Penalties for Failure to Contest or Pay Medical Bills Timely

Many insurers and third-party administrators utilize the services of third-party vendors to process payment or denial of medical bills. A recent Industrial Claim Appeals Office case awarding penalties against a self-insured employer for failure of the third-party vendor to process payment or denial of medical bills within the deadlines imposed by the Workers' Compensation Rules of Procedure serves as a chilling reminder that the duty to ensure payment of medical bills ultimately rests with the respondent, even when the respondent utilizes a third-party vendor to process the payment or denial.
Posted by: Clay Thornton, Esq.
Date: January 31, 2013

In Goss v. The Kroger Company, W.C. No. 4-855-895-02 (ICAO, January 14, 2013), the Industrial Claim Appeals Office affirmed the Administrative Law Judge's Order awarding penalties against respondent pursuant to the general penalty statute contained in C.R.S. 8-43-304(1) for respondent's violations of W.C.R.P. 16-11. Specifically, the ALJ found that respondent failed to timely pay various medical bills pursuant to Rule 16-11(A)(3), and that respondent failed to timely provide written notice of contest or explanation of benefits regarding those medical bills pursuant to Rule 16-11(A)(1) and (2), as well as Rule 16-11(B)(3).

On appeal, the ICAO rejected respondent's argument that the ALJ erred by penalizing them under the general penalty statute instead of the specific penalty provision found at C.R.S. 8-43-401(2) (which limits the penalty to 8% of the amount of medical benefits that are knowingly delayed for more than 30 days), citing the long line of appellate cases which have held that violation of a rule of procedure may be penalized under the general penalty statute.

More importantly, the ICAO also rejected respondent's argument that it was not required to send a written notice of contest of medical benefits because the adjuster initially approved the bills for payment when it submitted them to its third-party vendor for payment. However, the evidence showed that, despite the adjuster's approval of the bills for payment, the third-party vendor denied the bills because the medical providers had not submitted them within 120 days of the date of service as required by W.C.R.P. 16-7(F). ICAO determined that despite evidence that the adjuster submitted the bills for payment instead of denial, the third-party vendor's subsequent decision to deny payment triggered the respondent's duty to send a written notice of contest.

Moreover, the respondent argued that it should not be penalized for not timely paying these bills because they were, in fact, more than 120 days old. However, W.C.R.P. 16-7(F) requires providers to submit bills within 120 days of service only when there are no "extenuating circumstances" preventing such submission. In the underlying case, the Administrative Law Judge found that the bills originally were sent to the claimant's private health insurer because the respondent initially denied the claim, and tat the delay in accepting liability prevented the medical providers from submitting the bills timely. The ICAO affirmed the ALJ's conclusion that "extenuating circumstances" excused the providers' responsibility under W.C.R.P. 16-7(F).

Finally, respondent argued that the claimant failed to carry her burden to show that a written notice of contest or explanation of benefits was not submitted as required by Rule 16-11. However, once a claimant makes a prima facie showing that a bill was not paid within 30 days of receipt, the burden then shifts to the respondent to come forward with evidence that the bill has been paid or that it was contested properly under W.C.R.P. 16-11. By merely entering into evidence a bill that was not paid within 30 days of receipt, ICAO held that the claimant successfully shifted the burden to respondent to show that a written notice of contest or explanation of benefits was timely sent.

This case should serve as a reminder that respondents have an affirmative obligation to pay medical bills timely, or to deny the payment of those medical bills timely, and that the obligation does not end simply by passing the bills on to a third-party vendor. The third-party vendor's failure to comply with the rules of procedure will be imputed to the respondents and may result in penalties.

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