Guest Article: Coordinated no-fault benefits: no more payment delays for medical providers

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by Dan James, Katie Tucker and Dan Zick
Sinas Dramis Law Firm

During the past year, some medical providers in Michigan have operated under the notion that, when a patient has coordinated no-fault coverage, they must appeal the denial of the patient’s health insurance benefits before they could seek payment under the No-Fault Act.

A recent Court of Appeals decision now says otherwise.

On December 8, 2016, the Court of Appeals issued a binding decision in St. John Macomb Oakland Hospital v State Farm Mutual Automobile Ins Co (Docket No. 329056), holding that a medical provider is not required to appeal a health insurer’s denial of benefits before seeking payment of personal protection insurance (PIP) benefits from a no-fault insurer.

The St. John ruling clarifies the Court of Appeals’ 2015 decision in Farm Bureau Ins Co v Blue Cross Blue Shield, 314 Mich App 12. In Farm Bureau, the Court said that under the “unique circumstances” of the case, a medical provider could not collect no-fault PIP benefits under a coordinated policy where the health insurer had denied coverage

Why is the St. John decision important? Two reasons:

•it reinforces the intended purpose of the No-Fault Act, which is “to provide for assured, adequate, and prompt recovery for economic losses stemming from motor vehicle accidents.”
•it is a welcome relief for those medical providers who have been burdened by the pursuit of lengthy appeals of a health insurer’s denials, before attempting to recover the no-fault benefits to which they’re entitled.

Background

In St. John, an individual was injured in a car accident and admitted at St. John Macomb Oakland Hospital. The injured person had a coordinated no-fault policy with State Farm.

Pursuant to the coordinated no-fault policy, St. John submitted a claim to the individual’s health insurer, Blue Cross Blue Shield of Michigan (BCBSM), for payment of its services. Upon reviewing the claim, however, BCBSM’s mental health program administrator, Magellan Behavioral of Michigan, refused to authorize payment, determining that the treatment was not “medically necessary.” The denial letter indicated that a provider could pursue an internal appeal of that determination.

After receiving the denial letter, St. John chose not to appeal and, instead, submitted a claim for payment to State Farm. When State Farm refused to pay, St. John filed suit. In response, State Farm moved for summary disposition, arguing that St. John failed to make “reasonable efforts” to obtain payment from BCBSM and Magellan for the services that it provided to State Farm’s insured. In support of this argument, State Farm pointed to the fact that St. John never appealed Magellan’s “medically necessary” determination.

The trial court initially rejected State Farm’s argument, but later reversed its decision and dismissed the case, finding that St. John failed to show that it had made “reasonable efforts” to obtain payment.

No Appeal Necessary

In an opinion written by Judge Kathleen Jansen, the Court of Appeals reversed the trial court, finding that St. John presented sufficient evidence that it made “reasonable efforts” to obtain payment. The Court also held that St. John did not have to appeal the health insurer’s denial in order to make such a showing. 

To reach this conclusion, the Court of Appeals relied on Adanalic v Harco Nat’l Ins Co, 309 Mich App 173 (2015), where the appellate panel held that workers’ compensation benefits denied by an employer were not “available” to the claimant and, consequently, PIP benefits were payable. According to the Adanalic Court, the claimant did not have to litigate the denial of workers’ compensation before seeking PIP benefits, because that is contrary the No-Fault Act’s goal of providing prompt recovery for economic loss.

Likewise, the St. John Court held the claimant did not need to appeal the health insurer’s denial of benefits before seeking PIP benefits. The Court rejected State Farm’s reliance on Farm Bureau, where the provider had a contract with the health insurer that said the provider was financially responsible for claims that were denied as medically unnecessary, unless the insured had accepted responsibility in writing before receiving the service.
Under the contract at issue in Farm Bureau, because the provider – and not the insured – was financially responsible for the charges, the insured had not satisfied the PIP benefit prerequisite of “incurring” the charges and, therefore, the insurer did not have to pay PIP benefits. But the St. John Court held that Farm Bureau was limited to the “unique” contract at issue in that case, and that Farm Bureau did not stand for the blanket proposition that a provider/insured must appeal a health insurer’s denial.

Burden Lifted

The St. John decision is important because it offers clarity to medical providers in navigating situations where a patient has coordinated no-fault coverage.

Moreover, because the decision is published and is binding case precedent, medical providers faced with a denial by a patient’s health insurer can now turn to the patient’s no-fault insurer for coverage, knowing they have met the burden of making “reasonable efforts” to obtain payment from the health insurer. In turn, this allows medical providers to act promptly in pursuing payment from no-fault insurers.

Prompt action is crucial, given that §3145 of the No-Fault Act (MCL 500.3145) requires that an action for auto no-fault benefits be commenced within one year of the date the expense is “incurred.” Generally, an expense is “incurred” on the date that services were rendered, meaning medical providers typically have one year from the date of service to bring suit against a no-fault insurer for payment. 

With such a short time frame, the potential delay associated with having to fully exhaust a health insurer’s internal appeals process – which may take several months from start to finish – can be burdensome on a medical provider. It may also jeopardize a provider’s ability to receive payment from the no-fault insurer.

In the end, the Court of Appeals decision in St. John lifts this burden off medical providers, letting them act swiftly to pursue payment of benefits and protect their rights under the No-Fault Act.


Dan James, Katie Tucker and Dan Zick are associate attorneys who focus their practice on personal injury and auto no-fault law at the Sinas Dramis Law Firm, which has offices in Lansing, Grand Rapids and Chicago.

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