MONMOUTH MEDICAL CENTER VS. STATE FARM INDEMNITY COMPANY SAINT BARNABAS MEDICAL CENTER VS. STATE FARM INDEMNITY COMPANY (L-2482-17 AND L-0126-18, MORRIS COUNTY AND STATEWIDE) (CONSOLIDATED)

• Court: New Jersey Superior Court Appellate Division
• Decided: August 12, 2019
• Docket: A-3004-17T1/A-4208-17T1
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NOS. A-3004-17T1 A-4208-17T1

MONMOUTH MEDICAL CENTER, a/s/o MICHAEL ANNUCCI, APPROVED FOR PUBLICATION Plaintiff-Respondent, August 12, 2019 v. APPELLATE DIVISION

STATE FARM INDEMNITY COMPANY,

Defendant-Appellant. _____________________________

SAINT BARNABAS MEDICAL CENTER, a/s/o PAUL HAM,

Plaintiff-Respondent,

v.

Submitted December 17, 2018 – Decided August 12, 2019

Before Judges Messano, Gooden Brown and Rose. On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket Nos. L-2482-17 and L-0126-18.

Gregory P. Helfrich & Associates, attorneys for appellant (Alison Leonard Schlein, on the briefs).

Celentano Stadtmauer & Walentowicz LLP, attorneys for respondent Monmouth Medical Center (Steven Stadtmauer and Megan Elizabeth Verbos, on the brief).

Celentano Stadtmauer & Walentowicz LLP, attorneys for respondent Saint Barnabas Medical Center (Kristen Ottomanelli, on the brief).

The opinion of the court was delivered by

GOODEN BROWN, J.A.D.

In these back-to-back appeals, which we consolidate for the purpose of

issuing a single opinion, defendant State Farm Indemnity Company (State

Farm) seeks our review of two Law Division orders that vacated decisions

rendered by a dispute resolution professional (DRP) pursuant to the

Alternative Procedure for Dispute Resolution Act (APDRA), N.J.S.A.

2A:23A-1 to -30. Because N.J.S.A. 2A:23A-18(b) bars any "further appeal or

review" of such trial court orders, we dismiss the appeals.

In A-3004-17, the record reveals that Michael Annucci was injured in an

automobile accident on June 21, 2013. As a result of the injuries sustained in

the accident, on April 30, 2015, Annucci received out-patient hospital services,

A-3004-17T1 2 including surgical and ancillary support services, from Monmouth Medical

Center (Monmouth). Following Annucci's discharge, Monmouth billed State

Farm, Annucci's no-fault insurance carrier, for its services in the total amount

of $21,403.80. On the bill, Monmouth separately itemized its charges, line-by-

line, in accordance with the Medicare Claims Processing Manual. 1 Thus,

Monmouth separately billed for the surgical services and the ancillary services,

consisting of anesthesia, recovery room services, supplies, and drugs provided

to Annucci.

State Farm approved payment in the amount of $5707.80, representing

Monmouth's line item charges for the surgical services only. In two separate

Explanation of Benefits (EOB) statements, State Farm explained that it

processed the bill in accordance with the New Jersey Hospital Outpatient

Surgical Facility (HOSF) fee schedule, the Consumer Health Network (CHN)

Preferred Provider Organization (PPO) contract, and the New Jersey medical

fee schedule. According to State Farm, the ancillary services that were

separately itemized on Monmouth's bill were integral to the surgical

1 Specifically, Chapter 25, Section 75 of the Medicare Claims Processing Manual required "[t]he provider [to] enter[] the appropriate revenue code[] . . . to identify specific accommodation and/or ancillary charges" and "to explain each charge."

A-3004-17T1 3 procedure, were bundled into the HOSF fee schedule facility rate, and were not

permitted to be reimbursed separately in an HOSF setting.

After Monmouth's internal appeal of the underpayment was rejected by

State Farm, Monmouth demanded arbitration pursuant to the APDRA. 2

Following a hearing, on August 14, 2017, the assigned DRP issued an award

denying Monmouth's claims. The DRP found that Monmouth was "not entitled

to any further . . . medical expense benefits" and State Farm properly excluded

the ancillary services billed separately by Monmouth. In the decision, relying

on the regulations promulgated by the Department of Banking and Insurance

(DOBI), the DRP initially acknowledged that it was "uncontroverted" that the

unpaid ancillary services were, in fact, included in the list of covered services

authorized in N.J.A.C. 11:3-29.5(a). Further, the DRP found "it noteworthy"

that "the aggregate of the charges invoiced by [Monmouth did] not exceed the

HOSF fee schedule rate assigned to the [applicable] primary procedure codes."

