PIP Benefits Still Payable despite Illegally Formed LLC: Michigan Court of Appeals Holds that Carriers Lack Standing to Challenge Illegality.

PIP Benefits Still Payable despite Illegally Formed LLC: Michigan Court of Appeals Holds that Carriers Lack Standing to Challenge Illegality.

06/27/2022

The cases of Grady v Wambach and Skwierc v Whisnant both tackle the issues of claims for allowable expenses under MCL 500.3107(b) when the treatment was provided in violation of Michigan Law. Many insurers base denials on MCL 500.3157, which requires that treatment be lawfully rendered in order to be payable. MCL 450.4904 requires that all members of a PLLC be licensed under the same profession as the corporation while MCL 500.3107b states that services provided by a chiropractor are not considered compensable unless the services fall under the statutory definition of the practice of chiropractic medicine.

Background in Grady v Wambach

Grady arose out of treatment provided by Mercyland Health services, which is owned by Dr. Mohammed Abraham. Abraham was not licensed to practice medicine in Michigan while treatment was provided to Grady. Meemic, Grady’s no-fault insurer, denied payment of benefits on the basis the Mercyland was not properly formed under MCL 450.4904, which requires that all members of a PLLC be licensed under the same profession as the corporation. Meemic filed a summary disposition motion, stating that benefits were not lawfully provided payable under MCL 500.3157. Mercyland argued that Meemic did not have standing to challenge whether Mercyland was properly incorporated and Meemic was only able to challenge whether the treatment was legally rendered by licensed private physicians, which it was. The Trial Court dismissed the case.

Law and argument in Grady

The Court of Appeals reversed, finding that Meemic did not have standing to challenge Mercyland’s corporate status. The court relied on the Supreme Court decision in Miller v. Allstate Ins. Co. 481 Mich. 601 (2008), which states that the legislature cannot expand persons who possess standing but may limit those who may challenge a statutory violation. The Supreme Court in Miller also analyzed whether insurance companies have standing to challenge incorporations under the Business Corporations Act. The Miller court relied on a provision in the Business Corporations Act which states that “the corporate existence shall begin on the effective date of the articles in corporation filing as conclusive evidence that the corporation has been formed under the Business Corporations Act except in an action or special proceeding by the Attorney General.” The Court held that this language limited all challenges to incorporation to the Attorney General alone.

Background in Skwierc v Whisnant

Skwierc arose out of a 2018 accident which resulted in chiropractic treatment completed by Michigan Head and Spine Institute. Michigan Head and Spine Institute then referred Skwierc for MRI imaging of his lumbar spine. Michigan Head and Spine argued that it was entitled to reimbursement for allowable expenses because the statute that defined chiropractic care included the ability for chiropractors to use diagnostic tools, which included MRIs. At the trial level, the court ruled that Michigan Head and Spine’s chiropractor unlawfully engaged in the unauthorized practice of medicine when prescribing the MRI.

Law and Analysis in Skwierc v Whisnant

The Court of Appeals based much of its analysis on Hofmann v Auto Club Ins Ass’n[1], which held that since the scope of chiropractic care has been determined by legislators rather than medical professionals, the scope is subject to judicial interpretation. 3107b states that a practice of chiropractic service rendered before July 2, 2021 is not reimbursable unless that service was included in the definition of practice of chiropractic under section 16401 of the health code.

The court relied on the Measel[2] framework, which requires the court to consider whether the services were lawfully rendered and reasonable and necessary, whether there’s PIP coverage under 3107, and whether each service was a chiropractic service. The court in Measel found that if the service falls under the current definition of practice of chiropractic provided under MCL 333.16401, it falls within the scope and is payable.

The court criticized the analysis by the trial court since it skipped the Measel framework and went straight to the question of whether an MRI was within the scope of chiropractic care. The court also stated that the trial court erred by concluding that the MRI was unlawful by analyzing the statute as written on January 1, 2009. The court relied on its previous holding in Hoffman where it stated that just because an activity is not lawfully rendered as chiropractic care that does not mean that it is not subject to no-fault payments.[3] The court noted that the purpose of the statute was to not prohibit those acts outside of the statute but to prohibit the acts within the statute without a license.

Further, the Court found that within the scope of a chiropractic care is to perform spinal analysis. The Court found that an MRI is a diagnostic tool that chiropractors may use to complete a spinal analysis. The statute that defined chiropractic care allows chiropractors to use analytical instruments, which are instruments that monitor the bodies physiology for the purpose of determining subluxated or misaligned vertebrae or related bones and tissues. The court determined that an MRI is defined as scanning technology that permits imaging of the muscles nerves and connective tissue distinct from x-rays or CT scans. The court found that the two align within the meaning of chiropractic care.  The Court also opined that the statue does not have to explicitly state whether MRIs were included in those instruments for them to be within the scope of chiropractic care.

Key Takeaways from Grady and Skwierc

Grady and Skwierc rulings provide further guidance related to issues of whether treatment is lawfully provided under MCL 500.3157. The Court in Grady found that insurance companies do not have standing to challenge the corporate status of a medical provider, instead placing the focus on the licensure of the individuals providing treatment.  The Court in Skwierc took an expansive view of the statutes related to the scope of chiropractic care to find that MRI studies were within the scope of chiropractic care.  Carriers cannot challenge the corporate status of a provider, and should expect that challenges based on scope of practice to be subject to a broad interpretation of the applicable statutes.

 

[1] 211 Mich App 55, 67; 535 NW2d 529 (1995).

[2] Measel v. Auto Club Group Ins Co 314 Mich App 320.

[3] Hoffman v Auto Club Ins Ass’n 211 Mich App 55, 67 (1995).


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