Thursday, April 28, 2016

Stahl is Over in Florida

There was ample excitement in Florida workers' compensation in April. On April 20, 2016 the Florida First District Court of Appeal decided Miles v. City of Edgewater Police. On April 28, 2016, not to be outdone, the Florida Supreme Court decided Castellanos v. Next Door Company. Both are interesting and intriguing decisions. The landscape of claimant attorney fees in Florida workers' compensation is different today than it was in March. 

With the excitement and furor over Castellanos, many (me initially) missed the Supreme Court's decision in Stahl v. Hialeah Hospital. Stahl was a challenge to the constitutionality of the state workers' compensation law, and specifically to exclusive remedy. It had similarities to the Padgett v. Florida Workers Advocates that was decided by the Florida Third District last year, a case which the Florida Supreme Court declined to hear.  

The Supreme Court decision in Stahl is not nearly as long as Castellanos (55 pages) and really adds little to the great workers' compensation debate. Essentially, the Supreme Court said that accepted jurisdiction to hear Stahl, considered the briefs in Stahl, heard oral arguments, and has now decided not to consider the case. This is known as a "discharge" of jurisdiction. It is not a decision on the merits of the case, but a decision by the high court not to review the merits after all. The result is that the decision of the First District Court in Stahl stands, exclusive remedy in Florida stands, for now. 

Stay tuned for further challenges and arguments. We still await the Supreme Court decision in Westphal, but much of the wait and conjecture is now concluded with Stahl and Castellanos decided. While many lament that the decisions were not all made yesterday, as Meatloaf reminded us "two our of three ain't bad."

The ingenuity and intelligence of the professionals engaged in the practice of Florida workers' compensation law on both sides of the debate are simply without equal.  

Castellanos is Decided by Supreme Court

Another chapter in the Florida workers' compensation attorney fee debate has closed (or is it the first shoe to drop?). 

The Florida Supreme Court on April 28, 2016 rendered its decision in Castellanos v. Next Door Company. The case had been pending 540 days since the oral argument on November 5, 2014. It is 55 pages long, including one concurring decision and two dissenting opinions. Justice Pariente is the author of the majority opinion concluding that Section 440.34(1) is "unconstitutional under both the Florida and United States Constitutions as a violation of due process." She was joined by Labarga, Quince, and Perry. Justice Lewis concurred with his own opinion. 

Just a week before, the Florida First District Court of Appeal concluded that the same statutory provision, Section 440.34(1) was unconstitutional in the setting of fees paid by an injured worker, Martha Miles, and a union that sought to pay fees on her behalf. The first question voiced to me following the Court's publication of Castellanos was "what impact does this have on Miles." That is an intriguing question. One that the Court in Castellanos discussed briefly (characterizing the First District decision as an "as applied" decision). While the debate as to whether is is "as applied" or facial, the decision in Castellanos may arguably make that debate moot in most or all instances. 

The Castellanos Court noted that the First District certified questions of great public importance regarding workers' compensation attorney fees. The Court rephrased the question before it answered. Further, the Court noted that this issue affects "numerous claimants," because in the 540 days the case has been pending decision, "the First District has certified that its disposition in eighteen additional cases passes upon the same question."

The opinion concludes that Section 440.34 "presumes that the ultimate (statutory) fee will always be reasonable to compensate the attorney, without providing any mechanism for refutation." Finding a historic foundation in reasonableness, the Court held "the right of a claimant to obtain a reasonable attorney’s fee when successful in securing benefits has been considered a critical feature of the workers’ compensation law since 1941."

It is worth noting for historical reference that Section 440.34 limited fees with the use of a statutory presumption in the 1990s. That presumption could be overcome with proof that the presumptive fee was not reasonable. In 2003, that presumptive fee calculation was legislatively rendered mandatory. With that amendment, however, the legislate retained language regarding the reasonableness of attorney fees. The section stated: "A fee, gratuity, or other consideration may not be paid for a claimant in connection with any proceedings arising under this chapter, unless approved as reasonable by the judge of compensation claims or court having jurisdiction over such proceedings. (emphasis added). 

The seemingly mandatory constraint of the "formula fee" was challenged in various cases early this century, and ultimately the Florida Supreme Court considered the implications of Section 440.34 in Murray v. Mariner Health, 994 So.2d 1051, (Fla. 2008). The Court avoided the constitutional questions raised (which bore similarities to those raised in Castellanos) and decided Murray on the basis of statutory interpretation. It concluded that the presence of "as reasonable" resulted in a statutory ambiguity, and the Court held that "reasonable," that is hourly, attorney fees could therefore be appropriately awarded or approved under the 2003 fee statute. 

The Florida Legislature returned in 2009 and amended Section 440.34 removing the "as reasonable" language. This amendment thereby rendered the "formula fee" as a strict constraint on the calculation of claimant's attorney fees. 

The Castellanos Court expounds on its perception of workers' compensation generally. It noted that "from its outset, the workers’ compensation law was designed to assure, as the current legislative statement of purpose provides, 'the quick and efficient delivery of disability and medical benefits to an injured worker.'" The Court noted that this intention is stated in Section 440.015, the "preamble" to the statutory process. 

However, the Court concluded that "while the Legislature has continued to enunciate this purpose, in reality, the workers’ compensation system has become increasingly complex to the detriment of the claimant." As a result, the Court noted, the injured worker "depends on the assistance of a competent attorney to navigate the thicket." The Court held that "it is undeniable that without the right to an attorney with a reasonable fee, the workers’ compensation law can no longer “assure the quick and efficient delivery of disability and medical benefits to an injured worker.” 

The Supreme Court is clear in it holding, that "it is the irrebuttable statutory presumption—not the ultimate statutory fee awarded in a given case—that we hold unconstitutional." This is a distinction with which the dissenters took issue. The Court concluded that its holding of facial unconstitutionality is in part based upon its conclusion that "the possibility of an as applied challenge to the statute on a case-by-case basis, would be both unworkable and without any standards for determining when the fee schedule produces a constitutionally inadequate fee." This is likely in part due to the fact that the trier of fact in Florida workers' compensation, the Judges of Compensation Claims, lack authority to make any findings regarding constitutionality. Thus, in an "as applied" process, any finding of constitutional infirmity would necessarily have to be made on a case-by-case process before the Florida First District Court. 

