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Defense of Provider Fee Claims after Washington Township Fire Department v. Beltway Surgery Center

By Jennifer D. Meyer
| Date: 08/01/2010

Provider fee claims have increased in the Indiana Worker’s Compensation arena over the last several years and many employers and workers compensation insurers are unaware of what is required of the defense on these cases as well as the best way to combat these types of claims.

A medical provider fee claim can result when an injured worker receives medical care for a claimed work-place injury.  The medical provider then attempts to obtain payment on the services from either the employer or the worker’s compensation insurance carrier.  If the bill is not paid or if the medical provider contends that the bill was not correctly paid, an Application for Adjustment of Claim for Provider Fee, State Form 18487 may be filed.   The provider must designate on the Application if the claim is either a total billing matter, meaning the employer or the insurance company has not paid anything toward the medical services, or a balance billing matter, meaning the bill has been partially paid.  The provider must also attach proof of their due diligence in attempting to have the bill paid as well as the actual bill to the Application upon filing the claim.

The provider fee claims may either attach to underlying compensability claim or be filed independently, if the injured worker does not have an open claim with the Indiana Worker’s Compensation Board (“the Board”).  The Board will assign the claim the same “C” cause number as the injured worker’s active case at the Board if the claim attaches to the underlying claim and will assign a “P” cause number to the claim if it does not attach to an underlying claim.

If the claim is attached to an underlying compensability claim, the Board will not approve a compromise settlement agreement unless the provider fee claim is addressed within the agreement and signed by counsel for the provider or if the provider fee claim is concluded before the underlying case settles.  Accordingly, it is a best practice to address provider fee claims as soon as possible after they are filed and be cognizant of their presence throughout the progression of the case.

The Board Members will not become involved in provider fee causes until the date of hearing.  Essentially, the Defendant may either attempt to settle the matter with Plaintiff’s counsel or try the case at hearing.

Eightieth Percentile Reduction

Indiana Code §22-3-3-5.2 requires a bill review service to adhere to the four statutory requirements regarding determination of pecuniary liability of the employer or the employer’s insurance carrier for each specific service or product covered under the Act.  First, data used in formulation of the billing review standard should be based on charges submitted to the employer and the employer’s insurance carrier from the same geographic community.  The only exception is for services or supplies that are unique or specialized, or the product does not have sufficient comparative data to allow reasonable comparison.  Secondly, the data used to determine pecuniary liability must be compiled on or before June 30 and December 31 of each year.

Next, the billing review standards must be revised for prospective future payments and medical service provider bills for payment of the charges at a rate not more than the charges made by eighty (80) percent of the providers, during the prior six months within the same community.  This is often referred to as the “eightieth percentile”.  The data is used may not be more than two years old, must be periodically updated by a representative inflationary or deflationary factor, and may not exceed the actual charge invoiced by the medical service provider.  Lastly, the bill review standard must include the billing charges of all hospitals in the applicable community for the service or product.

Further, if the Worker’s Compensation Board determines that an employer’s billing review service (i.e. employer, insurance carrier, or third party administrator) used a standard that did not comply with the statute for determining the pecuniary liability, the Board may assess a civil penalty against the billing review service in an amount not less than $100.00 or more than $1,000.00; Indiana Code §22-3-3-5.2 (c).

In the recent case of Washington Township Fire Department v. Beltway Surgery Center, 921 N.E.2d 825, (Ind. 2010), the Supreme Court of Indiana held that if an employer or insurer refuses to pay the full amount of a provider’s bill, the employer must prove before the Board that its pecuniary liability to that provider is less than the billed charges.  Further, if the employer fails to prove how a billing review service calculated that the amount exceeded the eightieth percentile standard, then the Board could order the employer to pay the full amount of the bill.  In the Beltway case, the Court awarded the full amount of the bill to the provider.

Therefore, the burden is on the employer to prove reduction and payment at eightieth percentile.  If such proof cannot be presented, the Board may award the full amount of the Provider’s bill at hearing.  The risk the Defendants take is that Defendant may be required to pay the full amount of the bill if they cannot provide sufficient data to show the reduction and payment were made in accordance with the eightieth percentile.

In order to evidence payment at the eightieth percentile, the Defendant must provide the billing review standard that was the basis for reductions taken from the total billed charges.  At a potential hearing, we would need to prove that the bill review reductions were in compliance with the Act and that each service was paid at the eightieth percentile, and that the data was current in accordance with the Act.  We need the bill review service to render eightieth percentile data for each of the specific line items in which they took reductions if the lines were not reduced according to a contract.

Network or PPO Discount

The Worker’s Compensation Board issued a January 1, 1995 memorandum indicating that the Board encourages preferred provider agreements between employers, carriers and medical providers concerning the level of payment for medical services.  That memorandum is, in part, no longer applicable due to changes in the statute, but the applicable part of the memorandum provides: “In the absence of a statutory provision, any such contractual payment agreements will take precedence over the Board’s criteria”.  We have spoken with Board personnel, who advised that the Board still may follow this memorandum as to this particular issue.  We believe it provides us with a compelling argument to abide by the terms of a PPO Agreement.

In order to successfully make this defense argument, Defendants need to provide a copy of contract between the medical provider and either the network or the PPO.  That way, the Defendant can evidence that the bill reductions were made pursuant to the Agreement at potential hearing.  However, if a PPO or network agreement exists, but the bill has not been paid in accordance with the contractual terms, our remaining defense will be payment at the eightieth percentile.

Further, if the Defendant cannot produce evidence of a contract, reductions made pursuant to a PPO or network agreement are invalid.  If we provide the contract at hearing, and the reductions were consistent with the terms of the agreement, we would request that the Board adhere to the memorandum described above regarding PPO Agreements.  If Board dismisses the entire memorandum upon which we would base our defense, we would need to prove that the bill review reductions were in compliance with the Act and that each service was paid at the eightieth percentile, and that the data was current in accordance with the Act.

Lastly, when a network or PPO contract is accessed by a third-party bill review company, we recommend review of the contract to determine if it provides that the third-party bill review service owes the employer or insurance carrier a duty to defend or render correspondence in our defense against provider claims.

Jen Meyer has worked in the area of Worker’s Compensation law for over three years.  Before she came to KPDE, she represented medical providers in Worker’s Compensation disputes.  For further information on effective defense of Provider fee claims in Indiana, contact Jen Meyer in the Indianapolis office at 317-814-4047 or via e-mail at