12-10-2018; KCB&A's Draft Chapter on New IL SB 904--Statutory Interest on Unpaid WC Medical Bills and more

Synopsis: This lengthy article is intended to be a Draft Chapter for KCB&A’s IL WC Textbook on SB 904 - Collection of Medical Bills by IL Healthcare Givers. If you want to be on the list for a complimentary copy of the new IL WC textbook, send a reply.

Editor’s comment: This is a draft for consideration in our IL WC textbook and is subject to change until the legislation is finalized and our KCB&A defense team approves it. Please note there is no IL defense firm that understands this new and unprecedented concept better than the team at KCB&A—if you need defense attorneys to handle this sort of new and unprecedented common law litigation for an employer or insurance carrier/TPA, send a reply.

History

In 2011, the State of Illinois passed IL WC reform legislation. Please note the history of IL WC legislation comes from what was the “agreed bill” process where the somewhat secret-powers-that-be that run our IL WC system spend/donate lots of free time working hard to insure the system works as well as we can make it. Management and Labor both have input into the “agreed bill” process and lots of informal vetting and legislative language-battles go on behind closed doors. SB 904 demonstrates why the “agreed-bill” process for WC reform works so much better than outlier legislation like this—this legislation has numerous challenges and odd issues that may take years to work out.

One aspect of the 2011 Amendments was a stricter and lower-budget IL WC Medical Fee Schedule. Doctors and other healthcare givers were getting a pretty good “haircut” as part of the IL WC reforms of the day, in the words of our great IL Senate President John Cullerton. As a legislation-watcher, I heralded the savings for IL business from lower cost WC medical care, as a result of the healthcare cost cutting reforms.

As an exchange to keep Doctors and other healthcare givers from leaving the State in droves, our IL Legislature added this language in the IL WC Act, Section 8(d)(1-3):

(1)       All payments to providers for treatment provided pursuant to this Act shall be made within 30 days of receipt of the bills as long as the claim contains substantially all the required data elements necessary to adjudicate the bills. 

(2)       If the claim does not contain substantially all the required data elements necessary to adjudicate the bill, or the claim is denied for any other reason, in whole or in part, the employer or insurer shall provide written notification, explaining the basis for the denial and describing any additional necessary data elements, to the provider within 30 days of receipt of the bill.

(3)       In the case of nonpayment to a provider within 30 days of receipt of the bill which contained substantially all of the required data elements necessary to adjudicate the bill or nonpayment to a provider of a portion of such a bill up to the lesser of the actual charge or the payment level set by the Commission in the fee schedule established in this Section, the bill, or portion of the bill, shall incur interest at a rate of 1% per month payable to the provider.  Any required interest payments shall be made within 30 days after payment.

So, if you carefully review the three bullet points above, number 1 requires medical caregivers to send medical bills with “all the required data elements necessary to adjudicate the bills.” In my experience, that doesn’t happen as often as one might expect. I have no idea why doctors and other healthcare givers send medical bills to WC insurers/employers and attorneys like the team at KCB&A without all necessary data elements. If you know why/how that happens, please send me a reply outlining why.

Number 2 requires the employer or insurer to provide written notification of the deficiency in medical billing, to include “denial” of the claim for any other reason. The employer or insurer is to provide written notification of the deficiency.

Number 3 is mildly interesting. If the WC medical billing provides substantially all of the required data elements and there is nonpayment of the “lesser of the actual charge or the payment level… in the [IL WC medical] fee schedule the bill or portion of the bill incurs interest at the rate of 1% per month payable to the provider.” This interest is due within 30 days after payment of the medical bill.

Initially, and at a the most basic level for adjusters and risk managers and others—statutory interest under Section 8(d)(1-3) is only going to be owed on WC medical bills in the amounts due under the IL WC Medical Fee Schedule. The doctors or hospitals or others that over-bill aren’t doing themselves any favors. The bills are going to be reduced to the WC fee schedule value and if not paid timely, interest is due calculated upon the discounted amount. As you can see in the legislation above, TELL the medical provider that.

Please note there were and are no enforcement provisions in this 2011 legislation. That is a constant facet of our IL WC legislation—the legislation may represent a major or minor change to IL WC law and practice but if they don’t give it “teeth,” it can shrivel and die. As one example, the proscription against “balance billing” in the IL WC Act prohibits that practice—however, the absence of any enforcement provision renders the legislation more like a guideline than a law.

