20 Fla. L. Weekly Supp. 671a

Online Reference: FLWSUPP 2007HORGInsurance — Personal injury protection — Coverage — Medical expenses — Where policy provides that insurer will pay 80% of reasonable expenses, insurer cannot systematically reimburse medical expenses at 200% of Medicare Part B fee schedule without any consideration of reasonableness of amounts charged

NEW SMYRNA IMAGING, LLC a/a/o FRANCIS HORGAN, Plaintiff, vs. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant. County Court, 7th Judicial Circuit in and for Volusia County. Case No. 2012-20804 CONS, Division 71. March 4, 2013. Honorable Robert A. Sanders, Jr., Judge. Counsel: Kimberly Simoes, The Simoes Law Group, P.A., Deland, for Plaintiff. John Morrow, Conroy Simberg, Orlando, for Defendant.

ORDER GRANTING PLAINTIFF’S MOTIONFOR SUMMARY JUDGMENT

THIS CAUSE is before the Court on Plaintiff’s Motion for Summary Disposition certificate date October 8, 2012, and its Supplemental Memorandum in Support of Motion for Final Summary Judgment, certificate date January 14, 2013. The Court having considered same, having considered the submissions by each party, having considered the evidence submitted, having heard oral argument made on behalf of the parties on February 18, 2013, and being otherwise duly advised in the premises, orders as follows:

I. Background.

On November 10, 2011, State Farm’s insured received an MRI of the cervical spine (72148), an MRI of the brain (70551) and x-rays of the cervical spine (72040) from New Smyrna Imaging (NSI). NSI submitted a bill in the amount of $1695.00 for the 72148, $1695.00 for the 70551 and $135.00 for the 72040 to State Farm. State Farm allowed reimbursement in the amount of $1066.28 for 72148, $1028.90 for 70551 and $79.08 for 72040. On the Explanation of Review provided to NSI, State Farm provided the following explanation,

“305 The allowed amount for this procedure is based upon 200% of the Participating Level of Medicare part B fee schedule for the region in which the services were rendered. (Reference: CMS Physician Fee Schedule File)

C1256 FL Our payment for this service is based upon the reasonable amount pursuant to both the terms and conditions of the policy of insurance under which the subject claim is being made as well as Florida Statutes 627.736(5)(A)1, which permits, when determining the reasonable charge for a service, an insurer to consider usual and customary charges and payments accepted by the provider, reimbursement levels in the community and various federal and state fee schedules applicable to automobile and other insurance coverages, and other information relevant to the reasonableness of the reimbursement for the service.”

Furthermore, the Explanation of Review advised the Plaintiff as follows:

“For date of accident 1/1/08 and after, if an insurer limits payment as authorized by subparagraph 2., the person providing such services, supplies, or care may not bill or attempt to collect from the insured any amount in excess of such limits, except for amounts that are not covered by the insured’s personal injury protection coverage due to the coinsure amount or maximum policy limits. F.S. 627.736(5)(a)5.”

Thereafter, NSI submitted a demand letter to State Farm and, when no additional payment was forthcoming, the present lawsuit was filed on March 6, 2012.

The Plaintiff filed its Motion for Summary Judgment on October 8, 2012, asserting that State Farm had breached its policy of insurance by failing to pay the reasonable charge as billed by NSI for the services rendered. In support of its Motion, the Plaintiff filed the Affidavit of Traci Postell the director of NSI, the deposition of State Farm’s corporate representative, the deposition of Darrell Spell and the deposition of Mitchell Medical. State Farm filed its Response to Plaintiff’s Motion for Summary Judgment on October 25, 2012, asserting that summary judgment was improper because it is within the sole province of a jury to determine whether the charge is reasonable. Further, in support of its Response, State Farm filed various materials including the Affidavit of Darrell Spell, an actuary with Milliman, Inc., the deposition of Traci Postell, an Affidavit of Daniel Merrigan and the Affidavit of Joffer Faria.

The Plaintiff took the deposition of Mitchell International on November 19, 2012. Mitchell International is a software company in San Diego, California that provides claims processing software to State Farm. The claim processing software provided to State Farm is Decision Point and the software has different functions which an insurance carrier can select from to reimburse claims. Mitchell testified that in early 2008, State Farm “activated” the 200 percent of Medicare Part B function in Decision Point. As a result of State Farm activating this function, Florida No Fault claims would be re-priced to reimburse at 200 percent of Medicare Part B. From 2009 to the present, State Farm has utilized 200 percent of Medicare Part B in determining the reimbursement rates for Florida claims.

