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AUTO-OWNERS INSURANCE COMPANY, Home-Owners Insurance Company, and Caleb Casanova, Plaintiffs-Appellees, v. COMPASS HEALTHCARE PLC d/b/a Compass Health, and Lansing Neurosurgery, Defendants-Appellants.
Defendants 1 appeal as of right the trial court's opinion and order denying their motion for summary disposition, sanctions, and attorney fees and, instead, granting summary disposition and awarding attorney fees and costs to plaintiffs.2 We affirm the trial court's order granting summary disposition in favor of plaintiffs and reverse the trial court's award of reasonable attorney fees and costs to Auto-Owners and Home-Owners under MCL 445.257(2).
I. RELEVANT FACTUAL BACKGROUND
On July 3, 2014, Caleb Casanova was injured in an automotive accident. Casanova sustained a concussion, a comminuted fracture of his C2 vertebra, and various other minor injuries. Casanova was admitted to the intensive care unit of Sparrow Hospital, and defendants 3 provided treatment to him on July 4, 2014. Compass Health submitted a bill to Home-Owners, Casanova's no-fault insurer, for $1,859. On August 5, 2014, Home-Owners submitted payment to Compass Health in the amount of $1,076.14, the amount Home-Owners determined was reasonable and necessary for the services Compass Health provided to Casanova. On August 13, 2014, Compass Health sent an invoice directly to Casanova for the remaining $782.86. A second statement was sent to Casanova on September 5, 2014.
On September 18, 2014, Home-Owners sent a second letter to Compass Health, indicating that if Compass Health wished to dispute the reasonableness of its $1,076.14 payment, it was to deal with Home-Owners directly, not with Casanova. Regardless, Compass Health sent Casanova invoices on October 20, 2014, and on February 11, 2016. On March 1, 2016, Home-Owners sent a second letter to Compass Health, advising that reasonable payment had been made to Compass Health on behalf of Casanova in accordance with MCL 500.3107 and MCL 500.3157. Home-Owners informed Compass Health that it could pursue legal action if it wished to dispute the reasonableness of the payment but that it was to cease having direct contact with Casanova. Nevertheless, Compass Health sent two more invoices to Casanova on April 11, 2016, and April 20, 2016.
On May 5, 2016, Home-Owners sent a third letter to Compass Health: this time, a notice to cease and desist. According to Home-Owners and Auto-Owners, the letter advised Compass Health that Home-Owners was “the only proper party to any dispute as to the reasonableness of the payment” and that all collections efforts directed at Casanova should be ceased. Yet on June 10, 2016, July 11, 2016, and August 10, 2016, Compass Health again sent invoices directly to Casanova.
On November 15, 2016, plaintiffs filed a five-count complaint against defendants, seeking a declaratory judgment under the no-fault act, MCL 500.3101 et seq., seeking a “declaration from the [c]ourt as to whether Compass [Health] may attempt to obtain payment” of its “balance bill”4 directly from Casanova, regardless of the reasonable payment made by Home-Owners. Plaintiffs also sought injunctive relief, requesting that Compass Health be prevented from contacting Casanova regarding collections pending the outcome of the instant action. Casanova also sought relief under Michigan's regulation of collection practices act (the MRCPA), MCL 445.251 et seq., seeking damages. Finally, all plaintiffs sought attorney fees pursuant to MCL 500.3148(2).
In lieu of an answer, defendants moved for summary disposition pursuant to MCR 2.116(C)(4) and (8) and for sanctions pursuant to MCR 2.114(F). Defendants argued that plaintiffs’ claim for declaratory relief was moot because the underlying debt giving rise to plaintiffs’ claim was unenforceable. Specifically, defendants admitted that the “debt is unenforceable ․ pursuant to the one-year-back rule that governs the recovery of benefits under” MCL 500.3145. Similarly, defendants argued that because the underlying debt was unenforceable, plaintiffs’ claim for injunctive relief was not yet ripe for review. Finally, defendants argued that plaintiffs were not entitled to attorney fees under MCL 500.3148(2) because plaintiffs could not recover fees related to a lawsuit they initiated. Defendants also sought sanctions, claiming that plaintiffs’ lawsuit was “frivolous.”
In response, Casanova argued that despite defendants’ admission that the balance owed was unenforceable as a matter of law, defendants continued to contact him in an effort to collect the balance, and for that reason, plaintiffs are entitled to the relief requested in their complaint. With his response to defendants’ motion for summary disposition, Casanova included a countermotion for summary disposition pursuant to MCR 2.116(C)(10), which Home-Owners concurred with. Plaintiffs agreed that all the medical expenses incurred by Casanova were covered under his no-fault insurance policy with Home-Owners and that pursuant to MCL 500.3157, Home-Owners had paid defendants a reasonable amount for services actually rendered. Casanova asserted that he was therefore not responsible for the difference and that in light of defendants’ own admission that the balance owed was unenforceable, summary disposition in favor of plaintiffs was appropriate.
Defendants replied, now arguing that plaintiffs had misunderstood their argument: although the balance bill was unenforceable under the no-fault act, Casanova still incurred an implied contractual obligation to pay independent of the act. Defendants articulated that they had not raised this argument earlier because plaintiffs had never claimed the balance was unenforceable under contract law and defendants were not required to negate every theory not raised by plaintiffs.
Following a hearing on defendants’ motion for summary disposition and Casanova's countermotion for summary disposition, the trial court entered a written opinion and order granting summary disposition in favor of and awarding attorney fees and costs to plaintiffs and denying defendants summary disposition, sanctions, and attorney fees and costs. The trial court ultimately concluded that Michigan law is well settled, that there is no factual dispute that Home-Owners is Casanova's no-fault insurer, and that Home-Owners is, accordingly, “liable to pay benefits for Casanova's care, treatment, and rehabilitation arising out of this injury.” Further, the court ruled that under MCL 500.3107(1)(a), Home-Owners must pay all “[a]llowable expenses consisting of all reasonable charges incurred for reasonably necessary products, services and accommodations ․” The court noted that defendants, as medical providers, also have duties under the no-fault act, including the duty to charge no more than a reasonable amount for the products, services, and accommodations rendered. As the court explained, this means that a medical provider “ ‘shall not exceed the amount the person or institution customarily charges for like products, services and accommodations in cases not involving insurance.’ ” (Quoting MCL 500.3157.)
