Articles & Updates

Further Obstacles Erected to Defending Against Disputed Medical Expense

by James B. Kennedy and Mary A. Lindsey

   On February 25, 2014 the Missouri Court of Appeals, Eastern District, issued an Opinion which will make avoiding liability for payment of disputed medical treatment costs that much more difficult. Although that case, Maness v. City of De Soto and Missouri Intergovernmental Risk Management Association, involved multiple issues, it is the Court’s ruling on the employer’s liability for past medical expenses that prompted this alert. But first, some background.

   In 2003 the Missouri Supreme Court decided Farmer-Cummings v. Personnel Pool of Platte County. In that case, the Supreme Court held the employer is not liable for medical expenses where the employee is no longer liable because the provider adjusted or wrote off medical fees and by doing so extinguished the employee’s remaining legal liability. The Court reasoned where these write-offs and adjustments were for the provider’s own purposes, they did not constitute “fees and charges” under Section 287.140. Furthermore, adjustments and write-offs do not involve, under the collateral source rule contained in Section 287.270, the “savings or insurance of the employee”, and thus, do not constitute “benefits derived from any other source than the employer or the employer’s insurer for liability under this chapter”. At trial, once the employee identifies the bills and testifies they are related to the injury, the employer has the burden of establishing any limitations on its liability, due to write-offs, adjustments or other legal limitations.

   In Maness, the employer disputed compensability, and denied liability for back surgery and approximately $102,000 in medical expenses related to that treatment. At trial, employer, in support of its claim for credits, submitted the sworn statement of an employee of the hospital where surgery was performed, in which she stated the employee had no further liability to the provider after the hospital reduced the amount of its charges to the amount for which the employee’s health insurer was responsible, and where the health insurer paid that amount in full. In addition, the employer’s Finance Director testified an employee’s liability under the employer’s health plan was limited, once the health insurer paid the amount for which it was responsible, to co-payments and deductibles. Despite this testimony, the Industrial Commission, after having found the case to be compensable, and after awarding temporary total and permanent partial disability benefits, also ordered the employer to reimburse the employee directly, in the full amount of the medical expenses incurred. Understandably, the employer appealed.

   On appeal, the Court of Appeals found the Affidavit of the Hospital employee was inadequate to meet the employer’s burden under Farmer-Cummings, since the Hospital’s records contained agreements the employee had signed, in which he agreed to be liable for the full amount of the provider’s charges. In her Affidavit, the Hospital’s representative did not state she had the authority to fix, change, or extinguish those agreements. Moreover, the Affiant did not state the reductions were made for the Hospital’s own purposes.

   The Court of Appeals also found the testimony of the employer’s Finance Director to be insufficient. That witness had no knowledge of the status and disposition of the employee’s medical bills.

   In addressing the propriety of ordering payment of the full amount of the medical expenses directly to the employee, the Court observed prior cases had held medical expenses could be ordered paid directly to the employee, even though that could be seen as a windfall, since the employee might be liable to an insurer for reimbursement, and the employee’s acceptance of benefits from some other source did not stop the employee from pursuing the employee’s workers’ compensation rights. Moreover, the Court observed a medical provider could have given notice of the provider’s intent to seek the direct payment of medical fees, pursuant to Section 287.140.13(6) [one of the medical fee dispute provisions]. If that had been done, the Administrative Law Judge would have the power to order direct payment to the provider, but no such notice had been given. (Although the Court mentioned the direct payment option involved treatment authorized in advance by the employer, the Court did not acknowledge that, since the claim was denied, no such authorization was given.)

   How then does the employer prepare to defend against disputed medical expenses at the time of trial? First of all, we know that, under Section 287.270, the employer (or insurer) is liable for collateral source payments. We also know the employer is liable, assuming the fees and charges are reasonable, necessary and related, for deductibles, co-pays and other out-of-pocket amounts. Now, though, the employer can also be held liable for adjustments and write-offs, unless the defense can prove the employee is no longer legally liable for those amounts because the medical charges were reduced “for the provider’s own purposes”. What constitutes an action taken for the provider’s own purposes? Although an accounting write-off would seem to satisfy that requirement, what about a contractual adjustment? How does the defense secure testimony from a provider, acknowledging the bill adjustments and write-offs, and stating the reductions were applied for the provider’s own purposes? Can a representative of the health insurer or plan testify concerning the limitations on the beneficiary’s legal liability or must some (or all) of that input come from the provider?

   It seems the evidence presented by the defense in Maness should have been sufficient to limit the employer’s liability, but that turned out not to be the case. Presenting even more detailed evidence on the issue of the employee’s remaining legal liability on disputed medical bills will be even more challenging. Please note that any reference to the “employer” above includes reference to the employer’s insurer.

Questions? Contact Mary Anne Lindsey at 314-552-4027, or James Kennedy at 314-552-4020,

Copyright Evans & Dixon, L. L. C., 2014