Iberia General Hospital v. St. Mary Sugar Cooperative, Inc.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

16-532

IBERIA GENERAL HOSPITAL, ET AL.

VERSUS

ST. MARY SUGAR COOPERATIVE, INC., ET AL.

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APPEAL FROM THE
OFFICE OF WORKERS’ COMPENSATION - # 4
PARISH OF LAFAYETTE, NO. 15-02994
ANTHONY PAUL PALERMO, WORKERS’ COMPENSATION JUDGE

**********

JOHN E. CONERY
JUDGE

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Court composed of Marc T. Amy, Elizabeth A. Pickett, and John E. Conery,
Judges.

AFFIRMED.

Denis Juge
Christopher Whelen
Juge, Napolitano, Guilbeau, Ruli and Frieman
3320 West Esplanade Avenue, North
Metairie, Louisiana 70002
(504) 831-7270
COUNSEL FOR DEFENDANTS/APPELLANTS:
LUBA Casualty Ins. Co.
St. Mary Sugar Cooperative, Inc.

Lawrence C. Billeaud
Attorney at Law
706 West University Avenue
Lafayette, Louisiana 70506
(337) 266-2055
COUNSEL FOR PLAINTIFFS/APPELLEES:
Iberia General Hospital
Iberia General Hospital & Medical Center

CONERY, Judge.

This is a workers’ compensation case involving a billing dispute between

Iberia General Hospital & Medical Center (Iberia General) and St. Mary Sugar

Cooperative Inc. (St. Mary) and its workers’ compensation insurer, Louisiana

United Business SIF (LUBA).1 The Workers’ Compensation Judge (WCJ) found

in favor of Iberia General and awarded damages, penalties, and attorney fees

against LUBA. By virtue of his ruling in favor of Iberia General, the WCJ, in

effect, also denied LUBA’s reconventional demand for overpayment, and there

was no appeal from the denial of the reconventional demand. For the following

reasons, we affirm.

PROCEDURAL HISTORY AND FACTS

The facts of this case are simple and undisputed. St. Mary’s employee,

Omar Martinez, suffered an on-the-job injury to his finger which required a

surgical procedure. LUBA approved the surgery for Mr. Martinez. It was

scheduled at the New Iberia Surgery Center (Surgery Center), which is partially

owned by Iberia General. Ms. Amy Gaudet, Director of Revenue Cycle at Iberia

General, testified that it was routine for patients at the Surgery Center to have their

outpatient pre-operative lab work performed at Iberia General.

Iberia General received an “order to perform outpatient services” on Mr.

Martinez prior to his scheduled surgery. On January 2, 2014, Mr. Martinez

received the required laboratory services at Iberia General. On February 6, 2014,

Iberia General submitted a bill for the laboratory services required for Mr.

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LUBA is designated in the litigation as LUBA Casualty Insurance Company. However,
the February 16, 2016 judgment identifies LUBA as Louisiana United Business SIF.

Martinez to undergo the finger surgery authorized by LUBA on the UB-04

Medical Claim Form.

The initial Iberia General bill listed the following pertinent codes,

description of services, and the amount due for each of the outpatient pre-operative

services provided for Mr. Martinez on January 2, 2014, (1) CODE 0300

LABORATORY (LAB) 36415 - $16.50; (2) CODE 0301 LAB/CHEMISTRY

80053 - $244.00; (3) CODE 0305 LAB/HEMOTOLOGY 85027 - $81.00; (4)

CODE 0305 LAB/HEMOTOLOGY 85610 - $63.00.

In accordance with its February 6, 2014 submission of the UB-04 Medical

Claim Form to LUBA for services rendered, Iberia General, as a hospital facility,

expected to receive payment for $404.50, less ten percent, for a total of $364.05,

pursuant to La.Admin. Code Tit. 40, pt. I, § 2507 promulgated in conjunction with

La.R.S. 23:1034.2. The identical bill was submitted by Iberia General on February

11, 2014, and again on March 26, 2014.

