NU Online News Service, Aug. 10, 3:35 p.m.EDT

A New Jersey appeals court has ruled that state officials can goahead and implement a controversial medical fee schedule for autoinjuries that doctors charged was too low.

The decision by a three-judge panel of the New Jersey SuperiorCourt, Appellate Division in Trenton upheld a New Jersey Departmentof Banking and Insurance revision of the Personal Injury Protection(PIP) medical fee schedule that was challenged in 2007 by a groupof health care providers.

In ruling that the schedule could go forward, however, the courttold the department it must review its use of a private provider'sdata base it contracted for to help it set rates.

Health care providers had argued that the data provider Ingenixwas owned by medical insurer United Health Care, which has a goalof reducing physician reimbursement.

Ed Rogan, a department spokesman said the rates went into effecttoday. He said the department had referred providers to Ingenix asa guide to set rates that were not on a list of fees the departmentset for 1,000 common medical procedures.

Among insurance trade groups that backed the department's feeschedule, the decision was hailed by Richard Stokes, counsel forthe Property Casualty Insurers Association of America (PCI).

"This long-awaited ruling will enable New Jersey to move forwardwith an important reform to the PIP reimbursement system which isexpensive, inefficient and anti-consumer," he said.

Implementation of the PIP medical fee schedule, he added, is "animportant component in controlling costs in New Jersey. While thestate has made progress in addressing many of the conditions thatcontribute to higher auto insurance costs, medical care continue tobe expensive. The new PIP medical fee schedule will put in place asystem that is fairer and ultimately delivers cost savings."

The department began work to revise the rates for the state'sno-fault auto insurance system after finding "an increasingdifference between fees billed by health care providers and thefees actually accepted by them as payment for servicesrendered."

The Department noted that the amount charged on the Explanationof Benefits (EOB) form was "almost always higher than the paymentto the provider by the health benefit carrier."

Under New Jersey's current no-fault statute, the department wasmandated to develop a schedule incorporating the reasonable andprevailing fees of 75 percent of practitioners within a region.

The move to revise the rates, the court noted, provoked protestsfrom "surgeons and emergency care physicians, who threatened tostop treating auto accident victims due to the low and, in theirview, arbitrary fees for PIP services."

But the court said it could rule against the decision of thedepartment only if it was "arbitrary, capricious, unreasonable orviolated express or implied legislative policies."

The health care providers who sued to block the rates, thecourt, found had failed to provide enough specific data on rates intheir challenge.

The panel ruled that the Department had made a considered andinformed judgment in setting the schedule, adding that while "manyelements of the process can be criticized, ultimately, the entirescope of the process must be assessed."

"We conclude that appellants have not met their burden ofshowing that the methodology for setting the PIP reimbursementrates was flawed or that the rates set violated the statutorymandate to represent the reasonable and prevailing rates of 75percent of the practitioners in the area," the court said.

A call to the New Jersey Medical Association was not immediatelyreturned.

New Jersey Banking and Insurance Commissioner Neil N. Jasey saidin a statement his department is pleased the decision affirmed"many years of work along with many interested parties and theprovider community in developing this fee schedule,"

"PIP costs have been rising dramatically, which has been a majorfactor pushing auto insurers to seek rate increases recently. Theimplementation of this fee schedule will exert downward pressure onauto insurance rates and benefit New Jersey's consumers," continuedMr. Jasey.

"The fee schedule helps contain rapidly rising health care costsby setting reasonable limits on insurer payments for medicalservices. It also reduces costly and time-consuming paymentdisputes by preventing unnecessary court and arbitrationproceedings," he concluded.