One final thought—I have some commentators calling this language a “statutory interest penalty.” I will let you draw your own “contusions” on that concept. I don’t feel this is a “penalty,” it is simply a math calculation—if you don’t pay the bill within 30 days of having whatever is needed to accurately calculate what is owed, you owe the bill and the statutory interest. If calling it a penalty floats your boat go for it but there are actual things in the IL WC Act called “penalties” and I don’t feel this is one of them.

So Gene, You Say This Has Been Around Since 2011, What Just Changed?

Well, the lack of enforcement provisions to collect statutory interest on admittedly unpaid medical bills upset lots of IL doctors, hospitals and others. Headed by the IL State Medical Society or ISMS, they spent last year and much of this year in an ultra-quiet legislative campaign to get the right to sue the employer or insurance carrier/TPA in the local Circuit Court for the 1% per month interest. I still feel this approach was a silly mistake and shows faith in the IL courts that I don’t have and a disrespect for the IWCC that is, in my view, misguided. I still feel our IWCC should supersede this legislation and render it useless by doing a better job taking care of doctors/clinics and other healthcare givers to insure they are paid what they are owed in a timely fashion.

The initial problems with this enforcement concept is simple. The rights created in the IL WC Act have always been enforced in one place—the IL WC Commission. IL taxpayers spend at least $30M of our money to run the place; why not use it to enforce all provisions of the IL WC Act, like this one?

In recent KCB&A Law Updates, I have chronicled my still-valid concerns about having two venues/places for adjudication of any workers’ comp issue or benefit. One issue the people behind this legislation apparently didn’t think of is some of the bean-counters and other fussy people in the insurance industry might think of claims for statutory interest as not being covered under a workers’ compensation insurance policy. This phenomenon occurs with release/resignations all the time—the bean-counters and fussy people in the insurance industry don’t want the claims handlers to know of or in any way handle a release/resignation at the time of settling a work comp claim. If there is parallel handling of these common law “statutory interest” lawsuits, the insurance industry may take the approach separate defense counsel is needed and their handling isn’t going to be part of the work of a typical WC claims adjuster. At present, I have no idea if that might kick in. We will all have to wait and see.

The other downside to this concept of filing lawsuits (and not go to the IWCC) to get paid statutory interest on unpaid medical bills is most doctors/clinics, particularly in rural or low population areas, don’t want to sue local employers, as their general counsels and execs don’t like being sued. At all. They get mad and, to the extent possible, they may direct their workers to anyone other than the doctor/clinic suing them, particularly if they are getting sued with regularity. I also feel this litigation is going to require both the employer and insurance carrier to be named as parties to the collection

litigation—I am sure the folks at ISMS never thought of that, as they sort of demonized the insurance carriers only. Employers don’t have the same issues and perspectives as insurance carriers in late payment of WC medical bills. In my view, both parties are going to have to be dragged into court for the judge to adjudicate who owes what and why.

Please remember these lawsuits are going to cost money to file and have the employers and insurance carriers served with process. There will be “appearance fees” to defending them. Legal fees will also be incurred, if there are the inevitable disputes that may readily occur.

What About the “Effective Date” of This New Legislation?

It is our understanding the concept of judicial or Circuit Court enforcement of statutory interest starts on late-paid medical billing that began on the “effective date” or November 27, 2018. That said, statutory interest has been “running” or was in place in the IL WC Act in this State beginning in 2011. What changed on November 27, 2018 is the ability of doctors and other healthcare givers to go into a local Circuit Court to get an award of statutory interest on WC medical bills that aren’t paid timely after that date. In short, the clock began to tick on November 27, 2018.

What About Denied WC Medical Bills Paid By A Group Health Care Plan?

Who knows!!! In my view, it would seem fairly clear a doctor/clinic or other healthcare giver shouldn’t get statutory interest on “paid” medical bills that are remitted by a third party. If there is a remaining balance that might be due after such payments, it may be considered prohibited balance billing for a healthcare giver to continue to seek collection of the unpaid portion to include statutory interest. This “partial payment” concept is sort of considered in the legislation and sort of not. It may be years before we have a clear picture on how it will work out.

What About Medical Bills for Care Incurred After a Missed IME?

Please note Section 12 of the IL WC Act arguably cuts off medical care and all pending benefits for a worker who is given proper notice of an IME and fails to attend without reason.