In response to Iberia General’s bills for Mr. Martinez’s outpatient pre-

operative procedures (blood tests), LUBA responded by paying $163.60. The

March 20, 2014 Explanation of Medical Benefits (EOMB) stated for Codes 300

and 301, “Note: BILLED CODE IS BEING REIMBURSED ACCORDING TO

THE BY REPORT RULES PER LAC TITLE 40, CH 51, 5125.C[.]” The EOMB

stated for Codes 305 and 305, “Note: THIS SERVICE OR ITEM IS REPRICED

ACCORDING TO THE LOUISIANA FACILITY FEE SCHEDULE.” However,

the EOMB also reflected under the heading “Type of Service: HO HOSPITAL

OTHER – OUTPATIENT[.]” After receiving the EOMB from LUBA, Iberia

General did not receive any further explanation from LUBA of why it failed to pay

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the requested amount of $364.05, and only paid the reduced amount of $163.60 for

the services rendered to Mr. Martinez.

On May 11, 2015, Iberia General filed a Disputed Claim for Compensation

with the Office of Workers’ Compensation, commonly referred to as a Form 1008,

pursuant to La.R.S. 23:1034.2(F)(1) against St. Mary and LUBA for “Improper

and/or late payment of medical bills (please see attached EOBs); penalties and

attorney fees for arbitrary and capricious handling of this claim.” See La.R.S.

23:1201.

St. Mary’s and LUBA’s Answer and Reconventional Demand

St. Mary and LUBA filed an answer to the claim by Iberia General and

denied that any additional reimbursement was owed to Iberia General for the

outpatient lab services provided to Mr. Martinez. St. Mary and LUBA

subsequently also filed a reconventional demand seeking the reimbursement of

more than $110.35 they alleged was an overpayment to Iberia General.

Trial on the Merits

A trial on the merits was held on October 20, 2015, before the WCJ. Iberia

General called one witness, Ms. Gaudet, the supervisor in charge of billing at

Iberia General. She identified the two exhibits submitted into the record by the

claimant. First, Exhibit A, the February 6, 2014 bill on a UB-04 Medical Claim

Form from Iberia General to LUBA and second, Exhibit B, the EOMB from

LUBA paying only $163.60, and disallowing the additional amount of $200.45

billed for the outpatient lab services rendered to Mr. Martinez. Ms. Gaudet further

verified that the EOMB sent by LUBA clearly identified the services rendered to

Mr. Martinez as outpatient services.

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Ms. Gaudet also testified that under the regulations of workers’

compensation billing, Iberia General was classified as a hospital and was required

to use the UB-04 Medical Claim Form when billing for its services and not the

HCFA 1500 Form, as provided in La.Admin. Code Tit. 40, pt. I, § 5111. When

questioned why hospitals were treated differently from stand-alone laboratories

that bill on the 1500 Form, she replied, “It would just be an assumption that our

overhead is a lot higher than a stand-alone laboratory . . . those providers that bill

on a 1500.”

Ms. Gaudet was questioned about how bills not fully paid in the past had

been handled by Iberia General. She responded that excerpts were sent from the

statutes stating that, “(A), hospital outpatient claims are to be billed on a UB-04;

and (B), that the hospital outpatient claims are to be reimbursed at ninety percent

of charges.”

Under cross-examination by counsel for St. Mary and LUBA, Ms. Gaudet

was questioned about the “listing of CPT codes with corresponding reimbursement

rates that applies to bills billed on a HCFA 1500 form for providers except dentists,

pharmacists[,] and hospitals.” She was specifically asked, “And would you happen

to actually know what the Fee Schedule allows for the CPT code 36415?” To

which Ms. Gaudet answered, “I do not because we don’t get reimbursed by those

codes.” Ms. Gaudet further responded to counsel’s question about the designation

“by report” for some CPT codes, to which she replied that she had seen that table

before, “but again, we don’t--I don’t know what’s on the table because it’s not the

way that we get reimbursed typically.”

Ms. Gaudet testified on re-direct examination that Iberia General had

received proper payment from LUBA for treatment of injured workers in other

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cases and that as a general rule, LUBA was not one of the carriers that had caused

problems with billing issues in the past.

