State Farm Mutual Automobile Insurance Company et al v. Mobile Diagnostic Imaging, Inc. et al
Filing
70
ORDER denying 41 Motion for Partial Summary Judgment; denying 43 Motion for Summary Judgment; granting defendants' 45 Motion for Summary Judgment (Written Opinion). Signed by Senior Judge David S. Doty on 3/25/2014. (PJM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 12-1056(DSD/JJG)
State Farm Mutual Automobile
Insurance Company, an Illinois
corporation, and State Farm Fire
and Casualty Company, an Illinois
corporation,
Plaintiffs,
ORDER
v.
Mobile Diagnostic Imagine, Inc.,
a Minnesota limited liability
company and Michael Appleman,
individually,
Defendants.
William L. Moran, Esq. and Murnane Brandt, PA, 30 East
Seventh Street, Suite 3200, St. Paul, MN 55101, counsel
for plaintiffs.
Eric C. Tostrud, Esq. and Lockridge, Grindal & Nauen,
PLLP,
100
Washington
Avenue South,
Suite
2200,
Minneapolis, MN 55401, counsel for defendants.
This
matter
is
before
the
court
upon
the
motions for
declaratory judgment and partial summary judgment by plaintiffs
State Farm Mutual Automobile Insurance Company and State Farm Fire
and Casualty Company (collectively, State Farm) and the motion for
summary judgment by defendants Mobile Diagnostic Imaging, Inc.
(MDI) and Michael Appleman (collectively, defendants).
Based on a
review of the file, record and proceedings herein, and for the
following reasons, the court grants the motion by defendants.
BACKGROUND
This insurance dispute arises out of an arrangement between
State Farm and MDI involving magnetic resonance imaging (MRI)
scans.
State Farm reimburses insureds for medical expenses,
including MRI scans, as part of its provision of no-fault benefits.
Compl. ¶ 14.
MDI employs technologists who take MRI scans of patients
referred by medical providers.
MDI then submits the scans and
other relevant information to independently-contracted physicians
and radiologists who interpret them and produce reports containing
their
findings.
Answer
¶
11;
Pomeranz
Dep.
31:12-22.
The
independent-contractor physicians and radiologists are employed by
non-party ProScan Reading Service (ProScan).
17.
Pomeranz Dep. 18:14-
Thereafter, MDI forwards the scans and reports to patients’
referring medical providers.
Ball Dep. 81:5-9.
In order to be
reimbursed, MDI submits documentation to State Farm and bills for
both the taking and interpretation of scans.
Compl. ¶¶ 14, 18.
MDI often practices “global billing,” which encompasses both the
taking and interpretation of scans.
See Appleman Dep. 117:2-6.
On April 24, 2012, State Farm notified MDI that State Farm
would no longer honor bills submitted by MDI.
E,
ECF
No.
52.
State
Farm
thereafter
See Carter Aff. Ex.
offered
to
indemnify
policyholders against any claims for unpaid services that MDI might
bring against them.
See, e.g., id. Ex. G.
2
On April 27, 2012, State Farm filed suit under the Declaratory
Judgment
Act,
seeking
a
declaration
(1)
that
MDI’s
services
constitute the practice of medicine in violation of the corporate
practice of medicine doctrine (CPMD); (2) that MDI’s practice of
engaging independent contractors violates the CPMD;1 (3) that the
violations of the CPMD were knowing and intentional and (4) that
State Farm is excused from payment of outstanding bills for MDI’s
services.
State Farm moves for declaratory judgment and partial
summary judgment, and defendants move for summary judgment.
DISCUSSION
I.
Standard of Review
The Declaratory Judgment Act, 28 U.S.C. § 2201, grants courts
discretion to declare rights.
Twin City Fed. Sav. & Loan Ass’n v.
Gelhar, 525 F. Supp. 802, 804 (D. Minn. 1981).
“An action for
declaratory relief properly should be entertained where a judgment
will serve a useful purpose in clarifying and settling legal
relations, and where it will terminate the proceedings and afford
relief
from
uncertainty,
insecurity
1
and
controversy.”
Id.
To the extent that State Farm now argues that MDI’s
confidential rental agreements with chiropractors also violate the
CPMD, such an argument was not pleaded and is not properly before
the court.
3
(citation omitted).
“Summary judgment is suitable in declaratory
judgment actions.”
Iams Co. v. Falduti, 974 F. Supp. 1263, 1269
(E.D. Mo. 1997) (citations omitted).
“The court shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed. R. Civ.
P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
A fact is material only when its resolution affects the outcome of
the case.
(1986).
