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Volume XXIV, No. 2, February 21, 2012    

From the Law Offices of Garan Lucow Miller, P.C.

From the Co-Editors

James L. Borin & Simeon R. Orlowski

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PIP INSURER’S DUTY TO CHALLENGE THE REASONABLENESS OF CHARGES FOR MEDICAL CARE ENTITLES INSURER TO PROBE INTO THE PROVIDER’S COSTS FOR PRODUCTS

 
CONTRIBUTOR – CHRISTIAN C. HUFFMAN

 
In its recently published decision in Bronson Methodist Hospital v Home-Owners Ins Co, ___ Mich App ___ (2012), the Michigan Court of Appeals recognized that PIP insurers are entitled to discover and consider a medical care provider’s cost to obtain medical care products as part of the PIP insurer’s “clear statutory right and obligation to question the reasonableness” of the medical care provider’s fees.

Plaintiff Bronson Methodist Hospital used surgical implant products, including screws and plates, to repair broken bones in two automobile accident victims. Bronson Methodist thereafter billed the patients’ respective PIP insurers a combined $386,418.85, $90,047.50 of which was listed on the bills as being for “supply/implant” products. After Bronson Methodist refused to provide invoices showing what Bronson Methodist had paid for the surgical implant products, the PIP insurers refused to pay that portion of the bills.

When Bronson Methodist filed suit in the Circuit Court, the PIP insurers again sought discovery regarding the wholesale costs to Bronson Methodist for the implant products, asserting that such information was relevant to the issue of whether Bronson Methodist’s charges for the products were reasonable. The Circuit Court disagreed, accepting Bronson Methodist’s argument that the PIP insurers’ reasonableness probe was limited to comparing what Bronson Methodist charges for the surgical implant products to what other medical providers “similarly located geographically” charge for them. In other words, the Circuit Court effectively held that any “mark up” Bronson Methodist was putting on the surgical implant products was irrelevant to the issue of whether the charges were reasonable.

In reversing the Circuit Court’s decision, the Court of Appeals noted that MCL 500.3158(2) further entitles the PIP insurer to request that the medical care provider produce “a written report of the . . . costs of treatment of the injured person.” The Court noted that because this statutory provision references the “costs of treatment of the injured person,” rather than the “costs of treatment to the injured person,” the Legislature must have intended that PIP insurers be entitled to a report detailing what it cost the provider to render the care, not just a report detailing what the provider charged the injured person for the care.

As further support for its rejection of Bronson Methodist’s assertion that the issue of reasonableness is to be determined solely by comparing its charges to those of other hospitals, the Court of Appeals reiterated several principles from its previous decision in Advocacy Organization for Patients & Providers v Auto Club Ins Ass’n, 257 Mich App 365 (2003), regarding the “reasonableness” limitation upon a PIP insurer’s duty to pay for medical treatment set forth in MCL 500.3107(1)(a). First, what constitutes a “reasonable” charge is not dependant upon what is “customarily” charged for like products and services. Second, the Legislature’s limiting a PIP insurer’s obligation to the payment only of “reasonable” charges clearly evinces a legislative intent to “to place a check on health care providers who have no incentive to keep the doctor bill at a minimum.” AAOP, supra at 378. Third, because of the aforementioned legislative intent to keep health care providers in “check,” “insurers are required to challenge the reasonableness of charges as a “cost-policing function”. Fourth, the permissible factors for a PIP insurer to consider when assessing the reasonableness of a charge cannot be definitively delineated, but instead must be determined by the insurer in each instance. And, finally, the provider ultimately bears the burden of establishing the reasonableness of its charge.

Based on these principles, the Court of Appeals held that limiting a PIP insurer’s assessment of reasonableness solely to a comparison of charges among similar providers would “leave the determination of reasonableness solely in the hands of providers, as a collective group, and would abrogate the cost-policing function of no-fault insurers, contrary to the intention of the Legislature.” Thus, the Court concluded that the PIP insurers were entitled to discovery regarding the wholesale cost to Bronson Methodist for the surgical implant products, and were further entitled to consider such wholesale costs in determining whether Bronson Methodist’s retail charges to the insured were reasonable.

It should be noted that the Court of Appeals recognized that “permitting insurers access to a provider’s cost information could open the door to nearly unlimited inquiry into the business operations of a provider, including into such concerns as employee wages and benefits.” Thus, the Court stated that its decision was specifically limited to “durable medical supply products,” such as the surgical implants at issue.

Since neither MCL 500.3158(2) nor the principles recognized in Advocacy Organization, supra, make any distinction between a provider’s costs for services and its costs for such “durable medical supply products,” it is possible that future decisions will extend Bronson Methodist’s holding to other issues (e.g. can a no fault insurer ask a particular surgeon what he charges a hospital to perform a specific procedure in order to determine whether the hospital’s subsequent charges to the patient are reasonable?)

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UPCOMING SEMINARS
Buckeye Seminar-Columbus Convention Center, March 15, 2012. To register please contact Eileen Carty at ecarty@garanlucow.com. Please see the Agenda below:

8:30 – 9:00 a.m. CONTINENTAL BREAKFAST / REGISTRATION

9:00 – 9:10 a.m. WELCOME AND INTRODUCTION

Speaker: SUSAN M. WILLIAMS

9:10 – 10:00 a.m. 2012 NO-FAULT DECISIONS – PIP UPDATES

Speaker: SUSAN M. WILLIAMS

10:00 – 10:45 a.m. PROS & CONS OF TRYING THIRD PARTY CASES WITH UIM CASES

Speaker: MARK R. MUELLER

10:45 – 11:00 a.m. BREAK

11:00 – 11:45 a.m. DEALING WITH THE ILLUSORY POLICY ISSUE IN UNDERINSURED

MOTORIST CASES/THIRD PARTY CASE LAW UPDATE

Speaker: MATTHEW S. LABEAU

11:45 – 1:00 p.m. LUNCH ON YOUR OWN

1:00 – 2:00 p.m. WHAT INSURER ADJUSTERS NEED TO KNOW ABOUT BANKRUPTCY

Speaker: THOMAS P. CHRISTY

2:00 – 2:30 p.m. QUESTION & ANSWER SESSION

RETURN EVALUATION FORMS

 

Comprehensive written materials will be distributed to all program attendees.

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Troy Breakfast Seminar – Troy Marriott, April 19, 2012

Indy City Seminar – JW Marriott, Indianapolis, May 23, 2012

Trial Boot Camp – Troy Marriott, May 31, 2012

To register for these Seminars, please contact Eileen Carty at ecarty@garanlucow.com.

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ATTENTION – Please note that the Traverse City office no longer has a post office box, the address for our Traverse City office is as follows:

Garan Lucow Miller, P.C.
1131 East Eighth Street
Traverse City, MI 49686

 
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