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CASE NO.: D065072
COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION ONE
CALIFORNIA INSURANCE GUARANTY ASSOCIATION, ET AL.,
Petitioner,
vs.
WORKERS' COMPENSATION APPEALS BOARD
and
ELITE SURGERY CENTER, ET AL.,
Respondents,
WCAB No. ADJ 2806916 (SDO 0271727) HONORABLE CLIFFORD LEVY, WCJ
AMICUS CURIAE APPLICATION and BRIEF BY CALIFORNIA WORKERS' COMPENSATION INSTITUTE
IN SUPPORT OF PETITIONER CALIFORNIA INSURANCE GUARANTY ASSOCIATION
Michael A. Marks, Esq. SBN 071817
Law Offices of Allweiss &McMurtry 18321 Ventura Blvd., Suite 500
Tarzana, CA 91356 Tel: (818) 343-7509
Attorneys for Petitioner California Workers' Compensation Institute
I CERTIFICATE OF INTERESTED ENTITIES OR PERSONS
California Rules of Court, Rule 8.208
Court of Appeal Case Caption:
California Insurance Guaranty Assn. D065072 v. 4th District- Div 1
WCAB, et al.
Name of Interested Entity or Person Nature of Interest
Please check here if applicable:
There are no interested entities or parties to list in this Certificate per California Rules of Court, Rule 8.208 .
Date: March 04 , 2014
Signature of Attorney or Unrepresented Party
Printed Name: Michael A. Marks
State Bar No: 071817
Address: Allweiss & McMurtry
18321 Ventura Blvd., Suite 500
Tarzana, CA 91356
Tel: (818) 343-7509
Party Represented: Amicus Curiae — California Workers Compensation Institute
Amicus Curiae Application & Brief by CWCI In Support of Petitioner California Insurance Guaranty Assn. Page 24
TABLE OF CONTENTS
Certificate of Interested Parties i Table of Contents ii Table of Authorities iii Application for Amicus Curiae Status vi Argument & Authorities
RESORT TO THE "RANGE OF EVIDENCE" DOCTRINE SHOULD NOT BE ALLOWED TO OBFUSCATE THE FACT THAT THE AWARD HEREIN IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE
1
BECAUSE THE DISPUTE HEREIN REMAINED UNRESOLVED AT THE TIME SB863 WAS ENACTED OUSTING THE WCAB OF ORIGINAL JURISDICTION OVER SUCH DISPUTES AND SUBSTITUTING A NEW MEDICAL FEE DISPUTE RESOLUTION SYSTEM THROUGH INDEPENDENT BILL REVIEW, THE DECISION BELOW MUST BE REVERSED AND THE MATTER REFERRED TO INDEPENDENT BILL REVIEW TO DETERMINE A REASONABLE FEE
9
Conclusion 23 Verification & Word Count 24
Declaration of Service By US Mail 25
Amicus Curiae Brief of California Workers' Compensation Institute - Page ii
TABLE OF AUTHORITIES CITED
Cases Cited
Avila v. WCAB (B.S.Bains) (1970) 14 Cal. App. 3d 33 7
Binda v. WCAB (D.J.Simpson Co.) (1981) 46 Cal. Comp. Cases 1340
2
Blackledge v. Bank of America (2010) 75 Cal. Comp. Cases 613 7 Bracken v. WCAB (1989) 214 Cal.App.3d 246 8 Braewood Convalescent Hospital v. WCAB (1983) 34 Ca1.3d 159 7 City of Martinez v. WCAB (Bonito) (2000) 85 Cal. App 4th 601 19 Daniels v. WCAB (2011) 76 CCC 1092 (writ den) 2 Department of Motor Vehicles v. WCAB (Payne) (1971) 20 Cal. App. 3d 1039
1
Ins. Co. of North America v. WCAB., 122 Cal. App. 3d at pp. 910- 911
8
Kuhn v. WCAB (Oceanview Furniture) (1982) 47 Cal. Comp. Cases 346
2
Kuntz v. Patterson Floor Coverings, Inc. (2002) 67 Cal. Comp. Cases 1588
3
LeVea v. WCAB (1973) 38 Cal. Comp. Cases 514 2 Minnear v. Mt. San Antonio Community College District (1996) 61 Cal. Comp. Cases 1055
11
National Convenience Stores v. WCAB. 121 Cal. App. 3d at p. 424 8 Nielsen Freight Lines v. WCAB (Parris)(1980) 45 Cal. Comp. Cases 1277
2
Pacific National Ins. Co. v. WCAB (Contreras) 44 Cal. Comp. Cases 968
2
People v. Allen (1999) 21 Cal.4th 846 18 Rogers v. WCAB (City of Merced) (1985) 50 Cal. Comp. Cases 59
2
Smith v. WCAB, 79 Cal.App.4 th 530, 537, fn. 2 2 State of California v. WCAB (Jones) (1989) 261 Cal. Rptr 130 7 Tapia v. Skill Master Staffing (2008) 73 Cal. Comp. Cases 1338 3 Universal City Studios. Inc. v. WCAB, 99 Cal. App. 3d at pp. 658- 695
8
Amicus Curiae Brief of California Workers' Compensation Institute - Page iii
Western Growers Ins. Co. v. WCAB. (1993) 16 Cal.App.4th 227
8
Statutes & Regulations
LC 139.5 19 LC 4600 12, 19, 20,
21 LC 4603.2 17, 21 LC 4603.6 17 LC 4610.5 12, 20, 21,
22 8 CCR 9792.5.4 19 8 CCR 9792.5.5 19 8 CCR 9792.5.7 18
Legislation
Assembly Bill 749 (2003) 12 Senate Bill 899 (2004). 12 Stats. 1993 ch. 121 (Labor Code Section 4062.9 subsequently repealed)
11
Stats 2012 ch. 363, SB863, Section 84 10, 18
Other Publications
Commission on Health and Safety and Workers' Compensation - 2011 Lien Report - Available at www.dir.ca.govichswc/reports/2011/chswc_lienreport.pdf
passim
Commission on Health and Safety and Workers' Compensation - 2012 Annual Report
14
Gardner, L., Swedlow, A. The Effect of 1993 — 1996 Legislative Reform Activity on Medical Cost, Litigation and Claim Duration in the California Workers' Compensation System. Research Note. CWCI. May 2002
12
Ireland, J., Swedlow, A., Gardner, L. Analysis of Medical and Indemnity Benefit Payments, Medical Treatment and
13
Amicus Curiae Brief of California Workers' Compensation Institute - Page iv
Pharmaceutical Cost Trends in the California Workers' Compensation System. CWCI, June 2013 Neuhauser, F. Doctors and Courts: Do Legal Decisions Affect Medical Treatment Practice? An Evaluation of Treating Physician Presumption in the California Workers' Compensation System. A Report for the California Commission on Health and Safety and Workers' Compensation. November 2002
12
Amicus Curiae Brief of California Workers' Compensation Institute - Page v
APPLICATION FOR AMICUS CURIAE STATUS
TO THE HONORABLE CHIEF JUSTICE AND THE HONORABLE ASSOCIATE
JUSTICES OF THE COURT OF APPEAL FOR THE STATE OF CALIFORNIA, FOURTH
DISTRICT, DIVISION ONE:
Pursuant to California Rule of Court 8.200(c) the California Workers'
Compensation Institute (hereafter CWCI or Institute) hereby requests an
order granting amicus curiae status and filing of the within Amicus Curiae
Brief in support of Petitioner California Insurance Guaranty Association.