The record reflects that prior to the trial, St. Mary and LUBA attempted to

submit into evidence the transcript of the deposition of John Kocke, RN, as a “bill

review expert.” The WCJ denied the request and allowed the deposition to be

proffered as “Proffer D-1[.]” St. Mary and LUBA did not offer any other exhibits

in opposition to Iberia General’s claim, and have not assigned as an error on appeal

the trial court’s exclusion of Mr. Kocke’s deposition.

After the close of all testimony and argument of counsel, the WCJ took the

matter under advisement, and on November 12, 2015, issued oral reasons on the

record. A judgment was signed on February 16, 2016, in favor of Iberia General

and ordered St. Mary and LUBA to pay the underpayment of the Iberia General

bill in the amount of $200.45, $2,000.00 in penalties, and $3,000.00 in attorney

fees. The reconventional demand filed by St. Mary and LUBA was denied. From

this judgment, St. Mary and LUBA now appeal.

ASSIGNMENT OF ERRORS

On appeal, St. Mary and LUBA allege the following as errors made by the

trial court in its ruling:

Assignment No. 1: The trial court erred by applying the Fee
Schedule’s outpatient reimbursement rules to a bill for laboratory
work rather than using the specific reimbursement amounts set out by
the Fee Schedule for these services.

Assignment No. 2: The trial court erred when it awarded a penalty
and attorney fee to Iberia.

LAW AND DISCUSSION

Standard of Review

“In general, an appellate court is to review factual findings issued in

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workers’ compensation matters according to the manifest error-clearly wrong

standard[.]” Miller v. Blacktype Farms, 06-1202, p. 4 (La.App. 3 Cir. 3/7/07), 952

So.2d 867, 870. Miller further instructed:

However, when there are errors of law asserted on appeal, the
appellate court must make a determination whether the workers’
compensation judge’s ruling was legally correct.

....

It is well settled that reviewing courts will defer to a reasonable
decision of the WCJ on a matter or question properly within its
discretion. However, if the WCJ’s decision is based on an erroneous
interpretation or application of law rather than a valid use of
discretion, the incorrect decision is not entitled to deference.

Id. at 870-72 (citations omitted). Moreover, “[i]f the review on appeal reveals a

reversible error of law, a de novo review of the record must be conducted.” Perry

v. Perry & Sons Vault & Grave Serv., 03-1519, p. 3 (La.App. 3 Cir. 5/12/04), 872

So.2d 611, 614.

Assignment of Error One- Billing and Payment of Medical Expenses

In a situation where an employee is injured on the job, his employer’s

obligation to provide medical expenses is governed by La.R.S. 23:1203. Louisiana

Revised Statutes 23:1203(A) states in pertinent part, “the employer shall furnish all

necessary drugs, supplies, hospital care and services, medical and surgical

treatment, and any nonmedical treatment recognized by the laws of this state as

legal[.]”

Nevertheless, the employer’s obligations to the injured worker are limited in

La.R.S. 23:1203(B), which states in pertinent part:

The obligation of the employer to furnish such care, services,
treatment, drugs, and supplies, whether in state or out of state, is
limited to the reimbursement determined to be the mean of the usual
and customary charges for such care, services, treatment, drugs, and
supplies, as determined under the reimbursement schedule annually

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published pursuant to [La.]R.S. 23:1034.2 or the actual charge made
for the service, whichever is less.

Louisiana Revised Statutes 23:1034.2(A) instructs the director of the office

of workers’ compensation administration to establish “a reimbursement schedule

for drugs, supplies, hospital care and services, medical and surgical treatment, and

any nonmedical treatment recognized by the laws of this state as legal and due

under the Workers’ Compensation Act[,]” along with the rules and regulations

governing the implementation of the schedule.

This case involves a billing dispute, therefore, La.R.S. 23:1034.2(F)(1)

governs and provides the proper procedure for its resolution:

Should a dispute arise between a health care provider and the
employee, employer, or workers’ compensation insurer, either party
may submit the dispute to the office in the same manner and subject to
the same procedures as established for dispute resolution of claims for
workers’ compensation benefits.

In accordance with the statute, Iberia General filed a Form 1008 Disputed Claim

for Compensation with the Office of Workers’ Compensation.

