Office-Based Surgical Facility Fees and No-Fault Insurance

No-Fault Insurance Law Wrap-up

In the June 11, 2015, No-Fault Insurance Law Wrap-Up,1 we reported on Government Employees Ins. Co. v. Avanguard Med. Group2 and the Appellate Division, Second Department’s holding as to whether a no-fault insurer is required to pay no-fault medical benefits to an office-based surgical (OBS) facility not licensed under Public Health Law Article 28. The Court of Appeals subsequently granted leave to appeal, and on March 31, 2016, issued its decision, affirming the Appellate Division’s decision.3

The defendant in Avanguard is a physician-owned OBS facility which provides out-patient surgical facility services, such as use of the operating room and staff, necessary for the performance of certain surgical procedures.4 The defendant is accredited as an OBS facility pursuant to Public Health Law 230. However, unlike hospitals and ambulatory surgery centers (ASCs), it is not licensed or regulated under Public Health Law Article 28. The defendant billed the plaintiff no-fault insurer for surgical facility fees. These OBS facility fees were in addition to and separate from the surgical services performed and billed by the treating physicians.

The plaintiff insurer commenced a declaratory judgment action against the defendant, seeking a declaration that it was not required to pay these bills as the defendant was not a licensed Article 28 ASC or hospital. The lower court denied the insurer’s motion for summary judgment and held that the no-fault regulations do not preclude a non-Article 28 OBS facility from recovering facility fees. On appeal, the Appellate Division reversed, granted the insurer’s motion for summary judgment and held, inter alia:

The fee schedules [applicable to no-fault claims] do not provide for facility fees for office-based surgery performed in a practice and a setting accredited under Public Health Law §230–d. * * * The absence of such a provision supports GEICO’s argument that a facility fee is not a necessary expense for medical services performed by a practice and in a facility accredited under Public Health Law §230–d.5

Thus, the court ruled, OBS facilities are not entitled to reimbursement under the no-fault law. The Court of Appeals granted leave to appeal and, in a unanimous decision by Judge Jenny Rivera, affirmed the Appellate Division’s ruling.

Court of Appeals Decision

The Court of Appeals’ decision includes an analysis of the framework for the reimbursement of no-fault benefits. Reimbursable “basic economic loss” includes expenses incurred for “medical, hospital…surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services…and any other professional health services.”6 Further, expenses for basic economic loss are limited, pursuant to Insurance Law §5108, to the fees set forth in the Workers Compensation Fee Schedule or other fee schedules adopted by the Superintendent of Financial Services. The court observed that:

The Chair [of the Workers Compensation Board] and the Superintendent [of Financial Services] have promulgated fee schedules for a wide variety of reimbursable services (see Official New York Workers’ Compensation Medical Fee Schedule, June 1, 2012…) This includes facility fees for hospitals and ambulatory surgery centers (ASC)…In addition, the Superintendent has promulgated Regulation 83, codified at 11 NYCRR 68.5, which provides two alternative methods for establishing payment for a health service, “reimbursable under section 5102(a)(1)…but not set forth in fee schedules adopted or established by the superintendent” (11 NYCRR 68.5).

The two alternative methods for establishing payment for reimbursable health services not contained in the fee schedules are as follows: First, under 11 NYCRR 68.5(a), “if the superintendent has adopted or established a fee schedule applicable to the provider, then the provider shall establish a fee or unit value consistent with other fees or unit values for comparable procedures shown in such schedule, subject to review by the insurer.”7

Second, under 11 NYCRR 68.5(b), “If the superintendent has not adopted or established a fee schedule applicable to the provider, then the permissible charge for such service shall be the prevailing fee in the geographic location of the provider, subject to review by the insurer for consistency with charges permissible for similar procedures under schedules already adopted or established by the superintendent.”

The court found that neither alternative method under Section 68.5 applies to OBS facility fees.

Avanguard argues alternatively that because the Superintendent has also failed to adopt a fee schedule that includes OBS facility fees, those fees are reimbursable under 11 NYCRR 68.5, which Avanguard claims serves as a catch-all for all other services. Avanguard’s reliance on the Superintendent’s regulation is misplaced because 11 NYCRR 68.5 expressly applies solely to “professional health services” and facility fees are not services. Instead, they are expenses incurred for services. The difference is recognized in section 5102 (a)(1) which provides for reimbursement of expenses for services, and categorizes the types of procedures—e.g. medical, dental, surgical—and includes ‘any other professional health services‘ (Insurance Law §5102 [a] [1] [iv] [emphasis added]). Since facility fees are not services, for purposes of 11 NYCRR 68.5, the fees cannot be recouped under the authority of this section.

Addressing the policy argument, that because OBS facilities provide services similar to those provided by Article 28 ASCs and hospitals, OBS facilities should therefore be treated similarly to hospitals and ASCs with respect to compensation, the court noted that notwithstanding the similarity in services, there is a discernable distinction between the two groups of facilities. Specifically, the court noted “that unlike OBS centers, hospitals and ASCs are regulated under Public Health Law Article 28, and are subject to strict standards under the health law and state Department of Health regulations that cover, inter alia, facility licensing and maintenance…”

The court found, for example, that the two types of facilities have different reporting requirements and record retention and reproduction requirements. Further, unlike OBS facilities, facility fees for Article 28 ASCs and hospitals are based on calculations implemented in the fee schedules and include a surcharge imposed by the Federal Health Care Reform Act,8 which helps subsidize uncompensated care. Finally, the court found that unlike Article 28 ASCs and hospitals, OBS facilities are not permitted to use certain words in their name. “Thus, we agree with the Appellate Division that given these differences between hospitals and ASCS, and OBS centers, there is no basis to interpret the statute to mandate reimbursement for OBS facility fees.”

