A California Court of Appeals has ruled that the state’s primary workers’ compensation insurer cannot deny an occupational medical clinic from its preferred provider network because it impaired the provider’s ability to practice occupational medicine in Fresno.
In Palm Medical Group Inc. v. State Compensation Insurance Fund, the court evaluated whether prohibiting Palm from becoming a part of SCIF’s preferred provider network violated the common law fair procedure doctrine.
In 1996, SCIF, the state’s primary workers’ compensation insurer, established a PPN as ” a coordinated care program designed to provide quality medical care, reduce workers’ compensation costs for employers and maintain employee productivity through medical management and early return to work efforts,” according to court documents. The PPN allowed employers to send injured workers to health providers within the PPN, who would work closely with employers and SCIF claims adjusters to develop effective treatment plans. In exchange for participation in the program, employers received a 10 percent discount on their insurance premiums.
According to court documents, doctors were selected for inclusion in the PPN based on the recommendation of a medical community liaison working in each of SCIF’s 18 offices. The MCL was supposed to familiarize himself or herself with the provider, and had “indispensable knowledge and information with regard to the physicians in their area,” SCIF indicated. In November 2004, SCIF began closing its PPN and stopped nominating new members. The PPN was dissolved in April 2006, after SCIF created a new medical provider network, which was authorized under the Labor Code.
When Palm tried to join SCIF’s PPN in 1998, it contacted Elisa Marie Moffitt, the MCL at SCIF’s Fresno district office. Moffitt toured Palm’s clinic and met with members of the medical staff. She ultimately indicated that she would not recommend Palm for admission in the PPN because there was no geographic need for another network provider in the northwest Fresno area. Palm attempted again in 2001 to be admitted to the PPN, but was denied in 2002 when Moffitt expressed concerns about Palm’s prior performance in SCIF cases she had reviewed, including failing to comply with certain workers’ comp reporting requirements and the quality of medical treatment.
The following month, Palm’s attorney wrote to SCIF explaining that it had “sustained substantial losses due to the arbitrary and capricious behavior and acts of Ms. Moffitt,” and that Palm would have “no choice but to sue for damages arising from [SCIF’s] discriminatory, fraudulent, deceptive and unfair business practices.”
A trial court jury returned a verdict in favor of Palm, on its claim for violation of the fair procedures doctrine. The jury found that SCIF owed Palm a duty of fair procedure with respect to its application to the PPN because SCIF “possessed power so substantial over the market for the treatment of occupational injuries in the Fresno area in 2001-2002 that the failure to admit an ordinary, competent medical provider to its [PPN] would significantly impair that provider’s ability to practice occupational medicine in the Fresno area.” The jury awarded Palm $1.1 million in damages.
Between 1998 and 2003, the market in the Fresno area for workers’ compensation insurance grew from approximately $62.1 million in annual premiums to $516.6 million in annual premiums. Approximately 60 percent businesses solicited in Fresno were insured by SCIF. And by 2002, 61 percent of the total written premiums received by SCIF from insureds in Fresno county came from employers participating in the PPN program.
Objecting to that decision, SCIF filed a motion to seat aside the judgment, arguing, among other things, that the evidence received at trial was insufficient to support the findings that SCIF possessed “substantial power” in the Fresno area, or that “any significant impairment” to Palm’s ability to practice occupational medicine resulted from Palm’s failure to gain admission to the PPN. The court vacated its prior judgment and entered new judgment in SCIF’s favor.
Palm filed an appeal, and the appeals court reversed the judgment and reinstated the initial jury verdict. “Having reviewed the trial transcript and the documentary evidence, we conclude the trial court erred in granting judgment notwithstanding the verdict,” the appeals court said. “The record includes ample evidence to support the jury’s finding that SCIF ‘possessed power so substantial over the market for the treatment of occupational injuries in the Fresno area in 2001-2002 that the failure to admit an ordinary, competent medical provider to its [PPN] would significantly impair that provider’s ability to practice occupational medicine in the Fresno area,’ and therefore, that SCIF owed Palm a duty of fair procedure in acting on its application to the PPN. We find no merit in SCIF’s alternate arguments in support of the judgment,” the appellate court said.
For more information on the case, visit http://www.courtinfo.ca.gov/opinions/documents/A114651.DOC.
Source: California Court of Appeals
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