Now in its second year, the U.S. News – Best Lawyers Best Law Firms program ranks U.S. law firms nationally in 75 major legal practice areas and by metropolitan areas or states in 119 major legal practice areas.  Rankings are based on client and lawyer evaluations, peer reviews from leading attorneys in their respective practice areas and information provided by law firms as part of the formal submission process.  Clients’ feedback addresses the practice groups’ expertise, responsiveness, understanding of a client’s business and needs, cost-effectiveness, civility, and whether a client would refer another client to the firm.

 “Wiedner & McAuliffe is honored to earn this top recognition for its Workers’ Compensation Law – Employers practice in Chicago,” said Wiedner & McAuliffe Managing Partner Paul Wiedner.  “This top-tier ranking represents the highest levels of success that we consistently strive to achieve for our clients.”

The Best Law Firms rankings are intended to serve as a referral guide for law firm clients.  National first-tier rankings are featured in the U.S. News & World Report’s November 2011 Money issue, while national and metropolitan first-tier rankings will appear in the Best Law Firms standalone publication.  All rankings also are posted online at http://bestlawfirms.usnews.com.

Hastings argued that it had properly complied with Section 4(b) of the Act in canceling the policy issued to Ultimate Backyard.  Hastings alleged that the case involved statutory interpretation: whether it complied with Section 4(b) of the Act when it sent a notice of cancellation to NCCI, the organization which receives and maintains certificates of insurance and notices of termination of coverage for the Commission.  Meanwhile, the case proceeded to trial at the Commission, prompting Vasquez and Ultimate Backyard to argue that the motion to stay filed in the Circuit Court was moot and should be dismissed. 

The Circuit Court granted the motion to dismiss, holding that the Commission had valid authority to decide the coverage issue.  The circuit court found that under the doctrine of primary jurisdiction, the factual questions which needed to be determined were being properly resolved at the Commission.  The circuit court held further that whether the policy of insurance was properly cancelled was a matter uniquely suited to the specialized and technical expertise of the Commission.  Hastings Mutual took an appeal.

On appeal, the court acknowledged that both circuit courts and the Commission have concurrent jurisdiction in coverage cases.  Hastings Mutual maintained that the courts have primary jurisdiction unless the legislature has divested the courts of jurisdiction or if the Commission has the specialized or technical expertise required to resolve the controversy.  Hastings argued that the legislature had not divested the circuit court of jurisdiction to interpret insurance contracts nor did such an interpretation require the expertise of an administrative agency. 

Hastings Mutual also argued that the notice of cancellation was logged in at the Commission and that the only question to be determined was whether this complied with the statute.  Vasquez and Ultimate Backyard argued that the issue before the circuit court was a question of fact, namely, whether the policy had been cancelled. This determination was well within the authority of the Commission.

The Appellate Court reversed and ordered a stay of proceedings before the Commission on the underlying compensation claim until the issue of whether there was proper notice of cancellation was decided by the Circuit Court.   It noted that the doctrine of primary jurisdiction provides that even when the courts have jurisdiction judicial proceedings should be stayed pending referral of a controversy to an administrative agency, but this is proper only where the agency has specialized or technical expertise or where there is a need for uniform administrative standards. Courts are well versed in interpreting insurance contracts and this type of question does not require any specified expertise possessed by the Commission.  Since interpreting Section 4(b) of the Act is a legal question best answered by the courts and one not requiring specialized expertise associated with an administrative agency, the Commission did not have primary jurisdiction over the claim. 

COMMENT

Hastings Mutualwas issued under Rule 23 and thus cannot be cited as precedent.  This is unfortunate because Hastings can resolve questions the WC community has regarding how, when and where coverage disputes should be resolved.  A close reading of Hastings reveals that if a claimant proceeds to a final decision at the Commission on a coverage question, unless that decision is appealed by the carrier a declaratory judgment action filed after the Commission award will fail.  The appellate court referred to Casualty Insurance Company v Kendall Enterprises, Inc., where the carrier sought declaratory judgment after the coverage question was decided by the Commission.  Kendall held that the Commission’s administrative findings of fact could not be contested under those circumstances and permitted the claimant to win the ‘race’ to the courthouse.

Hastings Mutualargues for the opposite approach which is that the courts should determine whether notice of cancellation has been properly made per the statute.  Hastings has a somewhat convoluted procedural history but the essence of it is that there was no finding by the Commission on the notice of cancellation issue.  The lesson of Hastings Mutual is that waiting for the outcome of a coverage dispute at the Commission will probably not serve the interests of the carrier.

As you may know, when a WCMSA proposal is submitted, CMS prioritizes its review in the order in which a proposal was received.  Generally, one month after the materials are submitted, the submitter will receive a letter acknowledging that CMS has received the proposal and indicating that most reviews can be completed within 60 days.  For quite some time, this timeline was more or less correct and we expected approval within 90 days of sending the appropriate materials to CMS.

Over the past year, CMS has become backlogged with WCMSA submissions.  It is now taking up to 6 months to receive review/approval of submitted proposals.  Coupled with the 30 days it takes to have the case prioritized, some WCMSA proposals are not reviewed for 7 months from the day that the materials are sent to CMS.  In cases in which weekly indemnity benefits are ongoing, this backlog has resulted in the loss of thousands of dollars for employers.  Furthermore, the backlog has resulted in settlements in which the claimant’s medical rights are left open pending the WCMSA review process, adding a great deal of time and medical expenses to the lives of countless files.

