In an important decision for insurers, the New York Court of Appeals recently ruled that accredited office-based surgery (OBS) centers are not entitled to bill patients’ insurance companies for facility fees under New York’s no-fault insurance law.

The case arose when an OBS center in New York sought to bill GEICO for both professional service fees and a facility fee, which the OBS center defined as, “a charge for the use of the physical location and equipment,” as well as for, “payment [of] technicians and medical assistants who helped with the surgical procedures.” GEICO paid the professional service fees, but denied reimbursement for the facility fee. The facility fee was over $1.3 million.

Facility Fee is Not a “Basic Economic Loss”

In the Court of Appeals, the OBS center argued that its facility fee constitute a “basic economic loss” that was eligible for reimbursement under New York’s no-fault insurance law. Section 5102(a)(1) of the law defines a “basic economic loss” as:

“All necessary expenses incurred for: (i) medical, hospital . . . surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; (ii) psychiatric, physical therapy (provided that treatment is rendered pursuant to a referral) and occupational therapy and rehabilitation; (iii) any non-medical remedial care and treatment rendered in accordance with a religious method of healing recognized by the laws of this state; and (iv) any other professional health services . . . .”

Under the no-fault insurance law, the Department of Financial Services (DFS) has the authority to create fee schedules which establish the types of services and maximum rates that are eligible for reimbursement as a “basic economic loss.” While DFS has established fee schedules covering OBS center professional fees and facility fees for hospitals and ambulatory surgery centers (ASCs), it has not established a schedule covering OBS facility fees.

Based on this exclusion, GEICO argued – and the New York Court of Appeals agreed – that the OBS center was not entitled to reimbursement of its facility fee. Referencing the schedules specifically covering facility fees for hospitals and ASCs, the Court of Appeals held that the exclusion of OBS facility fees “is no mere oversight,” and that a regulation allowing for payment of certain non-scheduled expenses did not support the OBS center’s facility fee reimbursement claim because the regulation applies only to “professional health services.” In the Court’s words, “facility fees are not services.”

Court’s Decision Supports Legislative Intent to Protect Insurers

In rejecting the OBS center’s facility fee claim, the Court of Appeals cited to what it called “the obvious legislative purpose behind” New York’s no-fault insurance law, which is to “contain costs by subjecting service charges to statutory ceilings and regulatory-fixed rates.” The Court also stated that DFS does not have a duty to announce fees that it chooses to exclude from reimbursement schedules under the no-fault insurance law, and that it can “implicitly reject reimbursement” by excluding fees from its schedules.

This is an important decision for insurers in New York, and one that insurance companies and their attorneys should keep in their hip pockets when facing claims not explicitly covered by DFS’s reimbursement schedules under New York’s no-fault insurance law.

BG&S, LLP| Insurance Defense Lawyers in NY & NJ

BG&S, LLP is a law firm with offices in New York and New Jersey that represents leading insurance companies in no-fault insurance matters and other claim-related disputes. To speak with an attorney, contact us online or call (631) 390-0010 today.

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