Court Denies Motion to Vacate Arbitration Award of DME Cost Despite Evidence of Fraud

NO-FAULT – DMEs – MEDICAL NECESSITY – FRAUD
Matter of Travelers Indem. Co. v. Tri Borough Medical Supply, Inc. a/a/o Clarence Beckles
(Sup. Ct., New York Co., decided 10/24/2008)

There were two things working against Travelers in this case: (1) the limited scope of judicial review of an arbitration award; and (2) an affidavit of the prescribing physician which said that "most" but not all durable medical equipment items (DMEs) he had prescribed while working at Sunset General Medicine & Rehabilitation, PC, in Brooklyn were not medically necessary.

Based on a negative peer-review report, Travelers timely denied payment of DMEs prescribed by the subsequently de-licensed Dr. Melchias Mukendi of Sunset General Medicine & Rehabilition, PC. Respondent DME provider filed for arbitration of that denial and was awarded $850.62 by the arbitrator, despite Traveler's submission of:

• the negative peer-review report, opining that the prescribed DMEs were not medically necessary;
• an affidavit from Dr. Mukendi, in which he averred that: “While at Sunset, [a manager and a representative of a DME supplier] gave me a list of DME that I was told to prescribe to rnost patients. I was required to prescribe these items even if there was no medical necessity to support the prescriptions. In addition, I was told that I should make referrals for consultants to other medical providers whose specialties appeared on the initial evaluation form. These referrals . . . were made regardless of medical necessity”; and
• copies of correspondence sent to a federal magistrate judge related to fraud in the no-fault DME industry that related to a RICO suit in which one of the defendants was thc wholesaler that provided the DME in this case.

Based on the submitted initial medical evaluation of Dr. Mukendi, which “specifically include[d] the medical equipment here in question in its 'Treatment Plan' and g[ave] as its reason for same ‘to alleviate pain and muscle spasm, to prevent stiffness, to improve blood circulation, to promote healing and restore normal joint mobility", the no-fault arbitrator concluded that Triborough "met its burden to present a prima facie case of medical necessity for the equipment here in question and has adequately refuted [Travelers'] peer review."

Travelers appealed the arbitration decision to a master arbitrator and lost, based on the mater arbitrator's conclusion that the original arbitrator had shown a "rational basis" for the award. Traveler's then commenced this special proceeding purusuant to CPLR 7511 to vacate the arbitration award as "arbitrary, irrational, contrary to applicable law and so imperfectly executed as to warrant vacatur and reversal."

In concluding that Travelers had not met its burden of establishing its entitlement to vacatur of the award, given the court's limited scope of review of arbitration awards, New York County Supreme Court Justice Eileen Bransten held:

Here, the evidence was sufficient. It was not irrational for the arbitrator, after holding a hearing, listening to the arguments of all counsel and reviewing the parties’submissions, to conclude that based on the medical evaluation, the DME was medically necessary. Dr. Mukendi's affidavit, while acknowledging that he was told to prescribe DME in "most" cases while working at Sunset, did not address the particular facts related to Mr. Beckles. The physician performing peer review on behalf of Travelers, moreover, never personally saw Mr. Beckles.

Additionally, there is absolutely no indication that the master arbitrator did not examine the sufficiency of the evidence. Indeed, the [master arbitration award] sets forth that it was within the arbitrator's province to “deterniine what cvidence or testimony to accept or reject, and what inferences should be drawn as supported by the evidence” and that the master arbitrator could not substitute his “interpretation of the evidence or [] judgment in place of the arbitrator.”

Regardless of what you may think about the outcome of this matter, this case points up the difficulty parties generally experience when asking courts to overrule and vacate arbitration awards. At each step of the appeal process, the scope of review becomes narrower and, consequently, it becomes more difficult to gain a reversal.