Long Is. Radiology v Allstate Ins. Co. (2006 NY Slip Op 51090(U))

Supreme Court, Nassau County

005513/05

Law Office of Kenneth M. Mollins, P.C.

Franklin, Gringer & Cohen, P.C.

Attorneys for Plaintiff Long Island Radiology

425 Broad Hollow Road, Suite 215

Melville, NY 11747

Sonnenschein, Nath & Rosenthal, LLP

Attorneys for Defendant Allstate

1221 Avenue of the Americas

New York, NY 10020

and –

Steve Levy, Esq.

Attorney for Defendant Allstate

8000 Sears Tower

Chicago, IL 60606

Rivkin Radler, LLP

Attorneys for Defendant State Farm

EAB Plaza

Uniondale, NY 11556

O’Melveny & Myers, LLP

Attorneys for Defendant GEICO

Times Square Tower

7 Times Square

New York, NY 10036

Stern & Montana, LLP

Attorneys for Defendant American Transit

Trinity Centre — 115 Broadway

New York, NY 10006

Short & Billy, P.C.

Attorneys for Defendant Progressive

217 Broadway, Suite 300

New York, NY 10007

and-

Conrad O’Brien Gellman & Rohn, P.C.

Attorneys for Defendant Progressive

1515 Market Street, 16th Floor

Philadelphia, PA 19102-1916

Cozen & O’Connor

Attorneys for Defendant One Beacon

1900 Market Street

Philadelphia, PA 19103

Thomas P. Phelan, J.

Motion by defendants, and cross-motion by plaintiff, for summary judgment on the issue of whether no-fault insurers may raise lack of medical necessity as a basis to deny claims for reimbursement to radiologists seeking payment for MRI tests provided to no-fault patients pursuant to prescriptions, is determined as follows.

Plaintiff’s further request for class certification pursuant to CPLR 901 and 902 and related relief is denied as premature. [*2]

By order dated November 29, 2005, this Court granted defendants’ motion dismissing the complaint for failure to comply with CPLR 3013. The cross-motion by plaintiff for an order directing that the proposed amended complaint be deemed served in place and stead of the original complaint was granted. The largely undisputed fact pattern underlying this case is as follows.

Plaintiff is a radiology office that performs MRI testing for persons involved in motor vehicle accidents and allegedly eligible for no-fault benefits. MRI testing is done pursuant to a prescription issued by the injured person’s independent treating physician. For payment plaintiff receives an assignment of no-fault benefits from the injured person, and submits claims directly to one of the defendants. Defendants deny numerous claims for payment on the ground of an alleged “lack of medical necessity.”

On this motion defendants argue that in the context of the no-fault statute and the regulations thereunder, “medical necessity” is a prerequisite for payment. They conclude therefore, that they have every right to deny plaintiffs’ claims on the ground of “lack of medical necessity.” This Court agrees with defendants’ argument, but not their conclusion.

The no-fault statute embodied in Insurance Law §5102(a)(1) defines the “basic economic loss” for which the statute was designed to provide payment as “All necessary expenses incurred for: (I) medical, hospital, . . . surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services . . .” Like the no-fault law, the regulations promulgated thereunder expressly state that basic economic loss comprises medical expenses which are “necessary” [11 NYCRR 65-1.1].

The purpose of the no-fault law was to “remove the vast majority of claims arising from vehicular accidents from the sphere of common-law tort litigation, and to establish a quick, sure and efficient system for obtaining compensation for economic loss suffered as a result of such accidents” [Walton v Lumbermens Mut. Cas. Co., 88 NY2d 211, 214(1996) citing L 1973, ch13; Governor’s Mem. approving L 1073, ch 13, 1973 NY Legis Ann at 298].

