BEFORE THE IOWA WORKERS’ COMPENSATION COMMISSIONER
______________________________________________________________________
:
UNITED FIRE & CASUALTY,
:
File No. 5048485
:
Insurer,
:
Petitioner,
:
MEDICAL FEE
:
vs.
:
DISPUTE DECISION
:
CEDARS SINAI MEDICAL CENTER,
:
:
Provider,
:
:
and
:
:
SEQUETOR, INC.,
:
:
Vendor,
:
Respondents.
:
Head Note Nos.: 2501, 2906
______________________________________________________________________
STATEMENT OF THE CASE
United Fire & Casualty (UFC), insurer, petitioner, filed a contested case
proceeding seeking resolution of a medical fee dispute between Cedars Sinai Medical
Center (provider) and Sequetor, Inc. (vendor), both as respondents, under rule 876 IAC
10.3 and rule 876 IAC 4.46.
Under Iowa Code section 85.26(4), a claim for benefits is normally only
maintained by an injured employee, the employee’s dependents, or a legal
representative. Iowa Code section 85.27(3) grants an exception to that requirement.
This section allows a healthcare provider, or an insurer, to maintain an action to
determine if charges are reasonable, and if the informal dispute resolution procedure is
followed under rule 876 IAC 10.3(3).
The administrative record in this file indicates that respondent and petitioner have
complied with the requirements of 876 IAC 10.3. The administrative record suggests a
good faith effort to reach a resolution of the dispute has failed. Insurer, as petitioner,
has instituted a contested case proceeding under rule 876 IAC 4.46.
The record in this case consists of petitioner’s Exhibits A-L and respondents’
Exhibits 1, 2, 5, and 6, previously filed as rebuttal addendums.
UNITED FIRE & CASUALTY V. CEDARS SINAI MEDICAL CENTER
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The undersigned added an additional exhibit to the record, Exhibit AA, under rule
876 IAC 4.46(3). Exhibit AA is a copy of an e-mail from a medical fee dispute reviewer,
Alex Kauffman, correcting a number regarding his review. The e-mail was sent to both
counsel for the petitioner and to the vendor in this matter, on February 14, 2014. Exhibit
AA is referenced in Respondent’s brief at page two, first paragraph. Exhibit AA has
been added to the record for clarity in the chronology of this matter. As both parties
received this e-mail, and the record is added for the purposes of clarifying facts in the
record, the addition of Exhibit AA is not prejudicial to either party.
In a ruling on a motion to strike the addendums, filed September 16, 2014,
addendum numbers 3 and 4 were struck from the record. Addendum numbers 1, 2, 5,
and 6 were not struck and shall, for the purposes of this decision, be referred to as
Exhibits 1, 2, 5, and 6.
By order filed by the acting workers’ compensation commissioner, this decision is
designated file agency action. Any appeal of this decision would be a petition for
judicial review under Iowa Code section 17A.19.
ISSUES
1. Are the charges, recommended by the reviewer, unreasonable.
2. Is the acceptance of petitioner’s payment an accord and satisfaction.
3. Does Sequetor, vendor, have standing in this matter.
In the brief in support of the contested case proceedings, petitioner also raised
the issue that vendor, Sequetor, was engaged in the unauthorized practice of law.
(Respondent’s brief pages 4-6) Following the filing of the petition, defendants retained
legal counsel licensed to practice in Iowa. As a result, the contention that the vendor is
engaged in the unauthorized practice of law is not an issue in this case and will not be
discussed in this decision.
FINDINGS OF FACT
On March 19, 2010, Cody Mills (Mills) fell approximately 25 feet from scaffolding
while working for Alan Stevens Associates, Inc. The record indicates Mills landed on
his head. (Exhibit K; Exhibit L, page 29)
Mills was transported to Cedars Sinai Medical Center in Los Angeles, California.
Cedars Sinai is a designated level one trauma center. (Ex. C)
Mills was initially assessed as having a left frontal hematoma. (Ex. K; Ex. L, p.
29) On March 19, 2010 Mills underwent an emergency craniotomy, and an epidural
drain placement. Mills was also assessed as having a complete fracture of the
anterolateral orbital complex. Mills was transferred to the Neurosurgical Intensive Care
Unit at Cedars Sinai. (Ex. K; Ex. L, pp. 41-42, 79)
UNITED FIRE & CASUALTY V. CEDARS SINAI MEDICAL CENTER
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On March 20, 2010 Mills underwent a second emergency procedure including a
right frontal craniotomy, evacuation of a right-sided hematoma, and the placement of a
ventricular drain to monitor intracranial pressure. (Ex. K; Ex. L, pp. 13-14)
Mills returned to the neurological intensive care unit, where he stayed until April
of 2010.
