## Facts

- Vance H. Lagerstrom, age 87, fractured his hip, underwent hip replacement surgery at Myrtle Werth Hospital, developed post-operative complications, and later died.
- His estate brought a wrongful-death medical-malpractice action alleging negligent care caused his death.
- The estate presented evidence that the reasonable value of necessary medical services was about $89,000.
- Defendants introduced evidence that most bills were paid or reduced by collateral sources (Medicare, private insurance, and provider write-offs), leaving $755 in out-of-pocket expense.
- Medicare asserted a statutory right to reimbursement from any recovery and notified the estate of its intent to seek repayment.
- The circuit court admitted collateral-source payment evidence under Wis. Stat. § 893.55(7) but excluded evidence of Medicare’s reimbursement right and notice.
- The jury awarded $20,000 for pain and suffering, $35,000 for loss of society and companionship, and $755 for medical expenses.
- The Wisconsin Supreme Court reviewed after certification from the court of appeals.

## Issues

1. Whether Wis. Stat. § 893.55(7) permits a jury to limit medical-expense damages to the plaintiff’s out-of-pocket costs based on collateral-source payments, rather than awarding the reasonable value of medical services.
2. Whether it was error to exclude evidence that Medicare had a statutory reimbursement right and intended to enforce it after admitting evidence of collateral-source payments.
3. Whether the jury instruction stating it “may, but is not required to,” reduce medical-expense damages due to collateral-source payments properly implemented § 893.55(7).

## Decision

- The Wisconsin Supreme Court reversed the judgment and the order denying post-verdict relief and remanded.
- The court held that § 893.55(7) allows admission of collateral-source evidence but does not change the reasonable-value measure of medical-expense damages.
- The court held the circuit court erred by excluding evidence of Medicare’s reimbursement rights after admitting collateral-source payment evidence, creating a misleading record for the jury.
- The court concluded the instruction, as given and combined with the evidentiary exclusion, permitted an improper reduction of medical-expense damages to the out-of-pocket figure.

## Legal Principles

- In Wisconsin tort actions, medical-expense damages are measured by the reasonable value of necessary medical services, not merely the amount paid out of pocket.
- Wis. Stat. § 893.55(7) is an evidentiary provision permitting collateral-source evidence in medical-malpractice cases; it does not, by itself, reduce recoverable medical expenses to net payments.
- When collateral-source payments are admitted, evidence of statutory subrogation or reimbursement obligations (such as Medicare’s repayment rights) must generally be admitted to prevent misleading the jury and unfairly benefiting the tortfeasor.
- Jury instructions applying § 893.55(7) must keep the jury’s focus on reasonable value while explaining how collateral payments and reimbursement rights bear on the damages determination.

## Conclusion

The court required that, despite the admissibility of collateral-source evidence in medical-malpractice cases, juries must still determine the reasonable value of medical care and must not be left with a one-sided view that ignores enforceable reimbursement rights; the case was remanded for proceedings consistent with these requirements.


Lagerstrom v. Myrtle Werth Hosp.-Mayo Health Sys., 700 N.W.2d 201 (Wis. 2005)