2 Pursuant to N.J.S.A. 39:6A-5.1(a), also known as the personal injury protection (PIP) statute, "disputes between an insurer and a claimant as to whether benefits are due under the PIP statute may be resolved, at the election of either party, by binding arbitration or by civil litigation." Kimba Med. Supply v. Allstate Ins. Co., 431 N.J. Super. 463, 482-83 (App. Div. 2013) (quoting Riverside Chiropractic Grp. v. Mercury Ins. Co., 404 N.J. Super. 228, 235 (App. Div. 2008)). The hospitals were the claimants' assignees.

A-3004-17T1 4 However, according to the DRP, under N.J.A.C. 11:3-29.5(b),3 the

HOSF fee encompassed all the covered services, including the ancillary

services, reimbursable for outpatient procedures "provided in [an] HOSF

setting." Because N.J.A.C. 11:3-29.5(b) "precluded" reimbursement for

separately billed "ancillary services provided in support of the primary surgical

procedures[,]" it "operate[d] as a regulatory preclusion" to any other billing

methodology. Acknowledging the "conflict . . . between the preclusionary

provisions" of N.J.A.C. 11:3-29.5(b) and "the Medicare billing requirements

cited by [Monmouth,]" the DRP explained that "DOBI [was] presumed to be

aware of such Medicare billing requirements" and "could have permitted the

invoicing of ancillary services in such instances." However, in the absence of

"an appropriate exemption . . . inserted into N.J.A.C. 11:3-29.5(b) to permit

3 N.J.A.C. 11:3-29.5(b) provides:

The [HOSF] fee is the maximum that can be reimbursed for outpatient procedures performed in a HOSF. The hospital outpatient facility fees in Appendix Exhibit 7 [of the Current Procedural Terminology (CPT) code] include services that would be covered if furnished in a hospital on an inpatient basis, including those set forth in (a)[(1) to (8) of N.J.A.C. 11:3-29.5].

N.J.A.C. 11:3-29.5(a)(1) to (8) include "[u]se of operating and recovery rooms," "[d]rugs," "supplies," "[a]nesthesia materials," and other ancillary services.

A-3004-17T1 5 the billing practices employed by [Monmouth]," the DRP concluded that "State

regulations [took] precedence over the Medicare regulations."

After Monmouth's application to the DRP for modification of the award

was denied, Monmouth filed a verified complaint and order to show cause

pursuant to N.J.S.A. 2A:23A-13(a) and Rule 4:67-1(a), seeking to vacate the

award on the ground that the DRP violated N.J.S.A. 2A:23A-13(c)(3) and

(c)(5). Specifically, in the complaint, Monmouth alleged the DRP

"commit[ed] prejudicial errors when he imperfectly executed his power and

erroneously applied law to the issues and facts presented." Monmouth sought

a modified award, entering judgment against State Farm for $12,535.02,

together with attorneys' fees and costs.

Following oral argument, on February 5, 2018, Judge David H. Ironson

issued an order, vacating the arbitration award and entering a modified award

in favor of Monmouth in the amount of $14,107.23. The judge then confirmed

the modified award in accordance with N.J.S.A. 2A:23A-13(f). In his written

statement of reasons, the judge explained that:

[Monmouth] was denied reimbursement for services that are permitted pursuant to N.J.A.C. 11:3-29.5(b). The [c]ourt finds that denying reimbursement for these services constituted prejudicial error by the DRP, via his erroneously applying the law to issues and facts presented for alternative resolution. [Monmouth] should not be penalized for its required method of billing, particularly when it would have been fully

A-3004-17T1 6 reimbursed for its costs had it "bundle billed." N.J.A.C. 11:3-29.5(b) does not explicitly require "bundle billing," and does not set forth how ancillary services must be billed. Accordingly, [Monmouth's] method of billing does not violate the [regulation]. Additionally, [Monmouth] is not seeking to be reimbursed for more than the maximum amount in the . . . HOSF [f]ee [s]chedule.

This appeal followed.

In A-4208-17, as a result of injuries sustained by Paul Ham in a January

18, 2015 automobile accident, on February 3, 2016, Ham received out-patient

hospital services, including surgical and ancillary support services, from Saint

Barnabas Medical Center (Saint Barnabas). Following Ham's discharge, Saint

Barnabas billed State Farm, Ham's no-fault insurance carrier, for its services.

In the bill, like Monmouth, Saint Barnabas itemized its charges for surgical

and ancillary support services, line by line, for a total amount of $31,426.10.

However, State Farm approved payments for only the surgical services,

totaling $8623.57, and issued two EOBs, explaining, as it did for Monmout h's

claims, that the fee schedule did not permit separate reimbursement for

ancillary service fees.

After Saint Barnabas' internal appeal of the underpayment was denied by

State Farm, Saint Barnabas demanded arbitration pursuant to the APDRA.

