United States District Court, D. Massachusetts
FINDINGS OF FACT AND CONCLUSIONS OF LAW
LEO T. SOROKIN, District Judge.
This dispute involves claims made by two companies that provide radiological services, Spinal Imaging, Inc. and Radiology Diagnostics, LLC, against two insurer-defendants, Aetna Health Management LLC and Aetna Life Insurance Company. A bench trial was held over the course of four days beginning on July 7, 2014. The following sets forth the Court's findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52 on each plaintiff's Chapter 93A claim.
I. PROCEDURAL HISTORY
This case involves two separate actions that were informally consolidated for discovery purposes and formally consolidated for trial. In the first action, plaintiff Spinal Imaging, Inc. ("Spinal") sued both defendants (collectively, "Aetna") in Massachusetts state court for breach of contract and violations of Chapter 93A of the Massachusetts General Laws. In the second action, plaintiff Radiology Diagnostics, LLC ("RD") sued Aetna also in Massachusetts state court, alleging breach of contract, violations of Chapter 93A, and negligence. Both cases eventually were removed to this Court.
Collectively, plaintiffs' claims arise out of approximately 12, 000 individual bills submitted to Aetna for payment between 2003 and 2012, each bill seeking payment for the interpretation of one or more x-rays of an individual patient. In the course of discovery, the Court determined that the several legal claims would be resolved on the basis of a selection of individual bills ("the exemplars"), with the resolution of the exemplars then applied to the remaining bills. See Doc. Nos. 84, 87, 192. In response to cross-motions for summary judgment, the Court entered judgment in Aetna's favor on both plaintiffs' breach of contract claims, RD's negligence claim, and, regarding both plaintiffs' Chapter 93A claims, all but eleven of the exemplar bills. Doc. Nos. 153, 156, 163. The bench trial focused on the remainder of the Chapter 93A claims.
II. FINDINGS OF FACT
Spinal's Business Model
1. Spinal is a Maine corporation founded by Bruce Abelson, D.C. to provide radiological services for chiropractors. At all relevant times, Dr. Abelson has owned all of Spinal's stock.
2. Dr. Abelson believes his training, obtained in chiropractic school, to read x-rays and other radiological images was only "rudimentary." Thus, he conceived of the idea to form a business staffed by a chiropractic radiologist-a chiropractor who had completed an additional three-year radiological residency and obtained board certification-who would read and interpret x-rays taken by chiropractors. Spinal resulted; it was formed in 1991.
3. Spinal advertised itself as performing "second opinions" for chiropractors, explaining that these "second opinions" would provide better interpretations of x-rays, more patient referrals for the referring providers, and better protection from possible malpractice liability. Ex. 109 at 542; Ex. 111 at 204-05. It also touted its services as "no cost" to the chiropractor because Spinal would bill the insurance company directly. Ex. 109 at 536; Ex. 111 at 204. Spinal encouraged referring chiropractors to send every x-ray they took to Spinal for interpretation and analysis. Ex. 109 at 536-37; Ex. 111 at 205. Spinal also explained to the referring chiropractors that Spinal's written report could be submitted to insurance carriers "in place of, or in addition to their own reports." Ex. 111 at 208.
4. When a chiropractor referred the x-rays of a patient to Spinal, the chiropractor completed a one-page referral form created by Spinal which sought basic information regarding the patient, the patient's health insurance information, and any pertinent medical information. The chiropractor also obtained the patient's signature on a one-page consent/assignment form on the reverse side of the referral form, which authorized Spinal to bill the patient's insurance company and explained that the patient's x-rays were being submitted to Spinal "for second opinion radiological evaluation and analysis by a specialist." See, e.g., Ex. 1. Finally, the chiropractor mailed, usually via FedEx and always at Spinal's expense, the two-sided form and films to Spinal.
5. When Spinal received the package, it created its own internal documents regarding the referral. Spinal never verified that the patient possessed insurance, that the patient's insurance covered chiropractic x-rays, that any required referrals or precertifications had issued, or that the applicable insurance, if any, would otherwise cover the services Spinal intended to render.
6. After Spinal's staff opened an internal file, Spinal's chiropractic radiologist examined the films and prepared a written radiological report of his findings. Spinal would also "digitize" the x-ray-a process in which measurements and angles of the spine are taken and compared to a "normal" spine. After digitization, a visual, comparative report of the patient's spine was created to accompany the written radiological report. Spinal then mailed the films and reports back to the referring chiropractor and billed the patient's insurance company.
7. If the insurance company did not pay Spinal, Spinal's administrative staff followed up with the insurance company by phone or fax, supplying additional information or refiling paperwork.
