Martinez v. Milburn Enterprises, Inc.

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IN THE SUPREME COURT OF THE STATE OF KANSAS

No. 100,865

KAREN MARTINEZ,
Appellant,

v.

MILBURN ENTERPRISES, INC.,
Appellee.


SYLLABUS BY THE COURT

1.
At common law, the collateral source rule prevented the jury from hearing
evidence of payments made to an injured person by a source independent of the tortfeasor
as a result of the occurrence upon which the personal injury action is based. Under the
collateral source rule, benefits received by the plaintiff from a source wholly independent
of and collateral to the wrongdoer will not diminish the damages otherwise recoverable
from the wrongdoer.

2.
The abuse of discretion standard of review includes review to determine that the
district court's discretion was not guided by erroneous legal conclusions.

3.
The purpose of awarding damages is to make a party whole by restoring that party
to the position he or she was in prior to the injury.

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4.
The collateral source rule applies to payments received gratuitously as well as
those received as a result of an obligation. As a result, a benefit secured by the injured
party through insurance contracts, advantageous employment arrangements, or gratuity
from family or friends should not benefit the tortfeasor by reducing his or her liability for
damages.

5.
The reasonable expense of an injured plaintiff's medical treatment is a proper
element of economic damages, including when the medical services are self-administered
or gratuitously provided by family members. The reasonableness of the expenses is a
question for the finder of fact. Consequently, the defendant has the right to challenge the
reasonableness of plaintiff's medical expenses.

6.
Evidence relevant to determining the reasonable value of an injured plaintiff's
medical expenses may include the amount actually billed by the health care provider. The
evidence may also include write-offs or other acknowledgments that something less than
the charged amount has satisfied, or will satisfy, the amount billed. Accordingly, neither
the amount billed nor the amount actually accepted after a write-off conclusively
establishes the reasonable value of medical services.

7.
When 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 address, much less bar, the admission of
evidence indicating that something less than the charged amount has satisfied, or will
satisfy, the amount billed.

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8.
When evidence is introduced for a limited purpose, the trial court should explain
the limitation to the jury at the time of its introduction and limit its application to that
purpose.

9.
Under PIK Civ. 4th 102.40, whenever any evidence has been admitted limited to
one purpose, the jury is to be instructed that it should not consider that evidence for any
other purpose.

10.
Relevant evidence is any evidence having any tendency in reason to prove any
material fact. Relevance only requires a logical connection between the asserted facts and
the inferences they are intended to establish.

11.
In a negligence action, recovery may be had only where there is evidence showing
with reasonable certainty the damage was sustained as a result of the negligence.
Recovery may not be had where the alleged damages are too conjectural or speculative to
form a basis for measurement. To warrant recovery of damages, therefore, there must be
some reasonable basis for computation which will enable the trier of fact to arrive at an
estimate of the amount of the loss.

12.
In this personal injury case involving private health insurance write-offs, it is held
that the collateral source rule does not apply to bar evidence of (1) the amount originally
billed by the health care provider for plaintiff's medical treatment or (2) the reduced
amount accepted by the provider in full satisfaction of the amount billed, regardless of
the source of payment. However, evidence of the source itself is inadmissible under the
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collateral source rule. Evidence of the amount originally billed and the reduced amount
accepted in full satisfaction are relevant to prove the reasonable value of the medical
treatment, which is a question for the finder of fact.

Appeal from Rice district court; MIKE KEELEY, judge. Opinion filed June 4, 2010. Reversed and
remanded.

Mitchell Rice, of Bretz Law Offices, L.L.C., of Hutchinson, argued the cause, and Matthew L.
Bretz, of the same firm, was with him on the brief for appellant.

Dustin L. DeVaughn, of McDonald, Tinker, Skaer, Quinn & Herrington, P.A., of Wichita, argued
the cause and was on the brief for appellee.

James R. Howell, of Prochaska, Giroux & Howell, of Wichita, was on the brief for amicus curiae
Kansas Association for Justice.

Lyndon W. Vix, of Fleeson, Gooing, Coulson & Kitch, L.L.C. of Wichita, was on the brief for
amicus curiae Kansas Association of Defense Counsel.

The opinion of the court was delivered by

NUSS, J.: This civil interlocutory appeal concerns the possible application of the
collateral source rule to medical bill write-offs.

FACTS AND HOLDING

The essential facts are straightforward. On July 23, 2005, plaintiff Karen Martinez
slipped and fell while shopping at defendant's business in Lyons, Kansas. She underwent
back surgery at Wesley Medical Center and was ultimately billed $70,496.15. The
hospital accepted $5,310 in satisfaction of the bill: $4,689 from plaintiff's private health
insurance company, Coventry Health Systems (Coventry), and $621 from plaintiff as her
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deductible and co-pay. Pursuant to its contract with Coventry, the hospital wrote off the
balance of $65,186.15.

In plaintiff's suit for recovery of damages, defendant filed a motion in limine
asking the district court to prohibit plaintiff from claiming the full $70,496.15 as
damages. The defendant apparently erred in its recitation of the specific amounts paid by
each source to satisfy the bill, as well as the total amount paid to the hospital. Those
errors apparently were repeated by plaintiff and the district court and by the parties in
their briefs to this court. The facts and resultant parties' arguments in this opinion have
been modified to conform with the amounts stated in Coventry's Explanation of Benefits,
which was attached to defendant's motion.

The court granted defendant's motion, limiting plaintiff's recovery to those
amounts actually paid by Coventry and plaintiff ($5,310) and preventing her from
submitting evidence of medical expenses in excess of that amount. The court made the
findings required by K.S.A. 60-2102(c) for an interlocutory appeal, and the Court of
Appeals granted plaintiff's application. We transferred the case on our own motion
pursuant to K.S.A. 20-3018(c).

The issue on appeal is whether in a case involving private health insurance write-
offs, the collateral source rule applies to bar evidence of (1) the amount originally billed
for medical treatment or (2) the reduced amount accepted by the medical provider in full
satisfaction of the amount billed, regardless of the source of payment. We hold that the
rule does not bar either type of evidence; both are relevant to prove the reasonable value
of the medical treatment, which is a question for the finder of fact. Accordingly, we
reverse and remand to the district court for further proceedings.

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ANALYSIS

Collateral source rule and the parties' arguments

Our analysis starts with this court's past description of the collateral source rule as
follows:

"'At common law, the collateral source rule prevented the jury from hearing
evidence of payments made to an injured person by a source independent of the tortfeasor
as a result of the occurrence upon which the personal injury action is based. The court has
stated the rule as follows: "Under the 'collateral source rule,' benefits received by the
plaintiff from a source wholly independent of and collateral to the wrongdoer will not
diminish the damages otherwise recoverable from the wrongdoer." (Emphasis added.)
Rose v. Via Christi Health System, Inc., 279 Kan. 523, 529, 113 P.3d 241 (2005) (Rose II)
(quoting Farley v. Engelken, 241 Kan. 663, Syl. ¶ 1, 740 P.2d 1058 [1987]; Thompson v.
KFB Ins. Co., 252 Kan. 1010, 1014, 850 P.2d 773 [1993]).

After a lengthy recitation of the Kansas appellate court decisions on the collateral
source rule, plaintiff contends they create the following standard: "[W]hen an injured
person has negotiated for, paid for or contributed in kind for a benefit that reduces his
obligation to pay for injuries caused by a tortfeasor, that benefit should not be used to
reward the tortfeasor or anyone responsible for his debt." Consequently, she argues that
the district court failed to apply the collateral source rule and, as a result, $65,186.15 of
the original hospital bill, $70,496.15, would be incorrectly withheld from the jury's
consideration of her damages.

In holding that the collateral source rule is inapplicable to the $65,186.15 write-
off, the district court explained:

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"The court finds the Collateral Source Rule is inapplicable in this case as that is
set forth in Bates v. Hogg, 22 Kan. App. 2d 705 (1996). The court finds this is a pretrial
declaration of law that the plaintiff's recovery should be limited to the amount actually
paid by the private insurance company. The court finds the proper measure of damages
for medical expenses under these facts and circumstances is the actual amount paid by
the plaintiff's own private insurance company . . . . To allow for the write-off amount is a
misleading piece of evidence that did not actually occur as damage to the plaintiff. The
evidence is the plaintiff cannot and will not be held responsible for the write-off, pursuant
to the contract between the hospital and her own private insurance company. Therefore,
only her actual medical damage is [$5,310] . . . . To require the defendant to pay for some
amount that was not paid would be giving the plaintiff the benefit of receiving more than
their actual damages that is actually needed to reimburse the plaintiff to be made whole."
(Emphasis added.)

As the holding indicates, the court initially ruled that only the amount paid by
plaintiff's insurance carrier ($4,689) could be recovered. But it later clarified that her
actual medical damages, i.e., the amount recoverable, was $5,310, which included
plaintiff's own payments of $621.

Defendant responds to plaintiff's position with three main points. First, defendant
argues that the doctrine of restoration is fair and "[r]equiring defendants to pay more than
the amount necessary to satisfy the financial obligation . . . violates . . . fundamental
fairness." Second, it points out that under its theory, plaintiff would not be made "less
than whole." Finally, elaborating upon the district court's decision, defendant argues that
plaintiff is only entitled to recover the "reasonable value" of her medical care and
expenses. Defendant contends that the reasonable value is necessarily the "agreed upon"
value, i.e., the $5,310 offered by plaintiff and her carrier and accepted by the hospital in
satisfaction of the bill. See, e.g., Bates v. Hogg, 22 Kan. App. 2d 705, Syl. ¶ 3, 921 P.3d
249 (1996) (person who suffers personal injuries because of negligence of another is
entitled to recover the reasonable value of medical care and expenses for the treatment of
his or her injuries); PIK Civ. 4th 171.02.
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Amicus Curiae–Kansas Association for Justice

Kansas Association for Justice (KsAJ) argues that write-offs and write-downs are
collateral source benefits. Like plaintiff, it contends that if a plaintiff has contributed to or
bargained for something, then benefits should not be considered in the damage award.
KsAJ posits that courts have "concluded nearly uniformly" that write-offs are collateral
benefits negotiated for or purchased from an independent third party. It argues against a
strict application of the restoration doctrine as encouraged by defendant.

KsAJ relies heavily upon the principles of the collateral source rule as provided in
the Restatement (Second) of Torts (1977): (1) deterrence, (2) compensation, and (3)
determining wrongful conduct. See, e.g., Section 920A(2) ("Payments 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.") It contends that these principles were not intended to be oppositional but
collaborative. Finally, KsAJ takes exception to the suggestion that Plaintiffs receive a
windfall under the collateral source rule; it suggests they instead obtain a "consequential
benefit."

Amicus Curiae–Kansas Association of Defense Counsel

Kansas Association of Defense Counsel (KADC) fleshes out the defendant's
argument that simply restoring a plaintiff to his or her preinjury status is fair. KADC
acknowledges Section 920A of the Restatement and how it effectively bars any argument
that plaintiff's damages should be reduced by the $4,689 paid by Coventry to the hospital
on her behalf. It argues, however, that the real issue before us is the value of plaintiff's
medical expenses. It cites comment h of Restatement (Second) of Torts § 911in support
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of its position that the appropriate compensation for injured plaintiffs is the amount
actually paid on the bill: here, $5,310. That comment states:

"When the plaintiff seeks to recover for expenditures made or liability incurred to
third persons for services rendered, normally the amount recovered is the reasonable
value of the services rather than the amount paid or charged. If, however, the injured
person paid less than the exchange rate, he can recover no more than the amount paid,
except when the low rate was intended as a gift to him."

KADC next argues that plaintiff's benefit of the bargain concept does not apply to
write-offs because the plaintiff plays no role in the bargaining process. It contends that a
consumer who contracts for health insurance seeks only to have the insurance carrier bear
the brunt of the consumer's medical expenses, whatever they turn out to be. According to
KADC, an insurance carrier's ability to negotiate with medical providers to reduce the
amount the carrier is required to pay in order to satisfy its obligation to the consumer, is
a benefit to the carrier–not the consumer.

KADC also points out that the basic principle of damages is to make the plaintiff
whole, not to grant a windfall. It observes that the collateral source rule itself operates as
an exception to that basic principle, since it allows an injured party to recover damages,
which the party itself did not pay. According to KADC, however, allowing the plaintiff to
recover not only the expenses paid by other sources but also expenses not paid by any
source, amounts to a "super-windfall" for which there is no public policy justification.

KADC further takes exception to the suggestion that limiting the plaintiff's
recovery to the actual expenses paid effectively grants the tortfeasor a windfall. It
contends that the tortfeasor is still responsible for the entire amount of the plaintiff's
medical expenses paid–whether or not these expenses were actually paid by the plaintiff,
e.g., through private insurance. KADC argues that this result is fair because the amount
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originally billed by the medical provider is an inflated rate, not the reasonable value of
services.

Finally, KADC argues that if the "sticker price"—the original amount billed—is
admitted into evidence, then the amount actually paid to satisfy that bill should also be
admitted. It contends that only then would the jury be able to determine the reasonable
value of the services provided.

Standard of Review

This court generally reviews the granting of a motion in limine for abuse of
discretion. See State v. Morton, 283 Kan. 464, 473, 153 P.3d 532 (2007). However,
"'[t]he abuse of discretion standard includes review to determine that the discretion was
not guided by erroneous legal conclusions."' Griffin v. Suzuki Motor Corp., 280 Kan.
447, 452, 124 P.3d 57 (2005) (citing Koon v. United States, 518 U.S. 81, 135 L. Ed. 2d
392, 116 S. Ct. 2035 [1996]). Here, the district court made "a pretrial declaration of law
that the plaintiff's recovery should be limited to the amount actually paid by the private
insurance company." Moreover, this issue arrives via interlocutory appeal because the
district court found there was a controlling legal issue requiring decision by the appellate
courts. Consequently, this court is asked to determine whether the district court's ruling
was guided by erroneous legal conclusions and a de novo standard applies. See State v.
White, 279 Kan. 326, 332, 109 P.3d 1199 (2005).

To better understand how the collateral source rule should be applied, if at all,
under the circumstances of this case, we need to review the case law on the interplay of
the rule with write-offs in Kansas.

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Bates v. Hogg

Kansas appellate courts first considered the applicability of the collateral source
rule to write-offs in Bates v. Hogg, 22 Kan. App. 2d 702, 921 P.2d 249, rev. denied 260
Kan. 991 (1996). Hogg's pickup struck Bates' vehicle and injured Bates. Hogg filed a
motion in limine to limit Bates' evidence of economic damages to the amount actually
paid by Medicaid to medical care providers on her behalf. The district court granted the
motion and prohibited Bates from presenting evidence of the market value or list price of
her medical treatment. 22 Kan. App. 2d at 703.

The question presented in Bates was the same one presented in the instant case
except that the write-off was pursuant to a Medicaid contract rather than a private
insurance agreement. The Court of Appeals panel first pointed out that the "'purpose of
awarding damages is to make a party whole by restoring that party to the position he [or
she] was in prior to the injury.'" 22 Kan. App. 2d at 704 (quoting Samsel v. Wheeler
Transport Services Inc., 246 Kan. 336, 352, 789 P.2d 541 [1990], overruled in part on
other grounds 248 Kan. 824, 844, 811 P.2d 1176 [1991]). It then explained the
reasonable value of the medical cost of restoration:

"The fundamental principle of the law of damages is that a person who suffers
personal injuries because of the negligence of another is entitled to recover the
reasonable value of medical care and expenses for the treatment of his or her injuries, as
well as the cost of those reasonably certain to be incurred in the future." (Emphasis
added.) 22 Kan. App. 2d at 704 (citing 22 Am. Jur. 2d, Damages § 197, p. 169).

The Bates panel concluded that the collateral source rule simply was not
applicable to its facts. It reasoned that because medical providers, by agreement and
contract, may not charge Medicaid patients for the difference between their "normal"
charges and the amount actually paid by Medicaid, then "the amount allowed by
Medicaid becomes the amount due and is the 'customary charge' under the
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circumstances." Bates, 22 Kan. App. 2d at 705. The panel further agreed with the
taxpayer-based public policy rationale of a North Carolina federal court:

"'It would be unconscionable to permit the taxpayers to bear the expense of providing
free medical care to a person and then allow that person to recover damages for medical
services from a tort-feasor and pocket the windfall.'" 22 Kan. App. 2d at 706 (quoting
Gordon v. Forsythe County Hospital Authority, Inc., 409 F. Supp. 708, 719 (M.D.N.C.
1976).

In effect, the Bates panel endorsed limited application of the collateral source rule.
Plaintiff was allowed to seek recovery of damages for the amount of medical expenses
that was actually paid by a nonwrongdoer, i.e., from a source "collateral" to the
wrongdoer. Plaintiff was not allowed, however, to seek recovery of damages for the
amount written off because it was paid by no one.

Judge, now Chief Judge, Rulon dissented, opining that a plaintiff should be
allowed to recover the reasonable value of medical services rendered to treat an injury
regardless of what amount was actually paid. 22 Kan. App. 2d at 709-10.

Rose I

This court first examined the interplay between write-offs and the collateral source
rule in Rose v. Via Christi Health System, Inc., 276 Kan. 539, 78 P.3d 798 (2003) (Rose
I). In Rose I, the executor of Rose's estate brought a negligence action against Via Christi
after Rose died as a result of injuries sustained from falling out of his hospital bed. After
a judgment for the executor, the hospital moved to offset the judgment by the amount of
medical expenses it wrote off for Rose pursuant to its contract with Medicare.

