CA Liens...Again - Entrepreneurs See Opportunity Unfortunately

I have often said that California influences workers' compensation in the United States disproportionately - yes the California market is much larger that any other state, but it is still just one state of 50.

California's bizarre lien claim process, which has been in the workers' compensation news frequently of late, is just one example of how the state's specific quirks affect business in other states.

MedStar Funding, a medical bill factoring company based in Austin, Texas, announced that it is hiring sales people and setting up operations in California to take advantage of the $1.5 billion in liens piling up at the California Workers' Compensation Appeals Board.

"You can have 50 MedStars come into California, and you wouldn't take up all the opportunity that is there," MedStar's CEO Dan Christensen said in a telephone interview with WorkCompCentral from his company's home office in Austin. "It is incredible, I guess, how much opportunity is out there."

Christensen told our reporter that MedStar operates nationally, but in most states it primarily buys unpaid medical bills related to personal injury cases. The company is active in the workers' comp industry in only two states: Illinois and California.

Christensen said Illinois has a relatively straightforward system under which unpaid medical bills are settled by the claimant's attorney when the case-in-chief is fully litigated. But he said California's lien labyrinth is so frustrating to medical providers that they rely on factors to pay them a percentage of the uncollected bills' face value just so they can make payroll and keep the lights on.

California is constantly criticized for its rapidly increasing medical costs. Doctors constantly state that they don't want to take work comp patients for various reasons. Payors decry the entire process because of bogus medical bills that come back and haunt previously closed files.

And in the meantime you have entrepreneurs who find money in the defects while the regulators seek to increase the complexity of the system to eliminate from their perspective the "lien problem".

My solution for ruining the business prospects of these entrepreneurs and eliminating the regulator's penchant towards complexity: make unresolved liens and bills the obligation of the party soliciting the expense.

The reason California has this "lien problem" is because there is no single person responsible for managing vendors on a case. The party responsible for incurring the cost of the vendor should be responsible for resolving any unpaid bills.

If the vendor is a physician hired by the carrier, then the carrier must pay the physician's bill at the negotiated face value and if the physician is forced to file a lien to protect its interest in getting paid then there needs to be a substantial penalty against the carrier for reneging on its promise to pay. Sure, we have a fee schedule, but the docs complain that it is insufficient and there is anecdotal evidence that many docs are compensated outside of the fee schedule to be induced to take work comp patients. So they should be paid as promised. Period.

If the lien/vendor was solicited by the injured worker or his/her attorney then that party must be responsible for resolving the bill out of the net proceeds. If it reduces the amount the injured worker gets, then at some point the injured worker is going to protest and since the injured worker is the ultimate customer there is going to be compliance.

There are many issues attendant with these ideas that would need to be worked out to reverse 50 years of procedural culture, but it would be nice at some point to be able to blog that California does NOT influence business in other states.