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State: California Hospital Wins in `Silent PPO' Case
Some California medical providers won a legal victory this week that might someday save them a lot of money, though it's a good bet many of them didn't even notice.
On Monday the State Compensation Insurance Fund quietly let pass a deadline to appeal a September panel decision by the Workers' Compensation Appeals Board that essentially labeled a contract between the State Fund and Blue Cross of California as a statutorily prohibited "silent PPO."
The contract between the state's largest insurance company and its largest workers' compensation insurance carrier has been used for several years to force hospitals to accept PPO-level payments from the State Fund for treating injured workers, whether or not the patients were members of the Blue Cross preferred-provider organization.
Even if the injured worker is a member of the Blue Cross PPO, hospitals -- most of which are not a party to the Blue Cross-State Fund contract, even if they do participate in the Blue Cross PPO -- have argued that they should be paid reasonable maximum workers' compensation rates in such cases. Those rates typically are much higher than PPO rates, but much lower than what would be charged a private patient who is not a member of a PPO or a health maintenance organization.
The WCAB ruling upheld a workers' compensation judge's May decision in Woodruff v. Greenfield Trucking, BAK0141023.
In that case, a hay-bailer and tractor driver named Virginia Woodruff suffered serious on-the-job injuries while working for Greenfield Trucking.
Good Samaritan Hospital in Los Angeles operated on her twice, and later sent a bill of $69,624.04 to the State Fund, the trucking company's workers' comp insurer. But the State Fund only paid $9,307.76, claiming its contract with Blue Cross entitled it to the discounted PPO rate.
Woodruff who was not a Blue Cross member and did not have a Blue Cross membership card. But even if she had, the hospital's attorney said, in the context her industrial injury, she was a workers compensation patient and not a Blue Cross patient.
When a workers' compensation insurance companies teams up with a PPO for the purpose of forcing medical providers to pay accept lower rates for treating injured workers, the arrangement is called a "silent PPO." They've become so controversial that many states -- including California -- have passed laws outlawing them.
But in previous cases, workers' comp judges have not viewed the contract between the State Fund and Blue Cross in that light -- until now. In previous cases, workers' comp judges have ruled that disagreements over silent PPOs were contract disputes over which they had no jurisdiction.
Judge Terrence E. McEvoy didn't see it that way. He wrote in ruling in favor of the hospital that "there is no showing that SCIF has complied with the provision of Labor Code 4609, and that such a so called silent PPO is statutorily prohibited. In this case, contrary to the provisions of Labor Code 4609, Blue Cross appears to have sold its PPO Discount to SCIF in contravention of this labor code provision."
On Sept. 4, the WCAB denied the State Fund's petition for reconsideration. The State Fund had until Monday to appeal the decision. Instead, it agreed to pay Good Samaritan workers' compensation rates in the case, which amounted to $21,237.
"This does not affect our relationship with Blue Cross," said Jennifer Vargen, communications director for the State Fund. "We're not pursuing this case primarily because it doesn't have precedential value."
That is true. The WCAB decision was neither "en banc" -- which would have set a binding precedent on all board panels and workers' comp judges -- nor was it labeled a "significant panel decision, which also would have carried greater weight.
Reid Steinfeld, an attorney who represented Good Samaritan in the case, said the decision was "citable," but he acknowledged that "a court doesn't have to follow it."
Still, he added, "It's the first time a judge has completely understood our argument" in a case involving the Blue Cross-State Fund contract.
Peggy Hinz, a spokesperson for Blue Cross of California, did not return a call seeking comment.
--By John Bowman, WorkCompCentral correspondent