8. Spinal's staff never filed any written appeals of any payment denials by Aetna. Spinal's staff never reviewed the terms of, or any provisions of, any insurance policy issued by Aetna. Spinal's staff never reviewed any of Aetna's claim processing policies available on Aetna's publicly accessible websites.
Insurance Companies' Treatment of Spinal's Claims
9. From Spinal's inception in 1991 until approximately 2002, the business prospered. By 2002, Spinal employed twenty-two people. In 2002 or 2003, however, a number of insurance companies, including Aetna, began questioning Spinal's bills and/or denying its claims for reimbursement. The basis for these denials and the insurance companies' specific concerns are not before the Court. The substance of the insurance companies' complaints, in whole or in part, was that they were paying Spinal to interpret an x-ray after having paid the referring chiropractor to interpret the same x-ray. Specifically, at some point in 2003, Blue Cross complained that Spinal could not bill for interpreting an x-ray when the referring chiropractor also billed Blue Cross for interpreting that same x-ray. Ex. 138 at 789.
10. During the time period relevant to these actions, the health insurance company with whom Spinal filed the most claims was Blue Cross Blue Shield. Aetna was one of the top four health insurers with whom Spinal did business, in terms of the number of claims filed.
Aetna's Requirements for X-ray Reports
11. The parties dispute the tasks a provider must perform in order to receive reimbursement from Aetna for interpreting an x-ray. This dispute underlies plaintiffs' assertion that they did not render second opinions. According to plaintiffs, a provider is not entitled to reimbursement for interpreting an x-ray unless the provider prepares a full written report detailing the findings of the interpretation. Plaintiffs fail to cite to any expert opinion evidence in support of this assertion. They also fail to identify any Aetna claim processing policy or a provision of any Aetna insurance policy that supports their position.
12. Aetna's witness, Kim Lajoie, has worked for Aetna for many years as a customer service representative, leader of customer service teams, and an investigator in Aetna's Special Investigations Unit ("SIU"). She testified that, from Aetna's perspective, a provider is entitled to reimbursement if it both performs the service-in this case, the interpretation of the x-rays-and documents the service in writing in the insured's medical records by at least noting the performance of the service and the findings. Ms. Lajoie was a forthright, credible witness with years of experience who testified candidly and specifically. I credit and accept her testimony on this point.
13. While plaintiffs point to an email from a medical director at Aetna stating that a "formal written report" is required, at least as to one billing code for reimbursement of x-ray consultations, Ex. 103, the record is devoid of evidence fleshing out the meaning of "formal written report" beyond the testimony of Ms. Lajoie and Dr. Abelson. Dr. Abelson cannot testify as an expert witness on this point. See note 3, supra. In addition, Dr. Abelson has no basis to testify regarding Aetna's requirements for reimbursement, as he admits he has never read any Aetna health insurance policies nor any Aetna claim processing policies. Thus, I credit and accept Ms. Lajoie's testimony as to what, as a factual matter, is sufficient to support a claim for reimbursement from Aetna.
The Knowledge and Understanding of Spinal and Dr. Abelson
14. Dr. Abelson and Spinal deny they knew or understood that the referring chiropractors were interpreting the x-rays, creating x-ray reports, and billing for the interpretation of x-rays. I reject this testimony as wholly incredible.
15. Dr. Abelson and Spinal knew, no later than the beginning of 2003 and in all likelihood since 1991, that health insurance companies do not pay twice for the performance of the same service absent an individualized showing of medical necessity. Thus, they understood that Aetna ordinarily would not pay for Spinal to interpret an x-ray and prepare a report if the referring chiropractor already had done so.
16. Dr. Abelson conceded he knew and understood that the referring chiropractors would take x-rays, examine the films, and make treatment decisions based upon this interpretation. He also knew and understood that these chiropractors generally would memorialize their work in written medical records, including x-ray reports. That the chiropractors would and did bill for this service is obvious; Dr. Abelson understood this, and Spinal is charged with Dr. Abelson's knowledge. Moreover, neither Dr. Abelson nor Spinal instructed referring chiropractors not to bill for interpreting the x-rays. They did not issue such a request or instruction, nor did they check to see if such billing had occurred, because they knew and understood that doing so would reduce the referring chiropractors' income and make those chiropractors less willing to refer films to Spinal for interpretation.
