Devonshire Surgical Facility v GEICO

[*1] Devonshire Surgical Facility v GEICO 2006 NY Slip Op 52450(U) [14 Misc 3d 1208(A)] Decided on December 1, 2006 Civil Court Of The City Of New York, New York County Jaffe, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on December 1, 2006
Civil Court of the City of New York, New York County

Devonshire Surgical Facility and Carnegie Hill Orthopedic Services a/a/o Lawrence Eisworth, Plaintiffs,

against

GEICO, Defendant.



25919/05



For plaintiffs:

Christopher McCollum, Esq.

Law Offices of Christopher McCollum

57 W. 57th St., Suite 502

New York, NY 10019

For defendant:

Emilio Cacace, Esq.

Law Offices of Teresa M. Spina

88 Froelich Farm Blvd.

Woodbury, NY 11797

Barbara Jaffe, J.

Plaintiffs move for an order granting them summary judgment on their claim for unpaid no-fault insurance benefits furnished by them, statutory interest, and attorney fees pursuant to Article 51 of the Insurance Law (the "No-Fault" law). Defendant opposes the motion and cross-moves pursuant to CPLR 3126 for an order striking plaintiffs' complaint and dismissing the action based on plaintiffs' failure to comply with discovery, or in the alternative, pursuant to CPLR 3025(b) and 3124 granting it leave to serve an amended answer and counterclaim and compelling plaintiffs to comply with discovery.

I. MOTION FOR SUMMARY JUDGMENT

A court may grant summary judgment upon a prima facie showing of entitlement to

judgment as a matter of law, through admissible evidence sufficient to eliminate material issues of fact. (CPLR 3212[b]; Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). Failure to make such a showing requires that the motion be denied regardless of the sufficiency of the opposing papers. (Winegrad, 64 NY2d at 853). In order for a treatment provider to establish its entitlement to summary judgment on its [*2]claim for no-fault benefits, a plaintiff must submit evidentiary proof that the prescribed statutory billing forms were mailed to and received by the defendant, and that the defendant failed to pay or deny the claim within the statutory 30-day period or did not timely request additional verification. (New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640, 641 [2d Dept 2004], lv denied 3 NY3d 609; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2d Dept 2004]; Bonetti v Integon Ntl. Ins. Co., 269 AD2d 413 [2d Dept 2001]; SZ Med. PC v State Farm Mut. Auto Ins., 9 Misc 3d 139[A] [App Term, 1st Dept 2005]).

Here, plaintiffs' employee's affidavit sufficiently proves that she personally mailed the claim forms to defendant and that defendant failed to pay the claims in full and otherwise failed to timely and properly deny the claims. (Affirmation of Christopher L. McCollum, Esq., dated May 25, 2006 [McCollum Aff.]; Affidavit of Martha Chamberlin, dated May 26, 2006 [Chamberlin Affid.]). Moreover, the annexed certified mail receipt reflects that defendant received the claims. (McCollum Aff.). I thus find that defendant received a claim from Devonshire Surgical Facility (Devonshire) in the amount of $3,000 for services rendered on February 22, 2003, and two claims from Carnegie Hill Orthopedic Services (Carnegie Hill) for services rendered on February 22, 2003. Thus, notwithstanding defense counsel's claims to the contrary which have no apparent basis, I find that plaintiffs have established, prima facie, their entitlement to no-fault benefits. (See New York Hosp. Med. Ctr. of Queens, 8 AD3d at 641; Mary Immaculate Hosp., 5 AD3d 742; SZ Med. PC, 9 Misc 3d 139[A]). The burden of proof thus shifts to defendant to raise a triable issue of fact as to these claims.

Defendant denies that Carnegie Hill is entitled to reimbursement for services it rendered on February 22, 2003. (Affirmation of Emilio Cacace, Esq., dated Aug. 21, 2006 [Cacace Aff.]).[FN1] Its denial of claim form reflects that it received the claims on April 4, 2003 and denied them on May 9, 2003, although that it partially paid Carnegie Hill $3,075.96. (Id., Exh. G). As the denial is untimely on its face, certain of its defenses are precluded, as hereinafter indicated.

