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concluding order granting discovery requests was an abuse of discretion because it compelled production of documents evidencing reimbursement rates for services different than those received by plaintiff and it sought discovery of reimbursement rates for all insurers rather than limiting the requests to insurers who had negotiated rates for the relevant services and time period
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NO. 14-19-01006-CV
09-01-2020
IN RE MEMORIAL HERMANN HEALTH SYSTEM d/b/a Memorial Hermann-Texas Medical Center, Relator
Lara Marie Price, Richard A. Sheehy, Travis Armstrong, Houston, for Relator. Kyle Christopher Herbert, Rachel Berkley, Houston, for Real Party in Interest.
Lara Marie Price, Richard A. Sheehy, Travis Armstrong, Houston, for Relator.
Kyle Christopher Herbert, Rachel Berkley, Houston, for Real Party in Interest.
Panel consists of Chief Justice Frost and Justices Christopher and Bourliot
Tracy Christopher, Justice On December 23, 2019, relator Memorial Hermann Health System d/b/a Memorial Hermann-Texas Medical Center ("MHHS") filed a petition for writ of mandamus in this court. See Tex. Gov't Code Ann. § 22.221 ; see also Tex. R. App. P. 52. In the petition, MHHS asks this court to compel the Honorable Latosha Lewis Payne, presiding judge of the 55th District Court of Harris County, to set aside her November 25, 2019 order overruling MHHS's objections to discovery. We conditionally grant the petition, in part, and deny the petition, in part.
BACKGROUND
On August 20, 2018, Chaun Poole was tending to a dog that had been hit by a vehicle when Poole was hit by a vehicle driven by Billy Duggan. Poole was treated for his injuries at Memorial Hermann – Texas Medical Center, a hospital facility within MHHS. On October 1, 2018, MHHS filed a lien in the amount of $52,038.00 representing unpaid bills for treatment of Poole from August 21, 2018, to August 25, 2018.
Two weeks later, Poole sued Billy and Jessica Duggan for negligence, negligent entrustment, and gross negligence. On January 24, 2019, Poole and the Duggans settled the suit, and Poole filed a motion to deposit the settlement funds into the registry of the court, asserting that MHHS's lien is invalid, unenforceable, and fraudulent. On August 1, 2019, the trial court granted the motion and ordered Poole to deposit the settlement proceeds into the court's registry for the use and benefit of Poole, subject to any court-authorized withdrawals for payment of attorney's fees, medical bills, and costs incurred in the prosecution of the case.
On August 29, 2019, MHHS filed its petition in intervention and suit for declaratory relief in the case between Poole and the Duggans to assert its rights and to protect its interest in the settlement funds. Poole served discovery on MHHS, seeking MHHS's price lists, fee schedules, "charge master rates," and negotiated reimbursement rates with Medicare, Medicaid, and private health insurers. Poole seeks information by which to challenge the reasonableness of the charges for treatment rendered underlying the lien filed by MHHS.
MHHS responded and objected that the discovery requests were overbroad and sought confidential, proprietary, and/or trade secret information. MHHS further argued that, to the extent the requests were directed to the reasonableness of the medical charges underlying MHHS's hospital lien, those requests were irrelevant because it is not necessary that MHHS's charges be reasonable in this case.
Poole filed a request for a ruling on MHHS's objections to discovery. The trial court held a hearing on November 14, 2019, and signed the order on November 25, 2019, overruling MHHS's objections in part and ordering MHHS to respond to the following interrogatories:
Interrogatory No. 2:
For each charge listed in the billing records of Plaintiff, please provide the following:
a. The billed rate;
b. The Medicare reimbursement rate;
c. The Medicaid reimbursement rate;
d. The lowest private insurer contractual reimbursement rate;
e. The average private insurer contractual reimbursement rate;
f. The highest private insurer contractual reimbursement rate;
g. The rate after applying any discounts for an indigent patient;
Interrogatory No. 3:
Did this Intervenor bill an insurance company or governmental entity for the medical charges of Plaintiff that were incurred? If the answer is anything other than an unequivocal "no," please identify what insurance carrier was billed and on what dates.
