Colamonico Case – a Big Deal

INTRODUCTION

In November of 2019 the WCAB issued the published En Banc decision Colamonico v. Secure Transportation, which made sweeping changes to the expectations the Administration now has for WCJs, Medical Legal Providers, and Payers when adjudicating medical legal receivables. Specifically, it changed the way the Administration views the various party responsibilities under Labor Code Sections 4620-4622.

Before we dive in, I want to briefly mention that people using the system will likely NOT have noticed much or any of the changes I am about to discuss, because it often takes YEARS for changes in the law to filter down into high volume day to day practice. So, if you are reading this and say to yourself “This is not a big deal, I’ve hardly had any push back on Colamonico or contested claim style disputes.” … what we are exploring in this article is what changed, and what will be the most LIKELY response by the system users in the future. With that said, here we go…

THE CHANGES

The net effect of the decision is that Payers are no longer required to dispute medical legal invoices within 60 days of receipt of the same, which has been the historical interpretation. In fact, because actions listed in Labor Code Section 4622 are precluded for the Payer until the Provider meets their “initial burden of proof” under LC Sections 4620 and 4621, the Payers are not required to take any action on a medical legal invoice they have been served with until the provider does something more than just serve the invoice. The Provider is now required to “meet their initial burden of proof” that Labor Code Sections 4620 and 4621 have been fully complied with BEFORE the Payer has any responsibilities under Labor Code Section 4622 – whatsoever. [See Colamonico page 2, lines 11 through 16]

It’s unclear exactly what is now required by a Provider to start the deadlines and procedures written into Labor Code Section 4622, but it’s definitely NOT just an invoice. The WCJs in the system have been put on notice by the WCAB that Payers who failed to timely serve an Explanation of Review (EOR) or objection to any invoice have definitely NOT waived any rights, and are not subject to sanctions, or for paying the Provider’s attorney fees should they have failed to timely dispute an invoice. [Colamonico page 5, line 3] The Payer can simply ignore the invoice for years without much consequence – as the Payer did in the Colamonico case. In Colamonico parlance, the Provider must meet their “Initial Burden Of Proof” that they have a right to request payment for their services under all of the requirements of Labor Code Sections 4620 and 4621 before the Payer has to review the Invoice and either pay, partially pay, and/or serve an Explanation of Review (EOR) as defined in Labor Code Section 4622.

ITS MORE THAN JUST THE CONTESTED CLAIM ISSUE

Most systems users were aware that Providers would need to prove their services were performed during a “contested claim” as defined by LC 4620, but most were NOT assuming the Payer didn’t have to object with an EOR until this was proven with evidence, and I don’t know anybody that carried the assumption the Provider had to prove ALL the possible issues that could be disputed before a Payer was even responsible for timely serving an EOR. [See page 7, line 18 through 24]

Under the Colamonico interpretation, Labor Code Section 4621 requires the Provider to present some evidence that proves their services were reasonably priced, actually occurred, were not DUPLICATIVE of other similar services (in other words, were NECESSARY)…and then Labor Code Section 4620 requires the Provider to prove their services were requested by a case party (and not made up by the Provider themselves), and were requested during a time in the claim where it was in a “contested claim” status according to subsection (b).

SO, this CHANGE that all of these issues listed above must be SHOWN to the Payer by the Provider with some type of EVIDENCE before the Payer has any responsibilities under Labor Code Section 4622 is SIGNIFICANT. [See page 7, line 9-17]

PRE-COLAMONICO COLLECTION AND ENFORCEMENT TRACKS

Previously, case parties and many WCJs followed the doctrine of Otis v. City Of Los Angeles [now repealed under Colamonico starting on page 6, line 20], which held that Payers who failed to timely dispute an invoice in writing within 60 days of receipt of the same had WAIVED their right to dispute the invoice. In other words, the Payer was held accountable to Labor Code Section 4622(c) right from the service of the invoice.

