Indiana Worker's Compensation Institute

The Court of Appeals in Pioneer Auto Truck Sales, Inc. v. Dolores Burch (decided 8/31/2010)  affirmed the Board’s ruling in favor of the employee based on a report obtained by her attorney without the employee ever being examined by the physician writing the report.      Ms. Burch suffered a shoulder injury on the job on November 3, 2006.  She went to the ER and to her family physician for treatment and missed less than a week of work.  She continued to work for Pioneer until January 19, 2007, and did not seek any additional medical treatment for her shoulder until March 19, 2007, though she continued to take medication and wear a sling during that time.

In March, 2007, Ms. Burch saw a physician and had an MRI of her shoulder that revealed “a small full thickness rotator cuff tear and possible mild impingement.”  She then filed her Application for Adjustment of Claim with the Board.

In preparation for the hearing, counsel for Ms. Burch hired Dr. Buschbacher to review the medical records and render an opinion concerning causation and her medical condition.  Dr. Buschbacher issued a report which stated that he had not examined the employee, but, based on the medical records provided, he believed her shoulder condition to have been caused by the work injury.  Defendant objected to the admissibility of the report on the basis that Dr. Buschbacher had not examined the employee and he did not provide all of the information required by Ind. Code §22-3-3-6(e).  The Single Hearing Member admitted the report, finding that it did comply with the statute, and issued an Award in favor of Ms. Burch.  The Full Board and the Court of Appeals agreed.

In affirming the decision in favor of the employee, the Court of Appeals noted that medical reports are admissible even though the doctor who writes them did not examine the claimant as long as they comply with the statute (citing Borgman v. Sugar Creek Animal Hosp., 782 N.E.2d 993, 997-98 (Ind.Ct. App. 2002) trans. denied.    In addition, the Court noted that Dr. Buschbacher’s report provided the history of the employee’s injury (as reflected on the medical records), her diagnosis, his opinion on causation, and his signature.  Therefore, the Court found that the report did comply with the requirements of the statute.

This decision (and the decision in the prior Borgman case) establishes that a doctor who renders an opinion need not examine the patient in order for that opinion to be admissible at hearing.  However, an examination of the employee by the physician would certainly lend added credibility to the physician’s medical opinion, especially if there are differing opinions among the physicians consulted and the reports submitted to the Board.

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¹ This is a “Not for Publication” decision, which means that it cannot be cited to support other decisions in the future.  However, it does provide guidance on how the Board and the Court of Appeals is likely to rule on other cases with similar issues.

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 jdmeyer@kopkalaw.com.

If you find that Jerry Jarrells is entitled to recover, you shall consider evidence of payment made by some collateral source to compensate Jarrells for damages resulting from the accident in question. In determining the amount of Jarrell’s damages, you must consider the following type of collateral source payments:

                Payments for worker’s compensation

In determining the amount received by Jarrells from collateral sources, you may consider any amount Jarrells is required to repay to a collateral course and the cost to Jarrells of collateral benefits received. Jarrells may not recover more than once for any item of loss sustained.

After a series of rather confusing and inconsistent rulings by the Court of Appeals over the last few years, the Indiana Supreme Court has now clarified the application of Indiana Code 22-3-2-13 to mean what it says!  The case of Smith v. Champion Trucking Co.,    — N.E.2d — (Ind. 2010), holds that if an employee settles a third party claim without the employer’s consent, the employee’s workers’ compensation claim is thereby barred.  In addition, the court held that the third party tortfeasor is released from liability for the claim based solely on the release provided by the employee, and the employer may not initiate a separate claim after settlement occurs.

Mr. Smith, an employee of Champion Trucking Company, was in a work related motor vehicle accident due to the negligence of another driver (Bittner).  He received medical benefits under workers’ compensation for his injuries.  However, he continued to work while in treatment after the accident so no lost wage benefits were paid.  He filed an Application for Adjustment of Claim against Champion, and he sued the other driver (Bittner) in civil court for damages.

