9 Fla. L. Weekly Supp. 334b

Insurance — Personal injury protection — Medical provider which referred and coordinated scheduling of insured’s MRI with entity which performed MRI did not render any necessary medical, surgical, x-ray, dental, and rehabilitative services to the insured and is not entitled to payment of any PIP benefits under insurance contract and section 627.736 — Medical provider’s arrangement with actual provider of MRI services, whereby MRI provider billed referring medical provider, and referring medical provider, in turn, billed insurer an increased amount for the MRI is unlawful and in violation of section 817.505 — Summary judgment granted in favor of insurer

LAKE CHARLESTON HEALTH CENTER, (As Assignee For Sonia Sing), Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant. County Court, 17th Judicial Circuit in and for Broward County. CASE NO: 00-14116 CACE 54. January 22, 2002. Zebedee W. Wright, Judge. Counsel: Cris Boyar, Singer, Farbman & Associates, for Plaintiff. Frank S. Goldstein, Hengber & Goldstein, P.A., Ft. Lauderdale, for Defendant.

ORDER GRANTING FINAL SUMMARY JUDGMENT

This matter having come before the Court for hearing on January 22, 2002, on Defendant’s Motion for Final Summary Judgment, and the Court having reviewed the file, heard argument of counsel, and being otherwise fully advised in the premises, it is

ORDERED AND ADJUDGED:

1. Defendant’s Motion for Final Summary Judgment is GRANTED.

2. This action was brought by Plaintiff, Lake Charleston Health Center, seeking recovery of $1,645.00 for magnetic resonance imaging (“MRI”) services provided to Sonia Sing, an insured of Defendant, State Farm Mutual Automobile Insurance Company (“State Farm”). Lake Charleston seeks recovery against State Farm under the Florida no-fault law, specifically, § 627.736, Florida Statutes, and the personal injury protection (“PIP”) benefits available under State Farm’s automobile insurance policy with its insured.

3. State Farm contends Lake Charleston is not entitled to recover any PIP benefits because it did not lawfully render the MRI services in question and because Lake Charleston’s arrangements with the actual provider of the MRI services are contrary to public policy and unlawful as violative of the Florida Patient Brokering Act, section 817.505, Fla. Stat. (2000).

4. As set forth below, the Court agrees with State Farm’s position and, accordingly, enters final summary judgment for State Farm.Undisputed Material Facts

1. State Farm’s insured, Sonia Sing (“insured”), was involved in a motor vehicle accident on April 11, 2000.

2. At the time of the accident, the insured had a policy of automobile insurance with State Farm that provided PIP coverage in accordance with the Florida Motor Vehicle No-Fault law.

3. Following the accident, the insured obtained chiropractic treatment from Dr. Richard Ridky, d/b/a Lake Charleston Health Care Center, (“Lake Charleston”) who referred her for an MRI.

4. On June 1, 2000, the insured underwent an MRI. The MRI was performed by Diagnostic Imaging Consolidated Services, Inc. (“D.I.S.C.”), who brought their mobile MRI equipment to Lake Charleston’s parking lot and performed the MRI on the insured.

5. The insured was referred to D.I.S.C. by Lake Charleston for provision of these MRI services. Pursuant to a contract between D.I.S.C. and Lake Charleston, D.I.S.C. rendered MRI services to patients referred by Lake Charleston at a discounted rate of $215.00 per scan. Pursuant to this contractual arrangement, Lake Charleston billed insurers, like State Farm in this case, $1,645 per scan. Lake Charleston retained the $1,430 difference although it did not render any of the MRI services.

6. Lake Charleston does not own or lease any MRI equipment. Moreover, Lake Charleston does not employ any MRI technicians, nurses, doctors, radiologists or any other such technical or medical personnel who could render, perform or interpret MRI scans.

