California: Court of Appeal Upholds Constitutionality of IMR

Shortly after the second Second District Court of Appeals provided the defense community with a welcome decision in Batten v. WCAB, the First Appellate District followed up with its much anticipated decision in Stevens v. WCAB, the first constitutional challenge to IMR to be heard by an appellate court. In its decision the First Appellate District left little doubt as to the legal basis for the legislature's ability to create a system of Independent Medical Review (IMR) and the validity of that system to the multiple challenges presented by the applicant's bar.

In its rather lengthy (27-page) decision, the appellate court went item by item through the arguments presented by applicant, striking each one down as being unsupported by statutory or case authority. However, the court found its own reason to reverse the W.C.A.B. decision and remand the case for further consideration of factual issues that the W.C.A.B. failed to address in its decision.

The court started its discussion in this matter with a lengthy review of the historical and legislative process involving medical treatment authorization and dispute resolution in workers' compensation. The court noted the process that existed prior to 2004 with battling QMEs, Agreed Medical Examiners and lengthy potentially-contentious litigation process. The Court described the legislation enacted in 2003, SB 899 and SB 228, as an effort to streamline the process and control litigation costs involving medical treatment. The effort involved two prongs. The first required the establishment of a utilization review program by each employer to prospectively, retrospectively or concurrently review, approve, modify, delay or deny medical treatment. The second prong of the 2003 legislation was to require the director to adopt a medical treatment utilization schedule based on "evidence-based peer-reviewed nationally-recognized standards of care." The medical treatment utilization schedule was to be considered rebuttably presumed correct on the issue of extent and scope of the medical treatment.

The court described the continued litigation over medical treatment with lengthy delays to resolve disputed medical issues while the parties worked their way through first the AME/QME process followed by litigation/appeal at the W.C.A.B. The court then reviewed the additional reforms that went into effect on January 1, 2013, establishing the IMR process to review adverse utilization review determinations. Interestingly the court was impressed with the legislature's extensive findings regarding the establishment of an IMR process, quoting at great length from the preamble provisions to SB 863. The court noted that, at each step of the process, if there is an adverse determination on the part of the employer, they are not able to challenge the determination and must accept the decision whether through UR or IMR. However, the employee has the additional option of challenging both the UR determination and an IMR determination. The court noted that the legislation provided employees with significant due process that did not exist for the employers. The court was also impressed with the fact that medical treatment which previously could be denied by a claims adjuster without a significant medical background could no longer be delayed, denied or modified without the opinion of a physician.

Against this background the court then reviewed the major arguments presented by Stevens:

1. State Constitutional Arguments:

Stevens argued that the IMR process violated the state constitution’s separation of powers as well as the due process clauses. The court rejected this argument, citing Section 4 of the state constitution which provides the legislature is "expressly vested with plenary power, unlimited by any provision of this Constitution, to create and enforce a complete system of workers' compensation, by appropriate legislation." (italics added by court). The court noted that the separation of powers clause expressly yields to other constitutional provisions, including Section 4, by preventing one branch of the government from exercising powers of another except as permitted by the constitution. Thus, the court noted there was no question that Section 4 with its authorization of plenary power to the legislature to create a workers' compensation system trumps the Separation of Powers clause under the state constitution by the plain terms of the constitutional language.

The court also determined that Section 4 also trumped the state constitution's due process clause, although the court also found that the due process provided in the UR/IMR process was constitutionally sound. Stevens had argued that the limitation on appealing IMR determinations to the Board based on the five statutorily identified provisions denied her due process in the ability to fully litigate and fully appeal an adverse IMR determination. However, the dourt was unimpressed with this argument, noting that there was no absolute right to an appeal and in this case the appeal provided a significant additional protection on top of both UR and IMR to the injured worker's entitlement to medical treatment. The court noted in this case the applicant not only obtained a utilization review determination, she appealed the utilization review determination internally and then also appealed it through IMR. In effect the court notes the applicant had three bites of the apple to present arguments for the requested medical treatment. Further, there were extensive additional documentation and record review at each of the subsequent appeals providing the opportunity for applicant to present additional information as allowed by law.

In reviewing the due process arguments, the court also noted that there was no basis for the position that Section 4 itself imposed separate restraints on the legislature's plenary power to create a workers' compensation system. Instead, the court noted Section 4 affirms the legislative prerogative in the workers' compensation realm as broad and sweeping and confers on the legislature the power to fix and control the method and manner of trial of any dispute, as well as the Rules of Evidence applicable to the tribunal or tribunals designated by it. The court commented on multiple occasions on the legislature's broad power to define a workers' compensation system had been upheld, giving the legislature complete, absolute and unqualified power to create and enact a workers' compensation system. This was consistent with the obvious intent behind the creation of the workers' compensation system and the constitutional grant to the legislature to create, modify and define such a system.