The Otis case doctrine, which is what most Payers and Providers in the system have been operating under up to Colamonico, is that if the Payer had some dispute over paying all or a portion of the invoice they must serve a written objection/EOR timely (within 60 days) as required by Labor Code Section 4622. Failure to timely object with a fully compliant Explanation of Review (EOR) and proof of services meant that the Payer waived their rights to dispute that invoice, and was responsible for paying the invoice in FULL, plus penalties and interest – and often including sanctions and paying the Provider’s attorney fees. There could be no more argument by the Payer against paying the invoice. [It should be noted that most system users understood that the Provider may have to prove there was a contested claim when the services were rendered, but not essentially every other possible objection a Payer may bring up, which is what including LC 4621(a) causes.]

THE CRUX OF THE COLAMONICO CHANGES

Parties and most WCJs have long assumed the services the provider performed had to be done during a period where the underlying claim itself (case in Chief) was in a “contested claim” state, as described in Labor Code Section 4620. So, this part of Colamonico is not new to us. However, few in the industry were operating under the assumption that the Provider was required to somehow PROVE to the Payer the claim was in this “contested claim” state before the Payer had any responsibility for the Tracks, Deadlines and Procedures written in Labor Code Section 4622 [See page 5, starting on line 12]… and I dare say nobody was thinking the Provider had to PROVE to the Payer the services were Reasonable, Necessary, Actually Performed, and were requested by a Party… ALL BEFORE the Payer had any responsibility to object, serve an EOR, or pay the invoice. In fact, as I sit here and write this, I’m sort of appalled at this.

FUTURE EFFECT OF THE COLAMONICO CHANGES

What the WCAB has done with Colamonico is release the Payers of all responsibility to timely object to medical-legal invoices. In other words, there is simply no risk at all to delaying or refusing to pay an invoice. The Deadlines, Procedures, and Forms listed in Labor Code Section 4622 should not concern Payers under Colamonico until the Provider has served them with something a WCJ would consider evidence of the following:

• The services were actually requested by a case Party (L.C. Section 4620, “…(a) For purposes of this article, a medical-legal expense means any costs and expenses incurred by or on behalf of any party…”
• The claim was in a “contested claim” state at the time the services were performed (L.C. Section 4620, “(a)… for the purpose of proving or disproving a contested claim.”)
• The services themselves were NECESSARY and not duplicative (L.C. Section 4621(a), “…shall be reimbursed for his or her medical-legal expenses and reasonably, actually, and necessarily incurred,…”)
• The charges on the invoice are REASONABLE (L.C. Section 4621(a), “…shall be reimbursed for his or her medical-legal expenses and reasonably, actually, and necessarily incurred,…”)
• The services were ACTUALLY PERFORMED (L.C. Section 4621(a), “…shall be reimbursed for his or her medical-legal expenses and reasonably, actually, and necessarily incurred,…”)

The WCAB gave us no guidance on what evidence might satisfy all these requirements, and it’s not clear that if once whatever is required to meet the Provider’s “initial burden of proof” is actually SERVED if that fully invokes Labor Code Section 4622 for the Payer, or not. I’m thinking NOT, because all the Payer need do is raise some issue that was not part of the evidence package the Provider served them with, and the WCJ must consider it. The key is the Payer need only pin the dispute on being either unreasonable, unnecessary, or not performed, and the deadlines in LC 4622 didn’t apply.

NEW ACTIONS REQUIRED BY PROVIDERS

So, Providers under the Colamonico interpretation who do not receive timely payment in full on their invoice must take additional action and serve additional documentation/evidence on the Payer that indicates all of the above bullet items are adequately proven… then wait 60 more days under the now-invoked Labor Code Section 4622… then if no objection/EOR is received within 60 days from the Payer the Provider should file a Petition with the Appeals Board.

