Clearing the Workers’ Compensation Benefit Highway of Medical Expense Land Mines
Medical expenses in contested workers’ compensation cases are now a significant and troublesome issue resulting in uncertainty, delay and potential future liability. The recent NJ Supreme Court decision, University of Mass. Memorial Hospital v. Christodoulou, 180 N.J. 334 (2004) has left the question of how to adjudicate medical benefits that were conditionally paid or paid in error. Presently there is no exclusively defined procedure to determine the allocation, apportionment of primary responsibility for unauthorized medical expenses and reimbursement.
NJ Lawyer April 24, 2007
Clearing the Workers’ Compensation Benefit Highway
of Medical Expense Land Mines
By John H. Geaney and Jon L. Gelman
Medical expenses in contested workers’ compensation cases are now a significant
and troublesome issue resulting in uncertainty, delay and potential future liability. The
recent NJ Supreme Court decision, University of Mass. Memorial Hospital v.
Christodoulou, 180 N.J. 334 (2004) has left the question of how to adjudicate medical
benefits that were conditionally paid or paid in error. Presently there is no exclusively
defined procedure to determine the allocation, apportionment of primary responsibility
for unauthorized medical expenses and reimbursement.
The NJ Workers’ Compensation statute was enacted in 1911 with the noble
mission of creating a social remedial system which would provide an efficient and certain
system of benefits to injured workers. In that same year Rambler, in Kenosha,
Wisconsin, introduced the Rambler 65 model motor car, which was a luxurious vehicle
that accommodated seven people and sold for $3,050. Like the initial workers'
compensation acts enacted that year, the vehicle performed reliably. Both were state of
the art and worked flawlessly. Over the years highways have changed, and like motor
vehicles, there have been changes also in the compensation delivery system to meet the
needs of the users or stakeholders. Now the largest component part of the workers’
compensation benefit delivery system is medical expenses that account for over 58% of
the program’s costs. Medical costs continue to grow exponentially.
The Federal government has become deeply concerned about what it considers to
be cost shifting of benefit dollars to the Medicare system in workers’ compensation
actions. Since the administration of Franklin Roosevelt, Americans have relied upon
Medicare to insure medical care in certain non-compensable claims. The Centers for
Medicare and Medicaid Services (CMS) has, under authority of the Medicare Secondary
Payer Act, established an elaborate national collection process to recoup conditional
medical payments and to prevent future medical changes from being transferred to the
federal system for payment where the employer may be primarily responsible.
Group Healthcare Carriers (GHC) and medical providers themselves are now also
seeking to recoup medical payments that they have allegedly paid erroneously or
conditionally. Since medical conditions are complex and modern medical treatment
modalities and protocols are expensive, obtaining a judicial resolution of the causal
relationship and the reasonableness and necessity of bills has become an acute issue.
While the NJ Supreme Court has declared that a GHC and/or provider may intervene in a
workers’ compensation claim, the Court provided no direction as to whether the parties to
a workers’ compensation action may seek to implead the GHC or medical provider into
the pending workers’ compensation case.
The New Jersey Workers’ Compensation Act provides for employer control of
medical treatment from the inception of the claim. N.J.S.A. 34:15-15. The employer is
obligated to provide all medical care which is reasonable and necessary, and such care,
inclusive of pharmaceutical prescriptions, continues until the employee reaches maximal
medical improvement. The obligation of the employer is to cure and relieve the worker
of the effects of the injury. For any number of reasons, an employee may end up seeking
medical care which is not authorized by the employer. If the employer denies the
compensability of the claim, the employee will obviously seek his or her own treatment.
If a dispute arises between the parties as to the adequacy of care or the need for surgery,
the claimant will sometimes seek unauthorized treatment. In the case of an emergency,
the injured worker may seek treatment without waiting for the employer to consent. In
these situations and others, the “unauthorized” medical care will become an issue in the
workers’ compensation case.
The NJ Supreme Court in Christodoulou, Id., discussed the responsibilities
of the parties in a workers’ compensation claim for medical benefits that remained
unpaid; however, it left unanswered whether the Division of Workers’ Compensation
could exert exclusive jurisdiction over the issue of collateral medical payments and
reimbursement of collateral source payments made on a conditional basis. Mario
Christodoulou was injured on June 28, 1996, while driving a car owned by his employer,
Auto Action Land of Jersey City. The accident occurred in Massachusetts.
Christodoulou spent two months in Massachusetts Memorial Hospital Center until his
death. Medical services were rendered by the hospital in the amount of $712,683.
Christodoulous’s father filed a dependency petition in the Division of Workers’
Compensation asserting that he and his wife were dependent on their son. The hospital
bill was listed as a medical provider on the dependency claim petition.
Through correspondence, the hospital’s attorney was advised by petitioner’s
counsel that the medical providers’ bills would be presented for payment. The
petitioner’s attorney assured the hospital that its bills would be presented to the court at
the time of the hearing and also suggested that a representative of the hospital would
likely have to appear at the hearing to prove the bills were reasonable and necessary.
However, that did not occur.