CWCI is a private non-profit research, information, and educational
organization dedicated to improving the California workers' compensation
system. Institute members include insurers writing 70% of California's
workers' compensation premium, and self-insured employers with $42B of
annual payroll (24% of the state's total annual self-insured payroll). Its
research, which is typically based on claims data collected from member
companies, offers analyses and practical expertise on issues and trends
affecting California workers' compensation, spotlights problems and
concerns within the system, helps build consensus for workable solutions,
and is often used to evaluate the impact of various legislative and regulatory
proposals. CWCI is interested in administrative, statutory, and judicial
matters that substantively affect the system of workers' compensation
created by Article XIV, Section 4, of the Constitution of the State of
California.
On behalf of its membership, the Institute further serves as a liaison
with employer, labor, medical, and legal communities within the workers'
compensation system, and frequently provides written and oral input at
legislative and regulatory hearings. Based upon its expertise in workers'
Amicus Curiae Brief of California Workers' Compensation Institute - Page vi
compensation, the Institute has made multiple appearances as amicus curiae
before the California Supreme Court and Courts of Appeal [including the
cases of Christian v. WCAB (1997), SCIF v. WCAB (Stuart) (1998),
Avalon Bay Foods v. WCAB (1998), Rosales v. Depuy Ace Medical
Company (2000), Lockheed Martin v. WCAB (McCullough) (2002), Wal-
Mart v. WCAB (Garcia) (2003), Honeywell v. WCAB (Wagner)(2005),
Green v. WCAB (2005), Rio Linda School District v. WCAB (Schefiner)
(2005), Nabors v. WCAB (2006), Yeager Construction v. WCAB (Gatten)
(2006), Chang v. WCAB (2007), Vaira v. WCAB (2007), Brodie, et al. v.
WCAB (2007), Babbitt v. Ow Jing (2007); Pendergrass v. Duggan
Plumbing) (2007) , Tanimura & Antle v.. WCAB (Lopez) (2007), Palm
Medical Group v. State Compensation Insurance Fund (2007), Smith &
Amar v. WCAB (2007), and Facundo-Guerrero v. WCAB (2008), Smith &
Amar v. WCAB) (2009) , Benson v. WCAB (2009), Boughner v. WCAB
(2009), Aguilar v. WCAB (2009), El Aguila Food Products v. WCAB
(Cervantes) (2010), Almaraz & Guzman v. WCAB (2011), Baker v. WCAB
& X.S. (2011), Ogilvie v. WCAB (2011), Valdez v. WCAB (2012); Pacific
Compensation vs. WCAB (Nilsen) (2013); Southern California Edison v.
WCAB (Martinez) (2013)].
As appears more fully below, CWCI is familiar with the parties, the
law, and the issues raised in this matter, and has completely reviewed all of
the briefs and informal letter-briefs heretofore submitted to this Court.
Pursuant to California Rule of Court 8.200, the CWCI respectfully seeks an
order granting it status as amicus curiae and ordering the filing of this
proposed brief in support of Petitioner California Insurance Guaranty
Association.
Amicus Curiae Brief of California Workers' Compensation Institute - Page vii
In the view of the CWCI and its membership, the decision below is
wrong for two reasons. FIRST, it reflects a disturbing trend by WCALJs to
resort to decision-making using a dartboard approach to an unsubstantiated
"range of evidence" and thus constitutes an unwarranted and unauthorized
departure from established principles of substantial evidence. SECOND, its
rejection of Independent Bill Review to resolve the dispute under newly
enacted statutes ignores the series of legislative reforms which culminated in
the creation of new paradigms for medical billing dispute resolution
contained within SB863, and codified by Labor Code Sections 4603.2, et
seq., Those statutes eliminate the Appeals Board's original jurisdiction over
such disputes, while expressly declaring that "This act shall apply to all
pending matters, regardless of date of injury, unless otherwise specified in
this act, but shall not be a basis to rescind, alter, amend, or reopen any final
award of workers' compensation benefits." As this matter remained pending,
it was error for the Appeals Board to assert continued original jurisdiction.
It is because of these important concerns, and the historical
perspective we can bring to the analysis, that the CWCI asks this Court to
grant it status as amicus curiae and an order that the within brief be filed.
Dated: March 4, 2014. LAW OFFICES OF ALLWEISS & McMurtry A Professional Corporation
Michael A. Marks, Esq.
