Let’s analyze this together…

LABOR CODE

Labor Code Section 4622 is the Legislature’s legal procedures for handling medical legal expenses. We know that copying services are all considered medical legal expenses, regardless of the type of records that were copied, because the WCAB told us this in the en banc case of Luis Martinez vs Anna Terrazas 78 Cal. Comp. Cases 444. The issue we are reviewing here is what format or form must be used by the provider of the services to dispute the payer’s under/non payment position and served EOR.

Subsection (b) of Labor Code Section 4622 states that if the provider contests the AMOUNT PAID, then the Provider may request a SECOND REVIEW within 90 days of service of the EOR. This subsection lists the requirements of a Second Review, and states that it should be made on a form prescribed by the Administrative Director of the DWC. This is the SBR-1 form.

However, what happens when the Payer refuses to pay anything towards the invoice, and instead objects to the Invoice in its entirety based on some issue OTHER THAN the amount to be paid according to a Fee Schedule? That instruction is found in subsection (c) of Labor Code 4622. This subsection says “If the employer denies all or a portion of the amount billed for any reason other than the amount to be paid pursuant to the fee schedules in effect on the date of service, the provider may object to the denial within 90 days of the service of the explanation of review.” There is no mention of using a form prescribed by the Administrative Director of the DWC, and there are no requirements listed for this type of objection.

You might be thinking “So what, both subsections are talking about disputing the Payer’s position, so it’s the same form and requirements.” I disagree…

IBR TRACK vs WCAB TRACK

There are TWO separate/distinct TRACKS to resolving disputes over payment of medical legal expenses. Track 1 is Independent Bill Review (IBR), which is a dispute process designed to resolve amounts to be paid according to a fee schedule that is in place at the time of the services. This track is described in subsection (b) of LC 4622. The IBR process is not designed to resolve LEGAL disputes that have nothing to do with the Fee Schedule and amounts to be paid. Track 2 is the WCAB District Office and a WCJ. Track 2 is used to resolve LEGAL disputes that don’t have anything to do with the amounts to be paid according to a fee schedule. This track is described in subsection (c) of LC 4622.

IBR TRACK

For Track 1, or IBR, the Administrative Director designed form SBR-1 for Providers to use to object to an EOR and underpayment, and start the process of IBR. This form includes specific information regarding the amount to be paid under a Fee Schedule. The form is not designed to resolve other types of legal disputes that would be resolved by the WCAB. In fact, if you try to use the SBR-1 form to resolve legal disputes through the WCAB, it doesn’t really seem appropriate.

SBR-1 FORM INSTRUCTIONS

If you look at the INSTRUCTIONS for the SBR-1 form, which is the second page, and read under “Overview” it says “The second bill review process must be completed before a provider can seek independent bill review of a billing dispute.” This indicates that if the copy service is not intending to go through IBR, the second bill review process is not appropriate. Now read further down under “When To Apply“, where it states “If an issue that would preclude your right to receive compensation for the submitted bill is under consideration by the Workers’ Compensation Appeal Board (WCAB), you have 90 days from the date of the service of the WCAB order that resolves the issue to request the second bill review.”

SO, it seems clear on the face of the SBR-1 form that the Administrative Director of the DWC does NOT intend for the form to be used if the issues raised would preclude the Provider’s right to receive ANY compensation because of other types of issues that must be resolved through the WCAB.

Let’s turn to the Regulations and see if they shed more light on this…

DWC REGULATIONS

First, let’s review the DWC’s regulations on medical legal disputes. Cal. Code of Regs. Section 9794(d) states “If the provider disputes the amount of payment made by the claims administrator on a bill for medical-legal expenses following the receipt of an explanation of review issued under subdivision (c), the provider must request the claims administrator to conduct a second review of the bill. The second bill review request must be made according to the provisions of California Code of Regulations, title 8, section 9792.5.5.” Note that this applies when the dispute is the amount of the payment, and not necessarily when no payment is made because of issues unrelated to Bill Review or a Fee Schedule. However, let’s move on and see what the referenced section 9792.5.5 says, since that seems to govern how we must object…

Cal. Code of Regs. Section 9792.5.5(c) states “The request for second review must be made as follows”, and then subsection (1) states “For a non-electronic medical treatment bill, the second review shall be requested on either:” …. and then subsection (1)(B) states “The Request for Second Bill Review form, DWC Form SBR-1, set forth at section 9792.5.6. The DWC Form SBR-1 shall be the first page of the request for second review submitted by the provider.” The reference to section 9792.5.6 is the actual form itself, making the included INSTRUCTIONS page of the form part of the DWC’s formal regulations on the issue. So….

As described in detail above, the Instructions page of the form that is Cal. Code of Regs. Section 9792.5.6 states that the SBR-1 form is not required to be served until 90 days after service of the order by the WCAB that resolved the disputes unrelated to Independent Bill Review (IBR).

In other words, the DWC’s regulations indicate that service of an SBR-1 form is not NECESSARY when the matter must be resolved by the WCAB and is not currently subject to (or appropriate for) Independent Bill Review (IBR). The dispute must go through the WCAB dispute process FIRST, and after those disputes are resolved and if there are still disputes over the amount paid according to a Fee Schedule, only THEN must an SBR-1 be served (within 90 days of said Order).

WCAB REGULATIONS

NEXT, let’s review the WCAB’s regulations on that matter, which is contained in Cal. Code of Regs. Section 10786. Subsection (g) states “(g) A medical-legal provider’s bill will be deemed satisfied, and neither the employee nor the employer shall be liable for any further payment, if the defendant issued a timely and proper EOR and made payment consistent with that EOR within 60 days after receipt of the provider’s written billing and report and the provider failed to make a timely and proper request for second review in the form prescribed by the Rules of the Administrative Director within 90 days after service of the EOR.” We just went over in detail the “form prescribed by the Rules of the Administrative Director” and concluded that service of an SBR-1 is NOT REQUIRED when the dispute is to be resolved by the WCAB until 90 days after the Order is issued by the WCAB resolving those disputes. In other words, the WCAB disputes get resolved FIRST, and then the IBR disputes get resolved. Before the WCAB’s regulation was renumbered to 10786 it was 10451.1, and that version of the regulation actually stated this two-track process pretty clearly. It’s odd that the WCAB changed the section during the renumbering and made this less clear.

CONCLUSION

SO FINALLY... this leaves us with the requirement in Labor Code Section 4622(c), which is that the Provider must “object” within 90 days if the EOR raises disputes that are unrelated to Independent Bill Review and requires the WCAB to resolve. It appears from all our research and analysis up to this point that the Provider need only serve an “objection”, and that the objection need not be on an SBR-1 form. It certainly COULD be, but doesn’t HAVE to be.

With all that said, Providers may want to attach a completed SBR-1 form anyway, just to avoid a Judge’s opinion that is different than our analysis. However, it was good to go through this exercise for those instances when an SBR-1 was not served within 90 days of receipt of an EOR, but there was some other indication that the Provider objected to the Payer’s position. Could a Payer argue that re-sending the invoices again within 90 days is an “objection”? That’s a debate for another day.

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INTRODUCTION

In November of 2019 the WCAB issued the published En Banc decision Colamonico v. Secure Transportation, which made sweeping changes to the expectations the Administration now has for WCJs, Medical Legal Providers, and Payers when adjudicating medical legal receivables. Specifically, it changed the way the Administration views the various party responsibilities under Labor Code Sections 4620-4622.

Before we dive in, I want to briefly mention that people using the system will likely NOT have noticed much or any of the changes I am about to discuss, because it often takes YEARS for changes in the law to filter down into high volume day to day practice. So, if you are reading this and say to yourself “This is not a big deal, I’ve hardly had any push back on Colamonico or contested claim style disputes.” … what we are exploring in this article is what changed, and what will be the most LIKELY response by the system users in the future. With that said, here we go…

THE CHANGES

The net effect of the decision is that Payers are no longer required to dispute medical legal invoices within 60 days of receipt of the same, which has been the historical interpretation. In fact, because actions listed in Labor Code Section 4622 are precluded for the Payer until the Provider meets their “initial burden of proof” under LC Sections 4620 and 4621, the Payers are not required to take any action on a medical legal invoice they have been served with until the provider does something more than just serve the invoice. The Provider is now required to “meet their initial burden of proof” that Labor Code Sections 4620 and 4621 have been fully complied with BEFORE the Payer has any responsibilities under Labor Code Section 4622 – whatsoever. [See Colamonico page 2, lines 11 through 16]

It’s unclear exactly what is now required by a Provider to start the deadlines and procedures written into Labor Code Section 4622, but it’s definitely NOT just an invoice. The WCJs in the system have been put on notice by the WCAB that Payers who failed to timely serve an Explanation of Review (EOR) or objection to any invoice have definitely NOT waived any rights, and are not subject to sanctions, or for paying the Provider’s attorney fees should they have failed to timely dispute an invoice. [Colamonico page 5, line 3] The Payer can simply ignore the invoice for years without much consequence – as the Payer did in the Colamonico case. In Colamonico parlance, the Provider must meet their “Initial Burden Of Proof” that they have a right to request payment for their services under all of the requirements of Labor Code Sections 4620 and 4621 before the Payer has to review the Invoice and either pay, partially pay, and/or serve an Explanation of Review (EOR) as defined in Labor Code Section 4622.

ITS MORE THAN JUST THE CONTESTED CLAIM ISSUE

Most systems users were aware that Providers would need to prove their services were performed during a “contested claim” as defined by LC 4620, but most were NOT assuming the Payer didn’t have to object with an EOR until this was proven with evidence, and I don’t know anybody that carried the assumption the Provider had to prove ALL the possible issues that could be disputed before a Payer was even responsible for timely serving an EOR. [See page 7, line 18 through 24]

Under the Colamonico interpretation, Labor Code Section 4621 requires the Provider to present some evidence that proves their services were reasonably priced, actually occurred, were not DUPLICATIVE of other similar services (in other words, were NECESSARY)…and then Labor Code Section 4620 requires the Provider to prove their services were requested by a case party (and not made up by the Provider themselves), and were requested during a time in the claim where it was in a “contested claim” status according to subsection (b).

SO, this CHANGE that all of these issues listed above must be SHOWN to the Payer by the Provider with some type of EVIDENCE before the Payer has any responsibilities under Labor Code Section 4622 is SIGNIFICANT. [See page 7, line 9-17]

PRE-COLAMONICO COLLECTION AND ENFORCEMENT TRACKS

Previously, case parties and many WCJs followed the doctrine of Otis v. City Of Los Angeles [now repealed under Colamonico starting on page 6, line 20], which held that Payers who failed to timely dispute an invoice in writing within 60 days of receipt of the same had WAIVED their right to dispute the invoice. In other words, the Payer was held accountable to Labor Code Section 4622(c) right from the service of the invoice.

The Otis case doctrine, which is what most Payers and Providers in the system have been operating under up to Colamonico, is that if the Payer had some dispute over paying all or a portion of the invoice they must serve a written objection/EOR timely (within 60 days) as required by Labor Code Section 4622. Failure to timely object with a fully compliant Explanation of Review (EOR) and proof of services meant that the Payer waived their rights to dispute that invoice, and was responsible for paying the invoice in FULL, plus penalties and interest – and often including sanctions and paying the Provider’s attorney fees. There could be no more argument by the Payer against paying the invoice. [It should be noted that most system users understood that the Provider may have to prove there was a contested claim when the services were rendered, but not essentially every other possible objection a Payer may bring up, which is what including LC 4621(a) causes.]

THE CRUX OF THE COLAMONICO CHANGES

Parties and most WCJs have long assumed the services the provider performed had to be done during a period where the underlying claim itself (case in Chief) was in a “contested claim” state, as described in Labor Code Section 4620. So, this part of Colamonico is not new to us. However, few in the industry were operating under the assumption that the Provider was required to somehow PROVE to the Payer the claim was in this “contested claim” state before the Payer had any responsibility for the Tracks, Deadlines and Procedures written in Labor Code Section 4622 [See page 5, starting on line 12]… and I dare say nobody was thinking the Provider had to PROVE to the Payer the services were Reasonable, Necessary, Actually Performed, and were requested by a Party… ALL BEFORE the Payer had any responsibility to object, serve an EOR, or pay the invoice. In fact, as I sit here and write this, I’m sort of appalled at this.

FUTURE EFFECT OF THE COLAMONICO CHANGES

What the WCAB has done with Colamonico is release the Payers of all responsibility to timely object to medical-legal invoices. In other words, there is simply no risk at all to delaying or refusing to pay an invoice. The Deadlines, Procedures, and Forms listed in Labor Code Section 4622 should not concern Payers under Colamonico until the Provider has served them with something a WCJ would consider evidence of the following:

• The services were actually requested by a case Party (L.C. Section 4620, “…(a) For purposes of this article, a medical-legal expense means any costs and expenses incurred by or on behalf of any party…”
• The claim was in a “contested claim” state at the time the services were performed (L.C. Section 4620, “(a)… for the purpose of proving or disproving a contested claim.”)
• The services themselves were NECESSARY and not duplicative (L.C. Section 4621(a), “…shall be reimbursed for his or her medical-legal expenses and reasonably, actually, and necessarily incurred,…”)
• The charges on the invoice are REASONABLE (L.C. Section 4621(a), “…shall be reimbursed for his or her medical-legal expenses and reasonably, actually, and necessarily incurred,…”)
• The services were ACTUALLY PERFORMED (L.C. Section 4621(a), “…shall be reimbursed for his or her medical-legal expenses and reasonably, actually, and necessarily incurred,…”)

The WCAB gave us no guidance on what evidence might satisfy all these requirements, and it’s not clear that if once whatever is required to meet the Provider’s “initial burden of proof” is actually SERVED if that fully invokes Labor Code Section 4622 for the Payer, or not. I’m thinking NOT, because all the Payer need do is raise some issue that was not part of the evidence package the Provider served them with, and the WCJ must consider it. The key is the Payer need only pin the dispute on being either unreasonable, unnecessary, or not performed, and the deadlines in LC 4622 didn’t apply.

NEW ACTIONS REQUIRED BY PROVIDERS

So, Providers under the Colamonico interpretation who do not receive timely payment in full on their invoice must take additional action and serve additional documentation/evidence on the Payer that indicates all of the above bullet items are adequately proven… then wait 60 more days under the now-invoked Labor Code Section 4622… then if no objection/EOR is received within 60 days from the Payer the Provider should file a Petition with the Appeals Board.

NEW ACTIONS REQUIRED BY WCJs

Under Colamonico, the very first thing the WCJ is required to do is demand evidence from the Provider that all of the above bullet items have been met. Contested claim?… Check. Evidence of reasonable pricing?… Check. Evidence the services were necessary (and not duplicative)?… Check. Evidence the services were actually performed?… Check. Evidence the services were requested by an actual party to the case?…Check. Okay, once all that has passed muster, with evidence to back it up, the parties can now proceed with their dispute. If the Provider fails to produce adequate evidence of any one of those items, they LOSE.

… and all the while, the Payer representative can sit back and smugly wait for the Provider to get hung up on one of the items with the WCJ.

