Thursday, August 7, 2008

NYC Civil Court Finds That No-Fault Insurer Must Take "Final Action" Even If Verification Response Believed To Be Inadequate

NO-FAULT – OUTSTANDING VERIFICATION REQUESTS – PREMATURE CAUSE OF ACTION
Lenox Hill Radiology, PC, a/a/o Gerald Busanet v. Allstate Ins. Co.
(NYC Civil, New York Co., decided 8/4/2008)

A certain blawg reader and occasional commenter, who is a named partner in a certain law firm that represents a certain number of medical providers, including the plaintiff in this case, brought this as-of-yet unpublished decision to my attention yesterday under the email subject reference "Equal Time Doctrine" and with the request that I compare its holding to Judge Arlene Bluth's May 21st decision in Lenox Hill Radiology & MIA P.C. a/a/o Nila Sokol v. Global Liberty Ins., which I blogged on May 28th in my "What Part of "No" Did You Not Understand? Provider's Action Dismissed as Premature Based on Billing Counsel's Refusal to Provide Verification" post.

I did so and, in the interest of bloggeristic (it's a word, a new word, but a word) fairness and integrity, offer this short decision for your comparison and consideration.

In the AAO Sokol v. Global Liberty case, BSBGFM&N unsuccessfully argued that its letter responses to Global Liberty's verification requests not only were adequate, but that Global Liberty failed to present a "good reason" why additional verification was necessary. Judge Bluth rejected those arguments, holding that "[b]ecause plaintiff failed to respond to defendant's valid and proper verification requests, the 30-day period within which defendant had to either pay or deny the claim did not begin to run."

In this case, plaintiff submitted two claims for payment, presumably through BSBGFM&N. Allstate timely sent verification and follow-up verification requests for the two claims at issue. The parties stipulated that plaintiff responded to the "second round" of verification requests. According to the decision, plaintiff's letter responses to the two follow-up verification requests essentially stated that all the information sought by the verification request were submitted with "the initial claim". The decision does not make clear what the "second round" of verification requests was, or whether the "initial claim" refers to the first bill sent to Allstate.

When Allstate didn't pay, plaintiff sued, and the matter proceeded to trial on August 4, 2008. Allstate argued that its time to pay or deny was tolled by plaintiff's failure to adequately answer its verification request. Plaintiff argued that it did answer the verification request, and that Allstate was required to deny or pay on the claim after its receipt, but that it was not entitled to do nothing.

In accepting plaintiff's argument and finding for plaintiff, New York Civil Court Judge Peter Moulton held:
The sole issue to be decided by the court is whether defendant was compelled to deny or pay the claim, or whether defendant could deem plaintiff's letter responses insufficient. Defendant argues that its time to pay or deny is tolled by a failure to adequately answer a verification request. * * * * *

The court finds that defendant may not treat a response it deems inadequate as no response at all. The statutory scheme, which is "designed to promote prompt payment of legitimate claims" (Nyack Hospital v General Motors Acceptance Corp., 8 NY3d 294), is better served by defendant taking final action after receipt of a response to a verification request - even if finds that the request [sic] is inadequate. (See All Health Medical Care, P.C. v GEICO, 2 Misc3d 907.)
No, judge. With all due respect, the sole issue was whether Allstate was correct or incorrect in its position that plaintiff's verification responses were adequate or not.

It's arguable, at least to me, that this decision is four-square on point with and in diametric opposition to Judge Bluth's decision in the AAO Sokol v. Global Liberty case. In that case, it was clear from the decision that certain items requested were not provided at all, such as a letter of medical necessity. It's not so clear from this decision that the same occurred in this case. Judge Moulton's decision instead implies that the verification requests were duplicative on the two claims, and that plaintiff provided the requested materials or information in relation to the first but not second claim.

If that was the case, the court's decision is less befuddling, although Judge Bluth, in my opinion, got it right in realizing that it is the court's job in the first instance to decide whether a verification response was adequate or not, thus determining whether the claim was "due" and whether the insurer was therefore required to pay or deny the verified claim within 30 days.

There are several potential problems with Judge Moulton's decision. If a no-fault insurer believes verification is incomplete, Regulation 68 prohibits a denial. Period. There's no box on the NF-10 for denying a claim based on verification responses believed or "deemed" to be inadequate. The very act of denying a claim implies that verification is complete. If the rule of this case were to spread and/or be followed, and no-fault insurers were to issue "final action" precautionary denials even though they hadn't received what they asked for and ostensibly needed to verify a claim, the "premature action" defense will all but disappear, and it is conceivable that medical providers and their attorneys will argue, perhaps successfully to some judges, that the insurers' verification requests weren't reasonable or valid in the first place.

No-fault insurers probably realize that they run the risk of a court finding verification responses to be adequate rather than inadequate, as the insurer may have initially believed and contended. In such cases, the 30-day rule will apply to preclude all but coverage defenses, and interest and attorneys' fees will be awarded on overdue bills -- a stiff enough deterrent, it would seem, to making the wrong call on the adequacy or inadequacy of verification responses. Nonetheless, rather than imposing a "final action" requirement that Regulation 68 itself prohibits if indeed verification is incomplete, the courts should simply review and make that call themselves -- verification responses were adequate or not.

Requiring insurers, in effect, to deny claims when they believe verification is incomplete not only undermines the verification process, but runs contrary to both the letter and the spirit of Regulation 68. Perhaps Judge Moulton didn't realize that his decision, if followed, instead of "promot[ing] prompt payment of legitimate claims" may effectively force no-fault insurers either to deny claims believed to be as-of-yet unverified, or abandon their verification requests. How much is enough, after all? I'll give you this, but not this, this and that. Now take "final action" and make a claim decision.

Watch for more litigation on this issue.