On May 10, 1999, the workers’ compensation case was settled for $50,000 by the
petitioner and the respondent without participation of the medical provider under N.J.S.A.
34:15-20, the provision used for disputed lump sum settlements. Section 20 payments
are not considered workers’ compensation payments, except for insurance rating
purposes. The petitioner, Christodoulou’s father, acknowledged on the record that he had
no further rights against Auto Action except for indemnification by Auto Action in the
event that the hospital should pursue him for the outstanding medical bill. The order
stated that the respondent, Auto Action, would hold harmless the petitioner from any
medical bills arising out of the accident. The hospital then forwarded the bills after the
settlement to AIG, the carrier for Auto Action. The attorney for AIG argued that it had
agreed to hold only the father harmless, not his son’s estate, and therefore the carrier
declined to make payment on the bill.
In the extended litigation that ensued, the Appellate Division held that the hospital
was required to file a timely petition in the Division of Workers’ Compensation or
otherwise intervene in the workers’ compensation proceeding. The Supreme Court
reversed and held that the Workers’ Compensation Act is not the exclusive remedy for
the hospital or medical provider which has provided medical services arising from a work
injury. “Nothing in the Act suggests that a medical provider must file a petition in the
Division of Workers’ Compensation or intervene in a pending action in order to preserve
its right to a contractual remedy against a patient whose treatment arose from a workrelated
injury.” Id. at 346-347. With regard to the finality of the Section 20 dismissal
for $50,000, the Court said, “The employer and the employee . . . . cannot extinguish the
rights of those who do not participate, or do not have the opportunity to participate, in a
settlement.” Id. at 348.
The workers’ compensation settlement in Christodoulou, which did not in any
manner resolve the large hospital bill, led to a series of law suits against the parties and
their attorneys. The court declared that the health care provider has both a right to
intervene in the workers’ compensation proceeding or file a civil suit against the worker
for payment. If the civil suit is filed during the pendency of the compensation
proceeding, the court said that the civil matter should be transferred to the Division of
The Division of Workers’ Compensation provides a procedural mechanism, an
“Application for Payment or Reimbursement of Medical Payment,” which may be filed
by a provider for medical recovery. The form reflects information on the medical
diagnosis, dates of treatment, billing dates, the amount billed and the amount paid. Such
applications are being filed more often in the Division. The issues the court will be
required to entertain may include unauthorized treatment or even balances outstanding
for medical services. Similarly, PIP carriers have a right to bring a claim in the Division
of Workers’ Compensation as subrogee of the injured worker in order to recover
payments made for a work-related injury. Aetna Cas. & Sur. Co., v. Para Mfg. Co., 176
N.J.Super. 532 (App. Div. 1980).
The decision in Christodoulou does not address whether the parties to a workers’
compensation case have their own right to implead the health care carrier as part of the
workers’ compensation proceeding. The Supreme Court left open whether an impleader
of a GHC would grant to the Division of Workers’ Compensation exclusive jurisdiction
over the issue of collateral medical payments and reimbursement of collateral source
payments made on a conditional basis. While medical providers have a specific statutory
right to intervene, the parties to a workers’ compensation proceeding do not presently
have a right to implead the medical provider which may assert reimbursement rights.
When an injured worker has received treatment which has not been authorized or paid for
by the employer, the parties instead must deal with potential claims for reimbursement
via letters and phone calls in order to provide finality to the settlement.
Practitioners have learned from Christodoulou that “hold harmless” language in a
settlement presents serious risks for both sides. Further, employers are cognizant of the
danger of steering employees toward submission of medical bills to the company’s
private medical carrier when the medical condition arguably is a work-related one.
“When an employer undertakes to advise an injured employee to apply for certain
disability or medical benefits that are authorized by the employer, the employer
necessarily assumes a further obligation not to divert the employee from the remedies
available under the Act.” Sheffield v. Schering Plough Corp, 146 N.J. 442, 460 (1996).
Issues regarding medical reimbursement continue to delay the resolution of cases.
Much has been written about the inordinate delays in workers’ compensation court
caused by current procedures under the Medicare Secondary Payer Statute. This statute
provides that the Centers for Medicare and Medicaid Services (CMS) may pursue
damages against any entity that attempts to shift the burden of work-related medical costs
to Medicare. The purpose of the statute is to ensure that Medicare is only secondarily
responsible for payment of medical expenses for Medicare beneficiaries who were also
covered by another type of insurance. 42 U.S.C. §1395y(b). When dealing with Section
20 dismissals in which medical benefits are closed out forever, the parties in New Jersey
case often must wait a year or more for a response from the appropriate CMS vendor to
inquiries about “conditional payments,” or payments which Medicare may have made
prior to the date of any proposed workers’ compensation settlement.
Given the penalties which are set forth in the Medicare Secondary Payer Statute
for failure of the parties to properly protect the interests of CMS, claimants, employers
and their counsel have no choice but to wait patiently for a response from CMS. The
Director of the Division of Workers’ Compensation, the Honorable Peter J. Calderone,
has provided helpful guidance to practitioners on resolving orders approving settlement
under N.J.S.A. 34:15-22 while waiting for a response from CMS or its vendors. Section
20 dispositions, however, remain problematic because this vehicle for settlement
extinguishes a claimant’s right to medical care forever.