7. State Farm received a HCFA 1500 form from Lake Charleston, in which Lake Charleston billed State Farm $1,645 for the MRI services provided to the insured by D.I.S.C.Conclusions of Law

8. Pursuant to its automobile insurance policy issued to the insured and § 627.736, Fla. Stat., State Farm is obligated to pay eighty percent of “all reasonable expenses for necessary medical, surgical, x-ray, dental and rehabilitative services,” up to $10,000, that are related to the operation, maintenance or use of a covered automobile. § 627.736(1)(a), Fla. Stat. (1999). Although payment of such benefits would generally be made to the insured pursuant to the insurance contract, § 627.736 allows an insurer to pay for such reasonable expenses “directly to such person or institution lawfully rendering such treatment” when so authorized in writing by the insured. § 627.736(5)(a), Fla. Stat. (1999). There is no provision in § 627.736, or in State Farm’s insurance contract with the insured, that would allow (much less require) payment of PIP benefits to a stranger who did not render the services or treatment for which it has billed State Farm.

9. The undisputed evidence of record shows that Lake Charleston did not render the MRI services to the insured, lawfully or otherwise, for which it billed State Farm. Rather, Lake Charleston simply referred the insured to D.I.S.C. for provision of the MRI services. Lake Charleston, at most, made a couple of phone calls to schedule the insured’s appointment at the MRI facility — if even that.

10. D.I.S.C. actually rendered all of the MRI services to the insured. In addition, even assuming Lake Charleston scheduled the insured’s MRI appointment, the mere ministerial tasks of scheduling and billing for an MRI can hardly be considered providing a necessary medical service. In any event, those ministerial tasks are not the services for which Lake Charleston billed State Farm.

11. Because Lake Charleston did not render any “necessary medical, surgical, x-ray, dental and rehabilitative services” or the like to the insured — and, specifically, did not render the MRI services for which it has billed — Lake Charleston is not entitled to payment of any PIP benefits under State Farm’s insurance contract with the insured or § 627.736. See § 627.736(1)(a), (5)(a), Fla. Stat. It necessarily follows that State Farm is entitled to summary judgment in this action.

12. Based on essentially identical facts, the fifth District Court of Appeal held, in a decision released after the hearing on State Farm’s motion, that a billing entity such as Lake Charleston is not entitled to recover PIP benefits under Florida’s no-fault law. Medical Management Group of Orlando, Inc. v. State Farm Mutual Automobile Ins. Co.,¹* Fla. Law Weekly * (Fla. 5th DCA Feb. 8, 2002) [27 Fla. L. Weekly D371]. In so holding, the Court stated that:

a company such as MMGO [Lake Charleston, here] is not entitled to be compensated for PIP benefits. Section 627.736(1)(a) provides that the insurer must pay 80% of the “medically necessary medical . . . services.” We do not find that providing referral and billing services constitutes medical services under the PIP provisions. This is similar to the Medicare limitation on the requirement to pay for “medical care.” In Central States, Southeast and Southwest Areas Health and Welfare Fund v. Pathology Laboratories of Arkansas, P.A., the court recognized a distinction between services which were medical and those which were merely professional components of the billing. There is simply nothing medically necessary about a billing which compensates for the referral to a particular MRI provider and/or the costs of billing for the provider’s services.

Fla. L. Weekly at * [27 Fla. L. Weekly D371].

13. A similar result, based on virtually identical facts, was reached by the Third District Court of Appeal in Federated Nat’l Ins. Co. v. Physicians Charter Services, 26 Fla. L. Weekly D1637 (Fla. 3d DCA July 5, 2001). In its final summary judgment, the trial court in Federated determined that an entity is not prohibited from contracting with the actual providers of the MRI service or leasing time on MRI machines and, thus, is a health care provider who performs a necessary medical service as provided in § 627.736 and is entitled to the payment of PIP benefits.² The Third District Court of Appeal reversed, specifically holding that:

PCS [like Lake Charleston here] is not entitled to recover Personal Injury Protection (PIP) benefits for magnetic resonance imaging services allegedly provided to Federated’s insureds, because PCS does not perform any necessary medical services and is not a “physician, hospital, clinic, or other person or institution lawfully rendering treatment to an injured person for a bodily injury covered by PIP insurance.” § 627.736, Fla. Stat. (2000). There is no provision in Florida’s personal injury protection statutes for the payment of policy benefits to a third party who has not performed medical services. Thus the trial court erred in finding Federated liable for payment of PIP benefits to PCS, and in granting the final summary judgments in favor of PCS.