Comments anyone?

9 comments:

"A certain blawg reader and occasional commenter, who is a named partner in a certain law firm that represents a certain number of medical providers, including the plaintiff in this case" said...

Roy,
Although I agree that a denial is prohibited in the case of outstanding verification, in this case the verification response set forth, in sum, "you have everything the provider has and there is nothing more to give." Under such circumstances, would a denial be prohibited? However, I think the real problem in this case is that the carrier did nothing upon receipt of the letter, running afoul of 11 NYCRR 65-3.2(e) and (f), which require the carrier “Clearly inform the applicant of the insurer’s position regarding any disputed matter” and “Respond promptly, when a response is indicated, to all communications from insureds, applicants, attorneys and any other interested persons.” This appears to comport with Judge Moulton’s “Final Action” determination.

Roy A. Mura said...

Now that's a record pseudonym. Shouldn't that be hyphenated, though?

Thanks for the additional case information. That may explain Judge Moulton's decision, but, but, but saying that a response is required per 65-3.2(e) and (f) is quite different than requiring a outright denial of benefits, doncha think?

The All Health Medical Care case is somewhat similar, and its citation in this case is now more understandable, given that in that case the insurer is said to have done nothing except to have "inserted plaintiff's response in the relevant file and took no further action."

What, then, would you say in a case in which only a partial response were made if an insurer were to write back and say, "Thanks for what you sent, but we still need the E, F, and G records"?

Or are you suggesting that the rule of this case should be limited to situations in which, like here, the provider has provided, or claims to have provided, all there is to provide?

A certain blawg reader and occasional commenter, who is a named partner in a certain law firm that represents a certain number of medical providers, including the plaintiff in this case said...

The argument was that they must take action in the face of a verification response, even if they deem it insufficient. (e)and (f) support that. Not sure why the court went the denial route as the "final action." I think the insurer could have paid the claim or rejected the response with an explanation. Either action would satisfy the reg. However, if the provider says "I have nothing else, you have it all." a denial could be issued. It all depends on how you define "outstanding," I suppose. As a side note, if an IME is verification and the patient does not provide such, should a denial be issued? Hmmmm.

Larry Rogak said...

It's a common problem, at least in my practice, when the no-fault insurer demands additional verification and the provider says he doesn't have anything further to produce. In such cases I advise insurers to issue the denial, because by saying "I have nothing more to give," the provider signals the end of the verification process. You can't produce what you don't have, so there's no sense in holding the verification process open. If what has already been provided doesn't satisfy the insurer, then they should issue the denial. At trial, if all of a sudden some new evidence pops up, the insurer should argue to keep it out because the provider denied they had it previously.

Barshay said...

I agree with Larry. What's the world coming to?

Larry Rogak said...

The fact that Dave Barshay agrees with something I wrote actually lifts my spirits and gives me hope that even the most dogged conflicts in the world can be resolved.

Can I get a "KOOM - BY - YAH", people?

. said...

"Can I get a "KOOM - BY - YAH", people?"

No.

jon kogen said...

As a matter of fact, the NYSID issued an opinion letter about assignments that bears on this question. Their opinion was that if the provider told the insurer that they could not provide what was asked for in a verification request re an AOB (I don't remember exactly what it was) then the 30 day rule began when the insurance company received a communication that the AOB was not available. I believe the reasoning should go to anything else that the provider states is "not available," in response to a verification request.

jon kogen, phd

Roy A. Mura said...

I see that as a different situation, Jon. In that case -- where the provider says it's not going to resubmit a prescribed AOB and no other verification is outstanding -- the bill/claim is still complete and becomes "due", except that in the event of a payment, it must go to the EIP rather than to the provider.

"When a defective assignment is submitted to the insurer, with the initial claim for payment, the insurer should seek additional verification of the claim by promptly sending a letter to the provider with a copy of the prescribed assignment form, asking the provider to have the parties execute the prescribed form and re-submit the completed form to the insurer. The insurer is thereby making an additional verification request, giving the claimant and the provider the opportunity to establish the requisite proof of claim. Of course, at this point, if the insurer requires any other information for verification in order to process the claim, it may also include this in its request.

* * * * * In the instant situation, a failure by the provider to re-submit the prescribed assignment form in response to the additional verification request made by the insurer will render the status of the claim as open, pending receipt of the requested verification. Submission of a legally effective assignment of benefits by use of the prescribed assignment form is necessary for the establishment of proof of the provider’s claim. Without it, the claim is not complete and the 30 day period for the payment or denial of the claim by the insurer does not activate until such time as the verification information is received by the insurer.

If the provider and eligible injured person fail to execute the prescribed assignment form and re-submit it to the No-Fault insurer, the provider should promptly notify the insurer that they will not be re-submitting the assignment form. In this circumstance, the provider may bill its patient (the eligible injured person) directly for the health services provided because the patient has not effectively assigned their benefits to the provider. Upon receipt of such notification from the provider, the 30 day period for payment of the No-Fault claim begins to run and the insurer must make a determination whether to reimburse the eligible injured person directly, or alternately, issue a denial of claim to the eligible injured person. Of course, in the absence of a valid assignment, where the patient’s claim for reimbursement is denied, the patient has recourse to seek a remedy for resolution of the claims dispute by requesting No-Fault arbitration, or initiating a legal proceeding against the insurer." Effect of a defective assignment on the payment of a No-Fault health service claim (February 6, 2003)

"However, it should be noted that where a claimant supplies at least a part of the information requested and the insurer is able to make a determination as to the sufficiency of proof as to part of the claim, Section 5106(a), as referenced above, requires the insurer to make a determination to pay or deny the part of the claim within 30 days after receipt of the requested verification." No-Fault Request For Additional Verification (August 22, 2006)