Sanchez, the Evidence Code, and Expert Testimony:
A New California Paradigm?
Expert Testimony under Sanchez: A Paradigm Shift
In People v Sanchez,1 the California Supreme Court overruled long-standing authority allowing experts to rely on case-specific hearsay.2 The decision fundamentally limits an expert’s ability to rely on hearsay and asks the jury to consider the underpinnings for the expert’s conclusion.
“When an expert relies on hearsay to provide case-specific facts, considers the statements as true, and relates them to the jury as a reliable basis for the expert’s opinion, it cannot logically be asserted that the hearsay content is not offered for its truth.”3 “If an expert testifies to case-specific out-of-court statements to explain the bases for his opinion, those statements are necessarily considered by the jury for their truth, thus rendering them hearsay. Like any other hearsay evidence, it must be properly admitted through an applicable hearsay exception.”4
While the Sanchez ruling is a gang-related criminal prosecution case, the Court did not intend for it to be limited to that context.5 The Court saw itself as resolving Sixth Amendment concerns about “the proper application of Evidence Code sections 801 and 802, relating to the scope of expert testimony.”6 People v. Stamps 7 echoes this sentiment. It reiterates that an expert cannot testify about case-specific facts, which he treats as correct unless the expert has personal knowledge of the facts or a hearsay exception applies.
“After Sanchez, reliability is no longer the sole touchstone of admissibility where expert testimony to hearsay is at issue. Admissibility—at least where “case-specific hearsay” is concerned—is now more cut-and-dried: If it is a case-specific fact and the witness has no personal knowledge of it if no hearsay exception applies, and if the expert treats the fact as true, the expert simply may not testify about it. (Sanchez, supra, 63 Cal.4th at pp. 684–686, 204 Cal.Rptr.3d 102, 374 P.3d 320.) The underlying fact also may not be included in a hypothetical question posed to the expert unless it has been proven by independently admissible evidence. (Id. at pp. 684, 686, 204 Cal.Rptr.3d 102, 374 P.3d 320.) If the hearsay relied upon by the expert is not case-specific, as we read Sanchez, the evidence still is admitted for its truth (id. at pp. 685–686, 204 Cal.Rptr.3d 102, 374 P.3d 320 ), and is therefore hearsay, but we tolerate its admission due to the latitude we accord experts, as a matter of practicality, in explaining the basis for their opinions (id . at p. 676, 204 Cal.Rptr.3d 102, 374 P.3d 320 ). Where general background hearsay is concerned, the expert may testify about it so long as it is reliable and of a type generally relied upon by experts in the field, again subject to the Court’s gatekeeping duty under Sargon, supra. (Sanchez, supra, at pp. 676–679, 685, 204 Cal.Rptr.3d 102, 374 P.3d 320; Evid. Code, §§ 801, 802.)” 8
Pricing Medical Expenses Post- Sanchez
The decisions in Sanchez and Stamps have had a chilling effect on the testimony of experts. Nowhere is it more evident than in cases involving the testimony of life care planners, who are often asked to opine on health insurance costs and billed or charged amounts related to medical expenses. Litigators and legal scholars alike recognize the paradigm shift created by Sanchez.
“[Judges] may no longer overrule a hearsay objection on the grounds that the hearsay is being considered solely for explaining the basis of the expert’s opinion, and experts may no longer be asked to assume case-specific facts and opine on the significance of such case-specific facts, if such facts have not been, or will not be, independently admitted into evidence. Since the paradigm of allowing a limiting instruction to justify the admittance of expert basis testimony is no longer tenable under Sanchez, trial counsel [is] forced to shift their focus to ensur[e] they have established a proper evidentiary basis for admission of case-specific facts forming the basis of expert opinion testimony. [Doing so] may include calling more witnesses to properly authenticate and introduce evidence that trial counsel wishes the expert [to] relate to the jury. [However] if that [is] not possible, trial counsel may be unable to present such evidence altogether.”9
Post Sanchez, a growing number of life care planners are seeing their testimony upended by opposing counsel. Issues arise when they testify about the source of their cost data. For example, a planner describes their method of analysis by relaying to counsel the following process: 1) Planner inputs the relevant cost data for the plaintiff’s future care into a selected database, 2) Planner inputs unique identifiers to refine the data, and 3) the database produces outputs generally considered reliable by members of the life care planning profession. On its face, the methodology applied by the life-care planner appears appropriate. However, in a post-Sanchez world, litigators quickly move for evidentiary hearings10 attacking the admissibility of the expert’s testimony.