26 Fla. L. Weekly at D1637. The same conclusion reached in Medical Management and Federated is required in this case with regard to the Lake Charleston bill at issue where identical facts exist. See Pardo v. State, 596 So.2d 665 (Fla. 1992).

14. The well-reasoned decision in NuWave Diagnostics, Inc. v. State Farm Mut. Auto. Ins. Co., 6 Fla. L. Weekly Supp. 522 (Fla. Broward County Ct. May 7, 1999), further support this conclusion.

15. In NuWave, the court held:

NuWave [who played the same role as Lake Charleston here] did not in this case, and does not as a general matter, provide any treatment or any meaningful service to the patient, State Farm’s insured in this case. NuWave acts simply as a “facilitator” or middleman, fulfilling a “need” where there really is none. The Court finds that NuWave acts simply as a middleman creating an unnecessary, useless, extra layer of health care costs.

* * * *

NuWave is not a “physician, hospital, clinic, or other person or institution lawfully rendering treatment” to State Farm’s insured. Indeed, NuWave provided no treatment of any kind, and provided no “necessary medical, surgical, X-ray, dental, rehabilitative services” or the like that would qualify it as a health care provider entitled to payment of PIP benefits under section 627.736. In short, NuWave [does] not provide any treatment or meaningful service whatsoever to a patient such as State Farm’s insured in this case.

6 Fla. L. Weekly Supp. at 523. Accordingly, the court went on to hold that NuWave, like Lake Charleston here, was not entitled to the PIP benefits it billed for under State Farm’s insurance policy and § 627.736. Id. at 524. The same result is called for in this case.

16. Pursuant to the Florida Patient Brokering Act, it is unlawful for any person to:

[s]olicit or receive any commission, bonus, rebate, kickback, or bribe, directly or indirectly, in cash or in kind, or engage in any split-fee arrangement, in any form whatsoever, in return for referring patients or patronage to a health care provider or health care facility.

§ 817.505(1)(b), Fla. Stat. (1999). Put simply, “patient brokering” is the practice of receiving a portion of a fee for medical services in return for referring patients to the provider. Fla. H. R. Final Bill Analysis & Economic Impact Statement for CS/HB 283 at 2 (as revised by Comm. on Health Care) (May 6, 1996) (creating § 817.505, Fla. Stat.) (Ex. E and hereinafter referred to as “H.R. Bill Analysis”). “Fee splitting” exists where the compensation for a health care service provided to a patient is divided between the provider of the service and any person who sent the patient to the provider or called the provider for consultation. See Practice Management Associates, Inc. v. Orman, 614 So. 2d 1135, 1137 and n. 3 (Fla. 2d DCA 1993).

17. In adopting § 817.505, the legislature recognized that paying for patient referrals “results in the administration of unnecessary, excessive and inappropriate health care services paid for by both public and private insurance programs.” H.R. Bill Analysis at 2. Indeed, as found by the legislature, “[u]nsuspecting persons are sometimes referred to inappropriate programs or labeled with false diagnoses so that their insurance will cover their treatment.” To combat this evil, the legislature enacted § 817.505 “to eliminate or reduce the present practice of paying, or receiving payment for, the referral of an individual to a health . . . care facility or provider.” Id. at 3. The purpose of the statute, thus, “is to help hold down health care cost by eliminating unnecessary or inappropriate referrals.” Id. at 5. In addressing the economic impact of the statute, the legislature determined that a reduction in such referrals not only would benefit insurance companies by reducing payments, but also would “benefit the public in terms of lower premiums” and reduce overutilization. Id.

18. The undisputed evidence clearly demonstrates that Lake Charleston is engaged in unlawful patient brokering in violation of § 817.505 and the public policy that led to enactment of that statute. Specifically, the fee charged by Lake Charleston for the MRI services rendered to the insured is split between Lake Charleston and D.I.S.C., the actual provider of the services, in return for Lake Charleston’s referral of the insured to D.I.S.C. Pursuant to its split-fee arrangement with D.I.S.C., Lake Charleston retains 75 percent or more of the total fee (its kickback) although it performed none of the MRI services for which it bills.

19. This precise situation was addressed by the Fifth District Court of Appeal in Medical Management. In Medical Management, the plaintiff was engaged in the same activities and arrangements as Lake Charleston is in this case. Plaintiff contended, as Lake Charleston does here, that the arrangement did not violate § 817.505 because it was a “free enterprise commercial venture based on the common law right of assignment, claiming an assignment of the patient’s right under his insurance policy and an assignment from Premier [D.I.S.C. here] of its right to bill a commercially reasonable fee.” Id. at *. In rejecting the fiction that MMGO provided the MRI services based upon its “lease” arrangement with Premier, the District Court held:

We agree with the trial judge that the arrangement is nothing more than a fee-splitting scheme to compensate for MRI referrals prohibited by section 817.505, Florida Statutes.

The same result is called for in this case based upon as identical arrangement. Pardo, 596 So.2d 665.

20. Similarly, in NuWave, the plaintiff was engaged in the same activities and arrangements as Lake Charleston is in this case. The court there held that the payment sought by NuWave from State Farm’s insured’s PIP benefits would result in a “splitting of the fee for the MRI services between NuWave and Concept [the actual provider], with Concept receiving $400 and NuWave receiving $1,100 (per scan) for the MRI services, none of which services were actually provided by NuWave.” Id. at 523. In effect, the court held, “NuWave is receiving a referral fee of $1,100 per scan. . . for brokering this patient to Concept.” Id. The court concluded that “[a]ny such split-fee arrangement . . . is against the public policy of this state and is also specifically prohibited by section 817.505.” Id. at 523-24.

21. In specifically addressing the statutory violation, the NuWave court’s analysis is unassailable:

The patient brokering statute reflects clear legislative intent to prohibit receipt of any kind of payment — “directly or indirectly” — for mere referral of a patient as well as any split-fee arrangement — “in any form whatsoever” — whereby someone who refers a patient to a health care facility is paid a portion of the fee for the health care services provided by that facility, although the referring person provided none of those services. The statute would clearly preclude Concept from billing State Farm $1,500 per scan and then kicking back $1,100 to NuWave for the referral. That is, in effect, what NuWave seeks to accomplish here. The fact that, by contract, NuWave moves the money in a different direction by billing the insurer directly for its “kickback” or “referral fee” does not make the arrangement lawful. The legislature was clearly concerned with prohibiting the end result of sharing the fee, not the direction of the cash flow.

Id. at 524. Accordingly, the court concluded that the split-fee arrangement that existed between NuWave and the actual provider of the MRI services was “contrary to the public policy of this state as reflected in the patient brokering statute.” Id.

22. In addressing the broker’s claim for PIP benefits in NuWave, the court concluded that the amount charged by the broker over and above the amount charged by the facility actually rendering the MRI services “constitutes a kickback, rebate or split-fee arrangement within the meaning of § 817.505.” Id. As such, the court found that payment of the insured’s PIP benefits to the broker under § 627.736 would be contrary to Florida public policy. The court held, “it would be an illogical and unreasonable interpretation of the PIP statute to find that NuWave is entitled to payment of PIP benefits thereunder when its activities are not only contrary to public policy but expressly prohibited by the patient brokering statute.” Id.