The Rose I court concluded that the federal Medicare statute, 42 U.S.C. §
1395cc(a)(1)(A)(i) (2000), was in direct conflict with the district court's decision in
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granting Via Christi's motion to offset the written-off medical expenses. It further
concluded that the Medicare statute preempted the district court's ruling. 276 Kan. at 543-
44.
The court then considered the hospital's cross-appeal, in which it argued that the
district court should have limited the evidence of plaintiff's medical expenses to those
amounts actually paid and not include the amounts it wrote off. 276 Kan. at 544. The
court focused on the rationale in Judge Rulon's dissent in Bates which stated:

"The purpose for the collateral source rule is to prevent the tortfeasor from
escaping the full liability resulting from his or her actions by requiring the tortfeasor to
compensate the injured party for all of the harm he or she causes, not just the injured
party's net loss. )." Rose I, 276 Kan. at 544 (citing Bates v. Hogg, 22 Kan. App. 2d 702,
709, 921 P.2d 249, rev. denied 260 Kan. 991 [1996] [dissenting opinion citing 2 Minzer,
Nates, Kimball, Axelrod, and Goldstein, Damages in Tort Actions § 9.60, p. 9-88 (1991);
Restatement (Second) Torts § 920A, comment b (1977)]).

The Rose I court then ruled that Bates' holding was limited to cases involving
Medicaid. 276 Kan. at 546. The court distinguished Medicare and Medicaid cases on the
basis of the recipient's contribution for Medicare coverage, finding Medicare to be akin to
private insurance. 276 Kan. at 551. It found persuasive those courts applying the
collateral source rule to amounts written off due to private insurance. 276 Kan. at 551;
see, e.g., Koffman v. Leichtfuss, 246 Wis. 2d 31, 630 N.W.2d 201 (2001). It additionally
relied upon the court decisions from the three jurisdictions that had addressed the issue
and had unanimously concluded that the collateral source rule also applies to Medicare
write-offs. Rose I, 276 Kan. at 546-47 (citing Candler Hosp. v. Dent, 228 Ga. App. 421,
491 S.E.2d 868 [1997]; Wal-Mart Stores, Inc. v. Frierson, 818 So. 2d 1135, 1140 [Miss.
2002]; Brown v. Van Noy, 879 S.W.2d 667 [Mo. App. 1994]). Simply put, an injured
plaintiff could seek recovery as damages for amounts written off by health care providers,
i.e., amounts not paid by Medicare on plaintiff's behalf.

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The Rose I court looked to other jurisdictions because it found a Kansas case cited
by the hospital to be inapposite. In Jackson v. City of Kansas City, 263 Kan. 143, 947
P.2d 31 (1997), a jury awarded plaintiff damages for his personal injuries after his
girlfriend cut his throat while he was handcuffed and sitting on a curb in police custody.
The Rose I court rejected the hospital's argument that Jackson stood for the proposition
that a plaintiff's recovery should not include write-offs but should be limited to the
amount actually paid:

"Jackson, however, does not support this contention. In Jackson, the defendant sought to have the
damage award for medical expenses reduced to the amount that had actually been paid by the
plaintiff and a charity on his behalf. Finding no evidence to support the defendant's request for
remittitur, the Jackson court refused to reduce the plaintiff's damage award. 263 Kan. at 151-52,
947 P.2d 31. However, the Jackson court did not address the application of the collateral source
rule, so it is inapposite to the issue in this case." 276 Kan. at 546.

The Rose I court appeared to acknowledge that its ruling would result in a windfall
for plaintiffs. It held:

"Public policy in Kansas supports the theory that any windfall from the injured party's
collateral sources should benefit the injured party rather than the tortfeasor, who should
bear the full liability of his or her tortious actions without regard to the injured parties'
method of financing his or her medical treatment." 276 Kan. at 551.

In short, given the court's reliance upon case law holding that write-offs pursuant
to private insurance and write-offs pursuant to Medicare were all covered by the
collateral source rule, to date arguably only the Medicaid write-offs from Bates v. Hogg
were excluded from possible recovery by injured plaintiffs.

Justice Luckert wrote for the dissent, arguing that applying the collateral source
rule to "this portion of the judgment is contrary to the basic precept of the collateral
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source rule which is that benefits received by the plaintiff from a source wholly
independent of and collateral to the wrongdoer will not diminish the damages otherwise
recoverable from the wrongdoer." 276 Kan. at 552. She pointed out that the hospital was
both the "wrongdoer" and the entity writing off charges, i.e., not a source wholly
independent of the wrongdoer. 276 Kan. at 552.

Fischer & Liberty

This court granted a motion for rehearing in Rose I. Before release of our modified
opinion in June 2005, earlier that year one panel of the Court of Appeals released two
unpublished opinions dealing with the possible applicability of the collateral source rule
to write-offs. The decisions essentially excluded recovery for write-offs in the contexts of
both Medicare (contrary to Rose I) and private insurance.

First, in Fischer v. Farmers Insurance Company Inc., No. 90,246, unpublished
opinion filed February 18, 2005, the plaintiff was injured when her automobile was
struck by a pickup. She settled with the defendant's insurance company and sought
recovery under her own policy's underinsured motorist coverage. Her insurer filed a
motion in limine to exclude evidence of that portion of Fischer's medical expenses that
had been written off by the medical provider pursuant to an agreement with Fischer's own
group health insurance carrier.

The trial court relied upon Bates to exclude the amount of the write-off from
plaintiff's damages. The Court of Appeals panel agreed that the Bates majority holding
"was not principally driven by the fact that the write-off was mandated by a Medicaid
contract." Fischer, slip op. at 4. It emphasized the doctrine of restoration, explaining that
when the plaintiff is awarded damages equal to the amount actually paid to his or her
health care provider pursuant to an agreement, the plaintiff is then restored to his or her
exact economic preinjury status. While the plaintiff would not be able to pocket the
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write-off amount, neither would he or she owe anything for medical services. Fischer,
slip op. at 2. The panel explained that this solution results in restoration and equal
treatment for all plaintiffs:

"The principle of restoration should be applicable to all plaintiffs, regardless of
whether they be uninsured, covered by Medicaid, covered by Medicare, covered by an
employer's group health policy, or covered by an individually purchased private
insurance contract. . . . In short, applying Bates to all plaintiffs effects their restoration to
pre-accident status without arbitrarily overcompensating some injured persons." Fischer,
slip op. at 5.

The Fischer panel interpreted the Bates holding to mean that while the amount a
plaintiff's health insurer actually pays to the health care provider is a benefit from a
collateral source, the amount the provider writes off is not. Accordingly, like the Bates
court, it held that the collateral source rule was "'not applicable under these
circumstances.'" Fischer, slip op. at 8.

The Fischer panel also explained that the idea that a plaintiff should receive a
windfall so that the tortfeasor can be held fully liable is fiction:

"The sentiment that public policy dictates giving a plaintiff a windfall in order to
hold the tortfeasor fully liable for his or her tortious conduct is, in practice, an illusion. In
most cases, a tortfeasor pays nothing personally; the plaintiff's judgment is paid by a
liability insurance carrier. If the wrongdoer's bodily injury liability insurance limits are
inadequate to cover the plaintiff's injuries, it is common for the tortfeasor to confess
judgment in return for a covenant not to execute. On other occasions, a tortfeasor
discharges an excess judgment in bankruptcy." Fischer, slip op. at 12.

The panel not only concluded that the collateral source rule was inapplicable to
write-offs but also that the amount the provider agreed to satisfy its bill conclusively
established the reasonable value of the services:
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"In summary, we hold that the amount which a health care provider has, in
advance, agreed to accept in full satisfaction for services rendered to a plaintiff is the
measure of the reasonable value of medical care and expenses for the treatment of the
plaintiff's injuries. Previously established nonrecourse discounts by health care providers
are not a collateral source benefit within the ambit of the collateral source rule."
(Emphasis added.) Fischer, slip op. at 13.

It then logically followed that "[t]he plaintiff cannot introduce evidence of the
amount of the nonrecourse discounts as part of the plaintiff's economic damages."
Fischer, slip op. at 13.

In effect, Fischer extended the Bates holding and rationale—refusing to apply the
collateral source rule to Medicaid write-offs by medical care providers—to private
insurance write-offs by providers. And as in Bates, the rule still had some limited
application: plaintiff could seek recovery of damages for the amount of medical
expenses that was actually paid by a nonwrongdoer, i.e., plaintiff's carrier. Moreover,
Fischer more clearly articulated the rule inherent in Bates' result: the paid amount is "the
measure of the reasonable value of medical care and expenses for the treatment of the
plaintiff's injuries."

Two months later, the same panel released Liberty v. Westwood United Super,
Inc., No. 89,143, unpublished opinion filed April 29, 2005, rev. denied 280 Kan. 983
(2005). There, the plaintiff fell and sustained injuries in defendant's business. Plaintiff
challenged the district court's order in limine, based upon its interpretation of Bates,
which excluded evidence of the portion of her medical expenses, which the health care
providers wrote off pursuant to their contracts with Medicare. The Liberty panel then
extended the Bates holding and rationale—refusing to apply the collateral source rule to
Medicaid write-offs by medical care providers—to Medicare write-offs by providers.
This extension was contrary to our holding in Rose I, which was awaiting rehearing.
18

The Liberty panel explained that, for several reasons, applying the collateral
source rule to write-offs in Medicare scenarios made little sense:

"The application of that rule to mandatory Medicare discounts requires a great
deal of creativity. First, one must perceive that the nonconsensual, involuntary deductions
from a person's wages to fund the federally mandated Medicare program are akin to the
premiums paid by the fiscally prudent and relatively affluent purchaser of private
insurance. More importantly, however, one must fictionally characterize the mandatory
contractual discount for Medicare patients as a 'payment' of medical expenses. The
write-off is a volume discount allowed by medical care providers who want to tap into the
pool of Medicare patients. No one is paid the discount, but rather the discounted cost of
services assists in keeping the amount that must be deducted from one's paycheck at a
manageable level." (Emphasis added.) Slip op. at *13.

As the panel had done in Fischer, it also addressed the windfall argument in
Liberty:

"Finally, the rationale of giving the injured person a windfall in order to avoid allowing
the tortfeasor to reap a windfall simply ignores reality. One can perceive that in the vast
majority of cases, the 'windfall' [to the plaintiff] is funded by a [defendant's] liability
insurance carrier, not the tortfeasor personally. The tortfeasor is not taught a lesson via
his or her pocketbook, but rather the rest of us must share the cost of the windfall through
higher liability premiums." (Emphasis added.) Slip op. at *13.

Where the panel in Fischer only suggested, in Liberty it now stated directly:
"[T]he issue presented is not the applicability of the collateral source rule, but rather the
'reasonable value of medical care and expenses for the treatment of [the victim's]
injuries.'" (Emphasis added.) Liberty, slip op. at 13. Relying upon Bates, the Liberty
panel held that the amount permitted to be charged to Medicare patients, i.e., the amount
remaining after the write-off, is the "customary charge" for their medical treatment.
Accordingly, the Liberty panel, as it did in Fischer, held that this reduced amount
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conclusively established the "reasonable value" of plaintiff's medical care and expenses.
Liberty, slip op. at 13. As a result, the panel affirmed the trial court's exclusion from
evidence that portion of the plaintiff's medical expenses which the health care providers
wrote off pursuant to their contracts with Medicare.

Rose II

At the same time the Court of Appeals panel was considering Fischer and Liberty,
this court reheard arguments in Rose I—Rose v. Via Christi Health System, Inc., 279 Kan.
523, 113 P.3d 241 (2005) (Rose II). In our decision released 5 weeks after Liberty, this
court limited its ruling to the specific facts of that case, i.e., where the tortfeasor was also
the entity writing off its own charges for medical services. 279 Kan. at 529. As the court
explained its holding:

"Thus, we conclude that under the facts of this case, specifically where the
Medicare provider, Via Christi, is the defendant and also the health care provider of the
services which form the basis of the economic damages claim, the trial court did not err
in allowing a setoff or credit against the portion of the economic loss attributable to
medical expenses in the amount of the Medicare write-off, an amount not paid by the
plaintiff, Medicare, or any third party, and which reflected a cost incurred by the
defendant. The trial court's ruling is a correct application of Kansas law . . . ." (Emphasis
added.) 279 Kan. at 533.

Because this court upheld the trial court's decision to allow a setoff or credit, it did
not reach the cross-appeal question. That question was "whether evidence of medical
charges that are written off by a health care provider pursuant to a contract with Medicare
is admissible at trial as evidence of economic damages." 279 Kan. at 533-34. The court
explained that it therefore did not reach the broader issue (answered by the Court of
Appeals in Liberty 5 weeks earlier) of "whether Medicare, or a Medicare write-off, when
20
the services are provided by a health care provider that is not a defendant, is a collateral
source." (Emphasis added.) Rose II, 279 Kan. at 534.

Adamson v. Bicknell

Most recently, the Court of Appeals considered the collateral source rule and
write-offs in Adamson v. Bicknell, 41 Kan. App. 2d 958, 207 P.3d 265 (2009), rev.
granted March 31, 2010. There, the panel noted that pursuant to Bates, "evidence of
medical expenses written off pursuant to Medicaid requirements must be excluded from
evidence." Adamson, 41 Kan. App. 2d at 970. Accordingly, the panel reversed the trial
court and allowed the introduction of these write-offs at retrial because they were "within
the scope of the collateral source rule." Adamson, 41 Kan. App. 2d at 973.

Recent Kansas case law, i.e., from Bates to date, is therefore synthesized
chronologically as follows:

1. Medicaid write-offs are not covered by the collateral source rule per Bates;
2. Medicare write-offs are covered by the collateral source rule per Rose I;
3. Private insurance write-offs are not covered by the collateral source rule per
Fischer;
4. Medicare write-offs are not covered by the collateral source rule per Liberty
(contrary to Rose I); and
5. Whether Medicare write-offs are covered by the collateral source rule is
intentionally left unaddressed by the Supreme Court per Rose II.

Related case law from the Court of Appeals is further synthesized as follows:
Because write-offs by health care providers are not a collateral source benefit within the
ambit of the collateral source rule, the issue regarding these write-offs instead becomes
their possible relevance to the "reasonable value of medical care and expenses for the
21
treatment of the victim's injuries." Liberty, slip op. at 13. And the amount which a health
care provider has agreed to accept in full satisfaction for services rendered in treatment of
the plaintiff's injuries conclusively establishes the reasonable measure of those medical
care and expenses. Fischer, slip op at 13; Liberty, slip op. at 14. As a result, the plaintiff
cannot introduce evidence of the amount of the nonrecourse discounts, i.e., write-offs, as
part of the plaintiff's economic damages. Fischer, slip op. at 13.

Federal cases

The federal district courts in Kansas have uniformly held that the collateral source
rule does not apply to write-offs by health care providers—whether via Medicaid as in
Bates, via Medicare as in Liberty (contrary to Rose I), or via private insurance as in
Fischer. Like Liberty and Fischer, the opinions are all unpublished.
In Strahley v. Mercy Health Center of Manhattan, 2000 WL 1745291 (D. Kan.
2000) (unpublished opinion), Judge Vratil adopted the Medicaid-based rationale in Bates
and, like Fischer, extended it to private insurance write-offs by health care providers. She
held: "Although Bates addressed only a Medicaid write-off, the same reasoning applies to
amounts written off in conjunction with private health care insurance. No one, including
plaintiffs, is liable for the amount of the write-offs. Therefore, they do not represent
actual losses." Strahley, 2000 WL 1745291, at *2 (citing McAmis v. Wallace, 980 F.
Supp. 181, 184 [W.D. Va. 1997]).

Judge Vratil quoted with approval Mitchell v. Hayes, 72 F. Supp. 2d 635, 637
(W.D. Va. 1999):

"'Discounting is a reality of modern medical economics and it does no violence to
the collateral source doctrine to bring the tort compensation system the same extended
savings. By allowing the plaintiff to show the discounted medical expenses as evidence
of his damages, even though he paid no part of them, but refusing any evidence of the
22
write-offs that no one incurred, there is a proper balance of the competing interests at
issue.'" Strahley, 2000 WL 1745291, at *2.

One year later, in Davis v. Management & Training Corp. Centers, 2001 WL
709380 (D. Kan. 2002) (unpublished opinion), Judge Rogers faced a factual situation
similar to Bates. Medicaid paid part of plaintiff's medical expenses, and the remainder
was written off per an agreement between Medicaid and the health care providers.
Relying upon Bates and Judge Vratil's Strahley decision, the defendant argued that the
plaintiff's claim was limited to the portion actually paid by Medicaid. After
acknowledging the collateral source rule, Judge Rogers decided to follow these
authorities, holding that "[s]ince plaintiff is not liable for the amount of write-offs, we do
not find that the plaintiff has suffered actual losses. Accordingly, the court shall preclude
any evidence of any amount of the plaintiff's medical bills that represent write-offs."
Davis, 2001 WL 709380, at *3.

Finally, 1 year after Davis, in Wildermuth v. Staton, 2002 WL 922137 (D. Kan.
2002) (unpublished opinion), Magistrate Judge Waxse reviewed defendant's argument
that the collateral source rule did not apply to the amounts written off by health insurance
carriers after payment by Medicare. He rejected the plaintiff's counterarguments for
admission of the write-offs as evidence of damages–because they were required by
federal law:

"First, the write-offs were not a benefit that Plaintiff's were personally responsible for
obtaining or that they individually bargained for. Rather, the write-offs are required by
operation of federal law. " 2002 WL 922137, at *5.

He further rejected the plaintiff's arguments for admission of the write-offs as
evidence of damages because the collateral source rule does not apply to write-offs of
expenses that are never paid:

23
"Second, the Court sees no reason to distinguish between the type of benefits
received. What is at issue is the write-off and not the Medicare payments itself. It does
not matter whether the benefits received are from the Medicaid or Medicare program–the
collateral source rule, by its express terms, simply does not apply to write-offs of
expenses that are never paid. The collateral source rule only excludes 'evidence of
benefits paid by a collateral source.' Wendtling v. Medical Anesthesia Servs., 237 Kan.
505, 515, 701 P.2d 939 (1985) (emphasis added.) Because a write-off is never paid, it
cannot possibly constitute payment of any benefit from a collateral source. [Citation
omitted.]" Wildermuth, 2002 WL 922137, at *5.