Overall, the no-fault law is a compromise: prompt payment for basic economic loss to injured persons regardless of fault, in exchange for a significant limitation on litigation [Pommells v Perez, 4 NY3d 566, 570-71 (2005); see also Oberly v Bangs Ambulance Inc., 96 NY2d 295, 298 (2001)(No fault legislation was adopted to assure prompt and full compensation for economic loss, and non-economic loss for serious injury)].

To implement the legislative aim of curtailing delay and reducing expense, the regulations are written to encourage prompt payment of claims, to discourage investigation by insurers, and to penalize delays [Dermatossian v New York City Transit Authority, 67 NY2d 219, 225(1986)].

The court system is inundated with no-fault claims litigation [Vladimir Zlatnick, [*3]M.D.,P.C. v Geico, 2 Misc 3d 347(Civ Ct, Queens Cty, 2003); Ostia Medical P.C. v Geico, 1 Misc 3d 907(A)(Dist. Ct, Nassau Cty, 2003); see Karen B. Rothenberg and Jennifer R. Rapaport, No-Fault: The Litigation Epidemic, N.Y.L.J., 1/5/2004, p.4, col. 4]. As one court has noted, neither insureds nor insurers benefit from uncertainties engendered by scores of judges retrospectively attempting to exercise medical/professional judgment in these no-fault cases [Citywide Social Work & Psy. Serv., PLLC, v Travelers Indemnity Co., 3 Misc 3d 608 (Civ Ct., Kings Cty, 2004)].

One of the primary defenses litigated by the insurers is the alleged “lack of medical necessity.” The various plaintiffs in such cases present a prima facie case by proof of submitted claims (setting forth the fact and amounts of the losses sustained) and overdue payments [All County Open MRI & Diagn. Radiology P.C. v Travelers Ins. Co., 11 Misc 3d 131(A)(N.Y.Sup.App. Term 2006); Delta Diagnostic Radiology, P.C. v Progressive Cas. Ins. Co., 11 Misc 3d 136 (A)(N.Y.Sup.App. Term 2006); A.B. Medical Services PLLC v Liberty Mut. Ins. Co., 10 Misc 3d 128 (A) (N.Y.Sup. App. Term 2005)].

The burden then shifts to the insurer, who must prove that its denial was timely and that the medical services or supplies in question were not medically necessary [Nir v Allstate Ins. Co., 7 Misc 3d 544, 546 (Civ Ct., Kings Cty., 2005); Healing Hands Chiropractic, PC v Nationwide Assurance Co., 5 Misc 3d 975(Civ Ct., N.Y.Cty, 2004)]. To withstand summary judgment, the insurer’s proof must set forth a sufficiently detailed factual basis and medical rationale for the claim’s rejection [Nir at 546; AB. Medical Services PLLC ; Amaze Medical Supply Inc. v Eagle Ins. Co., 2 Misc 3d 128(A)(N.Y.Sup, App. Term, 2003)].

Most of the cases do not address the legal issue of the availability of the “lack of medical necessity” defense where the medical supplier or diagnostic tester is not the treating physician, but instead complies with the instructions found in a prescription from the treating physician. As noted in this Court’s earlier decision, only two courts squarely consider the issue, and they reach different conclusions.

In West Tremont Medical Diagnostics v Geico, [8 Misc 3d 423, 427 (Civ. Ct., Richmond Cty, 2005)], the Court noted in dicta, that this defense should not be available to insurers in connection with claims made by diagnostic centers. There, the Court expressly held, after trial, that the defendant insurer had failed to meet its burden of proof on the defense of lack of medical necessity.

The court’s broader reasoning was expressed as follows:

There is nothing in the No-Fault statute that indicates that the treating physician needs to get pre-approval testing before referring the patient for MRI’s or any other diagnostic modalities. Therefore, to deny First Party benefits, on the basis of lack of medical necessity, to the diagnostic center that does not come to a diagnosis based upon a physical examination of the patient can be found to be in derogation of the purpose [*4]and intent of the Insurance No-Fault Benefits statute which is expedient payment of benefits to automobile victims. . . . Therefore, in a matter, such as the instant case, wherein the usual and customary medical procedure was utilized by the examining physician in referring a patient involved in a motor vehicle accident for radiological tests after a physical examination, and the patient assigned her rights to the diagnostic radiological establishment for reimbursement of No-Fault benefits, the affirmative defense of lack of medical necessity should not be available as the diagnostic center does not make an independent medical evaluation of the patient and the denial of benefits to the diagnostic establishment is in derogation of the intent of the Insurance Law §5106.

