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Med-LegalExpenses,Liability,andPenaltiesPatrick C. GormanManaging Attorney/PartnerBradford Barthel, Redding

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BodyofLaw• Cal Labor Code 4620• Defines what Med-Legal expenses are

• Cal Labor Code 4621• Self Procured Med-Legal expenses

• Cal Labor Code 4622• EOR, IBR, Timeframes, and Penalties

• 8 CCR 10451.1• Required timeframes, petitions, and costs/sanctions

for bad faith actions or tactics

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IncreasingAreaofLitigation• Issue emerging at WCAB from around October 2016.

• Statutory penalties for failure to timely respond.

• No lien filing fees / standing other than as a lien claimant.

• Any Med-Legal Provider has standing to file a Petition.

• Potential for award of costs and attorneys fees pursuant to 8 CCR 10451.1(g). w

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WhatareMed-LegalExpenses?• “Cost or expense incurred by or on behalf of any party…

which may include X-rays, laboratory fees, other diagnostic tests, medical reports, medical records, medical testimony, and certified interpreter (Article 8) for the purposes of proving or disproving a contested claim.” (Cal. Lab. Code 4620(a))

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WhatisaContestedClaim?• A “contested claim” exists when the employer has actual or

constructive knowledge an employee is claiming entitlement to any benefit arising out of a claimed industrial injury and one of the following conditions exists:

1. Benefit claimed by the employee is rejected by the employer.

2. The employer fails to admit liability for benefits after a reasonable period of time (essentially contesting the claim by not admitting liability).

3. The employer fails to respond to a demand for payment of benefits after the expiration of any time period fixed by statute for the payment of the indemnity.

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Whatabout“selfprocured”Med-Legalexpenses?

• Labor Code § 4621 provides for reimbursement of medical legal expenses to an employee, or the dependents of a deceased employee, reasonably, actually, and necessarily incurred.

• BUT.. an employer is not liable for any med legal evaluation performed within the first 60 days of a claim being filed, absent an affirmative denial of that claim(See Cal. Lab. Code 4621). w

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DefectiveMed-LegalReports/Studies• Costs of medical evaluations, diagnostic tests, and

interpreters’ incidental to a medical report do not constitute medical legal expenses unless the medical report is capable of proving or disproving a disputed medical fact essential to an adjudication of the employees claim for benefits.

• Only Admissible Med-Legal evidence is subject to this statutory scheme.

• Caution- beware of self procured Med-legal reports pertaining to PTP recommendations / compensability of additional body parts. 20 days, or 30 days if pro per, to object. (Cal. Lab. Code 4061) see Simmons v. State of California Dept of Mental health (2005) (70 Cal. Comp. Cases 866)

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Cal.LaborCode4622• Covers “all medical legal expenses for which an employer

is liable.”• Mandates response by way of Explanation of Review,

even if expenses are denied• Mandates strict timeframes for defendant and Med-Legal

provider.• Mandates 10% Penalty and 7% interest for untimely

response.

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MandatoryTimelines• Upon receipt by the employer of all reports and documents required by the

Administrative Director incident to the services, the employer has 60 days to issue payment in full, partial payment accompanied by an EOR (defined by Cal. Lab. Code 4603.3) contesting reasonableness and necessity, or by denial. The denial must still be in the form of EOR (see Cal. Lab. Code 4622(c)).

• If the employer contests the amount paid, the provider may request a second review within 90 days. If the provider fails to do so, their bill is deemed satisfied. The request for second review must be submitted on forms prescribed by the AD and contain specified information (see Cal. Lab. Code 4622(b)(1)). Note: This only pertains to disputes of the invoice pursuant to the fee schedule.

• If the employer denies all or a portion of the bill for reasons other than a dispute over fee schedule, still in the form of EOR (see Labor Code § 4603.3), the provider must object to the denial within 90 days, or the employer or employee is not liable for the amount that was denied.

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TimelineScenariosScenario1

Injured Joe, one week after being terminated for failure to show up at work, submits to his employer a DWC-1 claim form alleging a cumulative trauma injury to his neck, back, and hips due to “repetitive work”. A delay notice is sent, pending further investigation and confirmation of whether or not there is evidence of injury before he was terminated.

You receive a Notice of Representation one day later, from Mr. CAAA Esq, accompanied by a report issued by Dr. Hack (who seems to always treat the client’s of Mr. CAAA, Esq). titled “Initial Consultation Report”. The report is accompanied by an invoice.. For $6,500.00, lab studies, and 6 MRI reports.