This is because if the Provider has failed to “meet their initial burden of proof” they don’t even have a right to go before the WCJ in the first place, or use the System. The Provider has the BURDEN to PROVE they have a valid medical-legal expense. I have read panel case after panel case – post Colamonico – where the WCAB has sent the matter right back to the WCJs for this very purpose.

NEW ATTACHMENTS SHOULD BE PART OF ALL PETITIONS FILED BY PROVIDERS

Based on this, it should be assumed by all medical legal Providers that any Petition the Provider files with the Appeals Board should have attached to it said evidence that meets their “initial burden of proof”, and the Petition should describe how the attached evidence proves that all of the terms and requirements in both LC 4620 and 4621 have been met… AND how they served this evidence on the Payer already and gave them 60 days to pay or object under LC 4622… and finally that the the Payer FAILED to execute their responsibilities as provided in LC 4622. If all that is executed, the Provider should have authority under Cal Code of Regs. Section 10786 (previously 10451.1) to file a Petition and seek an order for payment for its services. If the Provider fails to execute all that, a WCJ could technically ignore the petition, or dismiss the matter as a take nothing for the Provider.

The Colamonico decision has vastly COMPLICATED the relatively straightforward procedures, forms, and deadlines described in Labor Code Section 4622 that has so efficiently forced both Provider and Payers to resolve 80%+ of copy service invoices without using the Appeals Board. Over the course of the next three years I expect the dispute rate to skyrocket again. Let me explain…

PAYERS MAY CONSIDER NOT SERVING EORs, OR SERVING THEM UNTIMELY ON PURPOSE

If I were a Payer today who routinely delays payment of copy service invoices on represented cases until the case in chief is resolved, I would simply stop serving Explanation of Reviews regarding medical-legal invoices, or deliberately serve them months or years after the invoice. Why?… because by not serving EORs at all I can skip that expense and waste of resources and simply force the Provider to make me appear before a WCJ where I will claim the Provider never met their initial burden of proof under Colamonico. No matter what the Provider served me with in their effort to meet their “initial burden of proof”, I will make up and argue new points when I get to the Appeals Board. Most of the time, the WCJ will NOT hold me accountable to any penalties and sanctions because Colamonico says I WASN’T REQUIRED TO OBJECT YET [See page 5, starting on line 12]. Maybe I SHOULD serve EORs timely, because it’s the professional thing to do [See page 8, line 1], but I am not actually responsible for objecting under the Colamonico interpretation UNTIL the Provider has fully met their “Initial Burden Of Proof”…. whatever that is.

A more sinister approach would be to deliberately wait months or years to serve EORs, when the Provider either isn’t paying attention, or is otherwise predisposed, or maybe assumes the Payer blew their deadline in LC 4622 – and then FAILS THEMSELVES TO RESPOND to the EOR as provided in LC 4622(c). Under Colamonico, if the Payer serves a valid EOR at ANY TIME and the Provider fails to respond within 90 days as described in LC 4622(c), the Provider’s invoice is no longer payable by operation of law. If I were a Payer, why WOULDN’T I manage medical legal invoices in such a manner? The only reason I wouldn’t is if the Provider actually served me with evidence that supported their initial burden of proof under Colamonico – but we don’t even know what that is.

PROVIDERS WILL STRUGGLE TO GET THEIR ATTORNEYS FEES PAID

Over the past several years, a cottage industry of law offices have appeared that work for copy services and other medical legal providers, to help them collect their receivables. Cal. Code of Regs. Section 10451.1 (now renumbered to 10786) made it seem like when a Payer failed to object timely, or use an Explanation of Review, or failed to use a proof of service, or failed to make a reasonable objection – if any of these things occurred then the Payer was responsible for the Provider’s attorney fees, as well as sanctions, and penalties and interest under Labor Code Section 4622. This was the holding in Otis v. City of Los Angeles and used for decades, until now. These law firms were routinely getting awarded $2500 or more ON TOP OF THE INVOICE AMOUNT, and life has been good. Both for the law offices and their Provider clients – AND, maybe unbeknown to the WCAB Commissioners, life has been good for the SYSTEM itself, too. Eighty percent of the copy service invoices being generated within the system have been self-resolving… getting PAID. You can bet THAT is about to change, post-Colamonico.

The WCAB in Colamonico stated that WCJs can still hold Payers in Contempt and award sanctions [See page 8, line 1]… but WHEN? Under what circumstances? How can it be Bad Faith for a Payer to delay payment and not serve an EOR when those responsibilities in Labor Code Section 4622 didn’t apply yet? The answer is I don’t think a WCJ will ever hold the Payers in Contempt in a post-Colamonico world, and that means the Providers WON’T get awarded their attorney fees. Since most invoices from a copy service Provider are well under $200, there is no economic sense in paying an attorney to collect that invoice unless the Payer is responsible for that attorney fee when the Provider prevails. So… what does this mean for the law offices that have been helping Providers collect their receivables? What does it mean for Providers that need attorneys to appear before the WCJ and enforce payment of their invoices? I don’t think Colamonico – as written – bodes well for those system users.

CONCLUSION

Ohhhh, how the pendulum SWINGS. For the last several years copy services and other medical legal providers have been leveraging Cal. Code of Regs. Section 10451.1 (now renumbered to 10786) to get their unpaid invoices settled, and in the process have been dinging Payers for sanctions and attorneys fees like crazy. In response, the Payers have gone from voluntarily paying only 45%-55% of invoices in 2012-2015, up to 80% and better in 2019. It simply made more sense for Payers to pay the invoices than risk the heavy sanctions and attorney fees, and to try to perfectly execute all the deadlines and forms and procedures written into Labor Code Section 4622.

The system WAS working. Copy service and other provider disputes had gone way down over the past several years. Providers were reporting to me that the percentage of voluntary payments had never been this good. BUT…. some Providers were filing a LOT of Petitions for Reconsideration when they didn’t get everything they wanted, so it seems the WCAB may have decided to “clip the wings” of the Providers a bit… Make it more difficult to enforce payment of their receivables within the system, and make it more expensive for them to even TRY (less easily prove Bad Faith by the Payer). In Colamonico, the WCAB has hollowed-out the deadlines, procedures and forms contained in Labor Code Section 4622 as it relates to Payers, and hollowed-out the sanctions and attorney fees provision in Cal. Code of Regs. Section 10451.1 (now renumbered to 10786) for Providers. I understand the WCAB’s problem with LC 4622(f) that they were trying to work out, but the end result of their decision negated the deadlines and workflow built into LC 4620-4622 that self-resolved most medical-legal receivables. The WCAB literally de-fanged these sections as they relate to Payers, and that WILL have consequences.

The pendulum has swung, and Providers need to change the way they serve invoices on Payers… because I can hear the rumble down the “tracks” when I put my ear down. The rumble of Defense attorneys and Bill Review companies advising their claims adjuster clients during free catered seminars to NOT pay copy services and other medical legal providers, and let Bill Review and defense law firms handle it. Because there is little to no RISK in that sort of behavior, anymore. We experienced exactly this in 2009-2015, but things improved when Providers started using Cal. Code of Regs. Section 10451.1 (now renumbered to 10786)… and I’m telling you, it’s swinging back the other way again.

Colmamonico is a big deal.

The post Colamonico Case – a Big Deal appeared first on ScanFiles, Inc..

I’ve been blogging lately at ScanFiles.com/Blog regarding various issues that might be re-negotiated in 2019 for the Copy Service Fee Schedule. The DWC has shown some willingness to revisit this fee schedule soon. This week, I thought I would discuss the AMOUNT of the fees… why they are at the level they are today, what we might expect in the next schedule, and then some figures that might make more sense given the spirit of what the DWC was originally trying to accomplish.

SUMMARY

I like to summarize each post “up front”, for those who don’t want to read all the DETAILS. The bottom line is that I expect the DWC to open with just a “cost of living” increase to the existing fees, otherwise known as a COLA. There are well established COLAs used by the DWC for Temporary Disability and Total Permanent Disability, and that is the change in the State Average Weekly Wage (SAWW). If the DWC applies those same increases to the $180 flat rate it will jump to $212 for 2020, and the “no record” fee of $75 will jump to $88, and so on. 

While I’m sure the copy services would appreciate a COLA bump, and the employer side would tolerate a simple COLA increase, there is a strong argument that the DWC made an inadvertent ERROR when they calculated the fees in 2015. The CORRECT fee for copying should have been $220, rather than 180… and with a COLA increase, the 2020 fee for copying should be set to $260.

THAT’S my story, and this is fully supported by the FACTS and the official DATA used by the DWC to formulate the schedule in the first place.

MY INVOLVEMENT IN THE FEE SCHEDULE

Before you write me off as some copy service owner who simply wants drastically higher fees in the Schedule, hear me out on this. I have zero interest in any copy service today, so whatever values are set for 2019 mean nothing to me… I simply have the knowledge and experience to tell you what happened, what probably SHOULD have happened, and give you some context for what the fees really should be for 2019.

The applicant copy service data the DWC used to create the current Fee Schedule was actually gathered, delivered and explained to the state researchers by ME, personally. At the time, I was the CEO of a large applicant copy company that had hired our own political lobbying firm, and I was the Legislative Chair and a founding Board Member for the California Workers Compensation Services Association (CWCSA). We knew a fee schedule for copy services was in the works, so I contacted some of the other CWCSA members and put together a very large data set (598,342) of paid applicant copy service invoices to be used to prove the market rate for such services, and negotiate with the DWC. The DWC asked me to contact the Berkeley Research Group (BRG), who had been hired by the Commission on Health and Safety in Workers Compensation (CHSWC) to write a report called “Formulating A Copy Service Fee Schedule For The California Division Of Workers Compensation.” This report was used by the DWC to create the schedule. I met with the BRG researchers in person and by phone on multiple occasions to explain what our data represented, and how the applicant copy services differed from the defense copy services in process and cost. I also met  several times with the acting Executive Officer of CHSWC, as well as the current Administrative Director of the DWC and the Director of the Department of Industrial Relations at the time. My point in telling you all this is to show that I am VERY familiar with what is in that BRG report, and specifically what the DWC was trying to accomplish… probably more familiar than anybody outside of the two researchers at BRG that I met with.

In the middle of these negotiations I sold my interest in that copy company and a successor took over my role, including my role in dealing with the DWC. So, I was on the sidelines for the FINAL negotiations in 2014-2015, but the numbers the DWC published in the final version of the 2015 fee schedule make it abundantly obvious to me exactly what happened.

HOW THE CURRENT FEES WERE DERIVED

The BRG study suggested TWO different FLAT RATES; a fee of $103.55 if the Invoice was paid promptly without dispute (see top of page 4), OR $251.20 if the employer disputed/delayed the payment (page 8, last paragraph). They called this “Tiered” pricing (see page 4, first paragraph), and in both Tiers the fees were to be used regardless of the number of pages, from 0-1000 pages (see page 3, last paragraph).

I want to point out that on page 12, last paragraph, BRG explained that the lower Tier price of $103.55 did NOT yet include any value for witness fees, subpoena prep, mailing, or personal service of the subpoena on the witness… but that the higher-Tier price of $251.20 DID include those additional services and underlying costs. So, the two fees were not quite an Apples to Apples comparison as provided in the report, and when the report was publicly presented at a CHSWC meeting in October of 2013, both the applicant and employer sides DISLIKED the Two-Tiered Pricing approach. The report was eventually sent by CHSWC to the DWC to further refine the suggested fees into a more amenable (to both sides), single-Tier final fee schedule. The expectation was that the DWC would “split the difference” between the two prices, given that some invoices would be paid timely, and some wouldn’t.

Sure enough, the DWC came up with is a flat fee for copying of up to 500 pages for $180, which is almost an exact “split” between the average for defense copy services in the study (Exhibit 3a – Mean) and the average fees paid for applicant copy services (Exhibit 4a – Mean).  In other words if you take the 108 and 251 from the study data tables and divide by two for the average, you get exactly $180.

So, the DWC simply split the difference, and if they had stopped right there, I would agree they completed the task accurately.

…. but the DWC DIDN’T stop there. In an effort to further refine the schedule the DWC CARVED OUT a subcategory of the Invoices from the BRG study and arbitrarily reduced the value of those to only $75. This lower fee was for when NO records were copied, or what we call “Certificate of No Records.” I think the DWC (and everybody else) underestimated the dramatic effect this additional step made on the VALUE of the applicant copying services.

WHY THE FEE SCHEDULE GROSSLY UNDERPAID THE APPLICANT COPY SERVICES

The BRG study presented ONE VALUE for each Tier that represented the average PAID invoices for copy services for ALL types of services including zero pages, up to a maximum page count. So, it’s important to take note of HOW the DWC carved out those additional CATEGORIES of flat fees from BRG’s SINGLE values that were provided in the study. Simply “splitting the difference” of the overall averages for ONE category of Invoices (when pages are copied) but failing to take into account the fact that other categories in the underlying base value will be carved out and priced differently will completely change the outcome.

Let me show you some simple math to illustrate this…

In the BRG report, the un-adjusted defense copy service average fee for ALL types of services in Exhibit 3a was $108.98, and the un-adjusted applicant fee in Exhibit 4a was $251.20.  When you average them, you get $180:

$251.20 + $108.98 = $360.18 …… and $360.18 / 2 = $180.09

… which is what the DWC used when setting the COPYING flat fee. Now let’s look at what happens when you arbitrarily set the fee for CNRs to only $75.00…

BRG tells us in Exhibit 3a that the CNR ratio is 28%, so look at what happens when we change the price for CNRs to $75 and leave the copying fee at $180:

($75 * 28%) + ($180 * 72%) = $150.60

That first set of numbers, “($75 * 28%)” is the representation of CNRs from the BRG data. The second set of numbers, “($180 * 72%)” is the representation of the copied records (more than zero pages), and the final $150.60 is the AVERAGE value now for ALL the Invoices.

By setting the copied invoices to $180 and the CNRs to $75, the applicant copy services ended up with an AVERAGE FEE of only $150.60, instead of the “split the difference” price of $180. Think about this… BRG gathered and studied all the data in depth, talked to representatives from both sides, and then suggested a low of $108 and a high of $251, and rather than go with the middle at $180, the DWC gave the applicant copy services only $150.

Okay, you may be thinking, but maybe the DWC never actually intended to split the difference, and fully intended to give applicant copy services an average fee of only $150, including making them absorb all the Release of Information (ROI) fees at Cal Code of Regs. Section 9983(e).

