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Industry Insights

Geaney: Paying Twice

  • State: New Jersey

Imagine a conversation in a restaurant between a customer who orders a three-course meal and the waiter, who brings the customer a bill after the first course. 

John H. Geaney

John H. Geaney

“But I have not even finished dinner yet,” objects the customer. The waiter responds, “You misunderstand. This bill is just for the procedure. We had several cooks working on this meal.”

At the end of the meal, the waiter then brings a second bill to the table, announcing, “Now, this is the bill for your food.”

But isn’t that paying twice? One might say that this hypothetical sounds absurd. Yet, isn’t this what happens all the time in negotiations regarding awards for permanent partial disability benefits? The employer is presented with a large medical bill from the surgeon for a low-back fusion surgery early in the case, perhaps over $100,000. The carrier, third-party administrator or employer then pays the medical bill.

Two years later, when permanency settlement negotiations ensue, the petitioner’s counsel tells the judge, “My demand is 40% permanent partial disability because this was a two-level fusion.” That will mean a payment of about $145,000. The response should be, “So what? My client already paid that bill.”

Valuing a case for permanency based on the medical diagnosis or based on surgery having been performed is simply paying it twice. The two-level fusion argument is legally irrelevant. 

The Supreme Court of New Jersey said in Perez v. Pantasote (1984) that to obtain a permanent partial disability award, the employee must show proof of a lessening to a material degree of working ability. Alternatively, the court said, “Another criterion that may be considered in determining whether the injury is significant enough to merit compensation is whether the injury substantially interferes with other, nonwork-related aspects of the petitioner’s life.”

In other words, an award must be based on factual evidence offered by the petitioner that this accident produced significant changes in work or nonwork activities. Usually, people are back to work doing the same job at the time of settlement, so the focus shifts to the impact on nonwork aspects of life.

Our Supreme Court has spoken clearly, yet how many times have we heard this same argument: “This case is worth more because there was a surgery two years ago to the shoulder,” or “This surgery was open and not arthroscopic.” These arguments are red herrings. They do not address the legal test above. When it comes to awarding permanency, the focus should never be on the type of surgery that took place two years ago but rather on the present functional loss, if any, of the injured worker. 

Every case is different. Some spine surgeries produce tremendous recovery for patients; some do not. I know many people who have undergone fusion surgery that has eliminated their pain and restored their function to preinjury status. Such a person would not be entitled to a substantial award of permanency. Others find that surgery failed, and at the time of settlement, they have major life changes.  

So why is there so little attention paid to the words of our Supreme Court? One reason is that practitioners were wrongly taught to value cases based on the type of surgery, operated or unoperated, open or arthroscopic. Prior to the Perez decision, that’s how workers’ compensation worked. There were literally charts that practitioners used valuing cases based on diagnosis and surgery with operated surgeries being valued higher than unoperated surgeries, as if having surgery meant one would have more changes in one’s life. These myths continue today. 

Another reason for the tendency to compensate for diagnoses as opposed to functional changes is that many of the doctors who do permanency examinations do not understand what the law requires. Most of the IME reports we all read are just regurgitations of medical records that lawyers and adjusters already have read and have sent to the IME doctors. This happens on both sides of the fence. Many doctors do not ask anything about pre-accident level of function and post-accident level of function.  Some use meaningless canned phrases in every single report like “cold and damp weather aggravate discomfort.”

What should practitioners and judges be focusing on? In a word, the facts. Was the employee a weightlifter but now cannot lift weights? Did the employee have to quit his job because it was too physical, in favor of a lower-paying job? Can the employee no longer enjoy her avocation of swimming because of a shoulder injury? Is the employee doing her job without any limitations and taking more overtime than before? Was the employee doing well enough to add a second job? Does the injured worker with a knee and shoulder injury now regularly go hiking and bowl in a league? These are the kinds of legal and factual considerations that drive the value of cases up or down for permanency purposes, not whether there was or was surgery and not what the diagnosis was.

I suggest to every practitioner that one should read the permanency exams closely. Employers are required to pay only for proof of functional loss, which is proven not by operative records from 18 months ago but by current facts and sometimes current testimony. What the medical records add is context: If someone says he can no longer run but the injury is carpal tunnel syndrome, that assertion would make no sense. But if the injury were a foot fracture, that would make sense. 

Having a medical impairment may mean nothing at all, even if an MRI backs it up. I have a lateral meniscal tear in my knee. If it were from a work injury, I could present the MRI evidence of the tear, but I would not get a permanent partial disability award in New Jersey because I run at least four days a week. The tear has not caused any change whatsoever in my life other than occasional pain. 

Arguing that a case is worth 30% because the petitioner had a rotator cuff tear and that’s what rotator cuff tears are worth is a gross misunderstanding of New Jersey law. The equivalent would be a student demanding admission to Cornell University right after he took the SAT because he took an expensive SAT prep course and everyone in his class who took that course has always been accepted. The Cornell University admissions department will surely decline admission until it sees the results of the SAT.

IME physicians must ask relevant questions about the impact of the injury on one’s life. Nothing is more important than that in the examination. The obligation of the employee is to provide information about significant life changes caused by the accident. In some cases, the employer may contest the allegations. If an employee says he or she cannot run anymore because of the accident, the employer can offer evidence that the same employee recently ran several 5k races.      

Under the Perez case, objective evidence of an impairment is still required, such as a positive MRI, but that is not enough to get a permanency award. For an award of permanent partial disability, the focus must always be on proof of loss of function at work or home at the time of the settlement. Regardless of the type of surgery that took place and regardless of what the MRI showed, if the employee is functioning well at the time of settlement and there are minimal life changes, the award must be correspondingly low.  

There has never been any legal support for the argument that every fusion surgery is worth more than 30% or that every rotator cuff tear is worth 30%. These are myths that have cost New Jersey employers tens of millions of dollars over the years. We do not compensate medical records; we compensate real live people. 

Every person is different: Some have great results with minimal life changes after surgery, physical therapy and pain medicine treatment and should receive much lower awards than those who have major life changes from an accident that continue to affect them negatively at the time of settlement.

John H. Geaney is an attorney, shareholder and co-chair of Capehart Scatchard's Workers' Compensation Group in New Jersey. This post appears with permission from Geaney's New Jersey Workers' Comp Blog.

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