Legal Lines



By Christopher Cross - Skiles DeTrude
| Date: 12/01/2009

For many years, it has been the standard practice for carriers and third-party administrators to hire vendors to examine the medical bills submitted by providers of medical services to claimants pursuant to the Indiana Worker’s Compensation Act.  This customary practice arose out of the enactment of Indiana Code 22-3-2-1 and Indiana Code 22-3-3-5.2.  In concert, those two sections of the Act allowed medical services provided by claimants to be reduced to the 80th percentile by a billing review service with data used to determine pecuniary liability on or before June 30 and December 31 of each year.  In essence, this required a billing review service to compile data of medical providers every six months to determine the prior six-month average charge within the same community as the medical provider.  It is from this data that the billing review service would then determine the 80th percentile for particular medical charge.

In practice, the billing review service often did not give a detailed explanation as to how it arrived at its reduction of medical charges.  Most often, a statement was provided to the carrier or third-party administrator showing the bill and the reduction without giving reference to the specific data used or how the 80th percentile was calculated.  When the situation arose that a medical provider would file an application for adjustment of a provider fee, the carrier or the third-party administrator would submit the statement of the bill review service as a defense.  From the inception of the Code Sections allowing billing review services to determine the medical provider fees, billing review services were generally given the benefit of the doubt regards to their calculations.  The statement of reductions provided were given great credence by the Indiana Worker’s Compensation Board unless, a medical provider could show that there was some error in the calculation.

In recent years, this presumption has been challenged with great vigor by the medical providers.  More and more provider fee applications were filed and the calculations of  the billing review services were challenged on a frequent basis.  It was on this new frontier of litigation that the issue arose as to who bore the burden of proof in hearings determining the appropriate provider fee for medical charges involving treatment of claimants.

Recently, the Indiana Court of Appeals has decided this issue in Wayne Township Fire Department v. Beltway Surgery Center. In that case, Beltway Surgery Center provided medical services to an injured employee of the Wayne Township Fire Department.  The billing review service reduced a bill of $11,563.30 to $5,104.27.  After an application for adjustment of provider fee was filed with the Board, the billing review service recommended an additional payment of $2,230.14.  However, this left the Beltway medical charge reduced by $4,220.89.  When the provider fee application was heard before the Indiana Worker’s Compensation Board, the medical review service was unable to produce any of the data that it used in its calculation of the amount reducing Beltway’s medical charges.  Because of this, the Hearing Judge awarded Beltway its entire medical charge.  The decision was appealed to the Full Indiana Worker’s Compensation Board and the Full Board affirmed the ruling. Thus, it was the ruling of the Indiana Worker’s Compensation Board that it was the Defendant in a worker’s compensation claim who bears the burden of producing evidence explaining how the pecuniary liability of medical charges are calculated.

The Board’s decision was then appealed to the Indiana Court of Appeals.  The Court of Appeals looked at the Act for a legislative answer to the question as to who bears the burden of proof in medical provider fee applications. The Beltway Court pointed out that the Act was silent on the issue therefore, it had no alternative other than to examine case law from other jurisdictions.  The Court looked at jurisdictions that put the burden of proof on the medical provider and jurisdictions that put the burden of proof on the defendant.  Ultimately, the Court decided that the Indiana Worker’s Compensation Act is most like the jurisdictions that put the burden of proof on defendants.  Particularly, it cited Kentucky law on this issue.

The Beltway Court also pointed out that it is the defendant through its carrier who has the right to select medical treatment.  Because the carrier or the administrator selects medical care, it then has an opportunity to choose providers for which the medical charges are a known quantity.  In other words, because insurance carriers and third-party administrators direct care, they have the opportunity to negotiate the cost of that care beforehand, thus reducing their medical expenditures.

The Beltway Court also found that as a matter of public policy, the Indiana Worker’s Compensation Act should not discourage medical providers from providing services to injured claimants.  If medical providers determine that it is too difficult to achieve payment for their fees, they might quite possibly decide to not accept worker’s compensation patients.  Therefore, placing the burden of proof on the defendant would serve the purposes of the Act.

After reviewing the Beltway decision, the question then arises as to what effect it has on the processing of medical charges in the future.  It is quite evident that there are two different effects of this decision.  First, I believe that it would be appropriate for the insurance industry to pre-negotiate the cost of medical services on a more frequent basis.  This would avoid the need to reduce the bill when it is submitted at a later date.

Additionally, it is not believed that Beltway is a death knell to the billing review services.  With the advent of powerful computer technology, it would not be tremendously difficult to generate line item explanations of bill reductions showing the data that was used to determine bill reductions at the 80th percentile.  If the appropriate data is in place, the Board would have to consider this evidence as a prima facia establishment of the defendant’s burden of proof.  At that juncture, the medical provider would have to refute the data that was collected and this may be a difficult process for many medical providers.

One should note that a motion for rehearing has been filed on the Beltway decision.  A motion for rehearing is rarely granted; however, this could be a precursor to an appeal of the Court of Appeals decision to the Indiana Supreme Court, but in the meantime the Beltway decision is the law of the land.  Due to the present state of the newly established criteria, it would be beneficial for any party adjusting a claim to examine the practices of any billing review service that they may retain to ensure that they can provide the appropriate data to meet their burden as established in the Beltway case.