You do not refer the invoice and report to Bill Review.

65 Days later you receive a Petition filed by Mr. Former DA. Esq. demanding payment of the $6,500.00 in full, penalties and interest, and of course attorneys fees for your bad faith actions and tactics (covered later).

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TimelineScenariosScenario1(cont’d)

Is this a Med-Legal Expense, pursuant to Cal. Lab. Code 4620 or 4621?• No- Labor Code § 4620 defines Medical Legal expenses as “and cost

or expense incurred by or on behalf of any party… which may include X-rays, laboratory fees, other diagnostic tests, medical reports, medical records, medical testimony, and certified interpreter (Article 8) for the purposes of proving or disproving a contested claim. This is not a contested claim; AND

• Labor Code § 4621 provides for reimbursement of medical legal expenses to an employee, or the dependents of a deceased employee, reasonably, actually, and necessarily incurred [arising out of Labor Code § 4060, 4061, or 4062]. An employer is not liable for any med legal evaluation performed within the first 60 days of a claim being filed, absent an affirmative denial of that claim!

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TimelineScenarioScenario 2

Dr. Quack is a PQME in a separate denied case you have involving Sore Jane. Sore Jane somehow requested a Chiro Panel upon receipt of the denial letter, and selected Dr. Quack from that panel, only weeks before retaining Mr. CAAA, Esq as her attorney.

Dr. Quack evaluated Ms. Jane on 3/1/17, and issues a report on 4/1/17 finding Ms. Jane TPD- 100%, for bilateral Carpal Tunnel Syndrome.You receive an invoice and report from Dr. Quack on 4/5/17, with an invoice for $13,000, accompanied by bilateral EMG Studies, and 6 MRIs.

You send a letter to Dr. Quack objecting to his reporting, and advising him you are not paying for his garbage report, and take no further action…. 65 Days later you receive a Petition filed by Mr. Former DA. Esq. demanding payment of the $13,00.00 in full, penalties and interest, and of course attorneys fees for your bad faith actions and tactics (covered later).

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TimelineScenarioScenario 2(cont’d)

Question 1: Is this a Med-legal Expense Pursuant to LC 4620 and 4621? Quite possibly.. While the report may be untimely, the admissibility of Dr. Quacks report may depend on whether or not your objection was communicated to AA, Applicant, and Dr. Quack before the report was received on 4/5. While the report may not be admissible, because it does not constitute substantial evidence may be an inquiry, that is not as clear cut.

Question 2: If the report constitutes a med-legal expense, in that it is capable of proving compensability did you abide by the mandatory timelines outlined in Cal. Lab. Code 4622? Did your objection letter, issued within 60 days, serve as a valid “objection” pursuant to LC 4622(c)?

No, if the employer denies all or a portion of the bill for reasons other than a dispute over fee schedule, the denial must still be in the form of EOR!We will discuss the repercussions of this scenario monetarily, but first...

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OneMoreScenario,Scenario3Dr. Quack is a PQME in a separate denied case you have involving Angry Frank. Angry Frank also requested a Chiro Panel upon receipt of the denial letter, and selected Dr. Quack from that panel, only weeks before retaining Mr. CAAA, Esqas his attorney.

Dr. Quack evaluated Mr. Frank on 3/15/17, and issues a report on 4/15/17 finding Mr. Frank TTD for a sprained thumb.

You receive an invoice and report from Dr. Quack on 4/25/17, with an invoice for $12,500, accompanied by bilateral EMG Studies, and 6 MRIs.

On 6/20/17 you send an Explanation of Review to Dr. Quack objecting to his reporting, and advising him you are not paying for his garbage report that was late.

65 Days later you receive a Petition filed by Mr. Former DA. Esq. demanding payment of the $12,500.00 in full, penalties and interest, and of course attorneys fees for your bad faith actions and tactics (covered later).

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OneMoreScenarioScenario 3(cont’d)

Question 1: Does Dr. Quack’s report constitute a med-legal expense? For the reasons in the previous scenario, lets say probably.

Question 2: Did you comply with the timelines set forth in Cal. Lab. Code 4622? Yes, you responded within 60 days, utilizing an EOR, denying all of Dr. Quack’s bill.

Question 3: Do you owe Dr. Quack any payment? No- The provider must object to the denial within 90 days, or the employer or employee is not liable for the amount that was denied.

