Tuesday, May 6, 2008

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

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.


Anonymous said...

What am I missing here?
What did Ms. Lev need to do to demonstrate that the files she received from the medical care providers that retained her company to bill their services were "business records". What should third party billing companies do to get the patient files they receive from medical care providers converted to admissible evidence?
Was Pine Hollow Medical PC a medical care provider and if so, did they do their own billing?

Heidi said...

The above comment by "Anonymous" is Heidi Barron. Ooops.

Roy A. Mura said...

In Pine Hollow, it was an employee of the plaintiff's billing company who testified and was able to lay the foundation for admission of its claim records, which had been prepared from the plaintiff provider's "business records".

Frankly, it's difficult to reconcile Judge Sweeney's decision with the Appellate Term's decision in Pine Hollow. There are few facts recited in Pine Hollow from which to understand how the billing company employee in that case was able to lay the foundation for the information drawn from the records of its customer, the medical provider.

To me, it appears Judge Sweeney, expecting an appeal to be taken to the Appellate Term, is asking that court to review and reconsider its decision in Pine Hollow. Judge Sweeney goes to some lengths in his decision to discuss and distinguish the cases cited in Pine Hollow, almost as if to say that he disagrees with the outcome in that case. Of course, Kings Civil can't tell the Appellate Term what to do. I, myself, don't agree with the Appellate Term that a medical provider has a "business duty" to impart the treatment information to its billing company. Any business duty that exists in such a relationship seems to run in the opposite direction.

The easiest way around this Second Medical decision, of course, would be for providers to produce two witnesses at trial: one from the provider itself to lay the foundation for its records; and the second from the billing company to introduce the claim forms.

Richard Jaffe said...

It seems to me, in my humble opinion, that it is the insurance company's receipt of the bill, and consequently being put on notice of what is stated on the bill so that it has the opportunity to request additional verification or deny the claim outright, that needs to be admitted into evidence. Why should the truth of the matters asserted on the bill be at issue?

Roy A. Mura said...

A telling question, if there ever was one, for no-fault matters. I suppose for the same reason that the Court of Appeals is trying to decide whether insurers should be able to deny payment past 30 days from receipt of billings for DMEs that were never provided. Because otherwise, providers could make stuff up. Verification opportunities notwithstanding, if hearsay business records rather than live witnesses are going to be used to prove claims, there shouldn't be a "catch us if you can" standard applied to the substance of all billings. That's why, in my humble opinion, truth matters.

Richard Jaffe said...

Truth matters, this is a certainty. Nonetheless, I would respectfully submit that admitting the contents of what a bill for DME says only becomes relevant if its veracity is in issue. Why should it automatically be in issue if there is no reason to suspect its veracity? Perhaps if there was a good faith basis for a belief that the equipment was never issued, if shown, could be established first which would then require the admissibility of the underlying contents of the bill. Otherwise, it seems that the contents of the bill are being admitted not for the truth of the matter it asserts, but rather, as I had first suggested, only serves as notice to the carrier to request additional verification if the carrier thinks it is needed.

Roy A. Mura said...

I think we're talking about different things. This case and its ilk speak to what's needed to lay the proper foundation for qualifying and admitting something as a "business record" under CPLR 4518 into evidence. Not so much an insurance/no-fault law issue, as an evidentiary one, it seems.