According to representatives from CMS, the current WCMSA review contractor’s contract allowed for staffing to review 1,400 cases a month.  On average, 2,400 WCMSAs are being submitted, which resulted in a backlog of 1,000 cases per month. 

In addition to the Workers’ Compensation Review Contractor’s (WCRC) staffing issues, the submission of WCMSAs in cases where the settlement does not meet the threshold for review by Medicare have contributed to the backlog.  In fact, representatives from CMS indicated that 30% of the backlogged cases do not meet the threshold criteria for review.  The representatives indicated that many insurance carriers and attorneys opt to submit WCMSAs in cases that do not meet the threshold. 

Some parties have taken the position that the letter automatically generated by CMS, indicating that Medicare will not review the WCMSA, affords them some degree of protection from future inquiry by CMS.  Medicare has made it quite clear that there is no safe harbor in cases that do not meet the threshold criteria for review, and that the aforementioned letter provides no protection. 

Regardless of the reasons for the WCMSA review backlog, it is clear that there is a dire need for change.  CMS representatives explained some of the measures taken to solve the backlog problem and avoid additional problems going forward. 

CMS noted that it had authorized WCRC employees to work overtime from September through December solely to address backlogged cases.  The new WCRC contract allows staffing for the submission of 2,000 – 2,500 WCMSA submissions per month.  The contract also mandates periodic contract reviews to determine the current number of submissions so that the WCRC is adequately staffed.  Furthermore, there are performance indicators in the new contract that should encourage the efficient review and approval of WCMSA proposals.

CMS representatives also noted that they met with the Medicare Advocacy Recovery Coalition, a legislative advocacy group, to discuss the backlog issues.  The meeting resulted in CMS issuing the May 14, 2011 memorandum, which reiterated that submitting WCMSA proposals to CMS is voluntary and not required by law.

As discussed later in this Newsletter, CMS is also hopeful that its new web-based submission portal will ease the burdens on the parties to litigation. 

The CMS backlog continues to frustrate the parties to litigation.  CMS finally appears to be coming forward with some proposed solutions.  At Wiedner & McAuliffe, we will continue to monitor trends and implement solutions in the WCMSA process to ensure that our proposals are reviewed in the most timely fashion. 
 

Additional Signs of a Trend toward Non-Submission

Previous Newsletters have highlighted the CMS May 11, 2011 memorandum.  In that memorandum, CMS reiterated that submission of MSA proposals for review – even those meeting CMS thresholds – is a voluntary process.  There is no federal law or regulation requiring submission.  At that time we noted that CMS’ issuance of the May 11, 2011 memorandum appeared to signal that the parties to settlement may be free to “self-police” themselves.  In other words, so long as the parties to litigation reasonably consider Medicare’s future interests in good faith, submission to the onerous CMS review process is not required.

Recently, the Maryland Workers’ Compensation Commission revised its regulations to confirm that settlements meeting CMS’ review thresholds may be approved by the State of Maryland even if the parties have chosen not to submit an MSA proposal for CMS review.  This can occur contingent upon the parties acknowledging in writing that the settlement meets the published CMS review thresholds, that they have voluntarily chosen not to submit the matter to CMS, and that they are aware of the risk that CMS may refuse to pay for future medical services.   COMAR 14.09.19.

We view this new regulation by the State of Maryland to be further evidence of a potential trend towards non-submission of MSA proposals for CMS review.  While a CMS-approved Medicare Set-Aside can be an effective tool in consideration of Medicare’s interests, it is not the only mechanism with which the parties to settlement can obtain compliance with federal law.  In many cases, rather than submit to the onerous submission process, the parties may achieve the same goal – adequate consideration of Medicare’s interests – through a reasonable, good faith non-submitted Medicare Set-Aside proposal. 

Sixth Circuit Upholds Medicare’s Statutory Right to Conditional Payment Reimbursement

The United States Court of Appeals for the Sixth Circuit recently issued its long-awaited opinion in Vernon Hadden vs. United States.  While many in the Medicare compliance industry had hoped the decision would apply the rules of equity and apportionment to conditional payment claims, the decision instead reinforces Medicare’s statutory right to reimbursement of conditional payments made prior to settlement. 

Vernon Hadden brought suit for negligence after being struck by a vehicle owned by Pennyrile Rural Electric.  The owner of the vehicle settled Mr. Hadden’s claim for $125,000.00.  Prior to settlement, Medicare had conditionally paid $62,338.07.  Following settlement, Medicare demanded reimbursement.

Hadden reimbursed Medicare under protest, and brought suit claiming that Medicare should have only been entitled to reimbursement of 10% of the claimed conditional payments.  Hadden’s theory was that the $125,000.00 paid by Pennyrile only represented 10% of his claim’s value.  This was the case, argued Hadden, as an unidentified motorist held 90% fault for the accident.  Hadden also argued that approximately $117,000.00 of the settlement was allocated to pain and suffering, i.e., not medical expenses, and therefore should not be available to reimburse Medicare.  The Administrative Law Judge, District Court, and Sixth Circuit Court of Appeals all disagreed with Mr. Hadden.

On appeal, Hadden raised a wide array of arguments, based on statutory interpretation, policy and equity.  The Sixth Circuit, however, felt no need to go beyond the plain language of the statute.  Under the applicable provisions of the Medicare Secondary Payer Act, the court noted that CMS is entitled to pursue full reimbursement of conditional payments from a primary plan, or from any entity that has received payment from a primary plan.  Based on the language of the statute, the court found Mr. Hadden’s claim that he had settled his negligence action for a 90% discount on total exposure to be without any legal effect.

