Docs Call Workers Comp Law Unconstitutional

SAN DIEGO (CN) - California's workers' comp reform will bar some medical providers from reimbursement for previously provided care unless they pay a "ransom," a chiropractor claims in a federal class action.

Kirk Kancilia, who practices in San Diego, sued the state on behalf of medical providers who offer care to workers' compensation applicants on a lien basis.

Senate Bill 863, which makes wide-ranging changes to California's workers' compensation system, was passed on Aug. 31, 2012 and signed into law by Gov. Brown on Sept. 18, 2012. The bill took effect on Jan. 1, 2013, but not all of its provisions were effective immediately.

The reform was touted as providing increased benefits to injured workers and creating cost-saving efficiencies. Among other things, SB 863 increased permanent disability benefits by 30 percent, reduced the costs of workers' compensation losses by nearly $1 billion, and saved California $40 million annually in insurance costs, according to the governor's statement the day he signed the bill.

But in his lawsuit, Kancilia claims that the reform "creates a multi-million dollar windfall for big workers' compensation insurance companies by canceling millions of unpaid medical bills of injured California workers on January 1, 2014 absent this Court's intervention. Put simply, SB 863's implementation will deny California workers of the right to have their medical bills paid by employers and their workers' compensation carriers."

Kancila claims the law violates the Constitution by canceling lien claims filed by medical providers before Jan. 1, 2013, unless the providers pay a $100 "lien activation fee" before Jan. 1, 2014.

Healthcare providers have the right to file liens for payment for their services against an award made in favor of the injured workers. But Kancila claims workers' comp insurance companies delay resolution of liens, ignore them or underpay them, resulting in a large volume of unresolved claims congesting the workers' compensation system.

SB 863 seeks to reduce the volume of lien filings by imposing a flat $100 lien-filing fee on medical providers who filed liens as of Jan. 1, 2013, and a flat fee of $150 on those who file liens after that date.

The fees "discourage the filing or pursuit of meritorious low-dollar-value liens by rendering them valueless, thereby violating the constitutional rights of independent service providers," Kancilia says in the lawsuit.

While the fees will make it infeasible for independent providers to pursue liens for low-dollar-value services, they will not have the same impact on service providers who are part of an insurer's affiliates or preferred group of providers, as these entities typically rely on contractual rights, not liens, to obtain compensation, according to the complaint.

The fees will not make as big an impact on larger providers who offer higher profit-margin services and multiple services on a per-workers basis. Nor will the lien filing fees affect insurance companies, HMOs, labor union benefit plans, and other large holders of workers' compensation liens because SB 863 specifically exempts any lien filed by most of these entities, Kancilia says in the lawsuit.

However, for independent providers, the law eliminates their ability "to obtain judicial and administrative enforcement of their vested property right to secure reasonable compensation for their services through the workers' compensation lien procedures," according to the complaint.

For example, Kancilia claims he has 300 to 500 liens with dollar amounts ranging from $500 to $1,500 per lien.

"This means that to collect between $75,000-100,000, Dr. Kancilia will have to pay $30,000-50,000 in activation fees and wait indefinitely. This is something he simply cannot do from his own personal reserves and, moreover, is unable to finance these sums in light of the current economic and lending environment. This means that, on January 1, 2014, bills for up to $100,000 of services provided by Dr. Kancilia will be voided for the benefit of big workers' compensation insurance companies and to Dr. Kancilia's detriment - threatening his ability to continue in practice," according to the complaint.

Kancilia wants the law declared unconstitutional for violating the Fifth and 14th Amendments. He wants the government enjoined from collecting the lien filing and activation fees.

He is represented by Matthew D. Rifat.

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