Keeping It Real, Part I

The Appellate Term, 2d Department has been in engaging in some rather groundbreaking decision-making as of late: the application of "real" law (as opposed to solipsistic citation to prior no-fault decisions that had no particular basis in law on their own). For your consideration, we present the decision in West Tremont Med. Diagnostic, P.C. v Geico Ins. Co., 2006 NYSlipOp 51871(U) (App. Term, 2d Dep't, 2006). The "real" rule of law in question: "[I]t is well settled that the assignee stands in no better position than its assignor, and has no more right or claim than the assignor." Id., citing to Matter of International Ribbon Mills [Arjan Ribbons], 36 NY2d 121 (1975).

In the trial court opinion, Judge Judith R. McMahon held that "in a matter, such as the instant case, wherein the usual and customary medical procedure was utilized by the examining physician in referring a patient involved in a motor vehicle accident for radiological tests after a physical examination, and the patient assigned her rights to the diagnostic radiological establishment for reimbursement of No-Fault benefits, the affirmative defense of lack of medical necessity should not be available as the diagnostic center does not make an independent medical evaluation of the patient and the denial of benefits to the diagnostic establishment is in derogation of the intent of the Insurance Law 5106." West Tremont Med. Diagnostic, P.C. v Geico Ins. Co., 8 Misc. 3d 423, 427 (Civ. Ct., Richmond Cty., 2005). In sum, a carrier cannot deny MRI bills based upon a lack of medical necessity. This conclusion was based on that most vague and useless of arguments: that "the purpose and intent of the Insurance Law No-Fault Benefits statute which is expedient payment of benefits to automobile victims." Id.

The meat of the App. Term's rationale for overruling the Civil Court's order is as follows:

Under the Comprehensive Motor Vehicle Insurance Reparations Act (Insurance Law art 51), more commonly known as the No-Fault Law, "first party benefits" are available to reimburse persons for "basic economic loss" resulting from injuries "arising out of the use or operation of a motor vehicle" (Insurance Law § 5102 [b]). Insurance Law § 5102 (a) (1) defines "basic economic loss" as including, inter alia, "[a]ll necessary expenses incurred for: (i) medical, hospital . . ., surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services" and "(iv) any other professional health services." The Mandatory Personal Injury Protection Endorsement (11 NYCRR 65-1.1 [d]) defines "medical expenses" as consisting of "necessary expenses" for the services which are enumerated in the statute. Nowhere in the statutory or regulatory scheme is there any suggestion that services rendered by diagnostic centers or, for that matter, medical equipment suppliers, laboratories, or radiological facilities, all of which rely upon prescriptions or referrals from treating or examining medical providers, be exempt from the requirement that said services be "medically necessary." While it may be argued that a diagnostic center is in no position to establish the medical necessity of a prescribed MRI, it is well settled that the assignee stands in no better position than its assignor, and has no more right or claim than the assignor (see Matter of International Ribbon Mills [Arjan Ribbons], 36 NY2d 121 [1975]). If a claim is not assigned, and is submitted to the insurer directly by the eligible injured person, the insurer may assert a defense of lack of medical necessity which, if established, will shift the burden to the eligible injured person to provide his or her own evidence of medical necessity. If the defense may be asserted against the eligible injured person, it follows that it may be asserted against the provider as well. Moreover, "[t]o permit medical providers to receive reimbursement even when the insurer has proven that the service provided was not medically necessary would encourage fraud, rather than combat it . . . . In fact, the construction urged by plaintiff would require insurers to pay for MRIs of the entire spine when the insured suffered a broken toe, or for full body scans for broken arms" (Precision Diagnostic Imaging, P.C. v Travelers Ins. Co., 8 Misc 3d 435, 439 [2005]). 2006 NYSlipOp 51871(U).

This makes sense for a number of reasons, not the least of which is that the limitation of basic economic loss in § 5102 to "necessary [medical] expenses" doesn't have a subsection containing an exemption for instances where it would stink for the provider. To be sure, no one ever wants to write in a general exception to the laws and regulations when application of same would stink for the carrier.

Also, I think the end result of such a rule would be even worse than what the Civil Court posed in Precision Diagnostic: a no-fault applicant could have a single examination by a physician at which everything under the sun was prescribed, and then the resulting tens of thousands of dollars of no-fault claims would not be defensible on the basis of lack of necessity.

Indeed, I think the Court of Appeals has actually already decided the matter, anyway. The factual basis of Central General v. Chubb, 90 N.Y.2d 195 (1997) was as follows:

Central General Hospital provided medical treatment to Pamela Mandresh on four separate occasions for injuries allegedly sustained in an automobile accident. Chubb insured the automobile Mandresh was driving at the time she was allegedly injured. The hospital submitted standard requests for payment of no-fault billings totaling $ 2,403.50. Chubb rejected them on the grounds that the injuries were not related to the accident and the treatments were excessive. Chubb insists that Mandresh's injuries were sustained in a separate work-related accident about a year prior to the automobile accident. Id. at 198.

Although there was an allegation by Chubb that Ms. Mandresh had treated with the same physician for both injuries, this appears to be unrelated to the services rendered by the hospital. Either way, when a patient presents injuries and a given explanation to a physician, unless the injuries are somehow so blatantly unrelated that they cannot possibly have arisen as explained, the physician is in no position to determine the causality of the injuries. Nevertheless, the Court of Appeals concluded that "an insurer...may assert a lack of coverage defense premised on the fact or founded belief that the alleged injury does not arise out of an insured incident." If Judge McMahon's conclusion in the West Tremont trial decision was the correct rule, Central General should have held that carriers are precluded from raising the defense of lack of causality (unless the medical provider was actually a personal witness to the event that caused the injuries, I suppose).

Possibly more later on the potential effects of the App. Term's decision in West Tremont on the pending litigation in Long Is. Radiology v. Allstate Ins. Co., 12 Misc. 3d 1167A (Sup. Ct., Nassau Cty., 2006).