Application of the Medical Treatment Guidelines to Iberia General

St. Mary and LUBA argue that because Iberia General is a hospital facility,

it should be subject to the Medical Treatment Guidelines, Maximum

Reimbursement Allowances contained in La.Admin. Code Tit. 40, pt. I, § 5157.

This conclusion is based on the mandate in La.Admin. Code Tit. 40, pt. I, §

5101(A), which provides, “It is the intent of this reimbursement schedule to limit

to the mean of the usual and customary charge all fees for medical services,

supplies, and other non-medical services delivered to workers’ compensation

claimants, as authorized by law.”

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St. Mary and LUBA also rely on the language of La.Admin. Code Tit. 40,

pt. I, § 5103(A) in support of their argument that Iberia General, as a hospital

facility, should be subject to the Medial Reimbursement Schedule. Louisiana

Administrative Code Title 40, Part I, § 5103(A) (emphasis added) provides:

This document is primarily intended to facilitate the
establishment of the maximum allowable reimbursement for all
physician, chiropractic, physical and occupational therapy, pharmacy,
hospital, vision care, Hearing Aid Equipment, Nursing/Attendant
Care & Home Health, Home & Vehicle Modification, Medical
Transportation, Durable Medical Equipment, Prosthetic & Orthopedic
Equipment, Respiratory, Miscellaneous Claimant Expenses,
Vocational Rehabilitation and Dental Care Services.

The WCJ found in favor of Iberia General and stated the following oral

reasons on the record on November 12, 2015:

A quick perusal of the reimbursement schedule and the statutes
pertaining in this case [shows that] it’s very apparent that there are
specific CPT codes for these services that were provided, however,
the services were provided as out-patient services by Iberia General
Hospital. While I do think that it leads to a certain illogical
conclusion, after a review of the matter it is patent that the services
were provided as an out-patient at a hospital. Therefore, the hospital
is entitled to reimbursement at 90 percent of the billed charges.
Therefore, payment should’ve been made in the amount of Three
Hundred and Sixty-four Dollars and Five Cents. The insurer paid a
Hundred and Sixty-three Dollars and Sixty Cents. Therefore, Iberia
General is entitled to the difference between the actual payment and
the 90 percent that was owed. This amount is Two Hundred Dollars
and Forty-five Cents. Therefore, the Court awards Two Hundred
Dollars and Forty-five Cents to Iberia General in payment of the
billed charges.

In its reasons for ruling in favor of Iberia General, the WCJ relied on

La.Admin. Code Tit. 40, pt. I, § 2507, which provides the medical guidelines for

hospital reimbursements under the workers’ compensation statutes for outpatient

hospital medical services. Louisiana Administrative Code Title 40, Part I, § 2507

provides:

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Outpatient hospital and ambulatory surgery services will be
reimbursed at covered charges less a ten percent (10%) discount. The
formula for calculating payment amount is:

(BILLED CHARGES) - (NONCOVERED CHARGES) =
COVERED CHARGES x .90 = PAYMENT AMOUNT

If a patient is admitted as an outpatient, however; is in the
hospital overnight, this will be considered outpatient services. When
patient is in hospital by midnight census of day two, this becomes an
inpatient admission, thus services are paid at per diem rate.

In addition, all procedures which can safely be performed as
outpatient procedures shall be reimbursed as such. (Reference the
utilization Review Rules, Chapter 27).

For a hospital admission to be subject to inpatient
reimbursement, it must be medically necessary and not solely for the
convenience of the payor.

The WCJ correctly found that it was “patent that the services were provided

as an out-patient at a hospital.” Louisiana Administrative Code Title 40, Part I, §

2507 makes no distinction concerning the type of medical services that qualify for

the ninety percent reimbursement, only that the workers’ compensation employee

is an outpatient. In this case, Iberia General received an “order to perform

outpatient services” on Mr. Martinez prior to his scheduled surgery. Moreover,

LUBA’s own March 20, 2014 EMOB designated the procedures performed on Mr.

Martinez as, “Type of Service: “HO HOSPITAL OTHER – OUTPATIENT[.]”