There is speculation in the Medicare compliance industry that Hadden may seek relief in the United States Supreme Court.  Various legislative proposals are also under consideration to lessen the burden on the parties to litigation to reimburse conditional payments in full, regardless of disputes between the parties.  Conventional wisdom would dictate that if the parties to litigation resolve a case at a discount on exposure to reflect the disputes between the parties, Medicare too should discount its interest.  For now, however, the law is rather clear.  Medicare has a statutory right to reimbursement of all related conditional payments made prior to settlement.  It is recommended the parties investigate and resolve such claims for reimbursement prior to finalizing settlement. 

CMS Opens Web Submission Registration

As discussed in prior W&M newsletters, the Centers for Medicare and Medicaid Services (CMS) established a Workers’ Compensation Medicare Set-Aside Portal (WCMSAP) for electronic submission of Workers’ Compensation Medicare Set-Asides (WCMSA).  We are pleased to announce that the registration process has finally begun. 

CMS anticipates that the WCMSAP will significantly reduce the current timeframe for approval of submitted Workers’ Compensation Medicare Set-Asides by streamlining the submission process.  The WCMSAP will allow registered users to create a work-in-progress case, submit WCMSA cases, perform case lookups, append documentation to a case, and receive alerts regarding case activity.  The WCMSAP will further allow a user to track the status of a case and determine the current stage of review.  If an entity elects to continue using the non-electronic submission process, the above referenced activities must be completed via regular mail resulting in significant delay.

Due to the numerous benefits and significant time savings, the Wiedner & McAuliffe Medicare Department has already begun the registration process and will begin submitting Medicare Set-Asides through the WCMSAP as soon as the site becomes available.  We look forward to providing our clients with the most progressive and cost-effective Medicare related services available.

The employer’s human resources manager testified that the production bonus plan was part of an employee’s payment package and of the collective bargaining agreement.  The plan had a production component and a safety component.  If certain production levels were met, the bonus was paid; if no time was lost due to a work-related accident, a safety bonus was paid.  If there was a work accident or production levels were not met, no bonus for those components was paid.  Once benchmarks were hit, each employee received a bonus; if the benchmark was not met, no member of the team received a bonus.  The manager testified further that the bonus was not tied to stock price, was not seasonal, and was not given due to the generosity of management.  If an employee was sick or did not work he received no bonus.

A letter from the employer’s general manager stated that Common was eligible to receive a weekly production bonus based on two components – quality tons per 12-hour shift and safety performance.  The letter also addressed overtime, stating that this would occur on the days when an employee is scheduled to work additional time.  An employee could be excused from this overtime upon request and a valid reason.  Otherwise, most overtime was on a volunteer basis. 

The union president testified that overtime on the 12-hour days was mandatory but that an exchange of shifts was permitted with a supervisor’s approval.  If someone was scheduled to work and called off without the permission of the supervisor, that would be considered an ‘occurrence’ which could ultimately lead to discipline and discharge.  Common’s supervisor testified that 12-hour shifts were based on production and were normally done on Wednesdays but were actually based on the supply of iron received.  Shift switching and requests for time off were allowed if made 24 hours in advance.  If an employee was scheduled to work a 12-hour shift he was not permitted to refuse the extra four hours.  Unscheduled overtime on any given day was assigned on a voluntary basis based on seniority.

The Arbitrator and the Commission calculated weekly wages using both the bonus/incentive pay and overtime calculated at straight time.  The Commission did not include unscheduled or voluntary overtime wages in calculating the AWW.  The Commission found that the 12-hour shift was mandatory and that bonus/incentive was paid in ‘consideration for work.’

This decision was affirmed on appeal.  The Appellate Court cited Section 10 of the Act wherein the ‘average weekly wage’ is defined as:

“[t]he actual earnings of the employee in the employment in which he was working at the time of the injury during the period of 52 weeks ending with the last day of the employee’s last full pay period immediately preceding the date of his injury, illness or disablement excluding overtime, and bonus divided by 52. . .”(emphasis added)

With regard to overtime, the court cited Edward Hines Lumbar Company wherein ‘overtime’ was defined as:

 “[c]ompensation for hours beyond those the employee regularly works each week and extra hourly pay above the employee’s normal hourly wage.

In that case, the evidence established that claimant was required to work whatever hours the employer demanded; therefore, the average weekly wage was based on all hours the claimant was required to work.  The holding in Edward Hineswas reiterated in several subsequent cases, including Ogle vs. Industrial Commissionwhere the normal workweek consisted of 48 hours and overtime was mandatory, and in Edward Don Company vs. Industrial Commissionand Fressen, Inc. vs. Industrial Commission,where overtime hours were excluded from wages because there was no evidence the claimants were required to work overtime as a condition of employment or that consistent overtime hours were worked weekly.  Later, in the Airborne Expresscase, overtime was excluded because the claimant was not required to work overtime as a condition of employment.  Rather, the claimant in that case used his seniority and requested overtime.

In the case at hand, the evidence showed that Common worked scheduled overtime as well as unscheduled, voluntary overtime.  The Commission included only contract mandated and scheduled overtime in calculating wages.  The court found this consistent with prior case law because the scheduled overtime was a condition of employment. 

