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North Jersey Neurosurgical Associates, P.A. v. IFA Insurance Co.

August 4, 2010


On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-6180-09.

Per curiam.


Argued May 4, 2010

Before Judges Lihotz and Ashrafi.

Defendant IFA Insurance Company appeals from a Law Division judgment entered on behalf of plaintiff North Jersey Neurosurgical Assoc., P.A., which confirmed a June 9, 2009 personal injury protection (PIP) arbitration award. Plaintiff extended medical care to defendant's insured, Carlos Mojica, who sustained significant injuries in an automobile accident. As his subrogee, plaintiff sought payment under the PIP provisions of Mojica's policy. The amount awarded, $60,706.91, was subject to the policy's $250,000 PIP benefit limitation.

Prior to issuing payment of the award, defendant listed the total claims made against the benefit limit, advising plaintiff only $3,307.65 remained available. The total claims paid included "PPO fees" of $4,596.36. These fees were paid to Horizon Casualty Services (Horizon), hired by defendant to secure Preferred Provider Organization (PPO) contract rates that were applied to participating medical providers treating Mojica.

In a written opinion, the trial court determined defendant was not permitted to deduct the PPO fees paid to Horizon, and awarded plaintiff $4,596.36 plus attorneys fees and costs, in addition to the $3,307.65 payment previously made by defendant. On appeal, defendant seeks reversal of the judgment, contending the court erred in disallowing its deduction of the PPO service fees from the PIP limits before determining the sums available to pay plaintiff. We decline to disturb confirmation of the award and affirm.

Mojica sustained injuries following an October 15, 2005 automobile accident. His vehicle was insured by defendant under a policy containing the statutory maximum of $250,000 PIP coverage. N.J.S.A. 39:6A-4(a).

Plaintiff treated Mojica and, as his subrogee, demanded arbitration for payment of medical services rendered. Prior to arbitration, defendant submitted a PIP pay-out ledger identifying all expenses paid or processed to be paid, which totaled $240,895.99.*fn1 Throughout the ledger, various entries appear labeled as PPO service fees. By letter dated the day before the arbitration hearing, defendant revised the PIP ledger, reducing the available benefits to $3,307.65.*fn2 The letter stated the total "PPO fees" deducted were $4,596.36.

The question submitted to arbitration was what additional services provided by plaintiff were compensable. Defendant had paid certain invoices but disputed others, arguing proper pre-certification was not obtained, certain procedures were improperly coded and duplication of some items precluded payment. Following review, the arbitrator awarded plaintiff $60,706.91, plus attorneys' fees and costs.

Although defendant provided disclosure of its calculations of the remaining PIP benefit prior to the arbitration, it did not reveal the nature of the PPO fees charged against the PIP cap. Plaintiff later learned the sum represented Horizon's fee for negotiating the acceptance of PPO fee-for-service limits with participating providers. Horizon assured the contract expense rates for certain medical service providers conformed to PPO rates, which were generally well below what would otherwise be submitted. Horizon's service fees were computed as twenty-nine percent of the "savings" resulting from securing a medical provider's compliance.

The record also makes clear that the arbitrator was not asked and did not address the propriety of taxing the fees paid to Horizon against the available PIP cap. The award neither mentions the total benefits paid nor states the sums remaining for satisfaction of plaintiff's allowed claims. Following the award, defendant issued payment to plaintiff of $3,307.65.

On July 14, 2009, plaintiff filed a Law Division action seeking confirmation of the arbitrator's award and reimbursement of its attorneys' fees and costs. Plaintiff's complaint asserted defendant had not properly satisfied the award as the PIP benefits had not been exhausted, and argued the PPO service fees were administrative, making defendant solely responsible for their payment.

Defendant maintained Horizon's services benefited Mojica because they reduced the overall PIP benefits paid to a single provider, thus satisfying more claims within the PIP limitation. Noting it did not include Horizon's "processing fees," which defendant agreed were its administrative costs, defendant maintained the PPO service fees aided the ...

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