Louisiana Supreme Court Rules – PPO Discounts Don’t Violate LWCA

Reversing the decision of the Third Circuit Court of Appeals, the Louisiana Supreme Court ruled that the Louisiana Workers’ Compensation Act (LWCA) does not prohibit Preferred Provider Organizations (PPOs) from applying discounts to workers’ compensation services and reducing the payable benefits to health care providers.  The ruling, made on November 30th, is being labeled as a “test case,” which could have implications for other employers, insurers and health care providers, in the state of Louisiana, and possibly in the entire nation.

The case is Agilus Health (Allison Taylor) vs. Accor Lodging North America /Liberty Mutual Insurance Company

During the course of her employment with Accor Lodging North America (Accor), Allison Taylor (Taylor) was injured.  She received treatment at Agilus Health (Agilus), who acted as her health care provider for her work-related injuries.  When Agilus submitted their bills for payment, the charges were discounted below amounts provided by the Louisiana Workers’ Compensation Reimbursement Schedule.   Instead, discount amounts were applied according to a Participating Provider Organization (PPO) agreement that Agilus had entered into with First Health Network (First Health), and in turn, with Liberty Mutual Insurance Company (Liberty Mutual).  Agilus disputed the amounts received and, following a hearing with the Office of Workers’ Compensation (OWC), was awarded an underpayment in the amount of $181.20, a $2,000.00 penalty, and $4,000 in attorney’s fees, plus legal interest.  Accor and Liberty Mutual appealed.  Agilus answered by asking for additional attorney’s fees on appeal.

On March 10, 2010, the Court of Appeals of Louisiana, Third Circuit agreed with the findings of the OWC, and concurred that the underpayment violated the LWCA.  Agilus was awarded an additional $2,500.00 in attorney’s fees.

Accor and Liberty then applied for a writ with the Supreme Court of Louisiana arguing that “the discount taken pursuant to the PPO agreement does not violate any provisions of the LWCA and should be found to be a valid and enforceable contract.”  They were granted certiorari on June 18, 2010.

The Supreme Court of Louisiana found that, Agilus, as a member of the First Health network, agreed to receive lower rates from payors in the network for a number of different services, and Liberty Mutual Insurance Company was one of those many payors in the First Health network.  Agilus charged Liberty Mutual and Accor Lodging $1,158.00 for the services related to Taylor’s June 14, 2007 injury.  Agilus claimed it expected to be paid the maximum reimbursement under the LWCA reimbursement schedule, or $906.00.  However, because Agilus belonged to the First Health network, and Liberty Mutual was a payor in the network, Liberty Mutual paid the bill timely in the amount of $724.80, which was 80% of the LWCA reimbursement schedule.  Liberty Mutual paid this amount pursuant to the PPO agreement, which set forth the amount of reimbursement for workers’ compensation services for payors into the network at 80% of the state’s reimbursement schedule.  

 When reviewing the findings of the appeals court, the Supreme Court judges found themselves agreeing with the opinion of the lower court’s dissenting judge.  Judge Amy opined that the plaintiff in this case confused an employer’s liability to the employee with an employer’s obligation to a health care provider.  La. R.S. 23:1033 states, “No contract . . . shall operate to relieve the employer . . . from any liability created by this Chapter except as herein provided.”  Judge Amy also determined that the employer’s liability was satisfied upon paying the contractually agreed upon fee for workers’ compensation patient treatment.  A number of provisions were quoted from the contract, specifically the “Payment in Full” clause, which stated: “Provider agrees to accept the reimbursement specified in Appendix A as payment in full for Covered Medical Services rendered to Participating Patients.  In no case shall reimbursement exceed Provider’s billed charges.”  Judge Amy also pointed out that the president of Agilus knew the contents of the contract and specifically knew Agilus was “agreeing some kind of way to take less than the fee schedule” from the payors in the PPO network.  La. R.S. 23:1034.2(E) was found to permit PPO contracts, and Judge Amy was of the opinion that the decision of the OWC hearing officer should have been reversed.

 The LWCA was found to specifically contemplate “health care providers charging less than the fee schedule for their services to injured workers’ compensation patients based on La. R.S. 1034.2(E).  Nothing in the LWCA was found to “prohibit a health care provider from contracting to charge less than the reimbursement schedule, whether through a PPO or other agreement.”  It was also noted that, “the health care provider in this case voluntarily entered into the PPO agreement with First Health.  Agilus was not forced to sign the contract, but did so for the benefit of receiving patient steerage in general, as their corporate representative testified.  This was a business decision, and Agilus could have, and did in 2008,” (after the date in question related to this case) “opt out of the First Health Network.  The court declined to accept “Agilus’ claims that by simply listing its standard rate in the bill the LWCA forbids the payment of anything less than the maximum amount listed in the reimbursement schedule, thus relieving them of their obligation under the PPO contract to accept a lesser fee for their care.” 

 On November 30, 2010 the Louisiana Supreme Court reversed the decision of the Court of Appeal of Louisiana, Third Circuit, ruling that the “LWCA does not prohibit PPO agreements providing discounted fees for workers’ compensation services to health care providers.”