California Insurers Seeking Second Round Of Reductions Of Medical Bills

By Reid L. Steinfeld, Esq., Grant & Weber, and Richard Boggan, J.D., workcompliens.com

Insurance companies in California have been lately seeking a second round of reductions of medical bills for payments they had already reduced several years prior.

These requests for reimbursement/restitution are made from payments to medical providers that are several years old.  In some instances, the claims are more than six years old.

Restitution is an equitable remedy, which has been utilized primarily by courts to prevent unjust enrichment. Under certain circumstances, it has been held that administrative tribunals, such as the Workers' Compensation Appeals Board, may appropriately employ equitable remedies, which may be justified, for example, when fraud has been established.

Equity does put a limitation on time in which a party may seek restitution in most cases.  The courts have recognized that the passage of time may suggest the likelihood of substantial changes in financial position, and, thus, it would be unjust to order restitution. 

In the case of American Psychometric Consultants Inc. v. Workers' Compensation Appeals Bd. (1995) 36 Cal. App. 4th 1626, 60 Cal. Comp. Cases 559, the court stated:

“The passage of time involved in the present cases--between payment and attempted recoupment--suggest the likelihood that substantial changes in financial position took place.”[I]n cases where the plaintiff and the defendant are equally to blame for the mistake under which the money was paid, or equally innocent in respect thereto, an alteration of position on the part of the payee is held to prevent liability in an action for recovery."

Some of these reviewed medical bills from which the insurance carriers are seeking restitution seem to stem from the period when the fee schedule was created for outpatient services, which greatly reduced the payment for these services.

Insurance companies' reasons for seeking restitution are many and varied – some are for honest mistakes, others are not.

However, whether the initial reduction was valid or whether the carrier should have or should not have paid a specific amount to the medical provider is not the deciding factor courts use in determining whether to order restitution.

In the case of American Psychometric Consultants Inc., the court stated:

“Of most concern here is the element of transactional stability. We believe transactional stability an important element of any benefit system. Approving restitution in these cases would set a precedent which would have unfortunate consequences for the workers' compensation system. It would introduce the possibility of continued transactional instability so negative it would impact the number of medical providers willing any longer to participate in the system by evaluating workers with industrial injuries. No one can operate a business on receipts only conditionally possessed, and medical providers are no exception. Thus we have determined the restitution orders were unfair and must be annulled.”

In American Psychometric the court was concerned with the financial stability of already completed transactions, in contrast with the Scheffield Medical Group, Inc. v. Workers' Comp. Appeals Bd., (1999) 70 Cal. App. 4th 868, 83 Cal. Rptr. 2d 71, 1999 Cal. App. LEXIS 207, 64 Cal. Comp. Cas. (MB) 358 case, where the medical provider had not been paid. The Scheffield case dealt with an objection to payment of a medical-legal report that must be made within 60 days of receipt of the bill. 

Labor Code § 4603.2 states that the insurance carrier has 45 business days (60 days prior to 2004) to pay and/or object to the medical bills submitted.  Some cases interpreted this to mean that if the carrier fails to object to the reasonableness of the medical bills, the carrier forever waives such a right.  As stated in Town of Hillsborough v. Workers' Compensation Bd. (2003) 68 Cal. Comp. Cas. (MB) 1272, 1273 (writ denied):

"Defendant further argued at trial that the health care services fees were unreasonable. The WCJ responded in her 11/19/2002 Opinion on Decision that Defendant had failed to produce any evidence of what the amount of reasonable fees would have been, and allowed payment in full.”

The issue addressed in a claim for restitution is when the carrier made a payment and/or objection and then reduced the medical bills.  The courts would have to look at the application of the principles of equity. Would it be fair and just to allow a carrier to go back in time without limitation and seek restitution for further reductions of medical bills? This would be the question the courts must answer. 

Therefore, the case of American Psychometric Consultants Inc. v. Workers' Compensation Appeals Bd., puts limitations of time in which an insurer may seek reimbursement for payments to medical providers that it asserts were paid in excess of what was reasonable or were not due to some dispute, and thereby arguably puts closure to the litigation of the issue of when a carrier can seek restitution. 

It is possible that restitution may be considered just and reasonable when, for example, the insurance carrier made two identical payments for the same service. 

Accordingly, this attempt by insurance companies to draw additional monies from the medical providers should not be allowed to encumber the courts' time as the issue of restitution is both legally and equitably not a viable cause of action under the situations discussed above.