The deposition of State Farm’s corporate representative, Daniel Merrigan, was taken on January 13, 2013. The notice of deposition requested that State Farm designate a representative to respond to specific considerations by State Farm in adjusting the claim including State Farm’s determination that the Plaintiff’s charges were not reasonable. Notwithstanding this specific designation, State Farm was unable to provide any information regarding what, if anything, was considered by the adjuster when NSI’s bill was processed. State Farm testified that its policy required it to pay “reasonable expenses” incurred by its policyholder and that its policy allowed it to consider several factors in making this determination. However, State Farm did not consider any of the factors identified in its policy other than 200 percent of Medicare Part B. State Farm testified that it contracted with Mitchell International to re-price bills at 200 percent because State Farm believes that is a “reasonable rate.” No determination as to whether NSI’s bill was “reasonable” in price was made by anyone at State Farm and State Farm does not believe that it is required to make any determination as to whether NSI’s bill was reasonable. State Farm contends that its only obligation is to pay a reasonable amount for the service. Although State Farm could not identify whether any specific bill was paid by an adjuster or not, a bill can be “auto processed” without any adjuster participation. If a bill is “auto processed” the State Farm claims processing system will pay the bill without any adjuster reviewing the bill or making any determinations.

The Affidavit of Ms. Postell was filed with the Court and the deposition of Traci Postell, NSI’s corporate representative, was taken on January 17, 2013. Ms. Postell testified that she has been the administrator of NSI since 2007 and she is responsible for the day-to-day operation of the facility. Ms. Postell testified that the charged amount for the services rendered by NSI was reasonable for the Volusia County area based upon her personal knowledge in the industry. Ms. Postell attested that NSI has been charging the same rates for approximately ten years. Additionally, she testified that in 2007 she contacted six other MRI centers in the Volusia County area and confirmed that NSI’s charges were comparable with other facilities.

The deposition of Darrell Spell, State Farm’s proposed expert witness, was taken on January 16, 2013. Mr. Spell testified that he has no personal knowledge as to the charges by other medical providers in the Volusia County area. Mr. Spell’s opinions were based upon information he gleaned from five different databases. Mr. Spell has no personal knowledge regarding the accuracy of any of the data contained in these databases. In coming to his conclusions in this case, Mr. Spell relied upon the 200 percent of Medicare Part B reimbursement rates found in the Florida No Fault statute. Mr. Spell opined that, in his opinion, 200 percent of Medicare Part B would be the maximum reasonable charge for the services rendered in this case based upon his interpretation of the statute.

II. The Summary Judgment Hearing

The hearing on NSI’s motion for final summary disposition commenced on February 18, 2013. At the hearing NSI argued that the Florida legislature established two separate and distinct payment methodologies. The first methodology is found at 627.736(5)(a)1. which provides:

(5) Charges for treatment of injured persons. —

(a) 1. Any physician, hospital, clinic, or other person or institution lawfully rendering treatment to an injured person for a bodily injury covered by personal injury protection insurance may charge the insurer and injured party only a reasonable amount pursuant to this section for the services and supplies rendered, and the insurer providing such coverage may pay for such charges directly to such person or institution lawfully rendering such treatment, if the insured receiving such treatment or his or her guardian has countersigned the properly completed invoice, bill, or claim form approved by the office upon which such charges are to be paid for as having actually been rendered, to the best knowledge of the insured or his or her guardian. In no event, however, may such a charge be in excess of the amount the person or institution customarily charges for like services or supplies. With respect to a determination of whether a charge for a particular service, treatment, or otherwise is reasonable, consideration may be given to evidence of usual and customary charges and payments accepted by the provider involved in the dispute, and reimbursement levels in the community and various federal and state medical fee schedules applicable to automobile and other insurance coverages, and other information relevant to the reasonableness of the reimbursement for the service, treatment, or supply.

The parties agree that State Farm utilized this payment methodology and it was incorporated into the policy of insurance. The second methodology is found at 627.736(5)(a)2.f. and provides:

2. The insurer may limit reimbursement to 80 percent of the following schedule of maximum charges:

. . .

f. For all other medical services, supplies, and care, 200 percent of the allowable amount under the participating physicians schedule of Medicare Part B.