Following a hearing, on November 8, 2017, the assigned DRP issued an award,

denying Saint Barnabas' claims. In a written decision, the DRP rejected Saint

A-3004-17T1 7 Barnabas' reliance on the Medicare Claims Processing Manual to justify its

billing methodology, and determined that State Farm "correctly interpreted

N.J.A.C. 11:3-29.5(a)," which "precluded . . . separate reimbursement" for

ancillary services. After Saint Barnabas' application to the DRP for

modification of the award was denied, like Monmouth, Saint Barnabas file d a

verified complaint and order to show cause, seeking to vacate the award

pursuant to N.J.S.A. 2A:23-13(c)(3) and (c)(5). Saint Barnabas sought a

modified award, entering judgment against State Farm for $15,461.10, together

with attorneys' fees and costs.

On March 2, 2018, following oral argument, Judge Louis S. Sceusi

vacated the arbitration award. In an oral decision, the judge adopted Judge

Ironson's reasoning, and concluded that Saint Barnabas' "billing format" of

"itemiz[ing] ancillary services individually" was "not prohibited by statute or

regulation." As a result, Judge Sceusi determined "[t]here was . . . no basis for

the [DRP] to deny [Saint Barnabas'] application based upon the billing format

alone[,]" particularly when the total amount billed by Saint Barnabas was

"consistent with the maximums set forth in . . . the fee schedule." On March 6,

2018, Judge Sceusi entered a conforming order, modifying the award in favor

of Saint Barnabas in the total amount of $18,663.60, and confirming the

modified award in accordance with N.J.S.A. 2A:23A-13(f). Thereafter,

A-3004-17T1 8 finding that State Farm "raised no new issues," Judge Sceusi denied State

Farm's motion for reconsideration on April 16, 2018, and this appeal followed.

In both appeals, State Farm raises the following identical points for our

consideration:

POINT I

THE TRIAL JUDGE INCORRECTLY VACATED THE ARBITRATION AWARD BY FAILING TO APPLY THE CORRECT STANDARD OF REVIEW.

POINT II

THE TRIAL JUDGE ERRED IN MISINTERPRETING THE LAW THAT WAS THE BASIS FOR THE DRP'S RULING.

In response, both Monmouth and Saint Barnabas assert that "appellate

review is not warranted" because "[t]he trial court carried out its legislative

duty in reversing the DRP when he committed prejudicial error by erroneously

applying law to the issues and facts." "Moreover, State Farm has not alleged

any of those 'rare circumstances' grounded in public policy that might compel

this [c]ourt to grant limited appellate review." Accordingly, they urge us to

dismiss the appeals for lack of jurisdiction.

Whether we have jurisdiction to hear these appeals turns on the meaning

and scope of N.J.S.A. 2A:23A-18(b), which states:

Upon the granting of an order confirming, modifying[,] or correcting an award, a judgment or

A-3004-17T1 9 decree shall be entered by the court in conformity therewith and be enforced as any other judgment or decree. There shall be no further appeal or review of the judgment or decree.

With increasing frequency, we have been asked to examine the extent to

which we may intervene in these matters. In considering the scope of N.J.S.A.

2A:23A-18(b), our Supreme Court recognized in Mount Hope Development

Associates v. Mount Hope Waterpower Project L.P., 154 N.J. 141, 152 (1998),

that there are exceptions to N.J.S.A. 2A:23A-18(b). For example, the Court

held that the APDRA's general elimination of appellate jurisdiction does not

apply to child support orders. Ibid. The Court also recognized that there may

be other circumstances "where public policy would require appellate court

review" and observed that appellate review may occur when necessary for the

court to carry out its "supervisory function over the courts[.]" Ibid.

In Morel v. State Farm Insurance Company, 396 N.J. Super. 472, 476

(App. Div. 2007), we explained that this "supervisory function" permits our

exercise of jurisdiction when a trial court has exceeded its jurisdiction.

"Otherwise, the statute would be rendered meaningless." Ibid. In adhering to

Morel's approach as well as our deference to the Legislature's decree to

eliminate review beyond that exercised in the trial court, we have exercised

such review in only the most unusual circumstances. See, e.g., Open MRI &

Imaging of Rochelle Park v. Mercury Ins. Grp., 421 N.J. Super. 160, 166 (App.

A-3004-17T1 10 Div. 2011) (finding appellate review appropriate "when the relief sought in

arbitration (reformation) is beyond the power of the DRP to award"); Liberty

Mut. Ins. Co. v. Garden State Surgical Ctr., L.L.C., 413 N.J. Super. 513, 517

(App. Div. 2010) (finding the APDRA did not bar appellate review of "the

judge's denial of leave to file an amended complaint or of the judge's dismissal

of the action on timeliness grounds"); Morel, 396 N.J. Super. at 475 (invoking

our supervisory function where the trial court failed to rule on all of the

specific claims made by the plaintiff).