According to a letter dated May 5, 2003 subsequently sworn to by a medical audit specialist employed by Genex Services, Inc. (Genex), Carnegie Hill is entitled to reimbursement only for fees as set forth in the Workers' Compensation Fee Schedule (fee schedule). (Id., Exh. G). Defendant thus alleges that Carnegie Hill violated Insurance Law § 5108 by seeking fees beyond those set forth in the fee schedule. It also maintains that Carnegie Hill improperly issued separate bills for services that should be collectively charged within one medical code ("unbundling" its services). (Id.).

Defendant argues that Devonshire is not entitled to any reimbursement as the Workers' Compensation Board (Board) does not authorize payment to facilities that have not been approved by the Department of Health to provide ambulatory surgery services, again relying on the May 3, 2003 letter in which the Genex audit specialist recommends against reimbursement as Devonshire "is not on the list of licensed facilities for which payment could be authorized." (Id., Exh. G). In further support, defendant submits the following: 1) a letter from Genex to Carnegie Hill, dated July 15, 2004, relating to the claim of [*3]another assignor, and also recommending against reimbursement of Devonshire's facility fee as neither Carnegie Hill nor Devonshire appears on the Board's list of approved facilities for ambulatory surgery procedures;

2) a letter from Carnegie Hill to defendant, dated June 18, 2004, requesting that it reviewits denial of the other assignor's claim based on its assertion that Devonshire need not be licensed or listed as it is not a separate facility but a "trade style" used solely for billing purposes; 3) a letter from Genex to defendant, dated May 4, 2004 and subsequently sworn to, in which it recommends against reimbursement to Devonshire for surgery performed on the other assignor; 4) a New York State Department of Health printout from its website which reflects that the medical license of plaintiffs' principal, Allen Chamberlin, was revoked, effective August 8, 2005;5) a letter dated January 6, 2005 from an Associate WC Examiner at the Board to another law firm stating that "only licensed freestanding ambulatory surgery centers may be eligible to charge a facility fee," that the term "licensed" refers to those freestanding surgery centers licensed pursuant to Article 28 of the Public Health Law, that Carnegie Hill is not a licensed facility, and that it is therefore not entitled to reimbursement for facility charges, although the letter was sent in response to a request for clarification concerning charges for services rendered by Carnegie Hill and for "informational purposes only" and with the further proviso that no-fault cases "may be subject to differing interpretations"; and6) a letter from the Chair of the Workers' Compensation Board dated May 11, 2004, observing that the updated Ambulatory Fee Schedule for 2003 covers ambulatory surgery charges for services rendered on or after January 1, 2003 to patients pursuant to, inter alia, the worker's compensation law and the no-fault law.

(Cacace Aff., Exhs. D, E, H).

Defendant also observes that Carnegie's assertion in its June 18, 2004 letter that it bills under Devonshire's name as a "trade style" is inconsistent with the bills, and that if Devonshire's name is used only for billing purposes only, it is not entitled to reimbursement. Alternatively, defendant asserts that plaintiffs are not entitled to summary judgment due to their failure to respond to its discovery requests.

In reply, plaintiffs contend that defendant failed to deny their claims timely and properly, and that the Board requirements are inapplicable to no-fault claims.

As defendant's denial is untimely on its face, its defenses against Carnegie Hill based on the fee schedule and the alleged "unbundling" of services are precluded. (See Benson Med., P.C. v Progressive Northeastern Ins. Co., 12 Misc 3d 144[A], 2006 NY Slip Op 51427[U], *1 [App Term, 2d & 11th Jud Dists 2006] [untimely denial of claim precludes defense based on [*4]application of fee schedules to specific services provided]). Consequently, defendant has failed to raise a triable issue of fact sufficient to preclude a summary disposition in Carnegie Hill's favor.

Although it is undisputed that Devonshire is an ambulatory surgical center governed by Article 28 of the Public Health Law in terms of its eligibility for reimbursement (Public Health Law § 2801[1] [definition of "hospital"], § 2807[1] [reimbursement cannot be made unless at time service was provided, hospital possessed valid operating certificate authorizing such service]; Simaee v Levi, 22 AD3d 559 [2d Dept 2005] [ambulatory surgical center falls within definition of "hospital" in Public Health Law and thus center required to comply with law]), defendant has failed to offer persuasive authority for the proposition that the Board's guidelines apply to no-fault cases beyond the setting of fees in the schedules. I also observe that the letter from the Board's chair contains no reference to Devonshire and that the fee schedule bears no indication that only listed entities are properly licensed. Indeed, the Board examiner's letter contains a concession that no-fault cases may be subject to differing interpretations. For these reasons, I find that the absence of Devonshire's name from the fee schedule is immaterial to the issue of whether Devonshire is entitled to reimbursement.

