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In re Commissioner's Failure to Adopt 861 CPT Codes

March 07, 2003

IN THE MATTER OF THE COMMISSIONER'S FAILURE TO ADOPT 861 CPT CODES AND TO PROMULGATE HOSPITAL AND DENTAL FEE SCHEDULES.


On appeal from the 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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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, American Insurance Association (AIA), a national insurance trade association of property and casualty insurance companies licensed to do business in every state, appeals from the adoption of a physicians' fee schedule by the Commissioner of Banking and Insurance (Commissioner), N.J.A.C. 11:3-29 Appendix (Exhibit 1), and from the failure to adopt a hospital fee schedule. AIA appeals on behalf of its member insurers writing private passenger automobile insurance in New Jersey. AIA contends that by adopting a fee schedule for benefits payable under personal injury protection (PIP) laws which included only 92 Current Procedural Terminology (CPT) codes, after having proposed 953 codes, the Commissioner violated the Administrative Procedures Act (APA), N.J.S.A. 52:14B-1 to -25. AIA contends that the rule adoption should be invalidated because it departed substantially from the rule proposal. AIA also contends that the Commissioner failed to promulgate 861 additional CPT codes and to promulgate a hospital fee schedule, as required by N.J.S.A. 39:6A-4.6. We reverse the adoption of the Appendix, Exhibit 1, because of deficient notice and substantial deviation from the rule proposal. We remand to the agency for reproposal.

I.

On December 18, 2000, pursuant to N.J.S.A. 39:6A-4.6(a), the Department of Banking and Insurance (Department) published proposed new rule N.J.A.C. 11:3-29 Appendix, Exhibits 1 through 5; proposed repeal of N.J.A.C. 11:3-29.6; and proposed amendments N.J.A.C. 11:3-29.1, -29.2, -29.3, -29.4 and -29.5. 32 N.J.R. 4332 (a) (December 18, 2000). The proposal set forth medical fee schedules for automobile insurance PIP and motor bus medical expense insurance coverage, including a physicians' fee schedule (Exhibit 1), a home care services fee schedule (Exhibit 3), an ambulance services fee schedule (Exhibit 4), and a schedule for durable medical equipment and prosthetic devices (Exhibit 5). 32 N.J.R. at 4333, 4337-77. Exhibit 2, a dental fee schedule, was reserved. There was no proposed hospital fee schedule. Id. at 4357.

N.J.S.A. 39:6A-4.6 provides:

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 al.), 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. b. The fee schedule may provide for reimbursement for appropriate services on the basis of a diagnostic-related (DRG) payment by diagnostic code where appropriate, and may establish the use of a single fee, rather than an unbundled fee, for a group of services if those services are commonly provided together. In the case of multiple procedures performed simultaneously, the fee schedule and regulations promulgated pursuant thereto may also provide for a standard fee for a primary procedure, and proportional reductions in the cost of the additional procedures. c. No health care provider may demand or request any payment from any person in excess of those permitted by the medical fee schedules established pursuant to this section, nor shall any person be liable to any health care provider for any amount of money which results from the charging of fees in excess of those permitted by the medical fee schedules established pursuant to this section.

In the Medicaid context, DRGs (Diagnosis Related Groupings) are described as "specified diagnostic categories for which hospitals receive a predetermined fixed amount for inpatient services." Atlantic City Med. Ctr. v. Squarrell, 349 N.J. Super. 16, 22 (App. Div. 2002).

According to the Department summary, the proposal increased the number of CPT codes for physicians' services from 746 to 953, and implemented the requirement of N.J.S.A. 39:6A-4.6 to "incorporate the reasonable and prevailing fees of 75% of the practitioners" within a region. 32 N.J.R. 4332 (a), 4333 (December 18, 2000). In accordance with a 1997 amendment to N.J.S.A. 39:6A-4.6(a), the Department had contracted with a proprietary purveyor of fee schedules to develop the new schedule. Ibid. Although the fee schedule adopted in 1990 had been based on billed fees -- the charges set forth on the bills submitted to health insurers -- the revised fee schedules were based on paid fees -- the amounts actually paid as reimbursements to providers. Ibid. This change reflected the increasing disparity between billed fees and paid fees. Ibid.

On January 25, 2001 the Department held a hearing to receive public comments. 33 N.J.R. 1590(a) (May 21, 2001). On May 21, 2001 the Commissioner adopted these portions of the proposal: textual amendments to N.J.A.C. 11:3-29.1, -29.2, -29.4 and - 29.5, and the repeal of N.J.A.C. 11:3-29.6(b). Id. at 1596. On June 22, 2001, effective July 16, 2001, the Commissioner adopted the final portion: amendments N.J.A.C. 11:3-29.3 and -29.4 (remaining part); repeal of N.J.A.C. 11:3-29.6 (remaining part); and new rules N.J.A.C. 11:3-29 Appendix, Exhibits 1, 3, 4 and 5. 33 N.J.R. 2507(a) (July 16, 2001). In contrast to the proposal to increase the number of CPT codes for physicians' services from 746 to 953, the adoption set forth in Exhibit 1 listed just 92 CPT codes, setting the limit of an insurer's liability for the remaining 861 proposed codes at the providers' usual, reasonable and customary fee. The Department explained this dramatic quantitative departure from the proposal this way:

The physicians' fees adopted cover the CPT codes that are the most commonly used for treatment of auto accident injuries and represent approximately 85 percent of all codes billed for PIP reimbursement. For those CPT codes that are no longer on the fee schedule, the insurer's limit of liability is the providers' usual, reasonable and customary fee as provided at N.J.A.C. 11:3-29.4(e). The Department has reviewed the frequency that [sic] individual CPT codes are billed for PIP reimbursement and has determined that by adoption of a physicians' fee schedule at this time that contains the 92 most commonly used CPT codes, the Department is minimizing the regulatory burden while carrying out the cost containment objectives of the Automobile Insurance Cost Reduction Act of 1998 ("AICRA"). [33 N.J.R. 2507(a), 2507 (July 16, 2001).]

The Department asserted that the filing was made "with substantive and technical changes not requiring additional public notice and comment (see N.J.A.C. 1:30-6.3)." Id. at 2507.

On August 22, 2001 AIA filed an appeal from the final adoption, R. 2:2-3(a)(2), and sought a court order for the Commissioner to adopt the remaining proposed CPT codes for the physicians' fee schedule and to adopt fee schedules for all medical expenses reimbursable under PIP, including hospital and dental expenses. The dental fee schedule was later adopted. 34 N.J.R. 1032(a) (March 4, 2002). That aspect of this appeal ...


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