State Farm concedes that it did not elect to utilize 627.736(5)(a)2.f., but instead incorporated the methodology found at 627.736(5)(a)1 into the policy applicable to this case.

NSI urges that the payment methodology of 627.736(5)(a)1. requires the insurance carrier to pay the medical providers charge so long as the charge was reasonable. NSI contends that under this payment methodology, the inquiry is not whether State Farm’s reimbursement was reasonable. NSI contends that State Farm’s reimbursement is irrelevant under the parameters of 627.736(5)(a)1. NSI further contends that without complying with the endorsement requirements announced in Kingsway v. Ocean Health, Inc., 63 So. 3d 63 (4th DCA 2011) [36 Fla. L. Weekly D1062a], State Farm is not allowed to utilize the reimbursement limitations of 627.736(5)(a)2.f. for any purpose. NSI argues that State Farm is given a choice of payment methodologies and under 627.736(5)(a)1) it must pay a reasonable charge. State Farm’s reimbursement rate would only be relevant under the alternative methodology of 627.736(5)(a)2.f. which is inapplicable here. Under that alternate methodology, State Farm could have limited its reimbursement to 200 percent of Medicare Part B. NSI contends that since State Farm did not elect to limit its reimbursement as allowed by 627.736(5)(a)2.f., it is required to pay NSI’s reasonable charge. NSI challenges State Farm’s suggestion that if its reimbursement was “reasonable,” the inquiry ends. NSI further asserts that since State Farm did not consider usual and customary charges, payments accepted by the provider, reimbursement levels in the community or any other fee schedule other than 200 percent of Medicare when it adjusted the claim, that State Farm is precluded from relying upon these additional elements to defeat Plaintiff’s summary judgment by challenging the reasonableness of Plaintiff’s charges. Furthermore, NSI points out that State Farm has presented no testimony that any of this additional information would have resulted in State Farm actually making a determination that NSI’s bills were not reasonable in price.

In response, State Farm agrees that it selected to pay its policyholder’s claims pursuant to the provisions of 627.736(5)(a)1. However, State Farm contends that it’s only obligation under its policy is to pay a reasonable amount for the services. State Farm contends that it does not have to determine that NSI’s charges were unreasonable to pay a lesser amount. State Farm utilized the reimbursement limitations of 627.736(5)(a)2.f. in determining the reimbursement amount it would apply to the Plaintiff’s bills and contends that 627.736(5)(a)1. allowed it to do so. State Farm contends that the reimbursement limitations of 627.736(5)(a)2.f. is a “state medical fee schedule applicable to automobile insurance” and, therefore, 627.736(5)(a)1. provides that State Farm “may” consider it in deciding if the Plaintiff’s charge was reasonable. Although it did not consider any of the additional information the statute said it “may consider” when the claim was originally paid, State Farm contends it can now challenge the reasonableness of NSI’s charges by obtaining additional information which it could have originally considered under 627.736(5)(a)1. Thus, State Farm asserts that summary judgment is inappropriate because the issue of the reasonableness of NSI’s charge is a fact question for the jury.

III. Findings of Fact and Law

In this lawsuit NSI contends that State Farm failed to pay its reasonable charges for the MRI and x-ray services performed on State Farm’s policyholder. NSI provided evidence through the Affidavit of Traci Postell that NSI’s charge for the MRI and x-ray services provided to State Farm’s policyholder were reasonable in price. NSI contends that State Farm made no determination as to whether or not NSI’s charge was reasonable, but instead, utilized the statutory fee schedule found at 627.736(5)(a)2.f. to reimburse all services in an across the board manner. NSI contends that under 627.736(5)(a)1. State Farm was required to make a determination regarding the reasonableness of NSI’s charges and it did not make any such determination. Instead, NSI contends that State Farm has improperly implemented an automated process for reimbursing medical bills at 200 percent of Medicare Part B rather than complying with the terms of its policy to pay 80% of reasonable expenses. This Court agrees.