The trial court went on to conclude that “it is a well-settled matter of law that insurance providers like Home-Owners ․ have an obligation to audit charges and make only reasonable payments as part of a cost-policing function meant to provide health care providers an incentive to keep costs to a minimum.” Further, the court stated that simply because plaintiffs did not frame their complaint as requesting a declaration about Casanova's contractual liability did not mean that plaintiffs’ complaint “failed to state a claim or allege sufficient facts.” Indeed, plaintiffs’ “argument, through the Complaint and pleadings, is clearly that they are seeking a declaration on the question of whether the practice of reasonable partial payments made by insurers to providers allowed by the No-Fault Act should result in liability to the insured.” To that end, the trial court concluded that given relevant caselaw, statutory interpretation, and public policy,
a [medical] provider cannot lawfully charge more than a reasonable amount for products, services, and accommodations, [and it] is clear, that once an insurer has made its required audit, determination, and payment of benefits for the reasonable and necessary charges billed by providers, a provider cannot then pursue and collect the remainder of the bill from a patient-insured. Where a provider disputes an insurer's determination and subsequent partial payments, that dispute belongs solely between the provider and insurer, and is subject to the one-year-back provision of MCL 500.3145.
Finally, the trial court concluded that by sending defendant at least 10 collections letters or billing statements and by ignoring the cease and desist letters sent by Home-Owners, defendants had willfully violated the MRCPA, “by making misleading statements to Casanova that he owed the balance bill, where [d]efendants were on notice that Casanova's liability was in dispute and where Casanova never owed the bill charged in accordance with the No-Fault Act, pursuant to MCL 445.252(e).” The court ruled that Casanova was therefore “entitled to $150 in damages per violation, that being each of the ten billing statements sent to Casanova in an attempt to collect a debt he did not owe.” The trial court reiterated that because defendants violated MCL 445.252(e), all plaintiffs were entitled to reasonable attorney fees and costs under MCL 445.257(2).
Two days after the trial court entered its opinion and order, our Supreme Court issued its decision in Covenant Med. Ctr., Inc. v. State Farm Mut. Auto. Ins. Co., 500 Mich. 191, 895 N.W.2d 490 (2017). On the basis of that opinion, defendants moved for reconsideration of the trial court's opinion and order under MCR 2.119(F). Defendants argued that after Covenant, medical providers have “no statutory cause of action under the No-Fault Act against insurers, but that they are not remediless as providers can seek payment from the injured person for their reasonable charges.” Defendants asserted that, because Covenant is controlling “and precludes a finding in favor of [p]laintiffs,” reconsideration was appropriate under MCR 2.119(F).
The trial court entered an opinion and order denying defendants’ motion for reconsideration on August 7, 2017. The trial court concluded, in relevant part:
This Court acknowledges that, pursuant to Covenant, [d]efendants had a legal right to seek payment directly from Casanova under the provisions of the No-Fault Act. However, the issue presented before this Court was a separate consideration: whether health care providers could seek payment of “balance bills” from a patient-insured on a contractual liability theory, rather than under the No-Fault Act, after a provider's charges were audited for reasonableness and the provider was paid a partial payment based on the findings of those audits. This Court finds that although the May 23, 2017 Opinion & Order erred with regard to the determination that providers must dispute partial payments with insurers, rather than patient-insured, it does not affect this Court's determination that a provider does not have a contractual right to pursue a patient-insured after a provider's charges have been determined to be unreasonable in accordance with the No-Fault Act, and therefore, a different disposition of the motion is not required.
* * *
This Court determined that the provisions of the No-Fault Act requiring a provider to charge only “reasonable and necessary charges,” and the provisions of the Act requiring an insurer to pay “[a]llowable expenses consisting of all reasonable charges ․” imposed a standard of reasonableness that an insurer was duty-bound to enforce through audits. MCL 500.3107, MCL 500.3157. The Covenant decision did not change or affect either the standard of reasonableness or the insurer's duty to audit; indeed, the Covenant decision noted that a provider may seek payment only for a provider's reasonable charges. Since the present case raises the issue of a “balance bill,” Covenant does not provide [d]efendants with an unfettered right to pursue the patient-insured, Casanova, because [d]efendants’ charges were found to be unreasonable. This Court erred when it placed the dispute over whether [d]efendants’ charges were reasonable between [d]efendants and Auto-Owners and Home-Owners, as Covenant removed a provider's cause of action against an insurer absent an assignment of no-fault benefits, but Covenant does not remove the necessity of resolving the dispute under the provisions of the No-Fault Act. [Citation omitted.]
The trial court further noted that defendants had admitted in their pleadings that the balance in question was unenforceable under the no-fault act's one-year-back rule. In light of the foregoing, the trial court concluded that “a different disposition of this case is not required.” This appeal followed.
II. MEDICAL PROVIDER'S RIGHT TO SEEK PAYMENT OF BALANCE BILLS
Defendants first argue that the trial court erroneously refused to reverse its denial of summary disposition in plaintiffs’ favor and that it instead erroneously concluded that despite Covenant, “medical providers have no contractual right to seek payment from their patients once their patients’ insurers have paid the portion of the medical bills that the insurer deems reasonable.” We disagree.