I don’t buy that theory…

For one thing, the BRG report stated at the bottom of page 12 and top of page 13 that the BRG-suggested fee, which was based on the defense copy services blended with data from other states, DID NOT INCLUDE WITNESS FEES, SUBPOENA PREPARATION, MAILING, OR PERSONAL SERVICE OF THE SUBPOENA ON THE WITNESS… and the applicant suggested fee of $251.20 DID include all those incidental services. BRG went on to suggest that fees for those incidentals would be IN ADDITION TO their suggested lower-Tier flat fee. Furthermore, the final fee schedule made the dubious rule that the applicant copy service be entirely responsible for all ROI fees, which ALSO were not included in the BRG-suggested lower-Tier price. So, if you take the BRG’s suggested fee of $103.55 and add witness and ROI fees (combined) which most agree averages about $30 per location/transaction, plus personal service of a subpoena ($25), and add a fee for Subpoena prep and mailing of $5, the actual BRG-suggested lower-Tier flat fee goes up to $163.55, which is even MORE than what the applicant copy services actually received as an average fee under this Schedule. I don’t believe the DWC deliberately gave the applicant copy services a fee schedule that netted them LESS THAN the defense and “other state” copy services were being paid.

I think the people at the DWC simply didn’t realize the logic error in how changing the CNR fee would affect the overall VALUE of the applicant services under the schedule. And neither did any of the copy services at the time, because NOBODY that I talked to or read the public comments from made any sort of fuss about the TRUE average fees the applicant copy services were getting. Everybody was assuming they were getting an average of $180 which “split the difference” between defense and applicant copy service average fees.

Even if you disagree with my suggested prices of the Subpoena and witness fee incidentals, if the DWC actually INTENDED to make it seem like they were splitting the difference and in fact KNEW they were giving applicant copy services only $150, then that’s pretty dirty. The fee schedule was never advertised as $150… it was always advertised as $180. Again, I don’t buy a scenario where the DWC was deliberately deceiving everybody to stick it to applicant copy services. Nothing about that process seemed to me like the DWC/CHSWC was being anything other than transparent about all this, so the only conclusion I can support is that the DWC simply made an error, and priced the Copying fee inaccurately.

WHAT SHOULD THE FEE HAVE BEEN?

If the DWC intended to “split the difference” on the value of all “copy and related services” for both applicant and defense copy services, but only give applicant copy services $75 for CNRs, then the fee for COPYING should have been $220. Here’s why…

Take a fictional set of 100 invoices and we want the AVERAGE invoice to be $180. We know from the BRG report (Exhibit 3a) that 28% of the invoices will be CNRs, so 28 of the 100 invoices must be billed at $75. That leaves 72 invoices that, combined with the 28 at $75 will average out to $180 for the full set. Here is the math:

72 Invoices @ $220 =  $15,840 …. and 28 Invoices @ $75 = $2,100 …. together that is $17,940 ….. and divided by 100 is $179.40. If you want it to work out EXACTLY an average of $180 then the Copy (more than zero pages) invoices needed to be priced at $220.83 each.

So, it is my opinion that the applicant copy services were inadvertently HARMED in the 2015 Copy Service Fee Schedule, and the reason was simply that those developing the final figures did not fully understand the DATA they were looking at, and how their changes affected the outcome.

CONCLUSION

The Labor Code at Section 5307.9 authorized and instructed the DWC and CHSWC to formulate a copy service fee schedule. CHSWC hired the Berkeley Research Group (BRG) to study the industry and provide data that could be used to build a Fee Schedule. The BRG study suggested that there be TWO flat fees in the Schedule regardless of page counts, a fee of $103.55 (not including Subpoena prep, service, or witness fees) when the invoice is not contested, and a fee of $251.20 when the employer contests/delays the invoice.

Not wanting a two-Tiered schedule, the DWC took this data and attempted to “split the difference” and have only ONE flat fee for Copied records, which they set at $180. Unfortunately, either through an error in the their calculations OR possibly a mean spirited attitude towards applicant copy services, the subsequent fee schedule created additional categories of fees that gave the applicant copy services a much LOWER average fee than was suggested by BRG.

In this next fee schedule negotiation cycle, the DWC should consider re-calculating the flat fee for copying that is known as Cal. Code of Regs. 9983(a) and change it from $180 to the correct $220, and THEN allow for a COLA increase every year since 2015. For 2020, the fee at subsection (a) should be $260, including the COLA. Since the DWC wanted the fee for CNRs to be $75, that should stay the same except for an increase for COLA, making the 2019 fee for CNRs $88.

If the DWC saw fit to change the schedule to these values, the schedule would accurately reflect what BRG presented and suggested, but merge the two-Tiers into a single flat fee for Copied records and CNRs.

The post Copy Service Fee Schedule – A Case For $260 appeared first on ScanFiles, Inc..

As I mentioned in the last post, the DWC has shown some willingness to update the 2015 Copy Service Fee Schedule. When I think of the most important ISSUE facing applicant copy services  today when they go before a WCJ or the WCAB, it is being forced to prove the underlying claim was in a “contested” state as described in Labor Code Section 4620(b) when their services were incurred.

Many of the applicant copy service owners I have talked to tell me that this is not really a big deal for them. These are the same copy service owners that tell me they are rarely filing petitions or attending hearings at the Appeals Board. Trust me on this… it’s a big problem if you expect to collect all that older copy service receivables through the Appeals Board. Even if the employer failed to raise this objection beforehand, the copy service is responsible for proving this foundational issue at the Appeals Board. So, if the Fee Schedule really does get a makeover in 2019, this is likely the ONLY opportunity to get this IMPORTANT issue addressed for the next several years.  I have proposed a SOLUTION at the bottom of this post that copy services might consider pushing for in the upcoming Fee Schedule update.

WCAB PANEL CASES INDICATE A SIGNIFICANT PROBLEM FOR COPY SERVICES

So, you might be thinking, WHY does Stephen think this is such a problem? I like to read the panel cases that come out of the WCAB every month, and particularly copy service opinions. Panel cases are Appeals Board decisions that are not binding law, but give some indication of how the WCAB views the issues brought before them.  I like them because they inform me on what the current issues are that people are fighting over. In the case of copy services, there is a surprisingly high volume of dispute. I typically see four or five copy service disputes a month out of maybe a total of 20 panel decisions. I think that’s a significant amount of dispute, and indicates the need for better regulations. What I see is the WCJs are getting hung up on the same issues over and over, and parties are petitioning the WCAB again and again about the same things.

In nearly EVERY copy service panel case I see the same “copy and pasted” series of paragraphs that go through the legal foundation and requirements of a MEDICAL LEGAL EXPENSE. The paragraphs culminate in setting up a TEST for the copy service to PROVE their services were ordered on a CONTESTED CLAIM using the narrow definition listed in Labor Code Section 4620(b). I would say that more than half the time, the copy service FAILS this basic TEST, and either has their receivable dismissed entirely, or sent back to the trial judge to prove their services were ordered appropriately.

The Commissioners’ unanimous opinion is that even if the employer never raised the issue of a contested claim, the copy service STILL must pass this test before the other issues will be heard. This is a MAJOR problem for every applicant copy service that intends to actively collect their unpaid receivables through the Appeals Board.

WHY THE CONTESTED CLAIM ISSUE IS SUCH A PROBLEM

Any party can request records as discovery from a copy service ANYTIME they want… BUT, if the applicant intends to have the employer PAY for their DISCOVERY then the current state of the law is the services MUST meet all of the provisions of a MEDICAL LEGAL EXPENSE. Medical-legal expenses are defined under Article 2.5 of the Labor Code, sections 4620-4628.

This is worth repeating here: to enforce a right to payment of ANY copy service receivable, the services must not only comply with all provisions of the Copy Service Fee Schedule, but also comply with all of the limitations and provisions of a MEDICAL LEGAL EXPENSE.

So, as a medical-legal expense, RECORDS may ONLY be incurred¹ under one or more of the following circumstances from Labor Code Section 4620(b):

(1) The employer rejects liability for a claimed benefit.

(2) The employer fails to accept liability for benefits after the expiration of a reasonable period of time within which to decide if it will contest the claim.

(3) The employer fails to respond to a demand for payment of benefits after the expiration of any time period fixed by statute for the payment of indemnity.

When records are ordered outside of one of those three scenarios, the employer is not responsible for paying the bill. Seriously, I can show you case after case where this happened. So, copy services must be prepared to support their invoices by proving their services were ordered appropriately.

PROVING A CONTESTED CLAIM TO SUPPORT THE MEDICAL-LEGAL EXPENSE

Okay, you might say…. the Application For Adjudication of Claim lists seven different BENEFITS that can be in “disagreement” between the parties when so marked by the applicant and served, plus an “other” box. Therefore, as long as the records were ordered by the applicant attorney after the filing/serving of the Application for Adjudication of Claim, everything should be fine.

Nope… The currently active Commissioners on the WCAB all seem to be of the opinion that Labor Code Section 4620(b) defines three very specific tests for proving the claim is in a contested state or not, and “Areas of dispute marked on the Application For Adjudication of Claim form” is NOT one of three items. The opinions that have come out in panel cases this year are a bit inconsistent on this important issue, but my interpretation of their philosophy is that the Application For Adjudication is only evidence of possible dispute.  In other words, they will not accept the Application form as evidence of a Contested Claim. If the parties agree later in a compromise and release that the issues on the Application were bona fide issues that are now resolved, THEN the WCAB will accept that as of the time of the Application filing the claim was contested – for copying purposes. The same theory goes for a case that goes to trial and a WCJ resolves disagreements that first appeared on that Application form. In other words, the Commissioners will accept that records ordered after the Application was served are valid medical legal expenses SO LONG AS there is some ADDITIONAL evidence available proving that the disagreements listed on the Application were bona fide “contested benefits” at the time it was served. (Their thinking was explained as not wanting applicant attorneys to simply check boxes on the Application so they could run up a bunch of unnecessary medical-legal expenses… so the WCAB wants to see some evidence those were bona fide issues.)

There are other situations that seem to pass muster as causing a contested claim, including the parties requesting a Panel QME, or using an AME, or any Utilization Review denials, or the use of IMR. A slam dunk is if the records were ordered after a Denial Of Claim Letter from the Employer/carrier was served, or if the Employer/Carrier failed to either accept or deny (or send a letter of delay) the claim for 30 days after the service of the Claim Form and/or Application.

So, while it’s certainly not IMPOSSIBLE for a copy service to prove their services are valid and payable under Labor Code Sections 4620/4622, this situation is pretty COMPLICATED, and causes the copy service to have to HUNT DOWN the evidence they need.  In short, if the Invoice has to go before the WCAB, the copy service will RARELY prevail without figuring all this out AND PROVING IT. Ugh… 

PROPOSED SOLUTION

Copy services should NOT be okay with having to prove their services were incurred under such limited circumstances as written into Labor Code Section 4620(b). This section was written in 1993 and was targeting medical REPORTS, and not discovery. Not only is complying with this complicated and time consuming, but it requires a fair amount of COOPERATION by the parties to supply the necessary information and documents. Unless the WCAB backs away from their holdings in the Martinez case that ALL copy and related services are limited to the medical-legal category, the DWC needs to solve this problem through regulation in the Fee Schedule.

Cal. Code of Regs. Section 9982 is the DWC regulation that describes when ordering records is ALLOWED. This section is titled “ALLOWABLE SERVICES“.  I have read this section easily 50 times and I cannot tell you simply what it means, so this is a GREAT place for the DWC to do some re-writing and not only make this section more clear to stakeholders, but RESOLVE the Fee Schedule with the limitations of Labor Code Section 4620.

A proposal should be brought before the Administrative Director to include in Cal. Code of Regs. Section 9982 the following: The filing and SERVING of an Application of Adjudication of Claim form on the employer/carrier shall commence DISCOVERY under the jurisdiction of the Appeals Board, and the disagreements regarding liability for benefits as documented on the form shall be considered as evidence of a contested claim under Labor Code Section 4620 for the specific and limited purpose of incurring the copy and related services, as defined in this Article. 

REINTERPRETING LABOR CODE SECTION 4620(b)

I anticipate some people taking issue with the Administrative Director of the DWC interpreting Labor Code Section 4620(b) and adding another line item that the legislature did not authorize. I want to point out that the Administrative Director has ALREADY interpreted this Labor Code section and added a FORTH line item in Cal. Code of Regs. 9793(b)(4). Meaning, while LC 4620(b) only shows three line items, the definition of “contested claim” in C.C.R. 9793(b) has FOUR… so, obviously the AD does have the authority to interpret Labor Code Section 4620(b) and make additional categories such as I just proposed.

SUMMARY

The Martinez decision FORCED copy services and their applicant attorney customers to fit into the narrow definition for medical-legal expenses while in their discovery phase, and this has caused a big area of copy service DISPUTE. There is ample case law that stands for the applicant having a right to LIBERAL discovery, so this friction was either unintentional or unauthorized. Therefore, it seems reasonable that the DWC interpret the 1990’s limitations built into Labor Code Section 4620(b) to combat doctors writing too many reports, and clarify this important section in a way that preserves the applicant’s right to liberal discovery at the employer’s expense.

I welcome your feedback and comments, below.

FOOTNOTES

The post The Copy Service Fee Schedule And The “Contested Claim” appeared first on ScanFiles, Inc..

INTRODUCTION

Last week’s post was about an upcoming negotiation with the DWC to update the 2015 Copy Service Fee Schedule. That post discussed the concept of getting the Release Of Information fees un-bundled from the $180 flat fee. This week’s discussion is about a CHANGE to the limitation on the additional sets that may be charged by the copy service to the employer/carrier under Cal Code Regs. Section 9983(f)(2).

LIMITATION ON THE NUMBER OF SETS

Cal Code of Regs Section 9983(d)(2) appears to LIMIT the number of COPIES (sets) the applicant can request from their copy service as a Medical-Legal Expense. The paragraph is written such that it’s hard to tell if the limit is ONE additional set of records, or TWO… but for the purposes of this post I’m going to call it ONE additional set. What this means is that the applicant can only get 2 SETS or COPIES of a given record paid for by the Employer/Carrier to use in the management of their workers compensation case.

Another big limitation is there is no provision for anything but ELECTRONIC additional sets. In other words, there seems to be no provision for shipping a PAPER set of the records, or even a CD-ROM (if you are shipping paper or CD-ROM sets of records, consider using DocuCents!)

HOW MANY SETS OF A RECORD MIGHT THE APPLICANT NEED?

Off the top of my head, I can envision the following scenarios in a typical workers compensation case that would call for the applicant attorney to SEND a set of a records – particularly a medical record – to a physician and case parties:

1. A set for the Injured Worker and his/her  attorney to prepare for the applicant’s deposition to be taken by the employer. This would best be delivered in PAPER form, for the injured worker to review with his/her attorney, and would likely be the INITIAL set charged as $180 in the Fee Schedule under Cal Code of Regs. Section 9983(a).
2. A set for the Treating Physician, if the applicant attorney expects a full and complete treatment plan for the injury, and a properly written final medical legal report. The PTP may accept these in electronic form, although my experience is that many physicians still prefer paper. This would currently be billed at either $5 or $30 under the current Fee Schedule, under Cal Code Regs. Section 9983(f)(2).
3. A set to be sent to Maximus during any IMR (Independent Medical Review) dispute. The IMR regulations require that the applicant SERVE any documents or records going to Maximus on the Employer/Carrier, so this would require TWO MORE SETS of each record. Maximus allows electronic copies of records to be UPLOADED to their system a couple of different ways, but the employer/carrier would require either paper or CD.
4. The PTP (Primary Treating Physician) is responsible for a final medical legal report that can be used for rating Permanent Disability, but often these days the parties choose to use an AME/QME to get another opinion. The QME regulations call for the applicant to send the QME all records they want to be reviewed, and if you talk to the QME management companies, getting these records is a huge problem for the industry. Again, this ends up being TWO MORE SETS, because the regulations require the applicant to send all records they want to supply to the QME to the employer/carrier FIRST, and allow them time to object. (If the applicant already served the same records on the employer, they don’t have to do it a second time)

That is SIX sets of each record that are often needed on represented cases, and if there is more than one treatment dispute, or more than one area of the body to be evaluated, or more than ONE carrier/TPA, that number could grow quickly.