Mr. Smith eventually settled his civil claim against Bittner for $10,342, and notified the workers’ compensation carrier of the settlement.  Champion’s lien for medical expenses paid of $4,342.32 was reimbursed, less attorney fees, out of the third party settlement.

Thereafter, Mr. Smith obtained the evaluation of a neurosurgeon and was given a 19% whole body PPI rating, worth $26,500, under the Workers’ Compensation Act.  When Mr. Smith sought payment of the PPI rating from the Board, Champion opposed any further payment under Ind. Code 22-3-2-13, which states:

22-3-2-13.  Liability of third person – Subrogation of employer – Lien on award to employee – Notice to employer if employee sues – Settlements – When action barred – Costs – Attorney fees – Release and satisfaction.
Whenever an injury or death, for which compensation is payable under chapters 2 through 6 of this article shall have been sustained under circumstances creating in some other person than the employer and not in the same employ a legal liability to pay damages in respect thereto, the injured employee . . . may commence legal proceedings against the other person to recover damages notwithstanding the employer’s . . . payment of or liability to pay compensation . . ..  In that case, however, if the action against the other person is brought by the injured employee . . . and judgment is obtained and paid, and accepted or settlement is made with the other person, either with or without suit, then . . . the liability of the employer . . . to pay further compensation or other expenses shall thereupon terminate…

Based on this language in the Act, the Original Hearing Member dismissed the claim, but the Full Board remanded for a hearing.  After the hearing, the case was again dismissed and the dismissal was upheld by the Full Board.

The Court of Appeals reversed in its decision,  Smith v. Champion Trucking Co.    901 N.E.2d 620 (Ind.Ct.App., 2009) and ruled that the employee should be able to pursue additional worker’s compensation benefits under these facts.  The case was then appealed to the Indiana Supreme Court which vacated the Court of Appeals decision and affirmed the Board’s ruling that workers’ compensation benefits were terminated based on the third party settlement.

The Indiana Supreme Court, in making this ruling, noted that the value of the worker’s compensation PPI rating exceeded the third party settlement.  It found, however, that there may be tactical or financial reasons why the employee’s attorney chose to pursue the claim in this manner, and the statutory bar to further compensation does not lift based on whether or not that decision was a good one for the employee.  The court noted, as well, that its ruling will avoid the need for “satellite litigation over the adequacy of the settlement” and that the “burden” of notifying the worker’s compensation carrier of settlement discussions and securing its consent to settlement is not too difficult to fulfill.

This decision should do much to clarify the application of the Act in situations where there are both worker’s compensation and civil claims pending, both for employees and employers.

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.

A recent decision from the Court of Appeals is causing great concern among employers and their attorneys because, if upheld, it is likely to greatly increase your medical costs and the claims you have to cover.  The case, Boston Gourmet Pizza v. v. Childers, 2009 Ind. App. LEXIS 1241 (Ind. Ct. App. 2009), involved a morbidly obese employee who had a back injury.  The physician decided that the claimant required back surgery, but that it was too risky due to his obesity.  The Worker’s Compensation Board ordered the employer to provide bariatric lap band surgery, to pay temporary total disability while he had the surgery and was recovering and losing weight, and then presumably to provide the back surgery.

Briefly, the Board, and the Court, held that the obesity combined with the work-related low back injury to create a “single injury,” obesity-complicated back pain.  Based on certain precedents, it concluded that where two conditions, one work-related and one not combined, to create a single injury, the employer is responsible for the total result.

We are very concerned about this case, which seems to overturn entirely the long line of cases which have held that the Worker’s Compensation Act does not make the employer the group health insurer for all of its employees.  Further, the extension of this rather dubious single-injury theory to two completely unrelated conditions seems unfortunate.  We have spoken to defense counsel in this case and understand that it is very likely that they will seek transfer to the Supreme Court of Indiana.  We are encouraging our clients who are members of industry groups to talk with their groups about this case and to consider joining an amicus brief before the Supreme Court to assist the court in evaluating the impact of this decision.