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
A dispute is genuine if the evidence is such that it could
cause a reasonable jury to return a verdict for either party.
See
id. at 252.
On a motion for summary judgment, the court views all evidence
and inferences in a light most favorable to the nonmoving party.
See id. at 255.
The nonmoving party, however, may not rest upon
mere denials or allegations in the pleadings but must set forth
specific facts sufficient to raise a genuine issue for trial.
Celotex, 477 U.S. at 324.
See
A party asserting that a genuine dispute
exists — or cannot exist — about a material fact must cite
“particular parts of materials in the record.”
56(c)(1)(A).
Fed. R. Civ. P.
If a plaintiff cannot support each essential element
of a claim, the court must grant summary judgment because a
4
complete
failure
of
proof
regarding
an
necessarily renders all other facts immaterial.
essential
element
Celotex, 477 U.S.
at 322-23.
II.
Corporate Practice of Medicine Doctrine
State Farm seeks a declaratory judgment that MDI violates the
CPMD by (1) performing MRI scans and (2) maintaining relationships
with independent contractors who interpret the scans.
Further,
State Farm seeks a declaratory judgment that MDI’s violations are
knowing and intentional, excusing State Farm from payment of any
outstanding bills for services rendered.
Under
Minnesota
law,2
the
CPMD
practice of health care professions.”
prohibits
the
“corporate
Isles Wellness, Inc. v.
Progressive N. Ins. Co., 703 N.W.2d 513, 518 (Minn. 2005) (citation
omitted); see also Minn. Stat. § 147.081 (codifying the unlawful
practice of medicine).
prohibition
on
“When adopted by state courts, the general
corporate
employment
of
licensed
health
care
professionals has been based on a corporation’s inability to
satisfy the training and licensure requirements set out in state
statutes
and
related
public
policy
considerations.”
Wellness, 703 N.W.2d at 517 (citations omitted).
Isles
The CPMD “is
[not] limited to medicine and ... appl[ies] to other branches of
the healing arts.”
Spine Imaging MRI, L.L.C. v. Liberty Mut. Ins.
Co., 818 F. Supp. 2d 1133, 1140 (D. Minn. 2011) (alterations in
2
The parties do not dispute that Minnesota law applies.
5
original) (citation and internal quotation marks omitted).
The
CPMD, however, “does not automatically embrace every form of health
care or therapy.”
A.
State
Isles Wellness, 703 N.W.2d at 522.
Performing MRI Scans
Farm
first
argues
performing MRI scans.
that
MDI
violates
the
CPMD
by
Specifically, State Farm argues that the
provision of MRI services is an indivisible process requiring the
involvement of a licensed medical provider at all stages.
responds
that
MRI
services
involve
two
distinct
MDI
steps.
Specifically, MDI argues that physically recording an MRI scan is
a mechanical activity requiring limited training.
the
interpretation
of
MRI
scans,
by
contrast,
MDI argues that
requires
the
involvement of licensed physicians or radiologists to interpret the
scans and formulate reports of their findings.
MDI argues that it
may perform the technical component and contract with ProScan to
execute the professional component without violating the CPMD.
Minnesota courts have addressed the application of the CPMD to
MRI services in several unpublished opinions.
See, e.g., W. Nat’l
Mut. Ins. Co. v. Stand Up Mid-Am. MRI, Inc., No. A10-566, 2010 WL
4825320 (Minn. Ct. App. Nov. 30, 2010); Stand Up Mid Am. MRI, Inc.
v. Allstate Ins. Co., No. A09-1108, 2010 WL 1440199 (Minn. Ct. App.
Apr. 13, 2010).
squarely
The Minnesota Supreme Court, however, has not
addressed
indivisible.
whether
MRI
services
are
divisible
or
Thus, the court “must predict how [the Minnesota
6
Supreme] Court would decide this unresolved issue of state law.”
Midwest Oilseeds, Inc. v. Limagrain Genetics Corp., 387 F.3d 705,
715 (8th Cir. 2004) (citation omitted).
The parties agree that if the technical and professional
components are inseparable, MDI would be in violation of the CPMD
because it is well-established that laypersons are not permitted to
interpret MRI scans.
See Allstate, 2010 WL 1440199, at *1.
State
Farm, however, points to no precedent suggesting that MRI services
are
inseparable.3
In
fact,
the
reasoning
considering similar facts suggests otherwise.
of
other
courts
See id. at *2
(noting that the trial court found that the “taking of the MRI
images [by an MRI service] did not violate the CPMD,” but affirming
3
Instead, State Farm relies on the expert affidavit of Dr.
