W.C. No. 4-244-640Industrial Claim Appeals Office.
September 30, 1997
ORDER OF REMAND
The respondents seek review of a final order of Administrative Law Judge Henk (ALJ), which imposed daily penalties based on the “respondents’ failure to pay for physical therapy.” We set the order aside and remand for entry of a new order.
The ALJ’s findings may be summarized as follows. On October 11, 1995, one of the claimant’s treating physicians recommended an “aggressive” course of physical therapy to treat the claimant’s back injury. On October 12, 1995, the claimant’s other treating physician concurred in this recommendation. The respondent-insurer, Colorado Compensation Insurance Authority (CCIA), received the October 12 report at the end of October 1995, but it did not receive the October 11 report until February 1, 1996.
In October 1995, the CCIA employed a “medical management” firm known as HCX. HCX was responsible for reviewing the propriety of medical treatments prescribed for injured workers covered by the CCIA. The ALJ found that the CCIA never provided the written physicians’ reports to HCX.
In October 1995 Parkview Out-Patient Rehabilitation (Parkview) contacted HCX requesting prior authorization for the expense of providing the physical therapy prescribed by the claimant’s physicians. On November 1, 1995, HCX mailed to Parkview a letter and detailed questionnaire seeking information concerning the claimant’s condition and the type and length of treatment. However, Parkview did not reply to the inquiry, and on November 28, 1995, HCX sent a letter to Parkview stating that “additional therapy could not be approved.” Eventually, the CCIA approved the therapy on April 17, 1996.
Under these circumstances, the ALJ concluded that the “respondents” should be penalized $25.00 per day from February 6, 1996 through April 17, 1996. The ALJ reasoned that § 8-42-101, C.R.S. 1997, imposes a duty on employers to provide reasonable and necessary medical treatment. The ALJ found that when the CCIA received the October 11 medical report on February 1, 1996, it had sufficient information to demonstrate the reasonableness and necessity for additional physical therapy. Further, the ALJ concluded that the CCIA acted unreasonably by delaying physical therapy past February 6, and should be penalized for this misconduct.
On review, the respondents contend that the ALJ erred in imposing penalties for violating § 8-42-101 because they acted reasonably in delaying payment under the prior authorization provisions of Rule of Procedure XVI(J)(1), 7 Code Colo. Reg. 1101-3 at 79-80. They argue that the issue is not whether the prescribed physical therapy was “reasonable and necessary,” but whether it was proper to rely on the prior authorization rules to delay payment while requesting additional information concerning the type of treatment to be provided, the length of treatment, and the frequency of treatment. Because we conclude that the ALJ applied an incorrect standard in assessing the respondents’ argument, we remand for entry of a new order.
Although not specifically cited in the ALJ’s order, it is apparent that she imposed the daily penalties under the provisions of § 8-43-304(1), C.R.S. 1997. However, in Sears v. Penrose Hospital, ___ P.2d ___ (Colo.App. No. 96CA0909, February 20, 1997), the Court of Appeals ruled that the general penalty provisions of § 8-43-304(1) apply only in those cases where the Act does not create a specific penalty for the alleged violation. Moreover, the court indicated that where the “gravamen” of the disputed conduct is failure to pay medical benefits, the Act provides a specific penalty under § 8-43-401(2)(a), C.R.S. 1997. Therefore, § 8-43-304(1) does not apply in such cases.
Section 8-43-401(2)(a) provides as follows:
“If any insurer or self-insured employer willfully delays payment of medical benefits for more than thirty days or willfully stops payments, such insurer or self-insured employer shall pay a penalty to the Division of eight percent of the amount of wrongfully withheld benefits.”
Here, the “gravamen” of the claim for penalties is the CCIA’s delay in approving payment for physical therapy. Thus, the claim is governed by § 8-43-401(2)(a), not § 8-43-304(1). Sears v. Penrose Hospital, supra.
Moreover, there is a significant difference in the standard of conduct which justifies a penalty under § 8-43-304(1), and the standard which justifies a penalty under § 8-43-401(2)(a). Penalties may be imposed under § 8-43-304(1) if the violator’s conduct is unreasonable under an objective standard. The objective standard does not require the violator know that the conduct is unreasonable. See Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996).
In contrast, § 8-43-401(2)(a) requires that the violator act “willfully,” and that the benefits be “wrongfully” withheld. Willfulness requires that the violator act with “deliberate intent.” Sears v. Penrose Hospital, supra.
Here, the ALJ judged the case under the objective standard of § 8-43-304(1), and did not determine whether the CCIA’s conduct was deliberate and intentional under § 8-43-401(2)(a). Under these circumstances, the matter must be remanded to the ALJ for entry of a new order. The ALJ shall apply the provisions of §8-43-401(2)(a) and determine whether the respondents’ conduct falls within the standards established by the statute. Moreover, any penalties imposed should comply with the provisions of §8-43-401(2)(a). Should the ALJ conclude that it is necessary to hold an additional hearing, she may do so in the exercise of her discretion.
IT IS THEREFORE ORDERED that the ALJ’s order dated December 10, 1996, is set aside, and the matter is remanded for further proceedings and entry of a new order consistent with the views expressed herein.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ David Cain
______________________________ Kathy E. Dean
Copies of this decision were mailed September 30, 1997 the following parties:
Patrick J. Segura, P.O. Box 11389, Pueblo, CO 81001
Martin Music Company, 1405 Santa Fe Dr., Pueblo, CO 81006-1429
Colorado Compensation Insurance Authority, Attn: Laurie Schoder, Esq. (Interagency Mail)
Michael W. Seckar, Esq., 204 W. 12th St., Pueblo, CO 81003 (For the Claimant)
Thomas E. Hazard, Esq., 1700 Broadway, Ste. 1700, Denver, CO 80290-1701 (For the Respondents)
By: _______________________________