Agilus Health (Kenneth McKeithen) v. Dresser, Inc.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

10-313

AGILUS HEALTH, INC. (KENNETH MCKEITHEN)

VERSUS

DRESSER, INC., ET AL.

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APPEAL FROM THE
OFFICE OF WORKERS’ COMPENSATION - DIST 02
PARISH OF RAPIDES, NO. 07-08504
JAMES L. BRADDOCK, WORKERS’ COMPENSATION JUDGE

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JIMMIE C. PETERS
JUDGE

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Court composed of Jimmie C. Peters, Billy Howard Ezell, and Shannon J. Gremillion,
Judges.

AFFIRMED IN PART; REVERSED IN PART; AND RENDERED.

Gremillion, Judge, concurs in part, dissents in part, and assigns written reasons.

Eric J. Waltner
D. Paul Gardner, Jr.
Allen & Gooch
P. O. Box 81129
Lafayette, LA 70598-1129
(337) 291-1000
Counsel for Defendants/Appellants:
Liberty Mutual Insurance Company and Dresser, Inc.

Edward Emile Roberts
Neblett, Beard & Arsenault
P. O. Box 1190
Alexandria, LA 71309
(318) 487-9874

Counsel for Plaintiff/Appellee:
Agilus Health, Inc.

Edward R. Wicker, Jr.
Barrasso, Usdin, Kupperman
909 Poydras St., #1800
New Orleans, LA 70112
(504) 589-9700
Counsel for Defendants/Appellants:
Liberty Mutual Insurance Company and Dresser, Inc.

Richard Bray Williams
Williams Family Law Firm, L.L.C
P. O. Box 15
Natchitoches, LA 71458-0015
(318) 352-6695
Counsel for Plaintiff/Appellee:
Agilus Health, Inc.

PETERS, J.

Dresser, Inc. and its workers’ compensation insurer, Liberty Mutual Insurance

Company (collectively referred to as Dresser), appeal a judgment rendered by the

workers’ compensation judge (WCJ) in favor of Agilus Health, Inc. (Agilus),

awarding Agilus recovery of $23.40 for medical services rendered to one of Dresser’s

injured employees, $2,000.00 in statutory penalties, and $3,000.00 in attorney fees.

We reverse the WCJ award of statutory penalties, but affirm the judgment in all other

respects. Additionally, we render judgment in favor of Agilus and against Dresser in

the amount of $1,500.00 as an additional attorney fee for work performed on appeal.

DISCUSSION OF THE RECORD

This appeal is one of three cases now before this panel involving the same

litigants and raising the same legal issue. In each case, an employee of Dresser

sustained an injury compensable under the Louisiana Workers’ Compensation Act

and received medical treatment from Agilus. In each case, Dresser, through Liberty

Mutual, initially applied La.R.S. 23:1034.2 and La.Admin.Code tit. 40, part I, § 5157

to reduce Dresser’s medical charges pursuant to the workers’ compensation fee

schedule. However, Dresser further reduced the charges by an additional twenty

percent before tendering payment to Agilus. The correctness of the twenty percent

reduction is the single issue in all three cases.

All of the disputes now before us have the same undisputed factual background

and arise from a series of contracts involving a preferred provider organization (PPO)

which discounts its payments to Agilus by twenty percent. They begin with a 2004

contract between Agilus’ predecessor, Louisiana Physical Therapy Centers (LPTC),

and First Health Group Corporation (First Health), which had as its purpose LPTC’s

participation in a Preferred Provider Panel through which First Health would offer

discounted medical services to participating payors.

Section 2 of Article 4 of the LPTC contract addressed provider billing and

payment and provided, in pertinent part, “For Workers’ Compensation Payors,

reimbursement under this Agreement shall not exceed the amount allowed for

Provider’s services under Workers’ Compensation laws and regulations. ” Section

D of Appendix A, entitled “FIRST HEALTH OUTPATIENT CARE NETWORK

REIMBURSEMENT,” and attached to the contract, provided:

Reimbursement from Workers’ Compensation Payors for services
rendered to occupationally ill/injured employees shall be as follows:

(1) If any state law or regulation establishes rules or guidelines for
the payment of health care services, reimbursement shall not
exceed 85% of the maximum amount payable under such rules or
guidelines. Any procedure code which is unvalued shall be
reimbursed pursuant to Section A, Paragraph (3), of this
Appendix. This rate of reimbursement shall apply whether such
rules or guidelines are in existence at the time of execution of this
agreement or established at a later time.

(2) In the absence of any state law or regulation set forth in Section
D, Paragraph (1), reimbursement shall be the method set forth in
Section A, Paragraph (1), (2) and (3) of this Appendix, but in no
event shall reimbursement exceed the usual and customary charge
for the services, as determined by First Health or Payor.

