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 February 5, 2002, representing the position of the New York State Insurance Department.

No-Fault Billings, Independent Contractors

Issue

Based upon the information furnished by Medical Society A, will the Insurance Department modify the conclusion expressed in its February 21, 2001 letter?

Conclusion

No reason has been provided for this Department to modify the conclusion expressed therein.

Facts

By letter of February 21, 2001, this Department determined that when services are provided by an independent contractor, a Professional Corporation (PC) is not entitled to receive reimbursement from an insurer under the New York Comprehensive Motor Vehicle Insurance Reparations Act (No-Fault Law), New York Insurance Law Article 51 (McKinney 2000), in accordance with N.Y. Comp. R. & Regs. tit. 11, § 6515(j) (2001) (Regulation 68).

Medical Society A indicated it had received a complaint from a physician member that an insurer had relied on the February 21, 2001 opinion to deny payment for services rendered to a patient entitled to reimbursement under the No-Fault statute and gave two reasons why it believed the determination to be in error.

Analysis

In the February 21, 2001 letter, based upon the adoption by this Department for No-Fault medical payments of the Medical Fee Schedule established by the New York State Worker’s Compensation Board (Board), N.Y. Comp. R. & Regs. tit. 11, Part 68, Appendix 17-A (2001), it was indicated:

This Department has noticed that increasingly PCs are billing for No-Fault services provided through independent contractors. Such direct billing by the PC, due to the lack of supervisory control by the PC, may facilitate fraud, since the PC might bill under its own fee schedule as a specialist rather than the general practitioner fee schedule of the independent contractor, who actually provided the service. In addition, the patient may wrongfully believe the independent contractor’s actions are under the supervision of the PC.

Medical Society A correctly notes that since 1996 the medical fee schedule of the Board has not differentiated between specialists and general practitioners. Accordingly, the example expressed in the second quoted sentence is no longer valid. This, however, does not detract from the conclusion that the lack of supervisory control by the PC could lead to fraud on the insurer and a misapprehension on the part of the patient.

Medical Society A further asserts that

Many health plans, including Medicare, recognize the business relationship between independent contractors and PCs. The contract between the two would constitute an employer/employee relationship and would therefore contain accountability.

First, in the February 21, 2001 opinion, it was indicated that an indicia of an independent contractor is the lack of control by the employer and that, because of such lack of control, the principal is not usually held liable for the acts of the independent contractor.

Second, the United States Department of Health and Human Services has promulgated a regulation regarding assignment of Medicare benefits, 42 C.F.R. § 424.73 (2001):

Prohibition of assignment of claims by providers. (a) Basic prohibition. Except as specified in paragraph (b) of this section, Medicare does not pay amounts that are due a provider to any other person under assignment, or power of attorney, or any other direct payment arrangement.

Payment to an independent contractor is not encompassed within any of the exceptions listed in 42 C.F.R. § 424.73(b). A similar prohibition regarding Medicaid is found in 42 C.F.R. § 447.10 (2001).

An extract from the Carrier’s Manual issued by the Health Care Finance Administration1 provides:

Except as provided in B below, the carrier may pay assigned benefits only to the physician or other supplier who furnished the service and may not pay assigned benefits to any other person or organization under a reassignment or power of attorney or under any other arrangement where the other person or organization receives the payment directly.

Among the exceptions are:

The Medicare program may pay the employer of the physician or other supplier if the physician or other supplier is required, as a condition of his employment, to turn over to his employer the fees for his services.

While the Carrier’s Manual does mention payment to an independent contractor, it is in the context of the independent contractor performing services for a PC and receiving compensation on his own account. That provision may not be read to authorize the reverse, the PC receiving payment for the independent contractor’s services.

Accordingly, for the reasons mentioned above, this Department does not believe it necessary to modify the conclusion expressed in the February 21, 2001 opinion.

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

 


1 This organization is currently known as the Center for Medicare and Medicaid Services.