The Rogak Report: 31 Dec 2008 ** No Fault - Denials - Basis **
VERIFICATION DEMAND DOES NOT LIMIT NO-FAULT INSURER AS TO BASIS FOR DENIAL
Lenox Hill Radiology a/a/o Jose Almadovar v. New York Central Mutual Fire Insurance Co. 2008 NY Slip Op 28275 [20 Misc 3d 851] July 25, 2008 Engel, J. District Court Of Nassau County, First District Edited by Lawrence N. Rogak
This interesting decision answers one of the many arcane and elusive questions in no-fault claims practice: if the insurer delays payment of a medical bill with a certain verification request, is its denial limited to the subject matter of the verification request? Or may it also deny the bill on grounds that did not require verification? The answer, as detailed below, is that as long as a bill is properly delayed, the eventual denial may be based on any ground, even those grounds which were apparent without verification.
"The parties do not dispute the following essential facts of this claim: The plaintiff performed MRIs of its assignor's cervical and lumbar spine on January 4, 2002. The plaintiff submitted its bill for these services, dated April 5, 2002, in the total sum of $1,791.16, to the defendant, which received same on April 11, 2002. On April 24, 2002 defendant sent a verification request to the plaintiff and the plaintiff's assignor seeking records from Mark Heyligers, D.C., the referring chiropractor. On May 28, 2002, not having received the requested records within 30 days, the defendant sent a follow-up verification request to the plaintiff and the assignor. The requested verification information was received by the defendant on June 5, 2002. On July 1, 2002 the defendant made a partial payment in the sum of $1,571.24 and denied the balance of the plaintiff's claim, $219.92, asserting that the fees charged for the MRIs in question were in excess of the workers' compensation fee schedule.""In support of its motion for summary judgment, the defendant argues that the plaintiff improperly billed 100% for both the cervical and lumbar MRIs. According to the defendant, the plaintiff was required to charge the same fee for MRIs as is called for in the workers' compensation fee schedule, ground rule 3b, for diagnostic X ray procedures to two remote parts of the body, which calls for the payment of 100% of the greater single X ray fee charged and 75% of the lesser X ray fee. Applying this fee schedule for such X rays to MRIs the defendant alleges that it has paid the plaintiff's claim in full, requiring dismissal of the complaint."
"In opposition to the defendant's motion the plaintiff initially argues that although the defendant's denial of claim was received within 30 days of the defendant's receipt of the requested verification information, the denial was nevertheless untimely. The plaintiff accuses the defendant of 'using the verification protocols to delay payment of the claim, and then, once it determined the services were medically necessary, sought out a different basis to refuse payment. The verification requests do not extend the time in which the defendant has to deny the claim unless the defendant bases its denial on the requested verification.'"
"The plaintiff further posits that 'a failure by the insurer to issue a denial when it is in possession of the necessary information serves as a waiver of any right to deny a claim based on such information.' The plaintiff does not cite any case law or regulation that supports either of these propositions. The controlling regulations and case law are, in fact, contrary to the plaintiff's argument."
"The Insurance Department regulations in effect at the time the claim herein arose provided, in pertinent part, "[w]ithin 30 calendar days after proof of claim is received, the insurer shall either pay or deny the claim in whole or in part" (11 NYCRR former 65.15 [g] ). Insurance Law § 5106 (a) similarly provided that no-fault first-party benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained. The regulations further provided that this 30-day period may be extended by the insurer's timely demand for verification of the plaintiff's claim (see 11 NYCRR former 65.15 [d], [e]), and 'no-fault benefits are overdue if not paid within 30 calendar days after the insurer receives verification of all of the relevant information requested pursuant to subdivision (d) of this section.' (See 11 NYCRR former 65.15 [g]  [i]; Westchester County Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 262 AD2d 553 [2d Dept 1999].) Moreover, 'an insurer is not obligated to pay or deny a claim until all demanded verification is provided.' (Hospital for Joint Diseases v New York Cent. Mut. Fire Ins. Co., 44 AD3d 903, 904 [2d Dept 2007]. In fact, 11 NYCRR former 65.15 (g) (2) (iii) specifically provided that 'an insurer shall not issue a denial of claim form (NYS Form N-F 10) prior to its receipt of verification of all of the relevant information requested pursuant to subdivision (d) of this section (e.g., medical reports, wage verification, etc.)' (see New York Hosp. Med. Ctr. of Queens v Country-Wide Ins. Co., 295 AD2d 583 [2d Dept 2002]; Summit Psychological, P.C. v General Assur. Co., 9 Misc 3d 8 [App Term, 9th & 10th Jud Dists 2005]; Shtarkman v Allstate Ins. Co., 8 Misc 3d 129[A], 2005 NY Slip Op 51028[U] [App Term, 2d & 11th Jud Dists 2005]), and if the defendant had issued a denial, on the basis of an alleged fee schedule violation, without asserting the defense of lack of medical necessity, before the requested medical records were received, the defendant would have been deemed to have waived a possible defense of lack of medical necessity. (S & M Supply Inc. v Allstate Ins. Co., 2003 NY Slip Op 51191[U] [App Term, 2d & 11th Jud Dists 2003].)"
"The clear prohibition against issuing a denial of claim before all demanded verification information is received notwithstanding, the relevance of the medical records sought by the defendant before issuing its denial is patent. 'Defendant is not required to provide a blank checkbook to plaintiff. Rather, defendant is entitled to find out whether and why each MRI was prescribed; in other words, the carrier is entitled to inquire as to the medical necessity before it pays the bills.' (Lenox Hill Radiology & MIA P.C. v Global Liberty Ins., 20 Misc 3d 434, 438 [Civ Ct, NY County 2008].)"
"Given the nature of the defendant's fee schedule defense, that it is only obligated to pay 100% of the more expensive MRI and 75% of the less expensive MRI, this issue would not arise if the defendant was of the opinion that one or both MRIs were not medically necessary. It is only after receiving the requested medical verification that the defendant was able to determine that the MRIs were medically necessary and the fees it believed it was then obligated to pay."
"Alternatively, the plaintiff argues that the defendant has failed to submit proper proof in admissible form that plaintiff's bills were in excess of the appropriate workers' compensation fee schedule. On this score, the plaintiff is correct."
"...Having failed to proffer sufficient evidence to establish as a matter of law that plaintiff's claims reflected the incorrect amount for the services provided, the court denies defendant's motion for summary judgment."
Comment: It is sometimes suggested that once a no-fault insurer seeks additional verification on one issue, it cannot issue a denial on a different issue. This court decision hopefully provides some clarity as to that misconception.