In 2005, Section D of Appendix A was amended to provide that reimbursement from

workers’ compensation payors shall not exceed “80% of the maximum amount

payable under such rules or guidelines.”

In 2006, Liberty Mutual also entered into a contract with First Health. This

gave Liberty Mutual and its workers’ compensation insureds access to First Health’s

medical provider network and its “reduced and negotiated fees for health care

services.” In other words, there was no direct contract between Agilus and Dresser.

Rather, the basis of this and the other two suits is Dresser’s underpayment of medical

2

services that Agilus provided to its employees based on contracts emanating from

First Health.

In the matter now before us, Dresser’s injured worker is Kenneth McKeithen,

and it is not disputed that Mr. McKeithen sustained an injury compensable under the

Louisiana Workers’ Compensation Act, that Agilus provided medical care to Mr.

McKeithen totaling $2,588.00 and that the medical care was for the treatment of his

compensable injuries. In handling Agilus’ claim for payment, Dresser reduced the

medical care statement submitted by Agilus and tendered $3,013.40 to Agilus as

payment in full for the services rendered to Mr. Atwood. The WCJ determined that

$23.40 represented the additional twenty percent reduction provided for by First

Health’s contract with Agilus.1

Agilus brought this claim to recover the twenty-percent underpayment from

Dresser. Following a trial on the merits, the WCJ ultimately rendered judgment in

this case, as well as the other two now before us, awarding Agilus judgment for the

twenty percent at issue, penalties, and attorney fees. In doing so, the WCJ concluded

that Dresser could not rely on contracts with a PPO to reduce the amounts paid for

medical services provided by Agilus by to its injured employee. This appeal

followed.

In their appeal of this and the other two cases before us, Dresser raised three

assignments of error:

1. The Hearing Officer erred by invalidating Agilus Health’s contract with
First Health, and Liberty Mutual’s contract with First Health and
concluding that such contracts cannot be utilized to discount a health
care provider’s fees below the reimbursement fee schedule for medical

1
The judgment rendered by the WCJ recognizes the underpayment to be $23.40. However,
in its brief to this court, Agilus asserts that the underpayment was $420.40. Agilus did not appeal
the amount at issue nor did it answer the appeal to raise this issue.

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treatment rendered in connection with a workers’ compensation claim.

2. The Hearing Officer erred in finding that Liberty Mutual and Dresser
were arbitrary and capricious in light of their reliance on the PPO
contracts and other favorable and well-reasoned Louisiana court
opinions.

3. The Hearing Officer improperly held Liberty Mutual and Dresser liable
pursuant to Louisiana Revised Statute 23:1201, and improperly assessed
penalties and attorney’s fees against them.

Agilus answered the appeal requesting an award of additional attorney fees for work

performed on appeal.

OPINION

Dresser’s first assignment of error can be rephrased to ask: Can an employer

reimburse a health care provider at an amount below that provided by the Louisiana

Workers’ Compensation Act’s reimbursement schedule. In a concurring opinion

rendered in Beutler England Chiropractic Clinic v. Mermentau Rice, Inc., 05-942, p.

4 (La.App. 3 Cir. 5/31/06), 931 So.2d 553, 561(first alteration ours), the writer of this

opinion, joined by five of the twelve judges on this court, recognized that the answer

to this question is “no”:

As they did in Beutler England Clinic [v. Market Basket No. 27, 05-952
(La.App. 3 Cir. 12/30/05)], 919 So.2d 816, the defendants have
attempted to interpose the preferred provider organization (PPO)
contract as a defense to full payment, asserting that the attendant issues
remove the dispute from the jurisdiction of the OWCA. In doing so, the
employer and its insurer ignore the clear language of La.R.S. 23:1033,
which provides that “[n]o contract, rule, regulation or device whatsoever
shall operate to relieve the employer, in whole or in part, from any
liability created by this Chapter except as herein provided.” (Emphasis
added.) As stated in my dissent in Beutler England Clinic, 919 So.2d at
821,

[T]o the extent that the PPO contract purports to further
limit the employer’s liability for medical care, it runs afoul
of La.R.S. 23:1033 and may not serve as a basis to reduce
the amount owed to Beutler England for the treatment of
[the injured employee]. Because the PPO contract may not

4

serve as a basis to reduce the amount owed for the
treatment of [the injured employee], Beutler England’s
claim is properly before the OWC pursuant to La.R.S.
23:1034.2(F)(1) as a garden-variety medical expense claim.
Whatever remaining rights the defendants have vis-à-vis
the PPO, in light of the Workers’ Compensation Act’s
express disallowal of contracts in contravention of its
provisions, is another issue for another forum.

