[Cite as State ex rel. