David M. Barshay
David M. Barshay ()

This column analyzes a recent decision in which a physician established a relative value to bill for services but did not provide a supporting report justifying that value, as well as recent decisions that involved vacating arbitration awards.

‘By Report’ Codes

Pursuant to Insurance Law §5108 and No-Fault Regulation 68.1,1 the applicable no-fault insurance fee schedule for medical services is the Worker’s Compensation Fee Schedule (fee schedule). Most services contained in the fee schedule are assigned a relative value, which, when multiplied by the applicable conversion factor,2 results in the allowable fee. There are, however, a number of services that are not assigned a relative value, but, instead, are designated “by-report” items. General Ground Rule 3 of the fee schedule provides, in pertinent part:

“BR” in the relative value column represents services that are too variable in the nature of their performance to permit assignment of relative value units. Fees for such procedures need to be justified “by report.” Pertinent information concerning the nature, extent and need for the procedure or service, the time, skill and equipment necessary, etc. is to be furnished … For any procedure where the relative value unit is listed in the schedule as “BR,” the physician shall establish a relative value unit consistent in relativity with other relative value units shown in the schedule.

Thus, when billing for services with a designated “BR” code, the medical provider is expected to establish a proper relative value, and to justify its fee with an appropriate report, as set forth above.

What happens when a medical provider’s bill for a service with a designated “BR” code is not accompanied by a detailed report, or does not include any report at all? In those instances where the medical provider’s bill was denied because of the lack of a report, some no-fault insurers have argued that since the fee schedule does not assign a particular fee for the service, they are not obligated to pay the bill unless and until a detailed report satisfying General Ground Rule 3 is submitted. Some have even argued that in a lawsuit or arbitration, the medical provider’s prima facie case for a “BR” code service is not established without the requisite report.

This issue was recently addressed by the Appellate Term in Bronx Acupuncture Therapy, P.C. v. Hereford Ins. Co.3 The plaintiff medical provider had billed for medical services using “BR” codes, but did not submit any report or other such documentation to support the amounts charged. The defendant insurer did not pay for these services, nor did it request additional verification. The insurer moved for summary judgment dismissal, arguing that pursuant to the fee schedule, it was not obligated to pay for these services because the medical provider failed to submit the required report. The lower court granted defendant’s motion. On appeal, the Appellate Term reversed and held:

Plaintiff did not provide such documentation [a report] with its claim forms and defendant did not, within 15 business days of its receipt of the claim forms, request “any additional verification required by the insurer to establish proof of claim” (11 NYCRR 65-3.5 [b]). As defendant failed to demonstrate upon its motion that it had requested any additional verification from plaintiff seeking the information it required in order to review plaintiff’s claims for services billed under codes 97039 and 99199 of the workers’ compensation fee schedules, defendant was not entitled to summary judgment dismissing so much of the complaint as sought to recover for services rendered under those codes [citations omitted].

The court’s decision is consistent with, and cited, Gaba Med., P.C. v. Progressive Specialty Ins. Co.,4 which held, inter alia, that in the absence of a verification request, an insurer may not deny a portion of a claim based on lack of information furnished by the medical provider to support the services provided. Thus, an insurer who, because of lack of information, has any questions as to whether a particular billed-for service was justified or, in the case of a “BR” code, whether the fee charged was appropriate, would be well advised to request the additional verification needed before it determines to deny the claim or a portion thereof.

Vacating Arbitration Awards

A party aggrieved by an arbitrator’s award may appeal to a master arbitrator.5 The bases for appealing an arbitrator’s award are set forth in 11 NYCRR 65-4.10(a), and can be summarized as follows:

(1) Any ground for vacating an arbitration award set forth in CPLR Article 75.

(2) The award required the insurer to pay in excess of the policy limits.

(3) The award is incorrect as a matter of law (procedural or factual errors committed in the arbitration below are not encompassed within this ground).

(4) The arbitrator awarded an improper attorney fee.

The grounds in CPLR Article 75 (§7511(b)(1)) for vacating an arbitration award are:

(i) Corruption, fraud or misconduct in procuring the award; or

(ii) Partiality of an arbitrator appointed as a neutral, except where the award was by confession; or

(iii) An arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or

(iv) Failure to follow the procedure of this article, unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection.

A party aggrieved by a master arbitrator’s award may seek vacatur by commencing a court action, pursuant to CPLR Article 75. The grounds for vacating a master arbitration award are limited to those set forth in CPLR §7511(b).6 Alternatively, if the master arbitration award is $5,000 or greater, either party may commence a court action for a de novo review.7 Thus, with the exception of awards of $5,000 or more, a court’s authority to vacate a master arbitration award is more limited than a master arbitrator’s authority, insofar as the additional grounds to vacate a lower award set forth in §65-4.10(a) (other than those contained in Article 75) do not apply to a court review of a master arbitrator’s award.

There have been several recently reported decisions concerning vacating arbitration awards. Golden Earth Chiropractic & Acupuncture v. Global Liberty Ins. Co. of N.Y.,8 concerned an arbitration wherein the insurer denied the medical provider’s claim for medical benefits based on the assignor/patient’s failure to attend scheduled independent medical examinations (IMEs). The arbitrator awarded in favor of the medical provider because, he held, the IME scheduling letters were defective.9 The insurer appealed, and the master arbitrator vacated the award, finding that the arbitrator’s award “was not supported by sufficient evidence and was irrational, arbitrary and capricious and incorrect as a matter of law.” In an Article 75 proceeding, the district court ruled in favor of the medical provider, vacated the master arbitrator’s award (thus reinstating the lower arbitrator’s award) and held that the master arbitrator exceeded his authority by reviewing factual issues and impermissibly substituting his own factual determinations for the lower arbitrator’s determinations. On appeal, the Appellate Term reversed and held:

Judicial review of a master arbitrator’s authority to vacate an award under Insurance Law § 5106 derives from CPLR 7511 (b) (1) (iii) and involves the question of whether the master arbitrator has exceeded his or her power *** A master arbitrator is empowered to vacate an arbitration award based upon most grounds set forth in CPLR 7511 … or based upon the ground that the arbitration award “was incorrect as a matter of law (procedural or factual errors committed in the arbitration below are not encompassed within this ground)” (11 NYCRR 65-4.10 [a] [4] *** The power of a master arbitrator to review factual and procedural issues (unlike substantive law issues) is limited to “whether the arbitrator acted in a manner that was arbitrary and capricious, irrational or without a plausible basis” *** A master arbitrator “exceeds his statutory power by making his own factual determination, by reviewing factual and procedural errors committed during the course of the arbitration, by weighing the evidence, or by resolving issues such as the credibility of the witnesses” *** If, however, the master arbitrator vacates the arbitrator’s award based upon an alleged error of a rule of substantive law, the determination of the master arbitrator must be upheld unless it is irrational …

The Appellate Term further held the master arbitrator in that case did not exceed his authority, as his vacatur of the lower arbitration award was not based on an evaluation of credibility or a factual analysis, but was, instead, based on a legal analysis, which is clearly within the scope of a master arbitration review, as set forth in 11 NYCRR 65-4.10(a). Apparently recognizing the limited authority of the court to review and vacate a master arbitration award, the Appellate Term held that as the master arbitration award was not irrational, the district court erred in vacating the award. In other words, the Appellate Term recognized that while a master arbitrator may review an arbitrator’s determinations of law (but not fact), a court should not vacate the master arbitrator’s award unless it is irrational, even if the court disagrees with the master arbitrator’s conclusions of law.

In Matter of Global Liberty Ins. v. Coastal Anesthesia Servs.,10 the lower arbitrator apparently precluded the insurer’s late submissions pursuant to No-Fault Regulation 65-4.2(b)(3)11 (informally known as the “Rocket Docket” rule) and held in favor of the applicant medical provider. A master arbitrator upheld the lower arbitration award. In an Article 75 proceeding, the Supreme Court denied the insurer’s petition to vacate, and granted the medical provider’s cross-petition to confirm the award. On appeal, the appellate division affirmed, holding:

Petitioner failed to demonstrate the existence of any of the statutory grounds for vacating the Master Arbitrator’s award (CPLR 7511[b]). The decision of the Master Arbitrator in affirming the arbitration award had evidentiary support, a rational basis, and was not arbitrary and capricious *** The original arbitrator properly acted within her discretionary authority to refuse to entertain any late submissions proffered by petitioner [citations omitted].

In Nationwide Mut. Ins. Co. v HMP Orthopedics, P.C.,12 the insurer denied the medical provider’s claim because of the assignor/patient’s failure to appear for scheduled examinations under oath (EUOs). The insurer had mailed EUO scheduling letters to the assignor’s purported home address, as provided by his counsel, as well as to counsel. The home address was incorrect, as the scheduling letters mailed to the assignor were returned by the Postal Service. The insurer did not make any inquiry as to the assignor’s correct address or attempt to re-mail its letters to the assignor. The lower arbitrator ruled that the insurer had a duty to make further inquiry regarding the assignor’s correct address, and awarded in favor of the applicant medical provider. On appeal, the master arbitrator upheld the lower arbitration award. In an action for de novo review of the claim,13 the court found in favor of the insurer and denied the claim, holding, inter alia and contrary to the lower arbitrator and master arbitrator, that the mailing of the EUO scheduling letters to the assignor’s counsel was, by law, sufficient notice of the EUOs. Thus, while the court in this case substituted its determinations of law for those of the master arbitrator (and lower arbitrator), as this was a de novo review, the court’s ability to review or even disregard the findings of the master and lower arbitrators is greater than in a CPLR Article 75 review.

Endnotes:

1. 11 NYCRR 68.1.

2. Conversion factors are assigned based on the type of service performed as well as the geographic location where the service is performed.

3. 2017 NY Slip Op 50101(U) (App. Term 2d, 11th & 13th Jud. Dists. 2017).

4. 2012 NY Slip Op 51448(U) (App Term, 2d, 11th & 13th Jud Dists. 2012).

5. Pursuant to 11 NYCRR 65-4, No-Fault arbitrations and master arbitration appeals are heard by arbitrators and master arbitrators, respectively, appointed by the designated association in New York, which is and has been for quite some time, the American Arbitration Association (AAA).

6. 11 NYCRR 65-4.10(h)(1)(i).

7. 11 NYCRR 65-4.10(h)(1)(ii) provides: “A decision of a master arbitrator is final and binding, except for … if the award of the master arbitrator is $5,000 or greater, exclusive of interest and attorney’s fees, either party may, in lieu of an article 75 proceeding, institute a court action to adjudicate the dispute de novo.”

8. 2016 NY Slip Op 26395 (App. Term, 9th & 10th Jud. Dists. 2016).

9. 11 NYCRR 65-3.5(e) provides, in relevant part, “The insurer shall inform the applicant at the time the examination is scheduled that the applicant will be reimbursed for any loss of earnings and reasonable transportation expenses incurred in complying with the request.” The IME scheduling letters in this case stated that the applicant would be reimbursed for proven loss of earnings. The lower arbitrator held that the addition of the word “proven” rendered the letters defective.

10. 2016 NY Slip Op 08964 (1st Dept. 2016).

11. 11 NYCRR 65-4.2(b)(3), Submission of Documents, provides, in relevant part that with the exception of additional bills or claims, the applicant “shall submit all documents supporting the applicant’s position along with their request for arbitration.” After the mailing of notice of the arbitration request, the respondent insurer “shall, within 30 calendar days after the mailing of such advice, provide all documents supporting its position on the disputed matter” and may request an additional thirty days. “(iii) The written record shall be closed upon receipt of the respondent’s submission or the expiration of the period for receipt of the respondent’s submission. Documents submitted by either party after the record is closed shall be marked ‘Late’. (iv) Any additional written submissions may be made only at the request or with the approval of the arbitrator.”

12. 2017 NY Slip Op 30059(U) (Sup. Ct., N.Y. Cty. 2017).

13. The case qualified for de novo review pursuant to 11 NYCRR 65-4.10(h)(1)(ii), as the award exceeded $5,000.