Interest on WC Medical Treatment and Medical-Legal Liens

Monday, May 3, 2010 | 0

By Jon C. Brissman
Brissman & Associates

Many practitioners have an incomplete understanding about interest due for medical services not timely paid.  This article intends to provide guidance as to the application of interest.

Public policy:  Interest payment is intended to force a party in possession of funds rightly belonging to another to relinquish the profit it made or should have made while in possession of those funds.  The interest provision is not punitive; it is intended solely to restore the parties to the position in which they would have been if the debt had been paid timely.

No-fault:  The imposition of interest does not require a showing of bad faith, nor does a demonstration of good-faith actions relieve defendant of liability.  For example, if a defendant reasonably relied on the recommendations of a bill review service and an additional amount is found to be owing, defendant owes interest on the balance.

No judicial discretion:  A workers’ compensation judge has no discretion on whether or not to award interest for services provided after 1990 that are found to be payable.  Once the provider has established when the bills became due, usually through proofs of service or objection letters that acknowledge receipt, the WCJ must impose interest on any amount found to be payable.

Statutory bases:  For medical treatment and related expenses (medical transportation, interpreters, etc.), Labor Code Section 4603.2 and Title 8 California Code of Regulations Section 9792.5, impose interest at the same rate as judgments in civil actions.  For medical-legal expenses, L.C. § 4622(a) sets the interest rate at 7% per year.

Rate of interest in civil actions:  The California Constitution Article XV, Section 1 says:   “In the absence of the setting of such rate by the Legislature, the rate of interest on any judgment rendered in any court of the State shall be 7 percent per annum.”  The Legislature subsequently enacted Code of Civil Procedure Section 685.010(a), which says: “Interest accrues at the rate of 10 percent per annum on the principal amount of a money judgment remaining unsatisfied.”  Government Code Sections 965.5 and 970.1 exclude governmental entities from enforcement of the 10% rate set under CCP § 685.010, and thus the rate for which they are liable defaults back to the 7% rate set in the constitution.  Non-governmental-entity defendants are liable at the 10% rate for treatment-related expenses. 

Simple interest:  Interest on charges for medical services is simple, not compound.  For example, liability for four-and-one-half years at 10% per year will add 45% to the amount payable.

Prerequisites for attachment of interest:  Interest becomes a factor when medical treatment was provided or authorized by the treating physician, and defendant is presented with “an itemized billing together with any required reports and any written authorization for services that may have been received by the physician” [§4603.2(b)(1)].   For medical-legal services, the provider must furnish to the employer, “all reports and documents required by the administrative director incident to the services” [§ 4622].  Of course, the underlying medical-legal report must be valid with respect to prior notice [Reg. § 10430], content [Reg. § 10606], disclosures [§ 4628, § 5703(a)(2)], signature, and must be requested by a party to address a contested claim or a disputed medical fact [§ 4620].

Self-imposition:  Defendants are expected to add interest to untimely-paid medical bills without an order from the WCAB.  One of the bases for filing a complaint with the Audit Unit http://www.dir.ca.gov/dwc/Auditref.pdf" http://www.dir.ca.gov/dwc/Auditref.pdf is defendant’s failure to self-impose interest when applicable.  See Regs. § 10111.1(a)(8), -(9), and -(10) for the schedule of administrative penalties assessed by the Audit Unit for failure to pay medical billing with interest.

Effect of objection:  Although a timely, valid, and content-adequate objection letter will stop the imposition of an increase [§ 4603.2] or penalty [§ 4622], it has no effect on liability for interest. 

Time period for interest accrual:  The controlling case on interest for medical treatment liens is Boehm & Assoc. v. WCAB (Moore), 1999, 64 Cal. Comp. Cases 1350.  Although Boehm considered a version of § 4603.2 that has since been amended, it is still good law because later amendments did not affect the substance of the interest provision.  It specifies that interest is payable from the date the bills became due until payment is made.  The Boehm case found that bills for medical treatment become due sixty days after the employer or insurer receives the bill.  A subsequent amendment to § 4603.2 sets the interest-free payment period to 45 working days, or 60 working days for governmental entities.  However, for medical-legal expenses (which Boehm did not consider), bills become due on the date the bill and report were received [§ 4622(a)]. 