NEW ACTIONS REQUIRED BY WCJs

Under Colamonico, the very first thing the WCJ is required to do is demand evidence from the Provider that all of the above bullet items have been met. Contested claim?… Check. Evidence of reasonable pricing?… Check. Evidence the services were necessary (and not duplicative)?… Check. Evidence the services were actually performed?… Check. Evidence the services were requested by an actual party to the case?…Check. Okay, once all that has passed muster, with evidence to back it up, the parties can now proceed with their dispute. If the Provider fails to produce adequate evidence of any one of those items, they LOSE.

… and all the while, the Payer representative can sit back and smugly wait for the Provider to get hung up on one of the items with the WCJ.

This is because if the Provider has failed to “meet their initial burden of proof” they don’t even have a right to go before the WCJ in the first place, or use the System. The Provider has the BURDEN to PROVE they have a valid medical-legal expense. I have read panel case after panel case – post Colamonico – where the WCAB has sent the matter right back to the WCJs for this very purpose.

NEW ATTACHMENTS SHOULD BE PART OF ALL PETITIONS FILED BY PROVIDERS

Based on this, it should be assumed by all medical legal Providers that any Petition the Provider files with the Appeals Board should have attached to it said evidence that meets their “initial burden of proof”, and the Petition should describe how the attached evidence proves that all of the terms and requirements in both LC 4620 and 4621 have been met… AND how they served this evidence on the Payer already and gave them 60 days to pay or object under LC 4622… and finally that the the Payer FAILED to execute their responsibilities as provided in LC 4622. If all that is executed, the Provider should have authority under Cal Code of Regs. Section 10786 (previously 10451.1) to file a Petition and seek an order for payment for its services. If the Provider fails to execute all that, a WCJ could technically ignore the petition, or dismiss the matter as a take nothing for the Provider.

The Colamonico decision has vastly COMPLICATED the relatively straightforward procedures, forms, and deadlines described in Labor Code Section 4622 that has so efficiently forced both Provider and Payers to resolve 80%+ of copy service invoices without using the Appeals Board. Over the course of the next three years I expect the dispute rate to skyrocket again. Let me explain…

PAYERS MAY CONSIDER NOT SERVING EORs, OR SERVING THEM UNTIMELY ON PURPOSE

If I were a Payer today who routinely delays payment of copy service invoices on represented cases until the case in chief is resolved, I would simply stop serving Explanation of Reviews regarding medical-legal invoices, or deliberately serve them months or years after the invoice. Why?… because by not serving EORs at all I can skip that expense and waste of resources and simply force the Provider to make me appear before a WCJ where I will claim the Provider never met their initial burden of proof under Colamonico. No matter what the Provider served me with in their effort to meet their “initial burden of proof”, I will make up and argue new points when I get to the Appeals Board. Most of the time, the WCJ will NOT hold me accountable to any penalties and sanctions because Colamonico says I WASN’T REQUIRED TO OBJECT YET [See page 5, starting on line 12]. Maybe I SHOULD serve EORs timely, because it’s the professional thing to do [See page 8, line 1], but I am not actually responsible for objecting under the Colamonico interpretation UNTIL the Provider has fully met their “Initial Burden Of Proof”…. whatever that is.

A more sinister approach would be to deliberately wait months or years to serve EORs, when the Provider either isn’t paying attention, or is otherwise predisposed, or maybe assumes the Payer blew their deadline in LC 4622 – and then FAILS THEMSELVES TO RESPOND to the EOR as provided in LC 4622(c). Under Colamonico, if the Payer serves a valid EOR at ANY TIME and the Provider fails to respond within 90 days as described in LC 4622(c), the Provider’s invoice is no longer payable by operation of law. If I were a Payer, why WOULDN’T I manage medical legal invoices in such a manner? The only reason I wouldn’t is if the Provider actually served me with evidence that supported their initial burden of proof under Colamonico – but we don’t even know what that is.