Thus, the workers’ compensation procedures for billing required that Iberia

General bill the outpatient pre-operative procedures performed for Mr. Martinez

prior to his approved surgery as an outpatient on a UB-04 Form, as confirmed by

Ms. Gaudet in her testimony at trial.

This issue has been addressed in the context of an ambulatory surgery

center, which is coupled with outpatient services at a hospital in La.Admin. Code

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Tit. 40, pt. I, § 2507. In First Choice Surgery Center v. Fresh Pickin’s Market,

Inc., 11-1918, p. 7 (La.App. 1 Cir. 5/17/12), 102 So.3d 795, 799, writ denied, 12-

2456 (La. 1/11/13), 107 So.3d 618, the first circuit found that “[t]he director of the

office of workers’ compensation administration has not established a

reimbursement schedule for the specific procedures at issue in this case. However,

since First Choice is an ambulatory surgical center, the formula set forth in

[La.Admin. Code Tit. 40, pt. I, § 2507] applies to its charges.”

The provisions of the Louisiana Administrative Code Tile 40, Part 1, § 2507

are also applicable to the case at issue as they continue to be the law, as provided

in the “Credits” which state, “Current with amendments included in the Louisiana

Register, Volume 42, Number 9, dated September 20, 2016.” Therefore, we find

the WCJ correctly found that La.Admin. Code Tit. 40, pt. I, § 2507 was applicable

to Iberia General’s bill to LUBA for the outpatient pre-operative services rendered

to Mr. Martinez.

Reasonableness of the Iberia General Charges for Outpatient Pre-Operative
Services

In First Choice, 102 So.2d at 799, where there was no applicable

reimbursement schedule, the panel discussed the analysis applicable in the absence

of a reimbursement schedule and stated:

In the absence of a reimbursement schedule, the starting point for an
award of medical expenses is the actual charge. Manuel v. River
Parish Disposal, Inc., 96-302, 96-303 (La.App. 5[] Cir. 10/1/96), 683
So.2d 791, 795. However, implicit in the above provisions is a
requirement that the charges be reasonable. See Manuel, 683 So.2d at
795. The reasonableness of a particular medical fee depends on what
is customary in a community for similar operations involving similar
pre-operative and post-operative procedures and complications. Adler
v. Hospital Service Association of New Orleans, 278 So.2d 177, 180
(La.App. 4[] Cir. 1973).

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Ms. Gaudet testified at trial that she had conducted a comparison of the

charges in the Iberia General bill to LUBA with the charges made for the identical

codes at two other hospitals in the area. Those hospitals included Dauterive

Hospital in New Iberia, Louisiana and Lafayette Regional Medical Center in

Lafayette, Louisiana. Ms. Gaudet testified that the charges from Iberia General for

the outpatient pre-operative services rendered to Mr. Martinez “were significantly

lower than both of those entities.”

Based on the testimony of Ms. Gaudet, we also find support in the record on

appeal that the charges submitted to St. Mary and LUBA met the “reasonableness”

standard for “what is customary in a community for similar operations involving

similar pre-operative and post-operative procedures.” Adler v. Hospital Service

Association of New Orleans, 278 So.2d 177, 180 (La.App. 4 Cir. 1973).

For the foregoing reasons, we find that St. Mary and LUBA’s first

assignment of error is without merit and affirm the WCJ’s judgment ordering St.

Mary and LUBA to pay Iberia General damages in the amount of $200.45 for the

underpayment of the bill for the outpatient pre-operative services rendered to Mr.

Martinez.

Assignment of Error Two – Award of Attorney Fees and Penalties’

In their second assignment of error, St. Mary and LUBA challenge the

WCJ’s judgment assessing penalties in the amount of $2,000.00 and award of

attorney fees of $3,000.00 for their underpayment of Iberia General’s bill for Mr.

Martinez’s outpatient pre-operative medical services.

The WCJ stated in its November 12, 2015 reasons for ruling:

The next question is whether the underpayment of medical bills
leads to the imposition of penalties and attorney fees. It is clear from
the outset that this matter was disputed, that there was a difference of

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opinion between the parties as to how the matter should be billed and
how it should be paid. We’re -- in this instance we’re not dealing
with uneducated parties. We’re dealing with sophisticated business
enterprises and therefore, this Court finds that the imposition of
penalties and attorney fees is appropriate. The Court awards Two
Thousand Dollars in penalties to Iberia General. The Court has
reviewed the work done by the attorney and has considered the
experience of the attorney, the work that was done, the recovery that
was obtained and determines that a reasonable attorney fee in this
matter is Three Thousand Dollars.

