/or hotel stationary and some vague and indistinct memories of events that may or may not have actually occurred. As a result, what should be a simple five minute exercise in arithmetic (had you kept clear records) transforms into a five hour mad scramble to piece together the last month of your life from the various records you manage to unearth.

The same can be said for calculating medical bills. Let’s be honest: medical records, and especially medical billing records, are often not a thing of beauty. They can utilize proprietary codes and abbreviations, vague and ambiguous descriptions and less than helpful categories that may require multiple readings and/or years of experience with the system to properly decipher. As a result, it is sometimes necessary to spend tremendous amounts of time and effort to answer the simple question of how much was billed for a procedure versus how much was paid for it.

Why, you might ask, does this matter? The answer lies in a case called Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541. This case has been analyzed numerous times by other attorney and firms, so I’ll skip the in-depth analysis and give you the short version: a plaintiff can generally only recover as damages the amount actually paid for medical services, not the amount billed. So if a patient was billed $100,000 but his insurance company negotiated payment down to $1,000, if the patient sues for those costs his medical damages should be limited to just $1,000 and therefore any potential liability, as a defendant, has been reduced by 99%.

So what does this have to do with billing practices? Well, if you can reduce your potential liability by 99% but, because your records are in such bad shape, your attorney has to spend ten hours to make that calculation (or worse, can’t make that calculation) you’ve just thrown away some of the money saved under the Howell decision. On the other hand, if your records are clear and easily understood so that your attorney can make that calculation in an hour, you not only save yourself from $99,000 in potential liability but from nine hours worth of extra legal fees and the possibility that you end up paying for a medical expense that should have been reduced but was missed because of poor documentation.

The long and short of it: if you are involved in the medical profession, it behooves you to make your medical billing records clear and transparent. If you use abbreviations, define them somewhere. If you use codes, make them logical and provide a reference. Use headers that clearly describe the information under them. Don’t assume your reader is an accountant or a doctor. And don’t rely on the insurance company’s records to make up for lack of clarity in your own records. By taking the time to ensure that your billing records can be quickly and easily understood, you will ensure that you can fully enjoy the benefits of Howell without having to incur additional expense or headache to do so.

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If you’re involved in a lawsuit or risk management and have any questions regarding current or potential legal issues, we would urge you to contact an attorney as soon as possible to obtain advice, guidance and representation. At Baker, Keener & Nahra, we have the experience, skill and drive to get the best possible results for our clients, no matter the size of the case or the scope of the problem.  So if we can be of any assistance to you, please contact us and let us know how we can help.