Amicus Curiae Brief of California Workers' Compensation Institute - Page viii
RESORT TO THE "RANGE OF EVIDENCE" DOCTRINE SHOULD NOT BE ALLOWED TO OBFUSCATE THE FACT THAT THE AWARD HEREIN IS NOT
SUPPORTED BY SUBSTANTIAL EVIDENCE.
After some seventeen days of trial preceded by countless pre-trial and
post-trial hearings potentially impacting ±2,450 ambulatory surgery center
facility fee liens approaching a total of +$23million l , the WCALJ herein
rejected the evidence and instead determined that the range from which to
determine a "reasonable ambulatory surgery center facility fee" 2 should be
bracketed on the low end by reference to the Official Medical Fee Schedule
for ambulatory surgical centers that went into effect on 1/1/2004 and on the
high end by reference the 2001-2003 Official Medical Fee Schedule for
inpatient hospital surgery services in effect at the time the services were
provided. The WCALJ merely "split the baby" by averaging the two, and
justified the outcome by reference to a purported "range of evidence."3
The history of the "range of evidence" doctrine as a basis to support a
judicial determination is discussed in Department of Motor Vehicles v.
1 See WCAB Exhibit YY — General consolidation list 2 See Exhibit 13, WCALJ's Findings & Order — Opinion on Decision, pg. 5. [The ambulatory surgery center "facility fee" includes a host of bundled services, and is in addition to the actual medical treatment performed at the facility. The actual medical treatment is separately paid in accordance with the Official Medical Fee Schedule.]
3 See Exhibit 13, WCALJ's Findings & Order — Opinion on Decision, pg. 17-19.
Amicus Curiae Brief of California Workers' Compensation Institute - Page 1 of 23
WCAB (Payne) (1971) 20 Cal. App. 3d 1039, wherein the Court
acknowledged the rule but none-the-less reversed the decision below
because the range from which the judge selected a point was not supported
by the record and thus failed to meet the substantial evidence test. 4 Similar
Appeals Board and the Court decisions have consistently reversed workers'
compensation trial decisions based on a point within a "range of evidence"
where the record relied upon to create the range from which the judge
selected the point was not supported by substantial evidence, 5 as well as
where reliance on the "range of evidence" doctrine was merely used as a
convenient rationale to avoid having to rule on a close factual issue. 6
4 The Court's exact words were "In this record, however, there is no range of evidence."
5 See, e.g., LeVea v. WCAB (1973) 38 Cal. Comp. Cases 514; Daniels v. WCAB (2011) 76 CCC 1092 (writ den); Pacific National Ins. Co. v. WCAB (Contreras) 44 Cal. Comp. Cases 968; Nielsen Freight Lines v. WCAB (Parris)(1980) 45 Cal. Comp. Cases 1277; Rogers v. WCAB (City of Merced) (1985) 50 Cal. Comp. Cases 59; Kuhn v. WCAB (Oceanview Furniture) (1982) 47 Cal. Comp. Cases 346. [Although without stare decisis effect, Board panel decisions and denials of petitions for writ of review reported in the California Compensation Cases and in the California Workers' Compensation Reporter (Cal. Workers' Comp. Rptr.), along with Board denials of petitions for reconsideration also reported [**38] periodically in the latter publication, are properly citable authority but only to the extent they point out the contemporaneous interpretation and application of the workers' compensation laws by the Board. (Smith v. Workers' Comp. Appeals Bd., supra, 79 Cal.App.4 th 530, 537, fn. 2.)
6 Binda v. WCAB (D.J.Simpson Co.) (1981) 46 Cal. Comp. Cases 1340
Amicus Curiae Brief of California Workers' Compensation Institute - Page 2 of 23
The two seminal cases relating to determining what is a "reasonable
facility fee" where treatment was provided as an outpatient service in a free-
standing ambulatory surgical center (as opposed to an inpatient at a full
service fully staffed hospital) prior to the inclusion of such services in the
2004 Official Medical Fee Schedule are Kuntz v. Patterson Floor Coverings,
Inc. (2002) 67 Cal. Comp. Cases 1588 (Appeals Board en banc opinion) and
Tapia v. Skill Master Staffing (2008) 73 Cal. Comp. Cases 1338 (Appeals
Board en banc opinion).
In Kuntz, the Appeals Board recognized that though physician
services provided at a ambulatory surgical center are covered by the Official
Medial Fee Schedule, that schedule did not then apply to the "facility fee"
charged by the ambulatory surgical center, which nonetheless must be
reasonable. The Appeals Board further held that in determining what
constitutes a reasonable facility fee for dates of service prior to January 1,
2004,7 considerations include but are not limited to the following:
1. the medical provider's usual fee and the usual fee of other medical
providers in the same geographical area, which means the fee usually
accepted, not the fee usually charged;
2. the fee the outpatient surgery center usually accepts for the same or
similar services (both in a workers' compensation context and in a
7 All of the services herein were provided prior to January 1, 2004.
Amicus Curiae Brief of California Workers' Compensation Institute - Page 3 of 23
non-workers' compensation context, including contractually
negotiated fees); and
3. the fee usually accepted by other providers in the same geographical
area (including in-patient providers).
In Tapia the Appeals Board clarified and expanded upon its decision in
Kuntz, additionally ruling that:
1. lien claimant has the burden of proof of what is a reasonable fee;
2. even in the absence of rebuttal evidence, the lien need not be allowed
in full if it is unreasonable on its face;
3. any evidence relevant to reasonableness may be offered to support or
rebut the lien; therefore, evidence is not limited to the fees accepted
by other outpatient surgery centers in the same geographic area for the
services provided
In the decision below, for a variety of reasons the WCALJ found that
none of the mountain of evidence submitted 8 in accordance with Kuntz and
Tapia constituted substantial evidence on the "reasonable facility fee" issue.