Procedurally, the Court's decision provides a clear guidance to the marketplace. The Court quashed (invalidated) "the First District’s decision upholding the patently unreasonable $1.53 hourly fee award, and direct that this case be remanded to the JCC for entry of a reasonable attorney’s fee."

The Court reiterated, from Murray, the conclusion that the legislature's constraint on fees was "to ensure that the injured worker, rather than his or her attorney, would actually receive the bulk of the compensation award." To accomplish this, the Court said, "the Legislature, from the original adoption of the Act, gave the JCC or relevant administrative body, however denominated at the time, approval oversight of the amount a claimant paid to his attorney." This evolved in 1941 to encompass such fees being paid by the employer/carrier in some instances, rather than by the injured worker. 

The Court noted that an injured worker cannot proceed in Florida workers' compensation without an attorney due to the complexities of the workers' compensation law, quoting the First District saying "a claimant proceeding 'without the aid of competent counsel' would be as 'helpless as a turtle on its back.'" (citations omitted). 

The Court reiterated that attorneys fees in Florida workers' compensation are effective in two distinct purposes. First, the fees "enable an injured employee who has not received an equitable compensation award to engage competent legal assistance." While there are those who believe that workers' compensation is a legal system defined and refined by statute, the Court clarifies that it is in fact an equitable system. But, additionally, the fees "penalize a recalcitrant employer." Some might call this a marriage of the proverbial "carrot" (attracting counsel to such representation) and the proverbial "stick" (deterring unwarranted or unreasonable resistance to claims).

The Castellanos analysis concludes that lack of judicial discretion, the absence of "reasonableness" establishes "a conclusive irrebuttable presumption that the formula will produce an adequate fee in every case." Concluding this outcome is "not true," which is perhaps based on the evidence in this case (an analysis of "as applied" constitutional challenges) and noting the complexities of constitutional challenge in light of the limited authority of Judges of Compensation Claims, the Court concluded the result is "a chilling effect on claimants’ ability to challenge employer/carrier decisions to deny claims for benefits and disrupt the equilibrium of the parties’ rights intended by the legislature in enacting section 440.34.” 

The Court restated its previous test "for determining the constitutionality of a conclusive statutory presumption, which the Court says encompasses the fee schedule provided in section 440.34: "(1) whether the concern of the Legislature was 'reasonably aroused by the possibility of an abuse which it legitimately desired to avoid'; (2) whether there was a 'reasonable basis for a conclusion that the statute would protect against its occurrence'; and (3) whether 'the expense and other difficulties of individual determinations justify the inherent imprecision of a conclusive presumption.' (citations omitted). 

The Court seems to conclude that prong one is arguably present, but then explains that "Rules Regulating The Florida Bar already prevent against excessive fees." And, further, that the Supreme Court "does not condone excessive fee awards." The Court analyzed seemingly assuming "that the first prong of the due process test is satisfied because the Legislature desired to avoid excessive fees."

In discussing the second prong, the court referred to Miles. The Court concluded that Miles is "an as-applied constitutional challenge to sections 440.105 and 440.34," and that the combination of these violates the injured worker's "right to free speech, free association, petition, and right to form contracts." Thus, the Court reiterates “that the criminal penalties of section 440.105(3)(c), Florida Statutes, are unenforceable against an attorney representing a workers’ compensation client seeking to obtain benefits under chapter 440, as limited by other provisions.” The Court notes that section 440.105 is not being reviewed in Castellanos

Returning to the second prong, the Court concludes that section 440.34 cannot "actually serve this function—as required by the second prong of the test." The Court says that "excessive fees can still result under the fee schedule, just as inadequate ones can." and thus, regardless of the intent in prong one, the statute fails in prong 2. 

Furthermore, the Court held that the justifications in the third prong were not present in this analysis. It noted that "indeed, the JCC in this case actually made these individual determinations, but the inherent imprecision of the conclusive presumption prevented both the JCC and the First District from doing anything about the unreasonableness of the resulting fee." Because this "presumption" thus precludes deviation, and finding that it fails the conclusive presumption test stated, the Court held that "the statute violates the state and federal constitutional guarantees of due process."

The Court also foreshadows (according to some already prognosticating out there in the ether of social media) its future decisions in other pending workers' compensation reviews. The Court notes that several constitutional challenges are pending before the Court, and that "in each of these cases, there was either an outright denial of benefits or multiple defenses raised by the E/C, and in each case, the attorney for the E/C expended a number of hours equal to or exceeding the hours expended by the claimant’s attorney." Whether this portends any particular outcome in other current challenges, the Court explains this is evidence of an inequity in the compensation for claimant and defense attorneys. 

Of note, the Supreme Court somehow came across the annual reports generated by this office pursuant to statutory mandate. I received an email already congratulating me that someone at least is reading our reports!

The remedy for this unconstitutional statute, the Court holds, is revival of the previous (the last constitutional) statute. Thus Castellanos revives section 440.34 as amended in 2003 (and as it existed when upheld by Murray). This may have implications for the First District's decision in Miles, which last week cited Lundy and reiterated that section 440.34 was appropriate as to fees payable by the employer/carrier. 

So, now "a JCC must allow for a claimant to present evidence to show that application of the statutory fee schedule will result in an unreasonable fee." The Court emphasized "that the fee schedule remains the starting point, and that the revival of the predecessor statute does not mean that claimants’ attorneys will receive a windfall." As the 2003 statute did not contain "factors" for deviation from the statutory "starting point," the Court in Murray concluded that the factors it enunciated in Lee Engineering were appropriate for consideration. In Castellanos, the Court reiterated its deference to those Lee Engineering standards. 

Justice Canady dissented, saying that the Legislature's "policy determination" is "that there should be a reasonable relationship between the value of the benefits obtained in litigating a workers’ compensation claim and the amount of attorney’s fees the employer or carrier is required to pay to the claimant." He says that this policy violates no "constitutional provisions." Justice Canady contends that Castellanos, in this regard, is based on assumption "without any reasoned explanation." He concedes that the "policy (Secction 440.34(1)) may be subject to criticism," but that "there is no basis in our precedents or federal law for declaring it unconstitutional."

Justice Canady states that the "three part test" application in Castellanos "is unjustified because the majority misunderstands the test and misapplies it in the context presented by this case." He says the application of that test "simply ignores this fundamental point" ("disproportionate fees is the very evil that the Legislature sought to eliminate.") He predicts that "the line of reasoning adopted by the majority unquestionably has the potential to become a 'virtual engine of destruction for countless legislative judgments' previously understood to be constitutional."

