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California Insurance Guarantee Association v. Workers' Compensation Appeals Board

California Court of Appeals, Fourth District, First Division

December 16, 2014

CALIFORNIA INSURANCE GUARANTEE ASSOCIATION et al. Petitioners,
v.
WORKERS' COMPENSATION APPEALS BOARD and ELITE SURGICAL CENTERS, ESCONDIDO, L.P. et al., Respondents.

Original proceeding to review a decision of the Workers' Compensation Appeals Board. WCAB No. ADJ2806916

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COUNSEL

Heggeness, Sweet, Simington & Patrico and Clifford D. Sweet III for Petitioners.

Law Offices of Allweiss & McMurtry and Michael A. Marks for California Workers' Compensation Institution as Amicus Curiae on behalf of Petitioner California Insurance Guarantee Association.

Procopio, Cory, Hargreaves & Savitch, Anthony J. Dain and Brian J. Kennedy for Respondents Elite Surgical Centers, Del Mar, L.P., Point Loma Surgical Center, L.P., and Elite Surgical Centers, Escondido, L.P.

David Bryan Leonard for California Society of Industrial Medicine & Surgery, Inc., as Amicus Curiae on behalf of Respondent Workers' Compensation Appeals Board.

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OPINION

AARON, J.

I. INTRODUCTION

We issued a writ of review on the petition filed by petitioners in this matter to address the two questions raised in the petition: (1) Does the Workers' Compensation Appeals Board (the Board) retain jurisdiction over a medical billing dispute pertaining to more than 300 consolidated claims, after the Legislature passed significant workers' compensation reform legislation that created a new administrative independent review process for the resolution of billing disputes?; and (2) if the Board does retain jurisdiction over this dispute, is there substantial evidence to support the workers' compensation judge's (WCJ) findings of fact regarding his determination of the "reasonable fee" to be paid for arthroscopic knee procedures, arthroscopic shoulder procedures, and epidural injection procedures performed at three commonly managed ambulatory surgical center (ASC) facilities in San Diego County?

We conclude that although the text of the relevant legislation and resulting statutes is ambiguous, the most reasonable interpretation of the legislation is that it does not divest the Board of jurisdiction to decide the dispute at issue in this case. We further conclude that the WCJ's findings, which the Board adopted in its decision on petitioners' motion for reconsideration, are supported by substantial evidence. We therefore affirm the decision of the Board.

II. FACTUAL AND PROCEDURAL BACKGROUND

Petitioners[1] were defendants in an action before the Board brought by respondents Elite Surgical Centers, Escondido, L.P., Elite Surgical Centers, Del Mar, L.P., and Point Loma Surgical Center, L.P. (collectively Elite), concerning billing disputes related to the reasonable facility fees for arthroscopic knee procedures, arthroscopic shoulder procedures, and epidural injection procedures provided by Elite to injured workers prior to January 1, 2004.

The dispute over billing began when, in November 2000, Elite increased the charges that it billed for certain outpatient services, including the services

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at issue in this proceeding. Petitioners disputed the reasonableness of Elite's increased charges. Rather than remitting the amounts billed, petitioners paid only the amounts that they believed were appropriate for the services performed. Elite filed notices of liens with the Board's San Diego office, seeking to collect the remaining balances.[2] All of the facility fee bills that are subject to consolidation in this matter are for services rendered between November 2000 and December 31, 2003.

Division 4 of the Labor Code sets forth an extensive regulated system for the medical treatment of employees who are injured at work. (Lab. Code, § 3200 et seq.)[3] As part of this system, the administrative director of the Division of Workers' Compensation (DWC) is responsible for adopting and periodically revising an official medical fee schedule (OMFS) that establishes the "reasonable maximum fees" to be paid for medical treatment provided to employees who are injured at work. (§ 5307.1.) For the period between April 13, 2001 and December 31, 2003, the administrative director adopted an OMFS with reasonable maximum fees for services performed by 21 San Diego area hospitals. (8 Cal. Code Regs., tit. 8, § 9792.1.) This OMFS did not cover facility fees charged by ASCs. As a result, there was no established "reasonable maximum fee" for procedures provided at ASCs during the relevant time period.[4]

At the time the parties' dispute over Elite's bills arose, billing disputes were resolved through litigation before the Board. In a billing dispute case, the parties litigate before a WCJ, who acts for the Board in the first instance. In this case, a 17-day trial was held before the WCJ regarding the reasonable value for certain facility services provided by Elite in the consolidated cases. Both parties presented extensive documentary and testimonial evidence.