Judge Waxse also addressed the windfall arguments:

"Moreover, as the Kansas Court of Appeals noted in Bates, allowing a plaintiff to
recover the amount of charges written off would result in a windfall to the plaintiff.
Permitting Plaintiffs in this case to enter into evidence medical bills for which neither
Plaintiffs nor collateral source had any responsibility to pay and allowing Plaintiffs to
recover that amount does not further the purpose of the collateral source rule. The rule is
intended to prevent a defendant tortfeasor from escaping from full liability for the
consequences of his or her wrongdoing and to prevent a windfall to the tortfeasor, who
would otherwise profit from the benefits provided by a third party to the injured party. It
is not intended to provide a windfall to plaintiffs. As the Kansas Supreme Court has
noted, 'the basic principle of damages is to make a party whole by putting it back in the
same position, not to grant a windfall.' [Citation omitted.]" (Emphasis added.)
Wildermuth, 2002 WL 922137, at *5.

Judge Waxse expressly rejected plaintiff's additional argument that Bates v. Hogg,
22 Kan. App. 2d 702, 921 P.2d 249, rev. denied 260 Kan. 991 (1996), was inconsistent
with the policies supporting the collateral source rule. He found that the Bates rule was
entirely consistent with the theories of fair compensation reflected in Kansas Supreme
Court cases. First, "'the purpose of awarding damages is to make a party whole by
restoring that party to the position he or she was in prior to the injury'" and second, "the
'basic principle of damages' [is] . . . that the injured party should not be granted a
24
windfall." He concluded that "[a]pplying Bates to this case will further these goals."
Wildermuth, 2002 WL 922137, at *7.

The parties' arguments required Judge Waxse to go further than his federal
colleagues, judges Vratil and Rogers, and to review the reasonable value of the medical
care and expenses for plaintiff's treatment. More particularly, defendant alleged that
plaintiff had not met the threshold requirement of a reasonable value of $2,000 in
economic damages, e.g., medical expenses, which would allow him or her to seek
recovery of noneconomic damages in a motor vehicle tort action under K.S.A. 40-3117.
Based upon Bates' holding on Medicaid, he ruled that the reduced amount payable under
the care provider's agreement with Medicare conclusively established the "reasonable
value" of the medical services under the statute:

"Finally, the [Bates] appeals court recognized that, pursuant to the provider's agreement
with Medicaid, the provider was required to accept a reduced amount for his or her
services and could not charge the Medicaid patient for the full amount. That amount
became the 'customary' and, therefore, 'reasonable,' charge. Id. at 705. Implicit in the
appeals court's decision is the holding that the reduced amount payable under the
provider's agreement with Medicaid should be deemed the 'reasonable value' of the
services under K.S.A. 40-3117.

"The Court finds that Bates is consistent with the 'reasonable value' standard set
forth in K.S.A. 40-3117. The Court also finds that the Kansas Court of Appeals'
reasoning regarding the 'reasonable value' standard applies equally to Medicare write-
offs. As is the case with Medicaid, the reduced amount a provider is obligated to accept
pursuant to his/her agreement with Medicare should be deemed the 'reasonable value' of
the services." (Emphasis added.) Wildermuth, 2002 WL 922137, at *7.

At least in the context of K.S.A. 40-3117, Judge Waxse arguably foreshadowed
the Liberty panel's clarification 3 years later that "the issue presented is not the
25
applicability of the collateral source rule, but the 'reasonable value of medical care and
expenses for the treatment of [the victim's] injuries.'" Liberty, slip op. at 13.

In short, a synthesis of this case law from the federal district courts of Kansas is
similar to the synthesis of recent Kansas Court of Appeals decisions as described above.
Specifically, previously established write-offs by health care providers through Medicaid,
Medicare, or private insurance are not covered by the collateral source rule. Strahley,
2000 WL 1745291; Davis, 2001 WL 709380; Wildermuth, 2002 WL 922137. Moreover,
the amount which a health care provider has agreed to accept in full satisfaction for
services rendered in treatment of the plaintiff's injuries conclusively establishes the
reasonable measure of value of medical care and expenses under K.S.A. 40-3117.
Wildermuth, 2002 WL 922137. Finally, the plaintiff cannot introduce evidence of the
amount of the write-offs as part of his or her economic damages. See, e.g., Strahley, 2000
WL 174529; Davis, 2001 WL 709380.

Now that we have examined the direction in which Kansas case law appears to
lean, we look at other jurisdictions that have considered the question of the interplay, if
any, between the collateral source rule and write-offs.

Other jurisdictions

The Louisiana Supreme Court has explained that other courts have applied three
different approaches in determining whether to apply the collateral source rule to
Medicaid write-offs. Bozeman v. State, 879 So. 2d 692, 701 (La. 2004). While Bozeman
dealt only with Medicaid, the categories apply to all types of write-offs. These
approaches are: (1) reasonable value of services; (2) actual amounts paid; and (3) benefit
of the bargain.

26
1. Reasonable value of services

According to the Bozeman court, some jurisdictions apply a reasonable value of
services approach and some of those allow plaintiffs to recover the entire amount of
medical expenses originally billed, including any amounts later written off by the
healthcare provider. See Brandon HMA, Inc. v. Bradshaw, 809 So. 2d 611, 618 (2001)
(Mississippi); Haselden v. Davis, 353 S.C. 481, 579 S.E.2d 293 (2003) (South Carolina);
Koffman v. Leichtfuss, 246 Wis. 2d 31, 630 N.W.2d 201 (2001) (Wisconsin). The
reasonable value of services approach is largely based on the idea that the collateral
source rule applies even when the source of the payment is a public relief provided by
law. 879 So. 2d at 702. The Bozeman court pointed out that comment b to the
Restatement (Second) of Torts § 920A (the general collateral source rule) supports this
position:

"'If the plaintiff was himself responsible for the benefit, as by maintaining his own
insurance or by making advantageous employment arrangements, the law allows him to
keep it for himself. If the benefit was a gift to the plaintiff from a third party or
established for him by law, he should not be deprived of the advantage that it confers.
The 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.'" (Emphasis added.) 879 So. 2d at
701-02.

The Illinois Supreme Court recently addressed these three categories and adopted
the reasonable value approach in Wills v. Foster, 229 Ill. 2d 393, 892 N.E.2d 1018
(2008). The Wills court explained that the difficulty with this approach is how to
determine the reasonable value of services. 229 Ill. 2d at 407-11. It opined that a
"minority of courts employing this approach hold that the reasonable value of medical
services is the actual amount paid," (229 Ill. 2d at 407-08), and that the "vast majority of
courts using a reasonable-value approach allow the plaintiff to seek recovery of the
amount originally billed by the healthcare provider." 229 Ill. 2d at 410. The court held
27
that this latter position is supported by the Restatement (Second) of Torts, specifically
sections 924 and 920A. 229 Ill. 2d at 410.

The Wills court observed that Section 920A(2) states in relevant part 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." Like the Bozeman court in Louisiana, the Wills court
noted that under comment b "[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." 229
Ill. 2d at 411. Section 924 in turn allows an injured plaintiff to recover reasonable
medical expenses. Its comment f explains that this is a recovery for value even if there is
no liability or expense to the injured person. 229 Ill. 2d at 409-10.

The Wills court gave four basic reasons for adopting the reasonable value
approach. First, the court noted the policy justification for the collateral source rule that
the tortfeasor should not benefit from "the expenditures made by the injured party or take
advantage of contracts or other relations that may exist between the injured party and
third persons. [Citation omitted.]'" 229 Ill. 2d at 413. Second, Section 920A supports a
reasonable value approach and does not distinguish between private insurance and
government benefits or those who receive their treatment on a gratuitous basis. 229 Ill. 2d
at 413. Third, the benefit of the bargain approach (as discussed below) discriminates
against certain plaintiffs and prevents sick or disabled plaintiffs covered by Medicaid
from recovering the full billed amount. 229 Ill. 2d at 413; see, e.g., Bates v. Hogg, 22
Kan. App. 2d 702. Consequently, this approach undermines the spirit of the collateral
source rule because the measure of the defendant's liability is then determined by the
nature of the injured party's relationship with a source collateral to the tortfeasor. 229 Ill.
2d at 413-14. Fourth, "[t]he vast majority of courts to consider the issue employ some
sort of reasonable value approach." 229 Ill. 2d at 414.

28
The Wills court acknowledged the obvious criticism of the reasonable value
approach. Because it allows recovery of the entire amount of medical expenses billed,
including health care provider write-offs, it can lead to a windfall for plaintiffs. But the
court ruled that it is better for the benefit to go to the plaintiff rather than the tortfeasor.
229 Ill. 2d at 411, 413.

Some courts have taken a slightly different approach to determining the
"reasonable value" of damages. In Robinson v. Bates, 112 Ohio St. 3d 17, 857 N.E.2d
1195 (2006), the Ohio Supreme Court reasoned that the collateral source rule does not
apply to write-offs of medical expenses that are never paid. Accordingly, "the written-off
amount of a medical bill differs from the receipt of compensation or services." 112 Ohio
St. 3d at 22. It noted our holding that "[t]he collateral-source rule excludes only
'"evidence of benefits paid by a collateral source."' (Emphasis added.) Wentling v. Med.
Anesthesia Servs., P.A., 237 Kan. 503, 515, 701 P.2d 939 (1985), quoting 3 Minzer,
Nates, Kimball, Axelrod and Goldstein, Damages in Tort Actions (1984) 17-5, Section
17.00." 112 Ohio St. 3d at 22-23. Because no one pays the write-off, the Robinson court
reasoned that the write-off cannot possibly constitute payment of any benefit from a
collateral source. As a result, "Because no one pays the negotiated reduction, admitting
evidence of write-offs does not violate the purpose behind the collateral source rule. The
tortfeasor does not obtain a credit because of payments made by a third party on behalf of
the plaintiff." 112 Ohio St. 3d at 23.

The Robinson court sought to eliminate potential disparate treatment of plaintiffs
by simply emphasizing the reasonable value of the medical services received. It ruled that
both the amount originally billed and the amount ultimately paid may be considered by
the jury in making that determination:

"To avoid the creation of separate categories of plaintiffs based on individual
insurance coverage, we decline to adopt a categorical rule. Because different insurance
29
arrangements exist, the fairest approach is to make the defendant liable [only] for the
reasonable value of plaintiff's medical treatment. Due to the realities of today's insurance
and reimbursement system, in any given case, that determination is not necessarily the
amount of the original bill or the amount paid. Instead, the reasonable value of medical
services is a matter for the jury to determine from all relevant evidence. Both the original
medical bill rendered and the amount accepted as full payment are admissible to prove
the reasonableness and necessity of charges rendered for medical and hospital care."
(Emphasis added.) 112 Ohio St. 3d at 23.

The Robinson court acknowledged that the jury's determination of the reasonable value
could lie someplace in between the amount of the original bill and the amount accepted in
satisfaction:

"The jury may decide that the reasonable value of medical care is the amount
originally billed, the amount the medical provider accepted as payment, or some amount
in between. Any difference between the original amount of a medical bill and the amount
accepted as the bill's full payment is not a 'benefit' under the collateral-source rule
because it is not a payment, but both the original bill and the amount accepted are
evidence relevant to the reasonable value of medical expenses." 112 Ohio St. 3d at 23.

2. Actual amount paid

At least one jurisdiction only allows plaintiffs to recover the actual amount paid to
the health care provider in full settlement of the bill. See Dyet v. McKinley, 139 Idaho
526, 81 P.3d 1236 (2003) (Idaho). This approach is based on the premise that the plaintiff
did not incur the write-off amount and therefore should not receive the resulting windfall.
See Bozeman, 879 So. 2d at 702. In Dyet, the Idaho Supreme Court held that "'[a]lthough
the write-off technically is not a payment from a collateral source within the meaning of
[the collateral source statute], it is not an item of damages for which plaintiff may recover
because plaintiff has incurred no liability therefore.' [Citation omitted]." 139 Idaho at
529. The Illinois Supreme Court has explained that this approach focuses on "the
30
objective of compensatory damages as making an injured party whole." Wills, 229 Ill. 2d
at 408.

3. Benefit of the bargain

The third approach, the benefit of the bargain, allows plaintiffs to recover the full
value of their medical expenses, including the write-off amount, when the plaintiff has
paid some consideration for the benefit of the write-off. Bozeman, 879 So. 2d at 703
(Louisiana); see Helfend v. Southern California Rapid Transit Dist., 84 Cal. Rptr. 173,
465 P.2d 61 (1970) (California); Acuar v. Letourneau, 260 Va. 180, 531 S.E.2d 316
(2000) (Virginia). As the Virginia Supreme Court explained in Acuar: "The portions of
medical expenses that health care providers write off [do] constitute 'compensation or
indemnity received by a tort victim from a source collateral to the tortfeasor . . . .'
[Citation omitted.]" 531 S.E.2d at 322-23.

Similarly, the California Supreme Court's explanation of the policy judgment
behind the rule was that the court was in favor of

"encouraging citizens to purchase and maintain insurance for personal injuries and for
other eventualities. Courts consider insurance a form of investment, the benefits of which
become payable without respect to any other possible source of funds. . . . Defendant
should not be able to avoid payment of full compensation for the injury inflicted merely
because the victim has had the foresight to provide himself with insurance." Helfend, 2
Cal. 3d at 10.

The Illinois Supreme Court explained in Wills that "[u]nder this approach, courts
allow plaintiffs who have private insurance to recover the full amount of their medical
expenses because they have bargained for the benefits they received." 229 Ill. 2d at 406.
However, while these courts treat Medicare recipients the same as those with private
insurance, they do not allow the same for Medicaid: they only allow the amount actually
31
paid. 229 Ill. 2d at 406. As mentioned earlier, the Wills court pointed out that one
"obvious criticism" of the benefit of the bargain approach as used by some courts is that it
"undermines the collateral source rule by using the plaintiff's relationship with a third
party to measure the tortfeasor's liability." 229 Ill. 2d at 407 (citing, inter alia, Bozeman,
879 So. 2d at 703-05).

Discussion

Plaintiff contends this court should apply a benefit of the bargain approach. In
other words, we should allow plaintiffs to recover their full medical expenses, including
the write-offs, when plaintiff has paid some consideration for the benefit of the write-off.
Applying such an approach under Kansas law is problematic, however, for several basic
reasons.

First, such an approach is contradicted by the very case law relied upon by
plaintiff. In both Zak v. Riffel, 34 Kan. App. 2d 93, 115 P.3d 165 (2005), and Johnson v.
Baker, 11 Kan. App. 2d 274, 719 P.2d 752 (1986), the Court of Appeals acknowledged
that the collateral source rule also applies to gratuitous payments. For example, the Zak
panel held that "the collateral source rule applies to payments received gratuitously as
well as those received as a result of an obligation." 34 Kan. App. 2d at 106 (citing
Johnson v. Baker, 11 Kan. App. 2d 274, 719 P.2d 752 [1986]). More particularly, "'[a]
benefit secured by the injured party either through insurance contracts, advantageous
employment arrangements, or gratuity from family or friends should not benefit the
tortfeasor by reducing his or her liability for damages.'" (Emphasis added.) 34 Kan.
App. 2d at 106 (quoting Rose v. Via Christi Health System, Inc., 276 Kan. 539, 544, 78
P.3d 798 [2003] [Rose I]); see Johnson, 11 Kan. App. 2d 274, Syl. ¶ 2.

The Rose I language cited by the Zak panel is from an opinion of this court which
cited no authority for the proposition that the collateral source rule applies to gratuitous
32
payments. We observe, however, that in Lewark v. Parkinson, 73 Kan. 553, 555-56, 85 P.
601 (1906), we indicated that an injured plaintiff may seek recovery for nursing services
provided gratuitously by family members. To the extent that our past opinions, including
Wentling v. Medical Anesthesia Services, 237 Kan. 503, 701 P.2d 939 (1985), suggested
that the collateral source rule only precludes admission of payments made to the plaintiff,
we clarify today that the rule also precludes admission of evidence of gratuitous services
provided by a collateral source. Accordingly, the benefit of the bargain approach carries
little weight under Kansas law.

The second problem with plaintiff's proposed benefit of the bargain approach is its
possible violation of the equal protection provisions of the state and federal Constitutions
by effectively creating categories of plaintiffs. See Wentling, 237 Kan. 503 (holding that
legislature's limitation on the collateral source rule was unconstitutional because it
violated the equal protection provisions of the United States and Kansas Constitutions by
discriminating between indigent and insured plaintiffs). By distinguishing among patients
with Medicare, Medicaid, and private insurance, this court could potentially discriminate
among plaintiffs based on their ability to obtain certain types of health care coverage. See
Wills, 229 Ill. 2d at 407 (benefit of the bargain approach "undermines the collateral
source rule by using the plaintiff's relationship with a third party to measure the
tortfeasor's liability"). If we were to follow Bates v. Hogg, 22 Kan. App. 2d 702, and to
adopt plaintiff's proposal, a Medicaid patient in her position would only be allowed to
recover $4,689 plus the $621 she paid herself while a Medicare or privately insured
patient could potentially recover $70,496.15.

A third problem with plaintiff's proposed approach is that Medicare beneficiaries
do not truly "bargain with" Medicare. And even though insureds concededly may bargain
with their private insurance companies, they typically do not negotiate with their health
care providers for the write-offs. As Judge Waxse pointed out in Wildermuth v. Staton,
2002 WL 922137 (D. Kan. 2002), Medicare write-offs are not a benefit for which
33
plaintiffs are personally responsible for bargaining or otherwise obtaining. 2002 WL
922137, at *5. Additionally, as the Court of Appeals panel noted in Liberty, federally
mandated wage deductions for Medicare can hardly be considered the equivalent of
premiums voluntarily paid for private insurance. Liberty v. Westwood United Super, Inc.,
No. 89,143, unpublished opinion filed April 29, 2005.

