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A Better Partnership
January 11, 2016

COA - Skilled nursing facility responsible for patient’s medical expenses because it assumed financial responsibility under contract with health insurance provider

Where a skilled nursing facility assumed financial responsibility for a patient’s medical expenses under a provider agreement with the patient’s health insurance company, the health insurance company had no obligation to pay the patient’s medical bills, said the Michigan Court of Appeals in Farm Bureau General Insurance Company of Michigan v. Blue Cross Blue Shield, and Spectrum Health Continuing Care, and Spectrum Rehab and Nursing Center, No. 322423.  Further, the patient’s no-fault automobile insurance provider had no obligation to pay her medical bills since she did not “incur” those expenses, because the skilled nursing facility assumed financial responsibility.
In October 2011, Julie Klein was seriously injured in an automobile accident.  At that time, Klein was insured under a Blue Cross Blue Shield (“BCBS”) health insurance policy and a Farm Bureau General Insurance Company of Michigan (“Farm Bureau”) no-fault automobile insurance policy.  Her BCBS and Farm Bureau policies were coordinated, as allowed under MCL 500.3109a, so that BCBS was primarily liable for medical expenses and Farm Bureau was to pay for expenses not covered by BCBS.  After the accident, Klein was treated by Spectrum Rehab and Nursing Center (“Spectrum”), which was under a contractual agreement with BCBS.  The contractual agreement required that Spectrum seek pre-approval for payment prior to performing medical services.  After 14 days of treatment, for which BCBS agreed to pay, Spectrum requested that BCBS pay for an additional length of time for Klein’s treatment.  BCBS denied Spectrum’s request, which Spectrum and Klein failed to appeal.  Subsequently Spectrum submitted the claim to Farm Bureau for payment.  Farm Bureau paid the claim under protest and filed this lawsuit.  Each party moved for summary disposition and the trial court concluded that Spectrum was entitled to payment for Klein’s medical expenses and that BCBS was obligated to pay them; BCBS appealed.
In its analysis, the Court of Appeals found that Spectrum was responsible for Klein’s expenses for a number of reasons.  First, Spectrum failed to seek review of BCBS’s denial and thus it was bound by the contractual agreement, and therefore, assumed financial responsibility for Klein’s expenses.  Second, Spectrum did not seek pre-approval for payment for future services provided to Klein as required by the agreement.  Third, Spectrum failed to have Klein or those acting on her behalf to assume responsibility for the expenses in writing.  As for Farm Bureau, the Court concluded that the insurer was not responsible for Klein’s medical expenses due to the fact that Klein did not “incur” the charges for her medical treatment as required by MCL 500.3107(1)(a).  The Court reasoned, that because Klein had no legal responsibility for the medical expenses, those expenses were not “incurred” by Klein within the meaning of the statute.  The Court reversed the trial court’s grant of Farm Bureau’s summary disposition against BCBS and remanded for entry of summary disposition in favor of BCBS and Farm Bureau with respect to the claims against Spectrum.    

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