May 7, 2013

Annals of Claims Management: Full Catastrophe Denial

In the Insider's decade of exploring workers comp, we have encountered many unusual instances of compensability, legitimate claim denials and outright fraud. But rarely have we found cases where a claims administrator, in this case, a TPA, simply refuses to pay for medically necessary treatment. The saga of the late Charles Romano reminds us that the great bargain of workers comp is not just between employers and their workers; it includes the good faith effort of claims adjusters to carry out the letter - and spirit - of the law.

Charles Romano worked as a stocker for Ralph's Grocery Company, a California-based operation that is part of the Kroger chain. It is worth noting from the outset that Kroger is self-insured for comp, with Sedgwick serving as the TPA. As a stocker, Romano presumably did a lot of lifting and reaching. He suffered a work related injury involving his shoulder and back in August of 2003.

A Solution Worse than the Problem
After conservative treatment failed to resolve the problem, he underwent surgery in December 2003. What had seemed like a relatively simple solution to a shoulder problem quickly descended into a grave, life-threatening situation: Romano contracted a MRSA infection following the surgery, which led directly to total paralysis. He suffered renal failure and several heart attacks, which were related to the MRSA infection. After enduring inadequate medical treatment directly related to the TPA's denial of treatment, Romano died in May 2008.

Nearly three years after the initial surgery, a workers comp administrative law judge (WCJ) ordered that the TPA pay for all the medical expenses related to the infection. Without consulting with medical professionals, the TPA unilaterally refused all payments - totalling, by this time, hundreds of thousands of dollars. The TPA appealed the adverse ruling.

In February 2012, a workers comp administrative law judge imposed penalties for delay of treatment in eleven specific instances, finding that the TPA "failed in its statutory duty to provide medical care, egregious behavior which increased the suffering of a horrifically ill individual." He imposed the maximum $10,000 fine for each denial of treatment.

Unappealing Appeal
The TPA appealed the penalties for delayed treatment. In what surely qualifies as a new definition of chutzpah, the TPA contended that penalties were not appropriate, among other reasons, because the claimant had died. Well, duh, the routine denial of treatment throughout the course of the illness was a significant factor in the death. Romano simply did not receive medically necessary treatments to address his formidable medical conditions.
NOTE: The penalties, even when maxed out at $10,000 per incident, is dwarfed by the suffering inflicted upon Romano.

The Workers Comp Appeals Board upheld the penalties [For a link to a PDF of the lengthy ruling, Google "Charles Romano Trust vs. Kroger Company]:

The WCJ's Report makes it clear that he imposed the harshest penalties possible under section 5814 because of defendant's extensive history of delay in the provision of medical treatment; the effects of those delays on a paralyzed, catastrophically ill employee; the lengths of the various delays; and defendant's repeated failure to act when the delays were brought to its attention.

Lest the ruling be considered in any respect ambiguous, the court went on to say: "We have rarely encountered a case in which a defendant has exhibited such blithe disregard for its legal and ethical obligation to provide medical care to a critically injured worker."

Risk Transfer, Risk Retention
It is tempting to conclude that the TPA's actions were related to their customer's risk assumption - otherwise known as self insurance. It is one thing to purchase insurance (risk transfer) and have the insurance company assume liability for a catastrophic loss. It is quite another for a self-insured company to absorb a loss of this magnitude on its own. (Presumably Kroger had some form of stop loss in place.) Despite the multiple findings of compensability, despite the judicial determination that the horrendous MRSA infection was indeed work related, the TPA persisted in denying treatments and rejecting payments, long after Romano's untimely death.

As Mark Twain famously noted, "denial is not just a river in Egypt." It's also a poor strategy for managing claims. In his last years, the unfortunate Charles Romano certainly had to confront health issues beyond anyone's worst nightmare; denial for him was not an option. For reasons that remain unclear, when it came to paying for Romano's extensive and expensive care, the TPA chose a path of full catastrophe denial .

In the findings of the court, this denial was in itself an unmitigated disaster for the acutely vulnerable Romano, accelerating his precipitous decline and death. In the interests of saving their client some serious bucks, the TPA dug in its heels and refused to accept the compensability of a claim that had been adjudicated as compensable. In doing so, they violated the spirit and letter of the workers comp contract and earned themselves, in this particular instance at least, a place on the Insider's Management Wall of Shame.

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This page contains a single entry by Jon Coppelman published on May 7, 2013 3:54 PM.

Freedom of Religion = Freedom from Workers Comp? was the previous entry in this blog.

Health Wonk Review and other occupational news of note is the next entry in this blog.

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