The court also rejected Stevens' argument that the IMR system conflicts with the mandate that the workers' compensation system provide "substantial justice in all cases expeditiously, inexpensively and without encumbrance of any character". The court specifically noted that in establishing the IMR process, the legislature made a finding that the former system of resolving disputes over medical necessity of requested treatment was exactly the opposite of one which resulted in an expeditious, inexpensive and without encumbrance program for resolving medical disputes. The legislature specifically determined that the dispute resolution system that existed prior to SB 863 impeded justice because it was costly and time-consuming, prolonged disputes and caused delays in medical treatment for injured workers. The court also looked with favor upon the legislature's finding that having medical professionals ultimately determine the necessity of requested treatment furthers the social policy of the state regarding the use of evidence-based medicine to provide injured workers with the highest quality of medical treatment and that establishing the IMR program was necessary to that policy.

“…In sum, the Legislature found that, far from conflicting with Section 4’s mandate to provide substantial justice, the IMR process furthers it. It is not our place under the state Constitution to “second-guess the wisdom of the Legislature” in making these determinations.”

2. The IMR Process Does Not Violate Federal Due Process:

Having decided that the IMR process does not violate either the separation of powers clause or the applicant's right to due process, the court then turned to the argument that the applicant's right to federal due process was impeded. The court, in essence, found that the California workers' compensation system did not involve issues of federal jurisdiction and therefore that federal due process arguments fail. The court noted that in order for applicant to prevail on the issue of a federal due process, there must be a showing that the state action deprived her of a property or liberty interest without sufficient notice and opportunity to be heard. The court observed, without deciding such interests existed, that even if the IMR determination constituted state action and that a claim for medical treatment involved the constitutionally-protected property interest, the applicant did not have an undue taking in this case. The court noted that the U.S. Supreme Court had previously decided cases involving Independent Medical Review from other states and had found that even more onerous provisions had not involved an unreasonable taking under the due process argument. The court, relying on the body of constitutional law at the federal level, determined the argument that IMR constituted an unlawful taking simply failed. The court further rejected the argument that the UR/IMR process did not afford adequate due process. The court indicated due process is the right to notice and a meaningful opportunity to be heard. In this case the employee had multiple levels of opportunity to be heard and have her determination regarding medical treatment made. This included the right to have her own input including generating medical evidence and submitting it to both UR and IMR for review.

“Even assuming that the IMR determination constituted state action and implicated a protected property interest, however, we nonetheless conclude that Stevens’s federal due process claim fails because Stevens was afforded ample process. ‘The core of due process is the right to notice and a meaningful opportunity to be heard.’ (LaChance v. Erickson (1998) 522 U.S. 262, 266; see also Cleveland Bd. of Educ. v. Loudermill (1985) 470 U.S. 532, 547.) When due process must be afforded, the amount of process required is determined by balancing the affected private interest, the risk of erroneous deprivation of this interest, the probable value, if any, of additional or substitute safeguards, and the government’s interest in the process. (Mathews v. Eldridge (1976) 424 U.S. 319, 334-335.) In employing this analysis, we reiterate that workers seeking treatment under California’s scheme receive far more process, including through UR, than just that which is provided in the IMR procedure.”

The court further noted that given the multiple layers of review, the risk of erroneous depravations under the workers' compensation system appeared to be fewer, and certainly no more, than the risks under the Knox Keene Act procedures which had already been upheld as being constitutionally sufficient.

3. Anonymity of the IMR Physician:

The court was similarly unimpressed with the applicant's argument that the lack of information as to the actual evaluating physician in the IMR process was constitutionally defective. The court found that there was no authority for their ability to cross-examine such decision-makers. The court noted that the Independent Medical Review as well as utilization review provided detailed explanations of the reasons for denial and modification of the request for treatment with multiple opportunities to submit evidence and challenge the decisions.

Finally, the court, in what may end up being one of the more meaningful portions of the case, flatly rejected Stevens' argument that the IMR process violates the due process provisions of the constitution because there was no enforcement procedure for the statutory time limits for IMR decisions. The Board had noted that Stevens' IMR determination took over 7 months and found fault with the lack of statutory mechanism to enforce Labor Code Section 4610.6(d)'s requirement that an IMR determination be made within 30 days. The court noted as follows:

“…We are unconvinced that the lack of a mechanism to enforce time limits renders the IMR process unconstitutional. In the absence of a penalty, consequence, or contrary intent, a time limit is typically considered to be directory, and its violation does not require the invalidation of the action to which the time limit applies. (See, e.g., California Correctional Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th 1133, 1145.) Furthermore, without deciding whether a writ of mandate may have been available to enforce the time limit (see id. at p. 1148), we note that Stevens did not attempt to seek one or otherwise to insist on timely compliance.”

