Hearsay, Hearsay -- Medical Billing Company's Claim Forms Ruled Inadmissible

NO-FAULT – BUSINESS RECORD EXCEPTION TO HEARSAY RULE – MEDICAL BILLING COMPANY CLAIM FORMS
Second Med., P.C. a/a/o Marvin Calender v. AutoOne Ins. Co.
(NYC Civil, Kings Co., decided 5/2/2008)

Once a week, someone from Second Medical, PC, would deliver a bunch of patient files to Inga Lev at Maugust, Inc. Maugust served as Second Medical's billing company. Each file contained one or more medical reports, which described the nature of the services that Second Medical purportedly provided to a particular patient, as well as an executed AOB form and information identifying the patient's no-fault insurer. Either Ms. Lev or one of her co-workers would prepare no-fault claim forms based upon the information contained on the documents contained in patient files and mail the claim forms, along with an executed assignment, to the insurers responsible for payment of the no-fault benefits.

At the trial of this action, Ms. Lev testified to the above procedure, that the claim form her company had prepared was mailed to AutoOne, and that payment was not made within 30 days. Ms. Lev gave no testimony, however, concerning the practices and procedures that plaintiff Second Medical had utilized in creating the documents contained in the patient files.

Although AutoOne's NF-10, which acknowledged receipt of the Maugust-generated claim form, was offered and received into evidence, AutoOne objected to the admission of the claim form, arguing that Ms. Lev had failed to lay a proper foundation for its admission as a business record pursuant to CPLR § 4518(a). Relying "primarily" on the Appellate Term, Second Department's September 2006 decision in Pine Hollow Medical, P.C. a/a/o Karen Allen v. Progressive Cas. Ins. Co., another case involving a no-fault medical billing company, plaintiff's counsel argued that since Ms. Lev established plaintiff had a business duty to Maugust to deliver the patient files, and that Maugust routinely relied on the medical reports and other documents contained in the files and fully incorporated them into no-fault claim forms which it created in the regular course of its business, a proper foundation for the admission of the claim form as a business record had been laid.

In sustaining AutoOne's objection and dismissing plaintiff's complaint, Judge Peter Paul Sweeney reviewed the business record hearsay exception rule of CPLR § 4518(a):

Here, Ms. Lev did not demonstrate any familiarity with plaintiff's [Second Medical's] business practices and procedures. Accordingly, she did not establish that the documents contained in Mr. Calender's patient file were business records within the meaning of CPLR 4518[a]. Further, she did not establish the admissibility of the file documents under any other hearsay exception. Since all the documents contained in Mr. Calender's patient file constituted inadmissible hearsay, it necessarily follows that the no-fault claim form, which incorporated these records, is also hearsay.

Judge Sweeney also distinguished the Pine Hollow Medical case by stating:

Plaintiff's reliance on Pine Hollow Medical, P.C. is misplaced. In Pine Hollow Medical, P.C., the court stated that "it is well-settled that where an entity routinely relies upon the business records of another entity in the performance of its own business' . . . , and fully incorporate[s]' said information into records made in the regular course of its business. . . , the subsequent record is admissible notwithstanding that the preparer lacked personal knowledge of the information's accuracy,'" (13 Misc 3d 131(A), 2006 NY Slip Op. 51870 (U) [citations omitted & emphasis added] ). While this is a true statement of law, it was never demonstrated in this case that the documents contained in the patient files which Ms. Lev and her co-workers routinely relied upon and fully incorporated into the no-fault claim forms qualified as business records within the meaning of CPLR 4518[a]. The root of plaintiff's argument appears to be that the term "business records" as used in Pine Hollow Medical, P.C. means any records, including records that may constitute hearsay. The premise of plaintiff's argument is without logic or support and is belied by the cases cited in Pine Hollow Medical, P.C.

The court went on to discuss and distiguish the non-no-fault cases cited and relied upon by the Appellate Term in Pine Hollow Medical, ultimately concluding that "since the documents contained in Mr. Calender's patient file constituted hearsay, the no-fault claim form which was based on the information contained in these documents is also hearsay. Hearsay cannot be transformed into non-hearsay simply because a business routinely relies upon it and integrates it into its own records." As plaintiff submitted no other evidence in admissible form establishing the facts asserted in the Maugust claim form, the court held that it had not made out a prima facie case.

No-fault medical provider suits continue to be won or lost on procedural issues and defenses wholly unrelated to substantive coverage defenses. Expect more litigation on this issue, as both providers and insurers will likely assert this holding in support of objections to the proferred admission of any business records that themselves rely on information from other business records.

Post Script - The question of whether the business record exception to the hearsay rule applies to insurance claim documents has come up before in a non-no-fault context. In Hochhauser v. Electric Ins. Co. (2nd Dept., decided 10/23/2007), the Second Department ruled that since an insured lacks a business duty, as opposed to a contractual duty, to report to his or her insurer in the course of its investigation regarding insurance coverage, neither the insured’s statement nor testimony regarding such a statement is admissible pursuant to the business records exception to the hearsay rule.