Justice Polston also dissented from the opinion. He says that the "majority has rewritten the statute to avoid the standard governing facial challenges." He states that the Court has reinstated Murray and turned "facial constitutional review completely on its head." This, he says rewrites "the 2009 statute." He contends that there is no facial infirmity, but concedes "the possibility of a successful as-applied constitutional challenge." He notes, however, that no such as applied challenge was raised in Castellanos. The conundrum of as applied challenges in a system presided over by judges without authority for such decisions seems to play a part in both the majority and this dissent. 

Justice Polston notes that “for a statute to be held facially unconstitutional, the challenger must demonstrate that no set of circumstances exists in which the statute can be constitutionally applied.” (citations omitted). He also noted that “when we review the constitutionality of a statute, we accord legislative acts a presumption of constitutionality and construe the challenged legislation to effect a constitutional outcome when possible.” (citations omitted). He contends that by employing the presumption analysis to a statute that creates no presumption, the Court has inappropriately evaded these two long-held maxims that otherwise govern constitutional analysis. An analysis that he explains would, in this case, results in the precise conclusion reached by the First District Court of Appeal, that section 440.34 is constitutional on its face. 

Does Castellanos settle all the questions? There will be many that feel it does. With the same essential effect of Murray, the return of hourly attorney fees, many may feel the questions are answered. Some may still wonder, despite the Supreme Court's characterization of Miles being "as applied," whether there remains any efficacy of section 440.105(3)(c). Contrarily, others are already questioning whether Miles has any practical effect in light of Castellanos and the return to hourly "reasonable" fees (one asked me "why would a claimant pay a fee when the reasonable fees from the e/c are back?"). 

There remain questions. Whether this decision telegraphs the long-awaited outcome in Westphal remains to be seen, despite the prognostications of the tweeters and others. Stahl is a case in which the claimant sought diminution or elimination of exclusive remedy was also decided by the Court. Not in substance, but the Supreme Court decided to discharge the case without decision, essentially leaving the First District's decision intact. And finally, a more difficult questions to be debated. That is, will the Legislature race to a special session on workers' compensation? I cannot count how many times I heard that promised over the last 3 years. It will be interesting to watch. 

I said it in September 2014: There's No Other Place I Wanna Be. These are interesting and intriguing times. For those who do not watch or participate in workers' compensation, it is a little respected and little noticed field. But within it are truly some of the greatest legal minds I have ever met (I would argue they are among the greatest period). I am constantly impressed with their ingenuity, imagination, intellect and perseverance from so many perspectives. I appreciate and respect them as individuals and feel absolutely humbled to work with so many of them. It will be interesting to see where they take us all next.

Citing Authority may be Critical to Success

Making arguments to a tribunal is dependent upon integrating appreciation and understanding of two elements into an explanation. First, the facts of your situation are critical. As important is an understanding of the law and how it supports the outcome you wish. Understanding how to cite authority (law) may be critical to winning the argument.

A phrase has caught my attention over the years. Many an attorney argues her or his point with "the case law on this is legion." The suggestion being that the appellate courts have discussed the issue over and over and that the outcome this attorney wants is therefore so obviously correct that there can be no argument. No doubt, there are many legal issues that actually fall in this category. It reminds me of a 1991 release The Last Boy Scout in which the protagonist Joe Hallenback (Bruce Willis) repeatedly reminds us "the sky is blue, water is wet . . .." Hard to argue with. Facts are facts sometimes. 

So, there are certainly instances in which the "case law is legion." However, this cliché is overused. It has become a caricature that no longer evokes the intended reaction of trust or reliance. Instead, this statement and others like it raise questions. In a recent conversation at a conference this phrase was used to describe the state of the law. A second attorney in the group responded with "can you name one case?" The first attorney could not; could not name one case that stood for the proposition/argument that was being advocated. It made for an interesting discussion. If there are really that many examples, if the "case law is legion," shouldn't we be able to name one example?

If there is authority that supports your argument, I recommend finding it and bringing it to the tribunal's attention. I recommend bringing or citing a case. Remember in this context that there is a hierarchy of decisional law. If you can cite a Supreme Court case that might be best. If not practical, then a controlling appellate court case would be beneficial. In Florida workers' compensation, this would likely be from the Florida First District Court of Appeal. If that is not available, a persuasive appellate court case (from one of the other District Courts) might be helpful. The hierarchy may differ from state to state, but the logic still applies. Trial judge decisions are more available now than ever before, but those decisions are more likely to be persuasive than controlling. 

This reminded me of another interesting legal argument that came to my attention recently. A young associate is arguing a motion before a trial judge. The associate works for the firm of Smith, Jones and Green (a fictional law firm used to illustrate this example). One side of this particular case provides the trial judge a cogent, logical argument for a particular outcome in the case. Copies of two appellate cases (as suggested above) are provided to the judge, which each support the argument. 

Then it is the young associate's turn. The associate begins with "judge, that cannot be the law." And, continues: "I discussed this case with Mr. Green, who has been practicing workers' compensation for thirty years, and if that were the law I am sure he would have told me." This argument is questionable on a couple of levels. Primarily, Mr. Green is not an appellate court. Even if he (or your partner) "wrote the book" on workers' compensation, that book would be an interpretation of those statutes and appellate cases that recite and define the law. Mr. Green, in this example, is at best a "secondary source," and at worst is just a rumor. 

But as important, in this example, Mr. Green has made no representation whatsoever. Even if one were to accept that Mr. Green is the "be all and end all" of legal knowledge, the undeniable and indisputable "font of wisdom," he has still made no representation. The young associate is not asserting that Mr. Green told her/him that this is or is not the law. The associate is asserting that Mr. Green told her/him nothing and that if opposing counsel's argument were true then Mr. Green presumably would have spoken up and said something. In other words, the young associate actually expects the trial judge to disregard the proffered legal authority because Mr. Green apparently, purportedly, never said anything. This "Mr. Green would have told me" argument is perhaps not the best first choice. 

In another recent example, I ran across a trial order that explained the facts, recited the law, and adjudicated the issue. That is not uncommon. But, this order caught my eye because the law that was recited was not the plain language of the statute itself. It was not controlling authority from the Supreme Court or the First District Court. It was not persuasive authority from another Florida District Court. It was not another trial judge decision, or an interpretation of a similar statute in another state. 

