Medical Providers – Fee Schedules and Medical Bill Auditing

Many insurance companies have refused to pay the full amount of a doctor bill or hospital charge because the insurance company claims the charges are not “reasonable” within the meaning of
Subsection 3107(1)(a).

Denial of Claims based on Fee Schedules

Sometimes, the no-fault insurance company supports its denial of the claim by referring to certain fee schedules that are utilized in Workers’ Compensation cases or utilized to determine what benefits are payable under health insurance policies or government benefit programs. The Court of Appeals has clearly held that it is improper for a no-fault insurance company to use fee schedules to determine the extent to which medical expenses are compensable under Subsection 3107(1)(a) of the statute. See Munson Med Ctr v Auto Club Ins Ass’n,218 Mich App 375 (1996) and Mercy Mt Clemens Corp v Auto Club Ins Ass’n, 219 Mich App 46 (1996).

Moreover, Michigan voters rejected the use of fee schedules for no-fault claims when they defeated Proposal D in the November 1992 election and Proposal C in the November 1994 election. Therefore, it is not proper for no-fault insurance companies to utilize fee schedules to deny no-fault claims.

The Use of Medical Bill Auditing

Faced with this reality, many no-fault insurance companies have adopted an alternative strategy of sending a patient’s medical expenses to a so-called independent auditing company for a “medical audit,” i.e., an opinion as to whether the charges are “reasonable.” In the case of Advocacy Org v ACIA, 472 Mich 91 (2005), the Michigan Supreme Court approved the basic concept of medical-bill auditing but did not render any ruling on any specific methodology regarding how audits should be conducted.

Typically, medical audits result in a portion of the charges being denied. When this happens, the patient is caught in the middle of a dispute between the medical care provider and the no-fault insurance company. This can create problems for the patient, including an interruption in medical treatment.

To avoid this situation, the Michigan Insurance Commissioner has issued Bulletin 92-03, which requires no-fault insurance companies to protect the patient from any collection efforts undertaken by the medical provider and to inform the provider that the dispute is solely between the insurer and the provider and does not involve the patient.

However, it remains doubtful whether this bulletin can legally cut off the right of a medical provider to sue a patient to recover the balance that remains unpaid after an audit. Therefore, patients and providers should pay close attention to whether any portion of their medical expenses are being denied because of a no-fault insurance company audit. If this is happening, patients and providers should consult with legal counsel to determine what legal rights they may have regarding the unpaid amount.