Finally, even if "Devonshire Surgical Facility" is a trade style or trade name used by Carnegie Hill, Carnegie Hill is not prohibited from seeking reimbursement under that name. (See Channel Diagnostics PC v State Farm Mutual Auto. Ins. Co., Civ Ct, New York County, June 12, 2006, Jaffe, J., Index No. 018647/05 [GBL § 130(1-a)(c) permits corporations to maintain actions or proceedings in their assumed names]).

In sum, as defendant has set forth no legal basis for its contention that Devonshire is not entitled to reimbursement and absent any material issue of fact, I find that defendant has failed to raise a triable issue as to Devonshire's claim.

I address below defendant's argument that plaintiffs are not entitled to summary judgment absent the requested discovery.

II. MOTION TO DISMISS OR COMPEL DISCOVERY

A party may obtain from its adversary any and all information that is "material and necessary" (CPLR 3101[a]), including "any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity." (Andon v 302-304 Mott Street Assocs., 94 NY2d 740, 746 [2000], quoting Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406 [1968]). Pursuant to CPLR 3126(3), a party's failure to produce requested discovery may result in its pleadings being stricken or its action dismissed.

In the no-fault context, an insurer seeking discovery into a medical corporation's corporate status must demonstrate "good cause" to believe that it is fraudulently incorporated under Business Corporation Law (BCL) §§ 1507 and 1508 and Education Law § 6507(4) and thus not entitled to reimbursement for no-fault services rendered. (Continental Med. Acupuncture Svces., P.C. v Travelers Ins. Co., 13 Misc 3d 132[A], 2006 NY Slip Op 51890[U] [App Term, 1st Dept 2006]; see State Farm Mutual Automobile Ins. Co. v Mallela, 4 NY3d 313 [2005] [medical corporation that is fraudulently incorporated under BCL §§ 1507 and 1508 and Education Law

§ 6507(4) not entitled to reimbursement]).

Here, defendant asserts that plaintiffs failed to respond to discovery requests relating to their licensing, incorporation, or organization, which, if fraudulent, constitutes a non-waivable [*5]defense. To the extent that defendant relies on the 2005 revocation of Chamberlin's license to establish good cause (Cacace Aff.),[FN2] I find that the revocation does not give rise to a fair inference that Chamberlin engaged in fraudulent conduct in 2003, when the services at issue here were rendered, and in any event, on November 22, 2006, the Appellate Division, Third Department, in reviewing Chamberlin's appeal of the decision revoking his license, annulled the revocation as to certain charges and remitted the proceeding for a redetermination of the penalty. (2006 WL 3371774, 2006 NY Slip Op 08705, *1). Moreover, defendant has neither alleged nor proved that Chamberlin was unauthorized to practice medicine in 2003 in violation of BCL

§ 1503(b), or that at the time plaintiffs became incorporated they issued shares to Chamberlin in violation of BCL § 1507(a) and were thus fraudulently incorporated.

In Mallela and its progeny, the evidence of fraudulent incorporation consisted of proof that the corporation was owned or operated by unlicensed individuals or non-physicians in violation of BCL §§ 1507 and 1508. (Mallela, 4 NY3d at 320 [defendant companies were owned or operated by non-physicians]; Citywide Social Work & Psych. Svces., PLLC v State Farm Mut. Auto. Ins. Co., 13 Misc 3d 1215[A], 2006 NY Slip Op 51831[U] [Dist Ct, Suffolk County 2006] [medical provider owned by lay persons and unlicensed professionals]; Montgomery Med., P.C. v State Farm Ins. Co., 12 Misc 3d 1169[A], 2006 NY Slip Op 51116[U] [Dist Ct, Nassau County 2006] [actual profits from medical practice were possibly diverted to non-physician management company]; A.T. Med., P.C. v State Farm Mut. Ins. Co., 10 Misc 3d 568 [Civ Ct, Queens County 2005] [defendant demonstrated that plaintiff medical company had shared large percent of its revenues with corporation owned by non-physician]).