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At trial, Elite introduced in evidence the billing itemizations and operative reports for the facility services, to demonstrate the range of facility services that Elite had provided for epidural, knee and shoulder procedures during the relevant time period. David Kupfer, M.D., who served as the medical director and the general partner of Elite, reviewed each of the bills and operative reports and described the multiple, distinct procedures performed by the physician, the facility services provided by Elite, and the differences in services between and among bills and reports. For example, Dr. Kupfer testified that as to a number of the disputed bills, although the bills identified only a single "CPT code, "[5] the operative reports demonstrated that in fact, multiple procedures had been performed, thereby increasing the facility fees for the services provided by Elite. Petitioners' expert, Theresa Cokley, confirmed that, at least as to one of the bills, five separate procedures had actually been performed, despite the fact that only a single CPT code appeared on the bill. This evidence demonstrated that although only a single CPT code appeared on the bills, with respect to many of the bills, Elite had in fact provided multiple, distinct services.

Elite also presented collection data compiled over a period of approximately seven years to demonstrate that it generally collected 62.7 percent of the amount that it charged for facility fees.[6] In addition, Elite presented the testimony of its expert, Rocky Gentner, a health care financial management consultant, regarding the usual and customary fees that Elite and other ASCs accepted as full payment for facility services provided between 2000 and 2003. To compile this information, Gentner relied on a database of facility fee charges and payment amounts for all closed cases from all payers for facility services provided between January 1, 2000, and December 31, 2003. for all Southern California ASCs that were willing to participate in the database. Nineteen ASCs participated in the database, which contained information regarding 73, 319 closed cases.[7]

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Petitioners presented a report and oral testimony from their expert, Henry Miller, Ph.D. Dr. Miller offered his expert opinion that Elite's charges were grossly disproportionate to those of other San Diego County providers, that Gentner's analysis and opinion were fundamentally flawed, and that the ASC OMFS that went into effect as of January 1, 2004 is the only objective and fair method for determining a reasonable fee for Elite's services during the relevant time period. Dr. Miller also considered what other ASC providers charged and accepted for similar services during the relevant period. According to Dr. Miller, Elite's charges for the procedures at issue were more than two times the maximum amount allowed by law for full service inpatient hospitals in the same geographic area; up to seven times more than what Elite itself had customarily charged for the same services prior to increasing its charges in 2000; up to 10 times more than what Elite customarily accepted as full payment prior to 2000; up to four to five times more than the fees charged by other ASCs in the same geographic area; up to 24 times more than the amount accepted for similar services by other ASCs in the same geographic area; and up to seven times more than the maximum facility fee under the ASC OMFS in effect after January 1, 2004, for the same or similar services. According to Dr. Miller, the OMFS for ASCs in effect after January 1, 2004 is easily identifiable, objective, transparent, easy to calculate, provides fair compensation, and would provide an expeditious and straightforward way to resolve Elite's unresolved bills.

On January 1, 2013, after the case had been submitted to the WCJ but before the WCJ issued a decision, certain legislative changes to the workers' compensation law that were enacted in 2012 became effective.

One month later, on February 1, 2013, the WCJ issued his decision regarding the consolidated claims. The WCJ determined that the reasonable fee for arthroscopic knee procedures was "$5, 207.85 or the amount billed, whichever is less." This amount is approximately 28 percent of the amount that Elite customarily billed for such procedures, and is $5, 377 less than what Elite stated that it accepted, on average, per bill. The reasonable fee for

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percutaneous lysis of epidural adhesions was "$2, 337.52, or the amount billed, whichever is less." This amount reflects approximately 45 percent of the amount that Elite customarily billed for these procedures, and is approximately $854 less than what Elite stated it was able to collect per bill. Finally, the WCJ determined that the reasonable fee for arthroscopic shoulder procedures is "$4, 340.95, or the amount billed, whichever is less." This amount is approximately 22.5 percent of what Elite customarily billed for these procedures, and is approximately $14, 926 less than what Elite stated that it accepted, on average, per bill.