The court then addressed the production bonus issue.  Webster’s Dictionary defines ‘bonus’ as “something in addition to what is expected or strictly due,”which creates,

“a distinction between incentive-based pay which an employee receives in consideration for specific work performed as a matter of contractual right, and a bonus which an employee receives for no consideration or in consideration of overall performance at the sole discretion of the employer.”

Based on this distinction, the production bonuses paid pursuant to the collective bargaining agreement were not an extra benefit provided gratuitously by the employer.  The employer had no discretion in paying the bonuses – these were “strictly due” based on the volume and quality of steel produced and the number of days worked without accidents.  Only employees who worked on the dates scheduled received the production bonuses.  Consequently, the court held that the production bonuses were not bonuses “as contemplated by Section 10 of the Act,”but rather were received in consideration for work actually performed.  Therefore, the production bonuses were included in the weekly wage.

 Comment

The discussion of the overtime issue reflects current case law after the recent Tower Automotivecase.  This case was not cited but Towercatalogued previous case law and laid down the circumstances where overtime hours will be included in the AWW: 1) overtime is a condition of the employment; or 2) overtime is worked a consistent number of hours each week.  Here, the 12-hour shifts were a condition of Common’s employment.  This would place his workweek in the same category as the claimants in Edward Hines Lumberand Ogle, where overtime was included in weekly wages.

Regarding the incentive pay/production bonus issue, it is apparent that the word ‘bonus’ in the statute includes only those sums paid at the discretion of an employer – something in addition to what an employee expects, such as an envelope passed out by an employer at a Christmas party.  Here, both the collective bargaining agreement and the actual operating arrangements spelled out qualitative and quantitative criteria which, if met, triggered an obligation to pay certain sums.

Thus a ‘bonus’ is not always a bonus as defined by the statute.  It is obvious that the Commission and the courts will look at both functional and contractual arrangements and not mere nomenclature when determining whether pay other than hourly wages should be included in weekly wages.

Otto Baum’s associate risk manager testified he contacted Hilton on September 2, 2008, to offer light duty work but was told that “he was blacking out because***his anti-depressants were mixing with whatever painkillers he was prescribed and he did not want to drive over.”  The risk manager also testified that Hilton declined another offer of light duty work on September 9th because it “hurt [him] to drive [his car]” the distance required for the commute. During this time, the work restriction remained in effect.

On October 23, 2008, Hilton’s physician took him off work completely for one week; on October 28th, he was released to modified duty.  Hilton testified further that on November 11th he was cleared for sedentary work and requested such work from Otto Baum, but it was not offered.  The risk manager testified that Hilton contacted him in late November or early December 2008 to request work and was told he should refer requests through his attorney.  Apparently, Otto Baum no longer would offer restricted work because Hilton had declined previous offers.  Also, union rules precluded him from seeking work elsewhere.

Following a December 8, 2008 exam and FCE, Otto Baum’s Section 12 examiner found Hilton a candidate for 4 to 6 weeks of work hardening during which time he could work modified duty and resume full duty thereafter.  Hilton agreed to attend work hardening but it was not authorized until some four weeks later on January 7, 2009.  Hilton did not receive this care.  Instead, Hilton continued seeking care with his treating doctor, who imposed work restrictions that remained in effect through the time of arbitration.

The Arbitrator awarded Hilton TTD benefits for the period from August 7 through August 25, 2008, and from October 23 through October 29, 2008.  On review before the Commission, the TTD award was extended to include an additional period from December 10, 2008 through February 18, 2009 – the date work hardening would have concluded.  The Commission found that Hilton had refused offers for light duty work on September 2nd and September 9th, and that Otto Baum had denied his request for light duty work in December 2008 due to his alleged refusal to work in the past. 

On judicial review, the Circuit Court confirmed the Commission decision and Otto Baum appealed, claiming the Commission erred in awarding Hilton benefits from December 2008 to February 2009.  Otto Baum argued that the Commission decision was “clearly erroneous” because Hilton refused prior offers of employment within his restrictions.  The Court acknowledged that the “clearly erroneous” standard may apply to an administrative agency’s decision where there is a mixed question of law and fact involved.  But the court declined to apply this standard of review, opting for the “manifest weight” standard when reviewing factual findings of the Commission.  Citing the case of Interstate Scaffolding, the court stated that,

“the period during which a claimant is temporarily totally disabled is a question of fact to be resolved at the Commission, whose determination will not be disturbed unless it is against the manifest weight of the evidence.” 

The Court acknowledged that TTD benefits may be suspended or terminated if an employee refuses to accept work within the physical restrictions prescribed by his doctor, and agreed with Otto Baum that a an improper refusal of modified work may justify the termination of benefits.  However, the Commission had considered the evidence relating to Hilton’s refusal to work in September 2008 and ordered TTD for only the period preceding and following that refusal.  The Commission was also presented with evidence that Hilton eventually submitted himself for work in December 2008 and that Otto Baum refused to accommodate him at that time or even though its Section 12 examiner imposed work restrictions.  Given that evidence, the Court could not say that it was “clearly apparent” that Hilton was not entitled to benefits from December 10, 2008 to February 18, 2009 – the time of prescribed work hardening.  The Court did not consider it an abuse of the Commission’s discretion to suspend rather than terminate benefits due to his failure to accept work in September 2008.  Therefore, the award for TTD was affirmed.

