Court Opinion

ID: 2689803
Source: CourtListenerOpinion
Date Created: 2014-08-01 20:22:53.114259+00
Date Added: 2024-06-11T09:50:46.919962
License: Public Domain

[Cite as State ex rel. Haylett v. Ohio Bur. of Workers’ Comp., 87 Ohio St. 3d 325, 1999-Ohio-134.]

THE STATE EX REL. HAYLETT v. OHIO BUREAU OF WORKERS’ COMPENSATION ET AL.

[Cite as State ex rel. Haylett v. Ohio Bur. of Workers’ Comp. (1999), 87 Ohio St. 3d
325.]

Workers’ compensation — Managed care organization program enacted in R.C.

        4121.44 and 4121.441 does not violate Section 35, Article II of the Ohio

        Constitution.

The managed care organization program enacted in R.C. 4121.44 and 4121.441

        does not violate Section 35, Article II of the Ohio Constitution.

      (No. 98-675 – Submitted May 18, 1999 — Decided December 29, 1999.)

                                 IN MANDAMUS and PROHIBITION.

        In 1993, the General Assembly enacted R.C. 4121.44 and 4121.441, which

established a health plan system for Ohio’s Bureau of Workers’ Compensation

(“BWC”) called the Health Partnership Program (“HPP”).                                    The HPP is a

comprehensive managed care program administered by the BWC to provide

medical, surgical, nursing, drug, hospital, and rehabilitation services and supplies

to employees for injuries or occupational diseases that are compensable under R.C.

Chapters 4123, 4127, or 4131.

        An integral part of the HPP is the use of managed care organizations

(“MCOs”), private entities that contract with the BWC to provide medical

management and cost containment services. Each MCO has a network of business
partners that provides a full range of medical services and supplies, including

specialized services. Ohio Adm.Code 4123-6-041.

      Relator-claimant, Duetta Haylett, was injured at work on September 20,

1994. She filed a workers’ compensation claim that was allowed. Following her

injury, Haylett received chiropractic treatments from James Viers, D.C., which

were paid by the BWC.

      Respondent Anthem Blue Cross and Blue Shield, Inc. (“Anthem”) is a

certified MCO that contracted with Haylett’s employer to manage the medical

aspect of Haylett’s workers’ compensation claim.          In early 1998, Anthem

conducted a utilization review of the chiropractic treatment that Haylett was

receiving. In a utilization review, the MCO assesses the employee’s medical care

in terms of medical necessity, the appropriateness of the place, level, and duration

of care, and the frequency or quality of the services being provided.           Ohio

Adm.Code 4123-6-01(U). On February 9, 1998, Anthem notified Haylett and Dr.

Viers that “it appears that chiropractic services that [Haylett is] receiving are not

medically necessary.” The letter further informed Haylett and Dr. Viers that fees

for further treatments would not be reimbursed.        Anthem enclosed a dispute

resolution form with the letter to enable Haylett to readily appeal the decision.

Within   three    days,   Anthem     contacted      Haylett’s    chiropractor   with

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recommendations for other treatment that may have been appropriate for her

allowed conditions.

      Haylett initiated Anthem’s dispute resolution process on February 18, 1998.

Within a week, Anthem arranged another chiropractic review. That chiropractor

also concluded that Haylett’s chiropractic care was not medically necessary for her

allowed conditions.

      On March 3, 1998, Haylett filed for a second level of review in Anthem’s

dispute resolution process. Another review was conducted on March 4, 1998, by a

different chiropractor, who also concluded that Haylett was not benefiting from her

chiropractic treatments. On March 9, 1998, Anthem informed Haylett and Dr.

Viers of the results of the second level of the dispute resolution process.

      On March 13, 1998, counsel for Haylett referred Haylett’s claim to the BWC

for an independent review. On March 31, 1998, the BWC issued an order that

disallowed the requested chiropractic treatment. Haylett appealed to the Industrial

Commission. Following a hearing on June 1, 1998, the district hearing officer

granted Haylett’s appeal and vacated the previous BWC order. The district hearing

officer did not approve Haylett’s request for unlimited treatments but did authorize

two chiropractic treatments per month for three months.

      While her administrative appeal was pending before the Industrial

Commission, Haylett filed for a writ of mandamus and a writ of prohibition. She

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seeks to compel respondents BWC and Industrial Commission to prevent MCOs

from “terminating” medical treatment and benefits and from following the

mandatory dispute resolution process for MCOs in Ohio Adm.Code 4123-6-16.