As the record evidence clearly and unequivocally indicates, prior to the time the bills were incurred, submitted to and paid by State Farm, State Farm had implemented a process whereby Mitchell International would “re-price” claims to be reimbursed at 200 percent of Medicare Part B. It is without dispute that State Farm had already made a determination to reimburse the Plaintiff’s charges at 200 percent of Medicare Part B without any consideration of the “reasonableness” of the charge.¹ State Farm clearly contended that it did not believe it had any obligation under its policy to determine whether the provider’s bill was reasonable in price. Instead, State Farm erroneously relied upon the reimbursement limitations of 627.736(5)(a)2.f. to suggest that it reimbursed a reasonable amount to NSI. State Farm’s analysis misses the mark entirely. The relevant inquiry under 627.736(5)(a)1. is the reasonableness of the provider’s charge. The inquiry is not the reasonableness of State Farm’s reimbursement. If State Farm had elected to utilize the payment methodology found at 627.736(5)(a)2.f. then it’s reimbursement would be the relevant inquiry because under the provisions of 627.736(5)(a)2.f. the provider’s charge is irrelevant.

Because State Farm elected to pay the reasonable charges incurred, State Farm could have considered numerous factors in making that determination. State Farm did not consider any of the permissible factors contained in 627.736(5)(a)1. to determine if NSI’s charges were reasonable. In fact, it made no determination whatsoever regarding the reasonableness of the charges submitted by NSI. State Farm merely applied 200 percent of Medicare Part B and reimbursed the services at that rate. State Farm’s position was that it was entitled to avail itself of the limitations in 627.736(5)(a)2.f. in adjusting its claims and State Farm did, in fact, utilize the fee schedule set forth in 627.736(5)(a)2.f. in calculating the reasonable reimbursement rates under its policy. However, State Farm is not permitted to invoke the payment limitations of 627.736(5)(a)2.f. without complying with the provisions of Kingsway. F.S. 627.736(5)(a)2.f. is a payment limitation.

This Court also rejects the testimony of State Farm’s expert, Darrell Spell. Mr. Spell’s opinions are not relevant to the issues being litigated in this case, his opinions are not based upon personal knowledge and the basis for his opinions cannot be authenticated. Furthermore, Mr. Spell bases his opinions on 200 percent of Medicare Part B which is not authorized due to State Farm’s selection of the “reasonableness” methodology rather than the “payment limitation” methodology.

IV. Opinion of the Court.

F.S. 627.736(5)(a)2.f. established a minimum reimbursement schedule which insurance carriers were permitted to elect if they properly followed the mandates set forth by Kingsway. State Farm did not elect to follow 627.736(5)(a)2.f. and, as described herein, State Farm’s insurance policy stated that it would pay “80% of all reasonable expenses incurred.” By electing to follow the provisions of 627.736(5)(a)1., State Farm was required to pay “reasonable charges” billed by its policyholders’ medical providers. Instead of engaging in this analysis and making that determination when the claim was processed, State Farm set its reimbursements according to the provisions of 627.736(5)(a)2.f. State Farm systematically reimbursed medical expenses at 200 percent of Medicare Part B and admits that it made no determination as to whether the charge billed was reasonable.

Under the provisions of 627.736(5)(a)1. the purported reasonableness of State Farm’s reimbursement is irrelevant. State Farm’s suggestion that it may avoid further liability because it paid a reasonable amount is inaccurate as a matter of law under 627.736(5)(a)1. The sole consideration under this section is whether NSI charged a reasonable amount. The evidence in this case reveals that NSI’s charges were reasonable and State Farm has proffered no evidence which disputes this fact. It is without dispute that State Farm did not make any determination that NSI’s charges were not reasonable before, during or after the claim was paid. The Court rejects State Farm’s proffer of evidence from Darrell Spell as Mr. Spell’s opinions are not based upon personal knowledge and the information Mr. Spell relied upon cannot be authenticated and is, therefore, inadmissible hearsay. Furthermore, Mr. Spell bases his opinions on 200 percent of Medicare Part B which this Court finds inapplicable to challenge the reasonableness of the Plaintiff’s charges.

This Court finds no genuine issues of material fact regarding whether the Plaintiff’s charge for the services rendered was reasonable in amount. Therefore, the Court finds that Plaintiff’s charge of $1,695.00 for CPT code 72148, $1,695.00 for CPT code 70551 and $135.00 for CPT code 72040 is a reasonable charge.

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¹State Farm’s reimbursement at 200 percent of Medicare Part B was so automatic that State Farm implemented a claims handling process appropriately named “auto pay.” Under the auto pay process a bill would be received, re-priced and paid at 200 percent without the involvement of any human being.

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