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Workers' Compensation

California: Board Panel Reverses Rebolledo 1, Clarifies Term “Lien Owner” under Labor Code Section 4903.8

On October 29, 2021, an Appeals Board panel issued a decision in which it held that a medical provider’s billing/collection service could pursue a lien for medical services as a non-attorney representative on the provider’s behalf but could not be the owner of the lien under Labor Code section 4903.8 for purposes of payment because it was not the assignee of the lien, nor did the circumstances permit it to be an assignee. That decision was Rebolledo v. New Cure, Inc., 2021 Cal. Wrk. Comp. P.D. LEXIS 300 (Rebolledo 1).

Background

In that case, WSPT Network (WSPT), a billing/collection service, filed a timely lien for physical therapy services provided to applicant under Labor Code section 4903(b) by Lo Acupuncture, Inc. (Lo), through licensed therapist Josephine Chau (Chau). The lien was disputed and a WCJ found that WSPT was not the original provider of the physical therapy services that were the subject of the lien, nor was it an assignee under the provisions of Labor Code section 4903.8. The WCJ ordered that WSPT take nothing on its lien claim.

WSPT sought reconsideration of the WCJ’s decision, arguing that it is the lien owner as defined by Labor Code section 4903.8(a)(1) based on a contract that authorized it to seek payment on the lien for services provided to applicant by Lo through its licensee Chau. The panel in Rebolledo 1 rejected that claim and relied on Chorn v. Workers’ Comp. Appeals Bd. (2016) 245 Cal. App. 4th 1370 [81 Cal. Comp. Cases 332] (Chorn) in which the court concluded that the effect of Labor Code section 4903.8 is to prohibit the Appeals Board from ordering or awarding lien payments to anyone other than the medical provider who provided the services (i.e., the “lien owner”) absent a valid assignment. Although Labor Code section 4903.8(a)(1) permits a medical provider to assign a lien, the panel reasoned that a valid assignment could not be made because Lo/Chau had not ceased doing business. Nonetheless, the panel observed that the Appeals Board’s rules (Cal. Code Reg., tit. 8, § 10401(a)) allow a lien claimant to use the services of a non-attorney representative to file and seek payment on a lien. Thus, Lo/Chau could authorize WSPT to file and pursue a lien on their behalf. The panel then rescinded the WCJ’s decision and returned the matter to the trial level to allow WSPT to pursue and adjudicate the lien on Lo/Chau’s behalf.

State Compensation Insurance Fund (SCIF) sought reconsideration of Rebolledo 1, and reconsideration was granted on January 1, 2022 to further study the factual and legal issues raised. By its Decision after Reconsideration issued on March 25, 2022, the panel rescinded Rebolledo 1 and replaced it with a new decision. Rebolledo v. New Cure, Inc., 2022 Cal. Wrk. Comp. P.D. LEXIS – (Board Panel Decision).

Board Panel’s Analysis

The panel acknowledges that while WSPT timely filed a lien claim for physical therapy treatment provided to the injured worker by Lo’s licensee, Chau, WSPT was not the provider of those services, nor was it an assignee. Rather, WSPT is a medical billing/collection company that contracted with Lo to provide management services in the form of billing and collections. Such arrangements, the panel states, are permitted by Business and Professions Code section 650(b), which authorizes contracts between medical providers and non-medical providers for management services. The panel then frames the relevant legal issue as whether a medical provider’s billing/collections company can be the owner of a medical treatment lien (Lab. Code § 4903b)) under Labor Code section 4903.8(a)(1) and entitled to payment on such lien.

The panel begins its analysis by scrutinizing the precise language in Labor Code section 4903.8(a). Subdivision (1) of subsection (a) mandates that “any order or award for payment of a lien filed pursuant to subdivision (b) of Section 4903 shall be made for payment only to the person who was entitled to payment for the expenses as provided in subdivision (b) of Section 4903 at the time the expenses were incurred, who is the lien owner” (emphasis added). Next, subdivision (2) states that “all liens filed pursuant to subdivision (b) of Section 4903 shall be filed in the name of the lien owner only, and no payment shall be made to any lien claimant without evidence that he or she is the owner of that lien” (emphasis added). Further, subdivision (2) prohibits payment of the lien to an assignee, “unless the person (i.e., lien owner) has ceased doing business in the capacity held at the time the expenses were incurred and has assigned all right, title, and interest in the remaining accounts receivable to the assignee.”