Additionally, there are lots of other dispute types that can cause a QME evaluation and records needing to be served, including: compensability, future medical treatment, temporary disability, permanent and stationary status, work restrictions, ability to return to work, apportionment, causation and diagnosis.

WHY NOT LET THE APPLICANT PAY FOR THE ADDITIONAL SETS?

The attitude at the DWC is apparently that the applicant only “needs” one paper set, and one (or is it two?) electronic sets to manage their case. If they need more for these other scenarios, then the APPLICANT OR THEIR ATTORNEY SHOULD PAY FOR IT.

The law disagrees with that approach…

When injured workers gave up their right to bring a civil suit against their employer for a work injury, one of the constitutional provisions was that ALL of their costs in workers compensation would be paid by the employer. This is known as the Grand Bargain of workers compensation… the injured workers gave up their civil rights and access to a jury award in return for a “simplified”, expeditious system to cure and relieve the effects of the injury.

The whole point of medical legal expenses under Labor Codes 4620-4628 is to establish that the applicant can get their medical/legal costs PAID by the employer, and RECORDS are a well established part of that. There is no basis or authority the DWC used when drafting the Fee Schedule to FORCE the applicant to pay some of their reasonable and necessary medical legal expenses.

HOW TO DRAFT CHANGES TO THE FEE SCHEDULE FOR THE PROPER NUMBER OF SETS

I’m sure the DWC wants to prevent fraud and LIMIT the number of sets an applicant can order from a copy service to JUST what is truly NEEDED. I would suggest the BARE MINIMUM should be SIX. However, what happens if the law changes… or there are more disputed body parts than just one… more disputed treatment disputes than just one… or more employer/carriers than just one?

Now, I realize that some copy services refer their requests for additional sets now to their friendly competitors who charge the full $180 for the set, such as sets needed for IMR. They call these “IMR Orders”. I don’t condone or recommend that practice. It’s gaming the system and is why copy services have such a bad name in this industry. It would be better to explain the need to the DWC and lobby/negotiate a reasonable flat fee for additional sets, and get a provision for paper vs CD vs electronic download/upload.

While a “hard” maximum number would be easier for the claims adjusters to deal with, a more accurate limitation might be something like this: Additional sets of any record may be ordered by the applicant from a copy service who has the records in their inventory for use with Independent Medical Review, or for the purposes of Agreed Medical Examiner or Qualified Medical Examiner, or to send to the Primary Treating Physician, or any other regulated process that specifically calls for the applicant to send records to a party or physician.

LABOR CODE SECTION 4621 LIMITS ABUSE

The employer and carrier political groups might balk at the wording suggested above when limiting the number of sets, but the DWC should be reminded that Labor Code Section 4621 requires that only medical legal services that are “reasonable and necessary” are payable by the employer. So, copy services and their applicant attorney customers are still limited to the number of sets that are specifically authorized somewhere in the Labor Code or California Code of Regulations.

APPLICANT ATTORNEYS SHOULD BE INVOLVED IN THIS DISCUSSION

These regulations have a direct effect on applicant attorney law offices. Without the ability to order additional sets from their copy service, law offices must PRINT and SHIP voluminous sets of records around to physicians and other parties. The law seems very clear that “records” are a reasonable and necessary medical-legal expense, defined under Labor Code Section 4620(a), and should be paid by the employer.

I suggest that the California Applicants Attorney Association should be notified and get involved in the copy service fee schedule negotiations with the DWC.

SUMMARY

The point of this post is not necessarily to supply a “perfect solution” but to provide CONTEXT to the DWC and Stakeholders to start a meaningful conversation around this topic.

There should be a provision for more than 2 (or even 3) sets of a record that the applicant is allowed to get from their copy service to manage their case. There is also a serious need for different flat fees for PRINTED records vs CD-ROM vs electronic delivery.  It’s shortsighted to limit applicants to ONLY electronic downloads when many QMEs will only review PAPER records, and also because the Labor Code and Regulations specifically require that the other parties be served using either paper or CD. Mailing paper or even CD records through the US mail is expensive (consider using DocuCents, we have a CD shipping solution).

I hope the copy services and other Stakeholders will find this post useful, and feel free to use the COMMENTS section below to interact with each other and discuss this topic.

The post Copy Service Fee Schedule – ADDITIONAL SETS appeared first on ScanFiles, Inc..

Introduction

The DWC has shown some willingness to modify the 2015 Copy Service Fee Schedule. One of the major items copy services want is to UN-BUNDLE the Release Of Information fees that copy services often have to pay in order to gain access to records. The term un-bundle here means to allow copy services to pass-through whatever fees they paid to an ROI company ON TOP OF the copy service’s regulated flat fee they are entitled to charge for their services (currently $180). Under the current Fee Schedule, copy services must pay all ROI fees as part of THEIR cost of doing business, and NOT pass those extra fees on to the Payer/Employer.

The goal of this article is to give Stakeholders some context to discuss the pros and cons of un-bundling these ROI fees.

The Bottom Line

To cut to the chase, my own opinion is that lobbying to have the ROI fees UN-BUNDLED is a BAD IDEA. It will likely cause the DWC to reduce the Flat Fee for copying by the average amount of ROI fees being paid historically (discussed below). That will mean either the same or LESS PROFIT for copy services built into their regulated fee. The same or less profit does not seem like a good use of lobbying efforts for the copy services. A better path might be to shoot for the highest Flat Fee possible in this round, and then lobby for some tools to enforce the current ROI regulations, including the right to block the use of ROI companies in the first place.

Definition of an ROI Fee

An ROI company is a “copy service” that is hired by the WITNESS (medical office, etc.) to produce records requested by case parties… as opposed to a traditional Professional Photocopier that is hired by a LAW FIRM or Adjuster on the case to go on site and copy medical and other types of records needed to manage the case. An ROI company works for the WITNESS, whereas a Professional Photocopier (aka Copy Service) works for the LAW FIRM or case party.

Historically in California, most of the copying of records has been done by Professional Photocopiers. More and more often though, ROI companies are appearing and interfering with the job of the Professional Photocopier. The witness pressures the Professional Photocopier to deal with the ROI company to get the records, rather than let the Professional Photocopier go on their premises to copy the requested records.

Current state of who pays for ROI

Under the current Copy Service Fee Schedule, the Professional Photocopier is entitled to a $180 flat fee to copy records, and that includes any ROI fees that might be required. This keeps the cost down to Employers, keeps the ROI fees somewhat regulated, but INCREASES the cost of providing records for the Professional Photocopiers. The Photocopiers want the ROI fees to be removed from the Flat Fee (un-bundled), and charged to the Employer/Payer as a separate and additional fee on the Photocopier’s invoice.

This means the Payer would be responsible for the Flat Rate for copying ($180), PLUS whatever ROI fees the copy service paid to get those records. This could significantly INFLATE the percentage of copy service invoices where ROI fees appeared.

How much are copy services paying in ROI fees now?

I’ve been asking around and am fairly confident that the average “all in” fees paid by copy services to obtain copies of records is between $25 and $30 per location. That’s dividing the total fees paid for records by the total number of ALL transactions in a period. Let’s call it $27, and this includes the $15 standard witness fee normally paid to a witness to release records. This is an AVERAGE, so there are some transactions that have NO ROI fees associated with them, many with just the standard $15 witness fee, and a fair percentage that included ROI fees in the hundreds or even thousands of dollars.

Now, we probably shouldn’t stop at $27 as our answer because $15 of that $27 is the standard witness fee. So, the average ROI cost alone looks like $12, or 6.7% of the $180 Flat Fee provided by the Fee Schedule.

Most copy services will tell you that ROI services charge WAAAY more than $12. That’s right, because we are talking about AVERAGES across ALL locations copied. If a copy service only deals with an ROI company on 15% of their locations, then the average ROI fee would be about $80 when encountered. But don’t get caught up in the individual bills… think of ROI fees as just a part of the operating costs of the Professional Photocopier, and use the AVERAGE amount ($12) across all transactions for forecasting and budgeting. I’m pretty confident in the numbers in this article, as they came from high volume, reliable sources that studied the fees in their business.

What should be expected if the ROI fees are un-bundled?

Let’s say the DWC agrees to un-bundle the ROI fees from the Flat Fee for the copy services, and also agrees to a Cost Of Living (COLA) increase in the $180 Flat Fee.

A COLA increase from 2015 will move the fee up to about $205… but, you should expect the DWC to REDUCE the flat fee by the average amount currently being paid for ROI now as part of the UN-BUNDLING. If the DWC used roughly the same data used here that shiny new $205 gets reduced to $193. Keep in mind, that is IF (notice all CAPS) the DWC comes up with a similar $12 figure. They could easily use “other data” to reduce the shiny new $205 by much more than just $12.

Assuming the DWC agreed and set the Flat Fee to $193 (from $180) and un-bundled the ROI fees, what did this accomplish? My position is that copy services accomplished NOTHING with respect to how ROI fees affected their margins. The copy services would have fought and used up valuable political capital with the DWC and not moved the VALUE of their services one bit. They simply gave up $12 (or whatever the amount) of revenue in the flat fee to un-bundle $12 of average ROI costs across their transaction inventory. It’s a “wash”, but they “spent” their Political Capital that could have been used for something more valuable to them.

What about asking for more than a COLA increase?

The applicant copy services COULD go into negotiations with the DWC asking for much more than just a COLA increase, but the prospects of that seem dubious to me. The DWC spent years and budgeted a fair amount of money on the BRG study. They held several contentious public hearings to get to the current Fee Schedule of $180 (and $75 for when there are no records). There is a mostly new regime at the DIR/DWC now, so the people there probably aren’t enthusiastic about doing all the work and research to give copy services an entirely new Fee Schedule with a significant bump in fees, AND un-bundling of ROI fees. I think most reasonable people would NOT expect the DWC to increase the fees much beyond a COLA increase for this cycle. Nor would most reasonable people expect the DWC to be very enthusiastic about un-bundling a fee and shifting it to the employers, and allow that fee to be unregulated. Unregulated Fees = Abuse, in this system.

Hidden costs of un-bundling

Let’s say for the sake of argument the DWC agrees to un-bundle the ROI fees. Under the current fee schedule, applicant copy services do all they can to reduce or eliminate ROI fees from their transactions. This is because it’s a direct cost against their revenue, so the lower the average ROI costs they pay, the more profit the copy service enjoys. Employers and other Payers enjoy having a FLAT $180 (plus sales tax) without any add-on fees when anticipating and paying their claims costs. So, what happens when the ROI fees are un-bundled?

Under this un-bundled scenario, applicant copy service invoices suddenly jump UP in value from $180 to much more when an ROI company is involved. This will irritate Payers and cause confusion about the billing compared to the historical flat $180. Applicant copy service invoices will be DISPUTED more often, rather than being paid a high percentage of the time like they are now. This hurts the copy service, drives up claim costs, and uses up valuable local Appeals Board time to resolve unnecessary disputes.

With the ability to simply push the added cost of copying on to the Payer in the form of un-bundled ROI costs, applicant copy services will be encouraged to use an ROI company as much as possible, and pay whatever is requested. Using an ROI service whenever possible will reduce the copy service’s own copying costs, so they will enjoy more profitability on their flat rate under the fee schedule. In other words, the incidence rate of ROI costs appearing in a transaction will go UP, and that will drive the average overall copy service invoice UP as well. More costs to the employer and Payer, and with it more dispute for the system to deal with. Shady players will appear on the scene posing as ROI companies, charging exorbitant rates, and the system will now have created a problem they have to “fix”.

The historical California Professional Photocopiers would be getting closer and closer to simply a Deposition Officer Service, and no longer be in the copying business.

Conclusion

Personally, when I consider all of the elements of this situation, un-bundling the ROI fees from the Fee Schedule seems counterproductive for Professional Photocopiers. I would rather push for as high a bump in the Flat Fee as possible, and then lobby for some additional regulation that supports fighting and driving off ROI companies that overcharge. The DWC could be lobbied to provide penalties and fees when ROI companies don’t play fair. The goal of a Professional Photocopier business is to make a profit, so I suggest the copy services try to get the regulated fee as high as possible, and then fight to drive the ROI and other costs down using traditional methods. This makes more sense to me than deliberately encouraging the DWC to cut the regulated flat fee down so that more money can be paid to ROI companies.

What is your opinion? Please let me know in the comments section, below.

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Introduction

The WCAB has quietly, and with no direct authority, made efforts through their regulatory and decision powers to LIMIT the use and scope of applicant DISCOVERY in California workers compensation. These limits are PROFOUND. This was done through the 2013 En Banc decision Martinez v. Ana Terrazas and the followup rule change in that same year labeled C.C.R. Section 10451.3.

Specifically, what the WCAB has attempted to do is FORCE any and all discovery in the form of “Records” to be payable by the employer ONLY when the services were ordered during a period of time narrowly defined in LC Section 4620(b), Medical-Legal expenses. The Board went even further and opined that copying services specifically could NOT be incurred/collected as Labor Code Section 5811 Litigation “costs”, as has been the historical precedent. To make matters worse, in their subsequent panel cases since 2013 the Board has consistently expressed the opinion that the disputed issues listed on the Application Of Adjudication form by the injured worker is not sufficient evidence of a contested claim for the purposes of DISCOVERY, which was also the prior precedence.

The Effect Of The Martinez Case On Applicants And Copy Services

The EFFECT is that copy services are being required by WCJs to prove their services were ordered during a phase of the case where the claim was contested under the narrow definition of LC 4620(b). Often, the copy service can’t prove that, because the records were related to general discovery on the case, and unrelated to a medical-legal evaluation. While this situation is not widely known or enforced yet by the Payors in the system, the WCAB itself is holding every copy service that comes before the Board responsible for proving there was a contested claim when their services were incurred before considering any other issue – regardless if the records were medical-legal in nature, or not. As the WCAB’s new way of interpreting copy services “trickle down” to the local Judges and Claims Adjusters, this will present a very big problem for applicant attorneys and their copy services. From what I hear from hearing reps and collectors for copy services, this has already become quite a challenge on most or all of their receivables that go to trial for payment enforcement.