Lastly, but most important, Kansas courts do not reflexively order liable
defendants to pay the full amount billed by the health care providers to injured plaintiffs.
Kansas courts instead have typically based the value of damages on the reasonable
expense of treatment. See, e.g., Shirley v. Smith, 261 Kan. 685, 693, 933 P.2d 651 (1997)
("The reasonable expense of treatment is a proper element of economic damages.");
Cansler v. Harrington, 231 Kan. 66, 69, 643 P.2d 110 (1982) (question of reasonableness
is jury question); Bates v. Hogg, 22 Kan. App. 2d 702, Syl. ¶ 3, 921 P.2d 249, rev.
denied 260 Kan. 991 (1996) (person who suffers personal injuries because of the
negligence of another is entitled to recover the reasonable value of medical care and
expenses for the treatment of his or her injuries); PIK Civ. 4th 171.02 (recoverable
damages for personal injury include "reasonable expenses of necessary medical care").
Accordingly, the defendant has a right to challenge the reasonableness of the plaintiff's
medical expenses. Cansler v. Harrington, 231 Kan. at 69.

The "reasonable value" approach to recovery of medical expenses is expressly
identified as the one required in the Kansas Automobile Injury Reparations Act in K.S.A.
40-3117. For plaintiffs in a tort action involving motor vehicles to be eligible to seek
noneconomic damages, e.g., pain and suffering, they can be required to have an injury
with medical treatment of "reasonable value" of $2,000 or more. But the statute goes
further and expresses how reasonable value is to be determined. It provides that "the
charges actually made for medical treatment expenses shall not be conclusive as to their
reasonable value." (Emphasis added.) K.S.A. 40-3117. Instead, "[e]vidence that the
reasonable value thereof was an amount different from the amount actually charged shall
34
be admissible." 40-3117; see Wildermuth, 2002 WL 922137. Evidence demonstrating
that the charged amount is not reasonable typically has been admitted through cross-
examination of plaintiff's witnesses, by direct examination of defendant's witnesses, or
both.

Based upon our review of this and other Kansas state case law on the reasonable
value of medical expenses and our review of Kansas law on write-offs and the collateral
source rule—both from state court and federal courts—we reach several conclusions in
the instant case.

First, we reject plaintiff's benefit of the bargain approach because of the
shortcomings previously listed. Second, the reasonable value approach to medical
expenses remains valid, including when the medical services are self-administered or
gratuitously provided by family members. See, e.g., Shirley v. Smith, 261 Kan. at 693
("The reasonable expense of treatment is a proper element of economic damages.");
Lewark v. Parkinson, 73 Kan. 553, 555-56, 85 P. 601 (1906); PIK Civ. 4th 171.02. Third,
the charges "actually made" or billed by the health care provider for plaintiff's medical
treatment expenses are not conclusive as to their reasonable value: other evidence shall
be admissible. See, e.g., Cansler v. Harrington, 231 Kan. at 69 (defendant has right to
challenge reasonableness of plaintiff's medical expenses); K.S.A. 40-3117. Toward that
end, we note that according to KADC's brief, studies performed earlier in this decade
reveal that the average charge-to-cost ratio (i.e., "mark-up") for approximately 4,000
hospitals across the country was 244.37%. Wesley Medical Center, the hospital where
our plaintiff underwent her surgery and treatment, had a charge-to-cost ratio of almost
400% according to this study.

Fourth, and most important to resolving the issue in the instant case's collateral
source context, this other evidence relevant to determining the reasonable value of
medical expenses may include write-offs or other acknowledgments that something less
35
than the charged amount has satisfied, or will satisfy, the amount billed. Accordingly,
neither the amount billed nor the amount actually accepted after a write-off conclusively
establishes the "reasonable value" of medical services. We therefore expressly reject the
Wildermuth court conclusion that the amount accepted in satisfaction "should be deemed
the 'reasonable value'" of the medical services. Wildermuth, 2002 WL 922137, at *7. We
also reject similar expressions contained in Fischer v. Farmers Insurance Company, Inc.,
No. 90,246, unpublished opinion filed February 18, 2005, and Liberty, e.g., that the paid
amount is the measure of the reasonable value of medical care and treatment. In short, we
embrace the rationale and holding of Robinson v. Bates, 112 Ohio St. 3d 17, from the
Ohio Supreme Court: When medical treatment expenses are paid from a collateral
source at a discounted rate, determining the reasonable value of the medical services
becomes an issue for the finder of fact. Stated more completely, when 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 address, much less bar, the admission of evidence indicating
that something less than the charged amount has satisfied, or will satisfy, the amount
billed.

The Robinson approach—although rejected since its December 2006 release by
Wisconsin (Leitinger v. Dbart, Inc., 302 Wis. 2d 110, 736 N.W.2d 1 [July 2007]) and
Illinois (Wills v. Foster, 229 Ill. 2d 393 [June 2008])–was embraced by the Indiana
Supreme Court in Stanley v. Walker, 906 N.E.2d 852 (May 2009). There, plaintiff
introduced into evidence his medical bills showing the amounts originally billed to him
($11,570). Defendant attempted to introduce the discounted amount actually paid and
accepted as satisfaction of the bill ($6,820). The trial court excluded defendant's
evidence, holding that insurance and "'anything flowing from the insurance benefit
purchased by the plaintiff'" would be prohibited by the collateral source statute. 906
N.E.2d at 854. The Indiana Supreme Court ultimately remanded with an order to reduce
the damage award, holding that the statute did not bar admission of evidence of
36
discounted amounts or write-offs for the purpose of determining the reasonable value of
medical services. 906 N.E.2d at 858-59. Its journey to this conclusion is instructive.

The Stanley court elaborated upon the rationale established by the Ohio Supreme
Court in Robinson. Although Indiana, unlike Kansas, has a collateral source statute, like
Kansas law the Indiana statute retained

"the common law principle that collateral source payments should not reduce a damage
award if they resulted from the victim's own foresight–both insurance purchased by the
victim and also government benefits–presumably because the victim has paid for those
benefits through taxes." Stanley, 906 N.E.2d at 855.

Also like in Kansas, an Indiana "injured plaintiff is entitled to recover damages for
medical expenses that were both necessary and reasonable." (Emphasis added.) Stanley,
906 N.E.2d at 855. As a result, the Stanley court, like this court in the instant case (and as
suggested in Fischer and Liberty), was directly "confronted with the question of how to
determine the reasonable value of medical services, when an injured plaintiff's medical
treatment is paid from a collateral source at a discounted rate." Stanley, 906 N.E.2d at
855.

The Stanley court noted that while the proper measure of medical expenses is their
reasonable value, that particular determination was difficult due to complexities of health
care pricing structures:

"The complexities of health care pricing structures make it difficult to determine
whether the amount paid, the amount billed, or an amount in between represents the
reasonable value of medical services. One authority reports that hospitals historically
billed insured and uninsured patients similarly. Mark A. Hall & Carl E. Schneider,
Patients as Consumers: Courts, Contracts and the New Medical Marketplace, 106
MICH. L. REV. 643, 663 (2008). With the advent of managed care, some insurers began
demanding deep discounts, and hospitals shifted costs to less influential patients. Id. This
37
authority reports that insurers generally pay about forty cents per dollar of billed charges
and that hospitals accept such amounts in full satisfaction of the billed charges. Id."
Stanley, 906 N.E.2d at 857.

The Stanley court observed the present tenuous relationship between medical
charges and medical costs. Accordingly, it concluded that the reasonable value of medical
services was not necessarily represented by either the amount originally billed or the
amount actually paid:

"As more medical providers are paid under fixed payment arrangements, another
authority reports, hospital charge structures have become less correlated to hospital
operations and actual payments. The Lewin Group, A Study of Hospital Charge Setting
Practices (2005). Currently the relationship between charges and costs is 'tenuous at
best.' Id. at 7. In fact, hospital executives reportedly admit that most charges have 'no
relation to anything, and certainly not to cost.' Hall, Patients as Consumers at 665. Thus,
based on the realities of health care finance, we are unconvinced that the reasonable
value of medical services is necessarily represented by either the amount actually paid or
the amount stated in the original medical bill." (Emphasis added.) Stanley, 906 N.E.2d at
857.

After acknowledging that the focus was on the reasonable value of medical
services, not the actual charge, the Stanley court held that the Robinson approach was
also the fairest. More specifically, the Robinson court avoided the problem of creating
separate categories of plaintiffs based upon how their medical expenses were financed:

"The reasonable value of medical services is the measure used to determine
damages to an injured party in a personal injury matter. This value is not exclusively
based on the actual amount paid or the amount originally billed, though these figures
certainly may constitute evidence as to the reasonable value of medical services. A
defendant is liable for the reasonable value of the services. We find this to be the fairest
approach; to do otherwise would create separate categories of plaintiffs based on the
method used to finance medical expenses. See Robinson, 857 N.E.2d at 1200 (discussing
38
how its rule avoided the creation of separate categories of plaintiffs based on individual
insurance coverage)." (Emphasis added.) Stanley, 906 N.E.2d at 858.

The Stanley court recognized several methods, including those used in Kansas, for
determining the reasonable value of medical expenses:

"Given the current state of the health care pricing system where, to repeat,
authorities suggest that a medical provider's billed charges do not equate to cost, the jury
may well need the amount of the payments, amounts billed by medical service providers,
and other relevant and admissible evidence to be able to determine the amount of
reasonable medical expenses. To assist the jury in this regard, a defendant may cross-
examine any witness called by the plaintiff to establish reasonableness. The defendant
may also introduce its own witnesses to testify that the billed amounts do not represent
the reasonable value of services." (Emphasis added.) Stanley, 906 N.E.2d at 858.

See, e.g., K.S.A. 40-3117.

The Stanley court then approved the additional method permitted in Robinson for
determining reasonable value, i.e., allowing evidence of discounted amounts, write-offs,
or reimbursement rates:

"Additionally, the defendant may introduce the discounted amounts into evidence
to rebut the reasonableness of charges introduced by the plaintiff. We recognize that the
discount of a particular provider generally arises out of a contractual relationship with
health insurers or government agencies and reflects a number of factors—not just the
reasonable value of the medical services. However, we believe that this evidence is of
value in the fact-finding process leading to the determination of the reasonable value of
medical services."(Emphasis added.) 906 N.E.2d at 858.

The Stanley court concluded that "to the extent the discounted amounts may be
introduced without referencing insurance, they may be used to determine the reasonable
value of medical services." (Emphasis added.) Stanley, 906 N.E.2d at 853; see also Scott
39
v. Garfield, 454 Mass. 790, 807, 912 N.E.2d 1000 (2009) (Cordy and Botsford, JJ.,
concurring) ("While I do not challenge the principal tenet of the collateral source rule,
that benefits or payment received on behalf of a plaintiff from an independent source
should not diminish recovery from the tortfeasor, the 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."); cf. Liberty v. Westwood United Super, Inc., No. 89,143, unpublished
opinion filed April 29, 2005, rev. denied 280 Kan. 983 (2005) ("[T]he issue presented is
not the applicability of the collateral source rule, but rather the 'reasonable value of
medical care and expenses for the treatment of [the victim's] injuries.'").

Criticism of Robinson

Robinson has been criticized. As mentioned, since Robinson's December 2006
release its approach has been rejected by Wisconsin (Leitinger v. Dbart, Inc., 302 Wis. 2d
110 [July 2007]) and Illinois (Wills v. Foster, 229 Ill. 2d 393, 892 N.E.2d 1018 [June
2008]). Robinson's specific rationale that the evidence of write-offs and discounts is
relevant and admissible for determining the reasonableness of the plaintiff's medical
expenses has been expressly rejected. Among other things, the concerns seem to be that
admitting evidence of the write-offs and discounts will (1) impair or undermine the
collateral source rule; (2) confuse the jury; and (3) be of marginal, or no, relevance. Each
concern will be addressed in turn.

1. Undermining of Collateral Source Rule

The Wisconsin Supreme Court in Leitinger expressed the concern that admitting
evidence of the discounts or reimbursement rates undermines the collateral source rule:

40
"[T]he tortfeasor is not to benefit from the fact that the medical services provider was
paid less by a collateral source than the amount billed. If evidence of the collateral source
payments were admissible, even for consideration of the reasonable value of the medical
treatment rendered, a plaintiff's recovery of medical expenses would be affected by the
amount actually paid by a collateral source for medical services. Such a 'limitation' on
the plaintiff's damages contravenes the view of the collateral source rule." (Emphasis
added.) 302 Wis. 2d at 135-36.

The Leitinger court further considered the argument that the defendant insurance
company was not undercutting the collateral source rule because it was seeking to
introduce as evidence only the amount actually paid for medical treatment, not the source
of the compromised payments, and was not seeking "to reduce the damages by the
amount of these collateral source payments." 302 Wis. 2d at 136. The Wisconsin
Supreme Court observed that this argument had been rejected by the South Carolina
Supreme Court in Covington v. George, 359 S.C. 100, 104, 597 S.E.2d 142 (2004):

"The South Carolina Supreme Court evaluated an argument similar to [defendant's]. The
court declared that '[w]hile facially appealing, this argument ignores the reality that
unexplained, the compromised payments would in fact confuse the jury. Conversely, any
attempts on the part of the plaintiff to explain the compromised payment would
necessarily lead to the existence of a collateral source.' The South Carolina Supreme
Court held that the collateral source rule is directly implicated and that a party cannot
introduce evidence of the actual payment by a collateral source to challenge the
reasonableness of the plaintiff's medical expenses." (Emphasis added.) 302 Wis. 2d at
137.

Like the South Carolina Supreme Court, the Leitinger court then rejected
the defendant insurance company's argument, essentially holding that the
defendant was trying to outflank the collateral source rule:

"Although claiming that the evidence assists the fact-finder in determining the
reasonable value of the medical treatment and does not limit or reduce the damages, [the
41
defendant], in essence, is seeking to do indirectly what it cannot do directly, that is, it is
seeking to limit [the plaintiff's] award for expenses for medical treatment by introducing
evidence that payment was made by a collateral source. [Defendant] ignores the fact that
the collateral source rule protects against the 'ever-present danger that the jury will
misuse the evidence [of collateral payments] to diminish the damage award. [Defendant]
is trying to circumvent the collateral source rule.

"The collateral source rule prevents the fact-finder from learning about collateral
source payments, even when offered supposedly to assist the jury in determining the
reasonable value of the medical treatment rendered, so that the existence of collateral
source payments will not influence the fact-finder." (Emphasis added.) 302 Wis.2d at
137.

Apparently, Wisconsin's Supreme Court–and Illinois' in Wills–would be concerned
in the instant case that once the jury hears that $5,310 was accepted to satisfy the
hospital's original bill to plaintiff of $70,496.15, it would perhaps not only fail to award
the $65,186.15 but that it would also deduct the paid $5,310 (or at least Coventry's
$4,689) from its final damage award. In other words, the jury would not even award for
the $4,689 because that amount had already been paid by a collateral source, i.e., "'the
jury will misuse the evidence of collateral payments to diminish the damage award.'" 302
Wis. 2d at 137.

The evidence admitted, however, need not necessarily be "evidence that payment
was made by a collateral source," e.g., private insurance or Medicare. 302 Wis. 2d at 137.
Accordingly, if the jury only hears that "the hospital will accept $5,000 to satisfy its bill
of $70,000," i.e., it does not hear that payment was actually made, then the jury can still
reasonably perceive that the plaintiff will make payment herself. Similarly, even if the
jury hears that "$5,000 has paid this $70,000 bill in full," then the jury can still
reasonably perceive that the plaintiff has paid it herself, e.g., by receiving a cash
discount. In fact, in the instant case, plaintiff did pay part of the bill herself.

42
Stanley v. Walker, 906 N.E.2d 852, is again particularly instructive. There,
defendant Stanley conceded that he could not ask plaintiff the amount of expenses that
were paid by his health insurance carrier because "'that's the collateral source.'" 906
N.E.2d at 858. Instead, he sought to enter into evidence the amount that two parties had
agreed to as "reasonable," as evidenced by the discounts. Specifically, Stanley wanted to
submit evidence showing that the amount accepted in satisfaction of the medical charges
totaled $6,820, that is, $4,750 less than the $11,570 originally billed. The court held that
"[b]ecause Stanley sought to do so without referencing insurance, his evidence should
have been admitted." 906 N.E.2d at 859.

Accordingly, we are unpersuaded that the "unexplained compromise payment"
will cause ill effects. See Covington, 359 S.C. at 104 (rejecting defendant's argument
because "unexplained, the compromise payments would in fact confuse the jury"). We
therefore respectfully disagree with the courts in Leitinger and Covington.

2. Jury Confusion

As mentioned, in Leitinger the Wisconsin Supreme Court also articulated concerns
about confusion caused by admitting evidence of discounts and reimbursement rates. This
particular concern apparently arises because discounts can be due to factors besides the
value of medical services:

"The admission in evidence of the amount actually paid in the present case, even
if marginally relevant [to reasonable value of medical expenses], might bring complex,
confusing side issues before the fact-finder that are not necessarily related to the value of
the medical services rendered. Accordingly, [defendant insurance company] errs in
insisting that the amount actually paid by a collateral source in the present case is a factor
for the fact-finder in determining reasonable value of those services." (Emphasis added.)
302 Wis. 2d at 145-46.

43
See, e.g., Wills, 229 Ill. 2d 393. This concern somewhat overlaps with the earlier
articulated concerns by courts about unexplained compromise payments confusing the
jury. See, e.g., Covington, 359 S.C. at 104.

We are confident that any concerns about jury confusion with possible side issues
can be alleviated by a vigilant trial court. At the time the write-off and discount evidence
is admitted, the court can, if necessary, inform the jury of the evidence's limited purpose.
See K.S.A. 60-406 ("When relevant evidence is admissible . . . for one purpose and is
inadmissible for another purpose, the judge upon request shall restrict the evidence to its
proper scope and instruct the jury accordingly."). Kansas trial courts have been
instructing juries in this fashion for many years. See State v. Kidwell, 199 Kan. 752, 755,
434 P.2d 316 (1967) ("When evidence is introduced for a limited purpose the trial court
should explain the limitation to the jury and limit its application to that purpose.") (citing
Griffith v. Railroad Co., 100 Kan. 500, 166 P. 467 [1917]). The trial court can also, if
necessary, inform the jury of the particular purpose of the evidence through limiting
instructions at the time the case is submitted. See PIK Civ. 4th 102.40 ("Whenever any
evidence has been admitted limited to one purpose, the jury should not consider it for any
other purpose.").