      This cause is now before this court as an original action in mandamus and

prohibition.

                              __________________

      Stewart Jaffy & Associates Co., L.P.A., Stewart R. Jaffy and Marc J. Jaffy,

for relator, and urgins issuance of the writs for amicus curiae, Ohio AFL-CIO.

      Betty D. Montgomery, Attorney General, and Dennis L Hufstsader, Assistant

Attorney General, for respondent Ohio Bureau of Workers’ Compensation; and

James A. Barnes, Assistant Attorney General, for respondent.

      Vorys, Sater, Seymour & Pease, L.L.P., Michael J. Canter and Jacklyn J.

Ford, for respondent Anthem Blue Cross and Blue Shield.

      Gallon & Takacs Co., L.P.A., and Theodore A. Bowman, urging issuance of

the writs for amicus curiae, Ohio Academy of Trial Lawyers.

      Garvin & Hickey, L.L.C., Preston J. Garvin and Michael J. Hickey, urging

denial of the writs for amici curiae, Ohio Chamber of Commerce, Ohio

Manufacturers Association, Ohio Chapter of the National Federation of

Independent Business, and Ohio Farm Bureau.

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        Bricker & Eckler L.L.P., Charles D. Smith, Diane Richards Brey and James

Burnes; Porter, Wright, Morris & Arthur and Theodore G. Fisher, urging denial of

the writs for amici curiae, MCO League of Ohio and Ohio Association of

Managed Care Organizations.

                               __________________

        PFEIFER, J. At issue in this case is the constitutionality of the MCO

program. Haylett argues that the MCO program violates Section 35, Article II of

the Ohio Constitution because it is an improper delegation of authority to a private

entity. We disagree. She also argues that MCOs violate due process when they

terminate a claimant’s medical treatment without providing prior notice and a prior

hearing. We agree that the MCO program as currently administered can lead to

deprivations of due process.     However, based on the facts of this case, we

determine that Haylett was not deprived of due process. Accordingly, we deny the

writ.

        A statute is presumed to be constitutional and every reasonable presumption

will be made in favor of its validity. State ex rel. Michaels v. Morse (1956), 165
Ohio St. 599, 603, 60 Ohio Op. 531, 533, 138 N.E.2d 660, 664; State ex rel. Dickman

v. Defenbacher (1955), 164 Ohio St. 142, 147, 57 Ohio Op. 134, 137, 128 N.E.2d 59,

63. Accordingly, any doubt as to constitutionality is resolved in favor of the

validity of the statute. Id.

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                              The HPP/MCO Program

       The MCO program was created as part of an overall plan, enacted by the

General Assembly in R.C. 4121.44 and 4121.441, to more efficiently manage the

medical aspects of workers’ compensation claims. A committee composed of

individuals from business, labor, medical providers, and the BWC staff designed

the major components of the HPP, including the MCO program. The committee

included representatives from the AFL-CIO, the Ohio Civil Service Employees

Association, the Communications Workers of America, and the Ohio Trial

Lawyers Association.

       On March 28, 1995, the committee reached unanimous agreement on key

aspects of the BWC’s HPP. Following public hearings, the BWC promulgated a

series of administrative rules in Ohio Adm.Code Chapter 4123-6 to implement the

HPP.

       Under the new program, the BWC administers the HPP and monitors the

MCO program, including certifying each MCO and individual provider. The BWC

also conducts regular recertification reviews. The BWC exclusively determines

whether a claim is compensable and what conditions are allowed, subject only to

an appeal to the Industrial Commission. Ohio Adm.Code 4123-6-043(A); 4123-6-

045. The BWC authorizes the release of state funds to pay the medical claims.

Ohio Adm.Code 4123-6-043(A); 4123-6-045(A). The BWC works with the MCO,

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the employer, the employee, and the provider to effect a course of treatment that

promotes a safe and speedy return to work. Ohio Adm.Code 4123-6-043(B).

      The medical aspect of each claim is managed by an MCO. The MCO must

promptly notify the BWC of an employee’s industrial injury. While the BWC

determines the compensability of a claim, the MCO works “in conjunction with the

employer, employee, attending physician, and the [BWC to] seek a course of

medical or rehabilitative treatment that promotes a safe return to work.” Ohio

Adm.Code 4123-6-043(B).