Applicant Attorneys May Be Barred From Ordering Records On Many Of Their Cases Under This Interpretation

By forcing “all” copying services to be related ONLY to a medical legal situation – and specifically NOT allowing copy services to be LC 5811 Costs –  applicant attorneys would no longer be entitled  to use a copy service on ADMITTED CASES where there is currently no disputed medical issues, and treatment and benefits are being provided. It also means that applicant attorneys would have to WAIT before starting discovery for up to 90 days, or until the employer accepted or denied the claim. This latter interpretation of the employer’s statutory time to review the case DELAYS when applicant attorneys can get busy doing discovery on their cases, and will delay the overall case timelines. Again, historical precedent is that applicant law offices start their discovery immediately after taking the case, so they have the evidence they need to make appropriate decisions while representing the injured worker.

Why Would The Applicant Attorney Order Records Before A Claim Is Contested?

Records are one of the most basic forms of discovery in workers compensation. Imagine the position the applicant’s attorney would be in if he/she were unable to review discovered records prior to the applicant’s DEPOSITION. On admitted cases where TD and treatment is being provided appropriately, THIS is the situation the WCAB’s decision has put applicant attorneys. Medical, employment and claims records have historically been used to prove industrial injury, prove or disprove prior medical conditions, prove or disprove adherence to the various medical guidelines required in the system (MTUS/ACOEM)… to help prepare an appropriate Request For Authorization (RFA) and subsequent UR denial response, and to send to IMR along with a request for treatment decisions. Employer records are used to prove notice of the injury, compliance with workers compensation requirements, wages, job description, notices, postings, and many other important benchmarks and data used throughout the case. Claims records are used to prove or disprove the fact that the injured worker received the proper and timely notices, that TD and other payments are the right amounts and provided timely, and to discover what records are available in the employer/claims possession. WCIRB records often must be subpoenaed to discover coverage information so the right parties can be noticed. These are just a few examples of the need for discovery unrelated to the need for a medical-legal evaluation.

In short, without proper discovery and records, the applicant attorney cannot represent his client in a professional manner – and especially on accepted cases. It is for this reason that most applicant attorneys and their copy services have simply ignored the WCAB’s decision in Martinez and changes in C.C.R Section 10451.1, and continued to order records at the start of their cases. Frankly, I doubt most attorneys or even their copy services fully understand what these changes meant to them.

The root issue here is copy services are struggling to get paid for the valuable work they provide to the injured workers when the carriers push this issue all the way up the chain to the WCAB. From the cases I’ve been reading, this is coming up more and more at local lien trials, as well. The swell is happening, which is why I am writing about this.

How Is The WCAB’s Interpretation Different Than Historical Precedent?

Prior to the Martinez decision and subsequent Regulation 10451.3, records were ordered and payment enforced under more than simply LC 4620. Payments for copying services were enforced as one of the following, depending on the status of the case, the type of records being copied, and the intended use of the records: (a) Labor Code 5811 “costs” between the parties, (b) Medical-Legal expenses, or (c) Medical expenses under LC 4600.

In other words, applicant attorneys could (and routinely DID) order records on admitted claims, as well as prior to there being any contested issues or medical disputes, and these services were enforced and collected as Labor Code 5811 “costs” between the parties. We are all aware and comfortable with this SAME situation when using Interpreters, so this concept should not be foreign to anybody. Also flying in the face of the WCAB’s holding in Martinez, Primary Treating Physicians could (and routinely DID) order records through copy services as part of treatment, and the copy service was able to enforce and collect their fees through Labor Code 4603.2(b)(1)(A).

What Authority Or Precedent For Records Being LC 5811 “Costs” Is Available?

I managed a large applicant copy service from 1986 through 2012, and our company enforced and collected copying receivables as LC 5811 expenses all the time. I was a witness at trial on at least one case where the Judge awarded the receivable as a 5811 “cost”, and not a medical-legal expense. Most of the other copy services, with a few exceptions, rarely pushed their issues before a WCJ to collect on their fees, and chose instead to just call and mail the adjuster endlessly for payment. Regardless, those of us that had to support the copy expense before a WCJ understood and used LC Section 5811 routinely.

In support of my personal experience, CHSWC documented the historical precedence for copy service costs as 5811 Litigation Expenses in their 2011 “Liens Report”, on page 15. Click on the clip, below to view.

Furthermore, in 2013, Labor Code Section 5307.9 became law, and was known as the Copy Service Fee Schedule, and echoes the CHSWC report in providing that the Fee Schedule SHALL apply to copy service costs when incurred under Labor Code Section 5811 (and 4620 and 4600). Click on the clip, below to view.

When the courts interpret the language of the legislature in a code section they are required to give all words and terms meaning, and not simply assume that by mentioning Labor Code 5811 here that the legislature either didn’t know what they were talking about, or didn’t REALLY mean that copy service receivables could be enforced under that section.  I can only assume that the Commissioners in Martinez simply overlooked this important Labor Code Section while forming their opinion, along with the fact that records are a valid treatment expense under LC 4603.2. By the way, I searched the Martinez case for mention of LC 5307.9 or LC 4603.2(b), and the Commissioners never addressed either one.

Finally, the Copy Service Fee Schedule regulations as enacted by the DWC in 2015, is the absolute authority regarding how and when records are to be ordered by applicant law offices. The fee schedule is based on the authority of LC 5307.9, which states “The schedule shall specify the services allowed..”  In plain language, this means that the schedule (regulations) shall be the authority that defines the circumstances surrounding WHEN and HOW the services are to be incurred.

It is important to note that the Fee Schedule Regulations were enacted TWO YEARS AFTER the Martinez decision, so the Martinez decision may have been superseded by the Fee Schedule Regulations on this issue. The problem with that theory is the WCAB is still publishing panel cases currently using Martinez as their benchmark.

Regulation Section 9982 is titled as and defines “Allowable Services” for use of a copy company, and there is no limitation mentioned or indicated that copying services may ONLY be incurred on contested claims as defined under LC 4620(b), nor does the Fee Schedule give any indication that other limitations may exist for copy services other than what’s stated. It would be pretty sneaky not to mention the fact that the services could only be incurred on claims during a period narrowly defined in LC 4620(b), if that were in fact what the Administrative Director was thinking when this regulation was enacted. The Fee Schedule does make a number of important limitations about WHEN during the course of the case copying services may be utilized, but again, nothing about NOT ALLOWING copying on admitted cases, or where there is no officially “contested claim” yet¹.

So, there is strong precedent that copying has always been allowed as a 5811 Litigation Cost, Labor Code LC 5307.9 specifically states that records may be enforced under LC Section 5811 through the Fee Schedule, and the Official Copy Service Fee Schedule regulation makes no mention of limiting discovery and records to only medical-legal situations.

Why Doesn’t LC 5811 Mention Copy Services

Okay, you might say… if copy service receivables have historically been enforced under LC 5811 then why doesn’t LC 5811 specifically provide for copying type services, like it does for Interpreters?

The pertinent section of LC Section 5811 that historically supported copy services is the second sentence:  In all proceedings under this division before the appeals board, costs as between the parties may be allowed by the appeals board. There is a significant body of case law that supports applicant litigation costs under this specific section. Interpreters and copy services and vocational experts all have routinely enforced payment for their services under this section over the last 30 years that I have been involved in the system.

In 2013, as part of SB863, Interpreters were specifically added to Labor Code Section 5811(b) to better clarify when an Interpreter can and cannot be used in a non-medical legal basis. The purpose was to put controls around the use of Interpreters – not to exclude copy services or any other type of service. The language that was added to subsection (b) of LC 5811 does not state or infer that Interpreters are the ONLY type of service or vendor that can be used under LC 5811, post-SB863, and no court has interpreted the changes to subsection (b) to mean that. So, it’s not clear why the WCAB chose to exclude JUST copy services from falling under LC 5811 in Martinez, and to lock them out of using a Petition For Cost in CCR 10451.3. In any event, that is what the Commissioners did.

What Authority Did The WCAB Use To Exclude LC 5811 “Costs” From Copy Services?

My interpretation of the Martinez opinion (En Banc) is that the Commissioners were concerned that Copy Services, in general, would withdraw their liens in bulk, and re-file all their receivables as a Petition For Cost under LC Section 5811 TO AVOID PAYING THE LIEN ACTIVATION FEE. This was the underlying situation in the Martinez case – the copy service filed a Petition For Cost under LC Section 5811 and withdrew their Medical Legal Lien they had previously filed, hoping to avoid the lien fee.

So, that is what this case really STANDS FOR.

The WCAB looked up Labor Code Section 4620 and saw that “medical records” were specifically defined there as a medical legal expense… and when they looked at Labor Code Section 5811 they did not see copy services specifically listed there – only interpreters. So, the CONVENIENT legal position the WCAB took was that any type of expense that is explicitly defined in one code section and not another IMPLIES that the expense should be EXCLUSIVELY considered in the defined area ONLY. In other words, since they found “medical records” written in LC Section 4620 and not specifically in Section 5811, they ruled out ANY OTHER usage for discovery/records except for in relation to a medical-legal evaluation (i.e. limited to LC Section 4620 only).

This interpretation fit nicely into what the WCAB was trying to accomplish as far as the lien fees, which was to STOP all copy services from withdrawing their medical legal liens and filing Petitions For Costs under LC 5811. However… the underlying premise is critically FLAWED, and causes what I believe were unintended consequences.

Why The WCAB’s Interpretation Is Flawed

First, to declare En Banc and in Regulation that copy services may only be used by applicants as a medical-legal service severely LIMITED the applicant’s right to DISCOVERY on their cases… and there was absolutely no authority as part of SB863 or anywhere else that indicates the Legislature intended to limit the applicant’s discovery rights so drastically. The WCAB’s entire premise in Martinez is based on the fact that the Commissioners only found “medical records” listed in LC 4620, and nowhere else in the Labor Code.

Which is where they got it wrong…

Records are clearly defined in Labor Code Section 4603.2(b) as a TREATMENT expense. And that’s just one place they missed…

Even more important is that Labor Code Section 5307.9, which was enacted as part of SB863 in 2013, defines and gives authority to a copy service FEE SCHEDULE, and gives authority to the Administrative Director to create a Schedule that defines what services are allowed. In other words, the Fee Schedule is responsible for listing all limitations on the services allowed by copy companies. Near the bottom of LC 5307.9 it states that the fee schedule shall be enforced under Labor Codes 4600, 4620 and 5811, or any other authority. This explicit use of Labor Code Section 5811 within the Copy Service Fee Schedule authority should leave NO DOUBT that the WCAB should NOT have concluded that copying services would ONLY be appropriate under LC 4620, and under no other Labor Code Section simply because they did not find any such authority in their limited research.

To drive the last nail into the proverbial coffin, California Code of Regulations Section 9982, the AD’s Fee Schedule Regulation, authorized and enforced by LC Section 5307.9, is titled “Allowable Services” for copy services, and nowhere in this list of limitations on the use of copy services does it state that such services may only be incurred on “contested claims” and used ONLY in relation to a medical-legal report under LC Section 4620.

Conclusion

It’s understandable that in 2013, the WCAB was trying to digest all of the changes from SB863 and fit all the various service types into their new silos of enforcement. The Commissioners wanted to keep copy services who had filed liens from spilling out of the “Medical-Legal Lien” silo and into the unregulated LC 5811 Litigation Cost silo. I seriously doubt any of the commissioners had given deep thought as to how discovery and copy services fit into the scheme of the system until then. In their haste to corral the pesky copy services the Commissioners neglected to do all of the research and thinking necessary to avoid some serious unintended consequences. I don’t believe the makeup of the WCAB at the time, or even now, really intended to limit the applicant’s discovery rights to the very narrow set of circumstances listed in LC 4620(b). They simply acted, and did the best they could in 2013, and in the ensuing years they are waiting for somebody to come along and give them a solid argument, with points and authorities, to change their mind. Thus far, this apparently hasn’t happened.

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INTRODUCTION

Last week, we discussed the possibility of collecting MEDICAL-LEGAL expenses that were part of a now-extinguished Claim of Lien by filing a Petition For Determination Of Non-IBR Medical-Legal Dispute under Labor Code Section 4622(c) and CCR Section 10451.1(c)(3). This week, I want to dive even deeper into this concept, because not only am I feeling more and more confident that the current state of the law supports this approach, but the method can also be used to collect Invoices that were part of liens that have been extinguished for other technicalities, such as:

• Failure to file a Claim of Lien before the Statute of Limitations in LC 4903.5
• Failure to prosecute Claim of Lien within 6 months of becoming a Party under CCR 10582.5
• Failure to comply with all the procedures and details required by CCR 10770 and 10770.1

THE THREE JURISDICTIONAL ENFORCEMENT “TRACKS”

The current state of the law since passage of SB 863 is that there are THREE “tracks” that may be employed to adjudicate DISPUTES between the provider and the employer/carrier over payment for services that were provided as part of an employee’s workers compensation claim. These Tracks are:

1. Independent Bill Review (IBR) under LC 4622(b) and LC 4603.6, along with the related Petition to appeal an IBR decision under CCR 10957
2. Lien procedures under LC 4903(b) et. seq., CCR 10451.2 (Treatment Expenses), CCR 10770 and 10770.1
3. Petition For Determination For Non-IBR Medical-Legal Expense under LC 4621(a) and CCR 10451.1

Each of these Tracks are independent of each other. In other words, you don’t have to file a lien before filing a request for IBR, or visa versa. Nor must a lien be filed before filing a Petition For Determination in Track number 3. Each track manages it’s own TYPE of dispute, and in fact the Tracks tend to mutually exclude each other in that regard. In other words, if IBR is the appropriate venue for a “fee schedule billing” dispute, then IBR is the only venue that will hear that dispute and make an enforceable decision. If IBR is NOT appropriate for a type of dispute, then the IBR provider (Maximus) will not make an enforceable decision on that issue. When there are multiple disputes that fall under different venues, such as both a “threshold” issue related to the expense AND a billing dispute under a fee schedule, THEN the “threshold” dispute must be resolved before going to IBR.

This is all laid out pretty well by the DWC and WCAB in their various regulations, which I have provided links to, above.

NON-IBR MEDICAL-LEGAL DISPUTE RESOLUTION

From here on, I am going to specifically be addressing medical-legal disputes, and not medical disputes. Medical disputes presently have no “Petition For Determination” authority, so the only Tracks available to medical-only providers are IBR (when appropriate), and through the filing of a claim of lien in Track number 2, above.

The actual receivable that a medical-legal provider “owns” is a medical-legal cost or expense that is owed to the provider under Labor Code Section 4621(a). The authority and defined procedures for enforcing that receivable against the employer/carrier is contained in Labor Code Section 4622, and is resolved thereunder either through IBR in subsection (b), or through the filing of a Petition For Determination and DOR in subsection (c). The jurisdiction of the appeals board over medical-legal disputes is defined in LC Section 4621(a) and the related CCR Section 10451.1. CCR 10451.1 provides the DETAILS for the filing of a Petition For Determination Of Non-IBR Medical-Legal Dispute that is described in Labor Code 4622(c).