Scott Schultz to argue that the technical and professional
components of MRI scanning cannot be separated and that MDI is in
violation of the CPMD. See Schultz Aff. Ex. B, at 3. MDI objects
to consideration of the affidavit insofar as it pertains to a
purely legal conclusion: whether MDI’s practices violate the CPMD.
“[T]he admissibility of expert testimony in diversity cases is
governed by federal law.” Unrein v. Timesavers, Inc., 394 F.3d
1008, 1011 (8th Cir. 2005) (citation omitted). Federal Rule of
Evidence 702 provides that:
A witness who is qualified as an expert by knowledge,
skill, experience, training, or education may testify in
the form of an opinion or otherwise if: (a) the expert’s
scientific, technical, or other specialized knowledge
will help the trier of fact to understand the evidence or
to determine a fact in issue.
Fed. R. Evid. 702 (emphasis added). Determination of whether MDI
has violated the CPMD is a legal, rather than a factual, matter.
See Spine Imaging MRI, L.L.C. v. Liberty Mut. Ins. Co., 743 F.
Supp. 2d 1034, 1041, 1044 (D. Minn. 2010). As a result, the court
will not consider legal conclusions contained in the affidavit.
7
on different grounds); see also Spine Imaging MRI, L.L.C. v.
Country Cas. Ins. Co., No. 10-480, 2011 WL 379100, at *7 (D. Minn.
Feb. 1, 2011) (“[T]he [c]ourt cannot conclude as a matter of law
that ... [the] taking of MRI scans itself violates the [CPMD].”).
Moreover,
Minnesota
law
diagnostic-imaging facilities.
contemplates
lay
ownership
of
See Minn. Stat. § 144.565, subdiv.
1(2) (requiring diagnostic-imaging facilities to provide the health
commissioner with “the names of all physicians with any financial
or economic interest ... and all other individuals with a ten
percent or greater financial or economic interest in the facility”
(emphasis added)).
Such a provision indicates that “the Minnesota
legislature did not intend to prohibit lay people from owning MRI
facilities, potentially including those who employ or independently
contract with licensed medical professionals.”
2011 WL 379100, at *8 n.3 (citation omitted).
—
in
notable
contrast
to
the
laws
of
Spine Imaging MRI,
Thus, Minnesota law
states
that
expressly
proscribe lay ownership of diagnostic-imaging facilities — suggests
that some aspects of MRI services need not be directly controlled
by a licensed physician.
(“Any
diagnostic
or
See, e.g., N.J. Admin. Code § 13:35-2.6
screening
office
offering
diagnostic
or
screening tests for a fee shall ... [b]e solely owned and under the
responsibility
of
one
or
more
physicians
....”).
Moreover,
contrary to State Farm’s argument, the practice of global billing
does not demonstrate the inseparability of the technical and
8
professional components, as global billing is regularly used in the
industry.
No. 51.
See Schultz Aff. Ex. B, at 2; Appleman Aff. ¶ 10, ECF
As a result, the court concludes that the technical and
professional components of MRI scans are separable.
State Farm next argues that, even if the components of MRI
scans are separable, MDI violates the CPMD by performing the
technical component of MRI scans.
In general,
[a] prohibition on the corporate practice of
health
care
arises
not
simply
because
particular health care practitioners are
engaged in “healing,” but also because the
individual practitioners are members of a
state
licensed
profession,
must
undergo
significant training and education, and enjoy
independent professional judgment.
Isles Wellness, 703 N.W.2d at 522. Here, MDI technologists are not
members
of
a
“state
licensed
profession.”
Although
MDI
technologists register with the American Registry of Radiologic
Technologists,
licensure.
such
registration
is
not
equivalent
to
state
See Ball Dep. 7:1-3; see also Isles Wellness, 703
N.W.2d at 522 (“[N]o training or licensure is required by state
statute. Thus, much of the underlying rationale of the prohibition
on corporate practice is inapplicable.”).
Second, though MDI
technologists are subject to certain educational requirements, the
obligations
are
less
substantial
than
those
pertaining
to
professions subject to the CPMD, such as dentistry and chiropractic
care.
See Ball Dep. 6:22-7:10; see also, e.g., State v. Bailey
Dental Co., 234 N.W. 260, 262 (Iowa 1931); Isles Wellness, 703
9
N.W.2d at 523-24. Indeed, MDI technologists’ academic and training
backgrounds,
accreditation
status
and
continuing
education
obligations are materially similar to those of physical therapists,
whom Minnesota courts have specifically excluded from application
of the CPMD.
See Isles Wellness, 703 N.W.2d at 522-23.
