Michigan Court of Appeals; Docket # 322423; Published
Judges Gadola, Hoekstra, M.J. Kelly; Unanimous, Per Curiam
Judges Gadola, Hoekstra, M.J. Kelly; Unanimous, Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion 
STATUTORY INDEXING:
TOPICAL INDEXING:
CASE SUMMARY:
In this unanimous published per curiam Opinion involving a coordinated no-fault policy with Farm Bureau and a dispute over the payment of the insured’s medical expenses, the Court of Appeals issued several rulings:
1)under the terms of Spectrum Health Continuing Care’s agreement with Blue Cross Blue Shield (BCBS), Spectrum assumed payment responsibility for the services it provided an insured because, by virtue of its participating provider agreement with BCBS, Spectrum agreed to accept payment from Blue Cross under the agreement as full payment for its services;
2)BCBS had no obligation to reimburse Farm Bureau, the injured party’s no-fault carrier, because in these circumstances and under the terms of its agreement, Spectrum assumed financial responsibility for the services it provided to the insured;
3)because Spectrum was liable for the costs of the insured’s treatment, the costs were not “incurred” by the insured and, therefore, Farm Bureau was not responsible for these amounts.
This case involved a payment dispute over the skilled nursing facility services that Spectrum provided to Julie Klein, who was gravely injured in an auto accident. Klein had a coordinated no-fault policy with Farm Bureau and had health insurance with BCBS. Meanwhile, BCBS had a contractual agreement with Spectrum in its capacity as a participating skilled nursing facility. Farm Bureau begrudgingly paid Klein’s medical expenses and then initiated this declaratory action against BCBS and Spectrum, seeking reimbursement. All three parties moved for summary disposition, and the trial court held that BCBS was responsible for payment to Spectrum. On appeal, BCBS argued the trial court erred by granting Farm Bureau’s motion for summary disposition because BCBS reasonably denied Klein’s claims based on BCBS’s determination of medical necessity under the plain language of its policy.
The Court of Appeals held that Spectrum assumed liability for the insured’s medical expenses and that in these “unique circumstances neither BCBS nor Farm Bureau had an obligation to pay. The Court explained:
“[I]t is undisputed that Klein had a coordinated no-fault policy with Farm Bureau and that, as a result of this coordinated policy, Blue Cross was primary with respect to the payment of Klein’s medical bills. … Under Klein’s policy with Blue Cross, as a general matter, Klein was eligible for up to 120 days per year of care at a skilled nursing facility, provided that care during that period was ‘necessary for the proper care and treatment of the patient.’ Given that Blue Cross provided coverage for these services, Klein had an obligation to seek such coverage from Blue Cross before turning to Farm Bureau for payment. … Furthermore, by virtue of its participating provider agreement with Blue Cross, Spectrum agreed to accept payment from Blue Cross under the agreement as full payment for its services, Spectrum agreed to abide by Blue Cross’s pre-certification requirements, and, most notably, Spectrum assumed ‘full financial responsibility’ for claims denied as being medically unnecessary, unless the insured ‘acknowledges that BCBSM will not make payment for such services, and the [insured] has assumed financial responsibility for such services in writing and in advance of the receipt of such services.’”
The agreement between Spectrum and BCBS was “unambiguous” and “dispositive,” the Court of Appeals said, noting the effect of Spectrum’s participating provider agreement was to relieve Klein from the legal responsibility of paying for Spectrum’s services. Because Klein had no legal obligation to pay the medical costs these expenses were no longer “incurred” for purposes of MCL 500.3107(1)(a) and, therefore, Farm Bureau had no obligation to pay these expenses In this regard, the Court stated:
“Although there were mechanisms in place for Klein or Spectrum to contest Blue Cross’s denial, no challenge was made to the denial. Spectrum also wholly failed to seek additional preapproval for the ongoing services it provided to Klein in the coming months, despite Spectrum’s contractual obligation to abide by Blue Cross’s precertification requirements. Moreover, there is no indication that Klein, or anyone acting on her behalf, agreed, in writing, to assume financial responsibility for the services denied by Blue Cross. Instead, Spectrum simply turned to Farm Bureau for payment. However, under the terms of Spectrum’s provider agreement, once its request for preapproval of these services had been denied as not being medically necessary, Spectrum contractually assumed financial liability for the services rendered and it was contractually prohibited from attempting to bill Klein individually for these services unless Klein assumed responsibility in writing, which she did not do. Spectrum’s decision not to contest Blue Cross’s medical necessity denial and its decision not to seek preapproval at a later time does not, without the assumption of liability by Klein, render Farm Bureau liable as a secondary payer. Instead, given that the terms of Blue Cross’s provider agreement with Spectrum expressly relieved Klein of any legal responsibility for the costs at hand, it follows that these expenses were not ‘incurred’ by Klein, and thus Farm Bureau is not liable for payment of these claims under MCL 500.3107(1)(a).”
The Court of Appeals further held that BCBS was not liable for Klein’s medical bills. The Court pointed out that Spectrum and Klein failed to challenge BCBS’s decision and did not seek pre-approval before providing additional services, despite its contractual obligation to do so. The Court also noted that Spectrum did not obtain Klein’s written agreement to assume responsibility for services that BCBS determined were not medically necessary. According to the Court:
“In these circumstances, under the terms of its agreement, Spectrum assumed financial responsibility for the services it provided to Klein, and Blue Cross had no obligation to pay Klein’s bills, or to reimburse Farm Bureau.”
In conclusion, the Court of Appeals held the trial court: 1) improperly denied BCBS’s motion for summary disposition; 2) erroneously granted summary disposition to Farm Bureau as against BCBS; 3) improperly granted summary disposition to Spectrum; and 4) erroneously denied Farm Bureau’s motion for summary disposition against Spectrum.
