Rowley: Determinative authority would be welcome
There is “no realistic scope” to break down the elements of a medical reporting organisation’s (MRO) fee, the Senior Costs Judge (SCJ) has ruled – but its recoverable mark-up should not exceed 25%.
In a ruling that gave MROs and insurers reasons to be both happy and unhappy, SCJ Jason Rowley noted that the question of whether MROs should have to “deconstruct” their invoices have been “aired for more than two decades now without any directly relevant High Court or higher decisions”.
“I have said on more than one occasion during the proceedings that a determinative authority would be welcome in this area. I imagine that one, or possibly both, sides will wish to seek that determinative decision.”
The judge acknowledged that his ruling could have an impact on the MRO sector but said the wider policy issues were for the appellate courts, not him.
In a statement, defendant law firm HF – which acted in the conjoined cases before the judge – said: “An appeal by one or more parties seems reasonably likely given the circumstances.”
The two MROs involved were Medical and Professional Services (MAPS) and Premex.
SCJ Rowley held that MRO fees were disbursements, rather than an outsourced solicitors’ cost. This mattered because “it leads the assessment away from a comparison of time and effort spent by the MRO with the hypothetical time costs of the non-required solicitor”.
As a result, there was “no purpose in requiring an MRO to provide a breakdown equivalent to that produced by solicitors in their bill of costs”.
Rejecting challenges to elements of MROs fees – he held that they did not contain irrecoverable funding – SCJ Rowley decided: “I do think that there is no realistic scope for any attempt to deconstruct the elements of the MRO fee.
“It seems to me to be a little surprising that a commercial organisation would not have analysed its cost base to see which, if any, costs might be reduced or the relevant element dealt with in some other way which would lessen the cost and thereby increase the profit.
“However, there is no evidence before the court of any such analysis.”
Premex’s evidence was that the percentage uplift it claimed was either 35% or 45%, and it charged a minimum of £200 for smaller invoices. For MAPS, it was most commonly 53% but was also claimed at 30% for some fees and the outliers ranged from 20% to 104%.
SCJ Rowley said: “Since the MROs indicate that they do not calculate the percentage uplift on a case-by-case basis, but on a more macro level, it seems to me difficult for them to complain if the recoverable fees are dealt with on a similarly ‘swings and roundabouts’ basis.”
The court had to take a “cautious approach” when the receiving parties’ evidence was limited, he went on.
“I am not persuaded that even the range of 30% to 53% generally charged can be considered reasonable, let alone the outlier percentages, some of which result from fixed sums having been claimed.
“The general range of 30% to 53% plainly reflect variations resulting from ongoing commercial relationships between the solicitors and MROs rather than any case specific factors.
“There is nothing wrong with those relationships but they are not any basis on which to allow any particular percentage between the parties.”
He concluded that a mark-up of 25% between the parties was reasonable. “More than that would be a matter for the claimants, their solicitors or the MROs. Any mark-up claimed of less than 25% would be limited to that percentage.
“As a postscript, one advantage of a maximum recoverable percentage fee is that it can easily be stated on the MRO invoice, unlike the quasi-solicitors’ breakdown, which might assist all sides as well as the court in the future.”
Adam Fenton, a solicitor at Slater & Gordon who acted for the claimant and Premex in one of the cases, welcomed the findings about the nature of MRO fees but said the 25% figure “was not put forward by either side in their evidence and is not supported by the market for these services”.
He added: “We are therefore concerned by the impact this may have on our clients, with the judge indicating that fees above 25% may ultimately be borne by them.”
Wayne Brannan, commercial director at Premex, said: “Whilst it is undoubtedly good news to have confirmation that MRO fees are disbursements and do not require ‘breakdowns of breakdowns’, nor contain any specific unrecoverable elements within them, the assessment of a recoverable fee of 25% of the expert’s fee is both disappointing and concerning.”
He complained that the figure “seems somewhat arbitrarily derived, particularly given the limited articulation provided as to the logic applied in the award of this fee level”.
He went on: “Most MROs operate within a fairly narrow and consistent band of gross profit margins, which demonstrates a healthy, competitive and functioning market.
“The costs associated with procuring medical evidence at scale and particularly with doing so on deferred payment terms are real.
“The logical conclusion of a decision like this is that injured claimants – who in the main cannot afford to pay up front for medical evidence – will again suffer either by having to cover these costs from damages or simply be unable to access medical evidence at all.”
Henrietta Phillips, partner and head of legal services at Thompsons, who acted for the claimant in the MAPS case, said the outcome was “of real significance across the personal injury sector”,
“We welcome the court’s finding that, in principle, all elements of the MRO fees are recoverable from the defendants. This is an important result for injured people…
“However, we are concerned that the maximum recoverable mark-up decided by the Judge will mean that, in many cases, the shortfall will be yet another deduction from claimants’ compensation.”
HF said: “Given the shortfall between fees the medical agencies have/will charge and the gap imposed by this decision, some difficult conversations are likely to be needed between medical agencies and the solicitors who instruct them.
“Does this decision narrow the gap between the agencies and compensators to allow for productive industry discussions on a solution?”
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