Greathouse v. KASB Risk Management Services

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No. 102,640
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IN THE COURT OF APPEALS OF THE STATE OF KANSAS

PAULA GREATHOUSE, DIRECTOR OF THE DIVISION OF WORKERS COMPENSATION,
Appellant,

v.

KASB RISK MANAGEMENT SERVICES; KANSAS MUNICIPAL INSURANCE TRUST;
ALTERNATIVE RISK SERVICES, et al.,
Appellees.

SYLLABUS BY THE COURT

K.S.A. 44-510j is examined and applied. The statute sets forth the procedure to be
followed when, in a workers compensation case, the employer's insurance carrier or a
self-insured employer disputes a bill for services rendered for the care and treatment of an
employee under the Kansas Workers Compensation Act. The plain language of the
statute authorizes a party to the dispute to have the Workers Compensation Board review
the decision of the hearing officer without first seeking an intermediate review by the
Director of the Kansas Division of Workers Compensation.

Appeal from Workers Compensation Board. Opinion filed May 21, 2010. Reversed and
remanded.

A. J. Kotich, chief counsel, and Glenn Griffeth, deputy chief counsel, of Kansas Department of
Labor, for appellant.

George F. Verschelden, of Stinson Morrison Hecker LLP, of Kansas City, Missouri, and Charles
W. Hatfield, of the same firm, of Jefferson City, Missouri, for appellee OHS Compcare.

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Douglas M. Greenwald and Frederick J. Greenbaum, of McAnany, Van Cleave & Phillips, P.A.,
of Kansas City, for appellees KASB Risk Management Services, et al.

Before MCANANY, P.J., BUSER and LEBEN, JJ.

MCANANY, J.: This case arises out of a dispute between OHS Compcare (OHS)
and Kansas Municipal Insurance Trust, Alternative Risk Services, and the Kansas
Association of School Boards Risk Management Services (collectively, the insurers).
OHS provided medical care to a number of workers compensation claimants whose
medical bills were being paid by the insurers. The insurers disputed OHS's fees under
K.S.A. 44-510j. A hearing officer was appointed to conduct an informal medical dispute
hearing pursuant to K.S.A. 44-510j(b). The informal hearings failed to resolve the
dispute, so the parties requested a formal hearing.

The Kansas Department of Labor (Labor), the parent agency of the Kansas
Division of Workers Compensation, entered into a contract with the Department of
Administration, the parent agency of the Office of Administrative Hearings, to provide
officers to conduct hearings for workers compensation medical fee disputes, among other
issues. Pursuant to K.S.A. 44-510j(d)(2), the Director of the Kansas Division of Workers
Compensation (director) referred the matter to the Office of Administrative Hearings to
conduct the formal hearing requested by the parties. Hearing officer Sandra L. Sharon
presided over the hearing to resolve the matter.

The hearing officer conducted formal hearings, after which she concluded that

"inflated claims were submitted for payment by [OHS] on all medical claims which are
the subject of review in this matter.

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. . . .

"The modifications made by the third party payors on behalf of the Claimants on
the medical claims, which are the subject of review in this matter, are appropriate under
the Kansas Workers Compensation Act."

She advised the parties that "[a]n appeal of this decision may be made to the Workers
Compensation Board within ten days of the issuance of this decision. K.S.A. 44-
510j(d)(2)."

OHS appealed to the Workers Compensation Board (Board). After hearing oral
arguments, the Board issued its order dismissing the appeal. The Board stated:

"K.S.A. 44-510j(d)(2) provides for review by the Board of the decision of the
Director. . . . While the statute authorizes the Director to appoint a hearing officer to
conduct the formal hearing, it requires that the Director make the findings and
conclusions.

. . . .

"The appellees argue that the Initial Order of the [Presiding Officer] is the
equivalent of an order from the Director. The Board does not find that intent expressed in
the statute. If the Legislature had intended for the hearing officer or officers to make the
determination and for that decision to be appealable to the Board, then it would have said
so. The plain language of the statute shows that such was not the Legislature's intent.

"The Board has jurisdiction to review the decision of the Director, not of the
[Presiding Officer.] Accordingly, in the absence of a decision by the Director, this appeal
is premature.

. . . .
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"The Initial Order entered by the [Presiding Officer] is not a final order. The
Board is without jurisdiction to review that Initial Order."

Labor appeals, contending that the Board misinterpreted K.S.A. 44-510j(d)(2).
The parties to the underlying dispute take no position on whether the Board's
interpretation of the statute is correct. OHS claims the hearing officer's order on the
medical expenses issue was in error, and that it simply wants a final agency
determination which, if unfavorable, would entitle it to seek judicial review.

The issue before us is one of statutory interpretation, an issue of law over which
our review is de novo. Double M Constr. v. Kansas Corporation Comm'n, 288 Kan. 268,
271, 202 P.3d 7 (2009). In interpreting the statute we look to the plain meaning of the
words employed by the legislature. See State v. Gracey, 288 Kan. 252, 257, 200 P.3d
1275 (2009).

K.S.A. 44-510j

K.S.A. 44-510j is the relevant statute. Because of the length of subsection (d)(2) of
the statute, we have added a number in brackets for each sentence. The relevant portions
of the statute provide:

"When an employer's insurance carrier or a self-insured employer disputes all or
a portion of a bill for services rendered for the care and treatment of an employee under
this act, the following procedures apply:

. . . .

"(c) The director or the director's designee shall hold the informal hearing to hear
and determine all disputes as to such bills and interest due thereon. . . . If the parties are
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unable to reach a settlement regarding the dispute, the officer hearing the dispute shall
enter an order so stating.