Sanchez tells us that reference to any cost data is inadmissible, case-specific hearsay if the expert did not have personal knowledge about the data, its compilation or veracity. For this reason, the life care planner’s cost data cannot be counted as “general background information.” Instead, it is “case-specific hearsay” meant to place a value on the goods and services identified in the life care plan. Arguably, information about healthcare costs can be thought of as best provided by experts able to lay the foundation for those figures.
Pricing and Reasonableness Post- Pebley
Procurement professionals and policy analysts generally regard cost and price analysis as the appropriate vehicle for the valuation of medical expenses.11 This point is born out in Pebley v. Santa Clara Organics, LLC (2018) 22 Cal.App.5th 1266.12
Pebley involved an injured plaintiff who maintained health insurance but chose to be treated by healthcare providers that did not accept his insurance plan. The plaintiff received a very high bill for his care, an amount that was higher than the amount paid by his insurance plan, or other individuals using the same facilities. Despite objections raised by defense counsel, the plaintiff was permitted to enter into evidence the full amount of his unpaid bills.
Pebley reasoned that the insured and uninsured should not be dealt with differently under the law. If an insured plaintiff seeks and receives uninsured medical care, without applying her insurance, the Court should treat her the same as an uninsured plaintiff. Therefore, the insured plaintiff who has sought and received uninsured healthcare should be able to introduce evidence of the full amount billed. Even so, the Court also recognized that the plaintiff must be prepared to show through expert testimony that the billed amounts are “reasonable.”
The Pebley decision identifies the insured and uninsured as being on par in the marketplace. Each is subject to the “billed amount” at the moment medical care is rendered. And while this experience is an essential property of receiving medical care, being insured is accidental. Pebley reminds us that we operate in one healthcare market (and not two) by stripping away the veneer of insurance status. Stated differently, “what’s good for the goose is good for the gander” — all persons rendered medical care are subject to a billed amount.
Long before the Court’s decision in Pebley, policy professionals acknowledged the uninsured as stakeholders in the market. The experience of the uninsured, coupled with employment-based,13 direct purchase,14 Medicare, Medicaid, and Military-based15 insureds, offered a complete picture and a reliable explanation of price “reasonableness.”16 In other words, the uninsured, as suggested by Pebley, are an essential property of the market, and fair market value cannot be determined without interpreting their experience of price.
California Courts see the calculation of medical damages as a function of price “reasonableness” – i.e., “reasonable value.” The California Court of Appeals in Cuevas v. Contra Costa County,17 for instance, ruled that while injured plaintiffs are entitled to receive the reasonable value of future medical expenses,18 evidence of the full billed amount cannot be the basis of the reasonable value of these future medical expenses.19 The court quoting Markow v. Rosner20 stated that the reasonable value of medical expenses cannot be based on the amount billed , but rather must be based on the negotiated amount paid by the insurance company.21 Persuasive on this matter are the findings of the United States District Court of South Carolina Charleston Division in United States v. Berkeley Heartlab, Inc.22
Berkley involves allegations that the defendant’s overbilled the government for laboratory tests in violation of the Fair Claims Act. Responsive to the question of “reasonable value” is the Court’s rejection of the expert’s use of a charge-based methodology as determinative of “reasonableness.” The Court reasoned that because “physicians set their charges higher than the actual payment they expect to receive . . .”23 the billed rate is not the amount required. Therefore, any methodology to determine “reasonableness” of physician services based almost exclusively on charges is unreliable and is not a reasonable representation of fair market value.24
California has shifted its evidentiary approach to expert testimony. The change has forced litigators to reconsider: (1) Who can testify, (2) What information can be offered, and (3) Whether the evidence (for purposes of the court) is reasonable. These questions have become critical to discussions about personal injury and future healthcare costs. While California has led the conversation, it is not alone. The purpose of this article was to highlight the conversation and bring attention to the growing complexity litigators and experts are facing as they try to answer the question of costs.
To learn more about cost-benefit analysis in healthcare and to get help developing new best practices to deal with any changes, contact TD&P Consulting, Inc.