“This Court reviews for an abuse of discretion a trial court's ruling on a motion for reconsideration.” Sanders v. McLaren-Macomb, 323 Mich.App. 254, 264, 916 N.W.2d 305 (2018). An abuse of discretion occurs when the trial court's decision is “outside the range of reasonable and principled outcomes.” Id. (quotation marks and citation omitted). “MCR 2.119(F)(3) requires the party moving for reconsideration to ‘demonstrate a palpable error by which the court and the parties have been misled and show that a different disposition of the motion must result from the correction of the error.’ ” Id. (citation omitted). “The trial court has ‘considerable discretion in granting reconsideration to correct mistakes, to preserve judicial economy, and to minimize costs to the parties.’ ” Id. at 264-265, 916 N.W.2d 305 (citation omitted.) Additionally, we review de novo questions of law and the interpretation of statutes. Haksluoto v. Mt. Clemens Regional Med. Ctr., 500 Mich. 304, 309-310, 901 N.W.2d 577 (2017).
Defendant correctly argues that in Covenant, our Supreme Court held that “healthcare providers do not possess a statutory cause of action against no-fault insurers for recovery of personal protection insurance [PIP] benefits under the no-fault act” but that “a provider that furnishes healthcare services to a person for injuries sustained in a motor vehicle accident may seek payment from the injured person for the provider's reasonable charges.” Covenant, 500 Mich. at 196, 217, 895 N.W.2d 490. Accordingly, pursuant to MCR 2.119(F)(3), the trial court was well within its discretion to consider defendants’ motion for reconsideration and did, in fact, correctly conclude that it had previously erred by concluding that defendants were required to pursue only Home-Owners. After Covenant, the trial court correctly concluded on reconsideration that defendants had a “legal right to seek payment directly from Casanova under the provisions of the No-Fault Act.”
The trial court also correctly concluded that despite our Supreme Court's holding in Covenant, defendants were still not entitled to summary disposition in their favor. The original question before the trial court was whether defendants could “seek payment of ‘balance bills’ from a patient-insured on a contractual liability theory, rather than under the No-Fault Act, after a provider's charges were audited for reasonableness and the provider was paid a partial payment based on the findings of those audits.” We agree with the trial court and conclude that the answer to the question is no.
Under MCL 500.3157, a medical provider may only charge a “reasonable amount for the products, services and accommodations rendered” to an injured person for an accidental bodily injury covered by personal protection insurance. Likewise, under MCL 500.3107(1)(a), a no-fault insurer is only responsible for paying “[a]llowable expenses consisting of all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person's care, recovery, or rehabilitation.” Therefore, the trial court did not abuse its discretion by concluding that the “Covenant decision did not change or affect either the standard of reasonableness or the insurer's duty to audit; indeed, the Covenant Court noted that a provider may seek payment only for a provider's reasonable charges.”
Our Supreme Court's decision in Covenant also did not affect the validity of this Court's decision in Advocacy Org. for Patients & Providers v. Auto Club Ins. Ass'n, 257 Mich.App. 365, 670 N.W.2d 569 (2003), aff'd 472 Mich. 91, 693 N.W.2d 358 (2005) (AOPP ). This Court confirmed in AOPP that under the no-fault act, a medical provider will only be paid for reasonable and necessary charges actually incurred. AOPP, 257 Mich.App. at 374, 670 N.W.2d 569. The no-fault act
requires that an insurer only pay on behalf of the insured a “reasonable” charge for the particular product or service. However, the Legislature has not defined what is “reasonable” in this context, and, consequently, insurers must determine in each instance whether a charge is reasonable in light of the service or product provided. [Id. at 379, 670 N.W.2d 569.]
Again, in Bronson Methodist Hosp. v. Auto-Owners Ins. Co., 295 Mich.App. 431, 448, 814 N.W.2d 670 (2012), this Court concluded that no-fault insurers are required to challenge the reasonableness of a medical provider's charges and that medical providers should expect no less. Further, the “ ‘customary’ fee a particular provider charges under [MCL 500.3157] does not define what constitutes a ‘reasonable charge’ under [MCL 500.3107]. ․ Rather, the ‘customary fee’ is simply the cap on what health-care providers can charge, and is not, automatically, a ‘reasonable’ charge requiring full reimbursement under [MCL 500.3107].” AOPP, 257 Mich.App. at 377, 670 N.W.2d 569.
However, medical providers are permitted to “challenge [the] failure to fully reimburse them for medical bills as a violation of” the no-fault act. Id. at 380, 670 N.W.2d 569. They must do so in the trial court, and the providers have the burden of establishing by a preponderance of the evidence that their charges were reasonable. Id. See also Bronson, 295 Mich.App. at 450, 814 N.W.2d 670, in which this Court reiterated that the no-fault act contemplates that
insurers will assess the reasonableness of a provider's charges, paying that portion deemed reasonable, with the provider having the prerogative to then challenge the insurer's decision not to pay the entire charge submitted by filing suit. Once an action is filed, the provider has the burden of proving by a preponderance of the evidence the reasonableness of its charges.
As the trial court concluded in its opinion and order on reconsideration, “[t]he only effect of Covenant was to place the dispute over the reasonableness of the charges between a provider and a patient-insured, rather than between a provider and an insurer.” It did not alter the method of disputing the reasonableness of the amount paid.
In this case, it is clear that defendants never filed an action against Home-Owners or against Casanova, challenging Home-Owners’ determination of the reasonableness of its charges. Likewise, defendants never raised the reasonableness of its charges as an issue in its motion for summary disposition or any other responsive pleading, and never presented any evidence from which the trial court could have concluded by a preponderance of the evidence that the charge of $1,859 was reasonable and necessary for the services provided. Instead, defendants have chosen to harass Casanova over $782.86 outside the courts since 2014.