Comment:

This decision is consistent with the holding in Interstate Scaffolding where a claimant terminated for cause was awarded TTD because he had been working with a restriction at the time of termination.  Here, petitioner was restricted throughout the period in question.  When he refused the offer in September, the Commission suspended benefits, reinstating TTD only when his doctor placed him totally off work.  Evidently, the refusal of light duty in September carried over and after this short period.  However, the court felt it unreasonable for the employer to refuse to offer restricted work thereafter merely because the claimant had declined previous offers.  Had the claimant not made the call in November and December, it is doubtful the Commission would have supported his claim for compensation after October 2008.

In summary, the decision shows that in concert with the holding in Interstate Scaffolding, TTD benefits may be suspended for the wrongful refusal of modified work.  Best practices suggest the offer of modified duty be reduced to writing and specify the date and time, and when necessary, where to report for work.

The calls of former arbitrators will be handled as follows:

In addition, Arbitrators Jutila and Neal are out on medical leave. Arbitrator Jutila's call will be handled by Arbitrator Williams during Arbitrator Williams' trial dates. Various arbitrators will cover for Arbitrator Neal.

Starting in January 2012, arbitrators have been assigned to the new Downstate arbitration regions as follows:

One arbitrator will appear at each hearing site each month. Arbitrators will rotate in the sequence shown, e.g., Arbitrator Simpson will appear in Collinsville in January, Mt. Vernon in February, and Herrin in March. Put another way, by site, in Collinsville, Arbitrator Simpson will appear in January, Arbitrator Luskin in February, and Arbitrator Granada in March. See the 2012 downstate arbitration calendars for more detail.

Procedurally, all cases, including those with emergency petitions, will be randomly assigned among each region's arbitrators. A party with a 19(b) or 8(a) case will need to appear before the assigned arbitrator.

To accommodate the three-arbitrator regions, effective 1/1/12, we will return to 90-day continuance cycles. We are in the process of reassigning cases to the regions, and will send corrected notices. Any partially tried cases will stay with the original arbitrator.  

Please send settlement contracts to the assigned or covering arbitrator. Settlement contracts may be presented to any arbitrator at the assigned venue, or may be mailed only to the assigned arbitrator.

During these transition months, please do not bifurcate trials if at all possible. That only adds to the complexity of tracking and reassigning cases.

All tried-but-undecided cases and partially tried cases will be redistributed soon among arbitrators. If proposed decisions are due and a case is unassigned, email the proposed decision to Bertha Parker. The Commission will prepare and pay for a transcript. If parties want a new trial, they can present a motion immediately to the newly assigned arbitrator, who will determine if sufficient cause exists to grant a new trial. 

Section 8.2(a) of the Illinois Workers' Compensation Act provides that, each year, fee schedule rates shall increase or decrease by the percentage change in the Consumer Price Index-U (CPI-U) in the previous year.

The 2012 rates will be posted as soon as the vendor, Optuminsight, calculates them and obtains information about new and deleted codes. The rates are usually posted at the end of the year. We will give notice on this news web page and through our ListServe when the rates are available.

Independent Contractual Arbitrators Hired

Four individuals have been hired as independent contractual arbitrators: H. Case Ellis, Daniel Leahy, Alan Rosen, and Edward J. Schoenbaum.

Pursuant to House Bill 1698/Public Act 97-18, the claims of all current and former IWCC employees and appointees shall be heard by an outside independent arbitrator who does not practice before the IWCC. This is an occasional position, to be paid by the hour. The contractual arbitrators will attend the Commission's judicial training programs with the other arbitrators.

New Downstate Arbitration Regions Announced

As directed by House Bill 1698/Public Act 97-18, new downstate arbitration regions will take effect on January 1, 2012.

Three arbitrators will appear at each hearing site, and all cases, including those with emergency petitions, will be randomly assigned among a region's arbitrators. A party with a 19(b) or 8(a) case may need to travel to another hearing site to appear immediately before the assigned arbitrator. A party may file a 19(b) or 8(a) motion for hearing before the assigned arbitrator at another location for any trial date.

To accommodate the three-arbitrator regions, we will return to 90-day continuance cycles. We are in the process of reassigning cases to the regions, and will send corrected notices. Any partially tried cases will stay with the original arbitrator.  A new accident location table will be posted soon.

WC Advisory Insurance Rates Decrease 8.8%;
Lower Fee Schedule Rates Posted

In response to the recent enactment of House Bill 1698/Public Act 97-18, NCCI filed for an 8.8% decrease in voluntary advisory insurance rates. The Illinois Department of Insurance announced the change took effect September 1, 2011. Insurers may charge more or less than the advisory insurance rates, but the filings influence the market.

The decrease is due to the 30% reduction in fee schedule amounts that took effect 9/1/11.

DOI Now Accepting PPP Applications

The Department of Insurance is now accepting Preferred Provider Program (PPP) applications. The DOI will list approved PPPs on the page, "Approved Workers' Compensation Preferred Provider Program Administrator List." If you have questions, contact Kari Dennison(217/782-1771) at the Department of Insurance.

After an employee notifies the employer of an injury, an employer that has a PPP must notify the employee with the IWCC – approved PPP notification form, copy of which is attached.

If employers wish to notify all employees of the PPP, the Commission also provides a general notification form (this pro-active notification is not statutorily required).  A copy of this form is also attached.

Current Panels and Commissioners:

There are no statutory or regulatory provisions requiring that a WCMSA proposal be submitted to CMS for review…

So the question remains as to what to do in cases that meet current work-level review thresholds.  We all know that Medicare has mandated that the future medical interests of Medicare be "reasonably" considered and protected in workers' compensation settlements that close out medical rights.  Plainly put, however, CMS does not mandate a specific mechanism to protect the future interests of Medicare.  CMS has declined guidance on how parties might unconditionally be assured that Medicare's interests have been completely protected.