On March 24, 2010 Mills underwent a tracheotomy and placement of a feeding
tube. (Ex. K; Ex. L, pp. 63-66)
On April 9, 2010 Mills had an external ventricular drain and an inferior vena cava
filter placed. (Ex. K; Ex. 1; Ex. L)
On April 26, 2010 Mills had a ventricular shunt placed. (Ex. K; Ex. L) On
May 10, 2010 Mills had a right occipital ventriculoperitoneal shunt placed. (Ex. K; Ex. L,
p. 419)
On June 1, 2010 Mills underwent a cranioplasty on the left. (Ex. K; Ex. L, p. 505)
On June 4, 2010 a ventriculoperitoneal shunt was replaced. (Ex. K; Ex. L, p.
543) On June 9, 2010 the shunt was removed and an external ventricular drain was
placed. (Ex. K; Ex. L, p. 543)
On June 28, 2010 Mills had another ventriculoperitoneal shunt placed. (Ex. L, p.
681; Ex. 1)
On July 7, 2010 Mills underwent a thoracocentesis to remove fluid. (Ex. L, p.
665; Ex. 1) On July 8, 2010 Mills had a chest tube placed. (Ex. L, p. 646; Ex. 1)
On July 20, 2010 Mills had a ventriculoperitoneal shunt placed in the abdomen.
(Ex. L, p. 609; Ex. 1)
Mills was discharged from Cedars Sinai on July 28, 2010 after spending 131
days at the facility inpatient. In total, Mills underwent approximately 23 surgical
procedures. Records indicate he underwent a number of diagnostic tests including, but
not limited to multiple x-rays, CT scans, EEGs, and echocardiograms. (Ex. L)
Mills was discharged from Cedars Sinai on July 20, 2010. He was assessed at
that time, as having ventriculitis (inflammation of the ventricles in the brain),
intraventricular hemorrhage, hydrocephalus, pulmonary embolism, postoperative right
frontal epidural hematoma, a massive left frontal epidural hemorrhage, a complex
anterior skull fracture, a maxillary and orbital fracture, and a thalamic storm. According
to the record, a thalamic storm is excessive and uncontrollable activities of the
sympathetic nervous system leading to increased heart rate, restlessness, increased
respiratory rate, and fever. Thalamic storms are usually associated with brain injuries.
(Ex. K; Ex. L, p. 29-30)
UNITED FIRE & CASUALTY V. CEDARS SINAI MEDICAL CENTER
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The bill for Mills’ hospitalization at Cedars Sinai was $5,314,001.96. (Ex. G, p. 4)
The bill was submitted to UFC for payment. UFC submitted the bill to Alpha Review, a
bill reviewing agency. In a review that appears to be dated September 28, 2010, Alpha
determined the reimbursable amount owed totaled $939,455.04. (Ex. G, pp. 1-4; Ex. 6)
Notes on the review indicate that charges were priced in accordance to the First Health
Contract. Notes on the review also indicate that “. . . all reductions are in accordance
with the medical fee schedule as per the rules and regulations authorized by California
Labor Code Section 4603.5 and 5307.1.” (Ex. G, p. 4)
A check for $939,455.03 was paid by UFC to Cedars Sinai dated October 11,
2010. (Ex. 6)
A second review was performed by Alpha. This review appears to have been
performed in late October 2011. The second review allowed for an additional $740.78
to be paid. (Ex. H) Notes at the end of this review indicate “. . . unless otherwise noted,
all bill review reductions are due to charges exceeding amounts that would appear
reasonable for the provider’s geographic region.” (Ex. H, p. 6) A second check, dated
November 2, 2011, was paid to Cedars Sinai for $740.78. (Ex. 6)
In a report dated May 13, 2013 Mindy Daugherty, RN, gave her opinions of the
billing associated with the Mills’ claim. Ms. Daugherty indicated, in the report, she has
been a nurse for over 20 years and has 10 years’ experience in the accuracy of medical
bills and the reasonableness of charges. Nurse Daugherty indicates that as many as 43
states have medical fee schedules to standardize the costs associated with workers’
compensation medical claims. (Ex. K)
Ms. Daugherty noted that there are two types of fee schedules used regarding
workers’ compensation claims. They are the relative value scale (RVS) and the usual