A CLAIM OF LIEN IS NOT REQUIRED WHEN FILING A PETITION FOR DETERMINATION OF NON IBR-MEDICAL-LEGAL DISPUTE

Labor Code Section 4622 provides for TWO distinct Tracks for resolving medical-legal disputes, and that is IBR (Track number 1, above), which is defined in LC 4622(b), and the Petition For Determination and DOR, which is defined in LC 4622(c). The ONLY medical-legal disputes subject to Track 1, which is IBR, are disputes over FEES that are subject to an existing Fee Schedule. Therefore, ALL other medical-legal disputes fall under subsection (c) and the Petition For Determination, which is Track 3.

With CCR 10451.1, “Determination Of Medical-Legal Disputes“, the appeals board has interpreted LC 4622 and provided additional detail as required by the legislature in LC 4621(a). At CCR 10451.1(c)(3)(A) the appeals board states that a Petition and optional DOR may be filed by the provider for “any” non-IBR dispute. There are no limitations on WHEN the receivable underlying the dispute must be accrued, so it must be assumed this procedure applies to ALL medical-legal Invoices, including pre-2013 Invoices.

Subsection (D) of CCR 10451.1(c)(3) states that a claim of lien is optional but NOT REQUIRED. Now we just have to interpret the intent behind CCR 10451.1(e)…

Pre-2013 Claims Of Lien

Subsection (e) of CCR 10451.1(c)(3) talks about “lien claims filed before 2013.” It states that IF the provider once filed a claim of lien related to a medical-legal expense PRIOR to 1/1/2013, THEN that “claim of lien” shall be “subject to the lien conference and lien trial procedures of section 10770.1, subject to the timely payment of a lien activation fee, if applicable.”

That is specifically referring to Track number 2, the “Lien Track“. Subsection (e) does not state that if a lien had been filed before 2013 that the medical-legal expense, as defined in subsection (b), is somehow exclusively limited ONLY to the Lien Track, and cannot make use of the Petition For Determination. What subsection (e) tells us is that IF the provider intends to preserve his/her rights to the Lien Track for that medical-legal expense, they must pay the activation fee and follow the procedures defined in CCR 10770.1.

Subsection (e) does not state or insinuate that the “medical-legal expense” as defined in subsection (b) is extinguished if the “claim of lien” defined in subsection (e) somehow becomes defective or extinguished. In other words, (e) doesn’t say the expense is wiped out if the lien is extinguished. It simply says that if the provider intends to preserve the medical-legal claim of lien, they have to pay the activation fees. That’s it – short and to the point.

Still thinking (e) says you have to pay the activation fee or lose the expense entirely? Well, the telltale phrase written in subsection (e) is reference to the “claim of lien“, and not the “expense” that is defined in subsection (b). Since a claim of lien is a different Track from the “Petition For Determination” Track, and the claim of lien is entirely OPTIONAL when using the Petition for Determination as defined by CCR 10451.1(c)(3)(D), THEN allowing the “claim of lien” to become extinguished would not extinguish the “medical-legal expense”, itself. Losing a once filed “claim of lien” does not extinguish the legal responsibility that the defendant pay the “medical-legal expense” as defined in LC 4621/4622… and does not extinguish the jurisdiction of the appeals board as defined in LC 4621(a), LC 4622(c), and CCR 10451.1.

Keep straight in your mind when thinking about all this that we have the expense itself, which is defined in LC 4620… and the responsibility of the defendant to reimburse the applicant for that expense, as defined in LC 4621(a)… and then we have the PROCEDURES for enforcement of that expense before the appeals board that is defined in LC 4622(c) and codified in CCR 10451.1. Not one of those Labor Codes or Regulations states or even alludes to the concept that a claim of lien is required. The ONLY reason a claim of lien was required prior to SB 863 was because that was the only authority a provider had for getting a hearing before the appeals board. The claim of lien was what carried the provider’s jurisdictional rights to a hearing. Losing the rights to the lien claim has never extinguished the expense, or the defendant’s responsibility to reimburse the applicant for that expense… it’s just that if a provider lost their claim of lien, they had no rights to go before the appeals board and seek an order for payment.

Now that LC 4622 has been amended to include the authority to file a simple Petition For Determination and DOR to settle medical-legal disputes, and that has been further codified in CCR 10451.1 to allow the provider to file that petition and DOR, the provider has TWO choices (Tracks) to get a hearing before the appeals board: Track 2 (Lien), or Track 3 (Petition For Determination). If the provider loses Track 2 because they failed to pay the activation fees or follow the rules in CCR 10770.1, they can STILL use Track 3.

USING AN EXAMPLE TO INTERPRET CCR 10451.1 subsection (e)

If you still doubt the concept of using a Petition For Determination after a pre-2013 claim of lien has been extinguished, consider this example:

Provider A is a medical-legal provider that incurred Invoices PRIOR to 2013 but had never filed a claim of lien related to those invoices.

Provider B is a medical-legal provider that incurred invoices AFTER 1/1/2013, and never filed a claim of lien related to those invoices.

It’s clear in CCR 10451.1(c)(3) that both Provider A and Provider B may enforce their right to reimbursement for their medical-legal expenses using a simple Petition For Determination and DOR… Neither provider is required to file a claim of lien under LC 4903(b) to enforce their right to reimbursement before the appeals board using this simple petition, nor is either provider required to pay any lien fees.

Provider C is a medical-legal provider that incurred invoices PRIOR to 2013, but DID file a claim of lien related to his/her invoices under LC 4903(b). In other words, Provider C has a pre-2013 Claim Of Lien currently on file with the DWC.

It would be illogical and a misrepresentation of what both LC 4622(c) and CCR 10451.1(c)(3) stand for to say the rules CHANGE for Provider C, just because he/she had filed a claim of lien prior to 2013. In other words, “Ha! Ha! Provider C, you can’t use a Petition For Determination like every other provider because you once had filed a claim of lien but later failed to keep that claim in good standing.”

Labor Code 4622(c) and CCR 10451.1 both lay out the same standard procedure for enforcing reimbursement of “any” medical-legal dispute not subject to IBR through the filing of a petition and DOR. Labor Code 4622 makes no mention of filing a lien, and CCR 10451.1(c)(3)(D) specifically says that a “claim of lien” is NOT required to make use of a Petition For Determination. There is no limitation written in either LC 4622 or CCR 10451.1 that says the Petition and DOR filing described in both may only be used with Invoices or receivables that were incurred on or after 1/1/2013, or had NEVER been related to a claim of lien. Therefore, the plain wording and authority of these Sections stands for a Petition For Determination procedure being used with any and all medical-legal disputes, including the example above for Provider C.

The prior claim of lien for Provider C may become extinguished because of a failure to pay the activation fee, or some other technicality, and the provider may STILL continue to use the standard procedure defined in LC 4622(c) and CCR 10451.1 to enforce payment of their otherwise valid receivable, which is the Petition For Determination and DOR

WHY A CLAIM OF LIEN MAY BE OPTIONAL FOR MEDICAL-LEGAL EXPENSES

Things would be simpler if the Labor Code and regulations had just the THREE tracks I mentioned above, and kept them all separate. By including medical-legal expenses as one of the categories of expenses that may be part of a claim of lien as defined in LC 4903(b) it creates confusion as to HOW the legislature intends to adjudicate medical-legal disputes. Should the provider use Track number 2, the claim of lien… Track number 3, the Petition For Determination… or some combination of BOTH Tracks 2 and 3?

For one thing, ripping medical-legal providers out of the long established lien procedures and forcing them into some entirely new and simplified procedure would be seriously disruptive. Especially when the legislature knew that it would take some time for the WCAB and DWC to create regulations around all this, and to flush out all the bugs in the law. To ease the transition, I can understand why the DIR and the legislature would allow BOTH tracks to be available to medical-legal providers.

I could also envision the legislature accommodating those providers that routinely accrue BOTH medical expenses AND medical-legal expenses on the SAME CASE. Rather than force the provider to go through separate tracks to collect their various types of fees, the medical-legal expenses were made optional as PART OF THE MEDICAL LIEN CLAIM. By making medical-legal expenses an optional lien claim category, some providers could enforce resolution of their disputes through the lien procedures (Track 2), while others could enforce their disputes through the Petition For Determination (Track 3).

The legislature might also have anticipated applicants electing to incur a medical-legal procedure or service that is not payable by the defendant for some reason, such as a non-pQME medical report, and the applicant wanted to allow a lien against the their permanent disability compensation under LC 4903 to pay for the services.

I don’t know what the intent was in making medical-legal expenses both the subject of a lien AND the subject of an informal petition. The fact of the matter is that’s the way the law has been written, in both Labor Code and Regulation form. Therefore, failing to activate a lien should not mean the underlying right to reimbursement for the medical-legal expense as defined by Labor Code Sections 4620-4628 and CCR Section 10451.1 has also been extinguished.

I think the friction and confusion around interpreting CCR 10451.1, and particularly subsection (e), has been the ASSUMPTION that the Administration intended to wipe out all the small medical-legal providers that had filed liens prior to 2013 but then failed to pay their activation fees by the 12/31/2015 DEADLINE. I think the reality is that medical-legal providers never really needed to pay those activation fees, in the first place. The Legislature moved medical-legal expenses OUT of the Lien Track¹ with SB863, and created this new Petition For Determination Track defined in LC 4622(c), and later codified in CCR 10451.1(c).

CONCLUSION

The point of all this is to argue that medical-legal expenses are not subject to lien filing procedures, lien filing fees, lien activation fees, or the lien procedures defined in CCR 10770/10770.1 UNLESS that is the TRACK the provider deliberately intends to pursue. If a provider would rather go down the simpler Petition For Determination with DOR track, then the claim of lien is not necessary, and in fact should probably be avoided because of the fees involved.

While I’ve yet to hear of anybody actually attempting to use the Petition For Determination Of Non-IBR Medical-Legal Expense on a receivable that is associated with a now-extinguished claim of lien under LC 4903(b), I can’t find anything in the current state of the law that would preclude this procedure. To the contrary, when reading LC 4621(a), LC 4622(c), and CCR 10451.1(c), what I read is a very clearly defined and simplified procedure for getting medical-legal disputes resolved without a lien claim.  This isn’t some oversight… it’s the intention of the legislature.

If you know of some case or language that stands for something different than I have suggested here, please let me know by replying to this post, or sending me a private email (Stephen@ScanFiles.com). I would love to hear  your feedback.

As always, keep in mind that I am not an attorney and I am not giving legal advice here. I am merely pointing out what the Labor Code and Regulations say, and offering my personal interpretation.

FOOTNOTES

The post Jurisdiction Of The Appeals Board Still Available When Medical-Legal Lien Not Activated appeared first on ScanFiles, Inc..

INTRODUCTION

So, you’ve got hundreds of thousands (or millions) of dollars in workers comp lien claims you filed under Labor Code 4903(b) before January 2013, and you couldn’t raise the cash to pay the Activation Fee before the deadline. Now what?

Were the receivables underpinning those now-extinguished lien claims also extinguished? Could it be considered fraud under Insurance Code Section 1874.1 or Penal Code Section 550 to continue to send invoices and statements to the employer/carrier on those receivables where you know the lien has been extinguished? (Hint: I would say no, not even remotely.)

Given the Exclusive Remedy Rule that limits jurisdiction to the appeals board, is there ANY pathway to ENFORCE the payable underpinning those now extinguished lien claims against the employer/carrier? (Hint: For medical-legal expenses, I would say YES.)

This post reviews the nature of medical and medical-legal expenses and the Claim of Lien under Labor Code Section 4903, and explores post-LAF Deadline options for providers. Readers should take into account the fact that I am not an attorney, do not practice law, and am not providing any sort of legal advice here; I am simply trying to put all this into context so readers can understand the various pieces of this puzzle, and pointing out some interesting arguments that might be used to collect the medical-legal expenses that were once part of a now-extinguished lien claim.

MEDICAL AND MEDICAL-LEGAL EXPENSES ARE PART OF THE APPLICANT’S “COMPENSATION”

It’s important to understand each piece of this lien puzzle, and how the pieces fit together. The goal of our discussion here is to figure out what to do with the receivables that providers FAILED to activate before the 12/31/2015 DEADLINE. To do this, let’s start with understanding how the receivable fits into the applicant’s workers compensation benefits…

It always helps me see the big picture of things when I look at the Table Of Contents of the Labor Code. (You can click on this link to view the TOC.) Medical Treatment is in Article 2 of Chapter 2 of Part 2 of the Labor Code. Medical-Legal expenses are in Article 2.5 of the same chapter and part of the Labor Code. So, it’s important to realize that such expenses are part of the applicant’s “COMPENSATION”, which is a KEY WORD when we look at the LC 4903 lien provisions:

• Part 2 is titled “COMPUTATION OF COMPENSATION“
• Chapter 2 is titled “COMPENSATION SCHEDULES”

… so, medical and medical-legal expenses incurred by the applicant are paid to the providers as part of the applicant’s “compensation“.

Normally, we think of the applicant’s “compensation” as being just their permanent disability award at the end of the case. Permanent Disability is found in the same Chapter and Part of the Labor Code as medical and medical-legal expenses (Chapter 2 of Part 2), but PD is under Article 3, “Disability Payments”.

Thus, it’s all “compensation” afforded the applicant under the workers compensation system.

THE RIGHT TO PAYMENT FOR MEDICAL AND MEDICAL-LEGAL EXPENSES

Assuming the applicant has a right to compensation under the employer’s workers compensation policy, and assuming the expenses were incurred according to all pertinent Labor Codes and Regulations (and published case law), medical providers have a right to payment for their services as defined by Labor Codes 4600-4614.1 and CCR 10451.2. Medical-Legal providers have a right to payment for their services as defined by Labor Codes 4620-4628 and CCR 10451.1.

Medical-Legal providers have a very specific and well defined payment and dispute workflow defined in Labor Code 4622 that, if followed accurately and timely, provides authority for the provider to be paid relatively quickly and directly by the employer/carrier through either the IBR process, or through the filing of a Petition For Determination Of Medical-Legal Dispute. The Petition For Determination process is well defined in the WCAB’s regulation CCR 10451.1 and derived from the specific authority for such a petition as found in LC 4622(c). It’s pretty clear from that regulation (and Labor Code section) that enforcement of unpaid medical-legal expenses does NOT require a LIEN to resolve… at least as long as a lien was never filed. The rest of this article will go into a deeper discussion of what happens when a lien WAS filed, and has since been extinguished.

Medical expenses, on the other hand, are more complicated. The Labor Code defines a Utilization Review process and Independent Medical Review (IMR) process that is all about enforcing exactly WHAT procedures and medications may be prescribed by the treater, and an Independent Bill Review (IBR) procedure for resolving billing disputes. For everything else, or for expenses that were accrued prior to the IBR and IMR systems, the WCAB has defined in CCR 10451.2 that enforcement of disputes must be resolved through the Lien Procedures as defined by LC 4903(b), CCR 10770, and 10770.1. Thus, medical expenses present a deeper challenge to collect when a pre-2013 claim of lien has been extinguished due to lack of payment of the LAF fee by the deadline.

