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A Better Partnership
February 17, 2012

COA Opinion: No-fault insurers are entitled to cost information to determine whether healthcare providers' costs are reasonable

In Bronson Methodist Hospital v. Home-Owners Insurance Co., Nos. 300566, 300567, the Michigan Court of Appeals held that no-fault insurers have a right to discover information regarding the costs of the insured's healthcare. There, two insureds had received surgery requiring implant products. Bronson Methodist Hospital ('Bronson') billed the no-fault insurers for the costs of these implants. The no-fault act only requires insurers to pay 'reasonable' costs. The insurers asked Bronson for the wholesale cost of the implants in order to determine whether the costs billed were reasonable. Bronson refused to provide that information. Consequently, the insurers refused to pay that portion of the bill. Bronson filed suit to recover the costs. The insurers again requested discovery regarding the wholesale cost. The trial court refused to order this discovery, but the Court of Appeals held that the insurers were entitled to this information, emphasizing that the healthcare provider had the burden of proving its costs were reasonable.

The Court of Appeals also considered two other issues: (1) whether the trial court erred in granting Bronson summary disposition; and (2) whether the trial court abused its discretion in refusing to grant Bronson's request for attorney fees.

The Court of Appeals held that Bronson was not entitled to summary disposition. Following the trial court's denial of their discovery requests, the insurers decided to hire a consultant to determine whether the costs were reasonable. The consultant concluded that only a portion of the costs were reasonable (estimating Bronson's wholesale cost and adding 50% of that cost). The insurers then paid Bronson that portion of the billed costs. Bronson moved for summary disposition arguing that the consultant's method was unreasonable and that the 'only relevant consideration under the no-fault act is the amount of the provider's charges for medical services, and not the provider's cost of providing those services.' The trial court granted Bronson's motion. The Court of Appeals reversed. The Court emphasized that the healthcare provider had the burden to prove that its charges were 'reasonable.' Here, there was conflicting evidence on that point (the consultant's estimate), and the insurers had not been given the opportunity to conduct discovery regarding the reasonableness of the charges. Thus, summary disposition was improper.

Next, the Court considered whether the trial court had abused its discretion in denying Bronson's request for attorney fees. The Court noted that he law in this area is unclear, and the insurers had raised legitimate legal and factual issues regarding whether the insurers were required to pay the implant costs. Under these circumstances, the Court held it was not an abuse of discretion to deny attorney fees under MCL 500.3148.

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