By John H. Geaney and Jon L. Gelman

Medical expenses in contested workers' compensation cases are now a significant and troublesome issue resulting in uncertainty, delay and potential future liability.

The recent N.J. Supreme Court decision, University of Mass. Memorial Hospital v. Christodoulou, 180 N.J. 334 (2004) has left the question of how to adjudicate medical benefits that were conditionally paid or paid in error. Presently there is no exclusively defined procedure to determine the allocation, apportionment of primary responsibility for unauthorized medical expenses and reimbursement.

The N.J. Workers' Compensation statute was enacted in 1911 with the noble mission of creating a social remedial system which would provide an efficient and certain system of benefits to injured workers.

In that same year Rambler, in Kenosha, Wis., introduced the Rambler 65 model motor car, which was a luxurious vehicle that accommodated seven people and sold for $3,050.

Like the initial workers' compensation acts enacted that year, the vehicle performed reliably. Both were state of the art and worked flawlessly. Over the years highways have changed, and like motor vehicles, there have been changes also in the compensation delivery system to meet the needs of the users or stakeholders.

Now the largest component part of the workers' compensation benefit delivery system is medical expenses that account for over 58% of the program's costs. Medical costs continue to grow exponentially. The Federal government has become deeply concerned about what it considers to be cost shifting of benefit dollars to the Medicare system in workers' compensation actions.

Since the administration of Franklin Roosevelt, Americans have relied upon Medicare to insure medical care in certain non-compensable claims. The Centers for Medicare and Medicaid Services (CMS) has, under authority of the Medicare Secondary Payer Act, established an elaborate national collection process to recoup conditional medical payments and to prevent future medical changes from being transferred to the federal system for payment where the employer may be primarily responsible. Group Healthcare Carriers (GHC) and medical providers themselves are now also seeking to recoup medical payments that they have allegedly paid erroneously or conditionally.

Since medical conditions are complex and modern medical treatment modalities and protocols are expensive, obtaining a judicial resolution of the causal relationship and the reasonableness and necessity of bills has become an acute issue.

While the N.J. Supreme Court has declared that a GHC and/or provider may intervene in a workers' compensation claim, the Court provided no direction as to whether the parties to a workers' compensation action may seek to implead the GHC or medical provider into the pending workers' compensation case.

The New Jersey Workers' Compensation Act provides for employer control of medical treatment from the inception of the claim. N.J.S.A. 34:15-15. The employer is obligated to provide all medical care which is reasonable and necessary, and such care, inclusive of pharmaceutical prescriptions, continues until the employee reaches maximal medical improvement.

The obligation of the employer is to cure and relieve the worker of the effects of the injury. For any number of reasons, an employee may end up seeking medical care which is not authorized by the employer.

If the employer denies the compensability of the claim, the employee will obviously seek his or her own treatment.

If a dispute arises between the parties as to the adequacy of care or the need for surgery, the claimant will sometimes seek unauthorized treatment.

In the case of an emergency, the injured worker may seek treatment without waiting for the employer to consent. In these situations and others, the "unauthorized" medical care will become an issue in the workers' compensation case.

The N.J. Supreme Court in Christodoulou, Id., discussed the responsibilities of the parties in a workers' compensation claim for medical benefits that remained unpaid; however, it left unanswered whether the Division of Workers' Compensation could exert exclusive jurisdiction over the issue of collateral medical payments and reimbursement of collateral source payments made on a conditional basis.

Mario Christodoulou was injured on June 28, 1996, while driving a car owned by his employer, Auto Action Land of Jersey City. The accident occurred in Massachusetts. Christodoulou spent two months in Massachusetts Memorial Hospital Center until his death. Medical services were rendered by the hospital in the amount of $712,683.

Christodoulou's father filed a dependency petition in the Division of Workers' Compensation asserting that he and his wife were dependent on their son. The hospital bill was listed as a medical provider on the dependency claim petition.