Interrogatory No. 4:
If in response to interrogatory number 4 [sic] above the answer was "yes," then please describe and identify why the medical charges were not paid by the insurance company or entity that Intervenor billed for the medical charges of Plaintiff that were incurred as of September 10, 2014? If the answer is anything other than an unequivocal "no," please identify what insurance carrier was billed and on what dates.
The trial court also ordered MHHS to produce documents responsive to the following requests for production:
Request for Production No. 3:
All documents that evidence or illustrate Intervenor's charge master or charge description master effective during the time that Plaintiff was treated at Intervenor's facility.
Request for Production No. 5:
All documents that evidence or illustrate or reflect Medicare's reimbursement rates effective on the dates that Plaintiff received care at Intervenor's facility.
Request for Production No. 6:
All documents that evidence or illustrate or reflect Medicaid's reimbursement rates effective during the time that Plaintiff was treated at Intervenor's facility.
Request for Production No. 7:
All documents that evidence or illustrate or reflect a private insurer[’s] reimbursement rates during the time that Plaintiff was treated at Intervenor's facility.
Request for Production No. 8:
All documents that evidence or illustrate or reflect Intervenor's price lists or fee schedules on [sic] during the time that Plaintiff was treated at Intervenor's facility.
Also, on November 25, 2020, the trial court signed a protective order drafted by MHHS and to which Poole agreed to be bound by its terms.
At issue in the underlying action between Poole and MHHS is the reasonableness of MHHS's charges for the services it rendered to Poole as reflected in the lien. In this mandamus petition, MHHS contends that the trial court abused its discretion by compelling discovery because the requests are overbroad, the requests seek trade secret information, and the law does not require amounts charged for treating Poole to be reasonable in this case.
MANDAMUS STANDARD OF REVIEW
Ordinarily, to be entitled to a writ of mandamus, a relator must show that the trial court clearly abused its discretion, and that the relator lacks an adequate remedy by appeal. In re C.J.C. , 603 S.W.3d 804, 810-11 (Tex. 2020) (orig. proceeding); In re Turner , 591 S.W.3d 121, 124 (Tex. 2019) (orig. proceeding). A trial court clearly abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law or if it clearly fails to analyze the law correctly or apply the law correctly to the facts. In re H.E.B. Grocery Co., L.P. , 492 S.W.3d 300, 302–03 (Tex. 2016) (orig. proceeding) (per curiam); In re Cerberus Capital Mgmt., L.P. , 164 S.W.3d 379, 382 (Tex. 2005) (orig. proceeding) (per curiam).
The adequacy of an appellate remedy must be determined by balancing the benefits of mandamus review against the detriments. In re Team Rocket, L.P. , 256 S.W.3d 257, 262 (Tex. 2008) (orig. proceeding). Because this balance depends heavily on circumstances, it must be guided by analysis of principles rather than simple rules that treat cases as categories. In re McAllen Med. Ctr., Inc. , 275 S.W.3d 458, 464 (Tex. 2008) (orig. proceeding). Appeal is not an adequate remedy when the appellate court would not be able to cure the trial court's discovery error on appeal. In re Dana Corp. , 138 S.W.3d 298, 301 (Tex. 2004) (orig. proceeding) (per curiam); In re Ford Motor Co. , 988 S.W.2d 714, 721 (Tex. 1998) (orig. proceeding).
ABUSE OF DISCRETION
I. Order to Compel Production is Overbroad
MHHS contends that Poole's discovery requests are overbroad. Generally, a party is entitled to discovery on "any matter that is not privileged and is relevant to the subject matter of the pending action, whether it relates to the claim or defense of the party seeking the discovery or the claim or defense of any other party." In re State Farm Lloyds , 520 S.W.3d 595, 604 (Tex. 2017) (orig. proceeding) (quoting Tex. R. Civ. P. 192.3(a) ). Evidence is relevant "if it has any tendency to make a fact more or less probable than it would be without the evidence" and "the fact is one of consequence in determining the action." Tex. R. Evid. 401.
