On Thursday, August 23, 2018, the Supreme Court of California published its long-awaited decision in King v. CompPartners. This case marks the latest – but certainly not the last – challenge to California’s utilization review (UR) system.
Previous challenges to the UR process raised questions regarding the Constitutionality of the UR/IMR process, the jurisdiction of the Workers’ Compensation Appeals Board (WCAB) to review UR denials, or the enforceability of UR determinations that fail to meet regulatory requirements; however, the plaintiffs in King pursued a more direct approach: sue the folks that performed the UR.
Traditionally, those involved with the UR process have assumed that Utilization Review Organizations (UROs) and clinical personnel performing UR are protected from civil lawsuits by the Workers’ Compensation Act. The theory behind that assumption was that any harm resulting from a UR determination was, ultimately, either (1) harm resulting from the injury itself [an industrial injury covered by the Workers’ Compensation Act] or (2) harm resulting from the payer’s approval or denial of payment for treatment [in other words, administration of the claim pursuant to the Worker’s Compensation Act].
Additionally, UR has had a very limited role in the worker’s compensation process – and with limited power comes limited responsibility. UR physicians can’t prescribe treatment or prevent prescription of treatment. UR physicians can’t examine the employee (though, until recently, the UR statute permitted the employer to request that the authorized provider perform an additional examination and report their findings to the UR physician). Likewise, UR physicians have no real say as to when (or whether) the payer authorizes treatment. While a payer would be hard-pressed to deny a request for authorization in the face of a UR finding that the reviewed treatment is medically necessary, it is the payer – not the UR physician – who authorizes payment. On the other hand, if the UR physician finds that the treatment is not medically necessary, the payer still has the option of authorizing the treatment anyway.
Finally, what little discretion the UR physician has is overseen by the IMR process (if the determination is valid), the WCAB (if the determination is deemed to be invalid), and the watchful eyes of the auditors at the Department of Industrial Relations, Division of Workers’ Compensation (DWC). The Workers’ Compensation Act and its supporting regulations control nearly every aspect of the UR process, including:
- which companies are allowed to perform utilization review;
- which reviewing physicians are competent to perform a review;
- which evidence can be evaluated by the reviewing physicians;
- the order in which that evidence can be evaluated;
- what is included in the determination;
- to whom the determination is communicated;
- how the determination is communicated; and finally,
- when the determination is communicated.
So, with no authority to prescribe treatment, no authority to authorize payment for treatment or to deny payment for treatment, and only limited authority to comment on treatment (subject to a multitude of restrictions) – all pursuant to a process governed by the Workers’ Compensation Act — it was widely assumed that UROs and reviewing physicians were well-protected from the threat of a civil lawsuit.
This case put that assumption to the test.
In October of 2014, Mr. and Mrs. King – an injured employee and his spouse – filed suit against a UR physician (Dr. Sharma), a URO (CompPartners), and two other defendants. The complaint alleged negligence, professional negligence (malpractice), intentional and negligent infliction of emotional distress, as well as loss of consortium.
At the heart of the complaint was the argument that the URO and its reviewing physicians owed a duty of care – essentially, a responsibility under the law — to Mr. and Mrs. King, and that the duty of care was something entirely separate from anything owed to them under the workers’ compensation system.
Specifically, Mr. and Mrs. King claimed that the URO and its reviewing physicians had a “duty to warn.” Mr. King had been prescribed Klonopin by his authorized treating physician, and, on two separate occasions, the payer had denied payment for Klonopin based on UR determinations. When Mr. King was no longer able to obtain Klonopin for his condition, he began to suffer seizures.
Neither UR determination contained a warning that seizures could result from sudden cessation of Klonopin use. Neither UR determination contained a weaning plan. The Kings argued that this failure to provide a warning or means of reducing the medication gradually was, at least in part, responsible for the injuries to Mr. King.
Essentially, the question boils down to: Is there any way that an injured worker (or his/her spouse) can sue a URO or UR physician for harms resulting from a workers’ compensation UR determination?
When the Kings initially attempted to sue in Superior Court, Dr. Sharma and CompPartners argued that the law requires that the type of harm described in the Kings’ complaint – harms resulting from a workers’ compensation UR determination – must be addressed through the workers’ compensation system rather than a civil lawsuit. The Superior Court agreed, dismissing the Kings’ complaint.
