In addition to paying for medical expenses, death benefits, funeral costs and/or indemnity benefits for lost wages resulting from a compensable injury, workers’ compensation insurance carriers also expend considerable dollars for case management costs, medical bill audit fees, independent medical exam (IME) fees, expert fees, functional capacity evaluation charges, rehabilitation benefits, physician advisor fees, behavioral health or social worker support service fees, third-party vendor costs, nurse case management fees, workers’ compensation case attorneys’ fees, and the like. They pay significant attorney’s fees on permanency awards and incur other expenses in conjunction with the handling and adjusting of workers’ compensation claims. Which of these benefits are recoverable in workers’ compensation subrogation remains a point of considerable confusion and contention. An article discussing the issue can be found HERE, and an MWL chart which discusses the nuances of this issue across all 50 states can be viewed HERE. Subrogation professionals, lawyers, judges, and Administrative Judges are all equally confused on the law in this area, and very little clear guidance one way or the other can be found.
One by one, states are slowly beginning to weigh in on the recovery rights relative to recovery of these important medical expenses. The results have not always been positive for the subrogated carrier. In 2019, the issue was addressed for the first time in Tennessee by the Tennessee Court of Appeals in Memphis Light Gas & Water Division v. Watson, 2019 WL 589838 (Tenn. App. 2019). In Memphis Light Gas & Water Division v. Watson, the court held that an employer’s worker’s compensation subrogation lien, codified at T.C.A. § 50-6-112(c)(1), does not include recovery of $10,000 in nurse case management fees, even though such expenses are required by law and constitute a clear benefit to the employee. An article on this case can be found HERE.
On July 29, 2022, the Oklahoma Court of Appeals struck a blow in favor of the good guys in the ongoing struggle of a workers’ compensation carrier to seek reimbursement of nurse case management fees as part of its workers’ compensation subrogation lien—and in the process it has given us the recipe for arguing similarly in other states. In the as-of-yet unreported decision in Jones v. Cabler and Hobby Lobby Stores, Inc., Case No. 119,459 (Okla. App. July 29, 2022) (unreported decision), , the employee argued that the carrier was not entitled to be reimbursed for “nurse case manager” costs it had paid, because they were not a “benefit paid” to the employee and therefore not subject to subrogation. The employee’s argument was that 85A O.S. §113 indicates that case management costs are to be “borne by the employer or insurance carrier.” The court dismissed that argument by indicating that medical expenses and indemnity benefits were also “borne” by the carrier—until such time as there was a third-party recovery and the carrier was reimbursed. Although nurse case management fees are “initially” borne by the carrier, the statute does not say that the carrier is not entitled to reimbursement under Section 43. The employee also argued that such nurse case management fees were not “compensation” as defined in 85A O.S. §2(10). That section defines “compensation as “the money allowance payable to the employee or to his or her dependents and includes the medical services and supplies provided for in Section 50 of this title and funeral expenses.” Section 50 in turn provides:
…the employer shall promptly provide an injured employee with medical, surgical, hospital, optoetric, podiatric, chiropractice and nursing services, reasonably necessary in connection with the injury received by the employee.
The Court of Appeals disagreed and held that they had no evidence before them as to what services a medical case manager performed. The employee admitted that “a medical case manager facilitates communication between medical service providers and the adjuster” and “is chosen by the claims handler to make his job easier.” The court noted that 85A O.S. §2(4) defines a case manager as:
- “Case manager” means a person who is a registered nurse with a current, active unencumbered license from the Oklahoma Board of Nursing, or possesses one or more of the following certifications which indicate the individual has a minimum number of years of case management experience, has passed a national competency test and regularly obtains continuing education hours to maintain certification:
(a) Certified Disability Management Specialist (CDMS),
(b) Certified Case Manager (CCM),
(c) Certified Rehabilitation Registered Nurse (CRRN),
(d) Case Manager–Certified (CMC),
(e) Certified Occupational Health Nurse (COHN), or
(f) Certified Occupational Health Nurse Specialist (COHN-S).
Okla. Stat. Ann. tit. 85A, § 2
Because this definition requires very specific and strictly medical qualifications and implies that a medical case manager has a medical role in managing an injured employee’s treatment (rather than simply performing administrative functions to assist a claims manager, the court held it was reimbursable to the workers’ compensation carrier.
