Liberty Mutual Insurance Company v. Raia Medical Health, P.C., et al., 2016 N.Y. Slip. Op. 04916

Here is a case that is perplexing to say the least.  Joseph Raia is purportedly a licensed Physiatrist and the owner of Raia Medical Health, P.C., a licensed MRI facility.  Liberty Mutual filed a DJ action for fraud, unjust enrichment and other things based upon the premise that the PC was not wholly owned and controlled by licensed physicians and was therefore engaged in fee splitting with unlicensed individuals.  The Court granted a stay on all of the underlying collection cases on the following basis:

Here, the plaintiffs demonstrated a likelihood of success on the merits on their declaratory judgment causes of action. “Insurance Law § 5102 et seq. requires no-fault carriers to reimburse patients (or, as in this case, their medical provider assignees) for ‘basic economic loss’ ” (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 320). However, “[a] provider of health care services is not eligible for reimbursement under section 5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York” (11 NYCRR 65–3.16[a][12] ). “State law mandates that professional service corporations be owned and controlled only by licensed professionals” (One Beacon Ins. Group, LLC v. Midland Med. Care, P.C., 54 AD3d 738, 740), and provides that a professional service corporation may issue shares only to individuals, inter alia, “who are or have been engaged in the practice of such profession in such corporation or a predecessor entity” (Business Corporation Law § 1507[a] ). In this case, the plaintiffs established that RMH provided only radiological services consisting of X rays, and MRI and CT scans, and produced an affidavit from Raia, in which he admitted that he had “no training or experience in the field of radiology, including the performance and/or interpretation of MRI studies and/or x-rays.” Raia also averred that he did not consider himself “competent [in] either (i) interpreting MRI studies and/or x-ray studies that are performed on patients; or (ii) supervising the interpretations of MRI studies and/or x-ray studies.” The plaintiffs also submitted an affidavit from an investigator for the plaintiff Liberty Mutual Insurance Company within its Special Investigations Unit, who concluded that RMH was merely a “reincarnation” of Socrates Medical Health, P.C. (hereinafter Socrates), a predecessor professional corporation purportedly owned by Raia which was actually controlled by a nonphysician. The investigator indicated, among other things, that Socrates’s medical director, who was also RMH’s initial medical director, had previously faced “charges by the Attorney General of New Jersey that included being employed by unlicensed MRI facilities and negligently misreading MRI studies,” and had “agreed to pay $60,000.00 and be subject to monitoring for two years.” Thus, the plaintiffs’ submissions demonstrated a likelihood of success on the merits.

How can a facility be “unlicensed” if it employs radiologists who are the only ones reading and interpreting the films?  Hospitals and Article 28’s are run this way all the time.   Also, what about Matter of Allstate Prop. & Cas. Ins. Co. v New Way Massage Therapy P.C. 2015 NY Slip Op 09184 [134 AD3d 495]  This is classic licensing review and allegations of fee splitting which should wholly be left to the jurisdiction of the DOH according to New Way.

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