Indeed, in Fort Lee Surgery Center, Inc. v. Proformance Insurance

Company, 412 N.J. Super. 99, 104 (App. Div. 2010), we held that appeals to

this court must be dismissed even when we think the trial judge was mistaken

in finding the DRP committed error. There, we examined whether the trial

court exceeded its jurisdiction in its application of N.J.S.A. 2A:23A-13(c)(5),

permitting trial court intervention upon a finding that the DRP committed

prejudicial error in the application of the law to the facts, as occurred here. Id.

at 104. We held:

Certainly, not every instance in which a judge utters the phrase "prejudicial error" will preclude appellate review. The exercise of our supervisory function cannot be talismanically eliminated by the mere invocation of the words of the statute. But, when a trial judge is able to provide a rational explanation for how the arbitrator committed prejudicial error, N.J.S.A. 2A:23A-18(b) requires a dismissal of an

A-3004-17T1 11 appeal of that determination regardless of whether we may think the trial judge exercised that jurisdiction imperfectly. Any broader view of appellate jurisdiction would conflict with the Legislature's expressed desire in enacting [the] APDRA to eliminate appellate review in these matters.

[Ibid.]

We have said that "when the trial judge adheres to the statutory grounds

in reversing, modifying[,] or correcting an arbitration award, we have no

jurisdiction to tamper with the judge's decision or do anything other than

recognize that the judge has acted within his jurisdiction." N.J. Citizens

Underwriting Reciprocal Exch. v. Kieran Collins, D.C., L.L.C., 399 N.J.

Super. 40, 48 (App. Div. 2008). The provisions in N.J.S.A. 2A:23A-13

"define[] the scope of the trial judge's jurisdiction in such matters[,]" ibid., and

provide:

In considering an application for vacation, modification[,] or correction, a decision of the umpire on the facts shall be final if there is substantial evidence to support that decision; provided, however, that when the application to the court is to vacate the award pursuant to paragraph (1), (2), (3), or (4) of subsection [(c)], the court shall make an independent determination of any facts relevant thereto de novo, upon such record as may exist or as it may determine in a summary expedited proceeding . . . .

[N.J.S.A. 2A:23A-13(b).]

A-3004-17T1 12 Pertinent here, N.J.S.A. 2A:23A-13(c)(3) provides that "[t]he award

shall be vacated on the application of a party . . . if the court finds that the

rights of that party were prejudiced by" the umpires "exceeding their power" in

"making the award," or "so imperfectly executing that power that a final and

definite award was not made[.]" Therefore, when the claim is made that the

umpires "exceed[ed] their power or so imperfectly execut[ed] that power that a

final and definite award was not made," the judge must de novo consider the

factual record, and, if necessary, order a summary proceeding to supplement

the record.

N.J.S.A. 2A:23A-13(f) further provides:

Whenever it appears to the court to which application is made . . . either to vacate or modify the award because the umpire committed prejudicial error in applying applicable law to the issues and facts presented . . . [, N.J.S.A. 2A:23A-13(c)(5)], the court shall, after vacating or modifying the erroneous determination of the umpire, appropriately set forth the applicable law and arrive at an appropriate determination under the applicable facts determined by the umpire. The court shall then confirm the award as modified.

Thus, only if the judge concludes the umpire's application of the law to the

facts was "prejudicial[ly] erro[neous]" may the judge "vacat[e] or modify[] the

erroneous determination," and apply the "applicable law" to reach the proper

result. Ibid.

A-3004-17T1 13 Applying these principles, we are satisfied that the orders under review

fall within the parameters of N.J.S.A. 2A:23A-18(b). We dismiss the appeals

because both Judge Ironson and Judge Sceusi properly exercised the authority

granted to them under the APDRA, adhered to the statutory grounds in

vacating the DRPs' awards, and provided rational explanations of how the

respective DRPs committed prejudicial error within the meaning of N.J.S.A.

2A:23A-13(c)(5). Thus, "[b]ecause the judge[s] navigated within [the]

APDRA's parameters," Fort Lee Surgery Ctr., 412 N.J. Super. at 104, there is

no principled reason for the exercise of our supervisory jurisdiction, or any

unusual circumstances where public policy would require our intervention, and

we reject State Farm's contrary contentions. See Riverside Chiropractic Grp.,

404 N.J. Super. at 239-40 (noting that "the supervisory function of the

Appellate Division, as applied in Morel, [wa]s unnecessary" because the "trial

court in th[at] case did not commit any glaring errors that would frustrate the

Legislature's purpose in enacting the APDRA").

Appeals dismissed.

A-3004-17T1 14