case no.: d065072 court of appeal of the state of

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. 4

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


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.


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



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.




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


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


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%


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.


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.


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)


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.


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)


$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


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


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.")


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


[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.


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.


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


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.


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


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

case no.: d065072 court of appeal of the state of

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