The Kings requested that the Court allow them to revise their complaint; however, the Court refused – essentially holding that there was no conceivable way under the law that the Kings’ would be able to sue the UR physician and URO for this type of harm.
When the Kings appealed, the Court of Appeals upheld the dismissal of their complaint… but ruled that they should be given a chance to revise it.
This was where UROs and reviewing physicians began to get concerned.
When confronted with the question of whether a URO or UR physician could be sued by a patient, the Court of Appeals wasn’t offering a clear “yes” or “no,” just an ominous “maybe.”
Maybe it was possible for a URO or reviewing physician to be sued for a review performed pursuant to the Workers’ Compensation Act. Maybe there could be a duty of care, and, under the right facts, maybe a URO or a reviewing physician could be found liable for damages.
The long-held assumption that UROs and reviewing physicians were protected by the Workers’ Compensation Act was suddenly in serious jeopardy.
To no surprise, the Court of Appeals decision was appealed to the Supreme Court of California.
The Supreme Court of California narrowed the case to two issues:
“First, are the injuries the Kings allege in this case the sort of injuries that are covered by the workers’ compensation exclusive remedy? And second, are the defendants [the URO and UR physician] in this case entitled to the protections of workers’ compensation exclusivity?”
To the relief of UROs and UR physicians around the state, the answers were “yes,” and “yes.”
- On the issue of whether the injuries described in the complaint are the type of injuries covered by the Workers’ Compensation Act, the Court noted that the Act covers not just workplace injuries, but also complaints that are “collateral to or derivative of” workplace injuries, such as complaints relating to the mishandling of workers’ compensation claims.Additionally, the Court noted that when the Workers’ Compensation Act provides a remedy for a type of harm, that remedy is “in lieu of any other liability whatsoever to any person” (quoting Cal. Lab. Code § 3600). Because the Kings alleged that the harms described in their complaint were caused by the UR process – a process provided by employers pursuant to the Workers’ Compensation Act – those harms had to be addressed through the workers’ compensation system.
- On the issue of whether UROs and UR reviewing physicians are protected by the Workers’ Compensation Act, the Court found that the clear intent of the Act was to allow issues pertaining to denial of benefits (including medical benefits) or delay of benefits through the workers’ compensation system.The Court also found that UROs and reviewing physicians – much like independent claims administrators – perform a function that is mandated by statute, subjected to heavy regulation and oversight, and that requires them to “stand in the shoes” of the employer – essentially fulfilling responsibilities that the law places on the employer.
What this means for independent UROs and UR reviewing physicians:
Simply put: an end to the ominous “maybe.”
While employers and insurance carriers would continue to benefit from the “exclusive remedy” protections of the workers’ compensation system regardless of the outcome of this case, the plaintiffs’ arguments in King directly targeted those individuals and companies involved in the UR process who are not employees of the carrier or employer.
If the Supreme Court had sided with the plaintiffs, UR physicians and independent UROs (as opposed to UROs that exist inside of a carrier or employer) would have stood to lose the most.
Had the Supreme Court agreed that the Kings should be permitted to revise their complaint, there would have been a multitude of questions yet to be answered. What, exactly, is the duty that a URO or reviewing physician owes to the patient? How do they fulfill that duty without overstepping the very limited role of UR? Are there exceptions?
Plaintiff’s attorneys would have had no qualms about creating case law to answer these questions. The more reviews that a URO or reviewing physician produced, the more likely they’d find themselves on the wrong end of a lawsuit.
Thankfully, these concerns are, for the moment, dispelled.
While the Supreme Court didn’t go so far as to say that UROs and UR physicians can never be sued in tort, it did set the bar pretty high. The Court noted that the “exclusive remedy” of workers’ compensation would not apply where the conduct of the URO or UR physician is “so extreme and outrageous” that they have “in effect stepped out of [their] role” as contemplated by the Workers’ Compensation Act.
Given the strict oversight of UROs by the DWC – and now by URAC – that’s a line that UROs are unlikely to cross.