      During the life of a medical claim, the MCO performs utilization reviews, as

in the case of Haylett. Utilization reviews ensure that only medical services and

supplies that are medically necessary for the diagnosis and treatment of allowed

conditions and that are causally related to those conditions will be considered for

payment. The MCO must submit all medical bills to the BWC. Ohio Adm.Code

4123-6-11. The BWC then authorizes payment and sends it to the MCO for

reimbursement to the individual provider.

      The MCO program has a mandatory dispute resolution process that is

available to employees, employers, and providers. Ohio Adm.Code 4123-6-16.

The MCO is required to provide two levels of independent review that must be

completed within twenty-one days. Ohio Adm.Code 4123-6-16(C). The MCO

must notify the BWC if the dispute has not been resolved within that period of

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time. At that time, the BWC conducts its own independent review and issues an

order. Ohio Adm.Code 4123-6-16(D). Either party may appeal this order to the

Industrial Commission.

                         Section 35, Article II, Ohio Constitution

      Section 35, Article II of the Ohio Constitution provides that “laws may be

passed establishing a state fund to be * * * administered by the state, determining

the terms and conditions upon which payment shall be made therefrom. * * *

Laws may be passed establishing a board which may be empowered to * * *

collect, administer and distribute such fund, and to determine all rights of

claimants thereto.” Section 35, Article II has been interpreted as a permissive

grant of authority to the General Assembly and not a limitation upon its authority.

State ex rel. Michaels v. Morse, supra, 165 Ohio St. at 603, 60 Ohio Op. at 533, 138

N.E.2d at 663.

      Haylett contends that Section 35, Article II of the Ohio Constitution was

violated because the BWC transferred its duty to administer the workers’

compensation system to a private entity.

      MCOs manage only the medical aspect of state-funded workers’

compensation medical benefits claims. MCOs coordinate treatment plans and

review the plans to ensure that a claimant’s treatment is medically necessary for

the diagnosis and treatment of the allowed conditions. MCOs reimburse medical

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providers with payment received from the BWC. MCOs do not determine the

compensability of claims.

      The BWC supervises MCOs and continually monitors and evaluates their

performance. The BWC regularly reviews the certification of each MCO. The

BWC makes the final decision as to payment and issues payment from the State

Insurance Fund to MCOs so they can reimburse individual medical providers.

      Any decision by an MCO regarding treatment or payment is nonbinding and

subject to multiple levels of review. The final decision as to any aspect of the

claim lies with the Industrial Commission. Under the MCO program, injured

employees receive the same benefits as under the previous system.

      R.C. 4121.62(A)(1) enables the Administrator of Workers’ Compensation to

“[c]ontract with any public or private person for the rendition of rehabilitation

services.” The BWC has contracted with private persons and entities to perform

independent medical examinations and disability assessments, to review medical

files, and to pay hospital bills. The state also contracts with outside financial

advisers for advice concerning and management of money in the state fund.

      We do not agree that the MCO program constitutes an attempt to privatize

the state’s workers’ compensation system in violation of Section 35, Article II of

the Constitution. See State ex rel. Turner v. United States Fid. & Guar. Co. of

Baltimore (1917), 96 Ohio St. 250, 117 N.E. 232 (legislation authorizing

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employers to self-insure for workers’ compensation upheld as constitutional). The

state supervises the MCOs and makes the final decision as to the award and

payment of compensation. Further, injured employees are entitled to receive the

same benefits they would have received under the prior system. We hold that the

MCO program is not an improper delegation of authority to a private entity and

therefore does not violate Section 35, Article II of the Constitution on that ground.

      Haylett also argues that an MCO can terminate medical treatment and that

the termination can only be appealed by using the mandatory dispute resolution

process. Haylett contends that this process results in delays and hardships that

violate Section 35, Article II.

      Under the prior system, the BWC could refuse to authorize payment for

treatment without advance notice or a hearing. BWC claims examiners, who

usually had no formal medical training, conducted medical reviews for

reasonableness and necessity. If the BWC terminated authorization for continued

treatments, the claimant could appeal that decision to the Industrial Commission.

At that time, the claimant was afforded his or her first opportunity to submit

additional evidence or argument. This process normally took several months to

complete.

      The MCO dispute resolution process mandates two independent reviews by

medical experts within weeks of the MCO’s initial determination. If the claimant

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receives an adverse decision, the claimant is given an explanation for the denial

and has the opportunity to submit additional evidence. Employers and providers

may also take advantage of this process. Mandatory deadlines ensure that the

dispute resolution process moves quickly.