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Scenario2outcome,repercussionsforfailuretoabidebymandatorytimeline

“Within 60 days after receipt of each separate, written billing and report, and if payment is not made within the period [60 days), that portion of the billed sum then unreasonably unpaid shall be increased by 10 percent, together with interest theron at the rate of 7 percent annum retroactive to the date of receipt of the bill and report by the employer.” (Labor Code § 4622(a)(1))

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Seemsratherharsh...Whatifthereportisoutrageous,likeinScenario2?

• The first question that must be satisfied is: Does the late report of Dr. Quack constitute a Med- Legal Expense.. If the report was not timely objected to (before received), and constitutes substantial evidence with regards to the purpose of the evaluation (LC 4620) then you MUST respond by way of objection in an EOR.

• In Scenario 2, there would be a mandatory penalty of 10% AND 7% interest annum from the date the report and invoice were received until paid. The invoice would [may] be due in full (the only means to contest the reasonableness of an invoice is also by way of EOR).

• In this scenario you need to either prove that Dr. Quack’s report does not constitute substantial medical evidence and is inadmissible, or pay Dr. Quack his full invoice ($13,000.00), plus 10% ($1,300), and 7% interest, per annum, from 4/5/2017 until the invoice ($13,000.00) is paid.

• What about the attorneys fees and costs? Covered soon…

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MostImportantlyFAILURE TO COMPLY WITH ANY TIMELINES CONSTITUTES A

WAIVER OF ANY OBJECTION OTHER THAN THE AMOUNT INVOICED PURSUANT TO THE OFFICIAL FEE SCHEDULE

See 8 CCR 10451.1(f)(1) and (f)(2)

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WhatiftheProviderObjectstothedenialwithin90days?

• If the provider objects to the denial within 90 days the employer must file a petition and DOR within 60 days of the objection.

• 8 CCR 10451.1 (c)(2) states:

• A Defendant shall concurrently file a “Petition for Determination of Non-IBR Medical Legal Dispute filed by a Defendant” and a Declaration of readiness to proceed shall be concurrently filed, IF: Defendant has denied all or a portion of a provider’s med-legal billing for reasons other than disputes subject to IBR, and the defendant has objected to the partial or full denial within 90 days.

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WhatiftheProviderrespondstoanEORpertainingtoFeeSchedulein90days?• IBR Process is invoked.

• Payment (if additional payment ordered pursuant to Labor Code 4603.6) shall be made within 20 days of service of the order to pay.

• The WCAB has no jurisdiction over IBR!

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LaborCode4603.3• (a) Upon payment, adjustment, or denial of a complete or

incomplete itemization of medical services, an employer shall provide an explanation of review in the manner prescribed by the administrative director that shall include all of the following:

• (1) A statement of the items or procedures billed and the amounts requested by the provider to be paid.

• (2) The amount paid.• (3) The basis for any adjustment, change, or denial of the item or

procedure billed.• (4) The additional information required to make a decision for an

incomplete itemization.• (5) If a denial of payment is for some reason other than a fee

dispute, the reason for the denial.• (6) Information on whom to contact on behalf of the employer if a

dispute arises over the payment of the billing. The explanation of review shall inform the medical provider of the time limit to raise any objection regarding the items or procedures paid or disputed and how to obtain an independent review of the medical bill pursuant to Section 4603.6 .

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Sample–ExplanationofReviewLetter• RE: EXPLANATION OF REVIEW – NON-IBR DISPUTE•• Employee:• Employer:• Date of Injury:• Claim #:

• To Whom It May Concern:

• ________________________, on behalf of ____________________, administers the workers’ compensation benefits for ____________________, relative to the captioned claim. We are in receipt of your invoice [invoice number] for dates of service xx/xx/xxxxthrough xx/xx/xxxx regarding [description of services] in the amount of $________. After careful consideration, we have determined payment in the amount of $0.00 will be made for this invoice.

• The services billed are being disputed for the following reasons (include all that apply):

• Reasonableness and necessity of the services invoiced are in dispute.

• The services provided are not medical legal expenses, as defined under Cal. Lab. Code § 4620 or 4621.

• A motion to quash was timely filed with regard to the records at issue. The arguments set forth in the Motion to Quash are hereby incorporated in as additional basis for the denial of payment for services rendered.

