Verification – MRI

The Intersection of Verification Rights and Reproduction Costs

The verification process in no-fault insurance litigation serves as a critical mechanism allowing insurance carriers to investigate claims before making payment decisions. New York’s no-fault regulations explicitly authorize carriers to request verification of medical records, bills, and other documentation supporting claims for benefits. When properly invoked, a verification request tolls the 30-day payment period, extending the carrier’s time to pay or deny the claim until the requested verification is provided.

However, practical complications arise when providers demand payment for reproduction costs before complying with verification requests. Medical providers, particularly those conducting diagnostic imaging studies like MRIs, often assert entitlement to reimbursement for the costs of reproducing films or electronic copies before providing them to insurance carriers. This creates a standoff: the carrier claims it cannot evaluate medical necessity without the MRI films, while the provider refuses to provide the films without advance payment of reproduction costs.

The question whether an insurance carrier’s verification rights remain contingent upon payment of reproduction costs has significant implications for no-fault litigation. If providers can condition verification compliance on advance payment, carriers lose effective ability to verify claims before the payment deadline expires. Conversely, if carriers can demand verification without paying reproduction costs, providers may face practical difficulties recovering these costs through subsequent litigation.

Case Background and Decision

Lenox Hill Radiology & MIA, P.C. v Hereford Ins. Co., 2021 NY Slip Op 21157 (Civ. Ct. NY Co. 2021)

“Although plaintiff submitted decisions from no-fault arbitrations where the arbitrators ruled that the provider’s responses to demand payment of reproduction costs complied with the insurer’s verification requests (see plaintiff’s supplemental affirmation in opposition, arbitration awards), this court declines to follow those arbitration decisions. Those decisions rest on the premise that the toll triggered by the insurer’s verification request ended when the provider demanded payment of the reproduction costs. **However, as discussed above, in this court’s view, the insurer’s right to demand and receive verification is not contingent upon the insurer’s payment of the reproduction costs.

** Consequently, the toll did not end either when plaintiff responded that defendant must pay the reproduction costs before receiving the MRI films, or when defendant had promised but failed to pay the reproduction costs.

Often when I subpoena records, the entity if they charge a copying or professional cost and will provide the records with a bill. I would assume the provider could later sue for the $5.00, yet without threat of an attorney fee (the 20% rule makes these lawsuits untenable), where does this really lead us?

Legal Analysis: Verification Rights Trump Reproduction Cost Demands

The Civil Court’s decision in Lenox Hill Radiology establishes that insurance carriers’ verification rights do not depend on advance payment of reproduction costs. This holding rejected the approach adopted by some no-fault arbitrators who had ruled that providers satisfied verification requests by demanding payment of reproduction costs, thereby ending the toll period.

The court’s reasoning centered on the statutory and regulatory framework governing verification in no-fault cases. The insurance carrier’s right to request and receive verification stems from the no-fault regulations, which authorize carriers to seek documentation necessary to evaluate claims. Nothing in these regulations conditions the verification right on payment of reproduction costs. When a carrier properly requests MRI films as verification, the provider must comply with that request; demanding payment does not constitute compliance.

The court rejected the notion that the toll period ended when the provider demanded payment of reproduction costs. The toll triggered by a verification request continues until the requested verification is actually provided to the carrier. A provider’s demand for payment, unaccompanied by the requested materials, does not satisfy the verification obligation. Similarly, the carrier’s promise to pay reproduction costs, even if subsequently unfulfilled, does not end the toll period. The toll continues until the provider actually furnishes the requested MRI films.

This interpretation prevents providers from using reproduction cost demands as a mechanism to defeat verification rights. If providers could end the toll simply by demanding payment, carriers would face impossible choices: pay disputed reproduction costs to obtain verification materials needed to evaluate claims, or proceed without verification and risk paying for services that might not be medically necessary or causally related to the accident.

The court also noted that the plaintiff had not objected to providing the MRI films; the provider merely conditioned production on advance payment. This distinction matters because providers who object to verification requests as overbroad, irrelevant, or otherwise improper may have grounds to refuse compliance. However, conditioning compliance on payment does not constitute a valid objection to the verification request itself.

Practical Implications and Unanswered Questions

Jason Tenenbaum’s observation about subpoenaed records illuminates the practical complications created by this ruling. When records are subpoenaed through judicial process, custodians routinely provide the records with a bill for reproduction costs. The requesting party then pays the bill or disputes the charges through subsequent proceedings. This approach ensures compliance with the subpoena while preserving the custodian’s right to seek reimbursement.

The court’s decision suggests providers should adopt a similar approach for verification requests: provide the MRI films as requested, include a bill for reproduction costs, and if necessary, pursue collection of those costs through subsequent litigation. However, as Tenenbaum notes, practical obstacles make this approach problematic for small-dollar reproduction costs.

The amounts at stake in reproduction cost disputes typically range from a few dollars to perhaps $50 or $100 for complex imaging studies. Filing a lawsuit to recover such minimal amounts proves economically irrational when attorney’s fees cannot be recovered. The 20% rule in no-fault litigation—which generally limits attorney’s fees to 20% of recovery—makes litigation over $5 or $10 in reproduction costs completely untenable. No attorney can justify the time investment required to litigate such claims for a recovery of one or two dollars in fees.

This economic reality creates a practical problem: if providers must supply verification materials without advance payment, and subsequent litigation to recover reproduction costs proves economically impossible, carriers effectively receive free reproduction services. Providers absorb these costs as a routine expense of doing business, with no practical recourse for reimbursement.

The decision also raises questions about what constitutes reasonable reproduction costs. While the court held that carriers need not pay reproduction costs before receiving verification, it did not address whether carriers must ultimately reimburse reasonable reproduction costs, or whether such costs might be recoverable as part of the provider’s claim. Some providers might argue that reproduction costs constitute part of the reasonable charges for services, while carriers would likely dispute this characterization.

Furthermore, the decision does not address situations where reproduction costs are substantial. Providing extensive imaging studies, operative videos, or voluminous medical records might generate hundreds or even thousands of dollars in reproduction costs. In such cases, providers may have stronger equitable arguments for requiring advance payment, though the legal analysis in Lenox Hill Radiology would still support the carrier’s right to receive verification before paying.

The decision’s rejection of arbitration awards favoring providers demonstrates the limited precedential value of arbitration decisions in no-fault litigation. While arbitrators’ interpretations may carry persuasive weight, courts are not bound by arbitration awards from other cases. Providers and carriers should not assume that favorable arbitration decisions will be followed by courts when the legal issues reach the judicial system.

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