April 17, 2014

Contributed to by:
Richard Zimmerman

Point for practitioners! The New York Second Department Appellate Division upheld a a private right of action to recover payment for health care services based on a violation of the “Prompt Pay Law” (Insurance Law Section 3224-a). The Prompt Pay Law for those unaware states insurance companies in New York are required to pay undisputed claims within 30 days of receipt of an electronic claim submission, or within 45 days of receiving a claim by other means. If a claim is disputed, the insurance company must notify the policyholder, covered person, or health care provider of the dispute in writing and pay the undisputed portion of the claim (if any) within the same time frame. An insurer who fails to comply with the requirements of the Prompt Pay Law are liable to the claimant for the full amount of the claim, plus 12% interest per annum, computed from the date that the claim was required to be paid.

What the law doesn't specify is whether claimants are empowered to sue insurance companies directly for non-compliance, or whether enforcement is left to the New York State Department of Financial Services. However, that question was answered in a recent decision by the Second Department of the New York’s Appellate Division. In Maimonides Medical Center v. First United American Life Insurance Company, which was decided on March 5, 2014, the court directed that the Prompt Pay Law gives rise to a private right of action, meaning that healthcare providers may sue insurance companies directly if they fail to pay claims as mandated by the law.

From the opinion –

...the Prompt Pay Law is not simply remedial in nature, but affords health care providers and patients certain rights, and imposes an affirmative duty upon insurers to timely pay or dispute claims. In the event of a violation, health care providers and patients are given the right to full payment of the claim plus interest, and insurers are obligated to make such payment.

A review of the legislative history of the Prompt Pay Law reflects that the law was directed toward the protection of health care providers and patients from late payment of claims, and was not primarily designed to provide a mechanism for preventing harm to the public in general. The Senate sponsor's memorandum recognized that "[w]hen third party payers withhold reimbursements from health care providers who have already rendered their services, it hinders the providers['] ability to manage its own accounts and balance its books" (Sponsor's Mem, Bill Jacket, L 1997, ch 637). Comments submitted by the Insurance Department noted that the bill "will provide protection to both patients and health care providers" relative to timely payment of claims (Mem of Insurance Dept., Bill Jacket, L 1997, ch 637). Even the title of the statute itself reflects that the focus is on "settlement" of specific claims. In signing the legislation into law, the Governor, in his memorandum, noted that the intention of the Prompt Pay Law was to "provide protection to both patients and health care providers in connection with the timely payment of claims by insurers and health maintenance organizations" (Governor's Approval Mem, Bill Jacket, L 1997, ch 637).

Benefits flowing from the insurers' obligations inure directly and personally to the individual health care providers and patients submitting claims and bills, who have private contractual relationships with the insurers. A violation obligates the insurer to pay the full amount of the claim, plus 12% interest per annum in settlement of the claim. Thus, a health care provider or patient not receiving timely payment or notice of a disputed claim has a statutory right to payment of the full amount, regardless of whether a breach of contract cause of action would be otherwise successful.

Violations directly affect the health care providers and patients who do not receive timely payment or notice of a disputed claim. The remedies available to the Superintendent do not adequately address this individual harm. .... The recognition of a private right of action on behalf of health care providers and patients here would likewise "augment the existing enforcement devices and enhance a legislative scheme which, in part, imposes affirmative duties for the protection of those very individuals" (Henry v Isaac, 214 AD2d at 193; see Uhr v East Greenbush Cent. School Dist., 94 NY2d at 40; Goldman v Simon Prop. Group Inc., 58 AD3d at 216; Doe v Roe, 190 AD2d at 471).

Calling attention to this decision is certainly not a call to action endorsing litigation. Deciding whether to sue an insurer for failure to pay requires due consideration. If for any reason you are having problems with collections, contact our office to discuss. The issue may be you have an internal issue that can be resolved, or you may be working with the wrong billing company. Or, you may have a carrier failing to abide by its legal obligations - regardless, you deserve to be paid for services rendered.

Contact Jennifer or Richard for more information on this topic or to discuss collection issues.

Need  help collecting?


Recommendation on discarding Controlled Substances - (Thank you to Cheryl Malone, always an incredible resource! #supportoursocieties!)

Hi, Jennifer:
Hope all is well with you.  I wanted to share this resource with your  after reading today’s Healthcare Newsletter on controlled substance storage.  Dispensary of Hope is an organization that  doctors can use to help with  medication samples disposal. 
 Dispensary of Hope is a nonprofit organization that helps doctors donate sample or shortly expiring medications so they can be used by clinics serving the needy.  (They will take expired medication as well for disposal.)    Not only do they  put medications in the hands of a patient in need, they also reduce their staff time, reduce medical waste, and help the community.   Pledge to donate sample medications and the Dispensary of Hope will provide the practice with a donation bin and prepaid shipping. Participation is free.  The New York County Medical Society’s Clifford L. Spingarn, MD Memorial  Education Fund (aka MEDCOFUND) is a supporter of  Dispensary of Hope.    New York County Medical Society members have donated over $400,000 worth of medication in the past two years.  The practice will receive an itemized receipt of the samples donated for  its records.  No more worry about disposal or waste, and itemized list of what was donated.  Doctors can pledge today  at www.dispensaryofhope.org/give-meds  
Cheryl M. Malone, CAE
Executive Director
New York County Medical Society
12 East 41 Street, 15th Floor
New York, NY 10017
(212) 684-4670, ext. 210
Fax: (212) 684-4741

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