We observe, for example, that Kansas courts frequently admit evidence in criminal
trials of a defendant's prior crimes and civil wrongs under K.S.A. 60-455. This evidence
is potentially quite prejudicial as improper proof of defendant's propensity to commit the
present, often egregious, crimes. But the evidence is nevertheless allowed provided that
the jury receives limiting instructions about the narrow purposes for its admissibility, e.g.,
motive and knowledge. See State v. Gunby, 282 Kan. 39, 144 P.3d 647 (2006). And the
failure to give such limiting instruction does not demand automatic reversal but is subject
to a harmlessness analysis. 282 Kan. at 58; see State v. Cruse, 112 Kan. 486, 496, 212 P.
81 (1923).

44
We turn now to the specific concern about introducing confusing side issues that
are not necessarily related to the reasonable value of the medical services rendered. We
observe that in Wisconsin medical malpractice actions, evidence of collateral source
payments nevertheless can be admissible for this particular valuation purpose. See
Leitinger, 302 Wis. 2d at 140-41, 145 n.66 ("In Lagerstrom, this court recognized that the
legislature decided in enacting Wis. Stat. § 893.55[7] that evidence of collateral source
payments may be relevant to determining the reasonable value of medical services" but
"must not reduce the reasonable value of medical services by the amount of the collateral
source payments.").

Presumably, the Wisconsin trial courts take appropriate precautions when handling
these malpractice cases and strike an acceptable balance between these competing
considerations. Indeed, in Lagerstrom v. Myrtle Werth Hosp.—Mayo Health Sys., 285
Wis. 2d 1, 39, 700 N.W.2d 201 (2005), the Wisconsin Supreme Court ruled that while
evidence of collateral source payments may be used by the jury to determine the
reasonable value of medical services, "the circuit court must instruct the fact-finder that it
must not reduce the reasonable value of medical services on the basis of the collateral
source payments." 285 Wis. 2d at 38. In this fashion, Wisconsin appears to ably address
the aftermath of the concern of the South Carolina Supreme Court in Covington that
"attempts on the part of plaintiff to explain the compromised payment would necessarily
lead to the existence of a collateral source." (Emphasis added.) 359 S.C. at 104. In
short, the plaintiff's rights can be protected.

Several of our concurring colleagues criticize our rationale and holding. The
following abbreviated responses are sufficient.

First, they contend that under our holding, the uninsured plaintiff is eligible to
recover for the full amount of services billed while the insured plaintiff is not. They label
this as discriminatory. We disagree. An uninsured plaintiff may herself pay her medical
45
expenses at a negotiated price, e.g., steep cash discount upon her threat of bankruptcy.
See Robinson, 112 Ohio St. 3d at 23 ("Both the original medical bill rendered and the
amount accepted as full payment are admissible to prove the reasonableness and
necessity of charges rendered for medical and hospital care.") In that event, just as with
an insured plaintiff who has insurance carrier write-offs, evidence of the lower amount
accepted in full satisfaction of the debt could be admissible for determining the
reasonable value of the medical services.

Second, in today's world we do not share the concerns of our concurring
colleagues about the purported catastrophic results emanating from a jury's "likely
inference" about the existence of a plaintiff's collateral source, e.g., medical insurance.
For example, for years Kansas has required motor vehicle liability insurance coverage—
or self-insurance—and prohibited the owner of an uninsured vehicle from allowing it to
be operated on highways or upon property open to use by the public. K.S.A. 40-3104.
And for years Kansas has also required owner certification of the maintenance of
insurance before applying for registration or renewal of registration of motor vehicles.
K.S.A. 8-173(c). Because Kansas juries are often selected from drivers' license rolls, our
juries obviously contain Kansas drivers and motor vehicle owners. Accordingly, they will
"likely infer" insurance coverage for defendants and plaintiffs in cases involving motor
vehicle accidents. Yet we routinely entrust our juries with considering liability and
determining resultant damage amounts.

The two-car accident case of Bott v. Wendler, 203 Kan. 212, 453 P.2d 100 (1969),
is of guidance on this issue. There, the jury sent back the following question to the court
during their deliberation: "Amount of liability Ins. of Mrs. Bott and Mr. Wendler—There
is a lot of money involved here and we do not want to leave either party penniless. This
we need to know—Please." 203 Kan. at 224. The jury rejected defendants' damage
claims and awarded damages to plaintiffs. Defendants appealed, arguing that because of
plaintiffs' counsel's efforts, "the probability and fact that the defendants were covered by
46
liability insurance was injected into the case which materially prejudiced the defendants."
203 Kan. at 223. In one specific contention, defendants claimed that counsel had several
times referred to men who the jury might have identified as representatives of defendants'
insurance carrier who had helped defense counsel investigate the case.

In rejecting defendants' argument, we held that, among other things:

"Furthermore, there is nothing in the record to suggest that the jury's question to
the court concerning liability insurance was motivated by any reference to insurance at
the trial, nor does such fact suggest insurance was improperly injected into the case. It is
general knowledge that most drivers today have liability insurance, and neither party to a
lawsuit should be prejudiced by a question which may be prompted by the jury's own
experience and common knowledge of the affairs of mankind." (Emphasis added.) 203
Kan. at 228.

See also Kelty v. Best Cabs, Inc., 206 Kan. 654, 481 P.2d 980 (1971) (Despite plaintiff's
doctor's "monstrous testimony" about insurance, e.g., his employment of "the
opprobrious term," the "malignant term," and "odious expression", court held reference
was inadvertent and did not prejudicially affect the substantial rights of the complaining
party).

We now turn to the Wisconsin Supreme Court's last set of concerns.

3. Relevance

The Leitinger court also expressed relevance concerns with evidence of discounts
and reimbursement rates:

"The evidence [defendant insurance company] proffers will not assist the fact-
finder as [defendant] claims, because a particular health insurance company's negotiated
47
rates with a health care provider are not necessarily relevant evidence of the reasonable
value of the medical services in a tort action. . . . The reimbursement rate of a particular
health insurance company generally arises out of a contractual relationship and reflects a
multitude of factors related to the relationship of the insurance company, and the
provider, not just to the reasonable value of the medical services." (Emphasis added.)
302 Wis. 2d at 144.

See, e.g., Radvany v. Davis, 262 Va. 308, 310, 551 S.E.2d 347 (2001) ("negotiated
amounts . . . do not reflect the 'prevailing cost' of those services to other patients").

The Indiana Supreme Court in Stanley v. Walker essentially acknowledged this
concern but nevertheless found the evidence of discounts relevant to the reasonable value
of medical services:

"We recognize that the discount of a particular provider generally arises out of a
contractual relationship with health insurers or government agencies and reflects a
number of factors–not just the reasonable value of the medical services. However, we
believe that this evidence is of value in the fact-finding process leading to the
determination of the reasonable value of medical services." (Emphasis added.) Stanley,
906 N.E.2d at 858.

In Kansas, relevant evidence is any "evidence having any tendency in reason to
prove any material fact." K.S.A. 60-401(b). Relevance only requires a logical connection
between the asserted facts and the inferences they are intended to establish. State v.
Richmond, 289 Kan. 419, Syl. ¶ 9, 212 P.3d 165 (2009). Given this standard, we agree
with the Stanley court. Evidence of the amount accepted in satisfaction of the bill for
medical services provided to an injured plaintiff is of relevance, i.e., some value, in
determining the reasonable value of those services. As mentioned, the Leitinger court
itself acknowledged that the Wisconsin Legislature apparently felt that evidence of
collateral source payments was relevant in medical malpractice actions for the purpose of
determining the reasonable value of medical services. 302 Wis. 2d at 140-41, 145 n.66;
48
see also Scott v. Garfield, 454 Mass. 790, 912 N.E.2d 1000 (Mass. 2009) (Cordy and
Botsford, JJ., concurring) ("The 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.").

Moreover, when such relevant evidence is withheld from the jury, the jury is
inappropriately left to speculate on the reasonable value of the medical services. We
agree with the Leitinger dissent:

"'If the higher stated medical bill, an amount that never was and never will be paid, is
admitted without evidence of the lower reimbursement rate, the jury is basing their
verdict on 'mere speculation or conjecture.' The difference between the stated bill and the
paid charges . . . is purely fictional as a true charge.' [Citation omitted.]" 302 Wis. 2d at
156 (Roggensack, J. dissenting).

The Leitinger dissent is consistent with this court's long-stated concerns about
awarding damages based upon speculative evidence:

"In a negligence action, recovery may be had only where there is evidence
showing with reasonable certainty the damage was sustained as a result of the negligence.
Recovery may not be had where the alleged damages are too conjectural or speculative
to form a basis for measurement. To warrant recovery of damages, therefore, there must
be some reasonable basis for computation which will enable the trier of fact to arrive at
an estimate of the amount of the loss." (Emphasis added.) McKissick v. Frye, 255 Kan.
566, 591, 876 P.2d 1371 (1994).

Here, if there is only evidence admitted of a $70,496.15 hospital bill, and no
evidence of any lesser amount being accepted in satisfaction of that bill, a jury would
easily be justified in awarding the full $70,496.15 as reasonable value of damages. Cf.
Jackson v. City of Kansas City, 263 Kan. 143,151-52, 947 P.2d 31 (1997) (jury awarded
more than amount of medical bills: court refused to reduce jury verdict to amount
49
actually paid by plaintiff on those bills because no evidence in record that hospital had
settled for less than the amount due or had written off the remaining portion of the bills).
This verdict would be sustainable despite the awarded amount being approximately 12
times the amount the defendant contends—and the hospital's acceptance suggests—that
the services are reasonably worth. With this result, we begin to leave the realm of
compensatory damages and move toward the punitive.

Moreover, of this $70,496.15 awarded to plaintiff, not even the $4,689 actually
paid by Coventry would be subject to subrogation. K.A.R. 40-1-20 provides:

"An insurance company shall not issue contracts of insurance in Kansas
containing a 'subrogation' clause applicable to coverages providing for reimbursement of
medical, surgical, hospital or funeral expenses."

In conclusion, we reverse and remand to the district court for further proceedings.
On remand the district court may allow into evidence (1) the original amount billed
($70,496.15), and (2) the amount accepted by the hospital in full satisfaction of the
amount billed ($5,310). However, evidence of the source of any actual payments is
inadmissible under the collateral source rule. The finder of fact shall determine from
these and other facts the reasonable value of the medical services provided to plaintiff.

* * *

JOHNSON, J., concurring: On the issue of medical care provider discounts, I
remain convinced that Bates v. Hogg, 22 Kan. App. 2d 702, 921 P.2d 249, rev. denied
260 Kan. 991 (1996); Fischer v. Farmers Insurance Company, Inc., No. 90,246,
unpublished opinion filed February 18, 2005; and Liberty v. Westwood United Super,
Inc., No. 89,143, unpublished opinion filed April 29, 2005, rev. denied 280 Kan. 983
(2005), reached the correct result on the questions that are presented in this case, i.e.,
whether contractual discounts or write-offs are a collateral source benefit subject to the
50
collateral source rule and how to appropriately measure the reasonable value of medical
services. However, if I remain true to my convictions, the trial bench and litigation bar in
this state will be placed in the untenable position of not knowing what evidence is legally
admissible on the question of economic damages.

The existing precedent, i.e., Bates, Fischer, and Liberty, to which I adhere, would
instruct the trial court to admit only the evidence of the amount which the medical care
provider had contractually agreed to accept in full satisfaction of the bill for medical
services (amount paid). Three of my colleagues would tell the district court that evidence
of the amount the provider initially billed (prediscount amount) is admissible and the trial
court risks reversal based upon a violation of the collateral source rule if any evidence is
admitted on the amount actually paid or the amount of the discounts. The remaining three
justices would affirm a trial court's admission of any relevant evidence of the reasonable
value of the medical services, which they believe could include both the prediscount
amount and the amount paid. In effect, the trial court would be told that one justice says
only the amount paid, three justices say only the prediscount amount, and three justices
say both the prediscount amount and the amount paid. What evidence could a trial judge
admit without risking reversal?

I do not discern in my colleagues' opinions any practical solution to the dilemma
this appellate court deadlock would present to the district court upon remand. Therefore,
to avoid a calamity of epic proportions, I will fall on the sword of pragmatism. I cast my
vote with my colleagues who believe that both the prediscount amount and the amount
actually paid are relevant, admissible evidence of damages. However, in a fit of self-
pitying martyrdom, I feel entitled to indulge myself by setting forth some selected
thoughts on the matter.

I begin by taking issue with Justice Nuss' characterization of the first opinion in
Rose v. Via Christi Health System, Inc., 276 Kan. 539, 78 P.3d 798 (2003). Although I
51
believe the labeling of that opinion as "Rose I" unduly elevates its status, I will follow
that nomenclature for the sake of simplicity, as well as referring to Justice Nuss' opinion
as the majority and the joint opinion of Chief Justice Davis, Justice Rosen, and Justice
Biles as the concurrence.

I am concerned about two possible misconceptions about Rose I. First, the
majority's repeated reference to the Court of Appeals' decision in Liberty as being
"contrary to [the Supreme Court's] holding in Rose I" seems to intimate a failure by the
Courts of Appeals to follow Kansas Supreme Court precedent. See Buchanan v. Overley,
39 Kan. App. 2d 171, 175-76, 178 P.3d 53 (2008) ("[The Court of Appeals] is duty bound
to follow Kansas Supreme Court precedent, absent some indication the court is departing
from its previous position."). Second, in its synthesized chronology of recent Kansas law,
the majority declares that after Bates, but before Fischer, "Medicare write-offs are
covered by the collateral source rule per Rose I."

With regard to the first concern, the majority fails to mention that both Fischer
and Liberty acknowledged the existence of Rose I, but opined that, pursuant to the
Supreme Court's own rules, that decision was not binding precedent on the Court of
Appeals at the time Fischer and Liberty were decided and filed. I believe a review of the
chronology of Rose I and Liberty in conjunction with the Supreme Court Rules will
confirm that legal conclusion.

Rose I was filed October 31, 2003. Before the mandate was issued on that opinion,
the defendant hospital, Via Christi, filed a timely motion for rehearing or modification on
November 20, 2003. See Kansas Supreme Court Rule 7.06(a) (2009 Kan. Ct. R. Annot.
60) (motion for rehearing or modification to be filed within 20 days of decision date).
The filing of the motion for rehearing or modification stayed the issuance of a mandate in
the case, pending the determination of the issues raised in the motion. Rule 7.06(a). The
decision was not an effective final order, because the mandate had not issued. Cf. K.S.A.
52
60-2106(c) (Supreme Court may by rule provide for postdecision motions for rehearing;
when under such rule a decision of an appellate court becomes final, such court shall
promptly cause transmission of its mandate). The Supreme Court granted the motion for
rehearing on January 7, 2004. "If a rehearing is granted, such order suspends the effect of
the original decision until the matter is decided on rehearing." Rule 7.06(a) (2009 Kan.
Ct. R. Annot. 60). The case was not decided on rehearing until the decision in Rose II
was filed on June 3, 2005. Rose v. Via Christi Health System, Inc., 279 Kan. 523, 113
P.3d 241 (2005). To summarize, a mandate was not issued on Rose I; the issuance of such
a mandate was stayed, by rule, on November 20, 2003; the legal effect of Rose I was
suspended, by rule, on January 7, 2004; and the suspension of Rose I's legal effect
continued for approximately 1 1/2 years, until June 3, 2005.

The Liberty case was set for hearing in the Court of Appeals on February 13,
2004, after the effect of Rose I had been legally suspended. Some 14 months later, when
Liberty was filed, the Court of Appeals panel noted that it was "not currently bound by
[Rose I], albeit we have afforded our high court the deference of delaying our decision in
the hope that a rehearing decision would be forthcoming. However, we now choose to
proceed, based upon Bates." Liberty, slip op. at 12.

To reiterate, because the legal effect of Rose I remained suspended, that original
decision was not binding precedent upon the Court of Appeals (or anyone else for that
matter) when Liberty was filed. Indeed, if the Court of Appeals panel had been inclined
to follow the rationale of Rose I, it could not have cited to that unmandated opinion for
supporting legal authority. Perhaps the publication of the Rose I opinion in our official
reports convinces the majority that it had precedential value. Nevertheless, at the time,
there was no mandatory holding from the Supreme Court in the Rose case to which
Liberty could be "contrary"; rather, the only legally effective precedent was Bates.
Moreover, even if Rose I could have been considered some sort of persuasive authority,
the Supreme Court's uncommon act of granting a rehearing in the case certainly provided
53
"some indication the court is departing from its previous position." Overley, 39 Kan.
App. 2d at 175-76. As time would tell, the Supreme Court did depart from its original
decision.

My second concern is with treating Rose I as part of the case law in this state on
the issue of medical bill discounts. In my view, Rose I never became the law in Kansas.
As the majority notes, when the matter was decided on rehearing, the Supreme Court
issued the opinion referred to as Rose II. When the sole and only mandate in this case was
issued on September 22, 2005, it was accompanied by Rose II, not Rose I. As the
majority notes, Rose II specifically declined to decide whether medical bill discounts or
write-offs are a benefit from a collateral source. 279 Kan. at 534. In other words, to this
day, the Supreme Court has not issued a mandate accompanied by an opinion that
includes a holding on the medical bill discount issue presented in this case. In my view,
Rose I possesses no more legal effect or precedential value than a draft opinion; it is not
now nor has it ever been a final order of the Kansas Supreme Court.

To the contrary, Bates, Fischer, and Liberty, represent the case law from Kansas
state courts on this issue. Ironically, the Supreme Court declined an opportunity to
answer the question it left unanswered in Rose II or to reject the holding in Liberty on this
issue when it denied the petition for review in Liberty on the same date that it issued the
mandate in Rose II. Although one cannot read anything into a denial of a petition for
review, one might ponder why the Supreme Court would let Liberty stand unabated if
Rose I was Kansas law and Liberty was "contrary to [the] holding in Rose I."