What this means for payers:
Not much, but good news all the same.
Because King raised no question as to the liability of workers’ compensation payers, there was no direct risk for employers or carriers, regardless of the outcome of the Supreme Court’s decision.
On the other hand, there was some concern that there would be an indirect impact on payers – specifically in terms of cost and availability of UR.
A ruling for the plaintiffs would have increased the uncertainty surrounding the liability of those involved with the UR process, and, as a rule, uncertainty is expensive.
UROs and reviewing physicians might have had to contend with the specter of civil liability, and this could have led to some costly outcomes:
- Some UROs might have raised their prices to better offset the risk of civil liability.
- Smaller UROs (or medical management companies with smaller work comp UR programs) might have opted to discontinue their work comp UR business in California if it appeared that the risk of lawsuit outweighed the benefit of continued business in that state.
- Contracted reviewing physicians might have demanded renegotiation of their contracts to include higher rates or additional protections by the URO – either of which could have resulted in higher costs associated with each UR.
- Some reviewing physicians might have opted to quit performing California work comp UR altogether.
What lies ahead:
As always, payers will need to ensure that their URO is familiar with the law surrounding the UR process, and – more importantly — how the law is interpreted by the courts and WCAB.
While the King decision is great news for UROs and UR physicians, payers remain vulnerable to penalties and attorneys’ fees when they rely on a UR denial that fails to comply with the standards set by the WCAB.
Smart UROs will keep a close eye on WCAB opinions to ensure that they’re aware of new formal interpretations of the regulations as well as non-binding panel decisions that may indicate new trends in how the regulations are applied. Those UROs that pay close attention will be protecting not only the payers, but also themselves.
Additionally, we’ll likely see continued efforts to pursue UR reform. Notably, two California Supreme Court Justices authored separate opinions in King that explicitly called upon the Legislature to investigate the need for additional reforms to the UR process.
- Justice Liu highlighted that “the undisputed facts in this case suggest that the worker’s compensation system, and the UR process, in particular, may not be working as the Legislature intended,” and that while there are existing protections designed to keep UROs in line, “it is questionable whether those requirements are enough to prevent similar injuries from occurring in the future.”
- Justice Cuellar noted that Court’s decision “may have differed if the Legislature had failed to provide… safeguards, incentives, or remedies. Even now, those safeguards and remedies may not be set at optimal levels, and the Legislature may find it makes sense to change them.”
At the moment, the DWC is still working to implement the latest round of reforms to the UR process, which came into effect earlier this year. While it’s unlikely that the Legislature will consider adding substantial new reforms while the current reforms are still being implemented, critics of the UR system will certainly highlight the concerns of Justice Liu and Justice Cuellar as they push for tighter restrictions on payers, UROs, and UR physicians.
The King case will not be the last challenge to California UR process, nor will it be the last attempt at pursuing civil liability against a URO — though it’s hard to imagine what conduct would meet the “extreme and outrageous” threshold set by the Supreme Court. It’s likely that any extreme and outrageous conduct by a URO would result in a DWC audit or a URAC investigation long before a civil complaint was filed.
Even with the threat of civil liability extinguished (in all but the most extreme cases), the UR system will continue to face scrutiny from the Legislature and the DWC. Those UROs who stray outside the strict process set by the DWC may not find themselves paying damages to a patient, but they will find themselves paying fines – and potentially losing their right to perform UR – to the DWC.
If you’d like more information on this topic, let us know.
— David Price
Compliance Counsel, PRIUM
David Price is Compliance Counsel for PRIUM, a division of Genex Services. Mr. Price leads PRIUM’s Litigation Support program — working with payers and their defense counsel to maximize strategic benefit from cost-containment efforts in complex or highly-litigated claims. Mr. Price also serves as PRIUM’s Government Affairs Agent and acts as a direct liaison to state regulators across the country. Mr. Price regularly speaks on issues such as medical cost containment, formulary implementation, combined vendor/cross-vendor strategies, and litigation management in workers’ compensation claims.
The information in this article is not intended to serve as legal advice or to create an attorney-client relationship between the author and the reader. For legal advice concerning workers’ compensation claims in a particular state, please contact an appropriately-licensed attorney in that state.