California Insurance Guarantee Association and Uninsured Employers Benefit Trust Fund liability:  Insurance Code § 1063.1 specifies that the CIGA is not liable for interest that accrued while a claim was being administered by an insolvent carrier.  There is no authority, however, that excuses CIGA from interest liability for actions or omissions that occur post-liquidation while the claim was under CIGA’s administration.  L.C. § 3716.2 exempts the UEBFT from liability for interest on any awards, and the section appears to apply regardless of whether an interest-causing action or omission occurred on the employer’s or on UEBTF’s watch.

Post-Award or Post-Order Interest:  L.C. § 5800 provides that interest on any award of compensation “shall carry interest at the same rate as judgments in civil actions on all due and unpaid payments from the date of the making and filing of said award.”  Medical treatment and medical-legal expenses are compensation, per L.C. § 3207.  A Stipulation and Order to Pay Lien Claimant is an award and triggers the interest provision of § 5800.  If a defendant defers payment pursuant to an award or order while it pursues reconsideration or appeal, interest continues to accrue from the date of the original award until it is paid.

Dual accrual:  A Findings and Award or a Stipulation and Order to Pay Lien Claimant must include all interest up to the day of the award/order.  Notwithstanding the pre-award inclusion, interest continues to run from the date of the award/order until it is paid [Reg. § 9792.5(f)].  Often, parties specify in a lien settlement stipulation that interest is waived if payment is made in a specified time period, usually 25 days; absent such specification, interest accrues daily until payment is received.  Further, defendants are also subject to payment of post-award or post-order interest under L.C. § 5800.  Since interest under § 4603.2 or § 4622 and § 5800 remedy different harms, the two interest statutes run concurrently.  Accordingly, defendants can have post-award or post-order interest liability of 20% per year (or 14% for governmental entities).  As a practical matter, post-award or post-order interest is an insignificant amount if payment is timely made on the underlying liability.  But the dual-accrual amounts can become substantial if defendant fails to pay an award or order for months or years.

Interest contingent on fee schedule?   Some defendants argue that the language of § 4603.2 and Reg. § 9792.5 mandates that interest applies only to those services which were controlled by the Official Medical Fee Schedule under § 5307.1.  Those defendants argue that pre-2004 ambulatory surgery center facility fees, for instance, are not subject to interest because the amount of the charges was not specified in the OMFS.  The argument should fail because it ignores the public policy disfavoring retaining profit from moneys held that belong to another.  Further, the WCAB apparently disagrees with the argument, because its en banc decision in Maria Tapia v. Skill Master Staffing, 2008, 73 CCC 1338, upheld the WCJ’s imposition of interest on an award for pre-2004 facility fees (but note that interest was not the focus in the Tapia case).   No Court of Appeal has addressed the issue squarely. If a WCJ requires a statutory basis for equitably imposing interest on charges outside the OMFS, he or she may invoke § 5811(a).

Interpreters’ charges:  There is no statutory authority for interest on interpreter’s liens for services provided at WCAB hearings.  However, a prudent interpreter will obtain a WCJ’s signature at the hearing where services are provided on a stipulation and order to pay interpreting fees, and then will be entitled to interest under § 5800 if the order is not timely paid.  Defendant’s failure to timely pay for interpreting services at medical-legal events (§ 5811(b)) will trigger the medical-legal interest rate of 7%.  Since numerous panel decisions have found that interpreter’s charges at medical treatment visits are compensable under § 4600, any such charges that are paid untimely will carry interest under § 4603.2 at the civil judgment rate of 10% (with the governmental-entity, CIGA, and UEBTF exceptions noted above).

Median Charge Date:  When there are multiple charges over a long period of time, it is laborious and time consuming to calculate interest due on each charge.  An accounting shortcut is to calculate all the interest from the Median Charge Date, which is the date on which half the charges were prior and half subsequent.  The MCD may not be the chronological midpoint because charges are often frontloaded or backloaded.  The more charges there are and the longer the expanse of time over which the charges were incurred, the more accurate is the MCD method.

Interest calculation:  Several free Date Duration Calculators are accessible on the internet, such as  HYPERLINK "http://www.timeanddate.com/date/duration.html" http://www.timeanddate.com/date/duration.html.  Enter the start date (when the bill became due) and the end date (when payment will be received by the provider) to arrive at the number of days in the interest-accrual period.  To calculate interest, 1) ascertain the principal amount; 2) multiply by the applicable annual interest rate; 3) divide by 365 days; and 4) multiply by the number of days in the interest-accrual period.

Final note:  The payment of interest on untimely-paid medical charges is not optional.

Jon C. Brissman is owner of Brissman & Associates, a firm in Colton, Calif. that provides lien litigation for medical providers within the California workers' compensation system.