Through correspondence, the hospital's attorney was advised by petitioner's counsel that the medical providers' bills would be presented for payment. The petitioner's attorney assured the hospital that its bills would be presented to the court at the time of the hearing and also suggested that a representative of the hospital would likely have to appear at the hearing to prove the bills were reasonable and necessary. However, that did not occur.

On May 10, 1999, the workers' compensation case was settled for $50,000 by the petitioner and the respondent without participation of the medical provider under N.J.S.A. 34:15-20, the provision used for disputed lump sum settlements. Section 20 payments are not considered workers' compensation payments, except for insurance rating purposes.

The petitioner, Christodoulou's father, acknowledged on the record that he had no further rights against Auto Action except for indemnification by Auto Action in the event that the hospital should pursue him for the outstanding medical bill.

The order stated that the respondent, Auto Action, would hold harmless the petitioner from any medical bills arising out of the accident. The hospital then forwarded the bills after the settlement to AIG, the carrier for Auto Action. The attorney for AIG argued that it had agreed to hold only the father harmless, not his son's estate, and therefore the carrier declined to make payment on the bill.

In the extended litigation that ensued, the Appellate Division held that the hospital was required to file a timely petition in the Division of Workers' Compensation or otherwise intervene in the workers' compensation proceeding.

The Supreme Court reversed and held that the Workers' Compensation Act is not the exclusive remedy for the hospital or medical provider which has provided medical services arising from a work injury.

"Nothing in the Act suggests that a medical provider must file a petition in the Division of Workers' Compensation or intervene in a pending action in order to preserve its right to a contractual remedy against a patient whose treatment arose from a work-related injury." Id. at 346-347.

With regard to the finality of the Section 20 dismissal for $50,000, the court said, "The employer and the employee ... cannot extinguish the rights of those who do not participate, or do not have the opportunity to participate, in a settlement." Id. at 348.

The workers' compensation settlement in Christodoulou, which did not in any manner resolve the large hospital bill, led to a series of law suits against the parties and their attorneys.

The court declared that the health care provider has both a right to intervene in the workers' compensation proceeding or file a civil suit against the worker for payment. If the civil suit is filed during the pendency of the compensation proceeding, the court said that the civil matter should be transferred to the Division of Workers' Compensation.

The Division of Workers' Compensation provides a procedural mechanism, an "Application for Payment or Reimbursement of Medical Payment," which may be filed by a provider for medical recovery. The form reflects information on the medical diagnosis, dates of treatment, billing dates, the amount billed and the amount paid. Such applications are being filed more often in the division.

The issues the court will be required to entertain may include unauthorized treatment or even balances outstanding for medical services. Similarly, PIP carriers have a right to bring a claim in the Division of Workers' Compensation as subrogee of the injured worker in order to recover payments made for a work-related injury. (citation).

The decision in Christodoulou does not address whether the parties to a workers' compensation case have their own right to implead the health care carrier as part of the workers' compensation proceeding.

The Supreme Court left open whether an impleader of a GHC would grant to the Division of Workers' Compensation exclusive jurisdiction over the issue of collateral medical payments and reimbursement of collateral source payments made on a conditional basis.

While medical providers have a specific statutory right to intervene, the parties to a workers' compensation proceeding do not presently have a right to implead the medical provider which may assert reimbursement rights.

When an injured worker has received treatment which has not been authorized or paid for by the employer, the parties instead must deal with potential claims for reimbursement via letters and phone calls in order to provide finality to the settlement.

Practitioners have learned from Christodoulou that "hold harmless" language in a settlement presents serious risks for both sides.

Further, employers are cognizant of the danger of steering employees toward submission of medical bills to the company's private medical carrier when the medical condition arguably is a work-related one.

"When an employer undertakes to advise an injured employee to apply for certain disability or medical benefits that are authorized by the employer, the employer necessarily assumes a further obligation not to divert the employee from the remedies available under the Act." (citation).

Issues regarding medical reimbursement continue to delay the resolution of cases.