      We do not believe that a dispute resolution process that provides for two

reviews by medical experts over a period of less than a month and that affords a

claimant the opportunity to submit additional information in support of the

treatment requested constitutes a violation of the claimant’s constitutional right to

workers’ compensation benefits. We also do not believe that this non-binding

review system is quasi-judicial in nature.

      MCOs do not usurp the power and authority of the state to administer the

State Insurance Fund or to determine the terms and conditions of payment.

Accordingly, we hold that the statutory scheme authorizing the MCO program

does not violate Section 35, Article II of the Ohio Constitution.

                                       Due Process

      The Fourteenth Amendment to the United States Constitution prohibits any

state from depriving “any person of life, liberty, or property, without due process

of law.” Section 16, Article I of the Ohio Constitution states that “every person,

for an injury done him in his land, goods, person, or reputation, shall have remedy

by due course of law.”

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      In a due process challenge pursuant to the Fourteenth Amendment, the first

inquiry is whether a protected property or liberty interest is at stake. Am. Mfrs.

Mut. Ins. Co. v. Sullivan (1999), 526 U.S. 40, 119 S. Ct. 977, 989, 143 L. Ed. 2d
130, 149; Mathews v. Eldridge (1976), 424 U.S. 319, 96 S. Ct. 893, 47 L. Ed. 2d 18.

      R.C. 4123.54 states that “[e]very employee, who is injured * * * is entitled

to receive * * * compensation for loss sustained on account of the injury * * * as *

* * provided by this chapter.” (Emphasis added.) Thus, it is apparent that Haylett

is entitled to, and therefore has a property interest in, her workers’ compensation

medical benefits to the extent that they are compensable pursuant to R.C. Title 41.

      R.C. 4123.66 provides that the Administrator of Workers’ Compensation

shall pay for medical services that “he deems proper” and instructs the

Administrator to adopt rules that govern the furnishing of payment for medical

services. Accordingly, we turn to the Ohio Administrative Code to determine

when an injured worker becomes entitled to benefits.

      Ohio Adm.Code 4123-3-09(C)(3) provides that “[t]he burden of proof is

upon the claimant (applicant for workers’ compensation benefits) to establish each

essential element of the claim by preponderance of the evidence.” Among other

things, the applicant must prove that the applicant has a right to file for workers’

compensation benefits, that the application was filed on time, that the alleged

injury or occupational disease was sustained or contracted in the course of

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employment, and “[a]ny other material issue.” Ohio Adm.Code 4123-3-09(C)(3).

To be considered for payment, medical supplies and services must be “medically

necessary for the diagnosis and treatment of conditions allowed in the claim, [be]

causally related to the conditions allowed in the claim, and [be] rendered by a

health care provider.” Ohio Adm.Code 4123-6-25(A).

      The BWC has not argued that Haylett did not comply with these

requirements; indeed, the BWC had been paying for treatment for Haylett since

late 1994. Instead, the BWC argues that Haylett must prove that she is entitled to

ongoing medical benefits, citing Ohio Adm.Code 4123-3-09(C)(1) and (3)(e).

Nothing in these sections, or, as far as we can discern, anything else in the

statutory scheme, states that a claimant has an ongoing obligation to establish

eligibility for workers’ compensation medical benefits.

      Ohio Adm.Code 4123-3-09(C)(4) does provide that the BWC may “at any

point in the processing of an application of benefits, require the employee to

submit to a physical examination or may refer a claim for investigation.” This

section and the subsequent sections of Ohio Adm.Code 4123-3-09 appear to be

focused on the original application for benefits. Accordingly, we do not see them

as imposing an ongoing obligation on a claimant.

      In State ex rel. Jeep Corp. v. Indus. Comm. (1991), 62 Ohio St. 3d 64, 66,

577 N.E.2d 1095, 1097, we stated that a “claimant has the burden of supplying

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medical evidence to support a temporary total disability.” However, a significant

factor in that case was the fact that the claimant’s own doctor did not believe that

the claimant was temporarily and totally disabled. Id. In this case, Haylett’s

medical care provider believes that she needs ongoing medical attention.

Accordingly, Jeep Corp. does not control this case.

      The BWC describes the current situation as a “refusal to authorize future

medical treatment” and not a termination of medical benefits. (Emphasis sic.) It

states that the distinction is significant; we see the distinction as being without a

difference. Haylett began receiving workers’ compensation medical benefits in

late 1994, and whatever you term the MCO’s subsequent action, the result was the

same — Haylett was no longer receiving medical benefits. We conclude that upon

satisfying all initial requirements for receiving workers’ compensation medical

benefits, Haylett became entitled to receive those benefits pursuant to R.C.

