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Healthcare Law Update on Facilitation of Fair Reimbursement: IFPA Claims Asserted by GEICO Subject to Compulsory Arbitration under the FAA and NJ PIP Laws

Christopher B. Bladel, Paul D. Werner

In a landmark opinion filed on April 15, 2024, the U.S. Court of Appeals for the Third Circuit, interpreting New Jersey law, held that civil actions brought by automobile insurer GEICO against three New Jersey healthcare providers under New Jersey’s Insurance Fraud Prevention Act (IFPA) are subject to compulsory arbitration under the Federal Arbitration Act (FAA) and New Jersey’s compulsory arbitration scheme for resolution of disputes concerning payment of personal injury protection or “no-fault” (PIP) insurance benefits. (Govt. Emps. Ins. Co. v. Mt. Prospect Chiro. Ctr, P.A., Case Nos. 23-1378, 23-2019 & 23-2053, ___ F.4th ___, (3d Cir., April 15, 2024) (hereinafter “Mt. Prospect Chiro.”))

In doing so, the Court of Appeals extended rulings by other courts in similar cases requiring arbitration of causes of action related to claims for PIP benefits. These prior rulings include matters litigated by lawyers in our Provider Reimbursement Disputes practice:

  • Gov’t Emps. Ins. Co. v. Tri-County Neurology & Rehab. LLC, 721 F. App’x 118 (3d Cir. 2018), in which Tri-County Neurology & Rehabilitation, LLC was represented by John W. Leardi and Paul D. Werner of Buttaci Leardi & Werner, LLC before the District of New Jersey, and the Third Circuit Court of Appeals, and
  • Gov’t Emps. Ins. Co., et al. v. Faisal Mahmood, M.D., et als., No. 23-cv-04388 (NGG) (TAM) (Dkt. 31) (E.D.N.Y. Jan. 10, 2024) (hereinafter “GEICO v. One Oak Medical”) in which Faisal Mahmood, M.D. and his medical practices, One Oak Medical Group LLC and One Oak Orthopaedic & Spine Group, LLC were represented by John W. Leardi and Christopher B. Bladel of Buttaci Leardi & Werner, LLC before the U.S. District Court for the Eastern District of New York.

For healthcare providers in New Jersey, these decisions are significant in their refusal to allow GEICO to disrupt New Jersey’s statutory mandate that disputes regarding claims for PIP benefits be decided through arbitration.

A Closer Look at the Mt. Prospect Chiro. Matter

In the Mt. Prospect Chiro. matter, GEICO commenced civil actions against three New Jersey-based healthcare providers: Precision Pain and Spine Institute, L.L.C., Mount Prospect Chiropractic Center, P.A., and Caring Pain Management P.C. 

Each of GEICO’s lawsuits contained a cause of action seeking relief under the IFPA, asserting that the healthcare providers had engaged in a pattern of submitting fraudulent claims for PIP benefits. Specifically, GEICO asserted that the healthcare providers filed exaggerated claims for medical services (sometimes for treatments that were never provided), billed medically unnecessary care, and engaged in illegal kickback schemes. 

The healthcare providers each moved to dismiss GEICO’s causes of action, including the IFPA claims, and to compel arbitration under New Jersey’s PIP arbitration statute, noting that pursuant to New Jersey’s PIP benefit laws, GEICO was required to file a Decision Point Review Plan (DPRP) that requires arbitration of all disputes arising under the DPRP, or in connection with any claim for PIP benefits pursuant to a GEICO automobile insurance policy. 

Further, the healthcare practices argued that they had the right to seek arbitration because GEICO’s procedures for healthcare providers submitting claims for PIP benefits required that each practice submit an assignment of benefits form executed by the patient, which required each of the defendant practices to comply with all procedures and requirements of GEICO’s DPRP. 

Rulings from the District Courts Favored GEICO

With regard to the IFPA claims, the District Courts held that GEICO’s causes of action were not subject to mandatory arbitration. GEICO asserted that its complaints against the three healthcare practices placed the validity of the assignment of benefits at issue, therefore requiring the Court, and not an arbitrator, to first determine whether the alleged fraudulent conduct invalidated the assignment of benefits, thereby severing any contractual link between the defendants and the arbitration requirements of the DPRP. 