Further,
MDI
technologists
professional judgment.
they
did
not
use
do
not
exercise
independent
MDI technologists specifically stated that
their
own
discretion
in
determining
which
protocols to employ when taking MRI scans. See Ball Dep. 71:19-23;
Jankowski Dep. 69:6-7.
State Farm has furnished only conclusory
statements that MDI technologists exercise independent professional
judgment, but such unsupported statements are not sufficient to
create a genuine issue of material fact.
Ex. B, at 2.
See, e.g., Schultz Aff.
Given the fact that MDI technologists are not state-
licensed, undergo limited training and do not exercise independent
professional judgment, the CPMD does not prohibit the execution of
the technical component of MRI scans by MDI technologists.
As a
result, summary judgment for MDI is warranted.
B.
Maintaining Relationships with Independent Contractors
State
maintaining
Farm
next
argues
relationships
that
with
interpret MRI scans taken by MDI.
MDI
violates
independent
the
CPMD
contractors
by
who
Specifically, State Farm argues
that, by contracting with ProScan to interpret and provide reports
relating to the MRI scans, MDI indirectly practices medicine in
10
violation of the CPMD.
MDI responds that it does not improperly
usurp the role of a licensed physician because it communicates
findings to medical providers, not to the patients themselves.
“[T]he practice of healing ... includ[es] the diagnosis or
analysis of the condition of human health.”
Granger v. Adson, 250
N.W. 722, 723-24 (Minn. 1933); see also Minn. Stat. § 147.081,
subdiv. 3 (prohibiting unlicensed persons from “undertak[ing] to
prevent or to diagnose, correct, or treat in any manner or by any
means,
methods,
devices,
or
instrumentalities,
any
disease,
illness, wound, fracture, infirmity, deformity or defect of any
person”).
Thus, an unlicensed individual may violate the CPMD
where, for the purpose of diagnosis or treatment, he or she
directly
communicates
physician to a patient.
the
findings
and
advice
of
a
licensed
See Granger, 250 N.W. at 723 (proscribing
arrangement where “the opinion of [a] pathologist [was] passed on
by the [layperson] plaintiff” to a patient).
Here, however, MDI does not act in such a capacity.
MDI does
not directly relay its scans or ProScan’s findings to patients.
Rather, MDI transmits its scans and ProScan’s reports to referring
medical providers, not patients themselves. See Spine Imaging MRI,
2011 WL 379100, at *8 (distinguishing similar situation from
arrangement in Granger and declining to conclude that MRI service’s
relationships with independent contractors who analyze the MRI
images violate the CPMD).
MDI’s transmission of scans and ProScan
11
reports to patients’ referring medical providers — rather than the
patients themselves — does not implicate the same concerns as those
presented in Granger.
See 250 N.W. at 723.
As a result, MDI does
not violate the CPMD by maintaining relationships with independent
contractors who interpret the MRI scans taken by MDI.
C.
Nature of CPMD Violation and Payment Obligations
State Farm also seeks a declaration that MDI knowingly and
intentionally violated the CPMD,4 and that as a result of such a
violation, State Farm is excused from payment to MDI for services
rendered.
Specifically, State Farm seeks a declaratory judgment
that MDI is not entitled to payment of outstanding bills for
services rendered to State Farm insureds because (1) no valid and
enforceable contract exists between State Farm and MDI5 and (2)
MDI’s violations of the CPMD were knowing and intentional.6
As
4
State Farm also pleaded a claim against Appleman for
knowingly and intentionally violating the CPMD.
Compl. ¶ 22.
State Farm waived this claim at oral argument. Hr’g Tr. 29:12-15.
As a result, Appleman is entitled to summary judgment as to this
issue.
5
The parties do not dispute that no formal contract exists
between State Farm and MDI. Thus, the court considers only whether
MDI violated the CPMD knowingly and intentionally.
6
Courts “will not void a contract unless it is established
that the corporation’s actions show a knowing and intentional
failure to abide by state and local law.” Isles Wellness, Inc. v.
Progressive N. Ins. Co., 725 N.W.2d 90, 95 (Minn. 2006). Here,
because the court does not find any violation — and thus, no
knowing and intentional violation — it need not consider the effect
of any such violation on State Farm’s payment obligations.
12
already explained, however, MDI did not violate the CPMD. As a
result, summary judgment for MDI is warranted on the issue of
whether any such violation was knowing and intentional.
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1.
Plaintiffs’ motions for declaratory and partial summary
judgment [ECF Nos. 41, 43] are denied; and
2.
Defendants’ motion for summary judgment [ECF No. 45] is
granted.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated:
March 25, 2014
s/David S. Doty
David S. Doty, Judge
United States District Court
13
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