CMS approval of a WCMSA is not required but it is important that any medical allocation be engineered with careful consideration of CMS policy and procedure.

It has often been regarded that a benefit to obtaining CMS approval is that an amount of money determined by CMS is adequate at the time of settlement.  There is no statutory or regulatory authority for this proposition. 

The enforcement issue that CMS and Medicare have to deal with is what constitutes "reasonable" protection and consideration of the future interests of Medicare.  Recall, first, that in cases that do not meet a current work-level review threshold, CMS has instructed parties that CMS will not review a set‑aside proposal.  The future interests of Medicare must still be reasonably considered and protected in those cases, but Medicare has not developed its own practice protocols for non‑threshold cases.  A majority of cases meeting review thresholds, and a majority of cases that do not meet work-level review thresholds, do not involve clear future medical liability or, the care which might be contemplated in those cases is remote in time.  When a case meets a work-level review threshold, direct and purposeful measures to protect Medicare's future interests are necessary.  While CMS recognizes a CMS - approved set‑aside is the recommended compliance mechanism for ensuring that Medicare's future interests are considered, CMS has also clearly told us that submission of the set‑aside is a voluntary process.

When CMS declines to review a set-aside, a recent District Court case from Arkansas may be instructive.  In Smith v. Marine Terminals (August 2011), claimant Smith received $265,000.00 in workers' compensation benefits paid under the LHWCA.  He also maintained a Jones Act claim sounding in negligence.  While the LHWCA case was dismissed, the paid workers' compensation benefits remained, and when a settlement of the Jones Act case was reached, it was learned that Smith was a Medicare beneficiary.  The various parties agreed that workers' compensation would waive its lien, that a future Medicare allocation was to be estimated and sent to CMS for approval, and that Smith would receive $1 million; among other terms.

A Medicare set-aside estimate of some $14,647.00 was sent to CMS.  CMS ultimately decided to not review the estimate, ostensibly citing work level review thresholds.  This, even though the settlement terms quite plainly exceeded known CMS work level review thresholds.

To effectuate the settlement worked out by the parties, and on a Motion to Determine Medicare Set-Aside, the District Court made the following findings, among others:

1.         The parties reasonably considered the interests of Medicare in the overall settlement.

2.         The $14,467.00 set-aside estimate is approved by this court as fairly and reasonably taking in to account the interests of Medicare (emphasis supplied).

Other findings by the Court set out the status and relationships of the parties, addressed conditional payments, and recognized Medicare.

Would the “finding” about the adequacy of the set-aside be binding on Medicare? Various CMS Policy memos suggest the answer is a “no.”  However, the issue is the reasonableness of the measures taken to consider Medicare’s interests.  The estimate in Smith was professionally prepared.  The future interests of Medicare were properly considered in the context of the voluminous CMS Policy memos.

Management of the relative “risk” of Medicare is straightforward.  There is no requirement that CMS approve a set-aside in a workers’ compensation case.  There is no statutory basis for a “guarantee” associated with CMS approval of a set-aside.  Thorough knowledge of CMS policy, expertise with workers’ compensation law, and experienced counseling helps determine what is reasonable in a given case. 

Medicare's future interests are not necessarily implicated in every case (whether the case meets a work-level review threshold or otherwise).  Taking Medicare-related measures in every non‑threshold case is unnecessary and unrealistic.  Similarly, awaiting CMS approval of the set‑aside of certain cases that actually do meet review thresholds may well be unnecessary.  What is important is that cases with anticipated future medical requirements, whether meeting a work-level review threshold, or otherwise, be identified well before definitive settlement discussions begin.  Protocol should also be initiated to single out those cases with finite and completed medical care.  Definitive steps can be taken to sufficiently protect the future interests of Medicare without the necessity of a lengthy CMS approval process.

MSPRC GOES AUTOMATED AND OTHER CMS CHANGES

“MSPRC” is the Medicare Secondary Payer Recovery Contractor.  MSPRC handles conditional payments, among other responsibilities.  MSPRC is, first, combining and merging with the CMS COBC (Coordination of Benefits Contractor).  CMS is soliciting bids for one centralized contract for recovery and coordination efforts.  This is, in part, in response to the Congressional attention paid to the conditional payment process; as discussed in previous newsletters.

Next, the new “self-service” automation at MSPRC will assist us in ascertaining conditional payment/lien status, and will expedite the resolution process.

ONLINE MSA SUBMISSION

Wiedner & McAuliffe has participated in the CMS training program for online MSA submission.  Per CMS, the online MSA submission portal should be available shortly.\

NEW CMS MEMO:  LIABILITY MSAs

In a September 29, 2011 Policy Memorandum from CMS dealing with Liability Insurance situations, it was announced:

 …Where the beneficiary’s treating physician certifies in writing that treatment for the liability insurance – related injury has been completed as of the date of settlement and no further care will be required, Medicare will consider its future medical interests satisfied …

This is discussed in our recent Alert.  While the essential position of CMS is similar in workers’ compensation situations, it is important to note that in liability cases, CMS now says there is no need for the beneficiary to submit the certification to CMS, and no need to submit a proposed Liability set-aside for review by CMS. 

