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

George E. Pataki
Governor

Howard Mills
Acting Superintendent

The Office of General Counsel issued the following opinion on March 22, 2005, representing the position of the New York State Insurance Department.

Re: Physician’s Billing for Services of Employees or Independent Contractors/Health Insurance

Issues:

1. May a physician bill an insurer, including a Health Maintenance Organization, in his or her own name for the services of another health care professional, where the physician, but not the other health care professional, is a participating provider for the insurer?

2. Would the answer be affected by whether the other health care professional is an employee of the physician or an independent contractor?

Conclusions:

1. The ability of the physician to bill the insurer, including an HMO, is governed by the contract between the physician and the insurer.

2. Because of the potential for fraud, the Insurance Department cannot express an opinion without more information.

Facts:

The inquirer’s client ("the client") is a physician who intends to establish a multi-disciplinary sports medicine facility employing the services of other health care professionals, such as chiropractors and physical therapists. Some of the health care professionals will be employed by the facility while others will be independent contractors.

It is not anticipated that claims will be submitted for services in accordance with either the New York Workers’ Compensation Law (McKinney 1994 and 2005 Supplement) or the Motor Vehicle Reparations Act (No-Fault), New York Insurance Law Article 51 (McKinney 2000).

Where the health care professional, not the client, is a participating provider with an insurer, including an HMO, a bill will be sent to the insurer directly by that other health care professional and there will be a financial transfer to the client in accordance with an existing agreement between the client and the health care professional. Where, however, the other health care professional is not a participating provider with a particular insurer and the client is such a provider, the insurer will be billed by the client at the rate appropriate for the health care professional actually rendering the services. In that case, the health care professional rendering the service will be compensated by a salary.

If, in either situation, the actual service provider is an independent contractor, again there will be, in accordance with an existing agreement, a financial transfer between the client and the other health care provider.

Analysis:

It is presumed that the services provided are all covered under the respective policies and contracts. It is further presumed that the financial arrangements between the client and the other health care professionals would not be in violation of New York Education Law § 6530(19) (McKinney 2001), illegal fee splitting.

New York Insurance Law § 4325(e) (McKinney 2000), regulating contracts of insurers, other than HMOs, with health care providers, requires:

In accordance with New York Public Health Law § 4406(1) (McKinney 2002 and 2005 Supplement), the contracts between an HMO and its subscribers are regulated as if they were Contracts entered into between an insurer and a health care provider shall include terms which prescribe: (1) the method by which payments to a provider, including any prospective or retrospective adjustments thereto, shall be calculated . …

In accordance with New York Public Health Law § 4406(1) (McKinney 2002 and 2005 Supplement), the contracts between an HMO and its subscribers are regulated as if they were subscriber contracts of not-for–profit health insurers, while contracts between HMOs and health care providers are regulated by the Department of Health. Accordingly, contracts between HMOs and health care providers are regulated by the Department of Health. New York Public Health Law § 4406-c(5-a)(a) (McKinney 2002) has an identical provision affecting contracts between HMOs and participating health care providers.

New York Penal Law § 176.05(2) (McKinney 2005 Supplement) defines health insurance fraud:

A fraudulent health care insurance act is committed by any person who, knowingly and with intent to defraud, presents, causes to be presented, or prepares with knowledge or belief that it will be presented to, or by, an insurer . . . or any agent thereof, any written statement or other physical evidence as part of, or in support of, . . . claim for payment, services or other benefit pursuant to such policy, contract or plan, which he knows to: (a) contain materially false information concerning any material fact thereto; or (b) conceal, for the purpose of misleading, information concerning any fact material thereto. . . .

The manner in which a physician bills an insurer, including an HMO, is governed by the contract between the physician and the insurer. The Insurance Department has previously opined that health care providers may not bill for the services of independent contractors in the context of No-Fault payments. The inquirer has not furnished sufficient facts to enable the Department to determine whether it would be appropriate for the services of an independent contractor to be billed in the manner proposed.

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