Here, by contrast, it is undisputed that in 2003, when the services in issue were rendered, plaintiffs were owned and operated by a licensed physician. (See A.B. Med. Svces. PLLC, et al. v Prudential Prop. & Cas. Ins. Co., 11 Misc 3d 137[A], 2006 NY Slip Op 5054[U] [App Term, 2d & 11th Jud Dists 2006] [no factual basis for belief that plaintiff fraudulently incorporated as it was unrebutted that plaintiff was duly registered]; Total MRI Mgt., LLC v Greenfield Imaging Assocs. Imaging, LLP, 11 Misc 3d 1062[A], 2006 NY Slip Op 50367[U] [Sup Ct, Nassau County 2006] [no proof of fraudulent incorporation as defendant's medical practice legally organized and created pursuant to applicable regulations]; CKC Chiro. v Republic Western Inc. [*6]Co., 5 Misc 3d 492 [Civ Ct, Kings County 2004] [provider may be reimbursed for services rendered when she was licensed or registered, even if she subsequently becomes unlicensed or unregistered]; Metro Med. Diagnostics, P.C. v Allstate Ins. Co., 6 Misc 3d 1037[A] [Civ Ct, Kings County 2005] [same]).

I thus find that defendant has failed to establish good cause to seek discovery concerning plaintiffs' corporate status. (Compare Citywide Social Work & Psych. Svces., PLLC, 13 Misc 3d 1215[A], 2006 NY Slip Op 51831[U] [discovery permitted on documentary and testimonial proof that provider may be owned by unlicenced professionals]).

Additionally, in deciding whether a defendant-insurer is entitled to discovery in a no-fault matter, it must be determined whether the desired discovery pertains to a defense set forth in a timely denial or asserted non-precludable defense. (See eg A.B. Med. Servs. PLLC v Utica Mut. Ins. Co., 11 Misc 3d 71 [App Term, 2d Dept 2006]; All-County Med. & Diagnostic PC v Progressive Cas. Ins. Co., 8 Misc 3d 616 [Dist Ct, Nassau County 2005]; Metropolitan Radiological Imaging, PC v State Farm Mut. Auto. Ins. Co., 7 Misc 3d 675 [Civ Ct, Queens County 2005]).

Here, Chamberlin's license was revoked due to his excessive and unnecessary treatments or fraudulent billing for services never provided, which are forms of provider fraud. A defense of provider fraud is precluded unless raised in a proper and timely denial. (Careplus Medical Supply Inc. v State-Wide Ins. Co., 2005 WL 3500845, 2005 NY Slip Op. 25545 [App Term, 2d & 11th Jud Dists]; see Ocean Diagnostic Imaging, PC v Utica Mutual Ins. Co., 9 Misc 3d 138[A] [9th & 10th Jud Dists] ["alleged irregularities in the treatment and billing process, not the traffic incident [] did not support a defense that survived the preclusion sanction."]). By failing to issue a timely denial, defendant waived this defense and in any event, did not include it in the denial. Consequently, it is not entitled to discovery concerning Carnegie Hill. (See Devonshire Surgical Facility and Carnegie Hill Orthopedic Srvcs. v GEICO, NYLJ, Apr. 7, 2006, at 20, col 1 [Civ Ct, New York County]). Similarly, defendant's failure to establish a legal basis for its denial of Devonshire's claim is fatal to its claim that it is entitled to the requested discovery. (See supra, I.).

Absent the issuance of a proper and timely denial, and given the preclusion of defendant's allegations of provider fraud and the absence of a legal basis for defendant's assertion that Devonshire was not licensed at the relevant time, there is an insufficient basis for denying summary judgment pending discovery. (See LMK Psych. Servs., P.C. v Liberty Mut. Ins. Co., 30 AD3d 727 [3d Dept 2006] [incomplete discovery did not preclude grant of summary judgment as defendant did not show that discovery may have raised triable issue of fact where it was undisputed that denial was untimely and defenses were thus precluded]; Spineamericare Med., P.C. v U.S. Fidelity & Guar. Co., 12 Misc 3d 138[A], 2006 NY Slip Op 51293[U], *1 [App Term, 9th & 10th Jud Dists 2006] [summary judgment should have been granted to plaintiff despite claim of incomplete discovery as defendants failed to establish defense that survived preclusive effect of untimely and ineffective denial]).

