Can a provider obtain fees in excess of the fee schedule when the fee schedule is unreasonable?

By way of background, the legislature in SB 228 (which was approved in 2003 and became effective in 2004) repealed former Labor Code Section 5307.1 and rewrote it without the express language allowing the medical provider to obtain fees in excess of the fee schedule.

Furthermore, in 2000, the language in the fee schedule changed from a minimum to a maximum reasonable fee schedule. Labor Code Section 5307.1 was amended in 2000 to the following:

''The administrative director, after public hearings, shall adopt and revise, no less frequently than biennially, an official medical fee schedule which shall establish reasonable maximum fees paid for medical services provided pursuant to this division . . .”

However, this change in 2000 did not affect the providers’ right to seek fees in excess of the fee schedule as the statute contained the following language:

“A provider shall not be paid fees in excess of those set forth in the fee schedule established under this section unless the provider provides an itemization and explanation of the fee that shows that it is both a reasonable fee and that extraordinary circumstances relating to the medical condition being evaluated justify a higher fee; provided, however, that in no event shall a provider charge in excess of his or her usual fee.  The employer and employee shall have standing to contest fees in excess of those set forth in the fee schedule.”

Prior to SB 228, Labor Code Section 5307.1(a) set forth the enabling language providing for the establishment of the official medical fee schedule and ''reasonable maximum fees''. Labor Code Section 5307.1(b), prior to 2004, allowed for a medical provider to be paid in excess of the official medical fee schedule if the provider meets certain enumerated requirements, including not charging in excess of his or her usual fee. The limiting language, ''not charging in excess of his or her usual fee'', applies only to instances where the provider desires to charge in excess of the fees set forth in the official medical fee schedule. Failure of a medical provider to meet the more stringent requirements of Labor Code Section 5307.1(b) limits the provider to the reasonable maximum fees of the official medical fee schedule.

Currently, in this writers' opinion, some judges feel the reasonableness of the medical bills is always an issue for the courts based on Labor Code Section 4600, while others feel that the fee schedule is the fee schedule and a provider is only entitled to fee schedule and nothing more in their interpretation of Labor Code Section 5307.1.

Under present law - what survived SB 228 - was:

8 CCR  § 9792.5  Payment for Medical Treatment

(c) To be properly documented, a bill for medical treatment which exceeds the amount presumed reasonable in the Official Medical Fee Schedule adopted pursuant to Labor Code Section 5307.1, must be accompanied by an itemization and explanation for the excess charge.

Labor Code Section 5307.6.   (b) A provider shall not be paid fees in excess of those set forth in the fee schedule established under this section unless the provider provides an itemization and explanation of the fee that shows that it is both a reasonable fee and that extraordinary circumstances relating to the medical condition being evaluated justify a higher fee; provided, however, that in no event shall a provider charge in excess of his or her usual fee.  The employer and employee shall have standing to contest fees in excess of those set forth in the fee schedule.

(Note: Although this section addresses medical legal, we assert that section (b) does apply to all providers.)

The goal of the Official Medical Fee Schedule is to have reasonable reimbursement for providers; however, there are extreme injuries and extraordinary circumstances where this is clearly not the case.

By way of example, consider the following hypothetical:

Treatment in an inpatient hospital stay is based on DRG code (“diagnosis-related group"), which takes into consideration many factors in assessing the reasonableness of  fees, including an average length of stay for the procedures performed and or assigned by the DRG coding.  Let it be noted the DRG code is not precise; it assigns the closest procedures based on ICD diagnoses and procedures. Now suppose a DRG code assigned a head trauma allows for reimbursement for a 20-day stay on an inpatient basis. However, the injured worker stays in intensive case for 120 days because of serve injury and complications in recovery. The question arises: If the DRG code assigned allowed for 20-day stay, is it adequate reimbursement for the injury and services rendered?. Or does the provider not get paid for the additional 100 days that medical services were provided because the fee schedule only allows for a 20-day specific reimbursement for those services?

The regulation states the Official Medical Fee Schedule is “Presumed Reasonable”, meaning that the provider can bring forth evidence (Preponderance of evidence to overcome a presumption) to show that, for a particular injury and/or treatment, the fee schedule would not be reasonable compensation based on a number of factors. In this writers' opinion, it is interpreted that the provider can bring evidence to show that the provider is entitled to fees in excess of the fee schedule.

According to the definition in Blacks’ Law Dictionary 7th edition, reasonable is defined as “Fair, proper, or moderate under the circumstances”

Cal Lab Code § 3202.5 Preponderance of evidence standard

“All parties and lien claimants shall meet the evidentiary burden of proof on all issues by a preponderance of the evidence in order that all parties are considered equal before the law. 'Preponderance of the evidence' means that evidence that, when weighed with that opposed to it, has more convincing force and the greater probability of truth. When weighing the evidence, the test is not the relative number of witnesses, but the relative convincing force of the evidence.”

