ALASKA SUPREME COURT IMPOSES PENALTIES FOR FAILURE TO PREAUTHORIZE MEDICAL TREATMENT

In Harris v. M-K Rivers, slip op. 6876 (March 14, 2014), the Alaska Supreme Court held that the Workers’ Compensation Act permits "imposition of a penalty on a medical benefit that has been prescribed but not yet paid" where a bad faith denial delayed receipt of prescribed medical treatment. To reach that decision, the Court held that "medical benefits become due for purposes of controversion and penalties when the employer has notice they have been prescribed by a doctor." The Court specified that "payments ‘due’ under the [Workers’ Compensation] Act are . . . payable immediately or on demand . . ." The penalty would be 25% of the value of the medical treatment that has been delayed. The decision does not state who would receive the penalty, the claimant, or the provider. The facts of the Harris case are very complicated, and the Supreme Court's decision only superficially discusses them. One issue was provision of an expensive Clinitron bed for the injured worker. The bed was "prescribed" in a note by an unidentified physician who wrote "Clinitron bed" on a prescription pad. Mr. Harris had previously used Clinitron beds that were paid under his claim. An IME physician noted that Harris had recently switched from a Clinitron to a different "Flap Chair" bed that he found helped his decubitus ulcers heal much faster. A bill for a new Clinitron bed was never submitted for approval or payment. A controversion notice was filed for a Clinitron bed due to the absence of details as to the model and features sought and in light of the IME observations that a different bed was being used. Harris made a claim for a penalty due to the delay in receiving a new Clinitron bed. The Board awarded a penalty, but the Appeals Commission reversed since no bill or medical report was ever submitted for the bed. The Supreme Court reversed the Commission, holding that there was not a good faith basis to controvert the bed at the time the prescription was written. The Court held that an employer could deny proposed treatment at will with no consequence unless penalties were allowed for such delayed treatment. Although bad faith denial is required, the Court made it clear that the response to a request for preauthorization must be immediate, or at least not lead to any delay in receiving the proposed treatment. The message conveyed by the Court in its decision is clear: at the time a physician gives "notice" to the adjuster that treatment has been prescribed, the adjuster must decide if the proposed treatment will be authorized or denied. To deny it, the adjuster must have evidence in the claim file that supports a denial, or a legal basis to do so, just as would be necessary to file any controversion notice in good faith. If there is no basis to deny the treatment at the time it is prescribed, it must be authorized so that there is no delay in receiving the treatment. If treatment is delayed due to a bad faith failure to authorize, a penalty can be awarded based on the value of the treatment that is delayed. It may be necessary for the Board to establish that value. The Court gave no guidance as to what constitutes adequate "notice" of prescribed treatment, for example, whether a phone call requesting preauthorization will trigger the need for an immediate decision to authorize or deny. The Court also did not address whether defenses discovered after treatment is preauthorized would later permit denial of payment for those services when bills are received. There is a high risk that preauthorization will constitute a binding contract to pay for the treatment despite subsequent defenses that may be discovered. Other questions raised are whether a request for preauthorization excuses a provider from complying with other obligations under the Act such as the obligation to provide a treatment plan within 14 days of treatment, and whether the failure to comply would nullify the preauthorization; how detailed the description of the proposed treatment must be in order to constitute a valid request for preauthorization; and whether the request for preauthorization extends to other medical providers who may be tangentially involved in medical care, for example, physical therapists who provide treatment following preauthorized surgery. WHAT TO DO NOW? We expect this new rule will be used as a tool by attorneys and providers to put adjusters in a position of having to commit to paying for substantial treatment before having any significant information about the condition or the claim. Especially as to surgery or other expensive treatment, it will benefit providers to seek preauthorization. Dormant claims that suddenly become active will be especially problematic since a provider can easily attach the presumption of compensability to proposed treatment before any investigation can occur. One concern will be preauthorization requests in the form of a telephone call. The Harris case dealt with written prescriptions and not verbal requests. A verbal request will be unrecorded, unverified, and subject to misunderstanding and confusion as to the extent of the request. In response to a telephone request, we think insurers can reasonably require the request to be submitted in writing. Although a Board decision issued after Harris imposed a penalty based upon a verbal request to authorize surgery, we feel it likely that the Appeals Commission and the Court will agree with a requirement that “notice” of prescribed treatment must be in writing to trigger an obligation to respond. However, the adjuster will likely be required to immediately inform the provider of that requirement and provide contact information to facilitate a request. Putting a request in writing will require providers to properly identify themselves as an attending physician under the Act and provide adequate details about proposed treatment so that disputes can be minimized. It may also give the adjuster a small window of time to determine if any defenses to preauthorization of medical treatment exist. We specifically recommend that the provider also be asked to state when the proposed treatment will be occurring so that it can be determined if a delay in treatment will occur if a response to the preauthorization request is delayed. Insurers may consider developing a "Preauthorization of Medical Treatment Form" to be completed by providers, but it remains to be seen whether that would be beneficial. As to a written request to preauthorize, we expect the Board and the Court to reject the "open claim" response currently used by adjusters as meeting the obligation under Harris to affirmatively authorize treatment in the absence of a basis to controvert. Even if a provider would accept that response and go forward with treatment such that no penalty could be awarded, we expect the Board and the Court to hold that the "open claim" response is in bad faith because it does not provide affirmative authorization of the treatment. However, we feel that the "open claim" response will be valid in response to a verbal request if the adjuster also informs the provider that a request must be in writing and will be acted upon once received. The Harris case will require employers and insurers to develop a procedure as to how to respond to requests for preauthorization of medical treatment. Additional training will be necessary in order to minimize the negative impact of the decision. Only further litigation will clarify employers’ obligations and the risks brought about by the decision, and only action by the Alaska Legislature could nullify the impact of this case.


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