Thursday, December 13, 2012

Reform is Like Trying to Stop Water

The biggest danger in drafting new laws is that there is no way anyone can anticipate all of the factual permutations that may be affected by the changes. Intent on either curtailing a certain abuse, or implementing a previously overlooked benefit, legal authors have no way of completely understanding all of the situations that could fit within a given statute, or can not adequately draft language that covers all situations.

Of course, California's new reform, SB 863, is a prime example.

There should be little doubt that a big driver of many of the more revolutionary changes made to the law under SB 863 has to deal with medical treatment, bills and liens. Those items have long been cited for hyper-inflationary growth and contributing disproportionately to administrative friction and costs.

These laws are intended to curb abuses that have been well documented by industry researchers, decried by industry observers.

Instituted to curb the "one-percenters" - the outliers that drive the majority of uncontrolled costs - new laws sometimes have the perverse effect of creating new case law that could have the reverse effect.

Many times I hear how, in California, the "liberal" courts have destroyed legislative intent by opening up big holes in the law. But the reality is that the courts deal with the application of specific factual situations to which the law is applied.

And often the facts don't fit the law very well. When the law is as complex and serpentine as California workers' compensation law, creative legal work will, like water, find the path of least resistance.

A comment was made on the WorkCompCentral Professional Forums yesterday that I think highlights the frustration of the majority of people that do not engage in abusive practices, and points to how reform law, intended to reel in costs, may unintentionally create costs in some other fashion and in the case of SB 863 increase the cost of litigation.

To paraphrase the post, the author described a situation where an obvious industrial injury occurred, but the physician did not want to take the chance of treating without specific authorization from the insurance company, then experienced delays while either the treatment request or billing authorization go through the various steps.

The poster states, after reciting quite a complicated fact pattern tied to the "process," "All of which I can tell you has happened just this year. So these endless rules to police the medical thugs makes the real life day to day care of the injured complicated, endangered and delayed right into the hands of representation. Or do we pull string, make calls to docs we know and get the patient care today, not knowing if our reward will be a $150 lien filing fee or $325 IBR."

"Medical thugs" - I like that term. But that's off topic.

The Forum discussion started when someone asked what the process was for a denied case where treatment was provided. I responded that, essentially, the provider was SOL, that no action would be taken regarding treatment or billing until the underlying AOE/COE issues were resolved and if the employer won on those issues there would be no payment forthcoming.

Someone responded that treatment would legally be authorized under Labor Code section 5402(c), which states that during the pendancy of claim submission (i.e. "delay") treatment is permissible and the carrier is liable for, up to $10,000.

That may be the case, but I can envision tendering a defense where the provider knew or should have known that the case would be denied and that services were provided under an assumption of the risk type of doctrine, thus no payment.

Even this, seems to me that process would be that, given the case where treatment is provided pending investigation and delay, the provider's actions would first be subject to utilization review (twice) then independent medical review, then whatever procedures were left over as "authorized" would then be subject to fee schedule review and ultimately independent bill review.

To which another posted, "Waiting for the AOE/COE issue to be tried is great, except as you all know, 90% of the cases settle by C&R."

Thus, where a case does settle, will there nevertheless be a trial on AOE/COE to determine the provider's reimbursement rights? Frankly, I doubt it because the claimant likely won't cooperate - he or she is long gone after having been through the process and would have no interest in helping the provider get paid.

Hmmm, didn't think about that fact pattern!

Will medical treatment withstand this test? Or will providers with a conciense simply reject workers' compensation cases that are not specifically authorized?

Another stated:

"In the real world outside the Comp Dreamland, no doctor, no dentist, no psychiatrist, no "H-Wave" provider, no EMG specialist, not even a sign painter, would ever dream of performing work until the party responsible said 'I'd like you to do this,' and agreed to pay (and to be clear, there is an implied in law agreement that when I walk into a dentist or whatever, that I will pay for services even though I did not sit down and discuss the contract with the doctor, barber, dentist, whatever.)

"Why would a medical provider just assume they could make the employer or insurance company pay? Because the system was grossly flawed, and allowed them to do that. Because they could."

And that returns us to the fact that the law when drafted can not be crafted to deal with all of the various permutations of fact that can be thrown at it. Life is just too complicated to box up.

Which means that the "medical thugs" will continue to be in business.

As another post responded, "seriously, you think people will not figure out how to game this system, either legally or through illegal means?"

All I know is that SB 863 is a hugely complex change in the law that attempts to plug holes created by those "one-percenters." Eventually some cases will come out of the courts dealing with a specific factual pattern that will be used by the "medical thugs" (and others in concert with them) to generate a new line of profitability at the expense of the system (and you and me).

Like flowing water, eventually leaks occur. And the leaks won't be detected until the water flows through. Unfortunately by then the damage is done.


  1. The lien claimant will object to the order approving the C&R demanding a trial on aoe/coe, and request an order for applicant to appear at trial.

  2. The problem with that one JG is that, under our crazy laws, the LC isn't a "party" until the case in chief has resolved, so the LC doesn't have any standing to do so!

  3. Lien Claimants cannot object to orders approving C&R's? Even when the C&R states fact that untrue and effect the lien claim? As you know most of the time when there is an objection to the order approving it is set for hearing, no matter who objects. If Applicant atty wants self procured treatment, they will get the applicant to appear.
    IBR is defined in the code as taking place under specific time limits. If these time limits are not followed by carrier we are no longer in bill review.
    I not trying to be mean, think this is a health debate

  4. Thanks JG - actually you make a very good point about the time limits, and I guess an LC could object. I was focusing on the hearing part... There are so many holes and unanswered questions in 863 - this is indeed a very health debate! We won't know really what's up with much of 863 until the courts tell us, which sort of defeats much of the alleged reasons behind the bill (i.e. reduce litigation ... )! I appreciate the feedback JG - no offense taken at all.