Use of the 2004 Official Medical Fee Schedule for ambulatory surgical
centers for these medical procedures was rejected as dispositive of the issue
in part because it was not in effect at the time the services were provided. 9
The amount claimed by Elite as its average fee accepted was rejected as
8 The list of exhibits alone takes up 14 typed pages!! [Ex. 34, Minutes of Hearing & Summary of Evidence, 11/5/20121
9 See Exhibit 13, WCALJ's Findings & Order — Opinion on Decision, pg. 10-11.
Amicus Curiae Brief of California Workers' Compensation Institute - Page 4 of 23
dispositive, reasoning that the data from which those percentages were
calculated included multiple and complex procedures lumped together, not
the kind of single uncomplicated procedures presented herein. 10 Evidence of
what every other ambulatory surgery center in the geographic area accepted
as payment for these same medical procedures was rejected as dispositive,
reasoning that most of that sampling was based on contracted rates with
group health insurers, 11 and the mix of procedures they covered were not the
same as the mix claimed by Elite's liens herein. 12 Both Elite's and
defendant's evidence of other comparison facilities' billed and paid data as
setting the "reasonable fee" was also was rejected as dispositive. 13
Having rejected all of the data driven evidence offered by parties in
conformity with the Kuntz and Tapia criteria as not substantial evidence, the
WCALJ elected instead to create a "range of evidence" using the 2004
Official Medical Fee Schedule for ambulatory surgery center facility fees as
the floor and the 2001-2003 Official Medical Fee Schedule for hospital
inpatient surgery as the ceiling, resulting in a "range of evidence" from
1° See Exhibit 13, WCALJ's Findings & Order — Opinion on Decision, pg. 11-12.
" Inexplicably, the WCALJ rejected that evidence, despite the fact that it was expressly authorized for consideration by Kuntz and Tapia.
12 See Exhibit 13, WCALJ's Findings & Order — Opinion on Decision, pg. 12-13.
13 See Exhibit 13, WCALJ's Findings & Order — Opinion on Decision, pg. 13-16.
Amicus Curiae Brief of California Workers' Compensation Institute - Page 5 of 23
which to choose a point that represents what is a "reasonable facility fee" for
a free-standing ambulatory surgical center." At that point in the analysis
there is no analysis. The WCALJ merely uses a "average" of the two fee
schedules, one of which (the hospital inpatient fee schedule) is wholly
inapplicable to a free-standing ambulatory surgery center! The only real
rationale expressed by the WACLJ is expressed as follows:
The fact that the end result is halfway between the two fee schedules is an acknowledgment that these liens have been outstanding for over 10 years, and that any solution requires compromise." 15
This is the judicial version of the "go outside and settle this" approach that is
precisely what the Commission on Health and Safety and Workers'
Compensation's 2011 Lien Report resoundingly criticized when it
commented as follows:
A court system that is overwhelmed by liens is unable to enforce the law. Instead, the court must encourage or even coerce settlements because it does not have the capacity to adjudicate all the disputes. As a result, parties are not held accountable for their conduct, and business practices that are contrary to law continue to flourish.
Faced with hundreds of thousands of liens and insufficient resources to deal with them, the court has no option but to promote or even force settlements. ... Settlements have a vital place in the dispute resolution system when parties can reach a reasonable compromise of a good faith dispute. Settlements defeat public policy when they
14 See Exhibit 13, WCALJ's Findings & Order — Opinion on Decision, pg. 17-18
15 See Exhibit 13, WCALJ's Findings & Order — Opinion on Decision, pg. 19
Amicus Curiae Brief of California Workers' Compensation Institute - Page 6 of 23
reward and perpetuate bad conduct. The Legislature and the Administrative Director of DWC have enacted statutes and regulations to govern the behaviors of the parties, but an overwhelmed judicial system is unable to enforce these laws 16 .
Instead of fostering compliance with applicable laws, such a judicial
approach represents an exhausted judiciary using temporal expediency at the
cost of abdication of the core judicial fact-finding function 17 and amounts to
no more than a convenient but improper "guesstimate." 18 As previously
noted, to be "substantial evidence," the "range of evidence" from which a
judicial determination may be made must itself be factually supported in the
record. The threshold issue is therefore whether this "guesstimate" meets
the "substantial evidence" test.
The substantial evidence requirement [Labor Code Section 5952, subd.
(d)], generally means evidence that is credible, reasonable and of solid
value, probative on the issues and adequate to support a conclusion.
(Braewood Convalescent Hospital v. Workers' Comp. Appeals Bd. (1983) 34
Ca1.3d 159, 164) Its general rules of application are that a factual finding,
16 Commission on Health and Safety and Workers' Compensation, Lien Report,
published January 5, 2011, Pg.10, 11, Available at wwvv.dir.ca.govichswc/reports/2011/chswc lienreport.pdf 17 See gen, Blackledge v. Bank of America (2010) 75 Cal. Comp. Cases 613 (En
Banc); State of California v. WCAB (Jones) (1989) 261 Cal. Rptr. 130 18 See gen, Avila v. WCAB (B.S.Bains) (1970) 14 Cal. App. 3d 33
Amicus Curiae Brief of California Workers' Compensation Institute - Page 7 of 23
order or award is not based on substantial evidence where the following
exists:
• if unreasonable, illogical, arbitrary, improbable or inequitable
considering the entire record and statutory scheme. (Western Growers
Ins. Co. v. Workers' Comp. Appeals Bd. (1993) 16 Cal.App.4th 227,
233] ; Bracken v. Workers' Comp. Appeals Bd. (1989) 214 Cal.App.3d
246, 254.)
• if it leads to an inequitable result when the entire record is examined for
fairness, reasonableness, and proportionality in the overall scheme of the
workers' compensation law and the purposes sought to be accomplished
by that law. ( National Convenience Stores v. Workers' Comp. Appeals
Bd. , supra , 121 Cal. App. 3d at p. 424 Universal City Studios. Inc. v.
Workers' Comp. Appeals Bd. , supra , 99 Cal. App. 3d at pp. 658-695.)
