COLLEEN MCLAUGHLIN, Employee/Appellant, v. ST. PHILLIPS CHURCH, SELF-INSURED, adm=d by BERKLEY RISK ADM=RS, Employer/Cross-Appellant.

 

WORKERS= COMPENSATION COURT OF APPEALS

OCTOBER 14, 2005

 

No. WC05-182

 

HEADNOTES

 

INTEREST; ATTORNEY FEES.  The compensation judge properly awarded interest on late payment of attorney fees pursuant to Minn. Stat. ' 549.09, subd. 1, as the award of interest contained in Minn. Stat. ' 176.225, subd. 5, pertains only to benefits ordered paid by the Department of Labor and Industry.

 

PENALTIES; MEDICAL TREATMENT & EXPENSE - SURGERY.  The liability of the employer for surgery is limited to the maximum fee in the medical fee schedule or the provider=s actual fee, whichever is lower.  The compensation judge properly awarded penalties to the employee based upon the fee schedule amount due for the surgery, rather than the larger amount prepaid by the employee.

 

INTEREST.  The compensation judge erred in awarding interest on the amount prepaid by the employee in excess of the medical fee schedule amount for the surgery.

 

PENALTIES; ATTORNEY FEES - RORAFF FEES.  Where the compensation judge issued an order requiring the self-insured employer to pay attorney fees based upon the medical benefits paid for the employee=s surgery, payment of attorney fees was due contemporaneously with each payment of medical benefits.  Since the payment of attorney fees should have commenced in October 2003 when the first medical bills were paid, and no attorney fees were paid until March 5, 2004, we modify the decision to increase the penalty awarded from 10 percent to 20 percent.

 

Affirmed in part, reversed in part and modified in part.

 

Determined by: Johnson, C.J., Wilson, J., and Pederson, J.

Compensation Judge: Jennifer Patterson

 

Attorneys: Timothy J. McCoy, McCoy, Peterson & Jorstad, Minneapolis, MN, for the Appellant.  Amy L. Borgeson, Heacox, Hartman, Koshmrl, Cosgriff & Johnson, St. Paul, MN, for the Cross-Appellant.

 

 

OPINION

 

THOMAS L. JOHNSON, Judge

 

The employee appeals from the compensation judge=s award of interest on attorney fees pursuant to Minn. Stat. ' 549.09, subd. 1,  rather than Minn. Stat. ' 176.225, subd. 5; from the award of a 30 percent penalty on $7,493.99, the amount due pursuant to the medical fee schedule for the employee=s surgery, rather than $17,126.83, the amount prepaid by the employee; and the award of a 10 percent penalty based on the self-insured employer=s delay in payment of attorney fees.  The self-insured employer appeals from the compensation judge=s award of interest on $17,126.83 from the date of pre-payment until the date she was reimbursed by the medical provider.  We affirm in part, reverse in part, and modify in part.

 

BACKGROUND

 

Colleen McLaughlin, the employee, sustained an injury to her low back on September 24, 2000, arising out of her employment with St. Phillips Church, then self-insured with claims administered by Berkley Risk Administrators.  The self-insured employer admitted liability for the employee=s personal injury and paid certain wage loss and medical benefits, including payment for an L2-S1 fusion performed by Dr. Manuel Pinto on March 14, 2001.

 

Dr. Pinto re-examined the employee on June 3, 2003, and recommended removal of the surgical instrumentation and an exploration of the fusion mass.  The employee filed a medical request on June 23, 2003, seeking approval for the surgery.  In a medical response, dated July 8, 2003, the self-insured employer denied liability for the proposed surgery.  On July 17, 2003, prior to scheduling the proposed surgery, the employee paid to the Twin Cities Spine Center the sum of $17,126.83.  Dr. Pinto performed the surgery on August 18, 2003.

 

The employee was examined by Dr. Mark Friedland at the request of the employer.  By report dated August 11, 2003, Dr. Friedland stated the surgical procedure recommended by Dr. Pinto was reasonable and necessary to treat the employee=s L5-S1 apparent pseudoarthrosis.  On September 24, 2003, Gregg Johnson, the employer=s attorney, contacted Timothy J. McCoy, the employee=s attorney, and stated, based upon the report of Dr. Friedland, the employer would pay for the employee=s surgery.  The parties agreed not to prepare a settlement agreement or obtain an award, agreeing instead the medical bills would be sent to Mr. Johnson for payment by the self-insured employer.  On September 30, 2003, the employee=s attorney served and filed a statement of attorney fees seeking payment of Roraff-type attorney fees.  By order dated October 15, 2003, a compensation judge ordered the employer to pay attorney fees of up to $13, 000.00 based upon the formula of 25/20 percent of the medical expenses paid.

 

On October 6, 2003, Mr. McCoy had sent to Mr. Johnson a letter enumerating the employee=s claim for medical expenses she had paid, including her payment to the Twin Cities Spine Center of $17,126.83.  The employer commenced paying medical expenses in October 2003.  In January 2004, the employer received an itemized statement from the Twin Cities Spine Center and paid them $7,493.99 pursuant to the fee schedule.  On May 5, 2004, Twin Cities Spine Center reimbursed the employee the $17,126.83 she had prepaid for the surgery.