• Pursuant to the Rule of Professional Conduct 3-700(D) upon the termination of an attorney's employment, "subject to any protective order or non-disclosure agreement," the attorney must "promptly release to the client, at the request of the client, all the client papers and property."

• Medical reports which are required to be served by the physician per §9785 will not be reimbursed as a record copying fee, as medical reports do not qualify as medical records.

• Pursuant to 4055.2, any party who subpoenas records in any proceeding under this division shall, concurrent with service of the subpoena upon the person who has possession of the records, send a copy of the subpoena to all parties of record in the proceeding

• For second and third sets of records, the copy service should provide proof that these duplicate sets of records were requested. The applicant attorney is allowed only one set.

• Pursuant to LC 5307.9, the schedule shall specify the services allowed and shall require specificity in billing for these services, and shall not allow for payment for services provided within 30 days of a request by an injured worker or his or her authorized representative to an employer, claims administrator, or workers' compensation insurer for copies of records in the employer's, claims administrator's, or workers' compensation insurer's possession that are relevant to the employee's claim.

• Pursuant to LC 4603.2(b)(4), duplicate submissions of medical services itemizations, for which an explanation of review was previously provided, shall require no further or additional notification or objection by the employer to the medical provider and shall not subject the employer to any additional penalties or interest pursuant to this section for failing to respond to the duplicate submission. This paragraph shall apply only to duplicate submissions and does not apply to any other penalties or interest that may be applicable to the original submission.

• The defendant reserves the right to invoke any further objections as applicable and to amend this objection. The objection is continuing and ongoing.

• If you disagree with the above, you may object to the Explanation of Review and adjudicate this in front of the Workers’ Compensation Appeals Board. Pursuant to Labor Code section 4622(c) and 8 CCR 10451.1(c)(2), you may object to this denial within 90 days of service of the explanation of review. If you object to this denial within 90 days of the service of the Explanation of Review, we shall file a Petition for Determination of Non-IBR Medical-Legal Dispute and a Declaration of Readiness to Proceed within 60 days of the service of your objection, as required by Labor Code section 4322(c) and 8 CCR10451.1(c)(2)(B). If you fail to object to this denial within 90 days, neither the employer nor the employee shall be liable for the amount that was denied.

• If a non-IBR medical-legal expense dispute is resolved in your favor, then any outstanding issue over the amount payable under an Official Medical Fee Schedule shall be resolved through IBR per Labor Code 4622(b)(1), if applicable.

• Sincerely,

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JurisdictionofWCAB overNon-IBRMed-LegalExpenseDisputes

• The WCAB has jurisdiction to resolve all non-IBR Med-legal Disputes and mandates duties on parties pursuant to this regulation.

• Non-IBR Med-legal Disputes include, but are not limited to:

1. Any threshold issue (such as coverage, employment, affirmative defenses, or jurisdiction);

2. Whether the claimed med-legal expense was for the purpose of proving or disproving a contesting claim;

3. Whether the claimed med-legal expense was reasonable and necessary;

4. An assertion defendant has waived any objection because of failure to timely comply with Labor Code § 4622, 4603.3, and 4603.6; 5.

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JurisdictionofWCAB overNon-IBRMed-LegalExpenseDisputes

5. An assertion the med-legal provider waived any claim because the provider failed to timely comply with LaborCode § 4622, 4603.3, and 4603.6; 5.

6. An assertion that an interpreter does not meet the criteria set forth in the Labor Code (certification).

7. An assertion that the interpreter was not reasonably necessary.

IBR ONLY PERTAINS TO DISPUTES REGARDING THE AMOUNT PAYABLE UNDER THE OFFICIAL FEE SCHEDULE

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EarlierImentionedaMed-Legalproviderdoesnothavetofilealien

• A provider may file a “Petition for Determination of Non-IBR Medical Legal Dispute” if defendant breaches a duty under 8 CCR 10451.1 or Labor Code § 4622 A med-legal provider is not required to file a claim of costs in the form of a lien.

Additionally,• The WCAB may defer hearing this issue until the issue is

presented in the underlying claim , the underlying claim has been resolved by way of Compromise and Release, the underlying claim has been abandoned (keep in mind the 7% per annum interest).