To conclude that defendants could prevail on the theory of an implied contract is contrary to the purpose of the no-fault act, and its implications would allow medical providers to circumvent the protective nature of the act. Therefore, we conclude that any claim defendants may have against Casanova would be for payment of services rendered to an injured person “covered by personal protection insurance” under the no-fault act. See MCL 500.3157. Accordingly, reversal of the trial court's original opinion and order granting summary disposition in favor of plaintiffs was unnecessary, and it was not an abuse of the trial court's discretion to refuse to do so.
III. ONE-YEAR-BACK RULE
Second, defendants argue that the trial court erroneously concluded that medical providers must file suit within one year from the date of providing medical services for automobile-related injuries because the one-year-back rule does not apply to benefits payable under Michigan contract law. Defendants further argue that after Covenant, a claim by a medical provider against its patient is not viewed as an action for recovery of PIP benefits under MCL 500.3145; rather, it is an “attendant contract claim.” We disagree.
Again, “[t]his Court reviews for an abuse of discretion a trial court's ruling on a motion for reconsideration.” Sanders, 323 Mich. App. at 264.
We disagree with defendants’ interpretation of Covenant with respect to whether a claim against a medical provider is now viewed as an action for recovery of PIP benefits or a contract claim. Defendants would like this Court to conclude that after Covenant, a medical provider's claim against a patient-insured is an “attendant contract claim.” However, the Covenant Court explicitly stated:
We conclude today only that a healthcare provider possesses no statutory right to sue a no-fault insurer. ․ This Court need not consider whether [a medical provider] possesses a contractual right to sue ․ because [the medical provider] did not allege any contractual basis for relief in its complaint. [Covenant, 500 Mich. at 217 n. 39, 895 N.W.2d 490.]
Likewise, defendants never filed a complaint seeking payment from either Home-Owners or Casanova under a theory of implied contract or otherwise. The first time defendants advanced a theory of contractual liability was in a reply in opposition to Casanova's response to defendants’ motion for summary disposition. Moreover, given our conclusion that any claim by defendants would still fall squarely within the parameters of the no-fault act, defendants’ recovery would be subject to the one-year-back rule found in MCL 500.3145.
In this case, Home-Owners made a reasonable payment to Compass Health on behalf of Casanova on August 5, 2014. Therefore, in order to contest the reasonableness of the amount paid or to pursue the remaining $782.86, defendants would have had to file suit against Casanova on or before August 5, 2015. See MCL 500.3145, which provides that
[a]n action for recovery of personal protection insurance benefits payable under this chapter for accidental bodily injury may not be commenced later than 1 year after the date of the accident causing the injury ․ unless the insurer has previously made a payment of personal protection insurance benefits for the injury. If ․ a payment has been made, the action may by commenced at any time within 1 year after the most recent allowable expense ․ has been incurred.
Defendants concede that they did not file any action in the trial court. Accordingly, any claim defendants may have had against Casanova is now barred by the one-year-back rule. The trial court did not abuse its discretion by concluding the same.
Moreover, defendants conceded in their motion for summary disposition that “[p]laintiffs’ debt to [d]efendants in the amount of $782.86 for the outstanding balance of the services rendered to ․ Casanova on July 4, 2014 is unenforceable as a matter of law” because defendants chose not to pursue legal action. Further, defendants conceded that “[t]he debt is unenforceable ․ pursuant to the one-year-back rule that governs the recovery of benefits under the” no-fault act. Therefore, defendants have waived this argument. See Bates Assoc., LLC v. 132 Assoc., LLC, 290 Mich.App. 52, 64, 799 N.W.2d 177 (2010), in which this Court articulated that a “party may not claim as error on appeal an issue that the party deemed proper in the trial court because doing so would permit the party to harbor error as an appellate parachute.”
IV. RECOVERY UNDER THE MRCPA
Finally, defendants argue that the trial court erroneously granted Auto-Owners and Home-Owners relief under the MRCPA because only Casanova brought a claim. Defendants assert that Auto-Owners and Home-Owners are therefore not entitled to the attorney fees and costs awarded by the trial court under the MRCPA. We agree.
In their brief on appeal, Auto-Owners and Home-Owners concede that “the lower court awarded attorney fees only under the MRCPA and that only Mr. Casanova sought recovery under that Act in the Complaint. As a result, Auto-Owners and [Home-Owners] withdraw their request for fees.” [Footnote omitted.] Further, Auto-Owners and Home-Owners correctly note in their brief on appeal that although the trial court awarded fees to Auto-Owners and Home-Owners under MCL 445.257(2) in its original opinion and order, it had not yet ruled on the fee request before this appeal. Therefore, Auto-Owners and Home-Owners argue, “any error on this point does not justify reversal.”
Only Casanova sought relief under the MRCPA. Therefore, only Casanova is entitled to damages and reasonable attorney costs and fees under MCL 445.257(2). The trial court accordingly erred by awarding such fees to Auto-Owners and Home-Owners on that basis. We reverse the trial court's grant of reasonable attorney fees and costs to Auto-Owners and Home-Owners under MCL 445.257(2).
We affirm the trial court's order granting summary disposition in favor of plaintiffs and reverse the trial court's award of reasonable attorney fees and costs to Auto-Owners and Home-Owners under MCL 445.257(2).
I concur in the result reached by the majority and in much of its reasoning. I write separately to offer an alternative rationale. In essence, I conclude that when a healthcare provider seeks to collect on a “balance bill”1 from an injured person who is entitled to no-fault benefits, the claim is in the nature of a contract claim; nonetheless, the contract in question is necessarily subject to principles of public policy as expressed in the no-fault act, MCL 500.3101 et seq. Under the circumstances of this case, those principles preclude defendants, Compass Healthcare, PLC, and Lansing Neurosurgery, from collecting on their balance bill to plaintiff Caleb Casanova.
