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Orthopaedic Associates v. Dep't of Banking and Insurance

January 20, 2009


On appeal from the Superior Court, Law Division, Bergen County, L-9017-06.

The opinion of the court was delivered by: Waugh, J.S.C. (temporarily assigned)



Argued September 10, 2008

Before Judges Stern, Payne and Waugh.

This appeal requires us to revisit that portion of our decision in New Jersey Coalition of Health Care Professionals, Inc. v. New Jersey Department of Banking and Insurance, Division of Insurance, 323 N.J. Super. 207 (App. Div.), certif. denied, 162 N.J. 485 (1999) (N.J. Coalition), that upheld the validity of personal injury protection (PIP) dispute resolution procedures, N.J.A.C. 11:3-5.1 to -5.12, governing medical review organizations (MROs) and the health care professionals (MRO physicians) utilized by them. The regulations at issue were adopted by the New Jersey Department of Banking and Insurance, Division of Insurance (DOBI), pursuant to the Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-1 to -35.

Plaintiff Orthopaedic Associates, as subrogee of its patient Samuel Mdigos-Mulli, contends that the MRO process, as established by the regulations and overseen by DOBI, is so inherently flawed that it violates the provisions of N.J.S.A. 39:6A-5.2, which require DOBI, in consultation with the Commissioner of Health and Senior Services, to establish standards of performance for MROs that include procedures for ensuring an "impartial review of the medical records of the injured person." More specifically, Orthopaedic Associates contends that, because MROs regularly utilize MRO physicians who also routinely perform evaluative services for insurance carriers, the required impartiality of the process is irredeemably compromised. Because we have concluded that the existing procedures, as interpreted and upheld in N.J. Coalition, supra, 323 N.J. Super. at 264-69, provide a mechanism to contest the impartiality of the MRO physician, we affirm the trial court's dismissal of this action.


This case has its origins in an automobile accident that took place on April 2, 2001. Mdigos-Mulli sustained an injury as a result of the accident. He sought and received PIP benefits from his automobile insurer at the time of the accident, defendant Progressive Insurance Company (Progressive).

Following the April 2001 accident, Mdigos-Mulli received conservative treatment for injuries to his right and left shoulders and to his cervical and lumbar spine. In May 2001, he underwent an MRI of his right shoulder, which the radiologist interpreted as normal. Bryan Massoud, M.D., a board certified orthopedic surgeon affiliated with Orthopaedic Associates and one of Mdigos-Mulli's treating physicians, reviewed the films and diagnosed hypertrophic changes in the acromioclavicular (AC) joint of the right shoulder.

Mdigos-Mulli was involved in a second automobile accident in November 2002. He alleged, however, that the pain in his right shoulder had not subsided prior to the November 2002 accident. Shortly after the second accident, on November 12, 2002, Mdigos-Mulli had a second MRI of the right shoulder. The radiologist interpreted the second MRI as revealing right-shoulder hypertrophic changes in the AC joint, which was essentially the diagnosis reached by Massoud based upon the first MRI.

In December 2003, Massoud performed arthroscopic right-shoulder surgery on Mdigos-Mulli at the Saddle Brook Surgicenter. In January 2004, Orthopaedic Associates submitted a request for payment for its services rendered in connection with the surgery to Progressive, the insurer responsible for PIP benefits arising out of the April 2001 accident. Progressive refused payment, arguing that the right-shoulder problem was not a result of the April 2001 accident. It relied on a defense examination performed in September 2001, prior to the second accident, which concluded that no further treatment was required, and a peer review examination, conducted in February 2004, which concluded that the surgery was not medically necessary and, in any event, was not related to the first accident.*fn1

On April 29, 2004, Orthopaedic Associates filed a demand for arbitration with defendant National Arbitration Forum Association (NAF), which is the dispute resolution organization (DRO) chosen by DOBI pursuant to N.J.S.A. 39:6A-5.1(b). In June 2004, Progressive entered an appearance and the matter was scheduled for arbitration in September 2004. On August 17, 2004, defense counsel requested that the matter be submitted for an MRO review and that the arbitration be adjourned pending receipt of the MRO physician's report. Orthopaedic Associates objected to the request for an MRO review as untimely, but NAF granted the request for an adjournment and directed that there be an MRO review.

In December 2004, NAF provided Orthopaedic Associates with a copy of the MRO report and identified the MRO physician as defendant Jeffrey Lakin, M.D.*fn2 Lakin concluded that MdigosMulli's right-shoulder injury was not related to the first accident, but "most likely secondary to some event after, the [first accident]," noting that there were two subsequent accidents.*fn3

In letters to both NAF and DOBI, Orthopaedic Associates objected to any consideration of Lakin's MRO report on the grounds that Lakin had a conflict of interest arising from the fact that he performed independent medical examinations and peer reviews for insurance companies in PIP and other matters. DOBI advised NAF to contact defendant First Managed Care Options (First MCO), the MRO organization assigned to provide the MRO review, about the request for Lakin's disqualification. In the interim, the arbitration was again adjourned.

Orthopaedic Associates contacted DOBI and NAF in June 2005, stating that it had not received any response to its application to disqualify Lakin. In July 2005, NAF advised Orthopaedic Associates that DOBI had instructed it that a decision on whether to disqualify Lakin would be made by First MCO. In November 2005, Orthopaedic Associates wrote to NAF, stating that it had not received any decision from DOBI or First MCO regarding its application to disqualify Lakin. The arbitration was again adjourned and rescheduled for May 2006. In December 2005, NAF advised Orthopaedic Associates to submit its application to disqualify Lakin directly to First MCO. Orthopaedic Associates complied.

On December 16, 2005, NAF informed Orthopaedic Associates that First MCO had reviewed Orthopaedic Associates' application to disqualify Lakin and determined that there was no conflict of interest and that Lakin would not be disqualified. First MCO apparently never issued an explanation for its denial, at least none ...

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