• if the findings are based upon inferences which cannot be fairly drawn
from the evidence, based on evidence lacking probative force, or based
on a surely "fanciful conclusion."' ( Insurance Co. of North America v.
Workers' Comp. Appeals Bd. , supra , 122 Cal. App. 3d at pp. 910-911.)
Perhaps the easiest way to summarize the decision below is to put it into
a chart form, which produces the following:
1 2 3 4 5
Procedure
Center
2004 OMFS for Ambulatory Surgery
2001 OMFS For Inpatient Hospital Surgery
Amount Awarded
% 2004 outpatient OMFS
% 2001 inpatient OMFS
Epidural $815.00 $3,859.55 $2,337.52 + 267% -40%
Amicus Curiae Brief of California Workers' Compensation Institute - Page 8 of 23
Injection (percutaneous lysis of epidural adhesion) Knee arthroscopy
$1,925.52 $8,490 $5,207.85 +270% -39%
Shoulder arthroscopy
$3,209.48 $5,652.43 $4,390.95 +137% -22%
Less than a year after most of the medical procedures herein were
performed, the legislature determined in 2004 what is a reasonable facility
feel for this kind of free-standing ambulatory surgery center (see column 1
above) for each of the procedures performed in this case, but the WCALJ
herein awarded an amount from 137%-270% above that level. There is no
evidentiary basis for this determination ... and the reasoning given by the
WCALJ is no more than an expression of judicial exhaustion. 19 On this
record, considerations of equity, reasonableness, proportionality and the
overall scheme of the workers' compensation the system as a whole preclude
a finding that the award herein is supported by substantial evidence, and
compel reversal.
BECAUSE THE DISPUTE HEREIN REMAINED UNRESOLVED AT THE TIME SB863 WAS ENACTED OUSTING THE WCAB OF ORIGINAL JURISDICTION
19 Perhaps as a tacit acknowledgement of the frailties of the decision herein, the WCALJ also ordered the parties to submit any further disputes to an Independent Bill Reviewer. See Exhibit 13, WCALJ's Findings & Order — Opinion on Decision, pgs. 2 and 18.
Amicus Curiae Brief of California Workers' Compensation Institute - Page 9 of 23
OVER SUCH DISPUTES AND SUBSTITUTING A NEW MEDICAL FEE DISPUTE
RESOLUTION SYSTEM THROUGH INDEPENDENT BILL REVIEW, THE
DECISION BELOW MUST BE REVERSED AND THE MATTER REFERRED TO
INDEPENDENT BILL REVIEW TO DETERMINE A REASONABLE FEE
A. Introduction
Shortly after this case was submitted for decision on November 5,
2012,20 but prior to the WCALJ's decision on February 1, 2013, 21 the
legislature enacted SB863 containing a provision mandating "independent
bill review" and eliminating the Appeals Board's original jurisdiction over
such disputes, while expressly declaring that "This act shall apply to all
pending matters, regardless of date of injury, unless otherwise specified in
this act, but shall not be a basis to rescind, alter, amend, or reopen any final
award of workers ' compensation benefits." 22 It was therefore error for the
Appeals Board to continue to assert original jurisdiction.
B. Historical Context of SB863 Changes
For more than 20 years, the California workers' compensation system
has struggled with how to resolve medical disputes. Prior to 1993, under the
employee provider "free choice" model, in which disputes would be
20 See Ex. 34, Minutes of Hearing & Summary of Evidence, 11/5/2012, Pg. 23]
21 See Ex. 13 WCALJ's Findings & Order — Opinion on Decision dated February 1, 2013 22 Stats 2012 ch. 363, SB863, Section 84.
Amicus Curiae Brief of California Workers' Compensation Institute - Page 10 of 23
adjudicated before a workers' compensation judge and ultimately decided by
the Workers' Compensation Appeals Board (WCAB) based upon opposing
expert opinions on medical necessity or price. This process was commonly
referred to as "dueling docs." Over time, this practice was found to be time
consuming, expensive, and could result in arbitrary, inconsistent medical
decisions.
In 1993, the California Legislature enacted major reforms that
included a presumption that the findings of the treating physician were
correct. 23 In 1996, WCAB en banc interpreted that to be a presumption of
correctness on all medical treatment issues 24 and limited a payor's ability to
challenge the treating physician unless it was erroneous, incomplete or
legally incompetent, a nearly impossible burden. Following that judicial
expansion of the statutory presumption, there was an unprecedented surge in
medical benefit costs. With treating doctors now firmly in control of all
medical decision-making, the fox was truly in charge of the hen-house.
Predictably, between1996 and 2002, the estimated average ultimate per
claim cost of medical care in indemnity claims increase by 267% and studies
23 CA Labor Code Section 4062.9 [Stats. 1993 ch. 121] (subsequently repealed) 24 Minnear v. Mt. San Antonio Community College District (1996) 61 Cal. Comp. Cases 1055 (Appeals Board en banc opinion)
Amicus Curiae Brief of California Workers' Compensation Institute - Page 11 of 23
revealed a clear association between the significant cost increase trend and
expansion of the treating physician presumption of correctness. 25 ,26
Confronted with the insatiable appetite of the fox, in 2003 and 2004,
the Legislature at first limited the treating physician presumption of
correctness and then repealed it altogether, replacing it with an objective
Medical Treatment Utilization Schedule (MTUS) comprised of medical
treatment guidelines using evidence based, peer reviewed and nationally
recognized standards of medical treatment against which treating doctor
recommendations in any given case would be evaluated to determine if it
was medically appropriate. 27 Having created a MTUS and employer control
of medical treatment through Medical Provider Networks28, disputes were
adjudicated through a process that was still considered too lengthy,
expensive, and often unsatisfactory path for injured workers and claims
administrators. Many felt that expert witnesses and the decisions of judges
25 Gardner, L., Swedlow, A. The Effect of 1993 — 1996 Legislative Reform Activity on Medical Cost, Litigation and Claim Duration in the California Workers' Compensation System. Research Note. CWCI. May 2002. 26 Neuhauser, F. Doctors and Courts: Do Legal Decisions Affect Medical Treatment Practice? An Evaluation of Treating Physician Presumption in the California Workers' Compensation System. A Report for the California Commission on Health and Safety and Workers' Compensation. November 2002.
