Neurotron, Inc. v. Med. Serv. Assoc. of PA

• Decision Date: 19 June 2001
• Docket Number: No. 00-1516,00-1516
• Citation: 254 F.3d 444
• Parties: (3rd Cir. 2001) NEUROTRON INC., APPELLANT v. MEDICAL SERVICE ASSOCIATION OF PENNSYLVANIA, INC., T/A PENNSYLVANIA BLUE SHIELD; HIGHMARK, INC
• Court: U.S. Court of Appeals — Third Circuit

Page 444

254 F.3d 444 (3rd Cir. 2001)

NEUROTRON INC., APPELLANT v. MEDICAL SERVICE ASSOCIATION OF PENNSYLVANIA, INC., T/A PENNSYLVANIA BLUE SHIELD; HIGHMARK, INC.

No. 00-1516

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued December 14, 2000

Opinion Filed June 19, 2001

On Appeal From the United States District Court For the Middle District of Pennsylvania (D.C. Civil Action No. 98-CV-00157) District Judge: Honorable Yvette Kane

Andrew W. Barbin Gleason & Barbin 123 State Street Harrisburg, PA 17101 and Charles I. Artz (Argued) Charles Artz and Associates 207 State Street Harrisburg, PA 17101 Attorneys for Appellant

Thomas E. Wood (Argued) Keefer, Wood, Allen & Rahal 210 Walnut Street P.O. Box 11963 Harrisburg, PA 17108 Attorney for Appellees

Before: Nygaard and Stapleton, Circuit Judges, and DEBEVOISE,^* District Judge

OPINION OF THE COURT

Stapleton, Circuit Judge

Neurotron, Inc. ("Neurotron") is a Maryland corporation which manufactures an electrodiagnostic medical testing device known as the Neurometer CPT ("Neurometer"). Highmark, Inc. ("Highmark")¹ is a Pennsylvania corporation engaged in the operation of nonprofit health care plans. Neurotron alleges that a passage in Highmark's newsletter, Policy Review and News ("PRN"), commercially disparaged the Neurometer. Highmark successfully moved for summary judgment. Neurotron appeals. We will affirm.

I.

The Neurometer tests a patient's ability to perceive small electrical currents through a procedure known as "current perception threshold" testing ("CPT"). CPT involves connecting electrodes to the surface of the patient's skin and then delivering a series of low-voltage electrical shocks and recording whether the shocks were perceived. Through a series of shocks at decreasing voltages, the Neurometer establishes the lowest level of current that the patient is able to feel. It then compares these readings to a database of "normal" readings and delivers a printout that states whether the patient's sensory perception of electrical current is either elevated ("hyperesthesia"), normal, or depressed ("hypoesthesia"). Hyperesthesia and hypoesthesia can be symptoms of numerous medical problems. Neurotron contends that the Neurometer is a useful diagnostic tool because it can detect these symptoms at a very early stage.

Highmark provides nonprofit health insurance programs which cover the medical expenses of Highmark members. Among the services that Highmark excludes from payment are services that are experimental or investigational. Its agreement with its members and health care providers stipulates that Highmark "does not cover services which it determines are Experimental or Investigative in nature because those services are not accepted by the broad medical community as effective treatments." App. III at 298a. That agreement defines "Experimental or Investigative" as follows:

the use of any . . . procedure . . . which[Highmark], relying on the advice of the general medical community which includes but is not limited to medical consultants, medical journals and/or governmental regulations, does not accept as standard medical treatment of the condition being treated, or any such items requiring federal or other governmental agency approval for which approval has not been granted at the time the services were rendered.

App. III at 300a.

Highmark's Medical Policy Department ("MPD") reviews developments in health care practice and procedure and makes determinations as to when a new product or procedure has advanced beyond the experimental or investigational stage and becomes an accepted part of standard medical practice. Highmark's Benefits Utilization Management Department ("BUMD") conducts post-payment audits of health care providers to assure that their billings to Highmark have been in accordance with the applicable policies and regulations, that services are reported and paid accurately, and that unnecessary services are not being prescribed.

In October of 1990, Ralph Cohen, Neurotron's President, wrote to Highmark requesting that the Neurometer be reviewed and evaluated for coverage. Highmark referred the request to the MPD which, pursuant to Highmark's policy, initiated a "consultant review." Three independent neurologists, Drs. Brennan, Jeffries, and Lossing, evaluated the Neurometer and CPT. Based upon the consultant review, Highmark concluded that CPT was investigational in nature and was, therefore, an uncovered service.