"(d) After the entry of the order indicating that the parties have not settled the
dispute after the informal hearing, the director shall schedule a formal hearing.

. . . .

"(2) [1] The formal hearing shall be conducted by hearing officers, the medical
administrator or both as appointed by the director. . . . [2] If the director finds that a
provider or facility has made excessive charges or provided or ordered unjustified
treatment, services, hospitalization or visits, the provider or facility may, subject to the
director's order, receive payment pursuant to this section from the carrier, employer or
employee for the excessive fees or unjustified treatment, services, hospitalization or visits
and such provider may be ordered to repay any fees or charges collected therefor. [3] If it
is determined after the formal hearing that a provider improperly utilized or otherwise
rendered or ordered unjustified treatment or services or that the fees for such treatment or
services were excessive, the director may provide a report to the licensing board of the
service provider with full documentation of any such determination, except that no such
report shall be provided until after judicial review if the order is appealed. [4] Any
decision rendered under this section may be reviewed by the workers compensation
board. [5] A party must file a notice of appeal within 10 days of the issuance of any
decision under this section. [6] The record on appeal shall be limited only to the evidence
presented to the hearing officer. [7] The decision of the director shall be affirmed unless
the board determines that the decision was not supported by substantial competent
evidence." K.S.A. 44-510j.

The question before us is a straightforward one: Do the parties have to seek an
intermediate review of the hearing officer's decision by the director before seeking review
by the Board, or can they go directly to the Board for review?
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We conclude that the plain language of the statute permits the parties to go directly
to the Board for review.

Subsection (c)

K.S.A. 44-510j(c) authorizes the director of the Division of Workers
Compensation to delegate to a hearing officer the responsibility to conduct an initial
informal hearing to attempt to resolve the dispute. If the matter is not settled at the
informal hearing stage, K.S.A. 44-510j(d) mandates that the director schedule a formal
hearing.

Subsection (d)(1)

The next subsection, K.S.A. 44-510j(d)(1), is not set out verbatim above. It
provides that the director may seek an independent review of the disputed billing,
including a peer review of the audit, before the formal hearing occurs. It does not
contemplate that the director will accomplish the review herself. It provides in part: "The
director may contract with one or more private foundations or organizations to provide
utilization review of service providers pursuant to the workers compensation act." K.S.A.
44-510j(d)(1).

Subsection (d)(2)

K.S.A. 44-510j(d)(2) provides details relating to the formal hearing.

Sentence [1] of this subsection directs that the hearing be held not by the director
herself, but by a hearing officer with or without the assistance of a medical administrator.
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The director's sole responsibility is to appoint a hearing officer and, if necessary, a
medical administrator. The obvious point of the formal hearing in our case was to arrive
at a decision on the issue of the reasonableness of the medical service provider's charges,
an issue which the parties were unable to resolve at the informal hearing stage. In the
case now before us, it does not appear that a medical administrator was appointed to
assist in resolving the issue. Thus, the decision to be made was the decision of the hearing
officer alone.

Sentence [2] relates to an order by the director if a medical service provider has
received an excessive fee payment that should be repaid. This provision does not apply
here. The medical providers apparently were denied payment in the first instance because
the charges were claimed to be excessive.

Sentence [3] gives the director the option of reporting the overcharging provider to
the relevant licensing board. This provision only comes into play upon resolution of any
judicial appeal, which, in the present case, has not happened yet. Interestingly, unlike in
sentence [2], there is no reference to any fact finding by the director. Sentence [3]
contemplates a decision by the hearing officer on the issue of overcharging following the
formal hearing. The only opportunity for a decision by the director arises after judicial
review (which occurs after Board review) when the director must decide whether to
report the provider to the relevant licensing board. The director is not an intermediary in
the Board's review process.

Sentence [4] is clear and bears repeating: "Any decision rendered under this
section may be reviewed by the workers compensation board." (Emphasis added.) K.S.A.
44-510j(d)(2). "This section" includes sentence [1] above. By any fair reading, this
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necessarily includes the decision made by the hearing office following the formal
hearing.

Sentences [5] and [6] relate to the time for an appeal and the record on appeal.

Sentence [7] requires the Board to affirm a decision by the director which is
supported by substantial competent evidence. Sentence [4] makes it clear that a decision
by the hearing officer following the formal hearing may be appealed to the Board.
Clearly, the reference to "the director" in sentence [7] cannot be construed to exclude the
hearing officer; that is, that only decisions by the director need be supported by
substantial competent evidence.

Under sentence [1], the director is required to appoint a hearing officer to hear the
dispute and to arrive at a decision on the merits. There is no provision in the statute for
review by any entity other than the Board. The statute neither requires nor permits an
intermediate review by the director. Hence, the decision of the hearing officer necessarily
becomes the decision of the director.

In its analysis of the issue, the Board does not appear to take the position that the
director does not have the authority to delegate to a hearing officer the authority to hear
and decide the issue at the formal hearing. After all, that is expressed pretty clearly in
sentence [1]. If the director is constrained by the substantial evidence standard in any
decision she might make which finds its way to the Board, she certainly cannot delegate
to a hearing officer decision-making authority that is not similarly constrained.

We need not address the other bases for reversing the Board advanced in this
appeal. Based upon the plain reading of the statute, it is clear to us that the Board has the
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jurisdiction to review the decision of the hearing officer.

Reversed and remanded to the Board for review on the merits.

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REPORTER'S NOTE: Previously filed as an unpublished opinion, the Supreme Court granted
a motion to publish pursuant to Rule 7.04 (2009 Kan. Ct. R. Annot. 54). The published version
was filed with the Clerk of the Appellate Courts on July 28, 2010.