THE LC 4903 CLAIM OF LIEN

Most people that are exposed to the term “work comp liens” assume that a provider who holds a lien has a right to be paid out of the injured workers Award for Permanent Disability – i.e., their “cash” award. After all, that’s what having a “lien” against some asset usually means. LC 4903 starts off in the first paragraph with the sentence, “The appeals board may determine, and allow as liens against any sum to be paid as compensation, any amount determined as hereinafter set forth in subdivisions (a) through (i).” (emphasis added).

However, based on our discussion earlier about medical and medical-legal expenses, we know that such expenses ARE paid out of a form of “compensation” provided by the employer/carrier to the applicant, but it’s NOT from the applicant’s permanent disability award.

Of the NINE categories listed in (a) through (i) of LC 4903, EIGHT of the categories are expenses paid out of the applicant’s permanent disability COMPENSATION, such as the attorney’s fee under (a), or from outside insurers, disability plans and third parties that paid some of the applicant’s expenses during the time the applicant was unable to work. These third party payers listed in (a) through (i) of LC 4903 may file a lien against the applicant’s compensation and be paid back out of the PD Award at the conclusion of the case. These include living expenses that may have been paid by some third party, burial expenses, and unemployment benefits.

Of the categories listed in (a) through (i), subsection (b) liens are the only ones NOT paid or reimbursed out of the applicant’s permanent disability compensation at the conclusion of the case. Liens in subsection (b) are paid out of the applicant’s medical and medical-legal compensation.

The point I am making here is that a “Claim Of Lien” under LC 4903 notifies the appeals board that some third party (not the applicant or the employer) is requesting their “claim” be paid out of the applicant’s “compensation” derived from the workers compensation benefits.

THE EXPENSE AND THE LIEN ARE TWO SEPARATE RIGHTS

An important concept in this discussion is that a “lien claim” is a separate and distinct right of the provider of services (or any lien claimant) from the expense defined and enforced under other Labor Code Sections. For example, LC 4660-4614.1 defines the rights of a provider of medical treatment services to be paid, and LC 4620-4628 defines the rights of a medical-legal provider to be paid.  Most providers collect their fees and costs under those code sections without ever acting on their right to file a lien under LC 4903.

For example, consider the “Mechanic’s Lien” in the civil world. A contractor that works on your house and remains unpaid may file a LIEN against your property. If your home is sold while the mechanic’s lien is still in effect then the contractor must be dealt with before the sale of the home can be completed. Usually, the money owed the contractor is taken out of the proceeds of the sale of the property and paid to the contractor holding that lien.

LC 4903 Liens in workers compensation are handled in much the same way as the mechanic’s lien. At the conclusion of the applicant’s case against the employer, any liens then on file under LC 4903 MAY be awarded out of the proceeds of the applicant’s compensation by the appeals board in the manner and fashion described in LC 4903 and 4903.1.

As I outlined earlier, the subsection (b) liens are a bit of a different animal than the other liens in subsections (a) through (i), but it’s all still the same theory and concept. While all the other categories of liens are awarded out of the applicant’s permanent disability compensation, the medical and medical-legal expenses are paid out of the applicant’s medical and medical-legal “compensation”.

The point here is the contractor in the mechanic’s lien scenario owns a receivable which is payable REGARDLESS of the lien claim against the house. The lien claim against the house is merely a legal pathway (process) for the contractor to enforce his rights to be paid by the homeowner for the services that were incurred. The mechanic’s lien is just a way for the contractor to secure that receivable. If the contractor failed to file the lien before the statute of limitations, or failed to pay the filing fee, or in any way failed to execute his right to file a lien against the property, that contractor CONTINUES to be owed the money by the homeowner, and may still ENFORCE and COLLECT that receivable through whatever legal means available. In other words, the LIEN and the RECEIVABLE are not the same thing.

This same concept applies to medical and medical-legal expenses in California workers compensation. Medical-legal expenses are defined and described in Labor Codes 4620-4628. The provider is responsible for accruing the expense under the defined procedures, and after properly billing for their services (following any established fee schedules) and serving all the correct parties with an invoice, the provider may be entitled to payment for their services. If the employer/carrier fails to pay the amounts owed for the services there are a series of collection procedures written into LC 4622 that must be followed to ensure and enforce the receivable as a medical-legal expense duly owed on the case.

Assuming the provider successfully navigated ALL the various procedures and timelines defined in LC 4622(c), and the receivable remains unpaid¹, that provider MAY file a claim of lien under LC 4903(b). The operative word being “may”. Just like in our mechanic’s lien example above, the provider of medical or medical-legal services owns a valid receivable separate and distinct from any claim of lien, and the provider has every right to enforce and be paid for their services regardless of the status of that claim of lien.

The reason a medical or medical-legal provider may want to file a lien is because there are specific lien enforcement procedures written into CCR 10770.1 and other related sections that provide a Lien Claimant certain rights to use the appeals board and seek awards for their underlying receivable. Given the fact that the appeals board has exclusive jurisdiction over any disputes regarding that receivable, these “lien procedures” may be the only avenue of legal enforcement available to the provider. However, the vast majority of all medical and medical-legal expenses are paid without the provider ever filing a lien. Some such expenses get paid quickly and without incident once the invoice is served on the employer/carrier. Some get paid paid by going through other enforcement procedures, such as IBR, IMR, or the Petition For Determination Of Medical Legal Dispute under CCR 10451.1. Some such expenses get paid after a LC 4903 lien is filed but without ever making an appearance at the appeals board… and, of course, there ARE some such receivables that ONLY get paid after attending a hearing or trial as a Lien Claimant under CCR 10770.1. The point is, nothing in any code or regulation (that I know of) states that a LC 4903 lien MUST be filed in order to qualify an otherwise valid medical or medical-legal expense as payable. Like the contractor and the Mechanic’s Lien, It’s just one option of enforcement that may be employed by the provider to secure his/her receivable.

THAT is a very big point in this whole Lien Activation Fee (LAF) Deadline situation.

EXTINGUISHING A CLAIM OF LIEN DOES NOT EXTINGUISH THE RECEIVABLE

For all those medical and medical-legal providers out there who had filed a lien prior to 2013, and failed to pay the activation fee on those liens before 1/1/2016, you should’t give up on those receivables just yet. You merely lost the claim of lien, which is not the same as having the receivable extinguished.

The PROBLEM providers face when they previously HAD a claim of lien prior to 2013 but that claim has since been extinguished “with prejudice” by operation of law, is that whatever appeals board enforcement rights that existed previously through that claim of lien and CCR 10770.1 have now been permanently lost. You can’t just re-file a new lien. The provider is no longer a Lien Claimant as defined by CCR 10301(t) and has no pathway to become a Lien Claimant on that case again for those same services. That also means the provider can never become a case “party” as defined by CCR 10301(x). Those are significant limitations, depending on what OTHER avenues of enforcement are available to that provider. If the claim of lien was the ONLY legal pathway to get an Award from the appeals board forcing the employer/carrier to pay the medical or medical-legal receivable, then that provider has a pretty serious challenge to get paid.

Make no mistake that the receivable is still OWED by the employer/carrier regardless of the status of the lien claim, and the employer/carrier are still fully responsible for payment of that receivable… but the provider lacks a legal right to go before a Judge in some court with jurisdiction and FORCE the employer/carrier to pay that debt.

HOW CAN RECEIVABLES BE ENFORCED WITHOUT A LIEN?

What we’ve described so far in this post is that a receivable under LC 4600 or 4620 et. seq. is still a valid receivable, payable by the employer/carrier, regardless of the existence of a LC 4903 claim of lien. I see no authority that stands for the underlying receivable becoming extinguished simply because the provider screwed up the claim of lien. The question becomes, HOW TO ENFORCE PAYMENT FROM THE EMPLOYER/CARRIER without going through the established Lien Procedures defined in CCR 10770.1, Labor Code 4903, and related “lien” procedure authority?

MEDICAL-LEGAL EXPENSES ATTACHED TO AN EXTINGUISHED LIEN CLAIM MAY STILL BE ENFORCEABLE

For medical-legal providers, there is a viable answer in CCR 10451.1, Determination of Medical-Legal Expense Disputes.

This WCAB regulation clearly sets out how the filing of a LC 4903(b) claim of LIEN is entirely OPTIONAL for medical-legal expense enforcement. See subsection CCR 10451.1(c)(3)(D), which states, “(D) A medical-legal provider is not required to file a claim of costs in the form of a lien in conjunction with the petition or DOR. However, if the provider elects to file such a lien, it must pay a lien filing fee, if applicable.”

This clearly states that if a provider never filed a claim of lien under LC 4903(b) then it can enforce collection of the receivable using a Petition For Determination Of Medical Legal Dispute process, without filing a lien, and without paying a lien fee. However, what if the provider already filed a lien?

CCR 10451.1(e) is titled, “Medical-Legal Lien Claims Filed prior to January 1, 2013 under Former Labor Code Section 4903(b)”. The brief language in this section states in its entirety: “Medical-legal lien claims filed prior to January 1, 2013 under former Labor Code section 4903(b) shall be subject to the lien conference and lien trial procedures of section 10770.1, subject to the timely payment of a lien activation fee, if applicable.” That’s it… end of subsection.

It’s important to note that it states medical-legal “lien claims”, and not medical-legal “expenses”. There again, this statement only applies to the claim of lien, and not the medical-legal claim for services provided. Those are two separate rights. Therefore, if the invoice is for services accrued prior to 2013 but a lien was never filed, then clearly the procedures in CCR 10451.1 would still be available to the provider. So…. if you never filed a lien on your pre-2013 invoices, you should be able to use the Petition For Determination Of Medical-Legal Dispute procedures without filing any liens, or paying any lien fee.

CCR 10451.1 doesn’t state what happens if the provider HAD file a lien on their pre-2013 invoice, and that lien has since been subsequently dismissed or extinguished by operation of law. Subsection (e) says the provider is responsible for paying the lien fees, which would include the LAF, but again it also states in subsection (c)(3)(D) very clearly that having a claim of lien is purely optional for medical-legal expenses, and is not required. Therefore, the existence or non-existence of a medical-legal lien claim should not affect the rights of the provider to file a Petition For Determination under CCR 10451.1.

In fact, if I were a medical-legal lien holder, I would have seriously considered not paying ANY LAF fees at all, let all those liens be extinguished by operation of law, and simply gone through the CCR 10451.1 route on all my accounts receivable.

Nowhere in CCR 10451.1 does it state that a Petition For Determination and the procedures set forth in the section cannot be used when the provider once HAD a claim of lien on file, but has since LOST the rights to that claim. I’m not trying to read something into CCR 10451.1 that isn’t there, I am simply taking the language of the section at face value and saying providers should follow it. Nothing in the section appears to me to stand for “If you screw up and lose your claim of lien then you can’t file a petition for determination and still collect on your receivable.” Logically, from a plain reading of the section, it would appear that liens are OPTIONAL and not necessary in the enforcement of a medical-legal dispute – period. CCR 10451.1 seems to provide all of the same benefits of CCR 10770.1, but with a whole lot less friction and landmines.

Which brings me to my next point…

WILL THE WCAB SUPPORT THIS THEORY?

Most of you are probably reading this and thinking “this is an interesting theory, but no Judge is going to stick his neck out and support this interpretation given the present political environment.” That’s probably an accurate response to what I’ve offered up here, but I’m just pointing out what the “black letter of the law” states in these various sections. What it boils down to is will the WCAB support this interpretation upon Petition For Reconsideration?

I want to point out that CCR 10451.1 is a WCAB regulation, written by the commissioners now sitting on the WCAB. The commissioners are attorneys and judges that came up through the ranks of this system, and have a fairly even political mix of both the applicant and defense backgrounds. In other words, the people in control of whether this interpretation wins or loses are the best legal minds our system has to offer – and the very people that wrote CCR 10451.1. They will respond to this interpretation of THEIR regulation from a LEGAL standpoint, more so than a political one.

As a stark contrast to the position of the WCAB commissioners, the Lien provisions of CCR 10770.1 is a DWC regulation, which was authored by political appointees inside the DIR, many of whom were directly behind the drafting and political wrangling that brought us all the anti-lien provisions of SB 863. When you compare the fairness to the providers in CCR 10451.1 with the frictional and aggressive treatment in CCR 10770.1 you get a distinctly different political flavor. My point here is that injured workers and the medical-legal providers have a fighting chance of NOT getting summarily dismissed for no other reason than they work for the applicant side when dealing with the WCAB.

Personally, I think medical-legal providers have a fighting chance at this interpretation of CCR 10451.1 through a WCAB published case. Medical providers don’t have the luxury of a Petition procedure like the medical-legal providers have, so for medical providers that failed to pay the LAF and protect their lien claim, things will be more difficult.

HOW TO PROCEED ON THIS ISSUE

To be successful with this vision, the providers should make a concerted effort to engage on this issue as a GROUP, much like the California Applicants Attorneys Association does when they want to get an important interpretation of the law published. Hire the best attorney possible and have him/her represent the best CASE possible in a venue where the appellate courts have the configuration you think have the best possibility for success. DO NOT simply start filing Petitions on every receivable you have, and sending any old lien representative to the Board on these. THAT would end in disaster. This is a sensitive legal matter that will take a delicate and thoughtful approach.

I suggest CAAA and CSIMS work on this together, and the medical-legal providers as a whole give the perfect case a year to percolate through the right channels and appear before the WCAB in the best possible light. I believe that the CAAA Board would be more than just open to supporting their valued providers in this area.

CONCLUSION

At least for medical-legal providers, there seems to be a dim but present light at the end of the proverbial tunnel when it comes to enforcing payment on their pre-2013 lien claims that were not “activated” by paying the LAF before the deadline. I certainly would not just give up on those receivables and destroy the files, or in any way stop pursuing the employer/carrier. It may not be worth the money spent on supplies and postage to send a ton of statements or invoices out on those receivables, the money IS still owed.

Medical providers need some sort of creative method to get jurisdiction over the employer/carriers, and some sort of class action lawsuit certainly seems in the realm of possibility.

I should point out that the CCR 10451.1 Petition procedure is silent on any Statute Of Limitations, so all those old receivables that never had a lien filed certainly seem like a candidate for such a petition to me. Any receivable that was never the subject of a lien seems ripe for a Petition For Determination Of Medical-Legal Dispute unless and until the WCAB comes out with a published case that says otherwise.

Providers should proceed very carefully from this point forward. I suggest you come together around CSIMS, CAAA or some other group so that some of you don’t go off in some direction and cause the WCAB you issue a poor case on this matter.

FOOTNOTES

The post What Happens to PRE-2013 Liens That Weren’t Activated? appeared first on ScanFiles, Inc..

INTRODUCTION

The subjects I pick to write about often come down to RISK. When things change in this industry, it often takes years for people to fully integrate those changes and make the necessary ADJUSTMENTS to manage them. If participants in this industry can’t assimilate the changes into their business goals and platform, they won’t be successful. Those participants that are early adopters of integrating the changes are usually the most successful. I happen to enjoy the process of reading all the changes and trying to predict the outcome. Often, this includes putting some thought towards the genesis of the changes – who caused the change, and what agenda the changes embody. The late-2012 legislation known as SB 863 introduced a lot of changes. Most of the posts here at ScanFiles.com have been my observations and concerns about what those changes mean to the PROVIDERS and attorneys that represent injured workers – including the regulations interpreting SB 863 that have trickled out of the various DIR Units since the bill was enacted.

