‘Lessor Of’ Language Costs Hospital $600K

F.J. Thomas

Wichita, KS (WorkersCompensation.com) – “Lessor Of” language in healthcare contracts and laws is usually difficult to administer and follow, and sometimes the language can be costly, depending on what side of the fence you’re on. A recent Kansas Supreme Court ruling allowing “Lessor Of” language cost a Wichita hospital $600,000 in payments for treatment of a workers’ compensation case.

A stop loss provision that included a $60,000 limit was added to the Kansas workers’ compensation fee schedule in 2010. The provision was added to compensate hospitals for “unusually costly services rendered during treatment to an injured worker.” Under the medical fee schedule, if an inpatient stay was more than the $60,000 threshold, hospitals were allowed to collect 70 percent of billed charges or the Medicare Severity-Diagnosis Related Group (MS-DRG) level, whichever was least. The “whichever is least” language, that is commonly used, was included in the 2011 fee schedule. However, the phrase was actually a typo that neither the appointed medical administrator nor the Director of the Kansas Division of Workers Compensation were aware of.

In 2011, Darin J. Pinion was severely burned while working. He was treated at Via Christi where he accrued over $1 million in inpatient hospital charges. Travelers Indemnity was the workers’ compensation carrier; however Paradigm, which specializes in more complex injury cases contracted with Travelers to process the claims. Paradigm processed the claims under the MS-DRG level instead of the 70 percent rate, paying a total $136,451 and considered the claims paid in full under the lessor of language in the state’s medical fee schedule at the time..

Via Christi however, argued that the claims should have been paid at the 70 percent rate for a total of $732,426, which was $595,975 over and above the payment it received. Via Christi’s position was that the “which is least” language was accidently included in the medical fee schedule. Via Christi brought the issue before an informal hearing at which time the division director agreed; however they did not have the authority to strike the language from the State’s medical fee schedule. Via Christi then took the matter to the State court of appeals which ruled in favor of the hospital.

As a result, Paradigm took the issue to the State Supreme Court which reversed the appeal court’s decision.

The court concluded “the issue of the rulemaking by the director—and the results of any accidental rulemaking—were not properly before the Board on appeal from the hearing officer.” Further opinion upheld the lessor of language stating, “…similarly, when the Board upheld the plain language (“whichever is least”) of the 2011 maximum fee schedule created under the director’s statutory authority, we fail to see how its enforcement of that schedule is unreasonable, arbitrary, or capricious.”

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