The authority cited in this order was Dubreuil's Florida Workers' Compensation Handbook. This is an example of what lawyers call "secondary" authority. Some would argue that it is even less authoritative, calling it instead "tertiary" authority. It is a book that provides the author(s) interpretation of what the statute or controlling cases say. It is the author's or authors' opinion of what the statute or court cases say. There are a great many publications like this, which provide an interpretation or opinions about the law. 

This particular book was originally written by an insurance professional named Dubreuil, who is deceased. As it was originally written, it was an insurance professional's opinion of Florida's workers' compensation law. It was not written by an appellate court, or a trial judge or even a lawyer. Since it was originally published, it has become part of the Lexis library, and there are now attorneys involved in updating and editing the book. But it remains at best a secondary source in which someone's opinions about the workers' compensation law are expressed.  

There are many secondary sources that are relied upon in deciding cases. Perhaps the most noteworthy secondary source on workers' compensation is Larson's Workers' Compensation Law written initially by Professor Arthur Larson, of the Duke University School of Law. Arguably the most comprehensive secondary source on Florida workers' compensation law is The Florida Workers' Compensation Handbook written by attorney Leo Alpert and later edited by Jonathan Alpert, an attorney, workers' compensation judge and professor at Stetson University College of Law. Similarly, perhaps the most noteworthy secondary source on Florida evidence law was written by Charles Ehrhardt, a professor of law at Florida State University (Professor Ehrhardt's book has been cited by appellate courts more than 500 times). Each of these books has been cited and relied upon by the Florida First District Court of Appeal and The Florida Supreme Court. And, there are some examples of appellate courts citing Dubreuil's Handbook

In a related side note, I heard of a lawyer once arguing that she/he had attended Florida State and took an evidence class taught by Professor Ehrhardt. She/he apparently argued against an evidentiary interpretation with a similar "I took evidence with Professor Ehrhardt Judge, and if that (the other side's argument) were the law I am sure Professor Ehrhardt would have mentioned it." Not much different than the "partner Green" argument discussed above.

These scholarly treatises are the opinions of others about the law. There are times when their opinions are found persuasive and even adopted by tribunals. They can be great tools in the research process. These sources can lead to court opinions that are persuasive or controlling authority, and they can assist one with understanding those statutes and cases. 

But, at their best, these publications are all opinions. It can be highly persuasive when the opinions of scholars, lawyers, and judges agree with your own, but they remain opinions. It is more persuasive if the argument can also be supported by a statute and the cases which are cited in these books. It is suggested that only when one cannot find statutory or case authority should one resort to citing such secondary sources. And then, it is perhaps more persuasive to argue the opinions of law professors and attorneys than to rely on those without such credentials. 

Another side note: never argue "I read it on Judge Langham's Blog" as legal authority for an argument. This blog has the authority and persuasive effect of a Bazooka Joe comic from a bubble gum package (and I am being generous with myself here). 

I had the chance to discuss the Dubreuil's Handbook example with a fellow judge recently. At one point he asked "Dubreuil was not a lawyer?" I took from that there is a chance this author's credentials are not well known. So, if you do decide to cite a secondary source, I recommend knowing the background of the author. In a hearing, during an argument, is not the time to learn of an authoritativeness question.

Thus, three examples of interesting legal arguments. Bloviating with "the case law is legend" (but I could not find a single example to cite or bring) is not likely to win arguments. Supporting your arguments with what some other lawyer told you (or worse did not tell you) is also unlikely to be persuasive. Advocates should remember the hierarchy of authority from statutes to controlling cases and persuasive cases. Secondary sources should be used to locate and help understand those, but should be cited sparingly. If forced to cite such a secondary source, it will perhaps be a stronger argument if the source was written by a law professor, judge or lawyer.  

Tuesday, April 26, 2016

Cost-Shifting Evolves into Case-Shifting?

Last fall, the Workers' Compensation Research Institute (WCRI) issued an interesting report on the Affordable Care Act (ACA, or Obamacare) and cost-shifting. It asked the question of whether cost-shifting would occur as a result of cost-limitation efforts in group health, such as "capitation." I conjectured then that the report contents rather supported the probability or even certainty of cost-shifting, and that the appropriate question would instead be how much cost-shifting would occur. 

In April, reported that WCRI has published another study related to the cost-shifting issue. This time questioning Do Higher Fee Schedules Increase the Number of Workers' Compensation Cases? This is beyond "cost-shifting" and instead is about a broader effect being labelled "case-shifting." The report's premise is that "43 states have physician fee schedules that set maximum prices for health care providers to be paid." And the analysis is how those schedules affect medical decisions. A wrinkle in any analysis of the effects of these schedules has to include consideration of the fact that they are inconsistent with each other, "the established fee schedule rates vary widely across states."

WorkCompCentral also analyzed the WCRI report. It concluded that "financial incentives" in various states "lead doctors to classify more injuries as work-related." notes that "in many states, workers’ compensation pays higher prices than group health." and thus the potential exists for reimbursement to drive determinations of compensability, which are dependent on the opinions of physicians. The physician determines whether an injury is work-related and therefore whether she/he is entitled to workers' compensation rates or group health rate for her/his treatment. The article notes that "in some states, workers’ compensation prices were two to four times higher than group health prices." 

The recent WCRI study focuses on the extent to which workers' compensation fee schedules may influence physicians in the formation of their compensability opinions. The report posits "that physicians may call an injury work-related in order to receive a higher reimbursement for care he or she provides to the patient,” citing two of the WCRI report findings. 

First, the nature of the injury may be critical to this analysis. The report concluded that "there was no evidence of case-shifting from group health to workers’ compensation" when the medical condition was subject to objective determination, such as "fractures, lacerations, and contusions." These objectively verifiable injuries are less dependent upon, or subject to, doctor opinions, and therefore not susceptible to case-shifting. 

Second, when injuries are "not straightforward," then "case-shifting is more common in the states with higher workers’ compensation reimbursement rates." That is, case-shifting to workers' compensation is dependent upon the existence of a financial incentive (higher reimbursement) and discretion (the injury determinations are more dependent upon doctor opinion as to the existence and causation). In those instances, the report concludes "the number of soft tissue injuries being called work-related (increased) by 6 percent."