4123.54. Accordingly, she was protected by due process.

      To determine what process is due, it is necessary to consider three factors:

      (1) the private interest that will be affected by the official action;

      (2)   the risk of an erroneous deprivation of that interest through the

procedures used, and the probable value, if any, of additional or substitute

procedural safeguards; and

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      (3) the government’s interest, including the function involved and the fiscal

and administrative burdens that the additional or substitute procedural requirement

would entail. Mathews, 424 U.S. at 334-335, 96 S.Ct. at 902-903, 47 L. Ed. 2d at

33.

      In this case, the interest affected was the continuation of workers’

compensation medical benefits to which Haylett was entitled pursuant to R.C.

4123.54.   Those benefits enabled Haylett to procure chiropractic services for

treatment of a chronic health problem.

      The risk that Haylett’s medical benefits would be erroneously deprived due

to the MCO appeals process was not great. The process provides for two timely

reviews, a third review by the BWC, and a final appeal to the Industrial

Commission. The primary risk engendered by the system is the loss of time. In

this case, that loss of time was not critical because the deprivation of services did

not endanger Haylett, whose medical need was not life-threatening.1

      The governmental interest involved is primarily financial.         The MCO

program is designed, at least in part, to minimize the amount expended, while

ensuring that the workers’ compensation system serves its primary function of

meeting the needs of its constituents.

      Anthem’s decision to terminate medical benefits was not binding. The

MCO appeals process and the statutory appeals process of R.C. 4123.511 were

                                         15
available to Haylett. She ultimately received a hearing, albeit after the initial

termination of benefits. After reviewing the three factors set forth in Mathews and

applying them to this case, we conclude that Haylett was not deprived of due

process. See Caddell v. Ohio Bur. of Workers’ Comp. (1994), 71 Ohio St. 3d 300,

302, 643 N.E.2d 1075, 1076 (a deprivation of procedural due process does not

occur when a claimant is initially deprived of a hearing if a hearing is subsequently

provided to the claimant).      The Industrial Commission ultimately authorized

limited treatments, and our conclusion is reached irrespective of that decision.

      Haylett also argues that Anthem has a vested interest in terminating her

medical treatments so that its decision was biased. This argument is contradicted

by the fact that Anthem’s decisions are not binding and are subject to review by the

Industrial Commission.

      Haylett also fails to establish that Anthem’s decision that her chiropractic

treatments were no longer necessary promotes a financial interest of Anthem’s.

Anthem’s MCO fee is not based upon the number of claims pending or closed, nor

is it related to any particular cost-cutting measure. We reject Haylett’s argument

that Anthem’s decision was motivated by an impermissible financial incentive.

                                        Conclusion

      A writ of mandamus is an extraordinary remedy. To be entitled to a writ of

mandamus, a relator must establish a clear legal right to the relief requested, a clear

                                          16
legal duty to perform the requested act on the part of the respondent, and no plain

and adequate remedy at law for the relator. State ex rel. Crabtree v. Ohio Bur. of

Workers’ Comp. (1994), 71 Ohio St. 3d 504, 510, 644 N.E.2d 361, 367. Haylett

has failed to establish that she has a clear legal right to the relief requested. We,

therefore, deny her request for a writ of mandamus.

      For a writ of prohibition to issue, the relator must prove “(1) that the court or

officer against whom the writ is sought is about to exercise judicial or quasi-

judicial power, (2) that the exercise of that power is unauthorized by law, and (3)

that denying a writ will result in injury for which no other adequate remedy exists

in the ordinary course of law.” State ex rel. Keenan v. Calabrese (1994), 69 Ohio

St.3d 176, 178, 631 N.E.2d 119, 121; State ex rel. Ruessman v. Flanagan (1992),

65 Ohio St. 3d 464, 465, 605 N.E.2d 31, 33. We deny Haylett’s request for a writ

of prohibition because we find that the MCO program is authorized by law and that

it does not unlawfully exercise quasi-judicial authority.

                                                                        Writs denied.

      MOYER, C.J., RESNICK, F.E. SWEENEY and LUNDBERG STRATTON, JJ.,

concur.

      COOK, J., concurs in judgment only.

      DOUGLAS, J., dissents.

FOOTNOTE:

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1. We can conceive of circumstances in which a critical medical need could go

unmet because of the MCO appeals process.       Under that circumstance, an

expedited process, which allows a claimant to demand an immediate evidentiary

hearing, would be of considerable value.

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