The no-fault act is a statutory scheme that “provides a system of mandatory no-fault automobile insurance, which requires Michigan drivers to purchase personal protection insurance.” Advocacy Org for Patients & Providers v. Auto. Club Ins. Ass'n, 257 Mich.App. 365, 373, 670 N.W.2d 569 (2003) (AOPP ). “Under personal protection insurance an insurer is liable to pay benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle, subject to the provisions of this chapter.” MCL 500.3105(1). Generally, “personal protection insurance benefits are payable for ․ [a]llowable expenses consisting of all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person's care, recovery, or rehabilitation.” MCL 500.3107(1)(a) (paragraph structure omitted).2 “Personal protection insurance benefits are payable to or for the benefit of an injured person or, in case of his death, to or for the benefit of his dependents.” MCL 500.3112.
This means, as is undisputed, that the no-fault act allows an injured person to bring suit against the appropriate insurer for benefits due under the act. Our Supreme Court has held, however, that a healthcare provider does not possess “a statutory cause of action against a no-fault insurer.” Covenant Med. Ctr., Inc. v. State Farm Mut. Auto. Ins. Co., 500 Mich. 191, 217, 895 N.W.2d 490 (2017).
This case, however, does not present a claim by either an injured person or a healthcare provider against a no-fault insurer. Defendants did not bring suit against either plaintiff insurers (which, as noted, Covenant determined they had no statutory right to do) or against plaintiff Casanova. Instead, this is an action for declaratory relief brought by the insurers and Casanova against Casanova's healthcare providers. Underlying that dispute is defendants’ efforts to secure payment from Casanova for the amount of their balance bill.3
The questions presented in this case include whether a healthcare provider may seek payment from its patient (the injured person) for a balance bill, the nature of any such claim, and the extent (if any) to which the provisions of the no-fault act are implicated with respect to that claim. As noted, I conclude that a healthcare provider may do so,4 that its claim is in the nature of contract, and that the principles of the no-fault act nonetheless are implicated so as to, in this case, preclude defendants from collecting on their balance bill to Casanova.
Given that the no-fault act is a statutory insurance scheme and that defendants’ relationship with Casanova is one relating to the provision of healthcare services rather than insurance, I conclude that a claim or cause of action by defendants against Casanova for payment for those services does not arise under the no-fault act itself, but instead is necessarily one arising from contract, albeit in this case an implied contract for the provision of healthcare services. Certainly, the no-fault act is implicated, but only because Casanova is entitled to insurance coverage from plaintiff insurers with respect to payment for those healthcare services. But the no-fault act does not itself provide a right of action by a healthcare provider against its patient for payment for services rendered. That cause of action, to the extent it exists, instead lies in contract. See McGill v. Auto. Ass'n of Mich., 207 Mich.App. 402, 406, 526 N.W.2d 12 (1994) (“ ‘To the extent that plaintiff has any liability for these expenses [charged by the healthcare provider] in the event his insurance does not pay, it is presumably contractual’.”), quoting Nasser v. Auto Club Ins. Ass'n, 435 Mich. 33, 49, 457 N.W.2d 637 (1990).5
Indeed, no party to this case maintains otherwise. That is, plaintiffs do not dispute defendants’ general contention that their claim against Casanova lies in contract. Indeed, for the reasons noted, it must. I therefore conclude that to the extent the trial court held that defendants’ claim against Casanova was not contract-based, it erred.6
The real dispute in this case is the extent, if any, to which the limitations of the no-fault act apply to defendants’ claim against Casanova notwithstanding the contractual nature of that claim. Defendants describe their contractual right as “unfettered.” And they cite Covenant as “expressly reaffirm[ing] the legal right of medical providers to seek payment of unpaid medical bills directly from their patients.” Yet they seem to acknowledge that the contractual right is fettered in at least one respect: defendants acknowledge that they remain subject to the reasonable-charge limitation of MCL 500.3157.7 Indeed, in holding that healthcare providers have no statutory right of action against no-fault insurers, Covenant couched its corollary acknowledgment (that a provider may still have a claim against its patient) in terms of that limitation. Covenant, 500 Mich. at 217, 895 N.W.2d 490 (“This conclusion [that a healthcare provider does not possess a statutory cause of action against a no-fault insurer] does not mean that a healthcare provider is without recourse; a provider that furnishes healthcare services to a person for injuries sustained in a motor vehicle accident may seek payment from the injured person for the provider's reasonable charges.”) (emphasis added); see also Nasser, 435 Mich. at 56 n. 10, 457 N.W.2d 637 (“It seems unlikely that plaintiff would have an express agreement with [his doctor] or the hospital to pay unreasonable and unnecessary medical expenses, and equally as unlikely that he would have an implied contractual duty to do so.”) (emphasis added).
Of course, defendants did not bring suit against Casanova seeking a determination of the reasonableness of their charges. Under AOPP, healthcare providers “may challenge [an insurer's] failure to fully reimburse them for medical bills as a violation of the act, but they have the burden of establishing the reasonableness of the charges in order to impose liability on the insurer.” AOPP, 257 Mich.App. at 380, 670 N.W.2d 569. Covenant clarified that any such suit must be against the injured person, rather than the insurer. Covenant, 500 Mich. at 217, 895 N.W.2d 490. And in that event, the insurer is obligated to “defend and indemnify the insured ․” AOPP, 257 Mich.App. at 380, 670 N.W.2d 569. See also LaMothe v. Auto Club Ins. Ass'n, 214 Mich.App. 577, 583-584, 543 N.W.2d 42 (1995), overruled on other grounds by Covenant.
What defendants did instead was to accept plaintiff insurers’ August 5, 2014 partial payment of $1,076.14 8 and to then almost immediately begin sending Casanova a series of invoices, rejecting or ignoring plaintiff insurers’ entreaties for defendants to cease doing so and seeking payment of the full amount of the balance bill (for the additional amount of $782.86) without a judicial determination of the reasonableness of defendants’ charges.9 By doing so, they effectively tried to circumvent the limitations of MCL 500.3157, denied plaintiff insurers the opportunity to fulfill their legal obligation to defend and indemnify Casanova with respect to the balance bill, and did so while failing even to apprise Casanova of defendants’ burden of proving reasonableness or Casanova's right to be defended and indemnified by plaintiff insurers. For the reasons that follow, it is unnecessary for us to determine the propriety of that course of conduct, but to me, it seems highly questionable on its face.