III. MOTION TO SERVE AMENDED ANSWER AND COUNTERCLAIM

Pursuant to CPLR 3025(b), a party may amend its pleading at any time by leave of the court, and leave shall be freely given upon such terms as may be just including the granting of costs and continuances. It is within the court's discretion whether a party may amend its complaint. (Murray v City of New York, 43 NY2d 400, 404-405 [1977], rearg dismissed 45 [*7]NY2d 966 [1978]; Lanpont v Savvas Cab Corp., Inc., 244 AD2d 208, 209 [1st Dept 1997]). The factors the court must consider in making this determination are whether the proposed amendment would "surprise or prejudice" the opposing party (Murray, 43 NY2d at 405; Lanpont, 244 AD2d at 209, 211; Norwood v City of New York, 203 AD2d 147, 148 [1st Dept 1994], lv dismissed 84 NY2d 849), and whether such amendment is meritorious. (Thomas Crimmins Contracting Co., Inc. v City of New York, 74 NY2d 166, 170 [1989] ["Where a proposed defense plainly lacks merit, however, amendment of a pleading would serve no purpose but needlessly to complicate discovery and trial, and the motion to amend is therefore properly denied."]; Ancrum v St. Barnabas Hosp., 301 AD2d 474, 475 [1st Dept 2003] [same]).

Defendant here seeks to amend its answer to assert the affirmative defense that Devonshire is not properly licensed and is therefore not eligible for reimbursement for no-fault services provided . (Cacece Aff., Exh. C). It also requests permission to amend its answer to assert a counterclaim against plaintiffs based upon Chamberlin's alleged fraud and unjust enrichment. Plaintiffs argue that the new affirmative defense and counterclaim are meritless.

Defendant's proposed counterclaim is comprised of allegations against Chamberlin which are almost identical to those relied upon by the Department of Health in revoking his license. As I have already found that these allegations pertain to a defense of provider fraud which is precluded due to defendant's untimely denial, defendant's proposed counterclaim is meritless. And as defendant has offered no proof that Devonshire was not properly licensed at the time the services in issue were rendered, there is no basis upon which to assert this affirmative defense either.

IV. CONCLUSION

Accordingly, plaintiffs' motion for an order granting them summary judgment is granted. The clerk is directed to enter judgment in favor of Carnegie Hill against defendant in the sum of $5,936.54, and in favor of Devonshire in the sum of $3,000, both with interest from May 4, 2003, plus attorney fees in the statutory pre-set amount of 20%, not to exceed a cap of $850, costs, fees, and disbursements. Defendant's motion to dismiss or compel discovery and to amend its answer is denied.

This constitutes the decision and order of the court.

_______________________________

Barbara Jaffe, JCC

DATED:December 1, 2006

New York, New York

Footnotes

Footnote 1: Defendant's denial of claim form includes a claim for which Carnegie Hill does not seek reimbursement ($154.30 for services rendered on February 10, 2003), and the $3,000 Devonshire claim. (Carace Aff., Exh. D).

Footnote 2: By order and determination dated July 22, 2005, the State of New York Department of Health, State Board for Professional Medical Conduct sustained charges of professional misconduct against Chamberlin and revoked his license to practice medicine in New York, effective August 2005. The sustained charges were based on findings that in and before 1998, Chamberlin had fraudulently billed insurance carriers for procedures that he did not perform, that he performed unnecessary or excessive medical treatment on patients, and that he made or filed false reports and bills. In deciding to revoke Chamberlin's license, the Board found as follows:

[I]n each case [Chamberlin] failed to perform a full diagnostic evaluation and failed to consider the concept of physical therapy. He took a one size fits all approach that is reflected in his standardized cook book' operative reports. He subjected all the patients to unneeded surgeries or excessive epidural blocks notwithstanding the potential risks.