WorkCompCentral noted that the determination of compensability in these "soft tissue" would potentially be "tricky." It contents that the "tricky" cases could include "back, knee or shoulder pain." The implications for this phenomenon are intriguing, and perhaps the effects are more significant than described in the medical costs themselves, but the medical costs alone are significant. Two years ago, I posed the question Why Does Surgery Cost Double in Workers' Compensation? That post noted that Florida employers have been documented paying almost double for shoulder or knee surgery that is workers' compensation, compared to group health costs. So the implication of case-shifting in Florida could arguably be a doubling of cost. 

The WCRI report, according to WorkCompCentral, suggests however that case-shifting is perhaps not as likely in Florida. The report notes that "as of July 2011, six states had workers’ comp medical fee schedules with rates within 15% of Medicare rates. They were California, Massachusetts, Florida, North Carolina, New York and Hawaii." The WCRI conclusion is that case-shifting is more likely in states where the workers' compensation fee schedule is 20% or more above the group health rates, that is, not in Florida. The report seems to therefore predict the greater potential for this effect are in states such as "Oregon, Delaware, Idaho, Illinois and Arkansas." 

But this analysis of workers' compensation fee schedules does not appear to include analysis of the reimbursement rates for hospitals. It also seems contradictory to the assertions that Florida workers' compensation costs for various surgeries have been documented as roughly double the group health rates (100% higher, not 15% higher). Some reconciliation of this seeming contradiction between the specifics cited in Why Does Surgery Cost Double in Workers' Compensation and the broader WCRI generalities about fee schedules might be enlightening. 

The medical cost could be only a beginning, however. A great many employers do not offer group disability insurance. Others that do offer this benefit do not pay the cost, leaving the purchase decision to the employee. A potential direct end-result is that an employee might be entitled to workers' compensation indemnity (lost wage) benefits if a physician opines that the soft-tissue injury is work-related, but may be entitled to no wage replacement otherwise. An indirect result of this disparity may be that return to work could occur sooner in group health cases compared to workers' compensation cases, as financial pressure affects behavior.

The indirect cost issues may be harder to measure. But the direct cost of workers' compensation indemnity is perhaps more easily illustrated. Missed work in the Florida workers' compensation system could be compensated in 2016 at a rate as high as $862.51 per week, the "maximum compensation rate." So, if recovery from such a "soft-tissue" injury required ten weeks off-work, the case-shifting to workers' compensation might add another four to nine thousand dollars to the already doubled cost of surgical repair under workers' compensation. This could be directly born by the employer if the employer is self-insured for workers' compensation. Or, if the employer has purchased workers' compensation insurance, the effect on the employer would be indirect in the form of potentially increased premium costs for workers' compensation following such events and payments.  

These effects are already occurring. Cases are demonstrably shifted from group health to workers' compensation according to WCRI. When the capitation effects of the ACA become more widespread, as discussed last fall, there is every potential that this tendency will increase. Capitation is expected to constrain reimbursement in group health. As the financial incentive increases by constraining group health reimbursement, who contends that physicians will be less likely to case-shift to the more financially rewarding opinion, workers' compensation? 

According to WorkCompCentral's analysis of the report, a very small percentage of case-shift, one percent, could result in significant cost-shifting. It concludes "a 1% shift of soft-injury cases from group health to workers’ comp would" increase workers' compensation costs "$35 million . . . in Pennsylvania, $80 million in California and $9 million in Iowa." As they say, "a million here, a million there, pretty soon you are talking about real money." 

So, there are consequences to price controls like fee schedules and capitation. If medical fees are restricted within a market, like workers' compensation, then cases may be shifted to another market such as group health. The opposite is not only possible, but according to the WCRI study it has occurred. There seems to be evidence that all third-party payer systems (those in which someone other than the patient pays) are struggling to control costs with these and other tools.  

According to WCRI "policymakers have always focused on the impact (workers' compensation) fee schedules have on access to care as well as utilization of services." This has been a two-part analysis. First, fee schedules have to be sufficient such that physicians are willing to provide care in the workers' compensation system. Second, the reimbursement cannot be too high, or perhaps overutilization is encouraged. But this recent WCRI report adds yet another consideration for policymakers, that workers' compensation fee schedules should be relatively comparable to group health reimbursement, such that case-shifting is also not incentivized. 

This disparity between costs has also been noted in discussions of "medical tourism." I noted some discrepancies last June in Medical Costs, Fee Schedules, Disparate Reimbursement and Medical Tourism. After years of suppression, the Federal Government released Medicare reimbursement data in 2013. That data supports that charges for medical services can vary markedly among providers, even in the same city. With the availability of such data, can competition in the market have any effect on medical reimbursements? In other words, might medical decision makers direct care to more efficient providers, across town, across state lines?

In the context of regulation and fee schedules, it is possible that reimbursement floors could be created. That is, a published schedule stating a price for a particular procedure in workers' compensation might drive the market to provide that price or more in other pricing models such as group health. The converse is also possible, that such fee schedule could create a ceiling such that the market would insist on that price or less in other pricing models like group health. The suggestion of the WCRI report seems to be that when the differential is less than 20% it may not significantly drive discretionary compensability opinions. But will that conclusion hold as the market enters the predicted era of greater capitation in the pricing models generally?

The evidence on fee schedules provides policymakers with interesting issues for consideration. 

Sunday, April 24, 2016

Moving toward Regulatory Adoption of Formulary

The North Carolina Industrial Commission has issued a report regarding implementation of a drug formulary. The potential benefits of formulary programs have been discussed for several years, after Texas led the way. It is touted as a process to control costs in a market that sees seemingly ever-increasing medical costs. 

The North Carolina report acknowledges that a drug formulary was a legislative idea there. in 2015, the legislature discussed the idea and charged the "North Carolina Industrial Commission (“Commission”) to study the implementation of a drug formulary in workers’ compensation." The initial focus was to be upon "claims filed by State employees." There is significant concern about prescription prices. Health Care Finance News reports "one of every five dollars spent on employer health insurance benefits" is spent on prescription medication. They say this is the "fastest growing part of the nation's healthcare budget." 

Several states have put formularies in place since Texas started the trend. I have noted that Texas, Ohio, Washington and Oklahoma are already in the formulary club. California, Georgia, Louisiana, Maine, Montana and Tennessee are all working in that direction. North Carolina is a step closer with the issuance of the Industrial Commission Report

The Commission Report concludes "that a drug formulary could potentially generate significant cost savings while improving the process by which medications are delivered safely and efficiently to injured workers." The report acknowledges its mandate was focused on state employees, and yet the Commission went further and "also considered system-wide application." 

