Overcoming Hearsay Objections to Medical Billing Expert Testimony

Lawyers who use medical billing experts to question or support the reasonableness of medical billings must anticipate objections to the expert testimony. A common objection, regardless of an expert’s field of expertise, is that the expert is basing an opinion on inadmissible hearsay.

Medical billing experts base opinions on information they acquire from their own experience and on medical billing data that might be compiled by outside sources. A federal court in Illinois explained how lawyers can overcome objections that a medical billing expert is relying on inadmissible hearsay when basing an opinion on data from a commercial database.

The customer at a Menards home improvement store was injured in the parking lot when a store employee pushed a train of shopping carts into her hip. The customer sued Menards. The case was heard by a federal district court in Illinois.

As part of her damages, the customer sought compensation for her medical bills. Menards retained a medical billing expert to evaluate the reasonableness of those bills. The expert concluded that the billings did not reflect the usual, customary, and reasonable (UCR) charges for the medical procedures performed. 

The customer filed a Daubert motion to exclude the testimony. The customer did not challenge the expert’s qualifications. Rather, the customer argued that the billing expert based her opinion on hearsay and that her opinion was therefore unreliable.

Daubert requires federal judges to act as “gatekeepers,” shielding juries from expert opinions that are not based on adequate facts, reliable methodologies, or the reliable application of those methodologies to the facts. Experts cannot simply express a bottom-line opinion but must explain the opinion. That explanation must identify the facts upon which the opinion is based and must articulate the method by which the expert arrived at the opinion. The expert must also articulate the reasoning that supports the opinion.

The medical billing expert employed a standard methodology to determine whether the services billed to the customer were at or below the UCR billing of similar services by the same provider types within the same geographical area. The expert reviewed the customer’s surgical, orthopedic, and chiropractic bills. She determined that their total cost of $745,327.11 exceeded the UCR cost of $256,739.76 for the services provided.

The facts that supported the expert’s opinion included data the expert drew from a nationwide database of medical billing codes. The database compiles actual charges for medical services that were provided to patients, including the date, the Current Procedural Terminology (“CPT”) code identifying the type of service, the identity of the provider of the medical service, and the zip code in which it was performed.

The expert explained that she used the database, together with her knowledge of CPT codes and billing practices in the medical field, to analyze the reasonableness of the charges associated with the CPT codes submitted for the customer’s medical treatment. If the charges were within the 80th percentile of the cost for similar medical treatment, she classified the charges as reasonable.

The heart of the plaintiff’s objection went to the expert’s reliance on a database to support her opinion. The customer objected that the database consisted of inadmissible hearsay.

It isn’t uncommon for expert witnesses to base opinions on hearsay. In some cases, the hearsay will be established by other evidence in the case. For example, a physician might be asked to assume that a plaintiff was struck by a shopping cart and experienced no other blow to her hip. The physician will then be asked whether the shopping cart collision caused the hip injury that the physician treated. A hypothetical question that calls for an expert to assume the truth of hearsay is proper if evidence is introduced to prove that the assumed facts are true.

Nobody expected the database to be introduced into evidence, so its hearsay nature could not be overcome by a hypothetical question. The question before the district court was whether the expert was entitled to base an opinion on facts she derived from the database despite having no personal knowledge that those facts were true.

The court answered the question by applying Rule 802 of the Federal Rules of Evidence. The rule provides that if experts in a particular field would reasonably rely on facts or data of a particular kind in forming an opinion on the subject, the facts or data “need not be admissible for the opinion to be admitted.” In other words, an expert can rely on a database if other experts in the field reasonably rely on such databases when they form expert opinions.

The billing expert laid an appropriate foundation for her use of the database. She testified that within the field of medical billing, it is common industry practice to use a CPT code database to compare prices for services. She testified that she reviews a patient’s medical records and billing codes, acquires 80th percentile price data from a database, and compares the two to determine whether the patient’s medical bills are usual, customary, and reasonable. She also testified that she relies on CPT codes because they have been standardized by the American Medical Association.

The court concluded that the standardization of CPT codes in the medical industry made it reasonable to rely upon a database of prices associated with those codes. Since reliance on the database was part of the expert’s reasonable methodology and was consistent with the custom and practice of others in the medical billing field, the database did not itself need to be admissible evidence.

Nor was it necessary for the expert to be familiar with the precise algorithms or formulas used to compile the database. The expert had sufficient knowledge of the database contents to support the court’s decision that basing opinions on data in the database was a reliable methodology. Opposing counsel was entitled to test the expert’s opinions through cross-examination or by presenting its own billing expert.

Objections that a billing expert has based an opinion on hearsay data can be overcome when lawyers anticipate the objection. Having the expert explain his or her methodology, and eliciting testimony that medical billing experts routinely rely on commercial databases to learn about UCR prices, will generally assure that the expert’s opinions are admitted into evidence.