In October of 1991, Dr. Jefferson Katims, Neurotron's Director of Research, wrote to Highmark to request again that the Neurometer be reviewed and evaluated for coverage. Dr. Joseph Ricci, Highmark's V ice President for Medical Affairs, responded in November of 1991 that Highmark's opinion remained unchanged and that, consequently, CPT would remain noncovered.

In 1994, Dr. Katims again wrote to Dr . Ricci to request reevaluation of CPT. Dr. Ricci referred the request to the MPD for review by Douglas Worley. Worley solicited advice from Drs. Lossing, Samuels, and Silverman. Based upon the advice of these independent consultants, Highmark concluded that CPT continued to be investigational. Highmark added CPT to Medical Policy Bulletin Z-24 which listed numerous products and procedures which were not covered because they had been determined to be investigational.

In 1996, Emelie Sconing, Manager of the BUMD, conducted a claims review of certain chiropractors who appeared to be inappropriately billing non-covered CPT as covered nerve conduction velocity tests. She sent the claims files of the providers under investigation to consultants for review. The consultants, Drs. Tar ola and Samuels, concluded that the providers under investigation had actually performed CPT and not nerve conduction velocity tests. Dr. Tarola opined that, "CPT is a nonspecific electrodiagnostic procedure that lacks proof of validity and reliability, and has limited clinical utility." App. III at 223a. He concluded that "the CPT's performed on the above referenced patients were medically unnecessary because of apparent indiscriminate use of the procedure and its lack of validity, reliability, and clinical utility." Id. at 224a. Dr. Samuels opined that a "CPT test is experimental and of no proven clinical value. It is not a nerve conduction test. All of these claims should be denied." Id. at 225a.

Having concluded that health care providers were submitting claims for covered nerve conduction velocity tests when in fact they were performing non-covered CPT, Sconing asked the MPD to prepare a notice for publication in Highmark's newsletter, PRN, that CPT tests were not permissibly billed as nerve conduction velocity tests. Highmark uses the PRN to communicate medical policies and other information to its participating health care providers.

Worley drafted the requested notice by adopting the language of Dr. Samuels' comments assessing CPT testing. The notice appeared in the February, 1997, edition of the PRN and read, in its entirety, as follows:

Neuro-selective current perception threshold test

The neuro-selective current perception threshold test is performed to provide an objective measure of subjective sensation. It requires the patient's conscious perception of the stimulation applied. The neuro-selective current perception threshold test has no proven clinical utility and is not eligible for payment, since it is considered to be investigational.

Use procedure code 95999 to report this service.

The District Court found that although the passage did not refer specifically to Neurotron or the Neurometer, there was sufficient evidence for a reasonable factfinder to find that the passage could be understood as referring to the Neurometer. The District Court also found that there was a genuine issue of material fact as to whether the PRN article was false. Summary judgment was granted, however, for three reasons, each of which precluded a recovery for Neurotron: (1) the PRN's statement that CPT had "no proven clinical utility" was not disparaging; (2) Highmark was conditionally privileged to publish the PRN, and Highmark had not abused its privilege; and (3) the record would not support a finding "that Defendants either knew their statement was false or acted in reckless disregard of its falsity . . . ."²

II.

We agree with the District Court that while the summary judgment record may perhaps reflect a material dispute of fact as to whether the challenged statement was the result of negligence on the part of Highmark, it will not support a finding that this statement was believed by Highmark to be false or made by it with reckless indifference as to its truth or falsity. We also agree with the District Court that Neurotron, as a matter of law, cannot recover in the absence of such a finding.

A. The Challenged Statement

We begin our analysis by focusing on the challenged statement. Its purpose was to communicate to participating health care providers that payments for CPT would not be reimbursed by Highmark. Understandably, the statement also communicated Highmark's explanation for its no coverage position: in Highmark's opinion, CPT was investigational in the sense that its clinical value had not been proven. While this explanation does not directly state to whom the clinical value of CPT has not been proven, the only reasonable inference to be drawn is the medical community. As Highmark stresses, its explanation cannot reasonably be understood as an affirmative assertion that CPT had been established to be without value in the practice of medicine.

B. The Governing Law

We agree with the parties that Pennsylvania law governs the liability issues in this diversity action. Accordingly, we are required to predict the law that would be applied by the Supreme Court of Pennsylvania to the facts of this case. See Gruber v. Owens-Illinois Inc., 899 F .2d 1366, 1369 (3d Cir. 1990).

The Supreme Court of Pennsylvania has not decided a "trade...