customary and reasonable scale (UCR). The RVS schedule is based on what fees
“should” cost. Ms. Daugherty indicates the most common RVS schedule is the
Medicare payment system. The UCR schedule is based upon what medical providers
“typically” charge for medical services. (Ex. K, p. 3)
Ms. Daugherty indicated that the Medicare payment schedule for inpatient
services is based upon the MS-DRG system (DRG standing for diagnostic related
groups). She indicated that if a patient contracts a hospital-acquired condition, the
payment received under Medicare is lessened in an effort to encourage hospitals to
provide quality healthcare. (Ex. K, pp. 4-5)
Ms. Daugherty indicated that the Official Medical Fee Schedule (OMFS) for
California workers’ compensation cases is issued by the DWC administrative director
and can be found in Title 8 of the California Code of Regulation. Ms. Daugherty
indicated that the OMFS system is based upon the Medicare DRG system. (Ex. K, p. 5)
Ms. Daugherty indicated that the Mills’ charges would be assessed under the MS-DRG
system, as the highest severity rating of major complications given the nature of Mills’
condition. (Ex. K, p. 6) She opined that under the MS-DRG system, Cedars Sinai
UNITED FIRE & CASUALTY V. CEDARS SINAI MEDICAL CENTER
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would have received $846,370.44 if the claims had been paid by Medicare. (Ex. K, pp.
5-7) She also suggests that Mills’ stay as an inpatient was likely extended due to
alleged hospital acquired conditions (e.g. pneumonia and infections). She opined that
because Medicare would analyze these conditions as hospital related, charges
associated with pneumonia or other infections, would have received a lower Medicare
payment. (Ex. K, pp. 5-6)
Ms. Daugherty opined that because the OMFS for California is based upon the
MS-DRG system, the reimbursement Cedars Sinai received from UFC would have been
reasonable under California and Iowa law. (Ex. K, p. 6)
The petitioner and respondents were unable to agree to full payment of the Mills’
bills. The parties chose to pursue resolution of the matter under rule 876 IAC 10.3.
Alex Kauffman was ultimately selected as the bill reviewer by the Iowa workers’
compensation commissioner under the procedures of 876 IAC 10.3.
Once Mr. Kauffman was chosen as the bill reviewer, counsel for UFC wrote to
Mr. Kauffman in a letter dated December 17, 2013. The letter indicates Mr. Kauffman
was given an itemization of charges and medical records for his review. UFC counsel
also provided Mr. Kauffman with the Alpha Review documentation, Ms. Daugherty’s
report, and a document entitled “Collector’s Notes.” (Ex. F)
In a report dated February 10, 2014, Mr. Kauffman gave his opinions regarding
the charges associated with the Mills’ claims. Mr. Kauffman indicated that for the Mills’
charges, he reviewed CMS billing forms, medical records, hospital charges, bill reviews
performed by Alpha Review, and the report from Ms. Daugherty. (Ex. C)
Ms. Kauffman indicated that he has been performing bill review and analyzing
bills since 1999 for both insurance companies and providers in California. He indicated
he is familiar with the California administrative code regarding workers’ compensation
fees and has been appointed by California workers’ compensation judges to conduct
independent bill reviews. (Ex. C)
Mr. Kauffman indicated petitioner paid the provider, based on a DRG analysis
representing an average length of stay of 31.6 days. Mills was inpatient for 131 days.
He also noted that the fee schedule used by UFC was unreasonable, as it did not take
into consideration Mills’ trauma designation, and the intense inpatient care required by
Mills. (Ex. C, p. 5)
Mr. Kauffman opined the claims should have been paid under CCR 9789.22(i)(1)
using a per diem method. This would have resulted in a total payment of
$3,894,576.10. Using the per diem method Mr. Kauffman opined that the insurer should
pay $2,955,121.10 ($3,894,576.10 - $939,455.03 already paid).