The reason that we need not decide that question in this case is that defendants’ own course of conduct—forgoing a judicial determination of reasonableness in favor of sending invoices to Casanova on at least nine separate occasions between August 13, 2014, and August 10, 2016 10 —caused the claim to become untimely and the balance bill therefore to become uncollectable. Indeed, this points us to the real crux of the dispute in this case, i.e., whether the no-fault act's one-year-back rule, MCL 500.3145, applies. I conclude that it does.
MCL 500.3145(1) provides:
An action for recovery of personal protection insurance benefits payable under this chapter for accidental bodily injury may not be commenced later than 1 year after the date of the accident causing the injury unless written notice of injury as provided herein has been given to the insurer within 1 year after the accident or unless the insurer has previously made a payment of personal protection insurance benefits for the injury. If the notice has been given or a payment has been made, the action may be commenced at any time within 1 year after the most recent allowable expense, work loss or survivor's loss has been incurred. However, the claimant may not recover benefits for any portion of the loss incurred more than 1 year before the date on which the action was commenced. [Emphasis added.]
Defendants maintain that because their claim against Casanova is contractual and not brought under the no-fault act itself, the balance-bill charges that defendants seek to collect are not “benefits payable under this chapter.” Id. I disagree. Initially, I find it impossible to reconcile defendants’ contention with their own conduct and acknowledgments. That is, defendants acknowledge that Casanova was injured in a motor vehicle accident and that plaintiff insurers were obligated under the no-fault act to provide personal protection insurance benefits with respect to Casanova's receipt of medical treatment for those injuries. Defendants further acknowledge that their charges for the medical treatment are subject to the reasonable-charge limitation of MCL 500.3157 and that plaintiff insurers paid defendants the amount that the insurers determined to be a reasonable charge. Consequently, defendants’ position at bottom is that the paid portion of the charges ($1,076.14) constitutes “benefits payable under this chapter,” MCL 500.3145(1), but that the unpaid portion of the charges ($782.86) does not. While clever, that argument strikes me as too cute by half. If accepted, it would enable defendants, while facially acknowledging that they are limited under the no-fault act to reasonable charges, to accept payment for a portion of the charges (i.e., the portion the insurers deemed to be reasonable), evade a judicial determination regarding whether the balance of the charges is reasonable (which, if found by a fact-finder to be reasonable, the insurer would remain obligated to pay), and yet insist that the patient pay the full balance as not subject to the reasonable-charge limitation of MCL 500.3157. The more one parses the contorted and circular logic of that proposition, the more obvious its ludicrousness appears. Simply put, the fact that healthcare providers do not possess a direct statutory cause of action against no-fault insurers, Covenant, 500 Mich. at 217, 895 N.W.2d 490, does not mean that the balance bills they direct to their patients are for something other than “benefits payable under” the no-fault act. Those bills remain subject to the reasonable-charge limitation of the no-fault act, the insurers remain liable to the extent the charges are determined to be reasonable, and the amounts sought to be collected therefore constitute “benefits payable under” the no-fault act.11
Defendants further maintain in this regard that a healthcare provider's balance-bill claim is a “stand-alone contract action between the provider and its patient.” Consequently, defendants argue, such a claim is subject to a six-year period of limitations. However, a person injured in a motor vehicle accident remains subject to the one-year-back rule of the no-fault act. Defendants effectively posit, therefore, that they are entitled to wait up to six years before bringing a balance-bill suit against Casanova—and that they therefore may wait up to six years before seeking a judicial determination of what constitutes a reasonable charge—even though, under the public policy set forth in the no-fault act, Casanova would by then have long ago been foreclosed from seeking coverage from his insurers for the services provided by defendants. Further, because the scope of an insurer's duty to defend is at least in part dependent on policy language, see Radenbaugh v. Farm Bureau Gen. Ins. Co. of Mich., 240 Mich.App. 134, 138, 610 N.W.2d 272 (2000), it is at least possible that Casanova would at that juncture be precluded even from demanding that plaintiffs fulfill their obligation to defend him with respect to defendants’ balance-bill claim.12
The public policy enacted by the Legislature in the form of the no-fault act affords to persons injured in a motor vehicle accident a right to personal protection insurance benefits and a right to have their insurer defend and indemnify them with respect to a claim for such benefits, subject to the limitations of the one-year-back rule. It would be anomalous indeed to allow a healthcare provider to divest an injured person of such rights, and thereby to subvert the public policy of this state, by failing to act in a manner that would allow the injured person to assert his or her rights in a timely fashion, all under the guise of a characterization of the provider's cause of action against the injured person as a “stand-alone contract action.” I conclude that a healthcare provider's cause of action in such a circumstance cannot properly be characterized as a “stand-alone contract action.” To the contrary, it is a contract-based claim that remains subject to public policy as expressed in the no-fault act. In other words, it is based on a contract, albeit in this case an implied one, that necessarily is subject to the public-policy limitations of the no-fault act, including the one-year-back rule of MCL 500.3145.