FOCUS ON SERVICE

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While exiting the post office, he received a radio assignment to assist his partner, who had arrested an intoxicated driver in the claimant’s assigned patrol zone.  Johnson acknowledged the assignment and proceeded to the designated location, traveling in excess of the posted speed limit from the time he received the assignment.  He did not notify the dispatcher he was outside his assigned patrol area, but did speak with his partner who inquired into his estimated time of arrival.  Johnson said he would arrive in three to five minutes when actually he was 10 to 15 minutes away.  The dispatcher testified that she would have assigned another deputy to the location if she had known Johnson was outside his assigned area.  Traveling to the location, Johnson was involved in an accident at the intersection of Route 59 and 75^th Street in DuPage County, 20 miles from the designated location.  He entered the intersection against the traffic signal with emergency flashers activated when he was struck on the passenger side of his patrol car.  The dispatcher was not aware of his true location until he reported the collision.

Johnson was suspended without pay for eight days and he admitted it was important for the dispatcher to know his location in case of an emergency, that the dispatcher would presume he was patrolling within his assigned area unless notified otherwise.  The Chief Deputy testified that deputies must receive permission from the dispatcher before leaving the County and that Johnson violated the Department’s rules and regulations when he left his assigned patrol zone and ventured into DuPage County without permission.  He admitted that Johnson was on duty at the time of the accident, however.

The arbitrator awarded Johnson TTD, PPD, and medical benefits but denied a penalties petition.  On review, with one Commissioner dissenting, the Commission reversed the arbitrator, finding that he failed to prove he sustained accidental injuries arising out of and in the scope of employment.  Specifically, the Commission found that petitioner was engaged in a personal deviation at the time of the accident and that the accident resulted from Johnson’s misconduct.

The Circuit Court reversed, ordering the Commission to reinstate the benefits awarded by the Arbitrator.  The Circuit Court made a specific finding that Johnson’s deviation from his duties ended when he received and responded to the assignment to assist his partner.  The Appellate Court agreed with this analysis, finding it undisputed that, at the time of his injury, the claimant was responding to an assignment from his dispatcher to assist another deputy.  The Court acknowledged the general rule that a deviation for purely personal reason takes an employee out of the course of his employment and that there was no question that Johnson was engaged in a purely personal deviation in DuPage County at the time he received the assignment.  However, “The question remains . . . whether at the time of his injury, the claimant completed his deviation and resumed a course of conduct related to the business of his employer such that he could be said to have been in the course of his employment.” 

For the Court, “the only reasonable conclusion that can be drawn from these facts is that, at the time of his injury, the claimant was acting within the sphere of his employment and that his injuries arose out of and in the course of his employment.”   

Therefore, the Court held that Johnson was no longer embarked on a personal deviation from his employer’s business, but was in the sphere of his employment because he was “performing the errand that he was directed to perform, and this errand was a part of his employment for an incident to it.” 

Justice McCullough dissented, citing the Commission’s finding that Johnson’s accident resulted from his own misconduct, rather than his employment.  The Sheriff’s Code of Conduct prohibited Johnson from leaving his assigned patrol area without first securing permission.  Also, if an officer were outside his patrol area when receiving the dispatch, he was expected to inform the dispatch of his location so that another officer could be assigned to the call.  Johnson obviously failed to inform the dispatcher of his actual location.  Last, when his partner requested his estimated time of arrival, Johnson falsely told him he would arrive three to five minutes and be there, when in reality, he was 15 minutes distant.  The Commission had made a specific finding that Johnson was exceeding the posted speed limit while proceeding through the intersection against the light “quickly enough to cover his own misconduct.”  Justice McCullough felt that the majority was merely substituting its judgment for that of the Commission whose prerogative it is to be the fact finder in workers’ compensationcases.

COMMENT

It is difficult to reconcile the outcome in this case with previous decisions involving deviation from employment.  Generally, compensation will be denied an employee who is injured during a deviation from his employment to perform a personal errand.  That this was the case here was undisputed.  The court made much of the fact that once the claimant received the dispatch the deviation ended, but this would appear not to have been the case – he was outside Will County at the time of the accident, far removed from the location to which he was traveling.  This prompted him to take an unnecessary risk, namely, to travel at a high rate of speed.  This finding was specifically noted by the Commission, but completely ignored by the Court.

The result in this case seems to be an unwarranted expansion of the zone of employment, a special carve out for police officers or other employees who may be subject to a dispatch system.  One questions how this result will fit in the case where the police officer broadsides a vehicle, killing its occupant and himself sustaining injuries.  One does not wish to contemplate such results, but they are inevitable given the holding in this case.

The September 29, 2011 memorandum provides that, in the liability context, no submission of a Liability Medicare Set-Aside (“LMSA”) proposal is necessary if a treating physician provides a written certification confirming that no further medical treatment or services will be required as a result of the claimed injury.  The treating physician must make this certification “as of the date of settlement.”  CMS provides a broad definition of settlement, including settlement, judgment, award or another payment.    

The newest CMS memorandum is not a large departure from the manner in which CMS addresses these matters in the WCMSA context.  We have long known that having a treating physician certify that no further care is needed is likely the most effective means for obtaining a $0.00 MSA determination from CMS.  As a practical matter, in a litigated case it may often be unrealistic to obtain a certification from a treating physician stating that no further medical treatment will be required.  Reluctance to obtain such a certification on behalf of plaintiff’s attorneys can be expected, due to fear of adversely affecting the value of a particular case.  An assurance that the certification is solely for settlement purposes may alleviate those concerns.

