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PEER REVIEW, A DEFENSE NO MORE?
By: CRAIG J. BRUNO, ESQ. & MICHAEL A. CALLINAN, ESQ

FOR THE DEFENSE

PEER REVIEW, A DEFENSE NO MORE?

BY CRAIG J. BRUNO, ESQ.
& MICHAEL A. CALLINAN, ESQ.

The file-based peer review, long the tool of No-Fault insurers in determining whether to pay or deny a claim, has come under attack in a recent outpouring of judicial activism by the New York City Civil Court, Kings County. The attack on the file-based peer review came in the recent case of Alliance Medical Office, P.C. a/a/o Charles Harvery v. Allstate Insurance Company, 196 Misc. 2d 268; 764 N.Y.S.2d 341 (N.Y. Sup. Ct. 2003) when Judge Silber held that a file based peer review alone is not sufficient for the defendant to meet its burden of establishing a lack of medical necessity “when the medical bill is for a diagnostic test.” Id. at 270, 343.

In order to understand the significance of the file-based peer review, one must have a general understanding of its use and application in the No-Fault arena. The No-Fault regulations state that an insurer must either pay or deny a claim within thirty days of receipt of same or else the insurer will be precluded from defending against the claim. See Presbyterian Hospital v. Maryland Casualty, 90 N.Y.2d 274 (N.Y. 1997). However, the insurer is entitled to seek additional verification of the claim within the thirty-day period. This provides the insurer the opportunity to obtain additional information before making a decision on the claim.

When all necessary information has been obtained, the insurer can submit the medical bill and documentation provided by the treating physician to an independent entity to determine if the treatment rendered to the injured person is compensable. This process is the file-based peer review and is used extensively to determine whether to pay or deny a bill.

The threshold question for the file-based peer review is whether the treatment provided by the physician was “medically necessary”. The independent doctor reviews the materials provided by the treating physician, and in conjunction with his or her own medical experience, renders a determination on whether the treatment provided was “medically necessary”.


The finding of a “[l]ack of medical necessity is a defense to an action to recover no-fault benefits, which an insurer may assert upon a timely denial, based either on a medical examination or a peer review report, as implicitly provided by Insurance Regulation 11 NYCRR 65.3.8 (b)(4), now 65-3.8 (b)(4).” See Rockaway Boulevard Medical, P.C. d/b/a Queens Diagnostic Center a/a/o Celia Scalfani v. Travelers Property Casualty Company, 2003 N.Y. Misc. LEXIS 485 (N.Y. App. Term 2003). Further, the Appellate Term held in S&M Supply Inc., a/a/o Pierre Vitelius v. Allstate Insurance Company, 2003 N.Y. Misc. LEXIS 1068 (N.Y. App. Term. 2003) that the peer review report, on which an insurer relies to timely deny a claim, is a proper means to assert the defense of lack of medical necessity and set forth a factual basis sufficient to establish a triable issue of whether the treatment was medically necessary. See also, A.B. Medical Services, PLLC, a/a/o Slawomir Gryszkiewics v. Allstate Insurance Company, 2003 N.Y. Misc. LEXIS 739 (N.Y. App. Term. 2003); Park Health Center Rockaway Boulevard Medical, P.C. a/a/o Bennett v. State-Wide Insurance Company, 2003 N.Y. Misc. LEXIS 623 (N.Y. App. Term. 2003); Rockaway Boulevard Medical, P.C., Park Health Center a/a/o Carolyn Jackson v. Allstate Insurance Company, 2003 N.Y. Misc. LEXIS 292 (N.Y. App. Term. 2003); Choicenet Chiropractic, P.C. a/a/o Lester Haynes v. Travelers Property Casualty Corporation, 2003 N.Y. Misc. LEXIS 310 (N.Y. App. Term. 2003).

In accordance with the preceding case law, a timely denial based on the results of a peer review creates an issue of fact that can only be resolved at the time of trial. Some courts hold that “to withstand a motion for summary judgment, a peer review report must set forth a factual basis sufficient to establish, prima facie, the absence of medical necessity.” Choicenet Chiropractic, P.C. a/a/o Ketevan Palagashvila v. Allstate Insurance Company, 2003 N.Y. Misc. LEXIS 314, at **2 (N.Y. App. Term. 2003).

Consequently, one would fathom that as long as the insurer timely denies a claim based upon a peer review, and as long as that report sets forth a factual basis for the finding of a lack of medical necessity, then a plaintiff could not prevail on a summary judgment motion, as a triable issue of fact exists. How does one define “medically necessary”?

When presented with this question in Alliance Medical, Judge Silber failed to address the issue and simply negated the use of the file-based peer review and opined, “while it may be possible to make out a prima facie case for the affirmative defense of lack of medical necessity for service or treatment with a file-based peer review, it is not possible to do so with regard to a test performed within a reasonable time following an accident and prior to the patient’s even arguably reaching maximum medical improvement.” Alliance Medical, 196 Misc. 2d at 271; 764 N.Y.S.2d at 343; but cf. Big Apple Medical Diagnostic, P.C. a/a/o Mirian Pena and Michael Skyers, et al., v. Allstate Insurance Company, New York Civ. Ct., Index No. 89406/2003, January 15, 2004 (holding that the peer review methodology is an entrenched procedure used in many professions to determine the necessity and quality of services performed).

In Big Apple, Judge Siegal, in following precedent established by the Appellate Term, correctly allowed an insurer’s timely denial based on a peer review to be considered as evidence against plaintiff’s case in chief. Judge Siegal understood and rejected the implications of Alliance Medical in that it incorrectly “closed the door on peer review[s] as a legitimate procedure for determining the necessity of medical and related procedures”. Since the peer review methodology is an entrenched procedure in the No-Fault arena, condoned by both the regulations and the Appellate Term, Judge Siegal allowed an insurer to assert its defense of lack of medical necessity established through the file-based peer review. Big Apple, Index No. 89406/2003, at page 3.



Under Judge Silber’s approach in Alliance Medical, an insurer would be left with no means to defend against a bill for diagnostic services once the treating physician testified that the services were necessary. This is in direct contradiction to the Appellate Term, where it has been consistently held that the file-based peer review creates a triable issue of fact to determine the necessity of the treatment rendered. Although real questions exist as to what the actual definition of “medically necessary” is, there is no dispute that it is an issue of fact to be decided at trial after all interested parties have given testimony. Accordingly, the trier of fact will find either side more credible and render a decision based upon that determination.

Without the peer review, insurers would be left without an economically viable means of addressing the vast amounts of No-Fault bills received on a daily basis. Insurers would have no other alternative than to honor almost every bill received without the benefit of even knowing if the services were medically necessary. Until Judge Silber’s approach is challenged on appeal, insurers must proceed with caution, as the previous defense of lack of medical necessity may be a defense no more. In the interim, however, insurers can take solace in the fact that the Appellate Term usually looks kindly on peer reviews.

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