MICHIGAN NO-FAULT COURT OF APPEALS DECISION ON REASONABLE CHARGE LAW: MARK UPS ON SURGICAL IMPLANTS ARE DISCOVERABLE!

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Written by:    Miller & Tischler, P.C. 
(248) 945-1040 
We expect some very significant holdings from our Supreme Court over the next few months. In the interim, we have already seen at least one "game changer" from the Court of Appeals. This is the case of BRONSON METHODIST HOSPITAL V. AUTO-OWNERS INSURANCE. This case involved two different patients who treated at Bronson Hospital after automobile accidents.  Both patients had surgery that included surgical implant products, including plates and screws.  The insurance company demanded that Bronson Hospital provide the wholesale cost of the surgical implant products and refused to pay unless they received this information.  Bronson argued that such a discovery request was improper and that it should not be required to provide this information.  The trial court agreed and granted summary disposition in favor of Bronson Hospital.  The insurer appealed the decision to the Michigan Court of Appeals.


On appeal, the Court reversed the trial court and held that the No-Fault act permits insurance companies to discover the wholesale costs to the hospital of the surgical implant products for which the patient is being charged. The Court went on to say that the hospital's actual cost for the surgical implants is not dispositive on the issue of whether the hospital's charges were reasonable, the actual cost is certainly a piece of the overall "collage of factors affecting the reasonable rate" of the hospital's charges." 

Fortunately, the Court limited application to this decision to surgical implant products.  However, a future Court could extend this reasoning to other aspects of treatment and open a huge can of worms - forcing hospitals and medical practices to disclose all kinds of "costs of doing business."

We believe this case is a "game changer" because "reasonable charges" under the no-fault law had always been determined by review of the relevant market place. I.e., charges were reasonable or unreasonable in comparison to the charges of other service providers. Now it appears that the Court of Appeals is willing to have courts and juries entertain the excruciating process of analyzing component costs (so far, limited just to surgical implants) and reaching determinations on case-by-case bases as to whether the profit margin on that cost is reasonable. If this decision stands, we can expect insurance fishing expeditions into other component costs, and arguments about whether profit margins are reasonable. This obviously will tend to penalize well managed companies, i.e., companies who are able to keep their costs down and therefore have a higher profit margin. This author would much prefer the market mechanism be used to determine whether charges are reasonable.

Miller & Tischler, P.C.  26711 Northwestern Hwy. Ste. 200
Southfield, MI 48033 

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