27 Assembly Bill 749 (2003) and Senate Bill 899 (2004).
28 See Labor Code Section 4600(c) and 4610, et seq. establishing employer's right to create a Medical Provider Network of exclusive providers of medical treatment unless the employee had pre-designated his/her personal physician.
Amicus Curiae Brief of California Workers' Compensation Institute - Page 12 of 23
often failed to adequately consider and apply the statutory guidelines and
judicial precedents, and consequently that the opinion of the judge failed to
consistently enforce the statutory medical standard of care established by the
MTUS.
A series of studies found that although the implementation of the
MTUS and Medical Provider Networks were associated with an initial
overall reduction of medical treatment and frictional costs, this was short-
lived. These reforms also were associated with an immediate and sustained
increase in medical cost containment expenses (i.e., utilization review and
bill review), a form of frictional cost, which nearly tripled between 2002
and 2010.29 In addition, anecdotal assertions of inconsistent decisions by the
WCAB on interpretations of the MTUS and medical billing issues cast doubt
on whether non -medical adjudicators such as judges were the optimal choice
for medical dispute resolution.
The CHSWC Liens Report published January 5, 2011 3° identified a
number of problems with medical provider treatment liens. Of the roughly
29 Ireland, J., Swedlow, A., Gardner, L. Analysis of Medical and Indemnity Benefit Payments, Medical Treatment and Pharmaceutical Cost Trends in the California Workers' Compensation System. CWCI, June 2013.
30 Available at www.dir.ca.govichswc/reports/2011/chswc lienreport.pdf (hereafter referred to as the CHSWC 2011 Lien Report)
Amicus Curiae Brief of California Workers' Compensation Institute - Page 13 of 23
$1.5-$2.0 billion in medical lien disputes annually in 2010-2011, 31 the
problems include the following:
• +$500 million in liens arise annually due purely to disputes over
application of the Official Medical Fee Schedule (i.e., providers claiming
fees above the statutorily authorized levels);
• +$200 million per year is paid by employers/insurers in loss adjustment
expenses (administrative costs) to handle medical liens
As noted in that CHSWC report,
the volume of liens in the California workers compensation system creates a heavy burden on the State's administrative system, interfering with injured workers' access to the courts, and imposing substantial costs on employers. [Id., at Pg. 4]
Quantifying that burden, the CHSWC Annual Report for 2012 32 observed
that the number of lien filings and the related burden upon judicial resources
from 2001-2011 increased astronomically from 194,000 lien filings and
14,800 judicial lien decisions in 2001, to an whopping 649,000 lien filings
and 41,400 judicial lien decisions in 2011.
CHSWC estimated that each lien produces "frictional costs" for
employers and insurers of $1,000 .... And simple math means that translates
to $649 million for liens filed in 2011 alone. Additionally, employers and
insurers are assessed annually to fund the DWC and the WCAB judicial
31 CHSWC 2011 Lien Report , Pg. 21
32 See CHSWC 2012 Annual Report at page 76-77 available at www.dir.ca.gov/chswc/Reports/2012/CHSWC_AnnualReport 2012 .pdf
Amicus Curiae Brief of California Workers' Compensation Institute - Page 14 of 23
system (for 2009-2010 employers and insurers were assessed $233 million).
Added to the frictional and administrative costs are the actual cost of
settlement payments, and CHSWC observed that "the cost of litigation
together with the difficulty of getting a lien case adjudicated gives an
employer an incentive to pay to settle a lien even if the employer believes
that the lien claim is without merit...." Moreover, CHSWC also recognized
that "Whatever employers are spending on loss adjustment expenses or on
settlement of unjustified lien claims is money coming out of the workers'
compensation budget that is not directly going into benefits for injured
workers or, more broadly, for payment of wages and benefits, for business
development, or for public services. 33 The CHSWC proposed solution was
adoption of a system of independent bill review with limited judicial
review. 34
" (CHSWC 2011 Lien Report, at Pg. 7,8)
34 See, Commission on Health and Safety and Workers' Compensation, Lien
Report, published January 5, 2011, Pg.25, Available at www.dir.ca.govichswc/reports/2011/chswc_lienreport.pdf ("The interpretation and application of fee schedules are technical and specialized. A fee schedule dispute requires documentation, not the testimony of witnesses in most cases. Without technical expertise in the fee schedules, busy workers' compensation judges are understandably inclined to urge settlement rather than offer adjudication on the merits of a fee schedule dispute. As a result, the public policies expressed in the fee schedule are not enforced. Neutral bill review experts would be more accurate and efficient arbiters of fee schedule disputes. An administrative bill determination system would permit an administrative determination of the
Amicus Curiae Brief of California Workers' Compensation Institute - Page 15 of 23
In response to the CHSWC recommendations, in late 2012, another
round of reforms began to take shape in the form of Senate Bill 863. The
Senate legislative analysis of SB 863 stated that the purpose of the bill was
"To reduce frictional costs [and] speed up medical care for injured workers."
In section 1 of SB 863, the Legislature expressly stated the rationale for
creating Independent Bill Review. The Legislature declared:
Existing law provides no method of medical billing dispute resolution short of litigation. Existing law does not provide for medical billing and payment experts to resolve billing disputes, and billing issues are frequently submitted to workers' compensation judges without the benefit of independent and unbiased findings on these issues. Medical billing and payment systems are a field of technical and specialized expertise, requiring services that are not available through the civil service system. The need for independent and unbiased findings and determinations requires that this new function be contracted pursuant to subdivision (b) of Section 19130 of the Government Code.
SB863 thus embodied the legislature's acceptance of the CHSWC solution
to the fact that the system is overwhelmed with a mountain of old liens that
it lacks the capacity to properly address.