PROVIDERS WILL STRUGGLE TO GET THEIR ATTORNEYS FEES PAID

Over the past several years, a cottage industry of law offices have appeared that work for copy services and other medical legal providers, to help them collect their receivables. Cal. Code of Regs. Section 10451.1 (now renumbered to 10786) made it seem like when a Payer failed to object timely, or use an Explanation of Review, or failed to use a proof of service, or failed to make a reasonable objection – if any of these things occurred then the Payer was responsible for the Provider’s attorney fees, as well as sanctions, and penalties and interest under Labor Code Section 4622. This was the holding in Otis v. City of Los Angeles and used for decades, until now. These law firms were routinely getting awarded $2500 or more ON TOP OF THE INVOICE AMOUNT, and life has been good. Both for the law offices and their Provider clients – AND, maybe unbeknown to the WCAB Commissioners, life has been good for the SYSTEM itself, too. Eighty percent of the copy service invoices being generated within the system have been self-resolving… getting PAID. You can bet THAT is about to change, post-Colamonico.

The WCAB in Colamonico stated that WCJs can still hold Payers in Contempt and award sanctions [See page 8, line 1]… but WHEN? Under what circumstances? How can it be Bad Faith for a Payer to delay payment and not serve an EOR when those responsibilities in Labor Code Section 4622 didn’t apply yet? The answer is I don’t think a WCJ will ever hold the Payers in Contempt in a post-Colamonico world, and that means the Providers WON’T get awarded their attorney fees. Since most invoices from a copy service Provider are well under $200, there is no economic sense in paying an attorney to collect that invoice unless the Payer is responsible for that attorney fee when the Provider prevails. So… what does this mean for the law offices that have been helping Providers collect their receivables? What does it mean for Providers that need attorneys to appear before the WCJ and enforce payment of their invoices? I don’t think Colamonico – as written – bodes well for those system users.

CONCLUSION

Ohhhh, how the pendulum SWINGS. For the last several years copy services and other medical legal providers have been leveraging Cal. Code of Regs. Section 10451.1 (now renumbered to 10786) to get their unpaid invoices settled, and in the process have been dinging Payers for sanctions and attorneys fees like crazy. In response, the Payers have gone from voluntarily paying only 45%-55% of invoices in 2012-2015, up to 80% and better in 2019. It simply made more sense for Payers to pay the invoices than risk the heavy sanctions and attorney fees, and to try to perfectly execute all the deadlines and forms and procedures written into Labor Code Section 4622.

The system WAS working. Copy service and other provider disputes had gone way down over the past several years. Providers were reporting to me that the percentage of voluntary payments had never been this good. BUT…. some Providers were filing a LOT of Petitions for Reconsideration when they didn’t get everything they wanted, so it seems the WCAB may have decided to “clip the wings” of the Providers a bit… Make it more difficult to enforce payment of their receivables within the system, and make it more expensive for them to even TRY (less easily prove Bad Faith by the Payer). In Colamonico, the WCAB has hollowed-out the deadlines, procedures and forms contained in Labor Code Section 4622 as it relates to Payers, and hollowed-out the sanctions and attorney fees provision in Cal. Code of Regs. Section 10451.1 (now renumbered to 10786) for Providers. I understand the WCAB’s problem with LC 4622(f) that they were trying to work out, but the end result of their decision negated the deadlines and workflow built into LC 4620-4622 that self-resolved most medical-legal receivables. The WCAB literally de-fanged these sections as they relate to Payers, and that WILL have consequences.

The pendulum has swung, and Providers need to change the way they serve invoices on Payers… because I can hear the rumble down the “tracks” when I put my ear down. The rumble of Defense attorneys and Bill Review companies advising their claims adjuster clients during free catered seminars to NOT pay copy services and other medical legal providers, and let Bill Review and defense law firms handle it. Because there is little to no RISK in that sort of behavior, anymore. We experienced exactly this in 2009-2015, but things improved when Providers started using Cal. Code of Regs. Section 10451.1 (now renumbered to 10786)… and I’m telling you, it’s swinging back the other way again.

Colmamonico is a big deal.