In the recent case of Lafayette Bone & Joint Clinic v. Louisiana United

Business SIF, 15-2137, p. 10-11 (La. 6/29/16), 194 So.3d 1112, 1120-21, the

supreme court affirmed the appellate court’s award of penalties and attorney fees

under La.R.S. 23:1201(F)(4) and provided the analysis for the determination of

same. The Louisiana Supreme Court stated:

[U]nder [La.R.S.] 23:1201(F)(4) (“[F]ailure to provide payment in
accordance with this Section . . . shall result in the assessment of a
penalty . . . together with reasonable attorney fees for each disputed
claim. . . . Penalties shall be assessed in the following manner: . . . (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. . . .”).

Because one purpose of the workers’ compensation law is to
promptly provide compensation and medical benefits to an employee
who has suffered injury within the course and scope of employment, a
failure to timely provide payment can result in the imposition of
penalties and attorney fees except when the claim is reasonably
controverted. See Authement v. Shappert Engineering, 02-1631, p. 8
(La.2/25/03), 840 So.2d 1181, 1186-87. See also [La.R.S.]
23:1203(F)(2) (“This Subsection shall not apply if the claim is
reasonably controverted or if such nonpayment results from
conditions over which the employer or insurer had no control.”). The
crucial inquiry in determining whether to impose penalties and
attorney fees is whether the payor had an articulable and objective
reason to deny payment at the time it took action. See Authement v.
Shappert Engineering, 02-1631 at p. 11, 840 So.2d at 1188.

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Based on our review of the record, we affirm the WCJ’s judgment awarding

penalties and attorney fees to Iberia General for St. Mary and LUBA’s

underpayment of the bill for the outpatient pre-operative services rendered to Mr.

Martinez. St. Mary and LUBA offered no opposition to the exhibits and testimony

offered by Iberia General. The WCJ stated in oral reasons, “We’re -- in this

instance we’re not dealing with uneducated parties. We’re dealing with

sophisticated business enterprises[.]” The statutory construction of the workers’

compensation provisions provide for the payment of medical services rendered to

injured workers. The statutory provisions cited by Iberia General, coupled with the

testimony offered by its witness, Ms. Gaudet, reflect that LUBA and Iberia General

had a billing relationship which had not been a problem in past transactions.

Therefore, we affirm the WCJ’s imposition of penalties and attorney fees against

St. Mary and LUBA who failed to demonstrate an “articulable and objective reason

to deny payment at the time it took action.” Id. at 1121.

Attorney Fees on Appeal

Iberia General seeks an additional award of attorney fees for work done on

appeal. In the case of Central La. Ambulatory Surgical Center v. McDonald’s of

Pineville, 09-0823, p. 1 (La.App. 3 Cir. 2/3/10), 29 So.3d 734, a panel of this court

stated, “A plaintiff who successfully defends a judgment on appeal is entitled to

additional attorney fees upon request.” See also Lafayette Bone, 194 So.3d 1112.

Iberia General was successful in defending the judgment in its favor on appeal.

Accordingly, we award Iberia General $2,000 in attorney fees for work performed

on appeal. We note that the parties did not request oral argument in this case.

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CONCLUSION

For the foregoing reasons, we affirm in its entirety the February 16, 2016

judgment of the Workers’ Compensation Judge awarding damages in the amount

of $200.05, penalties in the amount of $2,000.00, and attorney fees in the amount

of $3,000.00 in favor of Iberia General Hospital & Medical Center, and against St.

Mary Sugar Cooperative Inc., and Louisiana United Business SIF.

We also award Iberia General Hospital & Medical Center attorney fees in

the amount of $2,000.00 for work done on appeal. All costs of this appeal are

assessed to St. Mary Sugar Cooperative Inc., and Louisiana United Business SIF.

AFFIRMED.

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