What happens to medical bills for such care? Does the injured worker owe statutory interest for such billing when the bills remain unpaid? SB 904 doesn’t mention this possibility, limiting enforcement to the insurance carrier and employer only. Does the employer or insurance carrier have to give notice they don’t owe such bills, even if they receive “requisite data elements,” with their denial being consistent with Section 12 of the Act? Only the Shadow Knows!!!

Isn’t This Concept Only Going to Apply to “Accepted” WC Medical Bills—Isn’t That What ISMS Told Our Lawmakers?

In my view, this legislation was presented to the IL House/Senate telling our legislators the doctors/hospitals just wanted statutory interest on “accepted” WC medical care. In my reasoned legal view, that idea/concept is very challenging in WC. If a claim, at its outset, is completely denied with care ongoing and the medical bills submitted for payment, no one thought denied medical bills could later be covered and statutory interest due. In almost four decades of IL WC defense practice, I have seen WC medical bills well into six figures fully denied for five or more years to later be awarded by the reviewing courts. If 12% annual interest attaches to such medical billing, the statutory interest could be $100K or more. That is going to make reserving such costs dramatically more challenging, as no one knows how long IL WC litigation might take.

Take my word for it, when the previously contested IL WC claim is later awarded and/or denial is reversed, upon payment of previously submitted medical bills, such bills are by definition both “late” but now “accepted,” as the IWCC or reviewing courts have ordered the bills to be paid. There is no mention in the legislation about a delay in payment of WC medical bills due to early denial and later voluntary or “forced” acceptance.

As a more practical matter for lawyers on both sides, if unpaid WC medical bills are submitted at a hearing where some or all of the claim and the WC medical bills are contested/denied, it is now going to be crucial to include evidence in the record the bills were submitted to the employer or insurance carrier on a specific date with “substantially all the required data elements necessary to adjudicate the bills” as the statute requires. Again, it is up to the Claimant attorney to make that submission and such attorneys don’t necessarily care about a doctor/clinic/hospital getting paid statutory interest at a later time. In my view, this is another clear flaw in the approach taken by ISMS in propounding this legislation.

I don’t think there is any other way to approach or make sense of this legislation. Happy to have your best thoughts.

Here Are Some Excellent Q’s (from my readers) With My Best A’s

1. If a denied IL WC claim is later awarded as compensable, can the doctor/healthcare giver resubmit the bill and get statutory interest on all of it, and then reimburse the medical carrier? To my understanding, statutory interest would run from the date the bill was initially submitted with what is needed in “data elements to process.” Yes to interest for possibly years when/if the bill is later ordered to be paid and is thereby “accepted.” It will be very important for insurance carriers/TPAs to confirm they either have the data elements necessary to process a bill or they DON’T have the elements necessary. Statutory interest only attaches from the date when necessary data elements are received and the bill isn’t processed and paid.

1. Would the wording prevent a doctor/healthcare giver from getting statutory interest on any amount that had been paid, in part, by the medical carrier? If the bill is paid, in whole or in part, I feel confident statutory interest should stop on the amount paid. “Balance billing” should still be blocked and not subject to a claim for statutory interest—this is not in the legislation and may have to be decided in the courts.

1. Could the doctor/healthcare giver get statutory interest, from the work comp carrier, on an amount paid by the medical carrier that was later than required under SB904? Short answer, probably. This legislation raises a lot of questions on denied claims. We agree on questions. Yes to statutory interest on amounts paid on late medical bills starting on 11/27/2018.

1. In some scenarios would there be a way the comp carrier could make payment under some type of reservation of rights and later be reimbursed by the doctor or healthcare giver  if the contested IL WC claim is later found non-compensable? The statute/legislation doesn’t cover it but it would be challenging to make a large medical payment under a reservation of rights to then nicely ask for thousands of dollars back if the claim was later denied. It does make some sense but I think the docs/hospitals would have to be fully advised and agree to it. You still might have issues if medical practices are sold or change hands in any way.

This Thursday, I am meeting with the legislative experts from the IL Chamber and other defense attorneys to discuss these and other related issues. I strongly urge all Illinois businesses to join the IL State Chamber as they are on the cutting edge of protecting IL business from this sort of shenanigans. You can get more information about joining at www.ilchamber.org. In advance of the meeting, please send me your toughest questions and best thoughts. Please also post them on our award-winning blog.