I find it unnecessary to definitively address the mechanism by which the contract in this case is subject to the public-policy limitations of the no-fault act because the result is the same in any event, i.e., defendants are precluded from collecting on their balance bill to Casanova under the circumstances of this case. In other words, it matters not for purposes of this case whether, for example, the contract in question should be reformed in accordance with the public policy of the no-fault act, see Corwin v. DaimlerChrysler Ins. Co., 296 Mich.App. 242, 257, 263, 819 N.W.2d 68 (2012) (noting the ability of a court to reform an insurance policy to be “compatible with the existing public policy as reflected in the no-fault act”) (quotation marks and citation omitted), or whether the contract should be deemed, in whole or in part, unenforceable, see Restatement of Contracts, 2d, § 178(1), p. 6 (“A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.”); 17A CJS Contracts, § 278, p. 136 (“Contracts that violate public policy are unenforceable ․.”); 17A Am. Jur. 2d, § 231, pp. 239-240 (“[P]arties may not privately contract to contravene a state's public policy or to circumvent or disregard a statutory prohibition based on public policy.”) (citations omitted); 17A CJS Contracts, § 271, pp. 130-131 (“A court will not enforce a contract if it contravenes a statute. ․ A contract that is contrary to the terms and policy of an express legislative enactment is illegal and unenforceable. A contract provision is unenforceable if it fails to comply with existing, governing statutory requirements by attempting to provide fewer rights than legally mandated by statute, as one cannot do indirectly that which the law does not allow to be done directly.”) (citations and paragraph structure omitted).
It is indisputable that the no-fault act, as a statutory scheme enacted by our Legislature, reflects the public policy of this state. See Rory v. Continental Ins. Co., 473 Mich. 457, 471, 703 N.W.2d 23 (2005) (“In ascertaining the parameters of our public policy, we must look to ‘policies that, in fact, have been adopted by the public through our various legal processes, and are reflected in our state and federal constitutions, our statutes, and the common law.’ ”) (citation omitted).13 Consequently, a contract (including a contract for the provision of healthcare services) may not contravene the public policy of this state as expressed in the no-fault act. If, or to the extent that, defendants’ enforcement of their implied contract with Casanova would do so, the law will not permit it. For the reasons stated, I conclude that defendants’ efforts to collect their balance bill from Casanova in a way that would circumvent the reasonable-charge limitation of MCL 500.3157—and in a way that would preclude Casanova from proceeding in a timely manner under MCL 500.3145 to invoke his insurers’ duty to defend and indemnify him with respect to the balance bill—is not permitted under the public policy of the no-fault act. Defendants’ claim against Casanova therefore fails.
Defendants additionally maintain that MCL 500.3145 does not apply because it only limits a “claimant” from recovering benefits for losses incurred more than one year before the commencement of the action, and the Supreme Court in Covenant, 500 Mich. at 217-218, declared that healthcare providers are not “claimants” under the no-fault act. However, Covenant merely held that healthcare providers do not have a statutory right to directly sue a no-fault insurer. In other words, providers lack standing to bring suit against an insurer under the no-fault act. The Court did not, however, assess whether a healthcare provider's balance-bill claim against its patient is subject to the limitations of the one-year-back rule. In my judgment, it is improper to lift the Supreme Court's language out of the context in which it was used, see Id. at 217 n. 39, 895 N.W.2d 490, and employ it as a weapon against the public policy clearly expressed by the Legislature. Instead, for the reasons stated, I conclude that the contract on which defendants base their claim against Casanova is subject to public policy as expressed in the no-fault act, including the limitations periods set forth in MCL 500.3157 and MCL 500.3145.
Effectively, this means that while defendants’ claim against Casanova is based in contract, it is not subject to the usual six-year statutory period of limitations generally applicable to contract actions. Rather, MCL 500.3145 effectively superimposes on the contract (whether by reformation or by a limited-in-time enforceability) a shortened period of limitations as described in that section. Specifically, defendants were obliged to commence the action to recover the balance-bill amount within “1 year after the date of the accident,”14 with certain exceptions. MCL 500.3145(1). Because plaintiff insurers made a partial payment on August 5, 2014, the time for filing suit was extended to “1 year after the most recent allowable expense, work loss or survivor's loss has been incurred.” Id. The only allowable expenses were incurred on July 4, 2014. Consequently, MCL 500.3145 required that suit be filed by July 4, 2015. See Douglas v. Allstate Ins. Co., 492 Mich. 241, 258-259, 821 N.W.2d 472 (2012).
In this case, however, defendants never commenced an action against Casanova to recover the balance-bill amount. Defendants’ claim against Casanova is therefore time-barred. Moreover, MCL 500.3145(1) precludes claims “for any portion of the loss incurred more than 1 year before the date on which the action was commenced,” MCL 500.3145(1), which in this case is the entirety of the balance bill.
For all these reasons, I conclude that although the trial court incorrectly determined that defendants’ claim against Casanova was not based in contract, it reached the correct result, as does the majority. I therefore concur in the majority's determination to affirm the ruling of the trial court granting summary disposition in favor of plaintiffs.15 I also concur in the majority's determination to reverse the trial court's award of reasonable attorney fees and costs to plaintiff insurers under MCL 445.257(2).
1. Compass Healthcare, PLC (Compass Health), and Lansing Neurosurgery (collectively, defendants).
2. Auto-Owners Insurance Company (Auto-Owners), Home-Owners Insurance Company (Home-Owners), and Caleb Casanova.
3. Lansing Neurosurgery is a division of Compass Health.
4. The phrase “balance billing” refers to a “healthcare provider's practice of requiring a patient or other responsible party to pay any charges remaining after insurance and other payments and allowances have been applied to the total amount due for the provider's services.” Black's Law Dictionary (10th ed.).
1. Generally, a balance bill is an invoice from a healthcare provider to its patient after the provider's receipt of a partial payment from an insurer, requesting payment for the difference between the original charge and the amount of the partial payment received, i.e., the “balance.” See Black's Law Dictionary (10th ed.) (defining “balance billing”).
