The self-insured employer and Gallagher Bassett Services, Inc. (Gallagher Bassett) appeal the compensation judge’s finding that HealthEast Care System (HealthEast) was entitled to payment for surgical implants in an amount equal to 85 percent of HealthEast’s usual and customary charge, and the judge’s conclusion that he did not have authority to determine the reasonable value of the surgical implants at less than 85 percent of the hospital’s usual and customary charge.  We affirm.

Patricia A. Jennings, the employee, on January 29, 2008, sustained a work-related injury to her cervical spine arising out of her employment with the self-insured employer, Allina Medical Clinic, with claims administered by Gallagher Bassett.  The employer/Gallagher Bassett accepted primary liability and paid workers’ compensation benefits, including medical expenses.

On May 27, 2008, the employee underwent surgery at St. Joseph’s Hospital consisting of an anterior decompression and fusion at C5-6 and C6-7.  The parties stipulated the surgery was reasonable and necessary to cure and relieve the effects of the employee’s work injury.  St. Joseph’s Hospital is part of the HealthEast Care System and charges for services at the hospital are billed by and through HealthEast.  The employer/Gallagher Bassett paid the operating room charges, room charges, and charges for associated services, but paid only part of the charge billed by HealthEast for medical implants used in the surgery.

In April 2009, HealthEast filed a medical request seeking payment of the unpaid balance of the bill for the employee’s surgery.  The employer/Gallagher Bassett denied liability for the additional expense.  The case came on for hearing, and was presented on stipulated facts pursuant to Minn. Stat. § 176.322.  No testimony was taken before the compensation judge; the transcript consists of the offer and admission of exhibits and the comments of counsel.  The parties stipulated to the following pertinent facts:

Following a hearing, the compensation judge found the employer and insurer were liable to HealthEast for 85 percent of its usual and customary charge for the surgical implants.  The self-insured employer and Gallagher Bassett appeal.

The self-insured employer and Gallagher Bassett contend the compensation judge erred in determining that HealthEast was entitled to be paid 85 percent of its usual and customary charge for the medical implants,^[1] and in concluding that he did not have authority to determine the reasonable value of the implant hardware at less than 85 percent of the hospital’s usual and customary charge.  The appellant asserts that, pursuant to Minn. Stat. § 176.136, subd. 2, a compensation judge does have authority to review the hospital’s usual and customary charge and reject charges that are excessive.

Prior to 1992, Minn. Stat. § 176.135, subd. 3, limited the liability of an employer for medical expenses to “such charges therefore as prevail in the same community for similar treatment, articles and supplies.”^[2]  In 1992, Minn. Stat. § 176.135, subd. 3, was repealed.  The legislature directed the commissioner of the Department of Labor & Industry to enact a relative value medical fee schedule which “must reasonably reflect a 15 percent overall reduction from the medical fee schedule most recently in effect.”  Minn. Stat. § 176.136, subd. 1a.  The liability of an employer for treatment provided at a hospital with greater than 100 licensed beds is now limited to 85 percent of the provider’s usual and customary charge or, in the alternative, 85 percent of the “prevailing charges” for similar treatment articles or supplies, whichever is lower.  Minn. Stat. § 176.136, subd. 1b.(b).^[3]

The appellant asserts the compensation judge’s interpretation of the 85 percent statutory limit is erroneous.  It argues the Workers’ Compensation Act is to be interpreted to assure the quick and efficient delivery of medical benefits at a reasonable cost to employers under Minn. Stat. § 176.001.  Minn. Stat. § 176.136, subd. 1b, the appellant contends, explicitly grants authority and discretion to a compensation judge to determine the reasonable value of medical services, articles, or supplies.  It maintains the policy underlying this authority is to provide an independent check against unreasonable charges by hospitals for services or supplies outside the fee schedule.  The appellant point outs that neither the usual and customary standard or the prevailing charge standard prohibits hospitals from placing markups on products such as implants.  Further, the appellant argues, the legislature could not have intended the prevailing charge standard to be the sole safeguard to protect against unreasonable usual and customary billings because that standard fails to provide for any independent scrutiny of markups for things such as implants.  To prevent such abuses, the appellant contends Minn. Stat. § 176.136, subd. 1b.(b), caps the employer’s liability at 85 percent of the hospital’s usual and customary charge or 85 percent of the prevailing charge, but allows a compensation judge to award less than 85 percent.  The appellant argues that by capping the payer’s liability at 85 percent, the legislature set only the upper limit of liability and not a mandatory percentage for reimbursement.