This Court understands that West Tremont is being appealed to the Appellate Term, and the record herein includes the amicus brief (annexed to defendants’ reply papers) filed by the Attorney General’s office on that appeal.

By contrast, in Precision Diagnostic Imaging P.C. v Travelers Ins. Co.[8 Misc 3d 435 (Civ.Ct.,NYCty, 2005)], the Court found the no-fault statute clearly and unambiguously mandates that “claimants may only be reimbursed for necessary’ medical services.”Therefore, the Court reasoned that there was no need to look to the legislative purpose or history of the statute, expressly rejected the dicta in West Tremont, and concluded that “the defense of medical necessity is available against all medical providers” (Precision Diagnostic at 439). The Court further noted that “to permit medical providers to receive reimbursement even when the insurer has proven that the service was not medically necessary would encourage fraud, rather than combat it (Id.). As defendant in Precision Diagnostic had provided prima facie evidence that the test was not medically necessary and plaintiff failed to submit in opposition evidentiary proof in admissible form, defendant was awarded summary judgment dismissing plaintiff’s claim.

This Court acknowledges that to require insurers to make reimbursements without regard to medical necessity would inflate costs and encourage fraud. In view of the plain language of the no-fault statute and the regulations thereunder, this Court agrees with defendants that “lack of medical necessity” is a defense which must be available to insurers in no-fault cases. However the inquiry does not end here. A remaining and critical issue presented is: against whom may the defense be raised?

On this issue, the statute and the regulations are silent. Troubling is the fact that radiologists perform tests that are prescribed by others. In Omega Diagnostic Imaging, P.C. v State Farm Mut. Auto Ins. Co. [8 Misc 3d 715 (Civ. Ct., Kings Cty, 2005)], the insurer challenged a prescription by a chiropractor for an MRI of the injured party’s knee . While not couched in terms of the availability of the “lack of medical necessity defense,” the Court in Omega Diagnostic expressed concerns similar to those of plaintiff herein. The Omega Diagnostic Court considered “whether there is a legal duty imposed on the medical supplier or provider to investigate the authority of the author of the prescriptions it fills in order to receive [*5]first party no-fault benefits for the services it provides.” The Court found no legal authority on point, and concluded that it was not unreasonable for plaintiff therein to perform the MRI prescribed by the licensed chiropractor therein.

It is this Court’s opinion that the results in West Tremont and Omega Diagnostic comport with the underlying intent of the no-fault statute, that claims be processed quickly and efficiently, and that economic losses be fully compensated. As noted in West Tremont, there is no statutory or regulatory pre-approval requirement for radiology tests requested by treating physicians in no-fault cases. Furthermore it makes no sense to argue “lack of medical necessity” against radiologists, because they do not assess medical necessity. Radiologists neither examine the no-fault patient, nor render a pre-test diagnosis. Any diagnostic opinion is based on the radiological test. To require radiologists to render a pre-test diagnosis would cause significant delay in treating the injured.

As suggested in Omega Diagnostic, a radiologist should not be required to investigate every prescription for radiology tests in order to receive no-fault payments for tests admittedly performed.

Overall, this Court finds, that where a prescription for a radiology test has been provided by a treating physician or licensed medical provider in a no-fault case, the prescription should render a challenge on the grounds of “lack of medical necessity” unavailable against the radiologist. The prescription establishes medical necessity for the purposes of the radiologist.