Turning now to the concurrence, I note that my concurring colleagues are
enamored with the fact that the collateral source rule has a "100-year-old history" in this
state. With tongue in cheek, I would point out that the rule against perpetuities also has a
long history in this state, but such longevity alone does not make the rule against
perpetuities applicable to the question presented in this case. Likewise, the contractual
54
write-offs must fit within the definition of a collateral source benefit, regardless of how
long the collateral source rule has been applied in this state to insurance benefits that are
actually paid to the medical care provider. I wholeheartedly agree with preserving the
century-old collateral source rule in this case by excluding evidence that the health
insurer paid $4,689 of the $5,310 bill which was actually paid. I would not, today and for
the first time in this state, extend the rule to the phantom portion of the bill designated as
discounts or write-offs.

Looking at the concurrence's recitation of the collateral source rule from Wentling
v. Medical Anesthesia Services, 237 Kan. 503, 515, 701 P.2d 939 (1985), I note that it
states that "'[t]he collateral source rule permits an injured party to recover full
compensatory damages.'" (Emphasis added.) (Quoting 3 Minzer, Nates, Kimball, Axelrod
and Goldstein, Damages in Tort Actions § 17.00, p. 17-5 [1984]). A victim is fully
compensated when returned to his or her preinjury status. With respect to medical
services, that preinjury status is that the victim owes no medical bill. If judgment is
awarded to the plaintiff in an amount that will fully pay the medical bill, i.e., in an
amount that the medical care provider has contractually agreed to accept in full
settlement of the services provided, the plaintiff is returned to the preinjury status of
owing for no medical services and he or she has been fully compensated. Allowing the
victim to recover the amount of the contractual write-offs, which were never intended to
be paid by anyone, places the plaintiff in a better position after the injury with a pocketful
of fictional discount damages. The rationale often given is that it is better to give the
plaintiff a windfall than to let a tortfeasor escape full responsibility for his or her
wrongful act. That rationale suggests that the unpaid discount damages are actually
punitive damages to teach the tortfeasor a lesson, rather than compensatory damages to
make the plaintiff whole.

Looking further at the Wentling definition of the collateral source rule, recited by
the concurrence, it states that "'[t]he rule also precludes admission of evidence of benefits
55
paid by a collateral source.'" (Emphasis added.) Wentling, 237 Kan. at 515 (quoting
Damages in Tort Actions § 17.00, p. 17-5). Of course, as noted, the write-offs were not
"paid" by Coventry Health Systems (health insurer), the "collateral source" in this
instance, or by anyone else. In advance of Martinez' entering Wesley Medical Center
(hospital), Coventry had negotiated the discounts for its own benefit and Wesley had
agreed to accept the discounted payments, presumably to qualify as an authorized
provider for those persons insured with Coventry. The discounts resulted from a business
deal between Coventry and Wesley. There certainly was no gratuity involved.

Moreover, the bargained-for benefit concept is illusory. One would presume that
Martinez purchased health insurance to assure that she could receive reimbursement of or
payment for needed medical services which might be required for any reason, including
illnesses, as well as accidents. Health insurance is first-party coverage. It stretches one's
credulity to believe a person purchases health insurance with a view to the size of the
discounts that might be collected from a tortfeasor in the event medical services are
occasioned by someone else's negligence. To the contrary, a health insurance purchaser is
fiscally motivated by the amounts that will need to be personally paid to the company in
premiums; by the amounts that will need to be personally paid to the health care
providers in deductibles and copayments; and by the scope of the services covered by the
policy, e.g., maternity benefits.

Of course, some of what I set forth here is drawn from Bates, Fischer, and Liberty.
The concurrence perceives that the common threads in those three Court of Appeals
opinions are: "(1) plaintiffs are limited to claiming only the cash amounts actually paid
personally, [by] their insurance carriers, or [by] federal assistance programs; and (2) a
belief that the question in these cases is not the collateral source rule, but the reasonable
value of medical care and expenses for the treatment of plaintiffs' injuries." Interestingly,
the concurrence challenges the efficacy of the first common thread, which is at the heart
of the three opinions, with the one sentence declaration: "As to the first point, this court
56
has rejected it." Apparently, the concurrence ascribes to the theory that a majority of
votes trumps cogent thinking.

With respect to the second "common thread," the concurrence believes the Court
of Appeals decisions begged the question and answered the question by restating it.
Apparently, the concurrence does not discern that there are two sides to this coin. On one
side, the plaintiff is objecting to admitting evidence of the discounts because the plaintiff
characterizes them as collateral source benefits. On the other side, the defendant is
objecting to admitting evidence of the prediscount billing amount because it bears no
rational relationship to the reasonable value of the provided medical services. The
relevance or materiality of the allegedly inflated initial billing is a question that exists
regardless of the applicability of the collateral source rule.

Perhaps an analogy might be helpful. The assumptions are as follows: (1) a
defendant has a liability insurance policy which includes coverage for the cost of defense;
(2) the liability insurer has an agreement with a law firm to represent its insureds at the
rate of $200 per billable hour, which will be paid by the insurer without any additional
billing to the insured; (3) the trial court has determined that the plaintiff is liable to the
defendant for certain attorney fees, e.g., as a discovery sanction, and the court directs the
defendant to submit evidence of the amount of those fees; and (4) the law firm has
prepared a billing statement for the insurer that is calculated on the basis of $1,000 per
billable hour, but which then reflects a contractual discount or write-off of $800 per hour,
to get to the agreed upon hourly rate of $200. The questions presented are: (1) Whether
the defendant will be allowed to submit only the $1,000 per hour billing, excluding any
evidence of either the $200-per-hour actual payment or the $800-per-hour discount on the
theory that the discount or write-off is a collateral source benefit from the purchase of
liability insurance; and (2) whether the plaintiff can successfully object to the
introduction of the $1,000-per-hour billing because it is not the appropriate measure of
the reasonable value of legal services.
57

The hypothetical reinforces my contention that the bargained-for benefit approach
is unrealistic. The defendant contracted with the liability insurer to have competent legal
representation to defend the insured against any lawsuit. In selecting an insurer, the
insured might well have considered the amount of premium it would have to pay for the
liability coverage and the reputation of the insurer. However, the insured is unconcerned
about how much it will cost the insurer to fulfill its policy obligation to provide legal
counsel; the insured just wants competent counsel defending the insured. Moreover, it
defies imagination to believe that a liability insurance purchaser would contemplate the
situation in which a wrongdoer would be reimbursing the cost of defense, and,
accordingly, the purchaser would consider the insurer's contract with the law firm and the
law firm's billing policy.

Further, the hypothetical highlights the fallacy of ascribing any significance to a
fictional prediscount charge. The law firm knew that it was only going to collect $200 per
hour and, therefore, it could have arbitrarily selected any inflated amount it wanted as a
prediscount charge, even if it had never collected that rate from any client. If another law
firm had chosen to reflect an initial billing closer to reality, say $300 per hour, the
insured's windfall would be significantly reduced based solely on the candor of the
"collateral source." Moreover, the plaintiff could attack the admission of the $1,000-per-
hour billing as being unreasonable, even if evidence of the $200-per-hour contract is
excluded.

My last comment on the hypothetical is that it supports the notion that people and
entities should be free to make their own deals through valid and enforceable contracts,
and that when they do so, the contract establishes the value of the goods and services
involved. If the law firm feels that the reasonable value of its services is worth more than
$200 per hour, it is free to decline to represent the insurance company. If the law firm
believes that it must accept the $200 hourly rate in order to attract insurance company
58
clients because other firms are willing to accept that amount, then that simply means that
the reasonable value of legal services in that context is $200 per hour. To use another
example, if I list my house for $250,000, but actually get a purchase contract for
$200,000, the value of my house is the sale price, not my estimate of what I think the
house should be worth.

My final comments address the concurrence's argument that even introducing
evidence of the amount actually paid discriminates against those plaintiffs who are
insured and the majority's response that an uninsured plaintiff might also have a
negotiated reduction of the amount billed. I find the concurrence's argument to be
inscrutable and the majority's response to be incomplete.

The concurrence's example assumes two plaintiffs have similarly broken legs and
are billed $10,000 for the same medical services; one plaintiff is uninsured; and one
plaintiff is insured by an insurer which has negotiated a $9,000 write-off, leaving $1,000
to actually be paid. The issue before us is the evidence which can be admitted to establish
a specific category of damages, i.e., compensation for the plaintiff's economic damages.
Yet, the concurrence, utilizing its collective "common sense," finds disparate treatment
for the insured plaintiff based in part on its belief of how a jury would analyze the
separate category of noneconomic damages. The concurrence speculates that a jury which
does not hear that economic damages were satisfied by $1,000 will award more money to
the uninsured plaintiff for pain and suffering. That is akin to saying that a criminal
defendant charged with one count of theft is less likely to be convicted of that charge than
a defendant who is charged with nine other crimes in addition to the theft charge. While
common sense would suggest that it might be true that more charges increase the
likelihood of conviction of one of those crimes, legally each count must stand on its own
proof. The same should be true of damages in a civil action. Pain and suffering damages
should be driven by proof of the extent to which the injuries have caused the plaintiff
pain and suffering, separate and apart from the amount of money it took to fix the
59
injuries. Indeed, the broken leg used in the concurrence's example might well cause
considerably more pain and suffering for an extended period of time than some other
surgical procedure generating a much higher medical bill. In essence, the concurrence
believes that a jury is likely to abdicate its responsibility to determine the amount of each
category of damages based solely on the proof applicable to that category. It would have
us guard against jury nullification on noneconomic damages by manipulating the
admissible evidence of economic damages. As in the criminal analog, that position is
legally unsupportable.

Ironically, the concurrence's example will serve nicely to point out that, within the
category of economic damages, it is the uninsured plaintiff who gets the short straw
regardless of what evidence we deem to be admissible. As the majority notes, under
Kansas Administrative Regulations, an insurer is precluded from issuing a policy in this
State that allows it to be reimbursed for the portion of the medical bill that the insurer
pays. Therefore, if the insured plaintiff obtains judgment for $10,000 in medical services,
he or she pockets all but the amount of deductible and copayment the insured personally
paid. That would result in a windfall of over $9,000. Even if the insured plaintiff obtains
judgment for only the $1,000 that was actually paid for medical services, he or she still
pockets the portion of the $1,000 paid by the health insurer.

In contrast, I know of nothing that prohibits the hospital from collecting its bill out
of an uninsured plaintiff's judgment. Therefore, even though the uninsured plaintiff might
recover the entire initial hospital billing of $10,000 from the tortfeasor, that plaintiff still
owes the $10,000 hospital bill and will pocket nothing.

Additionally, a rather significant factor absent from the concurrence's hypothetical
is any provision for the payment of the plaintiff's attorney fees. Presuming a 40%
contingent fee arrangement, the uninsured plaintiff would actually net $6,000, less
expenses. However, the uninsured plaintiff still owes a $10,000 hospital bill, of which
60
$4,000 must be paid with personal funds unless he or she can personally negotiate a
discount with the hospital. In contrast, so long as the insurer's portion of the $1,000
actually paid for the insured plaintiff exceeds 40%, that insured still pockets money after
paying his or her contingent attorney fees.

In other words, an insured plaintiff will always be in a better cash position than an
uninsured plaintiff with respect to the economic damages. I can accept that circumstance
with respect to the amounts that the insurer actually paid for medical services under the
oft-stated theory that a person should reap the rewards of his or her prudence and
foresight in purchasing insurance. However, in reality, the ability to be insured is seldom
a function of prudence and foresight, but rather it depends too often on fortuitous
circumstances, such as favorable employment or affluence acquired via family-provided
opportunities. In that regard, I would note that the concurrence's hypothetical omits a
significant segment of our citizenry. Some persons, e.g., farmers or small
businesspersons, are unable to afford to purchase health insurance from a blue-ribbon
company that has the clout to extract huge discounts. The trade-off for affordable
premiums is that the health insurance policy has higher deductibles and copayments and
the amount of services for which the insurance will pay is reduced. Therefore, the
windfall for those who are underinsured will be less than the windfall for those fortunate
enough to be fully insured. I can find no justification for exacerbating the difference in
pocket money between the most fortunate and the least fortunate among us by allowing
the recovery of unpaid discounts.

Nevertheless, as a practical matter, I feel compelled to hold my nose and join with
the result reached in Justice Nuss' opinion.

61
* * *

DAVIS, C.J., ROSEN and BILES, JJ., concurring in part and dissenting in part: We
agree the district court erred in limiting plaintiff's recovery for medical expenses to only
those cash amounts actually paid by plaintiff and her health insurance company. The jury
must determine the reasonable value of medical services. But this determination should
not depend upon how successful plaintiff's insurance company was at negotiating lower
prices to benefit its insureds. For that reason, the district court's ruling on the motion in
limine must be reversed. We concur in this result.

We write separately to express our disagreements with our colleagues' approach as
to how the district court should proceed on remand. Our colleagues see this case as an
opportunity to depart from this court's long-standing limitations regarding collateral
source evidence, which would bar the admission of those cash amounts actually paid by
plaintiff or on her behalf by her health insurance company. These limitations derive from
our case law dating back more than 100 years, and the majority's method of departure is
unnecessarily complicating. We discern no compelling reason now to alter the
evidentiary landscape imposed by this court over these many years regarding a plaintiff's
collateral source benefits.

We would not change this court's historical collateral source principles. We would
not permit a jury to be told the plaintiff's medical bills "might be satisfied" by a particular
amount. We would continue to bar admission into evidence of the amounts actually paid
to satisfy those charges. We would further bar admission of any billing write-offs secured
under plaintiff's private medical insurance contract. These evidentiary facts exist only
because of the relationship between plaintiff, her health care providers, and her private
medical insurance carrier. This relationship was created when plaintiff procured her own
health care insurance. Under this court's existing case law, defendant is not permitted to
62
enjoy any benefit from plaintiff's private insurance contract. That principle should be
preserved.

BACKGROUND APPLICABLE TO THIS ISSUE

In Kansas, personal injury plaintiffs are entitled to claim as damages the
reasonable value of medical services necessary to recover from injuries caused by a
wrongdoer. Shirley v. Smith, 261 Kan. 685, 693, 933 P.2d 651 (1997) ("The reasonable
expense of treatment is a proper element of economic damages."); Lewark v. Parkinson,
73 Kan. 553, Syl. ¶, 85 P. 601 (1906) ("Expenses incurred by an injured [plaintiff], which
resulted from the injuries, including compensation for services of nurses, are proper
elements of damages in action against the [defendant] in such a case, notwithstanding the
services were performed by a member of the family of the injured person, if the services
were necessary and the charges reasonable."); see also K.S.A. 40-3117 (In a tort action
against the owner, operator, or occupant of a motor vehicle, "the charges actually made
for medical treatment expenses shall not be conclusive as to their reasonable value.
Evidence that the reasonable value thereof was an amount different from the amount
actually charged shall be admissible in all actions to which this subsection applies.") and
PIK Civ. 4th 171.02 (recoverable damages for personal injury include "reasonable
expenses of necessary medical care").

Similarly, the alleged wrongdoer has a right at trial to challenge the
reasonableness of the expenses plaintiff claims. Cansler v. Harrington, 231 Kan. 66, 69,
643 P.2d 110 (1982). "The reasonable value of services is generally [defined as] the
reasonable charges of the profession for those services, not the usual charges of the
particular physician or surgeon." Bates v. Hogg, 22 Kan. App. 2d 702, 709, 921 P.2d 249
(1996) (Rulon, J., dissenting) (quoting 2 Minzer, Nates, Kimball, Axelrod, and Goldstein,
Damages in Tort Actions, § 9.20, P. 9-14 [1991]); Lewark, 73 Kan. at 556 ("'If she had
paid ten times the true value of [medical] services she could only have recovered what
63
such services were reasonably worth.'"[quoting Brosnan et al v. Sweetser, 127 Ind. 1, 8,
26 N.E. 555 (1891)]).

In this case, Milburn Enterprises Inc. (Milburn) sought to shortcut its evidentiary
challenge to the reasonableness of Karen Martinez' damage claim for her medical care. It
did this by asking the district court to depart from instructing the jury to determine the
reasonable value based on the evidence to simply asking the court to decide as a matter of
law that her claim was limited to the cash amounts actually paid for medical care and
treatment resulting from Martinez' personal medical insurance. The district court agreed
with Milburn and permitted this limitation, relying on the majority opinion issued by a
divided Court of Appeals panel in Bates v. Hogg, 22 Kan. App. 2d 702, 921 P.2d 249,
rev. denied 260 Kan. 991 (1996), superseded on other grounds by K.S.A. 1999 Supp. 60-
226(b), (e) and 60-237(c), as stated in Frans v. Gausman, 27 Kan. App. 2d 518, 527, 6
P.3d 432, rev. denied 270 Kan. 897 (2000), concerning health care provider write-offs
under the federal Medicaid program. The obvious outcome from the district court's order
was to transfer the benefit plaintiff derived from the contractual arrangements between
her insurance company and her health care providers to the defendant Milburn. These
contractual arrangements resulted in certain negotiated write-offs, i.e. discounts, to the
amount billed under Martinez' contract for insurance. Clearly, Milburn's motion in limine
would not have been available if Martinez were uninsured.

This court agrees the district court was wrong to limit plaintiff's damages to the
actual amount paid under her personal health insurance agreement. But the court's
members disagree on how the collateral source evidence should be handled on remand.

Three justices contend Milburn should be permitted to offer into evidence: (1) the
actual payments made to plaintiff's health care providers under her personal insurance
contract; and (2) the medical expense write-offs provided as a result of that insurance.
They sanction a contrivance that would advise the jury that the plaintiff's medical bills
64
could be "satisfied" by a payment that happens to coincide with the cash payments made
by the plaintiff's health care insurance and plaintiff. There would be no mention that
plaintiff actually had health insurance to pay for her care and treatment, although the
implication is obvious. Any confusion this may cause, they believe, can be corrected with
limiting jury instructions. Justice Johnson begrudgingly joins these three in order to form
the majority needed to impose this methodology on our trial courts, even though he
vehemently disputes his colleagues' legal analysis that leads to this result.

