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Coalition for Quality Health Care v. New Jersey Department of Banking and Insurance

March 07, 2003

COALITION FOR QUALITY HEALTH CARE, NEW JERSEY ASSOCIATION OF OSTEOPATHIC PHYSICIANS & SURGEONS, SOUTHERN NEW JERSEY CHIROPRACTIC SOCIETY, MONMOUTH/ OCEAN CHIROPRACTIC SOCIETY, NEW JERSEY SOCIETY OF PHYSICAL MEDICINE AND REHABILITATION, NEW JERSEY CHIROPRACTIC SOCIETY, AMERICAN CHIROPRACTIC ASSOCIATION, AND DENTISTS FOR QUALITY CARE, APPELLANTS,
v.
NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE, DIVISION OF INSURANCE, RESPONDENT.



On appeal from New Jersey Department of Banking and Insurance, Division of Insurance.

Before Judges King, Wecker and Lisa.

The opinion of the court was delivered by: King, P.J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: January 15, 2003

In this case, eight non-profit organizations of health care professionals appeal from the adoption of regulations by the Commissioner of Banking and Insurance (Commissioner): N.J.A.C. 11:3-29 Appendix, Exhibit 1; N.J.A.C. 11:3-29.4(m); and N.J.A.C. 11:3-29.4(o). Appellants argue that the Commissioner violated N.J.S.A. 39:6A-4.6 and acted outside the authority delegated to her under the statute by basing the revised fee schedule for reimbursement of medical treatment covered by personal injury protection (PIP) laws (Exhibit 1) on paid fees rather than billed fees; violated the statute and exceeded her authority by imposing a daily fee cap of $90 in subsection 29.4(m); and impermissibly intruded upon the regulation of the practice of medicine and chiropractic by limiting the provision of evaluation and management services in subsection 29.4(o). We reject appellants' contentions and affirm.

I.

The procedural history and factual background of this regulatory dispute is generally set forth in detail in our companion opinion in In the Matter of the Commissioner's Failure to Adopt 861 CPT Codes and To Promulgate Hospital and Dental Fee Schedules, A-6787-00T2, filed on this date.

On July 2, 2001 appellants filed a notice of appeal from the entire adoption, on April 24 and June 22, 2001, of the rules and amendments to N.J.A.C. 11:3-29. At the same time, appellants sought from the Department a stay pending appeal; the Department denied a stay on July 10, 2001. The arguments in appellant's brief are limited to the Appendix of Exhibit 1 and N.J.A.C. 11:3-29.4(m) and (o).

II.

Appellants contend that, by basing Exhibit 1 (physicians' fee schedule) on paid fees rather than billed fees, the Department of Banking and Insurance (Department) exceeded the scope of its legislative authority and acted contrary to legislative intent. The Department responds that it acted within its ample discretion to establish fee schedules. Notwithstanding our reversal and remand for reproposal in A- 6787-00T2, we consider this issue on the merits. The charged- fee versus paid-fee issue must be resolved at some point. It is better resolved now than later.

The underlying statutory authority most pertinent to this appeal is found in N.J.S.A. 39:6A-4.6(a):

The Commissioner of Banking and Insurance shall, within 90 days after the effective date of P.L.1990, c. 8 (C.17:33B-1 et seq.), promulgate medical fee schedules on a regional basis for the reimbursement of health care providers providing services or equipment for medical expense benefits for which payment is to be made by an automobile insurer under personal injury protection coverage pursuant to P.L.1972, c. 70 (C.39:6A-1 et seq.), or by an insurer under medical expense benefits coverage pursuant to section 2 of P.L.1991, c. 154 (C.17:28- 1.6). These fee schedules shall be promulgated on the basis of the type of service provided, and shall incorporate the reasonable and prevailing fees of 75% of the practitioners within the region. If, in the case of a specialist provider, there are fewer than 50 specialists within a region, the fee schedule shall incorporate the reasonable and prevailing fees of the specialist providers on a Statewide basis. The commissioner may contract with a proprietary purveyor of fee schedules for the maintenance of the fee schedule, which shall be adjusted biennially for inflation and for the addition of new medical procedures.

In December 2000, Ingenix, Inc., a benefits consultant hired by the Department, submitted a report recommending revised fee schedules. This report made clear that the Department had directed the use of paid fees rather than billed fees as the basis for recommended revisions. The report stated:

The intent was to revise the fee schedules consistent with the Department's interpretation of the statutory requirement stating the fee schedules are to "incorporate the reasonable and prevailing fees of 75 percent of the practitioners within the region." This interpretation is based on the understanding that the term "reasonable and prevailing fees" refers to the fee paid rather than the fee charged for the service.

Historically it was common for fee schedules to be based on charge data, however, with the assimilation of managed care in the industry and the influence of HCFA's [the federal Health Care Financing Administration] Medicare fee schedule, the basis and level of fee schedules has changed, in some cases quite dramatically, over the past several years. To further complicate the definition of prevailing fees, a provider often has various fees depending on the payer of the service (e.g. Medicare, Medicaid, managed care organization, indemnity organization, etc.). Consistent with this variation in provider fees is the variability in payment levels by the different payers.

Appellants claim that this interpretation is unreasonable, and that "reasonable and prevailing fees of 75% of the practitioners within the region" in N.J.S.A. 39:6A-4.6(a) necessarily refers to billed fees. Appellants also object that the Department took into consideration medical fee schedules and workers' compensation schedules from Connecticut and Washington. The references to those states in the response to a comment were directed to the ...


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