This same issue has recently been addressed in Central Louisiana Ambulatory

Surgical Center, Inc. v. Payless Shoesource, Inc., 10-86, 10-91, 10-92, 10-96, 10-97,

10-99, 10-100, 10-115, 10-117, 10-118 (La.App. 3 Cir. 7/28/10), So.3d ,

rehearing granted, (La.App. 3 Cir. 10/20/10), ___ So.3d ___, and Agilus Health v.

Accor Lodging North America, 09-1049 (La.App. 3 Cir. 3/10/10), 32 So.3d 1120, writ

granted, 10-800 (La. 6/18/10), 38 So.3d 312. We agree with the holdings in those

opinions and incorporate the analysis in both as though set out herein in full. That

being the case, we find no merit in Dresser’s first assignment of error.

With regard to the penalty and attorney fee issues, the panel in Central

Louisiana Ambulatory Surgical Center, Inc. reversed the WCJ awards while the panel

in Agilus Health affirmed the WCJ awards and awarded additional attorney fees for

the work performed on appeal. The panel in Central Louisiana Ambulatory Surgical

Center, Inc. initially concluded that the defendant School Board had reasonably

controverted the claim. However, on rehearing, the panel reversed its position on the

penalty and attorney fee award based on the failure of the defendants to comply with

the notice requirements of La.R.S. 40:2203.1. With regard to the penalty issue, the

plaintiff in the matter before us did not properly raise the notice issue and, therefore,

we agree with and choose to follow the holding in the original opinion of Central

Louisiana Ambulatory Surgical Center, Inc. However, with regard to the attorney fee

issue, we agree that the attorney fee award should be affirmed, but for different

5

reasons from those expressed in either Central Louisiana Ambulatory Surgical

Center, Inc. or Agilus Health. We conclude that the WCJ may impose an award of

attorney fees as an item of recovery separate from the penalty issue.

In reaching the conclusion that the attorney fee award should be upheld, we

first note that the time and place of payment of workers’ compensation benefits, as

well as medical expenses, is governed by La.R.S. 23:1201(A) through (E). The

penalties for failure to make timely payments of compensation and/or medical

expenses to an employee are set forth in the initial paragraph of La.R.S. 23:1201(F),

and the conditions under which those penalties may be recovered are set forth in

La.R.S. 23:1201(F)(1)-(3). Louisiana Revised Statutes 23:1201(F)(1)-(3) reads as

follows:

Failure to provide payment in accordance with this Section or
failure to consent to the employee’s request to select a treating physician
or change physicians when such consent is required by R.S. 23:1121
shall result in the assessment of a penalty in an amount up to the greater
of twelve percent of any unpaid compensation or medical benefits, or
fifty dollars per calendar day for each day in which any and all
compensation or medical benefits remain unpaid or such consent is
withheld, together with reasonable attorney fees for each disputed claim;
however, the fifty dollars per calendar day penalty shall not exceed a
maximum of two thousand dollars in the aggregate for any claim. The
maximum amount of penalties which may be imposed at a hearing on
the merits regardless of the number of penalties which might be imposed
under this Section is eight thousand dollars. An award of penalties and
attorney fees at any hearing on the merits shall be res judicata as to any
and all claims for which penalties may be imposed under this Section
which precedes the date of the hearing. Penalties shall be assessed in
the following manner:

(1) Such penalty and attorney fees shall be assessed against either
the employer or the insurer, depending upon fault. No workers’
compensation insurance policy shall provide that these sums shall be
paid by the insurer if the workers’ compensation judge determines that
the penalty and attorney fees are to be paid by the employer rather than
the insurer.

(2) This Subsection shall not apply if the claim is reasonably

6

controverted or if such nonpayment results from conditions over which
the employer or insurer had no control.

(3) Except as provided in Paragraph (4) of this Subsection, any
additional compensation paid by the employer or insurer pursuant to this
Section shall be paid directly to the employee.

(Emphasis added.)

The matter now before us, however, is not a dispute between the employer/insurer

and employee, but one between an employer/insurer and a health care provider. The

right to penalties and attorney fees in such a dispute is governed by La.R.S.

23:1201(F)(4), which reads as follows:

(4) In the event that the health care provider prevails on a claim
for payment of his fee, penalties as provided in this Section and
reasonable attorney fees based upon actual hours worked may be
awarded and paid directly to the health care provider. This Subsection
shall not be construed to provide for recovery of more than one penalty
or attorney fee.

(Emphasis added.)

The initial paragraph of La.R.S. 23:1201(F) provides that the mandatory

penalty available to a claimant is comprised of two parts: (1) a percentage of the

unpaid compensation subject to a maximum amount, and (2) a reasonable attorney

fee. With regard to a health care provider’s claim, an award of anything over the

amount owed is subject to the WCJ’s discretion, although that discretion is limited

to some extent by the “reasonably controverted” requirement of La.R.S.