One issue that the court found to be relevant that Stevens appeared to overlook (as well as the WCAB) is the court's perception that the appellate rights to the WCAB were actually broader than the Board considered in its own determination. The utilization review determination and IMR determination had both ruled that the applicant was not entitled to home healthcare services involving personal attendant activities as being not included under the medical treatment utilization review schedule. The court noted that while the Board is not able to change the medical necessity determination, the Board's authority to review an IMR determination includes the authority to determine whether it was adopted without authority or based upon a plainly erroneous fact that is not a matter of expert opinion (Labor Code § 4610.6(h)(1) and (5)). These grounds include both review of factual and legal questions. The court noted that if Independent Medical Review were to deny authorization for medical treatment, but the basis for the denial was factually inaccurate, the Appeals Board could reverse and send it back for determination based on that erroneous fact. Similarly, the court noted:

"The denial of a particular treatment request on the basis that the treatment is not permitted by the MTUS would be reviewable on the ground that the treatment actually is permitted by the MTUS. An IMR determination denying treatment on this basis would have been adopted without authority and thus would be reviewable. “

The court determined that the Board failed to appreciate the latter point in its ruling that it was powerless to review the IMR determination categorically denying Stevens services of a home healthcare aide, even though it concluded that Stevens' condition requires care other than homemaker services and considered puzzling the determination's statement that "Medical treatment does not include personal care given by home health aides like bathing, dressing and using a bathroom when this is the only care needed." The question of whether the home healthcare services are authorized, when bathing, dressing and using the bathroom is the only care needed, is a question to be resolved by reviewing and interpreting the MTUS. The court determined that if the Board were to conclude that the IMR determination incorrectly affirmed the denial of these services by wrongly interpreting the MTUS and it was to find there were no other reasons supporting denial, the W.C.A.B. would have the power to reverse the determination and send it back to the IMR process. The court, therefore, disagreed with Stevens that the IMR process provided "no means to address conflicts about what constitutes medical treatment" and no "meaningful appeal to challenge an IMR decision based on erroneous interpretation of the law."

The case was, therefore, remanded to the W.C.A.B. to review the MTUS to determine if the denial of authorization was based on correctly read language in the MTUS.

COMMENTS AND CONCLUSIONS:

This case represents yet another resounding affirmation of the Legislature’s authority to define the workers’ compensation system and the continuing effort to redirect resources to providing benefits to injured workers rather than continuous feeding of litigation. While many will agree that UR and IMR are not perfect systems, the court makes it clear that perfection is not being sought. The court repeatedly comments that the employee’s due process in this system is more than adequately provided with multiple opportunities for the employee to have input into the medical decision making process.

It remains to be seen just how much can be made of the remand of the case to the W.C.A.B. to review the factual basis for the IMR determination. In reviewing the language, the UR and IMR decisions appear to have quoted the MTUS correctly. Hopefully this will not provide another avenue for the W.C.A.B. to assume it gets to decide medical treatment issues.

The court also noted the Legislature’s findings regarding the excessive waste of time and effort in the pre SB 863 process for resolving medical disputes, noting that the delays engendered in the litigation process were even more detrimental to the concept of substantial justice than the IMR process which the court observed actually furthered the constitutional mandate rather than being contrary to it, an observation the W.C.A.B. should take note of when it decides a one-day delay in deciding medical necessity is a basis to assume jurisdiction over medical decision making (as in the Dubon/Bodam line of cases). I have always found it disingenuous that the W.C.A.B., in deciding such delays provide it with authority to make medical decisions, cites minimal delays in UR and then proceed to spend months litigating an issue which had been decided promptly on a medical basis but notice was given a day late. The court’s language in Stevens augers poorly for the appellate courts upholding the W.C.A.B.’s continuing ability to assume control over medical care.

As the 3rd District has agreed to review the W.C.A.B. decision in the Hallmark v W.C.A.B. (Southard) case (where a split panel of the W.C.A.B. ruled late IMR is invalid and extends authority to the W.C.A.B. to decide medical issue), the dicta in Stevens that such time frames are “directive” not mandatory (as was argued by the dissenting commissioner) suggests that W.C.A.B. jurisdiction over medical decision making may be finally put to rest.

© Copyright 2015 Shaw, Jacobsmeyer, Crain & Claffey PC. All rights reserved. Reprinted with permission.