Michigan Court of Appeals Issues Favot Decision: What It Means for Your No-Fault Claims
September 18, 2025 — Michigan Court of Appeals Decision in Favot v MemberSelect Insurance Company
This morning, the Michigan Court of Appeals released a published opinion in Favot v MemberSelect Insurance Company. Because it is published, it is binding statewide.
The Court held:
- Auto insurers may use Medicare’s “rate-related” rules (such as multiple procedure payment reductions (MPPR), packaging/bundling, and geographic payment adjustments) before applying Michigan’s statutory No-Fault fee caps (for example, 190%).
- Insurers cannot apply Medicare adjustments unrelated to rates, such as utilization penalties, readmission penalties, sequestration, or bad debt adjustments.
The Court reversed in part and remanded. In practice, the legal door is open, but math and claim-specific details still matter.
Plain English Takeaways
What changed?
Insurers can now legally apply Medicare’s rate-related mechanics—like MPPR, packaging/bundling, and locality wage indexes—when computing the baseline “Medicare amount payable,” before multiplying by Michigan’s No-Fault percentage cap.
What’s off limits?
Broad, non-rate adjustments (utilization penalties, sequestration, readmission penalties, bad debt) remain excluded from No-Fault math.
What to expect next:
- EOBs with more bundling
- More order-of-operations disputes
- More geographic adjustments
How Favot Plays Out in Practice
Below we break down how this decision impacts different provider types, and what operational moves you should make.
1. Ambulatory Surgery Centers (ASCs)
What changes on payment:
- ASC packaging applies. Many facility items (OR time, routine supplies, some drugs, recovery room) are bundled into the main surgical code.
- ASC MPPR applies. First procedure paid at 100%, others at 50%.
- Geographic adjustments apply. ASC national rates adjusted by locality.
Operational moves:
- Do not expect separate pay for packaged items.
- Ethically schedule procedures to minimize MPPR reductions.
- Verify payer math: sequence should be (1) ASC rate, (2) wage index, (3) MPPR/packaging, (4) Michigan multiplier.
2. Orthopedic Surgery (Physician Services)
What changes on payment:
- Multiple surgeries policy. Highest value procedure paid at 100%, others at 50%.
- Global surgical package. Post-op visits and services bundled into surgical payment.
- Geographic (GPCI) adjustments. Apply before multiplier.
Operational moves:
- Double-check sequencing of primary vs. secondary procedures.
- Tighten documentation on post-op visits.
- Target appeals for wrong multiple-surgery indicators or misapplied globals.
3. Pain Management (Interventional)
What changes on payment:
- Imaging guidance bundled into many spinal injection codes.
- NCCI edits prevent separate billing of component services.
- MPPR applies for multiple levels.
Operational moves:
- Use modifiers (59/XU) only when services are clinically distinct and documented.
- Consider staging procedures when clinically appropriate.
4. Physical Therapy
What changes on payment:
- Therapy MPPR applies. 50% reduction to practice expense for secondary codes same day.
- No extra pay for overhead already in RVUs.
Operational moves:
- Prioritize high-value interventions per session.
- Audit payer math closely—many over-reduce.
5. Chiropractic
What changes on payment:
- Medicare coverage narrow. Only spine manipulation (98940–98942) is payable. Extraspinal manipulation and most ancillaries default to CDM-based caps (e.g., 52.5%).
- Same-day E/M and modalities limited. Separate pay requires strict compliance with modifier rules.
Operational moves:
- Always bill with AT modifier and robust documentation.
- Assume CDM-based caps for non-covered ancillaries.
Example of Correct Order of Operations
- Calculate the Medicare amount payable (apply geographic factor, then MPPR/packaging/bundling).
- Apply Michigan’s statutory cap (e.g., 190%).
- Exclude non-rate federal adjustments (utilization penalties, sequestration, etc.).
What Insurers Will Try Next
- Over-labeling as “rate related.” We will push back on attempts to sneak in non-rate adjustments.
- Wrong geographic factor. Frequent carrier errors here—auditing is critical.
- Over-bundling. Medicare’s packaging rules are precise. If Medicare pays separately, so should PIP.
How Koussan Law Can Help
At Koussan Law, we are already working to protect providers against overreduction and misapplied bundling:
- Complimentary “Favot Math” Spot Check. Send us recent EOBs with your ZIP code(s). We’ll verify order-of-operations and identify improper adjustments.
- Litigation Strategy. Targeted lawsuits on misapplied bundling, bad locality factors, wrong primaries, and non-rate reductions.
📩 To request a review, reply to this post or contact our office directly.
⚖️ Disclaimer: This blog provides general information, not legal advice. Claim-specific facts matter. For guidance tailored to your situation, contact Koussan Law.
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