What is apparently the most compelling reason for the court’s holding is what the court found to be an intentional absence of reimbursable OBS facility fees. The court observed that “the fee schedules provide reimbursement for professional services delivered in an OBS setting, and include payment for a doctor’s services.” Therefore, a bill by the attending physician performing surgical services would certainly be compensable. Further, the fee “schedules do not expressly permit reimbursement for OBS facility fees, but do allow facility fee payments for hospitals and ASCs.” Therefore, a bill for facility fees by an Article 28 hospital or ASC would likewise be reimbursable as there is a specific fee schedule for such facilities.9 However, “no existing schedules provide reimbursement for OBS facility fees. Moreover, since facility fees are specifically mentioned and intended to be paid to hospitals and ASCs, the absence of such language with regard to OBS facilities is no mere oversight.”

Additionally, although not noted by the court, the Department of Health, OBS Frequently Asked Questions for Practitioners includes the following FAQ:


35. Does OBS accreditation qualify a private OBS practice to receive a “facility fee”?

PHL §230-d does not address or require reimbursement of an OBS facility fee. Accreditation status does not require a third party insurer to pay a facility fee. An OBS practice is not a health care facility under PHL Article 28 or as defined by PHL §18. Neither Medicaid nor Medicare pays a facility fee to private physicians’ offices for office-based surgery. DOH does not establish fee schedules or billing guidelines for OBS.10

Thus, according to the court, “the legislature capped total payments for basic economic loss, and delegated the determination of fee rates to the Chair [of the Workers Compensation Board] and the Superintendent [of Financial Services]. Neither administrator has chosen to include OBS facility fees in the regulatory schedules. It is not for this Court to decide, contrary to Avanguard’s contention, whether this is a ‘good idea’ or if it would be better for patients covered by no-fault insurance, and for the efficient management of our health care system, to require reimbursement of OBS facility fees as a means to ensure that OBS facilities continue to be viable options for patients.”

Therefore, as the determination of whether to reimburse OBS facilities for facility fees is in the discretion of the executive branch of government (the Superintendent of Financial Services and the Chair of the Workers Compensation Board), as delegated by the legislature, under the separation of powers doctrine, the court will not impose fees where the other two branches of government have determined not to.

Other Providers and Services

To what extent can the holding in Government Employees Ins. Co. v. Avanguard Med. Group be applied to deny reimbursement to other medical providers or for other services not specifically included in the no-fault fee schedules? The answer to that question depends on the type of billing provider and the type of service being billed. For example, as acupuncture services are specifically included in the medicine and chiropractic sections of the Workers Compensation Fee Schedule and as licensed acupuncturists are not specifically mentioned in the fee schedule, can it be argued that the Chair and Superintendent intentionally excluded reimbursement to these providers?

The answer would be no, for the following reasons. First, the reason the court in Avanguard found that the alternative methods of Section 68.5 did not apply to OBS facility fees is because “11 NYCRR 68.5 expressly applies solely to ‘professional health services’ and facility fees are not services.” Acupuncture treatments, on the other hand, are clearly “professional health services” and therefore, Section 68.5(b) would apply to these medical providers.

Second, the New York State Insurance Department (predecessor to the Department of Financial Services), Office of General Counsel issued its opinion regarding no-fault billings for licensed acupuncturists in which it opined, inter alia “a licensed acupuncturist may bill a No-Fault insurer for services rendered at a fee based upon the prevailing rate charged by other licensed acupuncturists in the same geographic area, [although] such billed fees may be reduced by insurers to those fees established in existing fee schedules for similar procedures reimbursable at fee rates in existing fee schedules, pursuant to section 68.5(b) in Department Regulation 83.”11 Whether the holding inAvanguard can be applied to anyone other than OBS facilities, therefore, remains to be seen.


1. See “Statutory Requirements on Fees for Office-Based Surgical Facilities” by David M. Barshay, NYLJ, June 11, 2015.

2. 127 AD3d 60 (2d Dept. 2015).

3. Government Empls. Ins. Co. v. Avanguard Med. Group (2016 NY Slip Op 02473 [2016]).

4. Office-Based Surgery is defined as “any surgical and other invasive procedure, requiring general anesthesia, moderate sedation, or deep sedation” performed “in a location other than a hospital” (Public Health Law §230-d [1] [h]).

5. 127 AD3d at 64, 65.

6. Insurance Law §5102(a)(1).

7. 11 NYCRR 68.5(a).

8. Public Health Law §2807-j(1).

9. The fee schedule for Article 28 facilities is known as the Products of Ambulatory Surgery (PAS), which is a classification system developed by the New York State Department of Health for determining reimbursement rates. It classifies ambulatory surgery procedures based upon similarities in patient and resource use characteristics. See 10 NYCRR 86-4.40.

10.[last accessed April 6, 2016]

11. New York State Insurance Department, Office of General Counsel Opinion, Oct. 6, 2004. [last accessed April 6, 2016].

Reprinted with permission from the April 14, 2016 edition of the New York Law Journal © 2016 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. – 877-257-3382 –
The original article can be accessed from the New York Law Journal publication of April 14, 2016:
Related Posts