However, the WCAB does not have to defer the issued set forth in the provider’s “Petition for Determination of Non-IBRMedical Legal Dispute”

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ClarificationonwhomustfilePetitionsandDORs andwhenthefilingsaredue

1. Defendant shall concurrently file a “Petition for Determination of Non-IBR Medical Legal Dispute filed by a Defendant” and a Declaration of readiness to proceed shall be concurrently filed, if defendant has denied all or a portion of a provider’s med-legal billing for reasons other than disputes subject to IBR, and the defendant has objected to the partial or full denial within 90 days. AND; The DOR (and petition) MUST be filed within 60 days of receiving the objection from the med-legal provider.

2. Provider may file a “Petition for Determination of Non-IBRMedical Legal Dispute” if defendant breaches a duty under 8 CCR 10451.1 or Labor Code § 4622

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Didn’ttheQME’s attorneyrequestcostsandattorneysfees?

• If the WCAB determines that, as a result of bad faith actions or tactics, defendant failed to comply with the requirements and timelines outlined in Labor Code § 4622, 4603.3, and 4603.6, and the related regs, defendant shall be liable for reasonable attorney’s fees and costs, and for sanctions and for sanctions under Labor Code § 5813 and 8 CCR § 10561.

• Monetary sanctions shall not be less than $500.00.

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WhatconstitutesbadfaithactionsortacticsbyaDefendant?

Bad faith actions or tactics by a defendant may include but are not limited to:1. Failing to pay an uncontested portion of a med-legal bill;

2. Failing to make a good faith effort to comply with the applicable timelines;

3. Contesting liability based on a dispute over injury, or injury to a particular body part.

4. Those actions outlined in 8 CCR 10561.

Costs, sanctions, and attorney’s fees shall be in addition to penalties enumerated in Labor Code § 4622(a)(1).

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WhatconstitutedbadfaithactionsortacticsbyaProvider?

• If the WCAB determines as a result of bad faith actions or tactics, a med-legal provider has improperly asserted that defendant failed to comply with the requirements and timelines set forth in Labor Code § 4622 and 4603.6 and the related regs, the med-legal evaluator shall be liable for the defendant’s reasonable attorney’s fees and costs, and sanctions under Labor Code § 5813 and 8 CCR10561.

• Monetary sanctions shall not be less than $500.00

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Ripenessforlitigation• A provider’s position is that any violation of Cal. Lab.

Code 4622 is a violation of 8 CCR 10451.1(g), and is bad faith per se.

• A specific finding of bad faith is necessary for costs, attorneys fees, and sanctions to be awarded by the WCAB, and 8 CCR 10561 is referenced

• Is there a similar standard, enumerated in 8 CCR 10561, necessary for a finding of bad faith actions or tactics; OR

• Does any failure to pay an uncontested amount, make a good faith effort to comply with timelines, or contesting liability due to compensability of a specific body part constitute bad faith actions or tactics?

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PracticeTipsWhen in doubt, always respond to an invoice and report in the form of a EOR, within 60 days of receipt.

Order of handling:1. Is this a Med Legal Expense (see LC 4620 and 4621)?

2. If so, I must respond within 60 days from date of receipt, in the form of a EOR (4622(a)).

3. Provider has 90 days to object or request a second review (for disputes regarding fee schedule).

4. If Provider fails to respond within 90 days the invoice is deemed paid, or the employer is not liable (if no amount paid(4622(c)).

5. If Provider objects to partial or total denial within 90 days, you MUST file a “Petition for Determination of Non-IBR Medical Legal Dispute filed by a Defendant” and a Declaration of readiness to proceed within 60 days of receiving the objection from the provider. The WCAB will have jurisdiction to determine reasonableness and necessity.

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Failuretoabidebythepreviousslide..1. Labor Code § 4622(a)(1): Imposes an increase of 10%

together with “interest thereon” (compound interest) at 7% retroactive to the date the bill was received.

2. 8 CCR 10451.1(f)(1) and (f)(2):Failure to comply constitutes a waiver of any objection other than the amount invoiced pursuant to the official fee schedule.

3. The Provider may file a “Petition for Determination of Non-IBR Medical Legal Dispute” if defendant breaches a duty under 8 CCR 10451.1 or Labor Code § 4622.

4. Attorney for Provider will likely invoke an argument of bad faith actions or tactics, which imposes a minimum sanction of $500.00, costs, and reasonable attorneys fees.

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Patrick C. Gorman, Esq.Managing Attorney/ Partner

Bradford Barthel, Redding1805 Hilltop Drive, Suite 106

Redding, CA 96002Phone: (530) 242-6909

Fax: (530) 242-6988

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