23:1201(F)(2).

In the matter before us, the WCJ awarded the $2,000.00 statutory penalty

provided in the general language of La.R.S. 23:1201(F), as allowed in La.R.S.

23:1201(F)(4), and awarded a $3,000.00 attorney fee “for the work done” by Agilus’

attorneys. That is to say, the attorney fee award was awarded, not as a penalty as

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provided for in the general language of La.R.S. 23:1201(F), but for the actual work

performed as allowed under La.R.S. 23:1201(F)(4). While the WCJ’s discretion to

award the twelve percent penalty under La.R.S. 23:1201(F)(4) is still subject to the

“reasonably controverted” requirement of La.R.S. 23:1201(F)(2), the attorney fee

award is not.

Because Dresser does not argue in its assignments of error or in brief that the

$3,000.00 award does not represent a reasonable fee for the hours worked by Agilus’

attorneys, we will not review that award in that regard. Dresser does, however,

address the attorney fee in the context of the amount of the fee awarded when

compared to the base amount of the underpayment. Without citing this court to any

statutory or jurisprudential authority, Dresser asserts that an award so

disproportionate to the amount at issue is a violation of substantive due process. In

making this argument, Dresser ignores the fact that both sides to an issue are given

basic due process rights:

All courts shall be open, and every person shall have an adequate
remedy by due process of law and justice, administered without denial,
partiality, or unreasonable delay, for injury to him in his person,
property, reputation, or other rights.

La.Const. art. 1, § 22.

In response to this constitutional requirement, the legislature effects remedies

whereby all persons, rich or poor, having a claim in controversy, small or large in

monetary value, have access to the courts. In this case, the legislature did just that—it

effected an award of attorney fees, based on work performed, for health care

providers.

Here, the legislature effected a statutory scheme similar to that of an open

account collection action. Its obvious intent is to give those with small claims equal

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access to the courts as those with substantial monetary claims. Thus, we find no error

in the WCJ’s award of attorney fees to Agilus.2

Agilus’ Answer to Appeal

In its answer to Dresser’s appeal, Agilus sought only an increase in the attorney

fee award for work performed on appeal.3 Based on our conclusion on the merits as

set forth above, we find that Agilus is entitled to an additional attorney fee award of

$1,500.00 for work performed on appeal. We award this amount based on the same

mandate of La.R.S. 23:1201(F)(4) as did the WCJ, that the attorney fee be reasonably

“based upon actual hours worked.” Given that the issue is basically the same in all

three cases now before us, we find this amount reasonably appropriate.

DISPOSITION

For the foregoing reasons, we reverse the WCJ’s $2,000.00 statutory penalty

award to Agilus Health, Inc. We affirm the judgment in all other respects and award

Agilus Health, Inc. an additional attorney fee of $1,500.00 for legal work performed

on appeal. We assess all costs of this appeal equally between Dresser, Inc. and

Liberty Mutual Insurance Company.

AFFIRMED IN PART; REVERSED IN PART; AND RENDERED.

2
Our holding affirming the WCJ’s award of attorney fees does not address the amount of
attorney fees awarded as this issue was not raised by Dresser and Liberty Mutual on appeal.
3
In its brief to this court, Agilus did raise the issue of lack of notice from Dresser that its
payment would be further reduced by virtue of the PPO agreement. However, the judgment is silent
on this issue and the WCJ did not mention this claim in its reasons for judgment. When a judgment
is silent as to a claim, there is a presumption that the trier of fact rejected that claim. Garber v.
Badon & Rainer, 07-1497 (La.App. 3 Cir. 4/2/08), 981 So.2d 92, writ denied, 08-1154 (La. 9/19/08),
992 So.2d 943. Since Agilus did not appeal the rejection of this claim, we will not consider it on
appeal.

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10-313

AGILUS HEALTH (KENNETH MCKEITHEN)

VERSUS

DRESSER, INC., ET AL.

GREMILLION, Judge, concurs in part and dissents in part.

Because it is clear from the record that the procedures for notifying the health

care provider that a PPO discount would be applied were not followed, I concur based

on the rationale I expressed in my initial concurrence in Central La. Amb. Surg. Ctr.,

Inc. v. Payless Shoesource, Inc., 10-86 (La.App. 3 Cir. 7/28/10), ___ So.3d ___.

Because I believe the appellants did raise the issue of the amount of attorney

fees in their assignments of error, I dissent on the award of attorney fees and would

lower them, based upon the rationale expressed in my concurrence in the Central La.

Amb. Surg. Ctr. matter on rehearing. I also dissent on the issue of the reversal of the

WCJ’s award of penalties for the reasons expressed by the majority in the Central La.

Amb. Surg. Ctr. matter on rehearing.