What Consequences Does an Employer Face When There is a Refusal to Authorize Treatment? A Petitioner’s Perspective

By: Richard D. Hannigan of Hannigan & Botha

Hollywood Casino - Aurora v. Illinois Workers' Compensation Commission --- N.E.2d ----, 2012 IL App (2d) 110426WC, 2012 WL 933282, Ill.App. 2 Dist., March 16, 2012 (NO. 2-11-0426WC) is a case wherein the Appellate Court has found that there are no consequences for an employer's failure to authorize treatment. There are two dissenting opinions.

The case involved an injured employee with reflex sympathetic dystrophy. There had been a prior award entered and by the very nature of that award the injured worker's medical rights are open for life. At the time of the initial hearing the petitioner was in need of a dorsal cord stimulator and the respondent was ordered to pay for the reasonable and necessary medical expenses incurred including the cost of the spinal cord stimulator. This award was entered November 19, 2004.

Subsequent to the award, the injured worker's treating doctor advised the insurance company in December 2006 that the petitioner's battery for the spinal cord stimulator would need to be replaced in the first quarter of 2007 and if there are any questions the adjuster should contact the doctor. In May 2007 the battery in the spinal cord stimulator ceased to work and the treating doctor scheduled the battery replacement surgery for that month. The doctor's office contacted the adjuster with a request for authorization of the surgery. The authorization was neither denied or granted but there was a request for additional medical information advising as to the necessity for that surgery. On June 18, 2007, the doctor faxed all of the necessary information to the adjuster and again scheduled surgery for July. Authorization was not granted.

On August 2, 2007 the injured worker's attorney filed an 8(a) petition requesting that the Illinois Workers' Compensation Commission order the adjuster to authorize the surgery and asked for penalties and attorney's fees. On August 15, 2007 the adjuster authorized the surgery and it took place on August 27, 2007. The injured worker went four months without the benefit of the spinal cord stimulator.

The injured worker's attorney still proceeded with the petition for penalties and attorney's fees. In a decision entered by the Commission on August 31, 2010 the employer was found to have unreasonably delayed authorization for this surgery without good and just cause and awarded penalties which were in the amount of $40,750.00 but denied the request for attorney's fees. The penalties were based upon the actual cost of the medical procedure. It should be noted that shortly after the surgery all of the related medical bills were paid by the employer in a timely manner.

The employer sought a judicial review of the Commission decision in the Circuit Court of Kane County. The Circuit Court of Kane County reversed the decision of the Commission as to the 19(k) penalties finding that there is no legal basis for awarding fees and penalties where permanent partial disability had been awarded and there was a delay in authorizing treatment. The Circuit Court having reversed the decision of the Commission, the employee filed her appeal to the Appellate Court.

The sole issue is whether or not an employer is obligated to authorize medical treatment and if failure to do so can result in § 19(k) penalties.

In affirming the decision of the Circuit Court, Justice Hoffman wrote "The statute addresses 'delay in payment' and 'underpayment' of compensation. It says nothing about any award of additional compensation (penalties) for an employer's delay in authorizing medical treatment, even assuming arguendo that an employer has an obligation to give authorization in advance of medical treatment for an injured employee".

Noting the cardinal rule of statutory construction, the majority indicated that where the language of the statute is clear and unambiguous, courts must interpret the statute according to its terms without resorting to aids of construction. As to §19(k); it states penalties may be held where "there has been any unreasonable or vexatious delay of payment or intentional underpayment of compensation". Citing prior case law, "Payment is defined as the act of paying or giving compensation". The court also (as they have been doing lately) cited Webster's Third New International Dictionary which indicates the definition does not include giving of authorization for service.

The court concluded that "We are not unmindful of the fact that many medical service providers decline to render services to injured employees unless they first receive authorization from the employer or the employer's workers' compensation insurance carrier. Nevertheless, it is the function of the legislature, not the judiciary, to provide a penalty for those employers that unreasonably or vexatiously delay or refuse to authorize necessary medical services required to cure or relieve an injured employee from the affects of an accidental work injury.

There were two dissenting opinions. Justice Stewart wrote the first dissent which Justice Holdridge concurred. Justice Holdridge wrote his own dissent.

Justice Stewart noted that the very purpose of the Act is to protect injured workers and that purpose is clearly frustrated by the majority's interpretation. "The majority's interpretation provides no protection for the injured worker from an employer who unreasonably or vexatiously refuses to provide medical services by refusing authorization for those services. More specifically §19(k) provides penalties for a delay in payment. Justice Stewart noted that the delay in authorization therefore causes a delay in payment and therefore §19(k) should apply. "While it is true that the insurance carrier promptly paid bills for the surgery after it was performed, it is equally true that its delay in authorization of the surgery delayed the issuance of the bill in the first place. There is little doubt in this case that the delay in authorization of the surgery resulted in a delay in the performance of the medical services the claimant needed which also resulted in a delay in the payment of those services". Therefore, §19(k) would be applicable.

Justice Holdridge disagreed with the majority's interpretation of "delay in payment". He believes that is ambiguous and not clear. When §19(k) was first drafted pre-authorization was not contemplated for treatment. In this present day and age the medical community and insurance companies, have come to make authorization an integral part "or stage of payment". Therefore, refusal to authorize treatment is in fact a delay in payment since authorization is one of the stages in payment for treatment refusal to make the authorization when unreasonable or vexatious should result in penalties.

Author's note: I find that the lack of consequences when an employer fails to authorize treatment may lead to abuses in the system and consequences to the injured worker far greater than any of the current changes in the Workers' Compensation Act.