December 17, 2015
Julie Klein was covered under a no-fault policy with Farm Bureau, which was coordinated with a health insurance policy that Klein maintained with Blue Cross Blue Shield (“BCBS”). After suffering significant injuries in an automobile accident, Klein was taken to a skilled nursing facility operated by Spectrum. Significantly, Spectrum had its own contractual agreement with BCBS. That agreement required Spectrum to obtain pre-authorization from BCBS before rendering medical care to Klein. It further provided that if Spectrum provided medical care after a BCBS physician opined that the care was medically unnecessary, Spectrum could not bill Klein for the care unless Klein first agreed in writing to assume financial responsibility for the services.
Upon Klein’s admission to Spectrum, BCBS approved 14 days of skilled nursing care. Near the end of that 14 day period, Spectrum sought pre-authorization for an additional 14 days. But, BCBS’s reviewing physician deemed further skilled nursing services medically unnecessary. Spectrum did not appeal this decision through the process outlined in its contract with BCBS, and continued to render skilled nursing services to Klein without obtaining written acknowledgement from Klein that she would assume financial responsibility for such services. Spectrum then attempted to bill Farm Bureau, alleging that the no-fault act obligated Farm Bureau to cover any charges for Klein’s medical care that were not recoverable from BCBS.
Farm Bureau paid the bills submitted by Spectrum under protest so as not to incur interest and penalty fees under the no-fault act. Farm Bureau then filed suit against BCBS and Spectrum seeking repayment. The trial court found Spectrum was entitled to payment for services it rendered to Klein, and the BCBS was responsible for payment of those bills. The Court required BCBS to reimburse Farm Bureau finding BCBS to be the primary insurer.
In the unpublished decision of Farm Bureau General Ins Co v Blue Cross Blue Shield, decided Nov 17, 2015 (Docket No 322423), the Michigan Court of Appeals disagreed. It held that because Spectrum had not appealed BCBS’s denial of pre-authorization, and because Klein had not acknowledged in writing that she would pay for the services before receiving them, Spectrum had contractually assumed financial responsibility for the services. That is, the Court held that the terms of Spectrum’s contract with BCBS not only barred Spectrum from billing BCBS for the services, but also prohibited BCBS from attempting to bill Klein for the services. Moreover, because of its determination that Klein had no legal obligation to pay Spectrum for the skilled nursing services she received, the Court held that Spectrum could not bill Farm Bureau for those services because they had not been “incurred” by Klein as required by MCL 500.3107(1)(a).