COURT OF APPEALS DENIES MEDICAL PROVIDER’S MOTION FOR PROTECTIVE ORDER & HOLDS PROVIDER’S NEGOTIATED RATES ARE DISCOVERABLE

In In re Thomas Teran, No. 04-21-00436-CV, 2022 WL 849764 (Tex. App.—San Antonio, March 23, 2022, mem. op.), Thomas Teran was driving a tractor-trailer owned by Ruiz and Sons, Inc. and was acting in the course and scope of his employment with Ruiz and Sons, when he collided with a vehicle driven by Victor Galvan. Subsequently, Galvan sued Teran and Ruiz and Sons (collectively “Defendants”). Galvan sought $250,000 in medical expenses incurred as a “private pay patient” from treatment received from Foundation Surgical Hospital of San Antonio (“Foundation”).

Defendants served Foundation with a deposition on written questions and a subpoena duces tecum seeking information on the negotiated rates Foundation charged private insurers and government payors for the services it provided to Galvan.  Specifically, Defendants sought:

• A copy of all contracts in which Foundation is a party with Aetna, Blue Cross Blue Shield, Humana, United Healthcare, Cigna, Medicare, and Medicaid;
• An annual cost report that Foundation is required to provide to a Medicare Administration Contractor as a Medicare certified institutional provider for 2020;
• The Medicare and Medicaid reimbursement rates for each of the services Foundation provided to Galvan; and
• The reimbursement rates Foundation would have been paid for the services it provided to Galvan pursuant to Foundation's contracts with Aetna, Blue Cross Blue Shield, Humana, United Healthcare, and Cigna.

In response, Foundation filed a motion for protective order, arguing that the information sought was immaterial, irrelevant, and not reasonably calculated to lead to the discovery of admissible evidence; and was sensitive, private, confidential, proprietary, and protected business information. 

The trial court granted Foundation's motion. In turn, Defendants filed a petition for writ of mandamus, which the Court of Appeals granted. 

On mandamus, the Court of Appeals began its analysis by noting that “[e]vidence of a medical provider's negotiated rates for private insurers and public payers is relevant, though not dispositive, when considering the reasonableness of the [full or list rates charged to uninsured patients]” The Court concluded Defendants’ discovery requests tracked those that the supreme court approved in K & L Auto (627 S.W.3d 239) and North Cypress (559 S.W.3d 128). Accordingly, the discovery sought was relevant and not overbroad as a matter of law.

The Court of Appeals also rejected Foundation’s argument that Defendants did not need the requested discovery because they could instead hire experts to opine that Foundation's chargemaster rates are unreasonable (pursuant to section 18.001 of the Texas Civil Practice & Remedies Code). The Court reasoned that an opinion on reasonableness must be based on relevant facts and data and that denial of the requested discovery would limit Defendants to offering speculative evidence rather than the providers' actual agreed rates with insurers and other payors. 

The Court of Appeals also concluded that “when a tortfeasor challenges the reasonableness of a medical provider's chargemaster rates for the plaintiff's treatment, certain discovery on the provider's negotiated rates for the same treatment is necessary for a ‘fair adjudication of that challenge.’” Thus, permitting the discovery “is consistent with existing trade secret jurisprudence.” Further, “when a medical provider resists discovery of information regarding its negotiated rates on the basis that the information is confidential, proprietary, or a trade secret, it must show that an appropriate protective order will not address its concerns.”