We disagree with the majority approach and discern no reason why there should
be any change to both litigants' respective evidentiary obligations regarding the
reasonable value and necessity of the medical services provided to plaintiff as defined by
our existing law. Similarly, we believe imposing the majority's new evidentiary
methodology will most surely allow a jury to infer the existence of a plaintiff's insurance,
which is forbidden by the collateral source rule; inject jury confusion into what are
already complex deliberations at trial; and ultimately lead to the demise of the collateral
source rule itself. We dissent from that portion of the opinion by the majority as
discussed below.

ANALYSIS

The Collateral Source Rule in Kansas

Put simply, the collateral source rule is a common law tenet preventing the
introduction of certain evidence. Farley v. Engelken, 241 Kan. 663, 665, 740 P.2d 1058
(1987). In this state, our long-standing collateral source rule provides that "damages
recoverable for a wrong are not diminished by the fact that the party injured has been
wholly or partly indemnified for his loss by insurance effected by him, and to the
procurement of which the wrongdoer did not contribute." Rexroad v. Kansas Power &
Light Co., 192 Kan. 343, 354-55, 388 P.2d 832 (1964) (declaring this rule is "well
65
settled" and citing 15 Am. Jur., Damages § 201, pp. 617, 618); see also Davis v. Kansas
Electric Power Co., 159 Kan. 97, 109, 152 P.2d 806 (1944) ("[T]he general rule
applicable is that a tort-feasor is not entitled to have damages caused by him reduced
because the person whom he injured by his tort had insurance."); Berry v. Dewey, 102
Kan. 593, Syl. ¶ 10, 172 P. 27 (1918) ("Financial benefits derived by the heir of a person
who has lost his life by the wrongful act of another cannot be deducted from the damages
sustained, and the verdict and judgment be reduced by the benefits received."); Lewark,
73 Kan. at 556 (stating services donated by a good friend or family member are the good
fortune of the injured party and not a concern of the person liable for damages).

The collateral source rule prevents the jury from hearing evidence regarding
certain payments or gratuitous services provided for the plaintiff's benefit. The rule is
frequently stated simply as an understanding that benefits received by a plaintiff from a
source wholly independent of and collateral to the wrongdoer will not diminish the
plaintiff's damages otherwise recoverable from the wrongdoer. Farley, 241 Kan. 663,
Syl. ¶ 1; Thompson v. KFB Ins. Co., 252 Kan. 1010, 1014, 850 P.2d 773 (1993); see
Gregory v. Carey, 246 Kan. 504, 508, 791 P.2d 1329 (1990); Harrier v. Gendel, 242
Kan. 798, 800, 751 P.2d 1038 (1988); Wentling v. Medical Anesthesia Services, 237 Kan.
503, 515, 701 P.2d 939 (1985); Allman v. Holleman, 233 Kan. 781, 788, 667 P.2d 296
(1983); Pape v. Kansas Power & Light Co., 231 Kan. 441, 446, 647 P.2d 320 (1982);
Negley v. Massey Ferguson, Inc., 229 Kan. 465, 469, 625 P.2d 472 (1981); Southard v.
Lira, 212 Kan. 763, 769, 512 P.2d 409 (1973).

This court has also said the collateral source rule "'precludes admission of
evidence of benefits paid by a collateral source, except where such evidence clearly
carries probative value on an issue not inherently related to measurement of damages.'"
Wentling, 237 Kan. at 515 (quoting 3 Minzer, Nates, Kimball, Axelrod and Goldstein,
Damages in Tort Actions § 17.00, p. 17-5 [1984]). Specifically in the private insurance
context, such as the case now before us, we have held:
66

"The reasons generally given for the [collateral source] rule are that the contract of
insurance and the subsequent conduct of the insurer and insured in relation thereto are
matters with which the wrongdoer has no concern and which do not affect the measure of
his liability." (Emphasis added.) Rexroad, 192 Kan. at 354-55.

In other words, the overwhelming case law from this court has been that a
defendant is entitled to challenge the reasonableness of a plaintiff's damage claim but
may not introduce evidence derived from a collateral source to make that challenge.
Instead, defendants must approach the issue through other evidentiary means. For
example, if Wesley Medical Center, the health care provider in this case, is appropriately
documented for evidentiary purposes to have a typical charge-to-cost ratio as claimed by
the amicus curiae Kansas Association of Defense Counsel, this general evidence might
be available to the defendant to challenge the reasonable value of plaintiff's medical
services and treatments. But specific evidence regarding collateral source benefits
obviously resulting from the existence of plaintiff's private medical insurance is not
admissible.

Why Kansas has a collateral source rule

From its earliest beginnings, the purposes behind the collateral source rule were
articulated by this court as being grounded in notions of equity, fairness, and inherent
prejudice to the plaintiff if such evidence was presented to a jury. More recently, our
cases evolved to emphasize the additional public policy interests of deterrence and
accountability for tortfeasors. In Berry, one of our early cases on the subject, the
defendant tortfeasor in a wrongful death action argued the heir's damages should be
reduced by the amount of her inheritance from the decedent. Characterizing this
argument as "untenable," this court stated: "Although it appears to have standing in the
courts of some of the states, it does not address itself to the judgment of this court as
67
being sound, legal, equitable, or fair, and [evidence of the inheritance] cannot be
permitted to reduce the amount of recovery in any way." 102 Kan. at 598.

In Rexroad, this court said the plaintiff's insurance contracts were of "no concern"
to the wrongdoer. 192 Kan. at 355. Again recognizing equity and fairness principles, this
court noted that just as a plaintiff cannot tell the jury a defendant has liability insurance to
pay a judgment, the same rule has "application in reverse" regarding plaintiff's insurance
benefits. 192 Kan. at 355. In Southard, this court similarly noted it would be "highly
prejudicial to the plaintiff and should not [be] permitted" to allow defendant to put into
evidence a cash settlement reached with plaintiff's uninsured motorist insurance carrier.
212 Kan. at 769.

In Pape, this court used the collateral source rule to hold that it was improper for a
defendant to offer evidence that a surviving spouse in a wrongful death action had
remarried, characterizing such evidence as "highly speculative" on the claimed
justification that it showed mitigation of damages, and adding there was no justification
"to depart from our long recognition of the collateral source rule . . . ." 231 Kan. at 447.
In Negley, we said it was improper in a wrongful death action to disclose to the jury that
the surviving spouse was receiving workers compensation benefits, explaining that this
"would present the same danger of prejudice as does the disclosure of insurance in other
actions." 229 Kan. at 473. In Allman, this court denied the admission of evidence of
financial resources available to minor plaintiffs resulting from their father's death, stating
"[a]s the definition illustrates[,] the collateral source rule is merely a species of the
relevancy doctrine." 233 Kan. at 789. In other words, plaintiff's receipt of collateral
benefits was irrelevant on the damages issue.

In Wentling, this court quoted with approval 3 Minzer, Nates, Kimball, Axelrod
and Goldstein, Damages in Tort Actions § 17.00, p. 17-5 (1984) to describe the collateral
source rule as follows:
68

"'The collateral source rule permits an injured party to recover full compensatory
damages from a tortfeasor irrespective of the payment of any element of those damages
by a source independent of the tortfeasor. The rule also precludes admission of evidence
of benefits paid by a collateral source, except where such evidence clearly carries
probative value on an issue not inherently related to measurement of damages.'" 237 Kan.
at 515.

In Harrier, we compared the prejudice caused by a plaintiff revealing to a jury that
the defendant had insurance to satisfy the requested damages as the same prejudice a
plaintiff would suffer from the introduction of collateral source benefits. We said, "The
distinction is one without a difference." 242 Kan. at 801. We continued by declaring: "To
allow the introduction of evidence that the plaintiff received collateral source benefits is
inherently prejudicial and requires reversal." 242 Kan. at 802. In Rose v. Via Christi
Health System, Inc., 276 Kan. 539, 78 P.3d 798 (2003) (Rose I), modified on rehearing
279 Kan. 523, 113 P.3d 241 (2005) (Rose II) a majority of this court picked up on the
theme stated in Wentling and approvingly drew from Judge, now Chief Judge, Rulon's
dissenting opinion in Bates to state:

"The purpose of the collateral source rule is to prevent the tortfeasor from escaping from
the full liability resulting from his or her actions by requiring the tortfeasor to compensate
the injured party for all of the harm he or she causes, not just the injured party's net loss.
[Citations omitted.] A benefit secured by the injured party either through insurance
contracts, advantageous employment arrangements, or gratuity from family or friends
should not benefit the tortfeasor by reducing his or her liability for damages. If there is to
be a windfall, it should benefit the injured party rather than the tortfeasor." 276 Kan. at
544.

As the 100-year-old history of this court's treatment of the collateral source rule
illustrates, we have traditionally viewed the introduction of collateral source evidence
with disdain. This court has characterized the potential admission of collateral source-
69
related evidence as being inherently unfair and prejudicial because of the influence it can
have upon the jury in determining the recoverable damages. We also have found it
contrary to the important policy aspects of deterrence and accountability for tortfeasors,
who are not entitled to have damages caused by them reduced because the persons whom
they injure had insurance. See Davis, 159 Kan. at 109.

In this case, it is agreed plaintiff's private medical insurance contract is wholly
independent of and collateral to Milburn. Plaintiff's medical insurance did not come from
Milburn or any person or entity acting for Milburn. Our issue only arises because
Martinez had the foresight to secure for herself private medical insurance. Therefore, the
evidentiary question advanced by our colleagues' view is whether permitting Milburn to
present to the jury the cash payments and expense write-offs resulting solely from
plaintiff's private medical insurance contract violates the collateral source rule as this
court has traditionally articulated it. We believe it does.

Put another way, should the jury's damage calculations for Martinez be different
just because she has private health insurance from calculations for someone else who is
uninsured? Under the collateral source rule and common sense, the question answers
itself. The rule's purpose is to ensure a party's treatment is the same for all plaintiffs by
not reducing the tortfeasor's liability for damages through the introduction of collateral
source payments made on a particular plaintiff's behalf. Rexroad, 192 Kan. at 355.

With our colleagues' approach, an uninsured plaintiff would still be able to collect
from a jury the original amount billed. But an insured plaintiff, under the same facts,
would likely see a reduction in damages simply because he or she had the good sense to
be insured. Likewise, the tortfeasor lucky enough to injure an insured plaintiff would be
able to reduce its liability by seizing on the benefits available to the insured plaintiff,
even though the tortfeasor did not contribute to the those insurance benefits. The
70
justification for this disparate treatment is completely contrary to this court's prior case
law as discussed above.

This court looked at the interplay between the collateral source rule and actual
cash payments and medical write-offs in only one case, which had to be reheard to
produce a binding result by a divided court. See Rose I, 276 Kan. at 539; and Rose II, 279
Kan. 523. But both Rose decisions dealt with the question at hand only in the context of
the federal Medicare program, which has its own statutory and regulatory scheme.
Furthermore, those decisions involved an even more limiting factual scenario in which
the tortfeasor (Via Christi) was the health care provider that gave the write-off benefit for
the plaintiff's medical treatment. In the end, the unique nature of the Medicare program
and the facts resulted in a divided court holding that the Medicare write-off by Via
Christi could be allowed as a setoff or credit against the portion of the economic loss
attributable to medical expenses because it "reflected a cost incurred by the defendant."
(Emphasis added.) Rose II, 279 Kan. at 533.

Accordingly, the only controlling principle on the subject emerging from this court
to date is to exclude evidence of medical write-offs and actual payments, except when the
medical provider is also the claimed tortfeasor. Those facts are not presented here, so the
Rose II decision has no controlling precedential value in this case.

The Court of Appeals has addressed the write-off issue in four cases. We consider
those next.

Kansas Court of Appeals' Decisions

The first Kansas appellate court to consider the question of actual cash payments
and medical write-offs was Bates in which a divided Court of Appeals panel considered
whether an injured plaintiff could include in his economic damage claim amounts written
71
off by a health care provider under the federal Medicaid program. The two-judge
majority concluded that the collateral source rule was inapplicable under the
circumstances and agreed further to limit plaintiff's claim to the actual amounts paid. 22
Kan. App. 2d at 705 ("[T]he amount allowed by Medicaid becomes the amount due and
is the 'customary charge' under the circumstances.").

The Bates majority also expressed its agreement with the public policy reflected in
a federal court decision in a similar North Carolina case, stating that it would be
"'unconscionable to permit the taxpayers to bear the expense of providing free medical
care to a person and then allow that person to recover damages for medical services from
a tort-feasor and pocket the windfall.'" 22 Kan. App. 2d at 706 (quoting Gordon v.
Forsyth County Hospital Authority, Inc., 409 F. Supp. 708, 719 [M.D.N.C. 1976]). But
the Bates majority did nothing to reconcile its result with this court's historical basis for
strictly enforcing the collateral source rule. This court criticized that failing in Rose I. 276
Kan. at 545.

Judge Rulon vigorously dissented from the Bates majority view, taking the general
position that our state's case law required that a plaintiff recover the reasonable value of
medical services regardless of the amount actually paid or written off because of the
collateral source rule. Harkening back to our early collateral source jurisprudence, Judge
Rulon noted:

"While the plaintiff can only recover the reasonable value of the medical services
provided, there is no requirement in Kansas that it be shown that any amount was actually
paid. Were it otherwise, there is no way an injured party could recover damages for
services provided gratuitously by family members or charity." Bates, 22 Kan. App. 2d at
710 (citing Lewark v. Parkinson, 73 Kan. 553, 85 P. 601 [1906]).

Judge Rulon then observed the concepts of deterrence and accountability inherent
in our rule, by stating: "The purpose of the collateral source rule is to prevent a
72
wrongdoer from escaping from full liability for the consequences of his or her
negligence." 22 Kan. App. 2d at 709 (citing 2 Minzer, Nates, Kimball, Axelrod, and
Goldstein, Damages in Tort Actions § 9.60, p. 9-88 [1991]). He then quoted from 22 Am.
Jur. 2d, Damages § 566, p. 638 the following passage:

"Thus, if the basic goal of tort law is only that of compensating plaintiff for his [or her]
losses, evidence of these benefits should be admitted to reduce the total damages assessed
against the defendant. At the same time, reducing recovery by the amount of the benefits
received by the plaintiff would be, according to most courts, granting a 'windfall' to the
defendant by allowing him [or her] a credit for the reasonable value of those benefits.
Such a credit would result in the benefits being effectively directed to the tortfeasor and
from the intended party – the injured plaintiff. If there must be a windfall, it is usually
considered more just that the injured person should profit, rather than let the wrongdoer
be relieved of full responsibility for his [or her] wrongdoing." (Emphasis added.)

Later, the Rose I majority limited the Bates majority holding to cases in which a
Medicaid contract mandated the nonrecourse discount. Rose I, 276 Kan. at 545. But the
fact that all members of this court today refuse to adopt either the result or underlying
public policy reflected by the Bates majority speaks more pointedly to its failings and the
lack of precedential value both it and its progeny should be given in the present
discourse.

The next Court of Appeals panel to address the issue did so during the period of
time between Rose I and the rehearing in Rose II. That panel declared it was not
constrained to follow Rose I because the pending rehearing suspended the binding effect
of the original decision, and it extended Bates to apply to a private insurance carrier being
sued by its own insured under an uninsured motorist clause. Fischer v. Farmers
Insurance Company, Inc., No. 90,246, unpublished opinion filed February 18, 2005. The
panel determined it was proceeding with the case "based upon the currently effective
precedent of Bates and upon our firm belief that the collateral source rule has no place in
73
the determination of the proper measure of damages to be applied to all plaintiffs'
economic damages." Slip op. at 11-12.

In Fischer, the tortfeasor was not a party to the dispute. The trial court limited
Fischer to presenting to the jury only the cash amounts actually paid personally and by
her medical insurer. The write-off amounts were excluded from plaintiff's claim. Relying
on Bates, the Court of Appeals panel, which included then-Judge, now Justice, Johnson,
affirmed. The panel based its decision on its belief that Bates was not "principally driven"
by the fact that a Medicaid contract mandated the write-off at issue. Slip. op. at 4.

The same Court of Appeals judges who comprised the Fischer panel again sat as a
panel to decide the next case in our series, Liberty v. Westwood United Super, Inc., No.
89,143, unpublished opinion filed April 29, 2005, rev. denied 280 Kan. 983 (2005). Not
surprisingly, that panel extended Bates to Medicare write-offs and repeated its declaration
of freedom from the Rose I opinion because it was still pending on rehearing. The panel
again held that the amount permitted to be charged to Medicare patients was the
"customary charge" for their medical treatment, so a Medicare patient's damages were
limited to that amount.

More recently, a Court of Appeals panel in Adamson decided that write-offs under
a private insurance contract providing personal injury protection to the plaintiff and a
"self-pay" write-off for expenses charged directly to the plaintiff by a health care provider
were admissible and should not have been excluded by the trial court under the Bates
rationale. Adamson v. Bicknell, 41 Kan. App. 2d 958, 207 P.3d 265 (2009), rev. granted
March 31, 2010. In Adamson, plaintiff did not challenge the trial court's exclusion of
Medicaid write-offs because of Bates but did dispute the issue as to the other write-offs,
claiming they had nothing to do with Medicaid. The Adamson panel limited the holding
in Bates to Medicaid, agreed with plaintiff, and unanimously reversed the trial court's
exclusion of this evidence on the basis of the collateral source rule. Adamson, 41 Kan.
74
App. 2d at 971-72. The Adamson court did not address its sister panel's extension of
Bates in Fischer.

In summary, the common threads running through three Court of Appeals'
decisions (Bates, Fischer, and Liberty) are these: (1) plaintiffs are limited to claiming
only the cash amounts actually paid personally, their insurance carriers, or federal
assistance programs; and (2) a belief that the question in these cases is not the collateral
source rule, but the reasonable value of medical care and expenses for the treatment of
plaintiff's injuries. As to the first point, this court has rejected it. As to the second, it begs
the issue because we are concerned here with what evidence may be elicited at trial on
this issue. The collateral source rule has always been a limitation on evidence about the
reasonable value of medical service, which limitation is founded on principles of fairness,
equity, relevance, deterrence, and accountability for defendants. In effect, these Court of
Appeals panels simply answer the question by restating it. This ignores the underlying
principles this court has stated for having a collateral source rule.