Encouraged by their research and examination, the Commission concluded data "suggest(s) that a drug formulary could be beneficial for . . . the entire North Carolina workers’ compensation system." However, the Commission finds the formulary concept "complex," and therefore recommended that study should continue to assure "potential benefits of a drug formulary are max." These include "implementation of related medical treatment guidelines." It would likely include a mandate for the use of generic medications. 

If the ongoing study outcome is favorable, the Commission proposes that a prescription formulary should come to North Carolina through the executive branch, not the legislative. The Commission concluded that it has existing "administrative rulemaking . . . authority," sufficient to pioneer this change. 

Meanwhile, the effects of a formulary are seen in yet another state. Tennessee will see an almost 3% decrease in rates following its adoption of a prescription formulary. According to WorkCompCentral, the prescription medication costs amount to 18% of total system costs in Tennessee. They predict that the formulary will have significant effects on decreasing those costs. 

Florida has been reluctant to restrict medication. The efforts regarding repackaged drugs were spread over multiple legislative sessions. Many deride the result of those efforts, and contend that the long legislative process accomplished little, if anything. They prognosticate that Florida lacks the will to streamline the prescription process with a formulary. 

The workers' compensation world is evolving around us. Medical costs continue to increase, both in real terms and as a percentage of overall claims costs. Will Florida legislature or regulators discuss the path of formulary control?

Wednesday, April 20, 2016

Fla. Stat. 440.34 (Florida Attorney Fees) Unconstitutional

For over two years, the people of Florida workers' compensation have been watching The Florida Supreme Court waiting for a decision in Castellanos v. Next Door Company. Then, the Florida First District Court of Appeal issued a panel decision on April 20, 2016. Judge Bradford Thomas authored the 26 page opinion in Miles v. City of Edgewater Police, joined by Chief Judge Roberts and Judge Wolf. The court has declared Fla. Stat. 440.34 and  Fla. Stat. 440.105(3)(c) unconstitutional. 

The facts include a police officer, Martha Miles, who sought to prosecute an occupational exposure case in Tampa. She first appeared with the assistance of counsel and asked the Judge "to approve two attorney’s fee retainer agreements." One agreement sought approval of "a $1,500 retainer by Claimant’s union," and the other "provided that Claimant would pay her attorney an hourly fee once the $1,500 is exhausted." These were both denied; counsel then withdrew.

Claimant proceeded to trial pro-se (representing herself) and failed to prove her entitlement to benefits under the workers' compensation act. That is, that she suffered a "compensable" accident or injury. The term "compensable" "is a concept used to convey that the Florida Workers' Compensation Law applies." See Esad Babahmetovic v. Scan Design Florida Inc., discussed recently on this blog.

Claimant alleged that she was pro se at the time of trial because no attorney would represent her. She offered multiple affidavits from attorneys attesting that they could (or would) not take on trial of a case like this under the constraints of the statutory fee parameters of Fla. Stat. 440.34. In withdrawing from the case, her original attorney, for whose fee retainer she had been denied approval stated “it would not be economically feasible for the undersigned to continue on a purely contingent basis with fee restrictions as contained in Florida Statute § 440.34.” Counsel asserted that the requirements of the statute would "ask an attorney to basically work for free.” 

The trial judge concluded "I find that the law as it currently exists does not allow for non-contingent, claimant-paid hourly fees for prosecution of a claim on the merits." The court concluded that the restrictions of FlaStat. 440.34 violate the injured workers' rights under the First and Fourteenth Amendments to the United States Constitution. The First provides protections for freedom of speech and freedom of association. The Fourteenth provides due process and equal protection.  

Claimant alleged two occupational exposures. She "testified regarding what occurred on the two dates." She further "testified that she became ill after each incident and lost time from work, but was eventually released to return to work." Claimant was "diagnosed with Chronic Obstructive Pulmonary Disease" before she had these work exposures, and she may have been a smoker. Her argument in favor of causation was that "losing a significant amount of work and requiring medical treatment for a short time after each event 'would lead anyone to believe that there was something that occurred that was out of the ordinary from the individual normal health responses.'” The trial judge denied the claims concluding there was no "evidence as to what the specific substance or substances were to which she was exposed," nor of "the levels to which she was exposed," nor the causation of the "disease she complains of." (sic).

The court's analysis takes the reader through several points. First, the court reminds us that Judges of Compensation Claims are not a court and cannot decide issues of constitutionality, unlike the admininstrative officials in Oklahoma. Therefore, the constitutional challenges can be raised by Claimant in the appellate court without necessarily preserving that error in proceedings before the JCC. 

The First Amendment protects freedom of speech and association. With little explanation, the Court describes Claimant's "speech" in seeking benefits (through an attorney) as "content-based speech," and states that the standard of review is "strict scrutiny;" this means the statute fails "unless the government can show that the regulation promotes a compelling government interest and that it chooses the least restrictive means to further the articulated interest.” The court cites to its previous decision regarding an injured worker being allowed to pay an attorney outside the statute when defending a claim for costs. Jacobson v. Southeast Personnel Leasing, Inc., 113 So.3d 1042, 1048 (Fla. 1st DCA 2013). Though not stated specifically, some will argue that the court found Jacobson to be controlling authority in this analysis.

The court concluded that the Constitution protects "the right to hire attorneys on a salary basis to assist . . . in the assertion of their legal rights.” Claimant argued Fla. Stat. 440.34 violates her right to free speech, because the evidence established that no attorney would take her case if counsel’s compensation was limited to a 'guideline' fee." This remains true, according to the court, despite the fact that there is no evidence of what that fee might be if a claim were deemed "compensable." Despite not knowing what the statutory fee might be, the court concluded that the record in this case supported that "no reasonable attorney would accept the risk of investing their labor into representing Claimant where the likelihood of receiving any compensation was uncertain." 

As an aside, the court does not explain the multitude of civil cases filed every day in Florida in which the fee is wholly contingent upon success, and in some population of which no recovery or fee ever occurs. That is a point that has been raised often in the past. There may be argument that the court might have prevented future litigation with such an explanation. 

