Advising Clients on How to Minimize Medical Liens in Workers’ Compensation

Close early and close quickly. For brokers advising their clients on how to control their workers’ compensation costs, this axiom is a prime directive.

There are a host of reasons why this does not always happen. As a recent study from the Commission on Health and Safety and Workers’ Compensation (CHSWC) clearly shows, one of the prime reasons for the unnecessary delays and costs in the workers’ comp system is the choking number of liens filed by medical providers that threaten to grind the system to a screeching halt.

California is unique among the states in allowing all medical providers to file a lien against the final award of compensation. This lien right goes back to the formation of the system in 1913. Liens are, in essence, a notice that the provider has unpaid medical bills and wants the Workers’ Compensation Appeals Board (WCAB) to order them to be paid. It is estimated that for 2010 alone, more than 300,000 liens will be filed.

According to the CHSWC, the two primary causes of liens arising from disputed bills from medical providers are that the provider was not authorized to treat, and that the amount paid by the payer (insurer or self-insured employer) was inaccurate.

Because of the lien filings, cases take longer to close. Dwindling resources at the WCAB are used to resolve issues other than those involving the injured worker. The pressure to resolve liens results in payments made to providers that the 2004 reforms in Senate Bill 899 would otherwise prohibit. It is also apparent from the data that the short-lived lien filing fee that existed from 2004 to 2006 had a singularly positive effect on reducing the number of lien filings. Whether that fee will be reinstated, as recommended by the CHSWC, is up to the Legislature.

The solution to the lien problem is a complex one. But there are specific steps a broker can take to help reduce the effect of liens — and it all starts when a policy is issued.

The Division of Workers’ Compensation (DWC) has set up a complicated set of notice requirements for implementing a Medical Provider Network (MPN). The proper use of an MPN goes a long way to reduce the unnecessary and costly medical treatment that so plagued the workers’ compensation system prior to 2004. Conversely, failure to comply with these notice requirements can result in the applicant — and more likely the applicant’s attorney — taking control of medical treatment and driving up claims costs and experience modifications.

Understanding and complying with MPN notice requirements — especially when a business moves from one insurer to another — goes a long way toward reducing the possibility that an injured worker will seek treatment outside the MPN and that settlement of the case will not get bogged down with lien filings. Nearly 40 percent of disputed liens arise because of issues regarding whether the physician was authorized to treat. Working with your customer and carriers to make sure the right notices are delivered and posted on time will make claims administration run much more smoothly.

Another major reason for the large number of liens filed is disputes over the amount paid to a provider. Medical cost containment (MCC) expenses are high in California and among the highest in the nation. MCC has essentially three components — network management (MPN), utilization review (UR) and bill review (BR). Timely and accurate payments to providers are one measure of an insurer’s effective management of claims. Bill review helps to ensure that physicians are paid appropriately under either a contracted rate or the Official Medical Fee Schedule (OMFS).

The key problem in regard to MCC is that the OMFS has not been updated in many years. New procedures have no corresponding billing code in the fee schedule, and considerable judgment is involved in determining what the right amount to pay is for the procedures billed.
Because of this friction, providers frequently disagree with the amount paid even where the treatment is authorized. Consequently, an effective BR program is measured not only by the amount bills are reduced, but also by how efficiently and accurately providers are paid. Arbitrary reductions to providers that increase the number of liens don’t help your customer manage its workers’ compensation costs in the long run.

Finally, data indicates that claim denials are on the rise. This reflects the many changes brought about in SB 899. Once a claim is denied, however, the claims administrator has no control over who treats and what treatments are provided to the injured worker. Aggressive claims management, including challenging whether a claim arises out of and in the course of employment (AOE/COE), is vital to safeguard a client’s workers’ compensation program against ineligible claims.

However, one consequence of inappropriately denied claims can be the filing of liens for medical treatment that was provided prior to a workers’ compensation judge making a determination that the claim was in fact compensable. According to CHSWC data, such claims generate between 15,000 and 35,000 liens annually. Having a disputed claim determined to be compensable long after a treatment program has been started makes ongoing claims management very complicated and usually contentious.

Over the coming year, there will be many proposals advanced to reduce the number of liens in the system. Until one or more become law, it is up to all of us to do what we can to keep disputes with providers — and the liens that come from those disputes — to a minimum.

On the Web: The Commission on Health and Safety and Workers’ Compensation liens report can be accessed at: www.dir.ca.gov/chswc/Reports/2011/CHSWC_LienReport.pdf.