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Case Bulletin – Pennsylvania Supreme Court holds that to determine reimbursement due to providers of medical products or services, insurers may use methods not specified in the MVFRL or regulations to calculate the “usual and customary” charge for medical products

On February 16, 2016 the Pennsylvania Supreme Court ruled that insurance providers may use methods not specifically identified in the MVFRL or regulations to calculate the “usual and customary” charge for medical products, to determine reimbursement due. Freedom Med. Supply, Inc. v. State Farm Fire and Cas. Co., 8-EAP-2015, slip op. at p. 14 (Pa. 2016). Plaintiffs were a group of medical providers who supplied Electronic Muscle Stimulators and portable Whirlpools to automobile accident victims, and then sought reimbursement from State Farm. While the Plaintiffs only paid $20-30 and $40 for each of these products respectively, they charged the insurance company $1,600 and $525 respectively. In response, State Farm conducted an independent review of the price for these products, which included contacting providers for like products in the geographic vicinity and calculating an average price. This review yielded that these products had an average cost of $151 and $97, respectively.


Pursuant to Section 1797(a) of the MVFRL, where there is no federally determined Medicare fee for a product, a provider of medical products to automobile accident victims is entitled to reimbursement from automobile insurers in the amount of “80% of the provider’s usual and customary charge.” 75 Pa.C.S. § 1797(a) (emphasis added). The Pennsylvania Code provides that “in calculating the usual and customary charge, an insurer may utilize the requested payment amount on the provider’s bill for services or the data collected by the carrier or intermediaries to the extent that the data is made available.” 31 Pa. Code § 69.43(c) (emphasis added). Plaintiffs asserted that State Farm’s independent review was an improper measurement. The Supreme Court considered whether the two methods suggested by the Pennsylvania Code were permitted or required in the context of the MVFRL.


The court held that the language of the regulation – specifically the use of the term “may” rather than “shall” – supported the insurer’s argument that the methods suggested were not mandatory. The court noted that to rule otherwise “would permit providers of medical goods and services . . .  to set their prices and seek reimbursement for essentially any amount they choose to bill.” Freedom, slip op. at p. 12.  Thus, the court held that insurers are permitted to use methods not specifically identified in the MVFRL to calculate the “usual and customary” charge for these medical devices.


One final interesting note about this decision is that the Court heard argument in this case on September 9, 2015, then ordered it “resubmitted” on January, 20, 2016, after three new justices who won election in November 2015 were sworn in. This same procedure may occur with other cases left undecided in 2015, or the court may order that these cases be listed again for argument.