New York Court of Appeals Rejects Claim of Office-Based Surgical Practice Seeking Facility Fees Under New York’s No-Fault Law

April 1, 2016

In a unanimous decision, the New York Court of Appeals found that accredited office-based surgical practices (OBS) are not entitled to collect fees from automobile insurers for the use of medical facilities in providing surgical and other professional services. While this decision dismissed $1.3 million in disputed claims, the ripple effect will impact millions of dollars in claims against automobile insurers.

The New York Court of Appeals issued a decision yesterday that will have wide ranging impact on the automobile insurance industry. In Government Employees Insurance Company (GEICO) v. Avanguard Medical Group PLLC, the court unanimously decided that accredited office-based surgical practices (OBS) are not entitled under New York’s No-Fault Law to collect fees for the use of their facilities in connection with the performance of surgical and other professional services.  The disputed fees in the case totaled in excess of $1.3 million and the decision will impact millions of dollars of additional claims that are pending against GEICO and other New York automobile insurers.

Writing for a unanimous court, Justice Jenny Rivera adopted GEICO’s interpretation of New York’s Insurance Law and the corresponding regulations, concluding reimbursement of facility fees to office-based surgical practices was not supported by the language of the no-fault law or the legislative purpose behind it.

In an 11-page decision, Justice Rivera wrote:

“We reject Avanguard’s interpretation of the no-fault law framework, because it would permit Avanguard and other OBS centers to collect facility fees even though these types of fees are not expressly permitted by statute or payment schedules authorized hereby, and regardless of the fact that costs for the use of an OBS center are not reimbursable services under 11 NYCRR 68.5. Moreover, Avanguard’s view of the law undermines the obvious legislative purpose behind this framework, to contain costs by subjecting service charges to statutory ceilings and regulatory-fixed rates.”

Rivkin Radler was retained by GEICO once the case was accepted by the Court of Appeals, and the appeal was handled by Barry I. Levy, Evan H. Krinick and Henry M. Mascia.

“We are very pleased that the Court of Appeals agreed with our client’s positon on this issue,” stated Barry I. Levy, of Rivkin Radler. “The decision represents an important step in ensuring that benefits that are provided to GEICO policyholders under the no-fault system are protected from healthcare providers who seek through creative means to artificially reduce those benefits.”

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