Mr. Kauffman also opined that another way to review the bills at issue is that the
provider should have been paid at 90 percent of billed charges as per a report
UNITED FIRE & CASUALTY V. CEDARS SINAI MEDICAL CENTER
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sponsored by the RAND Corporation. This would have resulted in billed charges of
$4,782,601.70, leaving the amount owed by the insurer to be $3,843,146.70
($4,782,601 less $939,455.10). (Ex. C, p. 7)
The RAND report, referenced at Exhibit C, page 7, is a report titled “An Update
on Services Provided Under California’s Workers’ Compensation Program”, authored by
Barbara O. Wynn, and sponsored by the RAND corporation. The report makes findings
and recommendations regarding hospital services provided under the California
Workers’ Compensation system. (Ex. A, pp. 6-9, 15-17)
Mr. Kauffman averaged all three methods of payment together to reach an
average due of $2,579,240.90, less amounts paid, plus interest. (Ex. C; Ex. AA)
In subsequent correspondence Mr. Kauffman corrected an error and noted that
the amount owed by defendant insurer should be $2,266,089.20. (Ex. AA;
Respondent’s brief, p. 2)
CONCLUSIONS OF LAW
The first issue to be determined is if the additional charges, opined as due by
Mr. Kauffman, are unreasonable. Petitioner in this matter has the burden of proof to
show that the recommended charges are unreasonable under 876 IAC 4.46(1) and (4).
As detailed above, Mills had a life-threatening injury after falling 25 feet from
scaffolding. He underwent over 20 surgical procedures. It is true, as Ms. Daugherty
indicates in her report, that some of the surgical procedures were minor and were
performed at bedside. It is also true that a number of the 23 surgical procedures were
not minor procedures. These surgeries include three craniotomies (Ex. L, pp. 13-14;
41-42; 505), insertion of a feeding tube (Ex. L, p. 63), a tracheotomy (Ex. L, p. 65) and
the placement of a number of shunts in the skull. (Ex. L, pp. 419, 543, 681, 609) Mills
spent 131 days inpatient at Cedars Sinai.
Two experts have opined regarding the reasonableness of charges.
Ms. Daugherty, the petitioner’s expert, opined that the charges for Cedars Sinai are
excessive, and the amount paid by UFC was reasonable. Mr. Kauffman averaged three
different analyses of the bills at issue and opined that UFC still owed Cedars Sinai
$2,266,089.20, less amounts paid plus interest. (Ex. C; Ex. AA; Respondent’s brief p.
2)
Mr. Kauffman’s report has the advantage, in that he was able to review Nurse
Daugherty’s evaluation prior to issuing his report. Nurse Daugherty did not review, and
could not opine, regarding Mr. Kauffman’s opinions.
Mr. Kauffman’s report indicates he routinely evaluates claims using OMFS
standards in California for both providers and insurance. Mr. Kauffman is certified,
under California law, to review medical bills. Nurse Daugherty does not indicate she
UNITED FIRE & CASUALTY V. CEDARS SINAI MEDICAL CENTER
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has any experience in reviewing California medical claims. Nurse Daugherty does not
indicate that she is certified under California insurance law. (Ex. C, p. 3)
Mr. Kauffman opines the insurer used a fee schedule based on an average
length of stay for patients of 31.6 days. Mr. Mills was inpatient at Cedars Sinai for 131
days. Nurse Daugherty does not discuss this discrepancy. (Ex. C, p. 4)
Nurse Daugherty refers to the OMFS (the fee schedule for California). However,
her report indicates that she did not base her opinions on the OMFS, but instead relied
on Medicare regulations to reach her conclusions. (Ex. K, pp. 5-6) Mr. Kauffman
specifically referred to regulations in California regarding his opinions. All three of the
analyses used specifically refer to California workers’ compensation law. (Ex. C, pp. 67)
Mr. Kauffman was supplied with input from both the insurer and the provider and
used that information in arriving at his opinions regarding the reasonableness of the
Mills’ charges. (Ex. C; Ex. F) Nurse Daugherty’s opinions were based on information
provided only by the insurer. (Ex. K)
Mr. Kauffman was able to review Nurse Daugherty’s opinions. His report
indicates he has far more experience in evaluating California workers’ compensation
medical claims than does Nurse Daugherty. Mr. Kauffman relied on California law to
reach his opinions. Nurse Daugherty relied on Medicare regulations. Mr. Kauffman
opined the insurer based the payment and claims, in part, on a fee schedule based on
an average length of inpatient stay of 31.6 days. Mills was inpatient for 131 days.
Nurse Daugherty did not address this discrepancy. Mr. Kauffman had input from both
the insurer and provider. Nurse Daugherty only had information from the insurer. For
these reasons, and others as detailed above, it is found that the opinions of Mr.