The insurers’ recourse should lie against the treating physician or medical provider. An insurer who can prove that a radiology test is unnecessary or duplicative, should be able to challenge through subrogation the treating physician or medical provider who prescribed the test [see generally Pavone v Aetna Cas.& Sur. Co., 91 Misc 2d 658 (Sup Ct., Monroe Cty, 1977).

Based on the foregoing, defendants’ motion for summary judgment is denied, and that branch of plaintiff’s cross-motion for summary judgment is granted.

Plaintiff additionally cross-moves for class certification pursuant to CPLR 901 and 902, identifying the proposed class as:

all radiologists and radiology practices that have been denied no-fault benefits in the last six (6) years for MRI’s performed where said denial is based on lack of medical necessity, peer review or any other denial however worded based on the tests’ lack of medical necessity. (Mollins affirmation in support of cross-motion, par. 9.)

“In determining whether to grant class certification, plaintiffs must satisfy five prerequisites under CPLR 901(a) by competent evidence in admissible form (citations omitted)” [Feder v Staten Island Hosp., 304 AD2d 470 (1st Dept. 2003); see, Hazelhurst v [*6]Brita Products Co., 295 AD2d 240, 241(1st Dept. 2002)]. Specifically, the prerequisites are:

1. the class is so numerous that joinder of all members, whether otherwise required or permitted is impracticable;

2. there are questions of law or fact common to the class which predominate over any questions affecting only the individual members;

3. the claims or defenses of the representative parties are typical of the claims or defenses of the class;

4. the representative parties will fairly and adequately protect the interests of the class; and

5. a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

[CPLR 901(a); Small v Lorillard Tobacco Co. Inc., 94 NY2d 43, 54 (1999)]. The prerequisites of CPLR 901(a) are to be liberally construed [Wilder v May Dept. Stores Co., 23 AD3d 646 ( 2nd Dept. 2005); Tosner v Town of Hempstead, 12 AD3d 589( 2nd Dept. 2004)].

In addition, the Court must also consider the five factors set forth in CPLR 902, which are:

1. the interest of members of the class in individually controlling the prosecution or defense of separate actions;

2. the impracticability or inefficiency of prosecuting or defending separate actions;

3. the extent and nature of any litigation concerning the controversy already commenced by or against members of the class;

4. the desirability or undesirability of concentrating the litigation of the claim in the particular forum; and

5. the difficulties likely to be encountered in the management of a class action.

The decision whether to certify a class action is vested in the sound discretion of the trial court (Small at 52; Wilder at 649), and any error should be resolved in favor of allowing the class action [Wilder at 649; Kidd v Delta Funding Corp., 289 AD2d 203 ( 2nd Dept 2001)]. Class certification must be based upon a proper factual record [Klein v Robert’s American Gourmet Food, Inc., 28 AD3d 63 (2nd Dept. 2006)]. [*7]

In this case the Court agrees with defendants that some discovery is needed before certification can be resolved [see Dougherty v North Fork Bank, 301 AD2d 491 (2nd Dept. 2003); Negrin v Norwest Mortgage, Inc., 293 AD2d 726 (2nd Dept. 2002)]. As to the very first prerequisite of numerosity, plaintiffs state “the number of denials in New York State for MRI’s based on lack of medical necessity from all of these Defendants probably exceeds a few hundred thousand” (Mollins affirmation in support of cross-motion, par. 17). The evidentiary basis for this statement is not identified. Similarly, the factual basis for plaintiff’s assertion that it will adequately protect the interests of the class is not provided, and the record contains little information regarding plaintiffs’ attorney’s qualifications to represent a class.

Based on the foregoing, that branch of plaintiff’s cross-motion which seeks class certification is denied without prejudice to renewal.

The parties are reminded that a certification conference is scheduled to be held before the undersigned on June 16, 2006 at 10:30 A.M.

This decision constitutes the order of the court.

Dated: JUNE 7, 2006 THOMAS P. PHELAN

J.S.C.

APPEARANCES OF COUNSEL