C. Independent Bill Review Applies to This Case
reimbursement allowable under the applicable fee schedules based on the documentation exchanged in support of or objection to the amount billed, apart from any other disputed issues. Disputes would be submitted in writing, and decisions would be subject to limited judicial review (requiring the aggrieved party to prove that the administrative determination is not supported by substantial evidence) with strong disincentives for frivolous review. If an administrative bill review process is established, it could improve the resolution of fee schedule disputes, reduce delays in payments, reduce frictional cost, and remove the incentives for unmerited claims or objections.")
Amicus Curiae Brief of California Workers' Compensation Institute - Page 16 of 23
Based upon the legislature's declaration of the underlying reasons for
the establishment of both Independent Medical Review and Independent Bill
Review as encompassed within SB899, there can be no doubt that it was the
inability of the adversarial and judicial systems in workers' compensation to
effectively address these issues that led to the creation of a new medical
billing dispute resolution process: independent bill review. The Legislature
determined that fee disputes are so technical and specialized that they
require trained fee schedule professionals to determine what an appropriate
fee is, and that the determination of these issues is best not left up to
workers' compensation judges.
SB863 included the following three statutes relevant to the issue of
applying independent bill review herein:
• Labor Code Section 4603.2 establishes "independent bill review"
whereby if a provider disputes the employer's payment they may
request the employer conduct a second review [4603.2(e)(1)] , and if
the dispute is not resolved by the employer's second review then the
provider may request independent bill review [4603.2(e)(4)].
• The independent bill review is conducted in accordance with 4603.6
whereby the provider pays an administrative bill review fee
Amicus Curiae Brief of California Workers' Compensation Institute - Page 17 of 23
[4603.6(c)] and the Administrative Director assigns the disputed bill
to an independent bill reviewer [4603.6(d)] for expedited
determination [4603.6(e)] with narrowly drawn Appeals Board
jurisdiction [4603.6(0] whereby, even if overturned, the remedy is
limited to a new independent bill review and not a determination on
the merits by a WCALJ [4603.6(g)].
• Section 84 of SB 863 contains a "plus section" 35 that reflects an over-
all intent that the reforms be implemented forthwith. That section
states, "This act shall apply to all pending matters, regardless of date
of injury, unless otherwise specified in this act, but shall not be a
basis to rescind, alter, amend, or reopen any final award of workers '
compensation benefits. „ 36
In the Appeals Boards letter-brief dated February 13, 2014, they argue
that independent bill review only applies to dates of injury on/after January
35 A "plus section" is a provision of a bill that is not intended to be a substantive part of the code section or general law that the bill enacts, but to express the Legislature's view on some aspect of the operation or effect of the bill. Common examples of "plus sections" include severability clauses, saving clauses, statements of the fiscal consequences of the legislation, provisions giving the legislation immediate effect or a delayed operative date or a limited duration, and provisions declaring an intent to overrule a specific judicial decision or an intent not to change existing law. (People v. Allen (1999) 21 Cal.4th 846, 858-859, fn. 13 [984 P.2d 486, 89 Cal. Rptr. 2d 279].) 36 Stats 2012 ch. 363, SB863, Section 84.
Amicus Curiae Brief of California Workers' Compensation Institute - Page 18 of 23
1, 2013, and reference Labor Code Section 139.5 for that interpretation. In
the same paragraph, the Appeals Board subtly acknowledges that the
Administrative Director disagrees with that interpretation, as manifest by
adoption of 8 CCR 9792.56.4, interpreting the statutes to apply much more
broadly based on date of service, not date of injury. 37 But neither
interpretation gives appropriate consideration to the legislative purpose
behind enactment of 4603.2, et seq., the magnitude of the problem the
legislature sought to remedy as painstakingly outlined in the CHSWC Lien
Report analysis, the clear legislative mandate that it be applied to all pending
matters, nor the fact that Section 139.5 relates to an entirely different issue
of contracting authority and not to the effective dates of independent medical
review or independent bill review.
The judicial process in analyzing this kind of situation was well
articulated by the Court in City of Martinez v. WCAB (Bonito) (2000) 85 Cal.
App 4th 601, wherein the Court stated,
The applicable canons of statutory construction, which guide our analysis, are well established. The fundamental rule is to ascertain and effectuate the intent of the Legislature in enacting the statutes. (Moyer v. Workmen's Comp. Appeals Bd., supra, 10 Cal.3d 222, 230.) In determining the intent, we examine first the words of the statutes. (Id. at
37 The Administrative Director in fact adopted 9792.5.4, 9792.5.5(a), 9792.5.7(a) , all of which disagree with the Appeals Board's position and instead apply independent bill review more broadly.
Amicus Curiae Brief of California Workers' Compensation Institute - Page 19 of 23
p. 231.) Words, however, do not have fixed meanings they are symbols of thought whose meanings may vary depending upon the context and circumstances in which they are used. (Henry v. Workers' Comp. Appeals Bd. (1998) 68 Cal.App.4th 981, 984 [80 Cal. Rptr. 2d 631].) We consider the consequences of our interpretation and avoid constructions that defy common sense, frustrate the apparent intent of the Legislature or might lead to absurdity. (Id. at p. 985.) It is presumed the Legislature is aware of the existence of all relevant statutes when it considers a change or amends others. (Nickelsberg v. Workers' Comp. Appeals Bd. (1991) 54 Cal.3d 288, 298 [285 Cal. Rptr. 86, 814 P.2d 1328, 56 Cal. Comp. Cases 476].) The statutes "should be interpreted in such a way as to make them consistent with each other, rather than obviate one another."
