Key Takeaway
Court limits Mallela fraud defense in no-fault insurance cases, ruling fee-sharing arrangements don't justify withholding medical payments under New York law.
Matter of Allstate Prop. & Cas. Ins. Co. v New Way Massage Therapy P.C., 2015 NY Slip Op 09184 (1st Dept. 2015)
“Whether or not the fee-sharing arrangement at issue constitutes unprofessional conduct (see 8 NYCRR 29.1), it does not constitute a defense to a no-fault action (compare State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [“insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims”]). It is solely a matter for the appropriate state licensing board (see e.g. Necula v Glass, 231 AD2d 457 ; see also H & H Chiropractic Servs., P.C. v Metropolitan Prop. & Cas. Ins. Co., 47 Misc 3d 1075, 1078 ).”
This would probably be characterized as one of the largest cases of the year on the Mallela side of the equation. Aside from what could be characterized as the true doctor in the box scheme, the following defenses or perhaps even reasons to conduct EUOs or provider discovery viz verification include: (1) Self referrals, (2) Use of runners , (3) Improper ownership, i.e., MD not certified in acupuncture owning an LAC clinic, (4) Improper Fee splitting (among other grounds). These reasons don’t exist anymore.
This is what I have to say: an overzealous defendant stripped Mallela of all its adornments. Thank you Allstate and to the people who told you to appeal this. The real benefactors of this decision will be the medical practices who do all of the above, refuse EUOS in writing because the above “ solely a matter for the appropriate state licensing board” and beat out the insurance carriers in arbitration.
By the way, I invite you all to read Master Arbitrator Dachs decision in this case. Go to the electronic filed cases; it is an exhibit on the Petition. After I read that decision, I thought it was lunacy on this record to seek judicial and appellate intervention. Norman Dachs made sense. Many know that some of his decisions prior to his death were akin to lunacy. This one made a lot of sense, and there was no way a Supreme Court or an Appellate Division was going to reverse him.
Anyway, I made a bet with two regular readers of this blog (an attorney and a claims manager somewhere) that this appeal would result in a disaster for us. I was sadly correct. Also, my bet (and I cannot bet on this now) is that C&C Chiropractic (the cited to case) would have been reversed by the Appellate Term because the Appellate Term would have followed precedent re: self-referrals and found a violation of the Education law would be sufficient to deny compensation to a medical provider. I cannot make this bet because under stare decisis, this issue is done. I hope Metropolitan in the Civil Court action concedes the issue and moves on, as opposed to perfecting a wasteful appeal.
As always, it is the other players on the block that endure the wrath of a less than intelligent appeal.
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- Why does a Mallela defense survive an untimely disclaimer, while a workers compensation defense doesn’t?
- Professional Service LLC Dissolution in NY: When Medical Licenses Are Suspended
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- Mallela Violations as Legal Malpractice Defense Strategy – Long Island & NYC
