One Case. Three Medical Expense Numbers. Why Don’t They Match?

After a serious Alabama car accident, medical bills can become complicated very quickly.

Most people assume there is one number that represents the medical expenses from the accident. Of course, just compiling and totaling all the bills is a project.

In reality, there may be three overall numbers.

The first number is the amount the medical providers charged.

The second number is the amount for which those bills were actually satisfied.

The third number is the amount the health insurer later claims it is entitled to recover from the injured person’s settlement through subrogation or reimbursement.

At first glance, Numbers Two and Three should be the same.

Often, they are not. And when they are different, the reason matters.

Number One: The Medical Charges

Let’s start with a simple example.

Suppose someone is injured in a Huntsville car accident. He goes to the emergency room, has imaging studies, follows up with an orthopedic doctor and completes physical therapy.

The medical providers generate total charges of $40,000.

That is Number One.

It is the amount shown on the medical bills.

People sometimes refer to this as the “sticker price” of medical care because it is often far higher than the amount ultimately accepted by the providers.

If the injured person has health insurance, the insurer has usually negotiated discounted rates with hospitals, doctors and other providers.

So the provider may charge one amount but accept something substantially less.

That leads to Number Two.

Number Two: What Actually Satisfied the Bills

Suppose the providers charged $40,000, but because of health insurance contracts, payments and adjustments, those bills were satisfied for $16,000. Many injury victims are shocked to learn how much was actually paid on their bills.

That is Number Two.

The provider may have received insurance payments, a deductible or copayment from the patient, and contractual write-offs. With some hospitals and insurance plans, the write-offs can be huge.

The important point is that the original $40,000 charge no longer represents what it actually took to satisfy those bills.

In Alabama personal injury cases, this distinction matters because our law allows evidence concerning both medical expenses and payments from other sources.

So, as lawyers, we need to understand more than the face amount of the medical bills.

We need to know what was charged, what was paid, what was written off and what obligations remain. Why? Because that small number of what was actually paid is coming into evidence at trial.

But there may still be another number.

Number Three: The Health Insurer’s Subrogation Claim

When health insurance pays medical expenses caused by an accident, the health plan may later claim a right to be repaid from the injured person’s settlement or recovery.

That is generally referred to as subrogation or reimbursement.

Eventually, the injured person’s lawyer may receive a letter or ledger from the health insurer or a company hired to handle its reimbursement claim.

Suppose that company says the health plan paid $19,500 in accident-related medical expenses and wants that money repaid from the settlement.

Now we have three different numbers:

Medical charges: $40,000

Amount for which the bills were satisfied: $16,000

Health insurer’s subrogation claim: $19,500

That creates an obvious question.

How can the insurer claim $19,500 when the medical bills we are actually presenting in the personal injury case were satisfied for $16,000?

The answer is that the subrogation number is not simply an accounting calculation.

It also reflects what the health insurer believes is related to the accident. Some office worker sitting in an office somewhere has calculated that number. It may, or likely may not, reflect reality.

That belief is not always correct.

Sometimes the Health Insurer Misses Accident-Related Care

There are cases where the subrogation claim is lower than expected.

That can happen when the health insurer simply fails to recognize that certain treatment is related to the accident.

For example, perhaps the injured person receives treatment for neck and shoulder injuries after a wreck.

The insurer may correctly identify the emergency room, orthopedic care and physical therapy as accident-related.

But perhaps the patient later sees another specialist for headaches or another problem that is also part of the injury claim.

If the insurer does not make that connection, those payments may never appear on the subrogation ledger.

The insurer’s system may simply see another medical claim.

The lawyer handling the injury case sees something different: another component of the client’s accident-related treatment.

That discrepancy deserves attention.

More Often, the Health Insurer Includes Too Much

In our experience, the opposite problem is often more common.

The health insurer includes medical expenses in its reimbursement claim that we cannot prove were caused by the accident.

Suppose someone has a history of low-back treatment before a collision.

After the accident, the person treats for a new shoulder injury but also continues receiving some care for the pre-existing back problem.

A subrogation vendor may collect payments made during the months after the accident and place them on the reimbursement ledger. In some cases, the subrogation vendor simply adds every charge after the date of the accident.

But that does not mean every one of those expenses belongs in the personal injury case.

Some treatment may have been for a pre-existing condition.

Some may have involved an unrelated medical problem.

A particular office visit may have addressed several conditions, only one of which was accident-related.

Or the medical evidence simply may not be strong enough for us to prove that a particular treatment was caused by the wreck.

That creates a basic fairness problem.

We should not tell a liability insurer or a jury that medical treatment was caused by an accident when the evidence does not support that position.

But we also should not automatically allow a health insurer to take money from our client’s settlement for that same treatment simply because its subrogation vendor placed the charge on a spreadsheet.

A Subrogation Ledger Is Not Just Another Bill

That is why we do not view a subrogation ledger as simply another bill that needs to be paid at the end of the case.

It needs to be examined.

What medical charges are included?

Which providers generated them?

What treatment do those charges represent?

Does that treatment match the injuries we are actually claiming?

Is legitimate accident-related care missing?

Has unrelated medical care been added?

The health insurer may have excellent access to payment data.

But payment data is not the same thing as proof of medical causation.

Its computer system may know that the insurer paid a medical bill.

That does not necessarily establish why the treatment occurred or whether it should be part of the accident claim.

We Work Both Sides of the Settlement

This issue also illustrates something important about how we believe a personal injury case should be handled.

Our job is not finished when we obtain a settlement.

On one side of the case, we are trying to build the strongest claim the evidence supports.

That means proving the client’s injuries, medical treatment, lost income, physical limitations, permanent problems and the ways the accident has affected everyday life.

We are fighting for the highest fair recovery we can obtain.

But there is another side to that settlement.

Once money has been recovered, we also have to protect as much of that recovery as possible for the client.

If a health insurer submits a $20,000 reimbursement claim, we do not believe the proper response is simply to put $20,000 on the settlement statement and write a check.

We want to know why the insurer claims $20,000.

If the ledger includes unrelated medical expenses, those expenses should be challenged.

If the claimed amount can legally be reduced, we should pursue that reduction.

If something about the claim does not match the medical evidence, we want to understand why.

There are personal injury practices built around volume and speed. You’ve seen those firms on billboards. In that kind of system, it may be easier simply to accept a subrogation number and move on to the next file.

That is not how we believe a case should be handled.

A client’s result is not measured only by the size of the settlement.

It is also measured by what the client ultimately gets to keep.

Three Numbers. Three Different Questions.

The easiest way to understand this issue is to remember what each number actually represents.

Number One: What did the medical providers charge?

Number Two: What amount actually satisfied those medical bills?

Number Three: What does the health insurer claim it paid for accident-related care?

Those sound like three versions of the same number.

They are not.

And when Numbers Two and Three do not match, the difference deserves an explanation.

Sometimes the health insurer has missed medical treatment that belongs in the case.

Sometimes it has included treatment that does not.

Either way, we do not believe a subrogation claim should simply be accepted because an insurance company says it is owed.

The better question is:

Why is that the number?

And then:

Is that really what our client is required to repay?

One case. Three medical expense numbers.

Getting the first side of the settlement right means fighting for the highest recovery the evidence supports.

Getting the second side right means making sure the client does not pay back more than the law requires.

Both matter.