Kauffman are more convincing than the opinions of Nurse Daugherty regarding the
reasonableness of charges.
An additional aspect in this case is the amount of time Mills was in Cedars Sinai
and the lack of involvement during his stay on the behalf of the insurer. Under Iowa
law, the employer has the right to choose the provider of care except where the
employer has denied liability. Iowa Code section 85.27. Under Iowa law, an employer
must pay for all medical treatment they authorize and direct. Van Dyke v. Vermeer
Manufacturing, File No. 5012087 (App. Decision June 23, 2006).
As noted above, Mills was inpatient at Cedars Sinai for 131 days. There is
nothing in the record suggesting the petitioner/insurer attempted to direct or monitor
care in this case. Given the time spent by Mills at Cedars Sinai, and the fact that
defendant insurer did not attempt to monitor charges in this matter, defendant insurer
should not now claim that charges are excessive and ultimately pay less than one-fifth
of the amounts charged. Given the duration of time Mills spent inpatient at Cedars
Sinai, defendant insurer has some obligation to monitor the care at issue in this case.
UNITED FIRE & CASUALTY V. CEDARS SINAI MEDICAL CENTER
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Mills was hospitalized for 131 days in this matter. He received over 20 surgical
procedures. The review of Mr. Kauffman is found to be more convincing than that of
Ms. Daugherty. Given this record, petitioner UFC has failed to carry its burden of proof
that the charges sought by respondents are unreasonable.
The next issue to be determined is if acceptance of payment by respondent
resulted in an accord and satisfaction for all charges.
Rule 876 IAC 4.46(3) states, in relevant part: “. . . the issues of the contested
case proceedings shall be limited to the dispute considered in rule . . .” 876 IAC 10.3.
Accord and satisfaction was not at issue in the underlying fee dispute in this matter
between the parties under 876 IAC 10.3. For this reason, accord and satisfaction is not
an issue that can be determined in this contested case proceeding.
Assuming for argument sake that petitioner can still bring the issue of accord and
satisfaction in this contested case proceeding, an accord and satisfaction has not
occurred in this matter.
Iowa Code section 554.3311(4) states:
A claim is discharged if the person against whom the claim is
assessed proves that within a reasonable time before the collection of the
instrument was initiated, the claimant, or an agent of the claimant . . .
knew that the instrument was tendered in full satisfaction of the claim.
There is no indication in the record that Sequetor or Cedars Sinai knew
that the check for $939,455.03 was tendered in full satisfaction of the bills at
issue. Nothing on the check found at Exhibit G indicates that the check was
tendered to be full satisfaction of the medical bills at issue. For this reason, there
was no accord and satisfaction under Iowa Code section 554.3311.
The final issue to be determined is whether Sequetor, has standing to be
involved as a party in this matter.
As noted above, rule 876 IAC 4.46(3) indicates that the issues of the
contested case proceeding are limited to the disputes considered in the rule 876
IAC 10.3 proceeding. Standing was not at issue in the underlying fee dispute
between the parties under rule 876 IAC 10.3. For this reason, standing is not an
issue to be determined in this contested case proceeding.
Assuming for argument sake that standing can still be raised as an issue
in this contested case proceeding, Sequetor is a party that has standing in this
matter. The record indicates that Cedars Sinai hired Sequetor as its agent in
resolving the outstanding workers’ compensation payment issues in this case.
(Ex. 5) Sequetor is working as a vendor or agent of Cedars Sinai. There is no
prejudice shown by allowing Sequetor to be a party in this proceeding. For these
reasons, Sequetor has standing to be involved in this proceeding.
UNITED FIRE & CASUALTY V. CEDARS SINAI MEDICAL CENTER
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ORDER
THEREFORE IT IS ORDERED:
That petitioner, United Fire & Casualty, shall pay provider and vendor, together
referred to as respondent, two-million two-hundred sixty-six thousand eighty-nine and
20/100 dollars ($2,266,089.20), less amounts previously paid.
Signed and filed this ___________ day of December, 2014.
JAMES F. CHRISTENSON
DEPUTY WORKERS’
COMPENSATION COMMISSIONER
Copies To:
Sasha Monthei
Attorney at Law
PO Box 36
Cedar Rapids, IA 52406
smonthei@scheldruplaw.com
Jane V. Lorentzen
Attorney at Law
2700 Grand Ave., Ste. 111
Des Moines, IA 50312
jlorentzen@hhlawpc.com
JFC/sam