Good Business Sense: Part 1

Sunday, March 27, 2005 | 0

This is the first in a seris of six by Pamela W. Foust.

"A system that's easy to game destroys human character."
- Charles Munger

Part 1: A Claim Occurs

Once upon a time there was a machine operator who worked for a small fabrication shop. He was not an educated man, his skills were limited, and his English was less than perfect, but he went to work every day and did his job to the best of his ability. One day, while he was lifting a heavy metal pipe, he felt a stabbing pain in his low back. He continued working, hoping the pain would go away. When the pain was still there an hour later, he told his foreman that he lifted something heavy and now his back was hurting. The foreman suggested that he take a break and rest for a while. He took the foreman's advice, but the pain got even worse. He looked for the foreman, but didn't see him and by now it was time to clock out and go home. After dinner, the machine operator took two aspirins and a hot shower, and went to bed. When he awoke the next morning, the pain in his back had receded to a dull ache that was barely perceptible. He went to work and said nothing further about his back, nor did the foreman bring up the subject. Within a week, he had forgotten about the incident except on those occasions when he had to lift something heavy. Then, he'd remember that stabbing pain and wonder if the next time he might not be so lucky.

Six months later, the company's workers' compensation carrier notified the shop owner of a substantial premium increase. It couldn't have come at a worse time. Business had been slow and if the owner took any less of a draw, his family wouldn't be able to maintain its current standard of living. After some deliberation, he decided that his best course of action would be to lay some employees off and let the remaining workers take up the slack. The shop owner was not happy with this solution, but he was first and foremost a businessman. He couldn't allow himself to be swayed by other people's problems because he knew that a businessman who doesn't look out for his own interests is unlikely to survive. Five employees were selected for the layoff based primarily on their lack of skills to perform other tasks within their departments.

The machine operator was devastated when the foreman handed him his final paycheck and told him the company was letting him go. He had three teenaged children and a stack of bills to pay every month. Although his wife worked full-time as a cashier in a hardware store, there was never any money left over and it seemed as if they were going deeper into debt. From time to time he had looked around for a better paying job, but never found anything that would be worth making a change. Of course, he didn't believe for a minute that his layoff was necessary. There always seemed to be plenty of work and surely the boss could have figured out a way to keep him on the payroll after seven years of loyal service. He thought about how he never missed a day of work, not even when he hurt his back. Everyone told him he was a fool and that he could have sued them, but he didn't do it because he valued his job. On the other hand, if this was the way they were going to reward him for being a good employee, no more Mr. Nice Guy!

The machine operator found an ad for a workers' compensation attorney in the telephone book and made an appointment. He told the attorney the entire story, including his conversation with the foreman. "Are you still having problems with your back?" the attorney asked him. He thought for a minute and then said that he was. It wasn't really a lie. There were times that his back did ache at the end of a long day and after the incident with the pipe, he was nervous about lifting anything heavy. After all, he was 46 years old and no longer a young man. But that wasn't the real issue. It wasn't right for them to take his livelihood away after all those years. If there was any justice in this world, surely he was entitled to something more than a final paycheck and a goodbye. He asked the attorney if he could help him and waited for his response.

The attorney was a skilled practitioner who was well respected among his peers and a strong believer in the rights of the working man. However, first and foremost, he was a businessman. The answer to the machine operator's question had nothing to do with the law or the merits of the claim. The real question was whether the case would produce a fee that would justify the attorney's time and effort. The facts presented some problems, to be sure, but he had made good money on similar cases in the past and this one would probably be no different. The attorney told the machine operator that he would take his case. Then he turned him over to his paralegal to take care of the paperwork. After filling out some forms, the paralegal told him to report to a doctor's office on the following morning, and gave him a slip of paper with the name and address. She told him that this doctor would be his primary treating physician who would direct and coordinate his medical care throughout the course of his workers' compensation case.

At the primary treating physician's office, there were more questions and more forms to be filled out. Finally, the doctor examined him, took a few notes, and told him to speak to the nurse about the details of his treatment program. After leaving the examining room, the PTP went to his office and dictated into his computer's voice recognition program for a few minutes before seeing the next patient. This was of crucial importance because the real skill involved in these cases was not diagnosing the patient's medical condition and formulating an appropriate treatment plan. That part was easy because they were all more or less the same. The real trick was writing a report that the referring attorney could use to obtain a good settlement from the insurance company which would encourage the attorney to refer more patients.