23. The same conclusions are called for in this case which involves identical facts. Lake Charleston’s split-fee arrangements with D.I.S.C., the facility that actually rendered the MRI services to the insured, is unlawful under § 817.505 and contrary public policy. Because Lake Charleston’s activities and arrangements are unlawful, it would be contrary to public policy to allow Lake Charleston to recover under section 627.736. It would simply be illogical to conclude that the legislature determined that paying for patient referrals results in “unnecessary, excessive and inappropriate health care services,” and sought to eliminate the practice, but intended to allow recovery of fees for such practice as a reasonable expense for necessary medical services under section 627.736. See Medical Management; NuWave; Mayer v. State Farm Mut. Auto. Ins. Co., 7 Fla. L. Weekly Supp. 542 (Fla. 6th Jud. Cir., Pinellas Co. May 8, 2000) (“as a matter of public policy . . . . it is inappropriate for a provider to bill $1,150.00 for a service for which he was billed and paid $100.00 where he had absolutely nothing to do with the services rendered [and,] [a]s a matter of public policy, . . . it is fraud on the insurance carrier for the provider to bill . . . for the service at issue, given the fact that the provider [did not] render the services”).³

24. These conclusions are further supported by the findings and conclusions of the Fifteenth Statewide Grand Jury recently released. In its Report on Insurance Fraud Related to Personal Injury Protection, Case No. 95,746 (Second Interim Report of 15th Statewide Grand Jury) (Fla. Aug. 17, 2000), the grand jury examined the issue of fraud in PIP insurance, defining “PIP fraud” to include, among other things: “[1] brokering patients between doctors . . . and diagnostic facilities . . . ; [2] billing insurance companies for treatment not rendered; . . . [and] [3] inflating charges for diagnostic tests or procedures through brokers.” Id. at 1. The grand jury described what it identified as “MRI brokering” as follows:

Taking advantage of the excess capacities of MRI facilities, some unscrupulous individuals have formed what they call MRI brokerage businesses. What these businesses do is negotiate a deal with an MRI facility or multiple MRI facilities to perform MRI tests, for a price of roughly $350-$450. The MRI broker will then bill out these same tests to an insurance company for as much as $1,700. They do so by indicating in the billing documents that the broker is actually the facility administering the test, sometimes going so far as cutting and pasting documents, removing the letterhead from the real MRI facility and substituting their own.

* * * *

MRI brokers provide no real service other than scheduling an appointment which any doctor’s office can do, or for that matter . . . which any patient can on their own.

Id. at 12-13. This is precisely the type of activity engaged in by Lake Charleston in the instant case.

25. The grand jury found that “the illegal behavior is so rampant that those who are acting illegally are causing tremendous harm to the citizens of this State.” Id. at 3. In this regard, the grand jury specifically found:

[A] number of greedy anal unscrupulous [persons] have turned that $10,000 [PIP] coverage into their personal slush fund. Paying kickbacks for patients, abusing diagnostic tests, grossly inflating costs by engaging in sham transactions and filing fraudulent claims of injury, these individuals think nothing of enriching themselves by exploiting the misfortunes of others. The result is loss of coverage and marginal medical treatment for those who are injured, as well as higher insurance rates for all drivers.

Id. at 2. The grand jury further found that gross markups on diagnostic tests such as exists with MRI brokering “is not customary among legitimate medical professionals.” Id. at 11.

26. The grand jury went on to expressly endorse the result in NuWave v. State Farm, discussed above. It made specific note of the court’s rejection, as a legal fiction, of the broker’s claim that it had provided the MRI services. It also made specific note of the court’s finding that MRI brokering activity constituted a clear violation of § 817.505, with the markup between the charge by the MRI facility and the bill submitted by the broker to the insurance company being nothing more than a kickback. Id. at 13-14.⁴