Applying those principles, we begin with the legislative mandate to apply
SB863 to "all pending matters, regardless of date of injury, unless
otherwise specified." We can look to see how the issue of effective date was
handled in Independent Medical Review per 4610.5 also enacted as part of
SB863. Within that section there is an express statement phasing in the
Independent Medical Review process first only for injuries on/after January
1, 2013, and then to all treatment disputes regardless of date of injury
starting six months thereafter. If, as the Appeals Board letter-brief suggests,
Section 139.5 was broadly intended to limit retroactivity of the independent
review processes to dates of injury on/after January 1, 2013, that
interpretation would be in clear conflict with the express language of Labor
Amicus Curiae Brief of California Workers' Compensation Institute - Page 20 of 23
Code Section 4610.5. 38 Unlike the above-referenced language of Section
4610.5, the Section 4603.2 and the Independent Bill Review process enacted
as part of SB863 contains no language within that statute giving it either a
"incremental phase-in" or a "delayed implementation".
Therefore, on one hand we are left with a statute with no language of
delayed implementation for Independent Bill Review, a mandate to apply it
to all pending matters regardless of date of injury unless otherwise specified,
and a clear legislative intent to clean up the horrific lien mess through
administrative means with limited Appeals Board involvement, thus freeing
up the judicial resources to address more pressing issues of injured workers.
On the other hand there is a public contracting bid-avoidance authorizing
statute that says it needs the authority so the independent review processes
(both IBR and IMR) can go into effect for injuries on/after January 1, 2013
without public bidding.
These sections can be readily harmonized when it is recognized that
139.5's language exists only because the Administrative Director urgently
needed authority to contract with Independent Medical Review providers in
order to be able to meet the rapidly approaching initial Independent Medical
38 Though that issue is not before this Court in this case, the implications of the Appeals Board's position upon the broader workers' compensation scheme, other statutes and regulations should not be ignored.
Amicus Curiae Brief of California Workers' Compensatidn Institute - Page 21 of 23
Review implementation date which was set forth in 4610.5 to apply ab initio
only to dates of injury on/after January 1, 2013. This was the purpose of
Labor Code Section 139.5. That section was never intended to apply more
broadly to either thwart the legislative purpose behind Independent Bill
Review, nor the legislative cure for the lien problem, nor limit the mandate
of application to all pending matters. And despite the Appeals Boards's
urging in its letter-brief, judicial economy should not trump legislative intent
and sound public policy!
CONCLUSION
From the foregoing, it should be apparent that this case presents
precisely the scenario that the Legislature sought to remedy by curtailing the
WCAB's jurisdiction over medical billing disputes and replacing it with an
administrative process substituting experts in medical billing and coding
instead of WCALJ's with no technical expertise in fee schedules or coding. 39
Predictably due to same system-wide lack of judicial expertise in matters of
fee schedules that was commented upon by the Commission on Health and
39 Labor Code Section 4603.2, et seq., as amended by Stats 2012 ch. 363, SB863.
Amicus Curiae Brief of California Workers' Compensation Institute - Page 22 of 23
Safety and Workers' Compensation in its 2011 Liens Report,4° the result
heein was drawn from thin air, not meeting the requirements of Kuntz or
Tapia cases, and thus wholly lacking in any relevant evidentiary support as
outlined in the Petition for Writ of Review herein, and should be reversed on
that basis alone.
Additionally, based on the changes to the billing dispute resolution
procedures enacted within SB863 adopting a system of "independent bill
review" overseen by the Division of Workers Compensation's
Administrative Director, and eliminating the WCAB's original jurisdiction
over such disputes, this case should be remanded for determination utilizing
that administrative Independent Bill Review process.
Respectfully submitted,
Dated: March 4, 2014. ALLWEISS & McMURTRY A Professional Corporation
Michael A. Marks, Esq.
40 Commission on Health and Safety and Workers' Compensation, Lien Report,
published January 5, 2011, Pg. 25, Available at www.dir.ca.govichswc/reports/ 201 1 /chswc lienreport.pdf
Amicus Curiae Brief of California Workers' Compensation Institute - Page 23 of 23
VIII VERIFICATION & WORD COUNT
I, Michael A. Marks, swear that I have read the within Application
for Amicus Curiae Status and Amicus Curiae Brief and know the contents
thereof; that the within Argument & Authorities contains 5,337 words, based
on the automated word count of the computer word-processing program; that
I am informed and believe that the facts and law stated therein are true and
on that ground allege that such matters are true; that I make such verification
because the officers of California Workers' Compensation Institute are
absent from the County where my office is located and are unable to verify
the petition, and because as attorney for California Workers' Compensation
Institute I am more familiar with such facts and law than are the officers.
Sworn and executed this 04th day of March, 2014, at Essex,
Vermont.
Michael A. Marks
Amicus Curiae Application & Brief by CWCI In Support of Petitioner California Insurance Guaranty Assn. Page 24
DECLARATION OF SERVICE BY U.S. MAIL
I, Michael A. Marks, am a citizen of the United States of America and am
employed in the Tarzana, California. I am over the age of eighteen years
and not a party to the within action. My business address is: Law Offices of
Saul Allweiss, 18321 Ventura Blvd., Suite 500, Tarzana, CA 91356. On the
date noted below, I served the attached
APPLICATION FOR AMICUS CURIAE STATUS AND AMICUS CURIAE
BRIEF IN SUPPORT OF PETITIONER CALIFORNIA INSURANCE GUARANTY ASSOCIATION
by placing a true copy thereof enclosed in a sealed envelope with postage
thereon fully prepaid, in the US Post Office in Essex, Vermont, addressed as
follows:
Workers' Compensation Appeals Bd. P.O. Box 429459 San Francisco, CA 94142-9459
Anthony J. Dain 525 B Street Suite 2200 San Diego, CA 92101
Clifford D. Sweet Heggeness, Sweet, Simington & Patrico 4180 Ruffin Road, Suite 275 San Diego, CA 92123
I declare under penalty of perjury that the foregoing is true and correct.
Executed on 04th day of March, 2014, at Essex Junction, Vermont.
Michael A. Marks
Amicus Curiae Application & Brief by CWCI In Support of Petitioner California Insurance Guaranty Assn. Page 25
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