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A Way Around “Fair Price”
By: Gregory J. Popadiuk, Esq.

FOR THE DEFENSE
A Way Around “Fair Price”

By: Gregory J. Popadiuk, Esq.
Bruno, Gerbino & Soriano, LLP
Melville, New York

In a recent New York State Supreme Court, Nassau County case decided on January 29, 2008, the Court articulated a remedy for a defendant insurance carrier which had untimely denied a Plaintiff health care provider’s no-fault reimbursement claim on the basis of fraudulent billing.
Insurance carriers have been confined by the strict parameters of Fair Price Medical Supply Corp. v. Travelers, which held that fraudulent billing (i.e. billing for services or supplies not actually provided to an eligible injured person) is not a defense based upon lack of coverage and therefore a carrier must either pay or deny first party no-fault benefits within thirty days of receipt. Failure to do so would result in the carrier being precluded from interposing a defense in a lawsuit to recover assigned first party no-fault benefits.
In Carnegie Hill Orthopedic Services, P.C. v. Geico, the Supreme Court, Nassau County granted the Plaintiff’s motion for partial summary judgment on two of its fifty-three causes of action for no-fault benefits. The Court begrudgingly followed Fair Price and determined that Geico’s assertion of fraudulent billing was not a lack of coverage defense. Therefore, Geico was obligated to either pay or deny the Plaintiff’s claims within thirty days of receipt. However, in what appeared to be an attempt to dispel fraudulent billing practices, it also denied Plaintiff’s motion for partial summary judgment on Geico’s counterclaim for fraud. Geico’s allegations of fraud included “fabricating injuries, falsifying medical records to justify surgery billed for but not performed and performance of procedures/surgeries which risked harm to patients,” by Dr. Allen Chamberlin, the principal of the Plaintiff, Carnegie Hill Orthopedic Services, P.C. and owner of Devonshire Surgical Facility.
By allowing Geico’s counterclaim for fraud to withstand plaintiff’s motion for summary judgment and to be litigated further, the Court provides some authority and guidance to insurance carriers in dealing with established case law and obvious fraudulent billing.
The decision recognizes the often overlooked fact that a carrier might not have the ability to fully investigate a provider’s billing practices and procedures within the requisite thirty days to determine whether to issue payment or a denial. Fair Price unequivocally stated that the carrier was aware of the fact that services rendered were not provided within the thirty days it had to pay or deny the claim. In this regard, the Court in Carnegie Hill may also be indirectly recognizing a provider’s or eligible injured person’s potentially prolonged delay in cooperating with any such investigation, if at all. For instance, a carrier may correctly request examinations under oath or independent medical examinations and then subsequently issue a timely denial based on non-cooperation should the particular individual not appear. However, doing so would in effect permit the non-cooperation or failure to appear to potentially cover up any indicia of fraudulent billing. Arguably, a situation could arise where the carrier is completely limited by non-cooperation in ascertaining whether fraudulent billing has occurred and not only could it be in breach of the thirty day pay or deny rule but could conceivably never amass any information to establish a fraudulent billing scheme to assert, let alone prevail, on a counterclaim.
Despite the Court’s unhesitant adherence to Fair Price, which it is bound to follow, and not classifying fraudulent billing as a lack of coverage defense, it is careful not to enunciate what would be considered sufficient proof or indicia of fraudulent billing in order for an insurance carrier to prevail on a counterclaim for fraud. For instance, the Carnegie Hill opinion notes that Dr. Chamberlin’s medical license had previously been revoked and that he was the subject of an inquiry made by the New York State Board for Professional Medical Conduct. The opinion states that Geico submitted an affirmed report of Dr. Craig Levitz who determined that Dr. Chamberlin “carried out an extensive and pervasive practice of fraud which included fabricating injuries, falsifying medical records to justify surgery billed for but not performed, and performance of procedures/surgeries which risked harm to patients.” By contrast, the Fair Price decision, which albeit, did not deal with a carrier’s counterclaim based on fraudulent billing, noted that there was simply a signed statement from the eligible injured person stating that he did not receive the medical supplies billed for by the provider. It would seem that under either scenario, a carrier’s counterclaim for fraud would be meritorious, if not successful.
The Court’s decision provides limited guidance for an insurance carrier when dealing with evidence of provider billing fraud. While it may highlight a carrier’s or defense lawyer’s frustration with fraudulent billing, because the issue is not one of lack of coverage, the Court need not struggle with the decision of whether to award a provider no-fault benefits when there are clear indicators of fraudulent billing. It does not suggest how a carrier might be better able to ascertain fraudulent billing within thirty days nor does it even question the appropriateness of the thirty day pay or deny requirement in such situations.
It is far too early to ascertain whether the Court’s decision in Carnegie Hill would give some leverage to the carrier when dealing with a fraudulent billing scheme. The burden of production and persuasion would still rest with the defendant. While the Court’s decision does not deviate from the requirement of paying or denying a claim within thirty days of receipt despite evidence of fraud, it rightfully provides an opportunity for the carrier to fully litigate as to no-fault benefits that it should not have been compelled to pay.
Fair Price is presently before the New York State Court of Appeals.
Editors Note: Gregory J. Popadiuk is a graduate of Touro College, The Jacob Fuchsberg Law Center and an associate at Bruno, Gerbino & Soriano, LLP, located in Melville, New York.

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