27. As the foregoing demonstrates, the undisputed evidence establishes that Lake Charleston’s arrangement with D.I.S.C., the actual provider of the MRI services to the insured, is unlawful and in violation of § 817.505. As such, public policy compels the conclusion that Lake Charleston is precluded from recovery in this action. See Harris v. Gonzalez, 26 Fla. L. Weekly D1433 (Fla. 4th DCA June 6, 2001) (affirming summary judgment for defendant on tortious interference with contract claims because contract allegedly interfered with violated Florida public policy embodied in numerous Florida statutes which prohibit kickback and split fee arrangements involving patient referrals for health care services). See also Medical Development Network, Inc. v. Professional Resp. Care/Home Medical Equip. Serv., Inc., 673 So. 2d 565, 566-67 (Fla. 4th DCA 1996) (medical consulting agreement which violated federal anti-kickback law was not enforceable under Florida law); Dorado Beach Hotel Corp. v. Jernigan, 202 So. 2d 830, 831 (Fla. 1st DCA 1967) (affirming summary judgment for defendant, holding that defendant’s gambling debt to plaintiff could not be enforced in Florida “because it is contrary to public policy” and Florida “will not lend its judicial arm to the collection of monies wagered in such enterprises not authorized by the law of the State of Florida); Young v. Sands, Inc., 122 So. 2d 618, 619 (Fla. 3d DCA 1960) (gambling obligation cannot be enforced in Florida “because it is contrary to public policy”);William Lehman Mitsubishi, Inc. v. Washington, 3 Fla. L. Weekly Supp. 549 (Fla. 11th Jud. Cir. Ct. Dade Cty. Nov. 1, 1995) (car dealer could not recover balance due on down payment of vehicle because dealer violated the FDUTPA; “pursuant to the statute Plaintiff cannot profit from its illegal behavior”).Certification to Fourth District Court of Appeal

28. Pursuant to Florida Rule of Appellate Procedure 9.160, this Court hereby certifies that this case involves issues of great public importance, including the following issues:

(1) Whether an entity that refers and coordinates the scheduling of a patient’s MRI to and with a facility that actually performs and renders all the MRI services is entitled payment of PIP benefits under section 627.736 for the MRI services.

(2) Whether an entity that refers and coordinates the scheduling of a patient’s MRI to and with a facility that actually performs and renders all the MRI services pursuant to a contract that provides for a discounted charge in return for the referral, and then bills the patient’s PIP insurer for those MRI services at a markup of nearly 300% of the charge by the facility, is engaged in activity and arrangements that violate public policy and/or section 817.505.

Final Judgment

29. Based on the evidence of record and the findings and conclusions set forth above, final judgment is hereby entered in favor of State Farm Mutual Automobile Insurance Company and it is hereby ADJUDGED that Plaintiff, Lake Charleston Medical, Inc., take nothing by this action and that Defendant, State Farm Mutual Automobile Insurance Company, shall go hence without day.

30. The Court reserves jurisdiction to consider any motion by Defendants to tax fees or costs.

__________________

¹As of today’s date, this case is unpublished in Florida Law Weekly. [Published at 27 Fla. L. Weekly D371a].

²State Farm filed the Federated trial court’s summary judgment and, accordingly, the Court is aware of the facts underlying the Third District Court’s Decision.

³The fact that Lake Charleston is a chiropractic facility, as opposed to a third party MRI broker, is a distinction without a difference. While chiropractors are capable of performing compensable medical services, the simple fact is that Lake Charleston had nothing to do with the medical services rendered and its arrangement with D.I.S.C. constitutes unlawful patient brokering pursuant to section 817.505.

⁴As noted above, the grand jury found that the NuWave court had taken notice of the “MRI brokering” practice it categorized as “PIP fraud,” and made specific note of the court’s determination that such activity violated the existing Patient Brokering Act, § 817.505 to activities and arrangements such as those of Lake Charleston. The Grand Jury Report was adopted as the findings of the legislature in the last legislative session; making the NuWave decision legislatively-endorsed as a proper application of the existing Patient Brokering Act, § 817.505. Grand Jury Report at 13-14, adopted, CS/CS/SB 1092, § 1 (2001).

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