Friday, April 08, 2005

Parnell v. Adventist Health System (Cal. Supreme Ct. - April 4, 2005)

Here's an opinion by Justice Brown with which I agree. Admittedly, that's not saying much, since the decision was unanimous. But the opinion is still worth reading, for at least two different reasons.

First, it reaches an interesting result, especially for someone like Justice Brown. Don't get me wrong: again, I agree with the decision, which holds that a hospital doesn't have a statutory lien on settlement proceeds when the patient's insurance company has already paid the hospital all the money it's contractually owed. But it's very hard to reach that result by relying on either the text or legislative history of the relevant statute, both of which provide more than tolerable support for a contrary holding. The easiest way out is to engage in something akin to the common law tradition and to interpret the statute in a manner that makes it better (i.e., that interprets the statute in the way that we think would make more sense). Personally, I don't have a huge problem with such an approach, which is why I agree with what the California Supreme Court does here. But hard core textualists -- including Justice Brown -- do have a huge problem with it. At least usually. But apparently not here. Which is one reason why the unanimous result is a bit surprising. And particularly surprising since it's an approach articulated by Justice Brown.

Second, the opinion is also interesting for the subtle, but critical, cop-out at the end of the opinion -- a part of the opinion that, as a practical matter, I believe will make the central holding of the case utterly irrelevant. Justice Brown concludes that the hospital doesn't have a lien because it's essentially already been paid in full by the insurance company. Fair enough, right? After all, if the hospital thought that it was reasonable to get paid $500 for X procedure, why should it get more? If it can make a profit with $500 -- which you know it can, since this figure is the result of arms-length negotiation -- why should it be permitted to charge $700 (or, more accurately, pursuant to the statute, why is any amount over $500 "necessary and reasonable")?

But in the final paragraph of this 23-page opinion, Justice Brown makes it clear that this is not the basis for her holding; indeed, that the hospital would have a lien if they just amended their contractual agreement with the insurance company. Which, after this opinion, is exactly what the hospital is going to do. The hospital wants more money, so it will asks the insurance company to still pay only $500, but to let the hospital charge the third party tortfeasor another $200. It's not the insurance company's money, so what do they care? They'll agree. And it's not a co-payment or anything that a policyholder will typically notice, so the insured almost certainly won't know enough to effectively object either -- indeed, given the randomness of application of this provision (which is basically third party subrogation), the transaction costs of objecting would outweigh the benefits. So the hospital will end up making $700 for a procedure for which we know they can derive an acceptable profit at $500. The insurance company won't care since it's not their money, and the person that gets hosed -- since it's their money that's being taken -- is the insured. Awesome, eh?

So once you add that last paragraph, maybe it's not so surprising why Justice Brown is suddenly willing not only to sign on to a common law approach to statutory interpretation, but is also willing to be the author of an opinion that ostensibly adopts such an approach. For that last paragraph, you'd be willing to give up a lot. But why the rest of the California Supreme Court is willing to agree to the last paragraph of the opinion -- without comment or even seeming recognition of its significance -- is a mystery to me. It's the only part of the opinion that I think is likely wrong, and is also the only part that is practically likely to matter.