 

In February 2004, the employee filed a claim seeking penalties for failure to reimburse the employee the $17,126.83 she prepaid for the surgery, penalties for failure to timely pay attorney fees and interest on the attorney fee payments.  Following a hearing, a compensation judge ordered the self-insured employer to pay a penalty of 30 percent of $7,493.99, the fee schedule amount for the August 2003 surgery, and a 10 percent penalty for the late payment of attorney fees.  The  compensation judge also ordered the self-insured employer to pay interest on late attorney fees pursuant to Minn. Stat. ' 549.09, subd. 1.  The employee appeals these orders.  The compensation judge further ordered the self-insured employer to pay interest to the employee on $17,126.83 from July 17, 2003 through May 5, 2004.  The self-insured employer cross-appeals from this order.

 

DECISION

 

1.  Interest on Attorney Fees

 

The compensation judge awarded interest on attorney fees pursuant to Minn. Stat. ' 549.09, subd. 1.  The employee contends this award is legally erroneous and asserts the judge should have awarded 12 percent interest on the unpaid attorney fees pursuant to Minn. Stat. ' 176.225, subd. 5.

 

In Hanegmon v. National Steel Pellet, slip op. (W.C.C.A. Oct. 6, 2004), this court held the 12 percent interest award contained in Minn. Stat. ' 176.225, subd. 5, pertains only to benefits ordered paid by the Department of Labor and Industry and not to orders by a compensation judge.  Since the award in this case was by a compensation judge, the interest is properly computed under Minn. Stat. ' 549.09, subd. 1, as provided in Minn. Stat. ' 176.221, subd. 7.  The judge=s award of interest on attorney fees is therefore affirmed.

 

2.  Penalty on Twin Cities Spine Center Bill

 

The employee paid $17,126.83 to Twin Cities Spine Center in July 2003, as a pre-payment for the surgery performed in August 2003.  In January 2004, the employer paid Twin Cities Spine Center $7,493.99, the amount due pursuant to the fee schedule.  In May 2004, the Twin Cities Spine Center reimbursed the employee the $17,126.83 she prepaid for the surgery.  The compensation judge found the employee was entitled to a penalty for a late payment of the surgical bill and awarded 30 percent of the fee schedule amount.  Citing Chrz v. Sacred Heart Hospice, slip op. (W.C.C.A. Feb. 13, 1990), the employee contends the judge should have awarded the penalty on the full amount of the payment made by the employee to Twin Cities Spine.  We disagree.

 

In the Chrz case, this court decided that under Minn. Stat. ' 176.191, subd. 3,^[1] a health insurer is entitled to full reimbursement for medical expenses paid by the insurer even where the expenses are in excess of those allowed under the fee schedule.  The statute, however, is limited by its terms to insurers under Chapters 62A, 62C, and 62D and has no application to claims for medical expenses made by an employee.  The liability of the self-insured employer for the surgery is limited to the maximum fee in the medical fee schedule or the provider=s actual fee, whichever is lower.^[2]  The employer had no obligation to pay the employee more than the fee schedule amount.  The compensation judge=s award of penalties to the employee based upon the fee schedule amount for the surgery, therefore, is affirmed.

 

3.  Interest on Twin Cities Spine Center Bill

 

The compensation judge awarded the employee interest on $17,126.83 from the date of payment to Twin Cities Spine Center until the date she was reimbursed by Twin Cities Spine Center.  The self-insured employer admits liability for interest on the fee schedule amount for the surgery, but contends it has no liability on the additional amount prepaid by the employee.  We agree.  As stated above, under Minn. Stat. ' 176.136, subd. 1a, the liability of the self-insured employer for the surgery is limited to the maximum fee in the medical fee schedule or the provider=s actual fee, whichever is lower.  The compensation judge=s award of interest on the Twin Cities Spine Center bill in excess of the medical fee schedule amount is reversed.

 

4.  Penalty on Attorney Fees

 

The compensation judge awarded a penalty of 10 percent of the $13,000.00 in attorney fees based on the self-insured employer=s failure to pay the attorney fees until March 5, 2004.  On appeal, the employee contends the employer=s conduct was so egregious a 30 percent penalty should have been awarded.

 

The employer admitted liability for the employee=s surgery in September 2003.  Between October 22, 2003 and January 8, 2004, the employer paid over $60,000.00 in medical expenses.^[3]  The compensation judge concluded that because there were bills from multiple health care providers related to a single surgical procedure, it was not unreasonable to wait until January 8, 2004 to pay the Roraff fees.  Since the employer did not pay the fees until March 5, 2004, the compensation judge found an unreasonable delay and awarded a 10 percent penalty.  The employee appeals this amount contending the Roraff fees should have been paid contemporaneously with the payment of each medical bill.  Accordingly, the employee seeks a penalty of 30 percent.

 

Although there is a rule governing the date by which medical expenses must be paid,^[4] there is no rule governing when Roraff attorney fees computed on medical benefits are payable.  The compensation judge allowed the employer a reasonable period of time after payment of the medical expenses to pay the Roraff fees.  While there is merit to this approach, reasonableness is a subjective standard not well suited to determinations of time limits for the payment of benefits.

 

On October 15, 2003, the compensation judge issued an order requiring the self-insured employer to pay attorney fees based upon the medical benefits paid.  The attorney fees were, we hold, due contemporaneously with each payment of medical benefits.  Over $10,000.00 in attorney fees were due on October 22, 2003, but were not paid until March 5, 2004.  Since the compensation judge concluded the Roraff fees were not due until January 8, 2004, a position with which we disagree, we modify the compensation judge=s order and increase the penalty from 10 percent to 20 percent.