In essence, GHC and medical providers, which claim rights of reimbursement in
workers’ compensation, are asserting that they are secondary payers. In the absence of
any formal method to implead the health care carrier, the parties to a workers’
compensation case often experience extensive delays in resolving claims while
attempting to resolve outstanding medical bills and health care liens and explain why
certain bills may not be “compensable” under the New Jersey Workers’ Compensation
Act. Health care policies typically exclude any loss for which benefits are provided
under workers’ compensation laws. However, the mere fact that medical bills are paid by
a health care provider following the date of a workers’ compensation injury does not
mean that the medical care is “compensable” under the New Jersey Workers’
Compensation Act. Hunt v. Hospital Service Plan of New Jersey, 33 N.J. 98 (1960)
(where unauthorized medical care rendered by various health care providers was held
“unauthorized” and therefore not compensable).
Compounding the problem is that several GHC have recapture provisions in the
their contracts with health care providers, and the GHC will “recap” the payment from
the providers through a book entry. This results in the medical provider seeking redress
directly against the patient, injured worker, in a collateral law suit outside of the workers’
compensation arena which is costly and burdensome.
Because issues of compensability require an interpretation of the various
provisions of the New Jersey Workers’ Compensation Act, Judges of Compensation are
in the best position to decide them. This principle militates in favor of having a
mechanism in place to implead health care providers in certain situations in the workers’
compensation proceeding, particularly those in which the health care provider is well
aware of the workers’ compensation proceeding and legitimate issues of compensability.
There are legitimate concerns about a broad impleader requirement as noted in
Christodoulou. “A requirement that medical providers intervene or file a claim petition
in every pending workers’ compensation proceeding in order to protect their contractual
right to payment will entail additional collection costs for medical providers that will
likely result in higher costs for patient care, and may also have the unintended effect of
discouraging medical providers from providing care for injured employees. Such a result
would be inconsistent with the broad remedial objectives of the Workers’ Compensation
The new benefit highway that embraces a new paradigm which extends to a new
safety net and the existence of these collateral programs require a modification of the
Workers’ Compensation Act and/or Rules to safeguard the interests of the parties, while
remaining consistent with the social remedial intent of the legislation. These
considerations should be the subject of further study by the Division in order to
accommodate the rights of the parties to expeditiously resolve workers’ compensation
claims and avoid unnecessary litigation, delay and expense. The basic premise should be
consistent with the legislative intent to provide a summary and remedial system to
provide benefits to injured workers in a prompt and fair fashion and finality for
employers by adjudicating all aspects of medical expenses within the exclusive
jurisdiction the Division of Workers’ Compensation.
John H. Geaney is the author of “Geaney’s New Jersey Workers’ Compensation Manual for Practitioners,
Adjusters, and Employers.,” Capehart & Scatchard P.A., 8000 Midlantic Drive Suite 300
S, Mt. Laurel, N.J. 08054, t 856.914.2066, email@example.com, www.capehart.com
2 Jon L. Gelman, who practices in Wayne, NJ, wrote Workers’ Compensation Law 3rd Ed. (West-Thompson
2007), is co-contributing author of Modern Workers Compensation-National Treatise (West-Thompson
2001) & past Vice-President of the national Workplace Injury Law & Advocacy Group – American
Association for Justice. Jon L. Gelman, 1700 State Route 23 Suite 120 , Wayne, NJ 07470-7537, t
973.696.7900, firstname.lastname@example.org, www.gelmans.com.
Pending Legislation A4412
1. When payments for medical, surgical or hospital services are made by an insurance carrier or health benefits provider, other than payments made pursuant to workers’ compensation coverage, or medical, surgical or hospital services are provided by a health care provider, with respect to an injury or illness of an employee from an accident or exposure arising out of and in the course of employment, any claim for reimbursement by the carrier, health benefits provider or health care provider for the services or payments shall be under the exclusive jurisdiction of the Division of Workers’ Compensation, and the petitioner or respondent in any claim for workers’ compensation with respect to that injury or illness may join the carrier, health benefits provider or health care provider, on a motion, for the purposes of determining relationship, reasonableness, and necessity of the payments and services.
2. This act shall take effect immediately.
This bill provides that if payments for medical, surgical or hospital services are made by an insurance carrier or health benefits provider, other than payments made pursuant to workers’ compensation coverage, or medical, surgical or hospital services are provided by a health care provider for an employee injury or illness resulting from a workplace accident or exposure, any claim for reimbursement by the carrier, health benefits provider or health care provider shall be under the exclusive jurisdiction of the Division of Workers’ Compensation, and the petitioner or respondent in any related workers’ compensation claim may join the carrier, health benefits provider or health care provider, on a motion, for the purposes of determining relationship, reasonableness, and necessity of the payments and services.
Concerns jurisdiction over claims for reimbursement of certain payments or services related to workers’ compensation injuries and illnesses.
Link to Legislation:
PDF Format http://www.njleg.state.nj.us/2006/Bills/A4500/4412_I1.PDF