The issue of whether a workers’ compensation carrier can seek reimbursement in a third-party case for items such as nurse case management fees has been decided in only a handful of jurisdictions. Judges like things that fit neatly into neat legal categories and clearly established rules. Where such things are not available, the best argument usually wins. For that reason, the MWL chart referenced and linked above provides definitions, explanations, and arguments which can be used when the issue of which “benefits” can be subrogated has not been nearly established already. We must be the ones to establish it. The first place to look is the underlying workers’ compensation subrogation statute and its wording. While rarely determinative of the issue, it can frequently provide hand and footholds which can enable us to craft persuasive legal and public policy arguments as to why costs other than medical expenses and indemnity benefits should be reimbursable under a state’s workers’ compensation subrogation law. Take for example Texas’ statute which reads as follows:
…the net amount recovered by a claimant in a third-party action shall be used to reimburse the carrier for benefits, including medical benefits that have been paid for the compensable injury. V.T.C.A. Labor Code § 417.002.
The question becomes whether or not such things as case management costs and medical bill audit fees are considered benefits or medical benefits which have been paid “for the compensable injury.” Each state should be evaluated and argued differently because each state’s statute is different. Another interesting and cogent argument is an analogy to the right to a future credit. When a recovery by an employee is made, the carrier is given a credit toward future “benefit” payments. A close look at this law reveals that “medical-legal” costs should be costs against which a carrier can press a credit, implying that they constitute “compensation” under California law and should be recoverable by a workers’ compensation carrier. Adams v. W.C.A.B., 18 Cal.3d 226 (1976).
Arguments in each state in which there is no clearly established rule on this issue should be fashioned from the only tools available—statutory language and common sense. In North Carolina, for example, the workers’ compensation statute provides for reimbursement to the carrier of “all benefits by way of compensation or medical compensation expense paid or to be paid”. N.C.G.S.A. § 97-10.2. Further legal archaeology reveals the definition of compensation as follows:
“The term ‘compensation’ means the money allowance payable to an employee or to his dependents as provided for in this Article, and includes funeral benefits provided therein.” N.C.G.S.A. § 97-2.
North Carolina case law reveals no further clarification on exactly what “medical compensation expenses” refer to, but the door seems open wide enough to include some of the case management costs referenced above, yet not quite wide enough to include interest. Buckner v. City of Asheville, 438 S.E.2d 467 (N.C. App. 1994).
A few other states have decided the issue, and not always in the subrogation industry’s favor. For example, Illinois has totally ignored the cost savings to the claimant of such case management fees and expenditures. It has declared such items unrecoverable because such medical rehabilitative services provided by the claim coordinator at the insurance company’s direction were presumably provided for the benefit of the carrier and were not reimbursable necessary medical or rehabilitative services. Cole v. Byrd, 656 N.E.2d 1068 (Ill. 1995). The particular expense at issue was the medical rehabilitation coordinator services of a licensed professional nurse provided by Professional Rehabilitation Management (PRM).
The terms “nurse case management” and “utilization review” are often inappropriately conflated. “Nurse case management” is the coordination and organization of medical care in order to expedite the employee’s return to work. It is usually the responsibility of the nurse case manager. “Utilization review” on the other hand, is the review of actual medical services being provided to the employee to determine if it is medical necessity and appropriate for the injury. The utilization review is conducted by a nurse who has a utilization review physician available for medical opinions and guidance.
When attempting to recover for costs or expenses beyond the basic indemnity and medical benefit payments, a subrogation professional’s first strategy should be to look at the law of the particular state involved, determine exactly what the subrogation statute allows the carrier to recover, and craft an argument accordingly. For example, if it allows for recovery of “benefits” or “compensation” paid, then the definitions of those terms in other areas of the workers’ compensation law should be determined, and an argument fashioned that those definitions include case management type fees and expenses. If that proves to be a dead end, a logical argument should be made that by discouraging the spending of such amounts, the subrogation lien will actually increase, and the recovery of the injured worker will decrease. Such expenditures actually assist in holding down the cost of workers’ compensation insurance premiums, and every incentive to hold down liens and reduce fraud will make workers’ compensation systems more cost-effective and affordable for businesses. As a last resort, simply include these reasonable costs in the lien totals provided to plaintiffs’ lawyers, putting the burden on them to affirmatively challenge such expenses. A court may be asked to decide, and voilà; we have precedent, good or bad. Where the recovery of such costs is not proscribed, it is reasonable to expect reimbursement of expenses and costs which fall within the definition of the amount recoverable under the applicable workers’ compensation subrogation statute or which actually benefit the employee by keeping the benefits total to its absolute minimum. If the totals are not questioned, there is no foul. If they are, remember the words of Mark Twain, “Whatever you say, say it with conviction.”
If you should have any questions regarding this article or subrogation in general, please contact Lee Wickert at firstname.lastname@example.org.