Liens Stress California Workers’ Compensation System

Liens are “choking” California’s workers’ compensation system, with employers and insurers spending roughly $200 million per year in the state on loss adjustment expense to handle medical liens claims, a new report indicates.

In the Golden State’s workers’ compensation system, a lien is a direct claim against the defendant for a benefit which is not otherwise payable to the injured worker.

“The rationale is that the lien claimant has furnished medical treatment or other service that the employer was required to provide, so the lien claimant is entitled to payment from the employer.” A medical provider must not collect payment from the patient unless the claim turns out to be non-compensable. “A lien is the medical provider’s vehicle for contesting the employer’s determination of the amount payable for medical goods or services,” the California Commission on Health and Safety and Workers’ Compensation said.

The Commission predicts approximately 350,000 liens were filed in 2010 in California, and more than 450,000 are expected in 2011.

“The volume of liens forces the courts to encourage settlement, almost to the point of coercion. The necessity of settlement rewards both unjustified claims and unjustified refusals,” the report stated. “The volume of liens provides an environment where indefensible delays and denials by claims administrators and fraud and abuse by lien claimants can thrive, side by side.”

Among the Commission’s findings:

• Medical treatment liens account for more than 60 percent of the liens filed, and 80 percent of the dollars in dispute.
• $1.5 billion per year is claimed in medical lien disputes after adjusting for amended liens.
• One-third of medical liens involve disputes over the application of the Official Medical Leave schedule.
• Authorization for treatment was in dispute in seven out of 10 medical liens surveyed.
• Reasons treatment was not authorized were: 37 percent provider not authorized to treat; 7 percent denied claims; 6 percent medical necessity of treatment rejected by utilization review; 1 percent contested body parts; 20 percent authorization status unknown or not stated.
• The volume of liens filings is sensitive to changes, such as the adoption or repeal of a $100 filing fee.
• Up to 30 percent of medical liens are prematurely submitted before the time has elapsed for the claims administrator to pay or object to the provider’s bill.
• Ten percent of medical liens are submitted on the date service is provided.
• Nearly one quarter of medical liens are filed more than two years after the last date of services for which payment is claimed; 6 percent are filed five or more years after the last date of services.

The report was based on information provided by the Division of Workers’ Compensation.