Two RICO suits involving workers’ compensation have been settled before trial. One in 2012 in Colorado involved Walmart and Concentra. The other now being settled involves York’s claims services for the City of Phoenix. 

RICO litigation may be the greatest threat today to exclusive remedy because when a plaintiff can litigate in federal court under RICO, what looks to workers’ comp professionals as tolerable of mediocre adjuster behavior can appear from another perspective as a joint conspiracy to deprive injured workers of their rights.  

The problem is particularly acute when adjusters are overly bearing on medical providers or pay too little regard to medical questions, and then make decisions adverse to the claimant. This can include what is referred to as “bleeding the claimant,” meaning dragging things out to wear down the worker.

The Racketeer Influenced and Corrupt Organizations Act, simply stated, enables not just prosecutors but private parties to sue defendants on the grounds that collusive behavior imposes wrongful harm even if individual acts taken by themselves might not rise to that level.

Here is a summary of the two cases and an initial assessment of measures claims payers and medical providers can take to minimize exposure.  

In March 2009, lawyers led by Koncilja and Associates sued Walmart and Concentra in federal court for harm done to injured employees of Walmart in Colorado, asking for class status and for coverage under RICO.

Citing examples of misconduct, the plaintiffs alleged that Walmart prohibited Concentra doctors from prescribing certain medical treatments and from referring patients for additional care, Their lawyers got hold of documents from either Walmart or Walmart’s captive claims administrator, CMI, which included preauthorization requirements that apparently violated Colorado state law.

CMI apparently also demanded that Concentra doctors assign modified duty, and required Concentra to use only Walmart pharmacies for drug prescriptions. The plaintiffs alleged that Walmart persisted in these practices after several administrative law judges told the company to knock it off.

The federal judge in Gianzero denied a motion to dismiss the RICO complaint as he concluded that the “structure, hierarchy and control” features of a RICO enterprise were present, that the parties actually participated in it, and that the allegations were specific enough to allege a pattern of racketeering.

In November 2012, the court approved a settlement in which Walmart and Concentra’s insurer, Lexington, agreed to pay $4 million to settle the case.

In July 2013, in Laurie Miller et al. v. York Risk Services Group, the firm of Doyle Raizner sued York in federal court alleging that the TPA, the City of Phoenix and various doctors had engaged in an enterprise to fraudulently deny workers’ comp benefits to eight city firefighters and one police officer. This “association in fact” violated RICO, according to the suit. The TPA Avizent was involved because it preceded York in some of the claims management.

The filing (the fourth amended complaint of which is available on the internet) provides no smoking gun. But Doyle Raizner likely was aware of attempts by city employees to orchestrate York’s response. The lawyers at one point allege that the city was driving the bus: “York and/or Avizent, though its adjustment of the claim, substantially assisted Phoenix in denying the claim without a reasonable basis.” York’s responses to the claims were later than required by law. Administrative law courts overruled York on every case. 

The city and selected doctors were, according to the plaintiffs, part of the collusive enterprise, but neither they nor the city were listed as defendants. They appear as supporting actors to make the case that York violated RICO.   

York and Doyle Raizner are reportedly in the process of settling ahead of trial.

A suit in Michigan, Jackson v. Sedgwick, which involved Coca Cola as the participating employer, was denied RICO status on ultimate appeal. Maddin, Hauser, Roth & Heller defended Sedgwick. The Jackson and other cases show that gaining RICO status is not easy. I do not want to get into plaintiff and defense strategies on gaining RICO status. I want to stay with the observation that if granted RICO status, plaintiff lawyers can have a field day before a jury of peers, for the following reasons:

• First, it is pretty easy to allege harm done to injured workers by the workers’ comp system. Annoyances such as phone calls not returned and delays in medical care are part of an often observed continuum, known by practitioners and researchers of mishaps associated with long-term wage loss, repossession of homes and household breakup. It may be hard to trace from annoyances to personal catastrophes elsewhere; for instance, to assign a pattern of an airline’s losing luggage to serious economic loss of the unfortunate passengers. Not so in workers’ comp.
• Second, workers’ comp claims management has been moving toward ever closer collaboration among parties, for instance with internet connectivity among claims payers, employers, managed care vendors and medical clinics. We applaud collaboration. But to skeptics it can look like collusion.
• Third, like it or not, workers’ comp claims practices reflect lower standards of service proficiency than people experience as consumers of auto insurance, travel and appliances. The discrepancy has widened due to at least one factor: the intense enrichment of online consumer experience. For instance, why in 2015 does the injured worker have to wait more than 15 minutes for electronic approval of the great majority of specialty referrals, when the actual time for most approvals probably is a week if not more? To the worrying claimant, this can be evidence of an attempt to deny benefits.

For advice to claims payers, I asked a claims consultant who has been an expert witness in over a dozen bad-faith suits involving workers’ comp.

Most fundamentally, the consultant said, is to get the initial investigation of the claims done on time, with sufficient documentation by the adjuster to show she did her investigation well, addressed the medical issues carefully, and adhered to the applicable workers’ comp statutes. Timelines set out in the law must be respected; if delay is unavoidable, the reasons must be documented and pay without prejudice used. 

A doctor gave me pretty much the same advice for physicians: make sure that your medical decisions arise out of your professional competences and standards of ethics. A doctor needs ethically to consider the health of the injured worker and safety at the worksite. It may be clear to her that the employer or insurer expects a certain kind of decision, such as denial of work-relatedness or the use of a butterfly bandage rather than stitching to avoid an OSHA recordable. The doctor needs to show her decisions arose from her professional judgment.

These RICO settlements are wake-up calls.