Important Development In Vermont Medical Malpractice Defense: The Collateral Source Rule Does Not Apply To “Write-Offs” Of Invoiced Amount By Defendant/Health Service Provider. Plaintiff Cannot Recover More From Defendant/Health Service Provider In Medical Specials Than Defendant Received In Payment For Treating Plaintiff

Downs Rachlin Martin PLLC Attorneys Tristram C. Coffin and Jennifer McDonald recently won a trial court decision clarifying and reducing the measure of medical damages in a medical malpractice case.

In the recent decision on a Defendant provider’s Motion for Summary Judgment, the Vermont Superior Court, Chittenden Unit, concluded that in the context of a medical malpractice case involving government insurance, the collateral source rule does not apply to the amount of the medical invoice written off by the Defendant provider. In other words, where medical services were provided by the Defendant, the plaintiff’s medical damages are limited to the “amount paid” by Medicare in full satisfaction of the invoice, and not the “amount billed” by the Defendant. This decision represents a significant development in medical malpractice defense in Vermont.

To constitute a collateral source, there must have been a “payment made by an unrelated third-party on behalf of the plaintiff.”  In a typical case, the defendant-tortfeasor is not allowed to benefit from that third-party payment by way of reducing its damages liability to the plaintiff. But where the defendant was “connected with” the payment, the collateral source does not apply. In a medical malpractice case where the Defendant that treated the plaintiff accepted payment by Medicare of an amount less than the invoiced amount (the “amount paid”), the defendant health service provider—which is not an unrelated third party—contributed to the invoiced amount when it incurred the cost of the write-off amount. This payment by the defendant provider is “outside the collateral source rule.”  Therefore the court concluded that the plaintiff may only recover the amount paid by Medicare, since the write-off/contribution by the Defendant provider had the effect of reducing the Defendant provider’s liability.

In sum, amounts written off the invoice by a defendant/hospital or healthcare provider in a med mal case are not a third-party payment and cannot be recovered by the plaintiff as medical damages.

See DeGraff Spear et al. v. The University of Vermont Medical Center et al., Docket 239-3-18 Cncv (Toor, J) (May 12, 2020).       

Related Practice Areas

Health Care Litigation