The owners of several dialysis clinics sold all of their holdings to a national provider, retaining only accounts receivable (AR) prior to the closing date. The parties disputed this amount and the seller sued for breach of contract, claiming retained AR of over $2.8 million. The jury awarded $750,000 and the defendant appealed, arguing the plaintiffs’ expert’s calculations were unreliable under the Texas analogue to Rule 702 of the Federal Rules of Evidence.
The appellate court first noted that Texas has adopted a Daubert-type test, essentially requiring an expert’s theory to be testable, objective, peer-reviewed, and generally accepted among the professional’s community. In this case, the plaintiffs’ expert described his calculations as “very straight-forward.” He simply took the percentage of payments on past billings and applied that to the outstanding AR balances for private billings as well as Medicare payable.
For example, he assumed that private patients who had paid all or some of their past bills would continue to pay their current balances in the same all or percentage portion. Similarly, he assumed that Medicare and secondary insurers would continue to pay current accounts as they had in the past.
However, the expert did not review any of the underlying patient documentation, including the explanation of patient benefits from Medicare or other insurers. Neither did he age or write down any of the accounts, or conduct any independent analysis to determine the effects of aging. This failure to examine the underlying patient data rendered his assumptions speculative and his methodology unreliable, the court found.
By contrast, the defendant’s expert—a specialist in health care receivables and dialysis centers in particular—examined the payor contracts and Medicare guidelines as well as individual patient files and history. He explained the many reasons for reduced or nonpayment by third parties, such as varying reimbursement rates; varying patient coverage and contracts; and lapsed coverage.
In fact, the key problem with the plaintiffs’ expert was his assumption that a patient’s health care coverage was the same throughout a certain time period, “which doesn’t happen,” the rebuttal expert said.
The rebuttal expert also pulled eight Medicare patient files to demonstrate specific instances in which the plaintiff’s expert had missed critical data or overstated the receivable. This testimony showed that the patient records were available to the plaintiff’s expert, to at least test his assumptions, but he declined to do so. As a result, his analysis was “subjective, his assumptions were unfounded, his opinion has not been subject to peer review, and his technique has an unknown rate of error,” the court held.
Moreover, the expert had apparently developed his opinion purely for use in litigation, making it more prone to bias, and the court dismissed the jury’s award.
For more information, contact:
- In Tennessee: Tonya Cherry or Rick Swafford
- In Kentucky/Indiana: Rich Robinson