The new memorandum leaves many questions.  For instance, CMS has not provided guidance as to when submission of an LMSA proposal is appropriate, if at all.  It is interesting to note, however, the apparent theme of the past two CMS memorandums.  The September 29, 2011 memorandum follows the May 11, 2011 CMS memorandum, which addressed Workers’ Compensation Medicare Set-Asides (“WCMSA”).  In that memorandum, CMS reiterated that submission of WCMSA proposals for review is solely a recommended process, and that there is no federal statute or regulation requiring submission and approval of a WCMSA proposal.  The September 29, 2011 memorandum provides guidelines for when not to submit an LMSA.  CMS representatives have acknowledged that they are facing a significant backlog of MSA proposals that have been submitted for review.  As we are aware, this has created a review process that is known to exceed seven months in many instances.  The most recent CMS memorandums may be suggesting that the parties to litigation are free to “self-police” themselves, so long as Medicare’s interests are adequately considered upon settlement. 

Our upcoming Medicare Newsletter addresses these issues further. 

Central Management Services (CMS) intervened on behalf of the State of Illinois to recoup the amounts permitted under Section 5(b) of the Act for the payments made in the workers’ compensationcase.  CMS asserted the right to Johnson’s arbitration award less 25% for the statutorily-prescribed attorney’s fees set forth in Section 5(b).  Johnson argued that the lien could attach only to those proceeds related to her injuries resulting from the accident.  At a hearing on this issue, Johnson offered evidence that a substantial portion of the treatment she received following the occurrence which was claimed in the workers’ compensationcase was excessive and related to her pre-existing condition.  Petitioner’s chiropractor stated that he could not determine what portion of the condition for which he provided treatment could be attributed to the accident versus a pre-existing condition.  Following this hearing, the circuit court reduced the Section 5(b) lien by the same percentage that petitioner’s damages claim in the negligence action were reduced by the Arbitrator. 

When this issue was presented to the appellate court, the court stated that an employer has a right to reimbursement for compensation paid an employee due to an injury sustained as a result of third-party negligence.  In relevant part, the Statute provides:

“Where the injury . . . for which compensation is payable under this Act was caused under circumstances creating a legal liability for damages on the part of some person other than his employer to pay damages, then legal proceedings may be taken against such other person to recover damages notwithstanding such employer’s payment of or liability to pay compensation under this Act.  In such case, however, if the action against such other person is brought by the injured employee . . . and . . . settlement is made with such other person . . . then from the amount received by such employee . . . there shall be paid to the employer the amount of compensation paid . . . to such employee . . .

Out of any reimbursement received by the employer pursuant to this Section the employer shall pay his pro rata share of all costs and reasonably necessary expenses in connection with such third-party claim . . . and where the services of an attorney . . . have resulted in or substantially contributed to the procurement ... of the proceeds out of which the employer is reimbursed, then . . . the employer shall pay such attorney 25% of the gross amount of such reimbursement."

In sum, the Court stated the purpose of Section 5(b):  prompt and equitable compensation paid to employees who have suffered injuries while working regardless of fault, but allowing both the employee and employer to recover from the true offender while preventing a double recovery.

Considering this principle, the court found that the CMS lien should have been enforced without reduction, other than for reasonable fees and costs.  CMS compensated Johnson for more than the third-party recovery, but adjusted its lien accordingly, requesting only the amount Johnson recovered from the tortfeasors, less the 25% statutory attorney’s fees and reasonably necessary costs and expenses.  The court concluded that the statute does not provide for an arbitrary lien reduction such as the trial court imposed. 

“(T)he legislature removed impediments to the employer’s full reimbursement, and specified setoffs thereto only for costs, expenses and attorney’s fees.  If the legislature intended the employer’s reimbursement to be subject to additional setoffs, the legislature would have supplied them.” 

Therefore, the trial court’s decision to reduce the lien by a percentage equal to the amount the Arbitrator reduced Johnson’s request for relief was “baseless.”

The court went on to say that there are instances where it may be necessary for a trial court to conduct an evidentiary hearing.  Generally, these involve consortium claims by spouses who also file suit against the tortfeasors who cause a claimant’s injuries; also, there are instances where claimants have multiple compensation claims, only one of which may involve a third-party tortfeasor.  In these cases, a hearing is necessary to allocate that part of the civil recovery attributable to the compensation claim against which the employer is asserting its lien.  In the present case, however, an evidentiary hearing was not necessary merely because the arbitration award was reduced.  Last, the court found petitioner’s argument that her medical expenses and time off work were not related to the 2004 accident at work “disingenuous.”

 COMMENT

This decision marks the third in the recent past where the Appellate Court has chastised a lower court for permitting circumvention of the Section 5(b) lien.  The Supreme Court in Gallagher vs. Lenart made a very strong ruling on this subject and one is perplexed that claimants continue to seek to avoid the workers’ compensationlien provision of the Act.  Of particular note in this case was the petitioner’s “disingenuous” argument that since the Arbitrator in the negligence claim reduced her damages due to a pre-existing condition that the medical bills her employer otherwise paid were not be subject to the workers’ compensationlien. 

One cannot fail to appreciate the irony of an employer having to pay alleged excessive medical bills awarded by the Commission, and then have its lien reduced by the circuit court when the claimant says her treatment was excessive.  One suspects we will not see the last of this type of claim.  However, we can expect the courts to continue to enforce the Section 5(b) lien, as they have to date.