HANIF REDUCTION OF MEDICAL BILLS AT TRIAL-AVOIDING THE PITFALLS
May, 2007
By Mark G. Cunningham

            In almost all personal injury cases, a plaintiff will seek compensation for past medical expenses. Of course, as to that item of damage a plaintiff has the burden of proving the reasonable cost of reasonably necessary medical care that plaintiff received. See, CACI 3903(a) Often, the medical bills incurred by a plaintiff will be paid by a collateral source, such as Medi-Cal, Medi-Care or private health insurance.
            In 1988, the Court of Appeal, Third Appellate District, decided the case of Hanif v. Housing Authority (1988) 200 C.A..3d 635. In Hanif, the plaintiff offered into evidence the amount paid by Medi-Cal and also wanted to recover the full amount of the billed charges. The  trial court agreed with plaintiff and awarded plaintiff the total amount of medical bills incurred,  including the amount written off. The Court of Appeal disagreed with the trial court and ruled that plaintiff was overcompensated, saying:
         “ [a] plaintiff is entitled to recover up to, and no more than, the actual amount expended or incurred for past medical services so long as that amount is reasonable.” Hanif at 643.
            After the Hanif decision,  plaintiffs were able to confine the Hanif rule of limiting plaintiff’s recovery to the “actual amount expended or incurred for past medical services” to cases involving Medi-Cal or Medi-Care only.
            The Hanif rule was later extended in the case of  Nishihama v. City and County of San Francisco (2001) 93 C.A. 4th 298. The Nishihama Court extended the Hanif rule to include private health insurance reductions. In Nishihama, the plaintiff sought recovery of medical expenses, part of which had been paid by Blue Cross, her private health insurance through work.  Blue Cross negotiated with the facility where plaintiff treated and the charges were reduced. The Court concluded the  hospital could not assert a lien for more than the amount it contracted with the plaintiff’s insurer to accept as full payment. Moreover, the Court said:
“We therefore conclude that the trial court erred in permitting the jury to award plaintiff $17,168 instead of $3,600 for CPMC’s services. We do not agree with the City, however, that this error requires remand, because the jury somehow received a false impression of the extent of plaintiff’s injuries by learning the usual rates charged to treat those injuries. There is no reason to assume that the usual rates provided a less accurate indicator of the extent of plaintiff’s injuries than did the specially negotiated rates obtained by Blue Cross. Indeed, the opposite is more likely to be true. We therefore will simply modify the judgment to reduce the amount awarded as costs for medical care.”  Nishihama at 309.
            Before trial, insurance companies should seek the Hanif/Nishihama reduction during settlement negotiations. At trial, defense counsel must raise and seek the reduction with the trial court.  Although defense counsel should try to persuade the trial court to permit plaintiff to present only the reduced amount to the jury, the usual result is that the trial court is more inclined to allow a plaintiff to present the full amount of the bills to the jury and then later apply the reduction after verdict.
                It is important that defense counsel make sure the special verdict form includes an entry for past medical expenses so that the defense can take advantage of the Hanif/Nishihama reductions after verdict. Failure to do so can lead to disasterous results, which occurred in the case of Greer v. Buzgheia, (2006) 141 C.A. 4th 1150.
            In Greer, Plaintiff sued defendant for damages arising from an automobile accident. A jury awarded plaintiff $ 321,500 in damages. Defendant moved for judgment notwithstanding the verdict (JNOV), and the trial court denied the motion. On appeal, defendant argued, among other things, that the trial court erred in denying his motion in limine to exclude evidence of the full amount of plaintiff's billed medical expenses. The Court of Appeal affirmed the judgment and the order. The court concluded that the trial court properly denied defendant's motion in limine. Evidence regarding the full amount of plaintiff's billed medical expenses gave the jury a more complete picture of the extent of plaintiff's injuries. Thus, the trial court did not abuse its discretion in allowing evidence of the reasonable cost of plaintiff's care while reserving the propriety of a Hanif/Nishihama reduction until after the verdict. Defendant's claims that the trial court erred in not ordering a Hanif/Nishihama reduction after the verdict was returned had all been forfeited by defendant's failure to request a verdict form containing a separate entry for plaintiff's past medical expenses. The trial court got it right when it observed that it was, for all practical purposes, impossible to calculate a Hanif/Nishihama reduction, since the jury award failed to distinguish what fraction of the $260,000 economic damage award consisted of medical expenses and what portion was attributable to other items such as wage loss. Because the verdict form combined both components into one figure, the court could not apply a Hanif-type reduction of the verdict without engaging in obvious speculation.
            In sum, defense counsel should seek a Hanif/Nishihama reduction at trial.  In doing so, counsel should make sure the special verdict includes a separate entry for past medical expenses so the trial court can make the reduction.