The Court concluded that "because section 440.105(3)(c), Florida Statutes, makes it a crime for an attorney to accept a fee that is not approved by a JCC, and section 440.34, Florida Statutes, prohibits a JCC from approving a fee that is not tied to the amount of benefits secured, the two statutes operated as an unconstitutional infringement on the claimant’s right to hire an attorney." The court also concluded that the state failed to prove that asserted governmental interests were sufficient to uphold the statute. 

The Court held that “[laypersons] cannot be expected to know how to protect their rights when dealing with practiced and carefully counseled adversaries.” Thus, it appears that in any case in which the employer/carrier employs an attorney, the claimant will have the right to do the same. Some may argue that the court has essentially held that injured workers cannot prevail against attorneys. 

The court also concluded that Fla. Stat. 440.34 "violated the claimant’s right to contract for legal services." It noted that “the right to make contracts of any kind, so long as no fraud or deception is practiced and the contracts are legal in all respects, is an element of civil liberty possessed by all persons." Further, this is both a "liberty and property right" protected by the Fifth and Fourteenth Amendments. Some will argue that the Fifth is not involved, but the Fourteenth Amendment has been deemed to "incorporate" other protections, including those in the Fifth. As a point of clarity, each is therefore arguably involved in any due process analysis. 

The court reminded that that Fla. Stat. 440.34 “does not offend the right to freely contract," regarding fees paid by the Employer/Carrier. Lundy v. Four Seasons OceanGrand Palm Beach, 932 So.2d 506 (Fla. 1st DCA 2006). But where someone other than the Employer/Carrier (the worker or her union) is to pay the fee, the issue is "whether sections 440.105 and 440.34 are constitutionally permissible restrictions on claimant-paid fees based on the State’s police power." The court concluded they are not. 

Furthermore, the court held that the "application of the statutes to this scenario is arbitrary and capricious, because only the attorney’s fees paid to claimants’ attorneys are regulated, and E/Cs are free to contract for legal services without limitation."

The court conceded that "the Legislature could intend to prevent the public harm caused when injured workers might quixotically seek benefits the worker is highly unlikely to obtain. In addition, the Legislature could rationally seek to disincentivize meritless litigation which disrupts the workplace and causes unnecessary hostility between employers and employees." However, these interests are secondary, according to the court, to the right in "a free society" for individuals "the intellectual prerogative to personally weigh the benefits and risk of exercising their statutory right to obtain redress for their injury." Essentially, the decision about whether to enter into some agreement with counsel is up to the injured worker. 

In a nutshell, "the public harm to be prevented – undue depletion of workers’ financial resources and undue disruption of the workplace – does not prevail against the individual’s right to contract for legal representation." The legislature and the state have no interest, essentially, in attempting to protect someone from entering into a contract of her or his own choosing. 

Finally, the court held that "Florida case law has long recognized that an individual can waive his or her personal constitutional rights." Therefore, "if a person can waive constitutional rights, a person can also waive statutory rights such as those in section 440.34." The court found "no reason why a workers’ compensation claimant should not be able to waive a limitation on claimant attorney’s fees and agree to pay her attorney with her own (or someone else’s) funds."

The court reminded that "any fee agreement 'must nonetheless, like all fees for Florida attorneys, comport with the factors set forth in Lee Engineering & Construction Co. v. Fellows, 209 So.2d 454, 458 (Fla. 1968), and codified in the Rules Regulating the Florida Bar at rule 4– 1.5(b)."

The court held that such a Claimant-paid fee is somehow "subject to a JCC’s finding that the fee is reasonable," but cited no authority for the conclusion that a JCC has such authority. The Legislature specifically removed the word "reasonable" from Fla. Stat. 440.34 in 2009 following the Florida Supreme Court's decision in Murray v. Mariner. There are already those who question what authority exists for the exercise of JCC review or the constraint of "reasonable."

So, the "restrictions in sections 440.105 and 440.34, when applied to a claimant’s ability to retain counsel under a contract that calls for the payment of a reasonable fee by a claimant (or someone on his or her behalf), are unconstitutional violations of a claimant’s rights to free speech, free association, and petition . . . and also represent unconstitutional violations of a claimant’s right to form contracts." Thus, the "criminal penalties of section 440.105(3)(c) are unenforceable against an attorney representing a workers’ compensation client seeking to obtain benefits under chapter 440, as limited by other provisions discussed above." 

The court also says that the "proper remedy (to the constitutional infirmity) is to allow an injured worker and an attorney to enter into a fee agreement approved by the JCC." But again, the court cites no authority which affords the JCC authority for prospective approval of fee agreements.

All this time spent watching The Florida Supreme Court for a ruling on the constitutionality of restrictions on employer/carrier paid fees, and on an otherwise quiet Wednesday in April the First District renders this decision which provides ample food for thought. 

It is important to remember, as previously discussed on this blog, that if a District Court, such as the First District "declares invalid a state statute," then the case "shall" be reviewed "by appeal" by the Florida Supreme Court, pursuant to Florida Rule of Appellate Procedure 9.030(1)(a). So, so a rehearing is possible, as is a rehearing en banc (the whole court), and it will be reviewed by the Supreme Court as the case now stands. 

Ed. (Updated 04.21.16) A scholar and gentleman suggested that Kraay v. State of Florida, (1D14-602, September 10, 2014) might be interesting reading regarding the effect of the court's decision in Miles

Another Constitutional Decision

Much is being said about the Oklahoma Supreme Court's decision in Robinson v. Fairview Fellowship Home for Senior Citizens, ____ P.3d _____, 2016 OK 42 (OK 2016)(Case Number: 113735; 04/19/2016). This is a case that will be discussed from a variety of perspectives in days to come. Much of the focus will be upon the Oklahoma Opt Out, and whether this has implications for the Oklahoma Commission's decision in Vazquez v. Dillards Inc. Does the Robinson analysis spell the end of Opt Out?

Some of the discussion, however, will be about the legal foundations for the Court's decision. One lawyer has already commented on one of the social media platforms that it is "scary that an judiciary is willing to succeed its powers to 'judges' within the executive branch." He goes on to conclude "the people of Oklahoma are the losers as the result of this silliness."

People feel as they do about Opt-Out. The topic brings forth a good measure of emotion in some people, whether they are lovers or haters. I am not sure there is room for reconciliation between them, as there is a fair degree of ingrained perception and belief at this stage, and not a great deal of listening is apparent sometimes. 