There are arguments on both sides as to reasonableness. This issue should, and, in this writers' opinion, be within the discretion of the courts to award fees in excess of the fee schedule when sufficient evidence is brought forth and the facts warrant. Therefore, we contend that the California lawmakers did not limit the courts power to award fees in excess of the fee schedule when the provider overcomes the presumption of reasonableness of the fee schedule.

The most notable appellate decisions regarding fees in excess of the fee schedule have been termed  the two “Gould Cases”.

(Gould I)

Gould v. Workers' Comp. Appeals Bd. (1992) 4 Cal. App. 4th 1059, 1068-1069 [6 Cal. Rptr. 2d 228]. The court held:

“In deciding whether fees in excess of the schedule are reasonable, the WCAB may consider evidence regarding the medical provider's training, qualifications, and length of time in practice; the nature of the services provided; the fees usually charged by the medical provider; the fees usually charged in the general geographical area in which the services were rendered; other aspects of the economics of the medical provider's practice that are relevant; and any unusual circumstances in the case.  We emphasize, however,   that, although unusual circumstances are a factor that may be considered, a fee in excess of the schedule may be reasonable even if no unusual circumstances are present.”

(Gould II)

In Gould II, the WCAB noted that the treating physician was not automatically entitled to the fee charged under Gould. The WCAB further reasoned the Official Medical Fee Schedule applied because it had been revised after Gould.

“Gould Two” Gould v. Workers' Compensation Appeals Bd. (Barry), 60 Cal. Comp. Cas. (MB) 1109 (Cal. App. 2d Dist. 1995)

“The Board noted that payment in excess of the fee schedule is discretionary with the Board and not mandatory [citing Gould v. Workers' Comp. Appeals Bd. (1992) 4 Cal. App. 4th 1059, 6 Cal. Rptr. 2d 228, 57 Cal. Comp. Cases 157]. Since the Gould case was decided prior to the 1994 revision of the medical fee schedule and because the fee schedule had not been revised biennially as required by statute, the introduction of evidence regarding the medical provider's training and qualifications may be considered in the determination of whether a fee in excess of the schedule is reasonable. Under the circumstances of that case, it was appropriate to look to factors outside the fee schedule."

In recent decisions that cite the “Gould Case”, the Appeals Board gives one the indication that provider is entitled to fees in excess of fee schedule (i.e. Gould was cited in the 2008 En Banc Decisions of Tapia v. Workers' Comp. Appeals Bd., 73 Cal. Comp. Cas. (MB) 1338 (W.C.A.B. 2008), (Post SB 228).)

On a related side note we have the “Valdez” case cited below that states when a claim is denied AOE/COE but later determined compensable, the provider is entitled to its usual and customary fees and the fee schedule does not apply to a denied case. Using the rationale that if providers were not rewarded in taking cases in which they may not get paid, the providers would be reluctant  to treat cases where there is a potential for denial.

CNA Ins. Cos. v. Workers' Compensation Appeals Bd. (Valdez), 62 Cal. Comp. Cas. (MB) 1145 (Cal. App. 1st Dist. 1997)

“It is the policy of the law to permit the provision of treatment to injured workers on a lien basis where an employer refuses to provide the treatment. (See, Labor Code § 4903.) Treatment provided on a lien basis may avoid such undesirable consequences to society as an injured worker going without needed medical treatment or burdening public resources. Yet a medical provider may be reluctant to provide treatment on a lien basis where he or she must assume both the risk of (a) not being paid at all if the injury is adjudicated to be not compensable or, (b) if the injury is adjudicated compensable, being paid at a rate less than his or her usual and customary charges in accordance with the Medical Fee Schedule. The law protects an employer from liability for treatment when the injury necessitating the treatment is not compensable.”

CNA Ins. Cos. v. Workers' Compensation Appeals Bd. (Valdez), supra

“Additionally, the WCJ again concluded that when an employer or carrier disputes a claim of industrial injury and refuses for that reason to pay the charges of the treating physician, the OMFS is not applicable if the injury is later found to be compensable and the physician is entitled to payment of his or her reasonable, usual and customary charges. To support this conclusion, the WCJ relied on Federal Mogul Corp. v. W.C.A.B. (Whitworth) (1973) 38 Cal. Comp. Cases 584 (writ denied), in which the WCAB found that a disputed industrial injury was compensable and that, despite the OMFS, the employer had the burden of showing that the charges of a treating physician were excessive as compared to charges for similar services in the area where the employee was treated. The Court of Appeal denied review after considering the employer's position that the charges allowed exceeded those in the OMFS and the employee's position that the OMFS applies only to controversies between employers or carriers and the physicians they hire. The WCJ rejected Defendant's assertion that the Whitworth decision was nullified by the enactment of Labor Code § 4603.2. It was the WCJ's belief that the statute was intended to apply only to cases in which a claimed injury was accepted by the employer and not to disputed claims.”

These writers assert that there do exist circumstances in medical treatment and injury in which the medical fee schedule does not reasonably pay for the services rendered by the provider, and that the issue of reasonableness of the services rendered is an issue for the court to decide.

Furthermore, the law is fluid and not rigid and this is why we believe the court has the discretion to grant more than fee schedule when such an award is both appropriate and necessary.