Professional Liability Coverage for Medical Billing Errors

There is an interesting story out of Massachusetts concerning a $1.9 million settlement entered into by a physician related to allegedly fraudulent medical billing; the article is at http://www.masslawyersweekly.com/ (subscription required for the full article). In fairness and to be accurate, note that the physician denies the charges and has stated that the real problem was confusion on the part of federal officials over how certain unique services should actually be coded. I have no idea who is right, but what interests me is whether there is coverage for it under the doctor's professional liability policy. Massachusetts has well developed case law, in both the state and federal courts, concerning the limits of professional liability coverage. The case law establishes that such coverage encompasses only claims that require the expertise of the covered professional, and not those that, although part of that professional's business operations, would be common to both the professional's practice and any other business. You can review an article I published on this issue here, Download file.

In this, Massachusetts law is consistent with that of most jurisdictions. Where Massachusetts case law departs somewhat from other jurisdictions is in the specificity of its case law; both the state and federal courts have written extensively on this issue, including cases to the effect that billing and similar "back room" operations are not part of professional services for purposes of professional liability coverage (or for that matter, for purposes of professional liability exclusions).

What is interesting about this settlement, however, is the question of whether that would be different in this instance. Pure overbilling, or intentional fraud (I do not know what was the actual cause of the alleged overbilling in this case, and the physician's position is that this was not the case in this matter) presumably would fall within the province of prior decisions precluding coverage under professional liability insuring agreements for such "back office" operations. But it would seem to me the case may be different if the overbilling allegations stemmed, as the physician asserts, from judgment calls over how to code the procedure for billing purposes, because in that instance the physician's professional judgment may have been involved. A case can be made under the jurisprudence of this circuit that professional liability coverage should extend to the billing problems if they actually stem from decisions on coding that required the provider's expertise and professional judgment.

Again, I do not know what actually occurred in this case. Interesting grist for the mill, however, concerning a particular, and oft litigated, insurance coverage issue.