Supreme Court sides with Liberty Mutual -- discounts don't break law

By Steve Korris | Dec 3, 2010


Liberty Mutual Insurance didn't violate workers compensation law when it discounted bills through a preferred provider organization, the Supreme Court of Louisiana decided on Nov. 30.

All seven Justices reversed Third Circuit appeals judges in Lake Charles, who awarded reimbursement, penalties and legal fees to Agilus Health in a "PPO" test case.

The Justices bound Agilus Health to a contract that exchanged greater patient volume and prompt payment for a 20 percent discount.

Resolving a clash between state and federal courts in Louisiana, the Justices upheld the view of federal judges that the discounts broke no law.

Justice Philip Ciaccio wrote, "In no way does paying a lesser amount to the health care provider pursuant to a contract relieve any liability to the injured employee."

He wrote that the employer simply paid what the provider agreed to charge.

At oral argument in October, three Justices obligated Agilus Health counsel Greg Williams to eat a word.

He said the insurer forced discounts on providers.

Justice Jeffrey Victory barked, "Forced! You signed a contract."

Justice Bernette Johnson said, "It sounds like the argument is disingenuous."

Williams tried to back track but Justice Greg Guidry stopped him and said, "You said several times, forced to do this."

Williams apologized.

Johnson asked, "What is the harm?"

Williams said, "A lesser number of providers providing."

Johnson said, "That doesn't seem to be the case. They are lining up to accept 80 percent in order to get patients, aren't they?"

Three unhappy Justices turned into a majority when Ciaccio pounced on Williams.

"You are saying the state can go into the price fixing business and tell you that you can charge this and nothing less," Ciaccio said.

"The act sets out the schedule and we have experienced parties. Where does the state get into this picture?

"The employer isn't complaining. He saves money."

Williams tried to back track but Ciaccio stopped him and said, "Although I agreed to it, I'm just fooling."

Ciaccio said, "I really want the hundred even if I said 80."

Agilus Health billed $906 to treat Accor Lodging employee Allison Taylor.

Liberty Mutual paid $724.80, and Agilus Health petitioned workers compensation commissioner James Braddock for the balance.

Agilus Health argued that an insurer could discount bills for general health plans but not for workers compensation cases.

Braddock agreed, awarding Agilus Health $181.20 in reimbursement, $4,000 in legal fees, and $2,000 in penalties.

By affirming Braddock, the Third Circuit raised the stakes to millions for employers, insurers and providers all over the state.

Briefs from friends of the court on both sides piled high.

John Quaglino of Metairie sided with Liberty Mutual on behalf of the state as employer of 105,000 persons and defendant in 90 suits with estimated exposure of $1,210,000.

In a separate brief he estimated exposure of Sedgwick Claims Management Services clients at $3,250,000, in 10,000 claims.

In another he estimated exposure of General Motors at $1,120,000 in legal fees and $700,000 in penalties.

For Louisiana Workers Compensation Corporation, Jeffrey Warrens of Baton Rouge predicted a crisis as dangerous as one that led to creation of the corporation.

Rates rose more than 125 percent from 1986 to 1990. And, in the last five years, rates dropped more than 40 percent, Warrens wrote.

Hospitals and doctors expressed equal alarm at the prospect of reversal.

For the state medical society, Amy Phillips of Baton Rouge wrote that injured workers lost options for quality care because some members ceased treating them.

The medical society, the state hospital association, and Ochsner Health System all called on legislators to write a new fee schedule for workers compensation.

The providers can hope for help at the Capitol, but not at the Supreme Court.

Ciaccio's opinion quoted state code that, "Parties are free to contract for any object that is lawful, possible, and determined, or determinable."

He wrote that workers compensation code doesn't impose a duty on an employer to pay one amount or another, it simply caps an employer's monetary obligation to a provider.

Legislators clearly intended to encourage providers to charge less than the amounts in the fee schedule, Ciaccio wrote.

He rejected distinctions between fees, charges, and reimbursements, finding they mean the same throughout the code.

Ciaccio knocked down an argument that insurers misapply and mismanage PPO's, writing that parties can stay out of them or opt out.

"In no way are health care providers forced to enter into these contracts," he wrote.

He found no evidence that patients received substandard care or that providers no longer treat workers compensation patients.

Ciaccio sits for Chief Justice Catherine Kimball as she recovers from a stroke.

Judy Barrasso represented Liberty Mutual.

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