CNA Insurance Co. v. Arkansas Children's Hospital

Citations: 386 S.W.3d 631; 2011 Ark. App. 671; 2011 WL 5387456; 2011 Ark. App. LEXIS 720Docket: No. CA 10-1186

Court: Court of Appeals of Arkansas; November 9, 2011; Arkansas; State Appellate Court

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The appeal focuses on the interpretation of Arkansas Workers’ Compensation Rule 30, which sets maximum allowable fees for medical services to injured employees. The dispute involves a $4 million medical bill from Arkansas Children’s Hospital (Children’s) submitted to CNA Insurance Company (CNA) for reimbursement. The core issue is the application of Rule 30’s 150% multiplier for extraordinary services to the Inpatient Hospital Fee Schedule. Children’s interpretation supports full reimbursement, while CNA’s interpretation leads to a reduction of over $880,000 from the billed amount. The Arkansas Workers’ Compensation Commission ruled in favor of Children’s, mandating full payment from CNA. CNA appeals, arguing that the Commission's interpretation contradicts the General Assembly’s intent to control workers’ compensation medical costs. However, the appellate court affirms the Commission’s decision.

The court reviews statutory and rule interpretations de novo and emphasizes that workers' compensation statutes require strict construction, meaning that the language must be clearly expressed and given its plain meaning. A statute is considered ambiguous only when it allows for multiple interpretations. The court also highlights the necessity to give effect to every word in the statute and not to render any word insignificant. 

The case involves minimal disputed facts: claimant Michael Driggers sustained severe burns from a fall into extremely hot saltwater on November 13, 2007, leading to a 200-day hospital stay at Children’s, the only certified burn treatment facility in Arkansas. The total bill for Driggers’s treatment was $4,112,753.10, of which CNA only paid $3,226,503.34, claiming that this amount was all that was required under Rule 30, leaving an unpaid balance of $886,249.76. Workers’ Compensation Rule 30 is designated as the "Medical Cost Containment Program."

Promulgated under Arkansas Code Annotated section 11-9-517, Rule 30 outlines maximum fees that health facilities or providers can charge for necessary medical treatment of employees injured during their employment, along with payment procedures. The Inpatient Hospital Fee Schedule (IHFS) consists of two reimbursement calculation methods: the per diem method (PDM), with an agreed allowable charge of $267,600, and the stop-loss method (SLM), designed to ensure fair compensation for unusually costly services. The dispute centers on whether the 150% fee multiplier, applicable for extraordinary medical services, should be applied before or after the SLM calculation. Children’s asserts that the multiplier should apply to the combined total of the PDM and SLM, requiring CNA to cover the full medical bill. Conversely, CNA contends that the multiplier should only apply to the PDM, maintaining that this interpretation aligns with legislative intent to contain medical costs. Children’s received an administrative review order favoring their position, which was upheld by an administrative law judge, ruling that both PDM and SLM should be calculated first, followed by the application of the 150% multiplier.

The ALJ concluded that Rule 30 does not support CNA’s claim for applying a 150% multiplier to the Primary Diagnosis Modifier (PDM) prior to adding the Stop-Loss Modifier (SLM). The ALJ also rejected CNA’s public-policy argument, determining that the rule allows for full reimbursement in specific contexts, contrary to CNA's assertions. The Commission unanimously upheld the ALJ's decision, acknowledging that while the application of Rule 30 might not always align with the intent of controlling medical costs as stated in A.C.A. 11-9-517, the current interpretation by the Medical Cost Containment Division (MCC) aligns with the rule’s provisions. The Commission clarified that the Stop-Loss Method is part of the Inpatient Hospital Fee Schedule (IHFS) and must be applied before the 150% enhancement for extraordinary services can be considered. CNA's contention that the requirement to pay the full amount of Children's bill contradicts the cost-containment goal of Rule 30 was deemed unfounded, as the rule's language does not support applying the multiplier to the PDM before the SLM calculation. The Commission reaffirmed that the total reimbursement under the IHFS is derived from combining the PDM and SLM calculations before applying the 150% multiplier. While CNA acknowledged the textual plausibility of this interpretation, it maintained that it contradicts legislative intent. The Commission agreed that Rule 30 aims to contain costs but noted that not all medical costs are subject to containment, as two exceptions allow for higher reimbursements in specific cases.

Rule 30 allows medical providers to be reimbursed for the lesser of their usual charge, a maximum fee under the rule, or a contracted price, aiming to control workers' compensation medical costs. However, it does not mandate that all inpatient hospital bills be reduced, particularly in unique cases like the one involving over $4 million in medical expenses for Driggers. The Workers’ Compensation Commission's interpretation of Rule 30, which grants Children’s the full reimbursement for extraordinary services, is upheld as consistent with the rule's language and public policy. 

Under section 11-9-517, the Commission can set rules, including maximum allowable fees for medical services related to compensable injuries. The case used a per diem model (PDM) for calculating reimbursements, determining that Children’s PDM is $1,338, leading to a total of $267,600 for a 200-day stay. To qualify for stop-loss (SLM) reimbursement, total charges must exceed the hospital maximum payment by $10,000. Once this threshold is met, additional charges are reimbursed at 80%. 

Despite CNA's claims that the SLM is an independent payment method outside the IHFS, the court finds that SLM is indeed part of the IHFS framework. Children’s typically does not receive full reimbursement for workers’ compensation claims, receiving only about 65% of total charges. CNA’s failure to provide a breakdown of its calculations and denial of a reconsideration request further complicates the dispute, but the ruling affirms that Children’s is entitled to reimbursement based on the established rules.