238 A.3d 850
Del.2020Background
- Spine Care Delaware, LLC (SCD), an ambulatory surgery center, bills per injection for bilateral and multilevel spinal procedures though several tasks in a session are performed once; SCD is not in-network with State Farm.
- State Farm (insurer) applies Medicare-based Multiple Payment Reductions (MPRs): 100% for the first injection, 50% for subsequent injections, thereby paying less than SCD’s billed amounts in many instances.
- SCD filed a declaratory-judgment action under 21 Del. C. § 2118(a)(2), seeking a declaration that State Farm must pay any reasonable amount charged for covered PIP-related medical expenses and that applying Medicare MPRs violates the statute.
- The Superior Court granted summary judgment to SCD, concluding State Farm failed to show its MPRs correlate to reasonable charges and declaring the MPR practice unlawful under § 2118(a)(2).
- On appeal the Delaware Supreme Court reversed and remanded: it held the Superior Court erred by placing the burden of proof on State Farm; the plaintiff (SCD) must prove its charges are reasonable before MPRs cannot be applied.
- The Supreme Court instructed the trial court on remand to reassess reasonableness with a flexible approach (giving particular weight to the comparison with similarly situated providers) and to consider but distinguish evidence of Medicare or contracted-insurer payments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper allocation of burden of proof in PIP declaratory action | SCD: case was framed by stipulation as a challenge to State Farm’s reductions; Superior Court correctly required State Farm to justify MPRs | State Farm: plaintiff bears burden to prove claimed expenses are "reasonable and necessary"; court erred by shifting burden to insurer | Reversed trial court — burden rests with plaintiff (SCD) to show its charges are reasonable; insurer need not justify MPRs unless plaintiff meets burden |
| Whether applying Medicare MPRs per se violates § 2118(a)(2) | SCD: MPRs reduce insureds’ compensation below the statute’s requirement for reasonable medical expenses; practice unlawful | State Farm: statute requires payment of reasonable amounts; so long as insurer’s payment is reasonable, applying MPRs is permissible | Not decided as a categorical ruling on MPRs; court remanded for fact-specific determination after plaintiff proves reasonableness of billed fees |
| Standard for assessing reasonableness of provider fees | SCD: primary indicium is charges of similarly situated providers — SCD’s rates comparable to local competitors | State Farm: reasonableness can be shown by insurer’s methodology and industry practices; comparative evidence of other payors relevant | On remand court should apply a flexible reasonableness inquiry; comparison to similarly situated providers is the most relevant factor in this broader dispute over a billing methodology |
| Relevance of other payors’ payments (Medicare/contracted insurers) | SCD: most other PIP insurers pay SCD’s full fees; contracted payors’ rates reflect market acceptance | State Farm: it pays more than some private insurers and follows Medicare practice; such payments support reasonableness of MPRs | Payments by contracted insurers or Medicare are distinguishable and carry limited weight because contracts and patient-volume considerations can explain discounts; trial court to weigh such evidence on remand |
Key Cases Cited
- Tackett v. State Farm Fire & Casualty Ins. Co., 653 A.2d 254 (Del. 1995) (discusses insurer bad-faith standard and that insured bears burden to prove bad faith or lack of reasonable justification)
- GMG Capital Inv., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776 (Del. 2012) (summary-judgment review is de novo)
- Haley v. Town of Dewey Beach, 672 A.2d 55 (Del. 1996) (appellee may defend judgment on alternative grounds without cross-appeal)
- Winshall v. Viacom Int’l, Inc., 76 A.3d 808 (Del. 2013) (appellee may rely on alternative grounds supported by the record)
- In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59 (Del. 1995) (same principle permitting appellee to defend on alternate grounds)
- Ramsey v. State Farm Mut. Ins. Co., 869 A.2d 327 (Del. 2005) (illustrates allocation of burden on plaintiff in PIP/coverage disputes)