In making these findings, the WCJ stated the following:

"A broad range of evidence was presented and considered in this case. It is noteworthy that no one proposed a formula incorporating all of the relevant factors into a broadly applicable equation to arrive at 'reasonable.' Maybe that is because there is none.

"The universe of 'relevant factors' is too big, subjective, random, and dissimilar for this. But the universe of relevant factors at least establishes that 'reasonable' facility fees will not be less than what Medicare would allow, and not more than what Elite contends it has collected on average over the years for the various types of facility fees.

"Within this range of evidence, there are two other relevant factors that significantly narrow the range of reasonable and are well constructed for broad and objective application. One is the Official Medical Fee Schedule for ambulatory surgical centers that went into effect on January 1, 2004. The other is the Official Medical Fee Schedule for hospitals in effect from April 13, 2001 through December 31, 2003. The halfway point between these two schedules constitutes the reasonable facility fee."

Petitioners moved for reconsideration of the WCJ's order. The WCJ issued a report and Recommendation on the petition for reconsideration, recommending that the petition for reconsideration be denied in its entirety. In the Report and Recommendation, the WCJ reviewed much of the evidence presented, and set forth the factual and legal bases for his determination of the reasonable value of the services provided by Elite for the procedures in dispute. The Board granted reconsideration. After considering the petition for reconsideration, Elite's answer, and the WCJ's Report and Recommendation, the full Board adopted the WCJ's Report and Recommendation, and affirmed in its entirety the WCJ's original decision rendered on February 1, 2013.

Petitioners filed a petition for writ of review in this court. The Board filed an informal response pursuant to this court's request. Elite filed a return in

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opposition to the petition for writ of review. The California Workers' Compensation Institute filed an amicus curiae brief in support of the petition, and the California Society of Industrial Medicine and Surgery, Inc., filed an amicus curiae brief in support of the Board.

III. DISCUSSION

A. Legal standards on a petition for review of a Board decision

As to findings of fact, a court defers to the Board's findings if those findings are supported by substantial evidence. (§ 5952; Department of Rehabilitation v. Workers' Comp. Appeals Bd. (2003) 30 Cal.4th 1281, 1290 [135 Cal.Rptr.2d 665, 70 P.3d 1076].) "The term 'substantial evidence' means evidence 'which, if true, has probative force on the issues. It is more than a mere scintilla, and means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.... It must be reasonable in nature, credible, and of solid value....' " (Braewood Convalescent Hospital v. Workers' Comp. Appeals Bd. (1983) 34 Cal.3d 159, 164 [193 Cal.Rptr. 157, 666 P.2d 14], italics omitted.) When considering a petition for a writ of review on a decision of the Board, " ' " '[t]his court must determine whether the evidence, when viewed in light of the entire record, supports the award of the WCAB. This court may not reweigh the evidence or decide disputed questions of fact.' " ' " (Tenet/Centinela Hospital Medical Center v. Workers' Comp. Appeals Bd. (2000) 80 Cal.App.4th 1041, 1045 [95 Cal.Rptr.2d 858] (Tenet/Centinela).)

" ' " 'Questions of statutory interpretation are, of course, for [a] court to decide.' " ' " (Tenet/Centinela, supra, 80 Cal.App.4th at p. 1046.) However, although the Board's conclusions on questions of law are not binding on this court (Kuykendall v. Workers' Comp. Appeals Bd. (2000) 79 Cal.App.4th 396, 402 [94 Cal.Rptr.2d 130]), and the interpretation of a labor statute is a legal question subject to our independent review (Boehm & Associates v. Workers' Comp. Appeals Bd. (1999) 76 Cal.App.4th 513, 515-516 [90 Cal.Rptr.2d 486]), we nevertheless "generally defer to the [Board's] interpretation of labor statutes unless ...


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