The Michigan Supreme Court has left untouched an appeals court ruling that allowed a healthcare provider to file suit seeking payment for services provided to an insured because the no-fault act does not require the provider to administratively appeal an insurer’s utilization review.
In a May 2023 published decision, True Care Physical Therapy PLLC v. Auto Club Group Ins. Co . ( MiLW 07-106794 ), Judge Noah P. Hood wrote that, “[a]t its core, a utilization review is an ‘initial evaluation’ of the appropriateness of the level and quality of treatment.”
He explained that the case of action provided in MCL 500.3112 “is not preconditioned on the permissive administrative appeal of that initial evaluation. The plain language of the no-fault act demonstrates that the Legislature intended alternate pathways for determining whether care was appropriate.”
Insurer denies payment
Rozarta Vukaj suffered neck, back and right shoulder injuries in a 2018 motor vehicle accident. Ten months after the accident, she began physical therapy with True Care Physical Therapy that lasted approximately two years.
Physical therapy included hot or cold packs, therapeutic exercises, manual therapy and electrical stimulation for treatment of her neck, lower back and shoulder pain. The cost for each visit was between $655 and $925.
Vukaj’s no-fault insurance policy with Auto Club Group Insurance Company entitled her to personal protection insurance, or PIP, benefits. Vukaj assigned her rights to those benefits to True Care.
Auto Club paid True Care approximately $57,000 over two years for Vukaj’s treatment, but stopped paying in September 2021, following a utilization review.
The utilization review concluded that True Care’s treatment exceeded the American College of Occupational and Environmental Medicine guidelines’ recommendations for the frequency and duration of treatment for injuries like Vukaj’s.
True Care continued to treat Vukaj and submit charges to Auto Club for the same services. Auto Club conducted three subsequent utilization reviews in response, each of which reached the same conclusion and denied payment.
The explanation of benefits reflecting the utilization review provided information on how to appeal Auto Club’s determination to the Department of Insurance and Financial Services, or DIFS.
True Care did not appeal the utilization reviews and instead filed a breach of contract complaint in state court, seeking payment for its services.
Auto Club moved for summary disposition, arguing that MCL 500.3157a of the no-fault act and Rule 500.65 of the Michigan Administrative Code required True Care to appeal to the DIFS before filing suit, leaving the trial court without subject matter jurisdiction because True Care neglected to exhaust its administration remedies.
The Oakland County Circuit Court denied the motion. Auto Club appealed.
‘Permissive, not mandatory’
In 2019, the legislature passed comprehensive reforms to the no-fault act, including amendments that allow insurers to conduct a utilization review found at MCL 500.3157a and amendments that provide healthcare providers with a direct cause of action against insurers for the collection of PIP benefits, found at MCL 500.3112.
Importantly, MCL 500.3157a provides a mechanism for appealing an insurer’s utilization review conclusions to the DIFS.
Rule 500.65 provides for a timeline, stating that “A provider may appeal a determination made by an insurer or the association. The appeal must be filed within 90 days of the date of the disputed determination and must be made on a form prescribed by the department.”
Hood considered the utilization review procedures with the terms of MCL 500.3112, which grants healthcare providers a direct cause of action for the collection of PIP benefits against insurers.
“The terms of MCL 500.3112 do not restrict such claims to those that have been submitted to an administration utilization review,” Hood noted. “Rather, the only restriction contained in Section 3112 is that the benefits must be ‘overdue.’”
The plain language of the no-fault act indicates that the legislature intended that appeal under MCL 500.3157a and related regulations is permissive, not mandatory, the judge said.
“Read together, the unambiguous language of MCL 500.3157a(5), its related regulations and MCL 500.3112 compel a conclusion that the administrative appeal provided under MCL 500.3157a(5) and Rule 600.65 is permissive, not mandatory,” he wrote. “The text of the no-fault act plainly does not require administrative appeal of a utilization review as a precondition to suit under MCL 500.3112. The trial court correctly reached this conclusion in finding that it had subject matter jurisdiction over True Care’s claims based on the plain language of the operative statutes.”
MCL 500.3157a, Rule 600.65 and MCL 500.3112 do not instruct that an appeal of a utilization review determination to the DIFS is a mandatory or exclusive method of challenging an insurer’s initial decision to withhold PIP benefits, the judge explained.
Use of the term “may” suggests that both the legislature and the DIFS “intended subsection 3157a(5) and Rule 500.65 to provide an alternative and discretionary way to appeal utilization review determination to the DIFS, not an exclusive or mandatory method for challenging denial of benefits,” the court said.
Nor was Hood persuaded by Auto Club’s argument that “may” could mean “shall” or “must,” as reading the permissive language as mandatory or exclusive conflicted with the legislature’s intent as expressed in other parts of the no-fault act.
If the language was read as mandatory, it would impose an additional requirement for actions permitted under MCL 500.3112, something the legislature did not endorse, the court said. In addition, Auto Club’s reading of a mandatory appeal would create a conflict between the shorter 90-day timeframe for appealing a utilization review decision under Rule 500.65 and the one-year statute of limitations provided in MCL 500.3145.
“Because the plain language of the operative statutes and regulations permit an administrative appeal rather than require it, True Care was not required to appeal the utilization review decision to the DIFS to satisfy administrative exhaustion requirements,” Hood said.
The judge affirmed the decision to deny summary judgment.
“Auto Club’s argument is ultimately rooted in policy: that the practical effect of interpreting the statute according to its plain language will relegate it and Rule 500.65 to the realm of irrelevance,” Hood wrote. “Auto Club’s speculation is unsupported by evidence. And even if data could be gathered, the argument is more appropriately directed at the Legislature.”
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