Clearing the Workers’ Compensation Benefit Highway of Medical Expense Land Mines
Clearing the Workers’ Compensation Benefit Highway of Medical Expense Land Mines
By John H. Geaney1 and Jon L. Gelman2
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 and and apportionment of primary responsibility for unauthorized medical expenses and reimbursement.
The NJ Workers’ Compensation statute was enacted in 1911 to create a remedial social system that would provide an efficient and certain system of benefits to injured workers. That same year, Rambler, in Kenosha, Wisconsin, introduced the Rambler 65 model motor car, 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 also been changes in the compensation delivery system to meet the needs of the users or stakeholders. Now the largest part of the workers’ compensation benefit delivery system is medical expenses, accounting for over 58% of the program’s costs. Medical costs continue to grow exponentially.
The Federal government has become deeply concerned about the 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 ensure medical care in certain non-compensable claims. The Centers for Medicare and Medicaid Services (CMS) has, under the the 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 are now seeking to recoup medical payments they allegedly paid erroneously or conditionally. Since medical conditions are complex and modern medical treatment modalities and protocols are expensive, and obtaining a judicial resolution of the causal relationship and the reasonableness and necessity of bills have become 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.
NEW JERSEY WORKERS’ COMPENSATION
The New Jersey Workers’ Compensation Act provides employer control of medical treatment from the claim's inception. N.J.S.A. 34:15-15. The employer is obligated to provide all medical care that is reasonable and necessary, and such care,
inclusive of pharmaceutical prescriptions, continues until the employee reaches maximal medical improvement. The employer must cure and relieve the worker of the effects of the injury. For any number of reasons, an employee may seek medical care not authorized by the employer. If the employer denies the compensability of the claim, the employee will seek his or her treatment.
If a dispute arises between the parties regarding 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,“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 for $712,683. Christodoulou's father filed a dependency petition in the Division of Workers’ Compensation asserting that he and his wife were dependent on their son. The dependency claim petition listed the hospital bill as a medical provider.
Through correspondence, the hospital’s attorney was advised by the 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 suggested that a hospital representative 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 the 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 except for insurance rating purposes. The petitioner, Christodoulou’s father, acknowledged that he had no further rights against Auto Action except for indemnification by Auto Action if the hospital should pursue him for the outstanding medical bill. The order stated that the respondent, Auto Action, would hold the petitioner harmless from any medical bills arising from 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 pay 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 providing 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 to preserve its right to a contractual remedy against a patient whose treatment arose from a work-related injury.” Id. at 346-347. About 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 resolve the large hospital bill, led to lawsuits against the parties and their attorneys. The court declared that the health care provider has the 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 Workers’ Compensation.
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 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).
IMPLEADING MEDICAL PROVIDERS
The decision in Christodoulou does not address whether the parties to a workers’ compensation case have their 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 that has not been authorized or paid for by the employer, the parties must deal with potential claims for reimbursement via letters and phone calls 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.
MEDICARE SECONDARY PAYER STATUTE
Much has been written about the inordinate workers’ compensation court. Delays are 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 statute's purpose is to ensure that Medicare is only secondarily responsible for paying 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 the 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 before the date of any proposed workers’ compensation settlement.
Given the penalties outlined in the Medicare Secondary Payer Statute for the failure of the parties to protect the interests of CMS, claimants, employers properly, and their counsel has no choice but to wait patiently for a response from CMS. The Former Director of the Division of Workers’ Compensation, the Honorable Peter J. Calderone, provided 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 claim the right of reimbursement in workers’ compensation and assert 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. Healthcare 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 GHCs have recaptured provisions in 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 or injured worker in a collateral lawsuit outside of the workers’ compensation arena, which is costly and burdensome.
JUDGES OF COMPOSITION BEST POSITIONED
Because compensability issues 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 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 compensability issues.
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 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 Act.” Id.
THE NEW BENEFIT HIGHWAY
The new benefit highway embraces a new paradigm that extends to a new safety net. These collateral programs require a modification of the Workers’ Compensation Act and/or Rules to safeguard the parties' interests while remaining consistent with the remedial social intent of the legislation. These considerations should be the subject of further study by the Division to accommodate the parties' rights 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 promptly and fairly and finality for employers by adjudicating all aspects of medical expenses within the exclusive jurisdiction of the Division of Workers’ Compensation.
1 John H. Geaney, Capehart & Scatchard P.A.,firstname.lastname@example.org,
2 Jon L. Gelman, practices law in Wayne, NJ. He is the author of NJ Workers’ Compensation Law (Thomson-Reuters) and co-author of the national treatise Modern Workers’ Compensation Law (Thomson-Reuters). For over five decades, the Law Offices of Jon L Gelman 1.973.696.7900 email@example.com have represented injured workers and their families who have suffered occupational accidents and illnesses.
A version of this article first appeared in NJ Lawyer April 24, 2007
Recommended Citation: Gelman, Jon L., Clearing the Workers’ Compensation Benefit Highway of Medical Expense Land Mines, www.gelmans.com (2007),
© 2007-2023 Jon L Gelman. All rights reserved.
Prior results do not guarantee a similar outcome.
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