This interpretation of the statute, the appellant maintains, is evidenced by the difference in the language used in establishing the liability of an employer for small and large hospitals.  Subdivision 1b.(a) states that the liability of the employer for charges at a small hospital “shall be” the hospital’s usual and customary charge.  Subdivision 1b.(b) states the liability of the employer for charges at a large hospital “shall be limited to” 85 percent of the usual and customary or prevailing charge.  Had the legislature intended 85 percent to be the fixed amount for reimbursement to large hospitals, the appellant argues, it would have used the same obligatory language employed in subdivision 1b.(a) stating instead that the liability of the employer “shall be” 85 percent of the usual and customary charge.  Since it does not do so, the appellant argues, the 85 percent limitation is an upper limit only and the statute grants authority to a compensation judge to determine whether the hospital’s reasonable and customary charge is excessive.  We are not persuaded by these arguments.

Minn. Stat. § 176.136, subd. 1b.(a), establishes the liability of the employer for treatment at a small hospital at 100 percent of the hospital’s usual and customary charge “unless the charge is determined by the commissioner or a compensation judge to be unreasonably excessive.”  This subdivision of the statute, therefore, specifically provides for review, by a compensation judge, of a small hospital’s usual and customary charge.  In contrast, Minn. Stat. § 176.136, subd. 1b.(b), establishes the liability of an employer for treatment at a large hospital at 85 percent of either the hospital’s usual and customary charge or 85 percent of the prevailing charge, whichever is lower.  For a large hospital, therefore, the jurisdiction of a compensation judge is limited to determining which charge is less, 85 percent of the provider’s usual and customary charge or 85 percent of the prevailing charge.^[4]   That legislative intent is evidenced by the language of the statute which states that “[o]n this basis, . . . a compensation judge may determine the reasonable value of all treatment, services, and supplies, and the liability of the employer is limited to that amount.”  The qualifying phrase “on this basis” can refer only to the two alternate standards for establishing the liability of the employer.

Nor do we agree with the appellant’s argument that the 85 percent limitation is an upper limit only.  We agree the legislature’s use of the phrase “shall be limited to” was intentional and contemplates that the liability of an employer for treatment at a large hospital might be less than 85 percent of the usual and customary charge or 85 percent of the prevailing charge.  We do not agree, however, that a compensation judge has jurisdiction to make that determination.  The last sentence of Minn. Stat. § 176.136, subd. 1b.(b), provides that “[t]he commissioner may by rule establish a reasonable value of a service, article, or supply in lieu of the 85 percent limitation in this paragraph.”  The plain meaning of the statute is that the employer’s liability for charges at a large hospital are 85 percent of the hospital’s usual and customary charge or 85 percent of the prevailing charge unless the commissioner, by rule, establishes a lesser charge.  The authority to reduce the employer’s liability to less than 85 percent is limited to the commissioner through the rule making authority.  Nowhere in the statute do we find any implicit or explicit authority granted to a compensation judge to reduce the employer’s liability below the 85 percent limit.

We acknowledge the appellant’s argument that substantial markups on surgical implant components by large hospitals contribute to the high cost of medical care.  But this court cannot ignore the statute in order to fashion a remedy.  The liability of an employer for treatment at a large hospital is statutorily established at 85 percent of either the provider’s usual and customary charge or 85 percent of the prevailing charge.  The appellant has not sought to establish the prevailing charge and have stipulated to HealthEast’s usual and customary charge.  To the extent a systemic problem may exist related to markups on surgical implant components, the problem is best addressed by the commissioner through the department’s rule-making authority.

The self-insured employer and Gallagher Bassett also contend the compensation judge committed an error of law in excluding employer/Gallagher Bassett’s exhibits 8, 9, and 10.  The appellant asserts the exhibits are relevant and necessary “as they provide the context and factual basis to correctly conclude that the Court can and must scrutinize the hospital’s mark-up to a cap of 85 percent of their full charge to determine what is reasonable.”  (App. Brief at p. 19.)  As we have affirmed the compensation judge’s determination that HealthEast is entitled, as a matter of law, to be paid 85 percent of its usual and customary charge for the surgical implants, an amount stipulated to by the parties, the compensation judge properly excluded the exhibits.

The decision of the compensation judge is affirmed.  See Troyer v. Vertlu Mgmt. Co., Kok & Lundberg Funeral Homes, No. WC10-5077 (W.C.C.A. Oct. 4, 2010).