Finally, the more recent Adamson decision conflicts with the other panels'
rationale as it concerns write-offs provided directly to a plaintiff or to plaintiff's private
medical insurance carrier. In summary, we find little adherence to this court's historical
reading of the collateral source rule in the various approaches and rationales taken by the
Court of Appeals.

Kansas Federal Court Decisions

Our colleagues reference three unpublished federal district court decisions they
find reinforcing to their viewpoint. Wildermuth v. Staton, 2002 WL 922137 (D. Kan.
2002) (unpublished opinion); Davis v. Management & Training Corp. Centers, 2001 WL
709380 (D. Kan. 2002) (unpublished opinion); and Strahley v. Mercy Health Center of
75
Manhattan, 2000 WL 1745291 (D. Kan. 2000) (unpublished opinion). We find these
decisions unpersuasive for two reasons.

First, all three decisions use the majority opinion in Bates v. Hogg, 22 Kan. App.
2d 702, 921 P.2d 249 (1996) as their center of gravity. They do this because Kansas state
law governs evidentiary questions in federal diversity cases when those questions are
closely intertwined with a state's substantive policy. Wildermuth, 2002 WL 922137, at *2
(agreeing that the collateral source doctrine is governed by Kansas law); Davis, 2001 WL
709380, at *2 (quoting Strahley and concurring that the collateral source doctrine is
governed by Kansas law); and Strahley, 2000 WL 1745291, at *1 (stating: "Application
of the collateral source doctrine, while an evidentiary rule, is closely tied to state
substantive policy, and thus is governed by Kansas law."). As noted above, given the lack
of controlling authority from this court, Bates was seen by these federal courts as the next
best case, even though our decision in Rose I expressly limited that two-judge majority
opinion. Second, and as our colleagues noted, those federal decisions inaccurately
predicted how this court would analyze the collateral source rule questions presented
because this court has now rejected the federal result.

As to Wildermuth specifically, we also note this court expressly rejects its
conclusion that the cash amount paid to satisfy the medical bills should be deemed the
reasonable value of those services. But in addition, we find Wildermuth's reference to the
Kansas collateral source rule as being limited to amounts actually paid on plaintiff's
behalf ignores case law from this court dating back to 1906 applying the rule to
gratuitous services benefiting plaintiff. See Lewark, 73 Kan. at 555-56. Accordingly, we
find little in the federal case law referenced by our colleagues that informs our decision
any better than a review of our court's own case law as previously discussed.

76
Points of agreement with our colleagues

At this juncture, we think it is important to reflect on our points of agreement with
our three colleagues before discussing in greater detail our disagreements. We believe our
common ground can best be described as follows: (1) Plaintiff is entitled to the
reasonable value of the medical services necessary for plaintiff's recovery; (2) Plaintiff is
entitled to seek recovery for the reasonable value of medical services even when they are
self-administered or gratuitously provided; (3) Defendant is entitled to challenge both the
necessity and reasonable value of the expenses plaintiff claims; (4) Amounts billed by
health care providers for plaintiff's medical treatment expenses are not conclusive as to
their reasonable value, but are probative evidence as to value; and (5) The results reached
in Bates, Fischer, and Liberty are wrong when those Court of Appeals panels held as a
matter of law that the amount paid by Medicare, Medicaid, or private health insurers are
the only measure of reasonable value for the medical care and treatment plaintiff
received.

Our point of departure is the evidence our colleagues would authorize a defendant
to use at trial in an effort to attack the reasonableness of plaintiff's claims for medical
services. We discuss that departure next.

The Robinson approach from Ohio

Our colleagues distill from the case law and arguments a new course of action they
impose for use by our trial courts grappling with this issue. They adopt the approach
taken by an Ohio Supreme Court decision in Robinson v. Bates, 112 Ohio St. 3d 17, 857
N.E. 2d 1195 (2006). From Robinson, our colleagues find the trial court should continue
to allow plaintiffs to introduce into evidence the actual billings for plaintiff's medical
care, while defendants will be entitled to introduce the actual cash payments that satisfied
the medical obligation as well as the write-offs or negotiated discounts. They believe it is
77
best to simply allow the jury to make the reasonable value determination using this
information. Any potential prejudice to plaintiff arising from implying the existence of
insurance or another collateral source can be ameliorated, they argue, by having a vigilant
trial court provide limiting instructions to the jury. This approach, they claim, is the
"fairest." We disagree.

By our count, 22 courts in other jurisdictions that have considered one or more
aspects of our colleague's approach have rejected it. See Aumand v. Dartmouth Hitchcock
Medical Center, 611 F. Supp. 2d 78, 92 (D.N.H. 2009); Pipkins v. TA Operating
Corp.,466 F. Supp. 2d 1255, 1261 (D.N.M. 2006); Lopez v. Safeway Stores, Inc., 212
Ariz. 198, 207, 129 P.3d 487 (2006); Montgomery Ward & Co. v. Anderson, 334 Ark.
561, 567-68, 976 S.W.2d 382 (1998); Helfend v. Southern Cal. Rapid Transit Dist., 2
Cal. 3d 1, 9-10, 84 Ca. Rptr. 173, 465 P.2d 61 (1970); Tucker v. Volunteers of America
Co. Branch, 211 P.3d 708, 713 (Colo. App. 2008); Mitchell v. Haldar, 883 A.2d 32, 40
(Del. 2005); Hardi v. Mezzanotte, 818 A.2d 974, 985 (D.C. App. 2003); Goble v.
Frohman, 848 So. 2d 406, 410 (Fla. Dist. App. 2003), aff'd 901 So. 2d 830, 832-33 (Fla.
2005); Olariu v. Marrero, 248 Ga. App. 824, 825-26, 549 S.E.2d 121 (2001); Bynum v.
Magno, 106 Hawaii 81, 89, 101 P.3d 1149 (2004); Wills v. Foster, 229 Ill. 2d 393, 418,
892 N.E.2d 1018 (2008); Baptist Healthcare Systems, Inc. v. Miller, 177 S.W.3d 676,
683-84 (Ky. 2005); Bozeman v. State, 879 So. 2d 692, 705-06 (La. 2004); Lockshin v.
Semsker, 412 Md. 257, 284-85, 987 A.2d 18 (2010); Wal-Mart Stores, Inc. v. Frierson,
818 So. 2d 1135, 1139-40 (Miss. 2002); Brown v. Van Noy, 879 S.W.2d 667, 676 (Mo.
App. 1994); Covington v. George, 359 S.C. 100, 105, 597 S.E.2d 142 (2004); Papke v.
Harbert, 738 N.W.2d 510, 536 (S.D. 2007); Texarkana Memorial Hosp., Inc. v.
Murdock, 903 S.W.2d 868, 874 (Tex. App. 1995), rev'd on other grounds 946 S.W.2d
836 (Tex. 1997); Radvany v. Davis, 262 Va. 308, 310, 551 S.E.2d 347 (2001); and
Leitinger v. DBart, Inc., 302 Wis. 2d 110, 135, 736 N.W.2d 1 (2007).

78
We also note with particular interest a recent opinion from the Ohio Court of
Appeals that described its Supreme Court's majority opinion in Robinson as a "perplexing
decision" that "appears to both reaffirm the collateral-source rule in principle but
eradicate it in practice." Ross v. Nappier, 185 Ohio App. 3d 548, 559, 924 N.E.2d 916
(2009) ("Now, litigants are forced to navigate an uncertain and complex procedure when
presented with a case where the injured party received collateral benefits from a third
party.").

We find the collective analysis recited in these cases persuasive and far more
consistent with the long-standing principles this court has espoused to support the
traditional collateral source rule. This is particularly true in the context of the case before
us now in which the private insurance benefits at issue were purchased personally by the
plaintiff, i.e. they were not a derivative of a regulated public assistance program like
Medicare or Medicaid.

We would summarize our disagreements with the Robinson approach as follows:
(1) its implementation is highly likely to generate jury confusion and mistrials; (2) the
result discriminates against plaintiffs on the basis of whether they are insured; and (3) it
contradicts the underlying principles of the collateral source rule by allowing defendants
to benefit from the plaintiff's foresight or the kindness of others. We next address each of
those disagreements.

1. Implementation problems

Our colleagues acknowledge the probability that presenting juries with collateral
source evidence reflecting payments under an insurance policy will require trial court
diligence and limiting instructions to prevent the jury from considering that plaintiff's
insurance paid the medical bill when calculating damages. They suggest limiting
instructions, such as those used in criminal cases under K.S.A. 60-455, may avoid
79
prejudice, confusion, mistrials, and reversals. Our case law already foreshadows the
difficulties such a system creates.

In Zak v. Riffel, 34 Kan. App. 2d 93, 115 P.3d 165 (2005), the Court of Appeals
addressed a trial court's failed attempt at a limiting instruction after the trial judge
permitted collateral source evidence to be admitted to impeach an expert witness
regarding his damages calculations. After admitting the evidence, the trial court
admonished the jury as follows:

"'Members of the jury, these two exhibits that we have just been talking about . . .
were received in evidence by me earlier this afternoon for the limited purposes that I have
talked about before. They are merely being introduced for the purpose of laying a
foundation to determine some calculations that have been made by an expert witness who
will testify tomorrow. They are not received for the purpose of presenting evidence to
diminish the amount of economic loss, if any, that the plaintiff has suffered as a result of
the defendant's negligence.'" 34 Kan. App. 2d at 107-08.

The Court of Appeals reversed, saying, "The jury could only have been confused
by the limiting instruction." 34 Kan. App. 2d at 108. It found the evidentiary presentation
insufficient to permit the jury to understand any purpose to the admission of the collateral
source evidence, except for diminishing the plaintiff's recovery by making the jury aware
of the insurance payment at issue.

Furthermore, admission of other crimes evidence has not proven to be a simple
issue in criminal cases. The comments to PIK Crim. 3d 52.06, the K.S.A. 60-455 limiting
instruction, recognize other crimes evidence "has proven to be one of the most
troublesome areas in the trial of a criminal case." This is reflected by the volume of
appeals filed each year on this issue. We find the suggestion that limiting instructions will
cure whatever ills result from our colleagues' approach is unfounded based upon the
80
known complications demonstrated in our case law and the likelihood a jury will infer the
existence of insurance.

As noted above, this court traditionally has viewed the injection of insurance
coverage into a trial as highly prejudicial to the insured party. See Rose II, 279 Kan. at
529; Rose I, 276 Kan. at 544; Allman v. Holleman, 233 Kan. 781, 789, 667 P.2d 296
(1983); Rexroad v. Kansas Power & Light Co., 192 Kan. 343, 355, 388 P.2d 832 (1964);
Davis v. Kansas Electric Power Co., 159 Kan. 97, 109, 152 P.2d 806 (1944); Berry v.
Dewey, 102 Kan. 593, 598, 172 P. 27 (1918); and Lewark v. Parkinson, 73 Kan. 553,
555-56, 85 P. 601 (1906). This view has been advantageous for both defendants, whose
insurance coverage will pay any adverse verdict, as well as plaintiffs, whose collateral
source benefits from insurance are similarly shielded from the jury. Harrier v. Gendel,
242 Kan. 798, 801, 751 P.2d 1038 (1988). We agree with our sister jurisdictions that have
considered the problem in the context presented here and believe the risk is simply too
great that the jury will improperly subtract collateral payments from the plaintiff's
recovery in violation of the collateral source rule. Aumand, 611 F. Supp. 2d at 91; Goble,
848 So. 2d at 410; Wills, 229 Ill. 2d at 418; Covington, 359 S.C. at 104-05; Leitinger, 302
Wis. 2d at 134-36.

We also are concerned that, in cases where the only evidence presented will be the
original amount billed and the amount paid, juries will be lured into simply splitting the
difference between those two points on the evidentiary continuum. In that likely
occurrence, the verdict will have to be thrown out and a mistrial declared since there
would be no evidence upon which the jury could have based its compromise verdict. See
State ex rel. Stephan v. Wolfenbarger & McCulley P.A., 236 Kan. 183, 188, 690 P.2d 380
(1984) (holding that "'[i]n order for the evidence to be sufficient to warrant recovery of
damages there must be some reasonable basis for computation which will enable the jury
to arrive at an approximate estimate thereof.'") (quoting Venable v. Import Volkswagen,
Inc., 214 Kan. 43, 50, 519 P.2d 667 [1974]).
81

We appreciate that defendants have long sought to be able to introduce collateral
source evidence on any alternative basis in order to do indirectly what they have not
before been able to do directly. See, e.g., Zak, 34 Kan. App. 2d 93. We cannot help but
think our colleagues' approach is better seen as a solution looking for a problem to justify
its existence. But it is a solution with a high risk factor for prejudice, mistrials, appeals,
and delays in justice. Given that defendants have other evidentiary alternatives to present
to the jury regarding health care provider discounts and the reasonable value of a
plaintiff's medical care, we believe our adherence to existing collateral source case law is
required.

2. Discrimination against insured plaintiffs

Our colleagues note their sensitivity to the prospects of discriminating between
low income, public assistance plaintiffs, and private insureds under the so-called benefit-
of-the-bargain approach, which has been used to justify the collateral source rule in other
jurisdictions. But they do not address the obvious evidentiary schism generated by their
approach between plaintiffs with private insurance benefits and uninsured plaintiffs.

As an example, assume we have two civil trials against the same defendant
occurring across the hall from each other in any Kansas courthouse. Liability is admitted.
Plaintiffs each suffered a broken leg. The issues in both cases are the reasonable value of
the medical services provided to each plaintiff to heal the broken leg and plaintiff's
noneconomic damages for pain and suffering. Each hospital billed $10,000 for those
medical services. In the first courtroom, the plaintiff personally purchased for herself
medical insurance. The insurance company settled the $10,000 billing for an actual cash
payment of $1,000 and a negotiated write-off of $9,000. In the second courtroom, the
plaintiff had no medical insurance, so there was no write-off.

82
Under our colleague's approach, in the first courtroom, the jury would hear
evidence of the $10,000 billing to the insured plaintiff, be told "the hospital will accept
$1,000 to satisfy its bill of $10,000," and some limiting instruction will be given that
introduction of the $1,000 figure is not given to necessarily diminish plaintiff's
noneconomic loss. Any attempt by the insured plaintiff to explain the compromised
payment evidence will necessarily lead to disclosure of a collateral source. The jury will
be asked to determine the "reasonable value" of the medical services necessary for
plaintiff's recovery. The jury also will be asked to consider plaintiff's noneconomic
damages for pain and suffering but will not be able to consider the $1,000 figure in its
determination of noneconomic damages. The jury also will not be allowed to consider the
existence of the plaintiff's insurance, even though that fact is obvious. A limiting jury
instruction also will be added in an effort to address the potential for prejudice.

In the second courtroom, the uninsured plaintiff will have the jury consider the
same legal questions, but without the additional evidence about the $1,000 that would
satisfy the hospital bill. The uninsured plaintiff's lawsuit also will have none of the
complications or limitations outlined above for the insured plaintiff.

Common sense tells us the defendant is better off in the first courtroom against the
insured plaintiff because there is a greater likelihood the uninsured plaintiff will obtain a
higher jury verdict based on the original amount billed and a higher pain and suffering
award. This result makes no sense. See Wentling v. Medical Anesthesia Services, 237
Kan. 503, 517, 701 P.2d 939 (1985). In the first courtroom, the tortfeasor benefits from
the collateral source evidence, while in the second courtroom the same tortfeasor does
not. As the Helfend court observed:

"If we were to permit a tortfeasor to mitigate damages with payments from plaintiff's
insurance, plaintiff would be in a position inferior to that of having bought no insurance,
because his payment of premiums would have earned no benefit. Defendant should not be
83
able to avoid payment of full compensation for the injury inflicted merely because the
victim has had the foresight to provide himself with insurance." 2 Cal. 3d at 10.

In Farley v. Engelken, 241 Kan. 663, 678, 740 P.2d 1058 (1987), this court
decried a statute that altered the collateral source rule's impact for some, but not all,
tortfeasors and some, but not all, of their victims, as being devoid of a "legitimate
legislative purpose." Our colleagues fail to tell us what legitimate judicial purpose their
preferred result serves, or why it should be imposed at this time when it has such an
obviously disparate impact between those tort victims with insurance and those without.

3. Dismantles the principles underlying the rule

Finally, we need to mention how our colleagues' approach fails to recognize and
apply the long-standing rationales underlying the collateral source rule. As discussed
above, the collateral source rule, as articulated by this court over many years, is solidly
grounded in notions of equity, fairness, relevance, inherent prejudice to the plaintiff, as
well as deterrence and accountability for tortfeasors. We fail to detect those principles in
the alternative approach our colleagues now require.

We believe the law is unmistakable. The injured party's damages are not to be
diminished simply by the fact that he or she is indemnified for his or her loss by
insurance. The more recent clouds of compromise and needless complexity reflected in
some courts' decisions weaken the bright clarity of this principle. This erosive process
has now continued to the point where the underlying principle is becoming so
fundamentally altered that the collateral source rule is compromised beyond useful
applicability. As noted by the Ohio Court of Appeals, we fear our colleague's Robinson-
based approach will eradicate the collateral source rule in practice. Ross, 185 Ohio App.
3d at 562.
84
CONCLUSION

We agree with our colleagues that the district court erred in limiting plaintiff's
recovery for medical expenses to only those amounts actually paid by plaintiff and her
health insurance company. The district court's ruling on the motion in limine must be
reversed. We agree further that the result reached in Bates, Fischer, and Liberty is wrong.
But on remand, we believe the district court in this case should be directed to return to the
long-standing principles previously articulated by this court underlying the collateral
source rule. This would preclude the specific admission of the amount paid to satisfy the
medical bills as a collateral source benefit, which would eliminate the need for any
limiting instructions and the likelihood for jury confusion or misconduct on this highly
prejudicial subject matter.

We concur in the result, which reverses the district court's ruling on the motion in
limine. We dissent from the majority's adoption of the Robinson-based approach for the
admission of evidence regarding the amounts actually paid and the provider write-offs, as
explained above.