Public Health Law 238-a defense?

Stephen Matrangalo, DC, PC v Allstate Ins. Co., 2011 NY Slip Op 50517(U)(App. Term 1st Dept. 2011)

“Public Health Law § 238-a prohibits a practitioner from making a referral to a health care provider where the referring practitioner (or immediate family member of such practitioner) has a “financial relationship” with the health care provider (Public Health Law § 238-a). A “financial relationship” is defined in section 238(3) of the Public Health Law as “an ownership interest, investment interest or compensation arrangement.” Critically, a “compensation arrangement” means “any arrangement involving any remuneration between a practitioner, or immediate family member, and a health care provider” (Public Health Law § 238-a), but does not include “payments for the rental or lease of office space” if there is a lease that meets specific enumerated requirements, i.e., is in writing, for a term of at least one year, with a rent consistent with fair market value and not based upon the volume or value of any referrals, and would be commercially reasonable even if no referrals were made (Public Health Law § 238-a).”

To simplify this, let me ask the following question: What makes this any different than precludable provider fraud?  Is there coverage?  Yes.  Is PHL 238-a an explicit condition precedent to coverage set forth in the policy?  No.  Is PHL 238-a a Mallela based violation?  Probably not.

So, absent proof of a timely denial, the court should not have reached the merits of the case.  That is the law, as nutty as it may seem.

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