Rebolledo 1 relied on Chorn v. Workers’ Comp. Appeals Bd. (Chorn) (2016) 245 Cal. App. 4th 1370 [81 Cal. Comp. Cases 332] in concluding that the Appeals Board is prohibited from ordering or awarding lien payments to anyone other than the medical provider who provided the services covered by the lien. The Chorn court summarily concluded that the lien owner could only be the medical provider who provided the services. Such reliance, the panel now admits, was a mistake. The litigants in Chorn did not put in issue the definition of “lien owner,” as that term is used in Labor Code section 4903.8, nor was such definition relevant or necessary to the constitutional questions raised and decided in Chorn. Instead, the decision in Chorn addressed whether the lien filing fee (Lab. Code § 4903.05) and the anti-assignment provisions of Labor Code section 4903.8 violated various California Constitutional provisions. Chorn simply repeated the statutory language within section 4903.8, without offering any explanation or analysis to support the conclusion it reached that the lien owner could only be the medical provider who incurred the expense. Moreover, the panel observes, the summary conclusion was extraneous to the decision being made in Chorn and, therefore, is merely dictum.

Upon reaching the conclusion that Chorn is not controlling on the relevant legal issue before it, the panel allows for the possibility that WSPT may contractually be entitled to payment for the physical therapy services provided to applicant by Chau. While it is conceivable that WSPT may have become the lien owner through a contract and/or joint venture with Lo, the panel finds the record lacking substantial evidence to enable it to determine the nature and terms of any such contract and/or joint venture. Since those issues were not adjudicated at trial by the WCJ, the principles of due process and the right to a fair hearing require the case to be returned to the trial level for development of the record and consideration in the first instance of whether WSPT is the lien owner under Labor Code section 4903.8.

SCIF’s Contentions

Interestingly, the panel does not end its opinion here. Instead, the final four pages of the opinion specifically address each of SCIF’s contentions. The panel disagrees with SCIF’s assertion that the lien is subject to the assignment provisions within Labor Code section 4903.8, stating, “[i]t is undisputed that there is no assignment of Chau’s receivables to WSPT Network.” (Opinion, Part II, p. 7.) Next, it discusses widespread lien abuses that Senate Bill 863 was intended to prevent and SCIF’s implication that WSPT’s lien was frivolous. The opinion observes a complete lack of evidence in the record that WSPT’s lien in this case is a problem lien targeted by the Legislature. It then notes that the lien does not involve an assignment and was filed by WSPT in its own name because WSPT believed that it was the lien owner by virtue of its contract and/or joint venture with Lo/Chau. Next, the panel cautions that SCIF is asking the Appeals Board to interpret Labor Code section 4903.8 narrowly, so as to limit the filing of medical treatment liens to only those liens filed by the provider (or representative), or, if the provider has ceased doing business, by its assignee. The panel notes a lack of clear statutory basis for such a limited interpretation and concludes by expressing its uncertainty, “that the Appeals Board has the authority to interfere in the right of providers and general corporations to enter into lawful contracts.” (Opinion, Part II, p. 8.)

Notice of Joinder Necessary

Finally, the opinion offers the panels’ reasoning for directing the WCJ in Rebolledo 1 to issue a notice of joinder of Lo and Chau. An order of joinder may be necessary to ensure that any order of lien payment be made in favor of the proper party. While an order of joinder is clearly within the authority of the Appeals Board, the panel notes that SCIF’s argument is premature since a notice of joinder has not yet issued.

Takeaway

The newly issued Rebolledo opinion may not be the final word on the meaning of “lien owner” as that term is used in Labor Code section 4903.8. Nonetheless, the opinion’s significance should not be underestimated, either. The panel candidly admits that it made a mistake by accepting Chorn’s conclusory dicta in Rebolledo 1 without fully considering the relevant question: whether someone other than the provider of the medical treatment services might be the “lien owner.” The thoughtful, scholarly opinion is compelling and persuasive.

Reminder: Board panel decisions are not binding precedent.

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