New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on September 23, 2002 representing the position of the New York State Insurance Department.

Re: Services of an Assistant Surgeon

Questions Presented:

1. Is a denial of payment by an insurance company or Health Maintenance Organization for the services by a non-participating health care provider as an "assistant surgeon" subject to the utilization review procedures of Article 49 of New York Insurance Law (McKinney 2000) or New York Public Health Law (McKinney 1985 and 2001 Supplement)?

2. If the health care provider is a participating provider, is he or she entitled to the utilization review procedures of Article 49 of either the New York Insurance Law or New York Public Health Law?

Conclusions:

1. Yes, such a denial is subject to the provisions of those statutes.

2. No, neither statute was intended to protect the health care provider. Such a health care provider’s rights are governed by the contract between the insurer and the health care provider.

Facts:

The Department’s position is that New York Insurance and Public Health Laws Article 49 provide a right of utilization review where payment for the services of a non-participating health care provider as an assistant surgeon are denied. A request was made for the reconsideration of this position.

A Health Service Corporation that subsequently was merged into Company A, Company B, issued a contract to the Complainant. The Complainant underwent an extensive surgical proceeding. Company A paid the fee for the designated surgeon but denied coverage for the services of an assistant surgeon. Upon receipt of the denial, the Complainant made a complaint to the Consumer Services Bureau (Bureau).

In reply to an inquiry by the Bureau, Company A’s initial reply indicated that the claim "was never reviewed through the formal appeal review process" and that a "Standard Internal Appeal" would be conducted. In response, the Bureau inquired whether Company A had conducted a clinical peer review prior to the denial and whether the Complainant had received a notice from Company A indicating the Complainant’s possible right to an internal or external appeal pursuant to New York Insurance Law Article 49.

In its reply, Company A indicated that its usual practice was to make initial determinations as to whether to pay for an assistant surgeon based upon recommendations of national organizations, such as the American College of Surgeons or the Center for Medicare and Medicaid Services, as modified to reflect local conditions. It continued that it was an "industry standard’ to regard this as a coding issue and that, in accordance with advice of counsel, Company A believed that its initial determination was excluded by statute from utilization review. Company A concluded that, occasionally a health care provider will appeal the denial, in which event Company A will treat the matter as one involving medical necessity and will apply the utilization review process.

In a subsequent communication, Company A indicated that it had conducted a Standard Internal Appeal and made an administrative decision to cover the services of the assistant surgeon. This letter concluded that, since this was an administrative decision, prompt payment guidelines would not apply.

The material furnished to the Bureau with the latest letter included a request by Company A’s Claims Department for a review of the initial determination, a notification by a surgeon that he concurred in the initial determination, an entry by the Claims Department to "overturn per our discussion," an entry that the surgeon who had concurred in the initial determination had, on that same day, "overturned no new information." Company A then notified the Complainant that it had overturned the initial determination and invited resubmission of the claim. Six days after the letter to the Complainant, Company A issued an Explanation of Benefits indicating its payment was $0 with an explanation "Service provided not in accordance with community standards of medical practice."

There is presently pending an inquiry by the Bureau concerning whether the assistant surgeon is a participating provider and securing information as to the complainant’s financial liability for the services of the assistant surgeon.

Analysis:

Whether Company A is correct in its assertion that the prompt pay statute, New York Insurance Law § 3224-a (McKinney 2000), is not implicated is not the subject of your inquiry and is not analyzed herein. Similarly, Company A’s treatment of the complainant is being investigated by the Bureau and is not part of this Opinion. Accordingly, this Opinion is limited to the issues set forth below.

New York Insurance Law § 4904(a) (McKinney 2000) sets forth the right to utilization review:

An insured, the insured's designee and, in connection with retrospective adverse determinations, an insured's health care provider, may appeal an adverse determination rendered by a utilization review agent.

New York Insurance Law § 4900(a) (McKinney 2000) defines an adverse determination:

‘Adverse determination’ means a determination by a utilization review agent that an admission, extension of stay, or other health care service, upon review based on the information provided, is not medically necessary.

New York Insurance Law § 4900(i) (McKinney 2000) defines utilization review agent:

‘Utilization review agent’ means any insurer subject to article thirty-two or forty-three of this chapter performing utilization review and any independent utilization review agent performing utilization review under contract with such insurer.

New York Insurance Law § 4900(h) (McKinney 2000) defines utilization review:

‘Utilization review’ means the review to determine whether health care services that have been provided, are being provided or are proposed to be provided to a patient, whether undertaken prior to, concurrent with or subsequent to the delivery of such services are medically necessary. For the purposes of this article none of the following shall be considered utilization review: . . . (3) The review of the appropriateness of the application of a particular coding to a patient, including the assignment of diagnosis and procedure; (4) Any issues relating to the determination of the amount or extent of payment . . . and (5) Any determination of any coverage issues other than whether health care services are or were medically necessary.

In a December 14, 2001 opinion to a Health Maintenance Organization, the Office of General Counsel concluded that the exception from the definition of utilization review found in New York Insurance Law § 4900(h)(3) was intended to be limited to situations where the dispute was whether the correct code, e.g. a Common Procedural Terminology (CPT) ™ code, was applied. While it is uncontested that legislative history is to be utilized only if there is ambiguity in the statute, it has been asserted that this Office erred in utilizing the legislative history of New York Insurance Law § 4900(h).

However, the dispute between the Complainant and Company A is not in whether the assignment of a particular CPT code to the procedure performed was correct, but as to the ramifications of the CPT code so assigned. Whether the procedure, as performed on the complainant, justified the services of an assistant surgeon is a question of medical necessity, which allows the complainant the full range of appeals provided by New York Insurance Law Article 49.

The arguments now advanced in support of the contention that this Office was in error in its December 2001 opinion were advanced by the HMO and considered at that time. Accordingly, no new argument has been produced that would lead to a modification of the Department’s prior position concerning utilization review involving non-participating health care providers.

In addition, the Department’s position is misapprehended. This Department has no objection to the utilization of CPT™ codes in arriving at amounts to be paid. What is objectionable is considering such codes as delineating the availability of services without affording subscribers their full rights under Article 49 of both the Insurance and Public Health Laws.

As to participating health care providers, the same enactment which added New York Insurance Law and New York Public Health Law Articles 49, 1996 N.Y. Laws 705, also enacted New York Insurance Law § 4803 (McKinney 2000), affecting managed care policies issued by insurers, and New York Public Health Law § 4406-d (McKinney 2002), affecting Health Maintenance Organizations, to set forth in detail the rights of health care professionals vis a vis such insurers and HMOs. The ability to secure an independent review, for their own account, concerning the HMO’s or insurer’s determinations concerning payment to the health care provider is not among the protections therein provided.

Given the exception from utilization review as provided in New York Insurance Law § 4900(h)(4), and the companion statute for HMOs, New York Public Health Law § 4900(8)(d), the specific list of rights conferred by New York Insurance Law § 4803 and New York Public Health Law § 4406-d, it is apparent that the Legislature did not contemplate that a participating health care provider would be entitled to clinical peer review for its own account, and not for the benefit of the provider’s patient, where the insurer or HMO has contractually established the conditions of the health care provider’s compensation.

Accordingly, the rights of a participating health care provider to compensation are governed by the terms of the agreement between the provider and the insurer or HMO.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.