The party seeking the discovery may not engage in a "fishing expedition." Turner , 591 S.W.3d at 127 ; State Farm Lloyds , 520 S.W.3d at 611. "A central consideration in determining overbreadth is whether the request could have been more narrowly tailored to avoid including tenuous information and still obtain the necessary, pertinent information." In re CSX Corp. , 124 S.W.3d 149, 153 (Tex. 2003) (orig. proceeding) (per curiam). Therefore, discovery requests must be reasonably tailored to include only matters relevant to the case. In re Am. Optical Corp. , 988 S.W.2d 711, 713 (Tex. 1998) (orig. proceeding) (per curiam). A trial court abuses its discretion if it orders discovery that exceeds what the rules of civil procedure permit. In reNat'l Lloyds Ins. Co. , 532 S.W.3d 794, 802 (Tex. 2017) (orig. proceeding).
The Hospital Lien Act ("Act") found in Chapter 55 of the Texas Property Code permits hospitals to file liens representing unpaid charges for medical services rendered to a person. Tex. Prop. Code Ann. §§ 55.001 –.008. Specifically, section 55.02(a) provides:
(a) A hospital has a lien on a cause of action or claim of an individual who receives hospital services for injuries caused by an accident that is attributed to the negligence of another person. For the lien to attach, the individual must be admitted to a hospital not later than 72 hours after the accident.
Tex. Prop. Code Ann. § 55.002(a). The purpose of the Act is to give the hospital a separate cause of action to satisfy its lien, ensuring that an accident victim will receive aid and that the hospital will be reimbursed for its services, thereby reducing hospital costs. Baylor Univ. Med. Ctr. v. Travelers Ins. Co. , 587 S.W.2d 501, 503 (Tex. Civ.App.-Dallas 1979, writ ref'd n.r.e.). In the underlying action between Poole and MHHS, Poole challenges the reasonableness of the charges for Poole's treatment.
We find In re North Cypress Medical Center instructive with respect to MHHS's position that the trial court's order is overbroad. 559 S.W.3d 128 (Tex. 2018) (orig. proceeding). There, the plaintiff was involved in a vehicular accident and was taken to the emergency room at North Cypress. Id. at 129. North Cypress released the plaintiff after providing emergency services. Id. Because the plaintiff was not insured, North Cypress billed her for services at its full "chargemaster" prices and filed a hospital lien in the amount of the cost of its services, minus payments and adjustment credits to the plaintiff's account. Id.
The liability insurer of the driver at fault offered to settle the case, attributing a certain amount of medical expenses incurred at North Cypress. Id. at 130. The plaintiff and North Cypress could not reach an agreement on a reduction in North Cypress's bill, and the plaintiff sued, seeking a declaratory judgment that North Cypress's charges were unreasonable and its lien invalid to the extent it exceeded a reasonable and regular rate for services rendered. Id.
In discovery, the plaintiff sought from North Cypress (1) all contracts regarding negotiated or reduced rates for the hospital services provided to the plaintiff in which North Cypress was a party, including those with several insurers, Medicare, and Medicaid; and (2) the annual cost report that it was required to provide to a Medicare Administrative Contractor as a Medicare certified institutional provider. Id. The plaintiff also requested that North Cypress state the Medicare and Medicaid reimbursement rates for x-rays, CT scans, lab tests, and emergency room services as were performed on the plaintiff. Id.
North Cypress objected to the requests as overly broad and irrelevant. Id. The trial court ordered North Cypress to produce the requested information, narrowing the scope to include only contracts that covered the time period at issue in the case. Id.