2. By its terms, MCL 500.3107(1) limits an insurer's liability to that of paying for “reasonable” charges. Consistently with that limitation, MCL 500.3157 provides that “[a] physician, hospital, clinic or other person or institution lawfully rendering treatment to an injured person for an accidental bodily injury covered by personal protection insurance ․ may charge a reasonable amount for the products, services and accommodations rendered.” However, “[t]he charge shall not exceed the amount the person or institution customarily charges for like products, services and accommodations in cases not involving insurance.” Id. When contested, the question of what constitutes a “reasonable” charge is generally one for the fact-finder. AOPP, 257 Mich.App. at 380, 670 N.W.2d 569. See also Bronson Methodist Hosp. v. Auto-Owners Ins. Co., 295 Mich.App. 431, 448, 814 N.W.2d 670 (2012).
3. Plaintiff insurers have already made payment to defendants for what the insurers determined to be reasonable charges for defendants’ medical services to Casanova. Defendants did not bring suit against Casanova for payment of the balance bill but did send him a series of invoices requesting payment, even in the face of plaintiff insurers’ demands that they cease doing so.
4. The caveat to this conclusion, however, is that “the amount chargeable to the patient [under MCL 500.3157] ․ is limited, by statute, to a reasonable amount.” AOPP, 257 Mich.App. at 374, 670 N.W.2d 569. See also Covenant, 500 Mich. at 217, 895 N.W.2d 490 (“[A] provider that furnishes healthcare services to a person for injuries sustained in a motor vehicle accident may seek payment from the injured person for the provider's reasonable charges.”).
5. Of course, nothing about this conclusion would, in a different context, support an argument that a claim of medical malpractice should instead be characterized as one for breach of contract. See, e.g., Grewe v. Mount Clemens Gen. Hosp., 47 Mich.App. 111, 113-114, 209 N.W.2d 309 (1973), citing Miller v. Toles, 183 Mich. 252, 150 N.W. 118 (1914); Awkerman v. Tri-County Orthopedic Group, PC, 143 Mich.App. 722, 725-726, 373 N.W.2d 204 (1985).
6. Similarly, to the extent that the majority holds that defendants’ claim against Casanova arose under the no-fault act, rather than as a matter of contract, I disagree. For reasons I will note, however, the majority and I ultimately end up in the same place.
7. Although this acknowledgement was equivocal in defendants’ briefing on appeal, it was express and unequivocal at oral argument.
8. In certain circumstances, healthcare providers are required to accept, as payment in full, the amount paid by the insurer, and they therefore may not “balance bill” the patient. See, e.g., MCL 400.111b(14) (“Except for copayment authorized by the department and in conformance with applicable state and federal law, a provider shall accept payment from the state as payment in full by the medically indigent individual for services received.”); 42 CFR 447.15 (“A State plan must provide that the Medicaid agency must limit participation in the Medicaid program to providers who accept, as payment in full, the amounts paid by the agency plus any deductible, coinsurance or copayment required by the plan to be paid by the individual.”). Similar limitations frequently arise contractually.
9. If by sending those invoices defendants had been able to successfully induce Casanova to make full payment short of litigation, then defendants would have successfully avoided a judicial determination of reasonableness in favor of their own effectively unilateral determination that their full charge constituted a reasonable charge.
10. Defendants also sent an invoice to Casanova on a tenth occasion on December 14, 2016, after plaintiffs commenced this declaratory-judgment action.
11. I also reject defendants’ argument that the balance bills are not for “benefits payable under” the no-fault act because they are seeking payment for services rendered to Casanova rather than seeking benefits payable by Casanova. The fact remains that the insurers remain liable for those charges to the extent they are judicially determined to be reasonable and, therefore, they are “benefits payable under” the act even though payable by the insurers rather than Casanova.
12. Although not an issue in this case, if Casanova's claim for no-fault benefits had been assigned to an insurer through the Michigan Assigned Claims Plan, he would have had to commence “[a]n action to enforce rights to indemnity or reimbursement against a third party” within “the later of 2 years after the assignment of the claim to the insurer or 1 year after the date of the last payment to the claimant.” MCL 500.3175(3).
13. I do not invoke public policy lightly, and I do so with full appreciation that “public policy ‘is not merely the equivalent of the personal preferences of a majority of this Court; rather, such a policy must ultimately be clearly rooted in the law.’ ” Rory, 473 Mich. at 471, 703 N.W.2d 23, citing Terrien v. Zwit, 467 Mich. 56, 67, 648 N.W.2d 602 (2002). The Court in Terrien further stated:In defining “public policy,” it is clear to us that this term must be more than a different nomenclature for describing the personal preferences of individual judges, for the proper exercise of the judicial power is to determine from objective legal sources what public policy is, and not to simply assert what such policy ought to be on the basis of the subjective views of individual judges. This is grounded in Chief Justice Marshall's famous injunction to the bench in Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177, 2 L.Ed. 60 (1803), that the duty of the judiciary is to assert what the law “is,” not what it “ought” to be. [Terrien, 467 Mich. at 66, 648 N.W.2d 602.]Rather, “[i]n identifying the boundaries of public policy, ․ the focus of the judiciary must ultimately be upon the policies that, in fact, have been adopted by the public through our various legal processes, and are reflected in our state and federal constitutions, our statutes, and the common law.” Id. at 66–67, 648 N.W.2d 602. Indisputably, the no-fault act represents public policy that is deeply rooted in the statutory law of this state.
14. The accident occurred on July 3, 2014.
15. Contrary to defendants’ assertions, this result does not leave healthcare providers generally without a remedy. Nor does it require that they accept insurers’ unilateral determination of what constitutes a reasonable charge. To the contrary, providers need only (among other possible remedies) bring suit against their patients within the period of limitations afforded by MCL 500.3145, see Douglas, 492 Mich. at 258-259, 821 N.W.2d 472, and seek a judicial determination of what constitutes a reasonable charge.
Jansen and Gadola, JJ., concurred.
Response sent, thank you
Docket No: No. 339799
Decided: December 18, 2018
Court: Court of Appeals of Michigan.
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