Much has been written about the inordinate delays in workers' compensation court caused by current procedures under the Medicare Secondary Payer Statute. This statute provides that the Centers for Medicare and Medicaid Services (CMS) may pursue damages against any entity that attempts to shift the burden of work-related medical costs to Medicare. The purpose of the statute is to ensure that Medicare is only secondarily responsible for payment of medical expenses for Medicare beneficiaries who were also covered by another type of insurance. 42 U.S.C. Section1395y(b).

When dealing with Section 20 dismissals in which medical benefits are closed out forever, the parties in New Jersey case often must wait a year or more for a response from the appropriate CMS vendor to inquiries about "conditional payments," or payments which Medicare may have made prior to the date of any proposed workers' compensation settlement.

Given the penalties which are set forth in the Medicare Secondary Payer Statute for failure of the parties to properly protect the interests of CMS, claimants, employers and their counsel have no choice but to wait patiently for a response from CMS.

The director of the Division of Workers' Compensation, the Honorable Peter J. Calderone, has provided helpful guidance to practitioners on resolving orders approving settlement under N.J.S.A. 34:15-22 while waiting for a response from CMS or its vendors. Section 20 dispositions, however, remain problematic because this vehicle for settlement extinguishes a claimant's right to medical care forever.

In essence, GHC and medical providers, which claim rights of reimbursement in workers' compensation, are asserting that they are secondary payers.

In the absence of any formal method to implead the health care carrier, the parties to a workers' compensation case often experience extensive delays in resolving claims while attempting to resolve outstanding medical bills and health care liens and explain why certain bills may not be "compensable" under the New Jersey Workers' Compensation Act. Health care policies typically exclude any loss for which benefits are provided under workers' compensation laws.

However, the mere fact that medical bills are paid by a health care provider following the date of a workers' compensation injury does not mean that the medical care is "compensable" under the New Jersey Workers' Compensation Act. (citation)

Compounding the problem is that several GHC have recapture provisions in the their contracts with health care providers, and the GHC will "recap" the payment from the providers through a book entry. This results in the medical provider seeking redress directly against the patient, injured worker, in a collateral law suit outside of the workers' compensation arena which is costly and burdensome.

Because issues of compensability require an interpretation of the various provisions of the New Jersey Workers' Compensation Act, judges of compensation are in the best position to decide them.

This principle militates in favor of having a mechanism in place to implead health care providers in certain situations in the workers' compensation proceeding, particularly those in which the health care provider is well aware of the workers' compensation proceeding and legitimate issues of compensability. There are legitimate concerns about a broad impleader requirement as noted in Christodoulou.

"A requirement that medical providers intervene or file a claim petition in every pending workers' compensation proceeding in order to protect their contractual right to payment will entail additional collection costs for medical providers that will likely result in higher costs for patient care, and may also have the unintended effect of discouraging medical providers from providing care for injured employees. Such a result would be inconsistent with the broad remedial objectives of the Workers' Compensation Act." Id.

The new benefit highway that embraces a new paradigm which extends to a new safety net and the existence of these collateral programs require a modification of the Workers' Compensation Act and/or Rules to safeguard the interests of the parties, while remaining consistent with the social remedial intent of the legislation.

These considerations should be the subject of further study by the Division in order to accommodate the rights of the parties to expeditiously resolve workers' compensation claims and avoid unnecessary litigation, delay and expense.

The basic premise should be consistent with the legislative intent to provide a summary and remedial system to provide benefits to injured workers in a prompt and fair fashion and finality for employers by adjudicating all aspects of medical expenses within the exclusive jurisdiction the Division of Workers' Compensation.

John H. Geaney is the author of "Geaney's New Jersey Workers' Compensation Manual for Practitioners, Adjusters, and Employers." Jon L. Gelman, who practices in Wayne, N.J., wrote Workers' Compensation Law 3rd Ed. (West-Thompson 2007), is co-contributing author of Modern Workers Compensation-National Treatise (West-Thompson 2001) and past vice-president of the national Workplace Injury Law & Advocacy Group -- American Association for Justice.

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