North Cypress argued that the information about reimbursement rates from insurers and government payers was not relevant to the plaintiff's claims about enforceability of the hospital lien. Id. at 131. Chapter 55 of the Texas Property Code-the hospital lien statute-provides hospitals an additional method of securing payment from accident victims. Id. Subject to certain conditions, a hospital has a lien on the cause of action of a patient "who receives hospital services for injuries caused by an accident that is attributed to the negligence of another person." Id. (quoting McAllen Hospitals, L.P. v. State Farm County Mut. Ins. Co. of Tex. , 433 S.W.3d 535, 537 (Tex. 2014) (quoting Tex. Prop. Code Ann. § 55.002(a) )). The lien also attaches to the proceeds of a settlement of the patient's cause of action. Id. (citing Tex. Prop. Code Ann. § 55.003(a)(3) ). The court observed that the statute "is replete with language that the hospital recover the full amount of its lien, subject only to the right to question the reasonableness of the charges comprising the lien." Id. (quoting Bashara v. Baptist Mem'l Hosp. Sys. , 685 S.W.2d 307, 309 (Tex. 1985) ).
North Cypress argued that its negotiated reimbursement rates with health insurance carriers were not relevant to its charges to an uninsured patient and, because the plaintiff did not have private health insurance, Medicare, or Medicaid, she was not entitled to the benefit of the negotiated rates. Id. at 131–32. The plaintiff argued that the insurance contracts were necessary to establish whether the amount North Cypress charged the plaintiff for emergency services was excessive in comparison to the rates for the same services provided to other patients in the same hospital and, therefore, were relevant to show that North Cypress was customarily and regularly paid less for those services. Id. at 132.
The plaintiff sought reimbursement rates only for the specific services she received. Id. at 136. The Supreme Court of Texas did not hold that the rates negotiated between North Cypress and any particular insurer govern the reasonableness of its charges to uninsured patients. Id. Instead, the court held that the trial court did not abuse its discretion in concluding that the amounts North Cypress was willing to accept as payment for services rendered to the vast majority of its patients was relevant to the reasonableness of its charges for those same services rendered to uninsured patients. Id. "[F]or discovery purposes, a hospital's costs surely have some bearing on the reasonableness of its patient charges." Id. The court held that, because the amounts North Cypress accepted as payment for the same services from other patients, including those covered by private insurance and government benefits, were relevant to whether the charges to the plaintiff were reasonable, they were discoverable. Id. at 137.
A. Request for Production Nos. 3, 5, 6, 7, and 8
Under North Cypress , MHHS's reimbursement rates to private insurers, Medicare, and Medicaid for services rendered during the same time period are relevant to determining the reasonableness of MHHS's charges for the same services it provided to Poole. See id. The plaintiff in North Cypress limited her request to reimbursement rates for only the same services she had received, and the trial court, in granting the plaintiff's motion to compel, further limited the production of reimbursement rates and contracts to the time period applicable to the case. With respect to Poole's Request for Production Nos. 3, 5, 6, 7, and 8, although Poole limited the scope of his requests to the time of his treatment at MHHS, he did not limit his requests for documents showing reimbursement rates related only to those services he received, as the plaintiff did in North Cypress. Instead, Poole has requested reimbursement rates for all services. The trial court granted Poole's requests for production of reimbursement rates in their entirety with no limitations. Reimbursement rates concerning services not received by Poole are not relevant to the determination of whether MHHS's charges for the services received by Poole are reasonable.
We conclude that the order compelling production of documents evidencing reimbursement rates with private insurers, Medicare, and Medicaid for services not received by Poole is impermissibly overbroad and the trial court abused its discretion by ordering the production of this information.
Request for Production No. 7 is overbroad for an additional reason. In North Cypress , the plaintiff limited her request for contracts of negotiated rates to four private insurers in addition to Medicare and Medicare. Id. at 130. The supreme court held that the order compelling production of contracts with the four private insurers, Medicare, and Medicaid was not overbroad. Id. at 136.