The PTP was no hack. He had graduated from a prestigious medical school and had excellent credentials, but he owed his success to the fact that he was first and foremost a businessman. Otherwise, he reflected, he'd be working for peanuts in some HMO like so many of his less practical colleagues. It would not make good business sense to treat a patient who had no means of paying the bill. However, he had treated plenty of workers' compensation patients just like this one and had rarely gone unpaid. The insurance company would probably deny the claim, but the guy swore he reported the injury to the foreman and he seemed pretty straight. He might have to wait for his money but they'd pay in the end because they always did. Besides, the attorney was a good source of referrals and it would be foolish to jeopardize that relationship by refusing to take care of one of his clients.

The nurse explained to the machine operator that he was to report for physical therapy three times a week. She told him to apply for State Disability benefits and explained that disability paid much better than unemployment. Then she gave him the necessary forms, signed by the doctor. He was concerned about how much all this was going to cost because he was out of work. The nurse laughed and told him not to worry because the insurance company would have to pay for everything.

The PTP sent him out to another medical office for tests of both his neck and back after explaining that back injuries often affected the neck as well. The nurse asked him whether his fingers ever ached or got numb and when he recalled that this had happened on a few occasions when the weather was cold, he was sent out for more tests and was told he might have carpal tunnel syndrome. He had to travel 23 miles each way from his home to the PTP's office and sit in the waiting room until he was called. He wasn't used to all that driving and sitting and waiting and it seemed to him that sometimes his back didn't feel quite right even though he wasn't working. After a few months of this, he called the attorney's office and asked for a doctor that was closer to his home, but the paralegal told him that wasn't a good idea. There weren't that many doctors who were willing to wait for the insurance payment. Also, he needed a doctor who was experienced in workers' compensation cases and could write a report that would get him a good settlement in the end.

The shop owner opened the fat envelope from the law office, and was surprised to learn that the machine operator had filed a workers' compensation claim. He notified his insurance carrier and an investigator came out to the premises. The investigator told him that there were claims for two injuries to the back, neck and both arms. The first one allegedly occurred when the claimant lifted a heavy metal pipe approximately six months before he was laid off and the second one was attributed to the heavy lifting he had to do over the seven years of his employment. The shop owner told the investigator that this was a phony claim if he ever saw one because the guy came to work every day and did his job and never said a word about being injured. The investigator just wrote it all down and asked to speak to the foreman.

The foreman thought for minute and then said, yeah, he thought he did remember the machine operator saying something about lifting and his back about six months before the layoff, but it wasn't a big deal. He told him to take a break and he did. He came in the next day and worked and never mentioned it again. The investigator wrote everything down and had the shop owner and the foreman sign their statements. His report was sent to the claims adjuster who read the foreman's statement and asked her supervisor whether this meant they had to accept liability for the specific injury. The supervisor suggested they wait until they received their doctor's report and then decide what to do next.

The claims adjuster selected an orthopedic surgeon from the list of Qualified Medical Examiners who had been certified by the State as possessing the necessary expertise to write reports in workers' compensation cases. She made an appointment for the machine operator to be evaluated and sent him a letter notifying him of the appointment. On the day of the evaluation, he was initially interviewed by the doctor's assistant who asked him questions about his injuries and his medical history in general, writing down his answers on a form. Then the doctor spent about ten minutes examining him. It was difficult for the doctor to understand exactly what he was being asked to evaluate because the claimant's story was confusing and the claims adjuster didn't send him any medical reports or other explanatory documents. All he had was a copy of an appointment letter that referenced the dates of a specific injury and a cumulative trauma, together with a memo from the claims adjuster requesting an "AOE/COE evaluation" which meant that they hadn't accepted liability for the claim.

The defense QME could have picked up the phone and asked the claims adjuster for additional information, but it never occurred to him to do that. He was a competent orthopedic surgeon who had operated on many high profile patients in the past, but first and foremost, he was a businessman. He could only afford to allocate so much time to each case or he'd get backlogged. If he scheduled fewer exams, his income would suffer. Besides, he had learned from experience that the insurance company would pay him the scheduled amount no matter what kind of a report he sent them. Since it took much more time and effort to write a thorough, well-reasoned report than to fill in the blanks on a report that was mostly boilerplate, it simply didn't make good business sense to do more than the bare minimum. All he had to say in the report was that there was nothing wrong with the claimant and that he hadn't been injured, wasn't disabled, and didn't need any medical treatment. That would be enough to satisfy them. Based on the defense QME's report, the claims adjuster sent out denial letters on both claims.

Next in the series: Doctors and Lawyers

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