The first thing to remember about Robinson is that it was published on the web yesterday. It is not a final decision, and is subject to a motion for rehearing, and potentially changes. The opinion states (as most do) "this opinion has not been released for publication. Until released, it is subject to revision or withdrawal." I am not prognosticating, but reminding everyone that opinions have been withdrawn and re-drafted before. 

In Robinson, the injured worker "was denied workers' compensation benefits after an administrative law judge of the Workers' Compensation Commission found that her injury was not in the course and scope of employment." So, she had her due process before an administrative law judge in Oklahoma. Of note, there are those who believe that the Oklahoma statute revision, creating the administrative hearing process for workers' compensation claims, is unconstitutional in itself. One implication of Robinson is that the state's Supreme Court seems inclined to accept that new administrative process. 

The injured worker asserted that the application of workers' compensation law "unconstitutionally denied her a remedy for her injury." The administrative judge concluded she/he could not address the constitutional arguments, the Workers' Compensation Commission (WCC) affirmed, as did the Court of Civil Appeals. So there was a consensus that constitutionality issues were appropriately handled elsewhere in the system. It is curious to some that the WCC reached that conclusion in Robinson and later concluded it did have authority over constitutional questions in Vazquez. Did something happen to change the WCC's mind?

The Robinson Court noted that the ALJ concluded the WCC is not a court and "is without power to decide the Claimant's Constitutional arguments" regarding adequate remedy. The WCC affirmed stating that "claims that legislation is unconstitutional cannot be determined by law or this Commission en Banc. Those claims can only be decided by a court of competent jurisdiction." 

The Oklahoma Attorney General (AG) then entered the fray, filing a February 10, 2016 brief in Robinson. There, the AG argued "that the Workers' Compensation Commission has the authority to address the constitutionality of a statute as it is being applied in an individual proceeding, subject to judicial review by this Court." On February 26, 2016, the WCC rendered the Vazquez decision, in which it concluded it did in fact possess such authority regarding constitutional issues. Did the AG thoughts on the subject bear on that analysis?

It is critical that readers remember the distinctions between two bases of constitutional challenge. A statute or other state action can be unconstitutional on its face (there is no way the statute could be interpreted to reach a constitutional result in any set of facts) or can be unconstitutional as applied to a particular case. This has been discussed repeatedly in the context of Florida's long-pending constitutional challenges

We must note again that Robinson does not hold that the WCC has the authority to determine facial constitutional questions. It holds "the Workers' Compensation Commission has the Power to Determine Whether a Provision of Title 85A is being unconstitutionally applied to a particular party in a Commission proceeding." The WCC has authority, according to Robinson, to determine "as applied" constitutional questions. 

The Court reasoned that this is so for several reasons. First, considering "separation of powers," the Court noted that the constitution provides that "the judicial power of this State shall be vested in  . . . such Boards, Agencies and Commissions created by the Constitution or established by statute as exercise adjudicative authority or render decisions in individual proceedings." This constitutional grant of authority is specific to agencies such as the WCC. Thus, notwithstanding the social media commentary to the contrary, the Oklahoma judiciary did not "succeed its powers to 'judges'" in the executive branch. The Oklahoma judiciary followed precedent (this is important, see Stare Decisis), and obeyed the state constitution, which is ultimately the will of the state's people, who adopted or ratified that foundational legal structure for the state. Following the state constitution is a positive result in most perspectives.

The Court also noted that the language empowering the WCC was consistent with "statutory language contained in Oklahoma's first 'Workmens Compensation Law' enacted in 1915." Thus, the authority is not new to the state, though it is new to the agency which has recently undertaken adjudicatory responsibilities there. 

Another reason cited by the Court is more practical than legal. It concluded that there are "financial burdens" associated with appellate review. To expend such resources, "only to have this Court remand the case to the Commission to decide a question it could have decided in the first instance" was criticized by the Court. It concluded such a process was "not the 'prompt, certain, and inexpensive' remedy envisioned by the adoption of the workers' compensation system as a result of the industrial bargain." In other words, not allowing the WCC to make such interpretations would be inefficient. And that language is similar to the oft-cited "self-executing" nature of many workers' compensation statutes. 

The Court also found support for its conclusions from neighboring states (don't email me on this, I know where OK is, this is just colloquialism), New Jersey and New York. Citing Dep't of Envtl. Prot. v. Huber, 63 A.3d 197, 218 (N.J. 2013), the Oklahoma Court adopted the logic that "the benefit from having the administrative process initially address a constitutional issue among other issues within the agency's purview is that the process may result in fact-finding or interpretation and application of statutory processes that may obviate the need to adjudicate a constitutional question." In other words, the WCC determination process could be more efficient and timely.

In keeping with the broad statutory grant of authority, within the constitutional construct of what is a "court" there, the Court concluded that either the WCC or its administrative law judges may "properly refuse to apply a statute to a particular party before it," in the event that "such application would be repugnant to the Constitution." This is specific to Oklahoma, and based on its constitution.

The Oklahoma Court was careful to be clear, however, that this authority is limited to "as applied" claims. The Court said "of course, the power of the Commission and its ALJs to determine the constitutionality of a provision of Title 85A is limited." Though it is quasi-judicial, the WCC "is an executive branch agency lacking the full power of the judiciary." As such, the WCC "only has the power to resolve, on a case-by-case basis, questions regarding the constitutional or unconstitutional application of a statute to a particular party in a proceeding before it. Therefore, the WCC's "decision is binding only on the parties in that case." 

The Court concluded "the Legislature may not confer upon the Commission the power to determine the facial constitutionality of a statute, and the Commission may not assume that power--such power resides in the judiciary alone." That could not be much clearer. As mom used to say, "no means no, period."

So, this is an interesting decision. It sets forth parameters within which the Oklahoma WCC and administrative judges may act in any particular case. Those actions, however, are binding only on that case, and those parties. 

Any determination of facial constitutionality must be made by the courts. This is not because judicial authority was usurped or succeeded, but because the state's constitution says so; because prior precedent says so (and that is important, see Stare Decisis). And now the debate will begin about whether this means that the WCC acted appropriately in Vasquez or whether that declaration is beyond the scope defined and described in Robinson

For those who see a parallel for Florida, it would be well advised to read the Florida Constitution, and its definition of "court." The Florida Supreme Court has already analyzed that language in In Re Amendments to the Rules of Workers' Compensation Procedure. The Court concluded that the Office of Judges of Compensation Claims is not a "court." So, any assertion that this Office has similar authority as Robinson describes might face an uphill battle.