Today’s post is about the recent trend of provider ARRESTS for fraud: kickbacks, illegal referrals, and billing for unnecessary services. Some of the biggest provider names in the industry has shown up in the news lately. Could you be next?

APPLICANT-SIDE PROVIDERS ARE BEING TARGETED

There should be no question in anybody’s mind at this point that SB 863 specifically targeted the offices that treat and provide various other services to injured workers: physicians, chiropractors, interpreters, copy services, and other service providers that have historically filed LIENS under Labor Code Section 4903 have been under a serious (and successful) attack. The Lien Filing Fee (LFF), Lien Activation Fee (LAF) and markedly reduced Lien Filing Statute Of Limitations (LFSOL) all fit together to make it procedurally more difficult and expensive to provide services to injured workers and their attorneys than ever before. A new Fee Schedule for copy services has made sharp reductions in revenue for these types of providers, and weakened them. Similar fee schedule changes are affecting other types of applicant-side providers. These and other changes have shocked the system and caused cash flow issues for applicant-side providers of all types.

If you do some research on the Net (CCWC, CHSWC, DIR), you will find the same names of powerful folks that helped manage SB 863 through the legislature are also driving the anti-fraud efforts, and the obvious agenda is to put FRICTION on as many applicant-side providers in the system as possible. Take away their accounts receivable, put procedural friction and expense on their collection processes, and make it increasingly illegal to market their customers and business associates.

Providers that put themselves in the crosshairs of Insurance Code 1871.4, Penal Codes 549-550, and the SB 863-created Labor Code 139.32 are taking substantial RISKS in today’s anti-provider environment. Take steps now to review your marketing and business processes so that you DON’T become the next casualty in the system. Consider these recent news stories:

Drobot Says He Paid Nearly $23M to Alleged Co-Conspirators – Aug 2015

Frontline Medical Owners Charged in $150M Fraud Scheme – Sept 2015

SCIF Accuses 15 Additional Providers Of Conspiring With Drobots – Sept 2015

Drug supplier pleads guilty to paying illegal kickbacks to doctors – Dec 2015

Nine Arrested in $24.6 Interpreter Billing Scheme – Dec 2015

If you are an applicant-side provider in this system and haven’t carefully read each of the Fraud code sections mentioned in this Post and considered them in relation to how your business operates, you are literally playing a game of Russian Roulette every time you send an employer/carrier an invoice. If you are an applicant law office and are getting incentivized for referring injured workers or ordering services from your various vendors, you are playing the same dangerous game. If you are wondering what types of SERVICES fall into the category of “TARGET” by the Powers That Be, then look no further than Labor Code 139.32(a)(3) and review The List (of “Services”). These are the service providers targeted by the powerful people behind SB 863 and who need to stay squeaky clean while the post-SB 863 “shakeout” continues.

LABOR CODE 139.32

My personal opinion after studying this code section for countless hours over the last three years, is that it’s illegal (misdemeanor) for an attorney or provider of “Services” to accept or provide anything of value between each other if they refer injured workers to each other, or use each other’s services. These same provisions can be used against claims adjusters and their vendors, but that is a story for a different day.

If you are an applicant law office and you are accepting injured worker referrals, cash, gift cards, vacations, cars, free ancillary services or occasional gifts of any kind from a provider of services that you refer to (or place orders directly with), you are violating this code section and risking your State Bar status, your freedom, and your life savings. It’s completely unnecessary to take incentives from providers, and doing so hurts the reputation of the entire system. There is no scenario where this is worth the risk.

If you are a provider and trading cash, gift cards, free services, subsidizing licenses or fees, or trading anything of value for referrals or direct orders for your services, you are setting yourself up for elimination from the system through Labor Code 139.32. Many (including me at one time) thought that only the Interested Parties (attorneys and doctors) were at risk under this code section, but subsection (e) clearly states that as soon as you present an invoice to the employer/carrier for your services on a case controlled by that Interested Party whom you have incentivized, you have violated LC 139.32 and are subject to all the penalties in subsection (g), including jail and major financial penalties.

I’m not trying to concern anybody over lunches or drinks, or the occasional Starbucks cards… or even free charts or the usual and customary small-value gifts that help all businesses build relationships with their customers. I can’t imagine anybody getting arrested over such benign gifts as part of standard business marketing. I’ve listed some examples of what I think you should all be concerned about following the next section (see “Examples Of Illegal Incentives Under LC 139.32”). First though, let’s go over the details of Labor Code 139.32.

BREAKING THE CODE INTO DIGESTIBLE PIECES

The real problem with Labor Code Section 139.32 is that it’s so damn complicated and confusing to read and understand. I’ve broken each subsection down below, and tried to provide some context. However, be warned that I am not an attorney, and you should not rely upon my interpretation. Consult your attorney before making any decisions about this code section:

(a) contains all the Definitions needed to understand the section as a whole. Each subsection is listed below:

(a)(1) defines “Financial Interest“, and talks about how financial incentives might be passed between a provider of “services” and an Interested Party, such as a law office. The definition includes discounts and subsidies, including direct and indirect payments for orders or referrals. It’s so broad as to be construed to be just about anything and everything you could think of to incentivize direct ordering or referrals from a law office. Again, you can review my list of common examples of what I would consider illegal incentives in the next section, below.

(a)(2) defines “Interested Parties“. These are entities that have an interest in (and manage) the workers compensation case. This is the applicant and employer themselves, the claims examiners, treating doctors, and lawyers managing the claim. The providers of the “services” barred from incentivizing these Interested Parties are not usually Interested Parties themselves. In other words, vendors like Copy Services, Interpreters transportation companies, etc. are not Interested Parties.

(a)(3) defines the “Services” targeted by the code section. The items listed here have to do with the services likely to be billed to the employer/carrier by such a provider in response to an order or referral by an Interested Party. Pay attention to the fact that this list is not all-inclusive… it’s defined as “including” those items listed, but could include any type of product or service referred or ordered by an Interested Party.

(b) simply states that “Interested Parties” are required to disclose any “Financial Interest” they have with any provider of one of the “services” in (a)(3). It is assumed this would only apply to the types of Financial Interests that have been excluded as violations by subsection (h), since nobody would disclose a Financial Interest that caused a violation.

(c) makes it a violation for Interested Parties to REFER OR USE providers for medical and/or medical-legal services, any of which will be billed under Division 4 of the Labor Code, if there is a “Financial Interest” between the Interested Party and the Provider of the services. This includes treatment providers, pharmacies, Labs, x-ray and similar providers, copy services, interpreters, transportation companies, etc. – each of the providers that perform service under (a)(3). Claims examiners and network service providers are excluded from these types of referrals being a violation, but it certainly applies to law offices referring an injured worker to a particular provider, or ordering services directly from a particular provider, and getting incentivized for doing so. [Note that the Provider is ALSO committing a violation, as defined in subsection (e).]

(d)(1) catches schemes that involve third parties to provide the referrals or incentives to the “Interested Party”. This could include a provider of any of the listed “Services” subsidizing or paying the fees of a Third Party that normally would be paid by the Interested Party. It would also include referring injured workers to an Interested Party (like a law office) and then having that Interested Party refer or place orders with a particular service provider(s) on all such referred cases.

(d)(2) is a “catch all” paragraph making it illegal for an Interested Party to give or receive any sort of INCENTIVE for referring a person (usually the injured worker) to a particular service provider.  While this subsection uses the phrase “refer a person”, it could easily be construed to include using the services of a particular provider, such as a copy service, or interpreter.

(e) makes it a violation when a provider of any services defined in (a)(3) presents an invoice for payment to any employer, carrier, AND there is a “Financial Interest” with the Interested Party that provided the referral or order for services. For example, if a copy service was incentivizing a law office to ensure they received orders from that law office, it would be a crime for that copy service to send invoices to the employer/carrier for services on the cases originating from that law office. [Note the requirement of a statement for all copy companies that “no violation of LC 139.32 with respect to the services” must be included on every copy service invoice under CCR 9981(b)(2).]

(f) makes it a crime for the employer, carrier, TPA or “third party payer” to KNOWINGLY pay an invoice that was presented in violation as defined in (e).

(g) defines the penalties for violating LC 139.32. Any violation is a crime, and subjects the officers and managers of any Interested Party guilty of a crime. Violating the section requires that any licensing authority must be notified, such as the state bar association, and that licensing authority shall take appropriate disciplinary action. People prosecuted for violations of LC 139.32 are subject to a fifteen thousand dollar penalty FOR EACH OFFENSE. In other words, if referrals or orders for services occurred on 100 cases, the penalties could add up to $1,500,000. Several more penalties are include in various subsections of (g).

(h) defines some EXCLUSIONS to the “financial interest” between an interested party and a provider of services.

EXAMPLES OF ILLEGAL INCENTIVES UNDER LC 139.32

The bottom line is that if a provider listed under (a)(3) is incentivizing the law firm or other Interested Party in any way, and that provider receives referrals or direct orders from that law firm, it’s very likely a crime for both parties. If you are participating in “Give To Get“, you are in the Crosshairs of this powerful code section and should be looking over your shoulder right now.

Here are a few examples of things that you should assume violate LC 139.32:

• A provider supplying FREE or unreasonably discounted services to an Interested Party to ensure referrals or orders for services are given to that provider
• A provider paying the licensing fees and/or maintenance fees for software being used by an Interested Party to ensure the referrals or orders for services are given to that provider
• A provider installing equipment or paying for equipment used by an Interested Party, such as computers, printers or copy machines, which ensures referrals or orders for services are given to that provider
• A provider paying for temp or contract workers that perform work for an Interested Party to ensure referrals or orders for services
• A provider giving valuable services to an Interested Party without billing for it

If it sounds like a provider pretty much can’t do ANY favors or provide anything to their Interested Party customers… you’re right. Again, I think if you consider this in context with all of the other changes in SB 863, including the extremely draconian Lien Activation Fee Deadline, it should be clear to you that this Administration wants most of the lien providers – especially the high-volume ones – out of the system, and will do whatever it takes to make that happen.

PROVIDERS MUST ALSO UNDERSTAND AND STAY CLEAR OF INSURANCE CODE 1871.4 VIOLATIONS, ALONG WITH PENAL CODE 550 VIOLATIONS

What we’ve discussed above for LC 139.32 involves kickbacks for referrals or orders for services. Providers also must make sure never to send an invoice or collect a receivable from an employer or carrier on a workers compensation claim that was (a) not actually ordered by the listed ordering party, (b) the services listed on the invoice or statement were not actually performed or delivered as stated, and (c) the same services were not billed for more than one time.

The Interpreters that were arrested and made the Work Comp Central news this month (see link to story, above) are accused of  billing for services that were not actually provided or needed. At least, that’s what the news story indicates.

It’s easy for a high-volume provider to get caught up in the disputes and friction with the payers and inadvertently step on a Penal Code Landmine. For example, consider these subsections of Penal Code 550:

(a)(1) Knowingly present or cause to be presented any false or fraudulent claim for the payment of a loss or injury, including payment of a loss or injury under a contract of insurance.

(a)(2) Knowingly present multiple claims for the same loss or injury, including presentation of multiple claims to more than one insurer, with an intent to defraud.

(a)(6) Knowingly make or cause to be made any false or fraudulent claim for payment of a health care benefit.

(a)(7) Knowingly submit a claim for a health care benefit that was not used by, or on behalf of, the claimant.

(a)(8) Knowingly present multiple claims for payment of the same health care benefit with an intent to defraud.

Those are some paragraphs that jumped out at me, but providers should carefully read this entire section and make sure their businesses never cross over any of the lines defined therein.

Next, let’s look at Insurance Code 1871.4, which makes it unlawful to do any of the following:

(a)(1) Make or cause to be made a knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying any compensation, as defined in Section 3207 of the Labor Code.

(a)(2) Present or cause to be presented a knowingly false or fraudulent written or oral material statement in support of, or in opposition to, a claim for compensation for the purpose of obtaining or denying any compensation, as defined in Section 3207 of the Labor Code.

Violations of this section earn a minimum of one year in jail. This is scary stuff!

EXAMPLES OF INSURANCE CODE AND PENAL CODE VIOLATIONS

Here are some things you must not do as a provider:

• Bill for the same service more than one time
• Bill for services that were not actually requested or ordered
• List services on an Invoice or support documentation that was never provided
• Make a false declaration in support of payment or as part of the collection proceedings
• Present a bill for services that includes a credit for previous over-charges, without also showing that overcharge on the statement

Again, I am not an attorney and you should not rely on any advice from me. Read these sections yourself and decide how it applies, and consult your attorney before making any changes in  your business.

THERE ARE MILLIONS AVAILABLE TO LOCAL LAW ENFORCEMENT WHO TARGET FRAUDULENT WORK COMP PROVIDERS

I wonder how many of you readers are aware of the fact that the carriers and self-insureds are required by law to pool money that is set aside every year to help ferret out and arrest people committing work comp fraud. In the fiscal year 2013-2014 alone, $49 MILLION was collected from carriers and self-insureds to be provided to local District Attorneys willing to track down and prosecute people committing work comp fraud. See this link for more more information on this: http://www.insurance.ca.gov/0300-fraud/0100-fraud-division-overview/10-anti-fraud-prog/Workers-Comp.cfm

Carriers and self-insureds are required by law to setup in-house Special Investigation Units, whose job and focus is to investigate possible acts of fraud and help build cases against possible perpetrators. The SIUs then turn over their collected information to the local district attorneys. The DA’s offices can qualify for some of the that “pool” money I mentioned above that is set aside each year to combat insurance fraud.  If you are an applicant-side provider in the system, you should check out this Powerpoint slideshow on the DIR’s public website to see how all this works. It is an industry all on it’s own.

My point here is there are people dedicated to targeting you should you fail to carefully play according to the Rulebook. There are also MILLIONS in “reward money” that local DA offices can qualify for if they successfully prosecute the people who cross the established lines.

Have I concerned you yet? I sure hope so….

CONCULSION

I know, I know… my blogs are often apocalyptic. My goal isn’t to scare anybody out of the system or slow them down, or hurt anybody. My goal in these blogs is to HELP people navigate the law – and the CHANGES in the law – so they can be SUCCESSFUL. Nobody can be successful in this industry if they don’t know what they can and cannot do… what to expect from all the changes to the system… and most of all, they can’t be successful if they go “against the grain” of the laws they are supposed to live by.

If you make your living in the California workers compensation system and want to be successful, immerse yourself in the codes, regulations, and published cases. They tell you what to do, what not to do, and what to expect. Despite what anybody tries to tell you, California workers compensation is extremely procedural and complicated to participate in. Sure, you can bumble along by your wits for a while, but sooner or later you are going to paint yourself into a corner. I would hate to see that happen to anybody, on either side of the proverbial fence.

Pay attention and follow the Rulebook and there is room for everybody to be successful and get what they want out of the system.

Good luck out there!

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