Each healthcare practice appealed the District Court orders denying their motions to dismiss and compel arbitration.

The Third Circuit’s Resolution of Mt. Prospect Chiro.

The U.S. Court of Appeals for the Third Circuit noted that GEICO had the burden of persuading the Court that the IFPA prohibits arbitration of their claims against the healthcare practices. 

GEICO based its first argument, that New Jersey courts have long held that IFPA claims cannot be preempted by the PIP statute and its regulations, on a string of cites that the Court of Appeals rejected as having “little to no weight.”    

Therefore, the healthcare practices were entitled to demand compulsory arbitration under New Jersey’s statute that allows any party to compel arbitration of any dispute regarding the recovery of medical expense benefits or other benefits provided under PIP coverage…arising out of the operation, ownership, maintenance, or use of an automobile.

GEICO’s second argument, on the issue of the validity of the assignment of benefit documents that the providers asserted gave them the right to demand arbitration pursuant to GEICO’s DPRP on file with the New Jersey Department of Banking and Insurance, was also met with the Court’s disagreement.   

GEICO argued that by pleading that the healthcare practices had not provided “valid’ assignments of benefits executed by the insureds it challenged the ability of the providers to rely upon the language of the assignment of benefits provisions, which incorporate the arbitration provisions of the DPRP. In essence, GEICO challenged whether a binding contract was created when the providers submitted the assignments of benefits, and the Court had to resolve that issue prior to determining if the claims were arbitrable.

The Third Circuit found that GEICO’s complaints did not assert facts tending to establish an “invalid” assignment of benefits, but rather were legal conclusions. The unanimous appellate panel also held that GEICO’s assignment of benefits document clearly incorporated the right for the providers to demand arbitration of all disputes related to the PIP claims.

Therefore, absent statutory authority or binding case law to the contrary, the IFPA claims fall within the broad language of the arbitration agreement formed when GEICO accepted the assignment of benefit documents from the healthcare providers.

The Court stated that the arbitration provisions of GEICO’s DPRP are broadly worded and both the DPRP and the assignment of benefits forms were authored by GEICO, and those documents must be construed in the light most favorable to the defendant healthcare practices.

Why Mt. Prospect Chiro. Matters to Healthcare Providers

The Third Circuit’s decision in Mt. Prospect Chiro. closes the loop on whether an automobile insurer can use the IFPA to escape the mandatory arbitration provisions of New Jersey’s PIP statute and the compulsory arbitration clause of an insurer’s DPRP.

Of note, the ruling against GEICO extends the Court’s prior holding in Tri-County Neurology & Rehab. LLC, which dismissed GEICO’s “declaratory judgment” action as being subject to arbitration, to also require arbitration of IFPA causes of action concerning arbitrable claims for PIP benefits submitted by New Jersey healthcare providers.

Additionally, the Mt. Prospect Chiro. Decision comes on the heels of GEICO v. One Oak Medical, a recent decision in the Eastern District of New York in which GEICO commenced a similar lawsuit asserting the same causes of action against a surgical practice that rendered medical treatment to GEICO insureds in both New Jersey and New York. GEICO sought a preliminary injunction to halt Dr. Mahmood and his medical practice from pursuing both pending and future claims for PIP benefits rendered to GEICO insureds. In denying GEICO’s motion for a preliminary injunction, the Court reasoned that despite GEICO having a history of prevailing on nearly identical requests for injunctive relief in the Eastern District of New York, the record failed to establish irreparable harm, in part because GEICO’s application failed to consider the impact of New Jersey’s legislative requirement that PIP claims be arbitrated. [We provide further analysis of this decision, and its impact on medical practices that see patients in both New Jersey and New York, in our prior blog post.]

Buttaci Leardi & Werner regularly represents healthcare providers in reimbursement disputes with insurers including but not limited to defending providers accused of improperly seeking reimbursement of automobile insurance personal injury benefits. If you are concerned that you or your practice has been wrongfully accused of fraud in the submission of claims for insurance reimbursement, please contact John W. Leardi at jwleardi@buttacilaw.com or 609-799-5150.

  • Posted on: Apr 26 2024