Ask Our Lawyer: Auto-Owners v. Compass Healthcare Decision Makes Collecting Full Fee From No Fault Insurers More Difficult

by Daniel J. Schulte, MSMS Legal Counsel


I heard that our Court of Appeals recently decided a case that makes it more difficult for me to collect my full fee from a no-fault insurer.  I routinely treat patients that have been injured in auto accidents.  Collecting my full fee on a timely basis has always been a challenge.  Can you please explain what was decided in this case and what it means for physicians owed money for their services provided to auto accident victims?


First, a reminder of what our Supreme Court decided in 2017 in Covenant Medical Center v. State Farm would be helpful.  In Covenant the Court held that healthcare providers have no right under the No Fault Act to sue their patient’s no fault insurer for payment of their bills.  This was a dramatic departure from decades of Court of Appeals case law holding that healthcare providers may sue a no-fault insurer to recover their patient’s benefits for payment of their bills.  However, the Court was careful to point in Covenant that its decision did not affect either: (1) a health care provider’s recourse directly against patients for payment; or (2) a patient’s ability to assign his/her right to past or presently due no-fault benefits to a health care provider.  Following Covenant, a health care provider collecting the balance of a bill from the patient was thought to be a possibility.  That possibility was severally limited by the most recent Court of Appeals decision on this subject, the case you refer to, Auto-Owners v. Compass Healthcare et. al.   

That case involved a patient with injuries suffered in an auto accident.  The physician’s charges totaled $1,859.00.  The patient’s no fault insurer deemed $1,076.14 to be the reasonable charge for the physician’s services and paid this amount.  The physician sent several collection notices to the patient for the $782.86 balance.  Ultimately, the no fault insurer sued seeking a declaratory ruling that the physician could not obtain payment of the balance bill from the patient.  The Court of Appeals in the Auto-Owners v. Compass Healthcare et. al. case sided with the no-fault insurer, holding that the physician may not collect any amount in excess of the “reasonable” fee determined by the no-fault insurer and that any dispute regarding what constitutes a reasonable fee is between the physician and the patient (not the no-fault insurer).  The Court also held that a physician’s attempts to collect a balance bill from a patient (as opposed to disputing a no-fault insurer’s determination of reasonableness) could subject the physician to liability under Michigan’s Regulation of Collection Practices Act. The physician’s argument that he was entitled to payment of the balance of his bill based on a contract for payment between him and the patient was rejected by the Court which made clear that the physician was entitled to no amount in excess of what the no-fault insurer deemed to be reasonable. 

Following the Court of Appeals decision in Auto-Owners v. Compass Healthcare et. al. health care providers with bills that have been reduced to a reasonable amount by no-fault insurers must either accept what has been paid or sue their patients to dispute what is a reasonable amount.  The only exception would be for the physician to obtain an assignment of benefits from the patient.  An assignment would allow the physician to dispute the reasonableness of the charges directly with the no-fault insurer (instead of having to sue a patient).  As has been stated in this column previously, the best practice would be to have the patient sign an assignment of benefits form each time services are provided covering fees for the services then being provided and past services.  Assignments of future benefits are prohibited by MCL 500.3143.