17. Dr. Abelson and Spinal also knew and understood that the referring chiropractors were documenting their interpretations sufficiently to support billing the insurance companies for interpreting the x-rays. Spinal explained to the chiropractors in its marketing materials that Spinal's reports could be submitted "in place of, or in addition to [the chiropractors'] own reports." Ex. 109 at 543. In addition, neither Dr. Abelson nor Spinal ever told any referring chiropractor that billing the insurance company for an x-ray interpretation required a multiple page written x-ray report akin to Spinal's reports. While Dr. Abelson now maintains that the referring chiropractors were committing insurance fraud if they billed for an x-ray interpretation without a detailed written report, he never voiced that opinion to the referring chiropractors. To the contrary, Dr. Abelson and Spinal encouraged the referring chiropractors to continue business as usual and, indeed, to send every x-ray to Spinal for a second opinion, see, e.g., Ex. 111 at 205.
18. Spinal's conduct from 2003 to 2008 (and beyond) confirms the foregoing factual findings. In the face of hundreds and then thousands of claim denials by Aetna beginning in 2003, Spinal never appealed, never sought a formal meeting with Aetna, never declined a referral from one of Aetna's insureds, and never made any effort to verify the insurance coverage of any of Aetna's insureds. Further, Spinal never asked or instructed the referring chiropractors to refrain from billing for x-ray interpretation, and Spinal never made any effort to determine, either from Aetna or the referring provider, whether the referring provider already had billed for interpreting the x-ray. Put another way, at no time from Spinal's birth until 2008 did Dr. Abelson or anyone else from Spinal advise or instruct referring providers not to bill globally, that is, not to bill for both taking and interpreting the x-ray. In addition, upon receipt of a referral, Spinal did not ask whether the referring chiropractor had billed or would bill under the global code. Nor, after its claim was filed, did anyone from Spinal ever check to determine whether the referring chiropractor had billed under the global code.
19. Spinal undertook none of these actions because to do so would have threatened the income of the referring chiropractors and discouraged them from referring films for interpretation. Dr. Abelson understood that referring chiropractors would have been less likely to refer to Spinal if they could bill only for taking the x-ray, and not for taking and interpreting the x-ray. Spinal understood that referring chiropractors would receive less in reimbursements from Aetna if they ceased billing under the global code. Spinal's business model depended upon providing a service at no cost to the referring chiropractor, requiring no effort beyond placing every film in a prepaid envelope addressed to Spinal. For these reasons, Spinal continued to process and interpret thousands of x-rays of Aetna insureds while knowing it generally would not receive payment from Aetna.
20. Finally, for four of the five remaining exemplars arising from Spinal's bills, Spinal sought payment using CPT code 76140, which, per Aetna's publically available policy in effect since 2000, is a code used for "consultations on radiology reports for x-rays performed elsewhere." Ex. 42. Because that code is distinct from the codes used for either taking an x-ray or performing the initial interpretation of that film, the use of the code reasonably indicated, to Aetna at least, that Spinal was billing for second interpretations of x-rays taken and initially interpreted elsewhere. In other words, Spinal's billing mirrored its own website, advertisements, and assignment form in explaining that it was in the business of rendering second opinions.
21. Accordingly, I find that Spinal knew, no later than 2003, that referring providers were, in fact, billing for taking and interpreting x-rays before sending the films to Spinal for further analysis and report. Spinal knew and understood that it was in the business of rendering second opinions.
Aetna's Early Investigations into Spinal's Claims
22. Aetna had investigated Spinal's billing practices beginning as early as 1995. Ex. 92; Ex. 95 at 253. At all relevant times, the investigations into Spinal and RD's billing and business practices were conducted by Aetna's SIU.
23. From 2000 through 2002, the SIU investigated claims it was receiving from Spinal. Ex. 52. Before that, Aetna already had concluded that Spinal was billing for second interpretations of routine chiropractic x-rays without those second opinions being medically necessary. Id. at 072. The investigation included contacting Aetna insureds as early as 2001 to verify the services Spinal had rendered, id.; Exs. 93-94, and contacting Aetna medical directors-medical practitioners on Aetna's staff who consult on issues including medical necessity-as early as 2002, Ex. 52 at 074; Ex. 103. This consultation included seeking input from medical directors specializing in chiropractic and billing codes.
24. Before this investigation, Aetna had placed a flag on Spinal claims intended to prevent such claims from being paid without receiving medical records and verifying medical necessity for the second interpretation of an x-ray. Ex. 52 at 072. The investigation was closed in 2002, with the flag left in place and Aetna confident that additional action was not needed at that time. Id. at 074.
25. This flag did not result in the denial of all Spinal claims prior to 2003. The reason for the flag's initial inefficacy is unclear, but that question need not be resolved, as the claims at ...