MHHS attached the affidavit of its vice president of managed care, Michelle Lindsley. MHHS negotiates with "a number of managed-care companies" and currently has "a number of managed-care contracts with different payor organizations." MHHS has seven fulltime employees in the managed care group, who negotiate terms and rates. From Lindsley's affidavit, it is apparent that MHSS has contracts for negotiated rates with far more than four private insurers.
Here, Request for Production No. 7 requests documents that show reimbursement rates for all insurers, rather than limiting the number of private insurers with which MHHS has negotiated reimbursement rates (for the relevant services and time period). Therefore, we hold that Request for Production No. 7 is overbroad for this additional reason.
B. Interrogatory Nos. 2, 3, and 4
In Interrogatory No. 2, Poole requests MHHS's reimbursement rates negotiated with Medicare, Medicaid, and all private insurers for the same services as those rendered to Poole. For the same reasons we hold that Request for Production No. 7 is overbroad, we also hold Interrogatory No. 2 is overbroad and the trial court abused its discretion by ordering discovery of reimbursement rates negotiated between MHHS and all private insurers.
MHHS contends that reliance on North Cypress as support for producing information on its reimbursement rates is misplaced because the supreme court made the following statements: (1) reimbursement rates standing alone are not dispositive of what constitutes a reasonable and regular rate for a hospital service; (2) many considerations go into negotiated rates that may explain a discount to a particular insurer; and (3) the court was not holding that rates negotiated between a hospital and a particular insurer govern the reasonableness of its charges to uninsured patients. Seeid. at 135. However, MHHS ignores the court's observation that, a hospital's costs have some bearing on the reasonableness of its patient charges and the court's holding that the amounts that North Cypress accepted as payment from other patients for the types of services rendered to the plaintiff during the same time period were relevant to whether the charges to the plaintiff were reasonable and thus discoverable. Seeid. at 136.
Interrogatory Nos. 3 and 4 relate to whether MHHS billed an insurance company, Medicare, or Medicaid medical charges for the services received by Poole. MHHS does not make any specific arguments as to these interrogatories. In any event, we hold that they are not overbroad and the trial court did not abuse its discretion by compelling MHHS to provide information responsive to these interrogatories.
NO ADEQUATE REMEDY BY APPEAL
Having held that in its discovery order the trial court impermissibly compels production of all documents evidencing MHHS's reimbursement rates for all services, not just those specific services Poole received, and reimbursement rates with all private insurers with which MHHS has negotiated rates, we must determine whether MHHS has an adequate remedy by appeal. The adequacy of an appellate remedy must be determined by balancing the benefits of mandamus review against the detriments. Team Rocket, L.P. , 256 S.W.3d at 262.
The trial court's order exceeds what the discovery rule permits. SeeIn re Liberty Cty. Mut. Ins. Co. , 2020 WL 3716093, at *3 (Tex.App.-Hous. July 7, 2020) (stating that trial court abuses its discretion if it orders discovery that exceeds what the rules of civil procedure permit). MHHS has an interest in protecting its rights in not producing information that exceeds the permissible bounds of discovery under our procedural rules. SeeIn re Prudential Ins. Co. of Am. , 148 S.W.3d 124, 136 (Tex. 2004) (orig. proceeding). Once MHHS has turned over information not relevant to this case, the trial court's error cannot be cured on appeal. SeeDana Corp. , 138 S.W.3d at 301 ; Ford Motor Co. , 988 S.W.2d at 721. Therefore, we hold that MHHS does not have an adequate remedy by appeal.
