Introduction

What’s the value of a knee replacement? If you ask the hospital, it’s $95,000. If you ask Medicare, it’s $12,000. But if you ask the jury, you’d better be ready to prove it. In California, what counts now is not what gets billed—it’s what gets paid. Over the past decade, courts have abandoned inflated billed charges in favor of realistic, market-based measures of value.

California’s legal landscape has changed dramatically, thanks to three pivotal cases: People v. Sanchez, 63 Cal.4th 665 (2016); Cuevas v. Contra Costa County, 11 Cal.App.5th 163 (2017); and Audish v. Macias, 102 Cal.App.5th 740 (2024). These cases form the foundation for a new approach to medical damages: Fair Market Value (FMV).

People v. Sanchez (2016): Expert Testimony and Hearsay

In Sanchez, the California Supreme Court barred experts from reciting case-specific hearsay unless it’s admitted into evidence or fits an exception. (People v. Sanchez, 63 Cal.4th 665 (2016)). Experts can rely on hearsay to form opinions but cannot present that hearsay to the jury unless a foundation is laid.

This fundamentally changed expert testimony. Attorneys must now ensure data is admitted into evidence. If they fail, experts are limited to generalities. Sanchez added rigor but also complexity.

Cuevas v. Contra Costa County (2017): Market-Based Valuation

In Cuevas, the court endorsed market rates over full billed charges to assess the value of future care. (Cuevas v. Contra Costa County, 11 Cal.App.5th 163 (2017)). The decision builds on Howell v. Hamilton Meats & Provisions, Inc., 52 Cal.4th 541 (2011), and Corenbaum v. Lampkin, 215 Cal.App.4th 1308 (2013).

The court held that showing what is typically paid does not violate the collateral source rule—so long as the evidence is about value, not payer. Citing Civil Code §3333.1, it found that even ACA-related data is admissible in med-mal cases.

Audish v. Macias (2024): Extending the Standard

In Audish, the plaintiff’s expert projected $1.4 million in future care. The defense introduced Medicare rates to argue the value was far less. The jury awarded just $32,000. The appellate court upheld the defense win. (Audish v. Macias, 102 Cal.App.5th 740 (2024)).

The court confirmed that Medicare rates, when tied to value rather than payer, are admissible across tort cases. This ruling cemented the shift to real-world pricing.

FMV in Action: Real-World Litigation Outcomes

In a 2022 Los Angeles case, a plaintiff submitted $250,000 in billed charges for spinal surgery. The defense showed private insurers typically paid $38,000. The jury awarded $45,000.

In a San Diego trial, a defense economist relied solely on Medicare + 20%. The plaintiff successfully moved to exclude the opinion for lack of foundation, under Sanchez.

In a Contra Costa matter, both sides offered valuation ranges. The plaintiff proposed $90,000–$120,000; the defense presented $30,000–$50,000. The jury awarded $72,000—squarely within a negotiated range.

These examples demonstrate that FMV not only shapes doctrine—it directly influences case outcomes and illustrates a broader legal shift toward data-backed valuation.

Defining Fair Market Value in Medical Damages

Fair Market Value (FMV) refers to the price that a willing buyer and a willing seller would agree upon in an open and competitive healthcare market, without coercion and with full knowledge of relevant facts. In the context of medical damages, FMV serves as a legal and economic anchor—ensuring that the value of treatment reflects what providers customarily accept as full payment for services rendered, not merely what is listed on a bill. This standard helps courts and juries avoid inflated or artificially reduced figures and instead arrive at a valuation rooted in real-world economic transactions.

In litigation, FMV reflects what providers typically accept—not what they bill. It avoids overcompensation, aligns with tort principles, and levels the playing field between insured and uninsured plaintiffs. Experts calculate FMV using databases like FAIR Health and Context4Healthcare. Data must be disclosed and explained. FMV helps juries understand what treatment actually costs.

Why Billed Charges and Medicare Plus Fail

Billed charges are inflated and often never collected. Courts call them “phantom” numbers. In Pebley v. Santa Clara Organics, 22 Cal.App.5th 1266 (2018), the court required evidence that high billed rates were reasonable.

Medicare plus methods add arbitrary markups to low government rates. This approach:

• Risks violating the collateral source rule.
• Lacks evidentiary support.
• Understates market value.

Use Medicare as one data point, not a cap.

Bridging the Gap: Why FMV Emerged

Courts faced a dilemma: billed rates are inflated, Medicare rates are low. FMV emerged as the common-sense standard. If a service is billed at $100,000, paid by private insurers at $30,000, and reimbursed by Medicare at $15,000, FMV anchors valuation within that range.

California and National Trends

California isn’t alone. Texas caps recovery to paid amounts. Colorado and Kansas allow evidence of actual payments. Florida’s 2023 tort reform mandates insurer payments or fixed percentages over Medicare.

Federal courts are also skeptical of billed rates. In United States v. Berkeley Heartlab, Inc., 225 F. Supp. 3d 487 (D.S.C. 2016), a court rejected billed charges as a reliable basis for damages.

Practice Tips for Experts and Litigators

1. Authenticate Data: Lay a foundation for any figures experts reference.
2. Hire Savvy Experts: Ensure they know the case law and pricing systems.
3. Use FMV Ranges: Present a high/low spectrum, not one figure.
4. Leverage Sanchez: Use it to challenge unsupported opinions.
5. Frame Value Carefully: Talk about what a service costs—not who pays.
6. Disclose Data: In expert reports, name your sources.
7. Use Visuals: Charts work—if you can prove up the numbers.
8. Stay Current: New cases may expand or narrow what’s allowed.
9. Educate Juries: Clarify that billed ≠ paid.
10. Tell the Story Behind the Numbers: Give context, not just math. Jurors trust what they can relate to.

Conclusion: Why FMV Matters

The shift to FMV reflects a broader goal: fairness. Billed charges exaggerate losses; Medicare undercounts them. FMV steers between extremes. Sanchez heightened evidentiary rigor. Cuevas demanded market valuation. Audish sealed FMV as California’s default approach.

Fair Market Value is more than a standard—it’s a strategy for winning cases and earning the jury’s trust. In a legal environment increasingly skeptical of inflated claims, FMV offers a principled, data-driven pathway to persuasive, defensible damage awards.

When attorneys ground their arguments in FMV, they not only meet evidentiary standards but also speak to what juries inherently value: fairness, clarity, and truth. FMV ensures that damage awards reflect the actual cost of care—not speculation or sticker shock.

Ultimately, the lawyers and experts who thrive in today’s litigation environment are those who understand the rules of the road. FMV isn’t just the new standard—it’s the smart play. Use it well, and it won’t just guide your valuation—it will strengthen your case, win your jury, and reinforce your reputation as a credible advocate in the modern courtroom.