MHHS'S OTHER CONTENTIONS
I. Hospital Charges underlying the Lien are Required to be Reasonable
MHHS asserts that the Texas Property Code does not require that the amounts charged for treating Poole be reasonable in this case. See Tex. Prop. Code Ann. § 55.004(b). Section 55.004(b)(1) of the Texas Property Code provides that a hospital lien is for the amount of the hospital charges for services provided to the injured individual during the first 100 days of the injured individual's hospitalization. Tex. Prop. Code Ann. § 55.004(b)(1). MHHS argues that it is not necessary for it to show that the expenses are "reasonable" because subsection (b)(1) does not condition the lien on "reasonable" charges as compared to subsections (c) and (d)(1), which require "reasonable" charges and rates. Seeid. § 55.004(c) (providing that hospital lien described by section 55.002(a) "may also include the amount of a physician's reasonable and necessary charges"); id. § 55.004(d)(1) (providing that hospital lien described by section 55.002(a) does not cover "charges for "other services that exceed a reasonable and regular rate for the services").
MHHS claims that North Cypress expressly "carved out a potential exception" to its ruling that is applicable to this case. In North Cyprus , the amici curiae argued that not all charges secured by a lien under Chapter 55 of the Property Code need be reasonable. 559 S.W.3d at 131 n.3. MHHS states that the court's "acknowledgement and express preservation of the issue" means that (1) this issue was not part of the holding in North Cypress and (2) Poole may not rely on North Cypress to defeat this argument. The most that the North Cypress court did was state the amici's argument and that it was not addressing their argument because North Cypress did not raise the issue. The court did not expressly carve out a potential exception to the requirement that the charges be reasonable. See id.
The Texas Legislature has spoken on this issue and expressly prohibits a hospital from billing a patient for charges the hospital knows to be unreasonable. Tex. Health & Safety Code Ann. § 311.0025(a). A hospital that does so will be "subject to disciplinary action, including denial, revocation, suspension, or nonrenewal" of its license "in addition to any other civil, administrative, or criminal penalty provided by law." Id. § 311.0025(c). We reject MHHS's contention that it is not necessary for its lien to be supported by reasonable charges.
II. MHHS has not Shown the Current Protective Order is Insufficient
MHHS also asserts that the trial court abused its discretion by ordering production of its reimbursement rates because the rates are trade secrets. On November 25, 2020, the trial court signed a protective order. MHHS contends that the protective order is "useless" in this case. According to MHHS, there are other unpaid health care providers, which also are lienholders, and the trial court has ordered Poole to implead the other lienholders into this case. MHHS claims that at least one of the other lienholders, Houston Methodist Hospital, is a direct competitor and it will not be possible to avoid disclosing the requested information to the other lienholders once they become parties in this case.
Assuming without deciding that the requested information constitutes trade secrets, MHHS has not shown that the protective order is insufficient to protect its information. If MHHS believes the current protective order is not sufficient to protect its information from the other lienholders, MHHS may ask the trial court for a new protective order to address its concerns.
CONCLUSION
We conclude that the trial court abused its discretion by ordering MHHS to produce documents reflecting MHHS's reimbursement rates for services not rendered to Poole in Request for Production Nos. 3, 5, 6, 7, and 8. We also hold that the trial court abused its discretion by compelling MHHS to produce all documents evidencing reimbursement rates for all private insurers in Request for Production No. 7 and reimbursement rates for all private insurers in Interrogatory No. 2. Accordingly, we conditionally grant MHHS's petition in part and direct the trial court to vacate its November 25, 2019 order to the extent that it compels MHHS to (1) produce documents evidencing reimbursement rates for services Poole did not receive when he was treated by MHHS as set forth in Request for Production Nos. 3, 5, 6, 7, and 8; and (2) provide documents evidencing reimbursement rates for all private insurers as set forth as set forth in Request for Production No. 7 and reimbursement rates for all private insurers as set forth in Interrogatory No. 2. We conclude that Interrogatory Nos. 3 and 4 are not overbroad and deny the requested mandamus relief as to the information sought in those interrogatories. The writ will issue only if the trial court fails to act in accordance with this opinion. We lift our stay issued on December 23, 2019.
( Bourliot, J., dissenting without opinion).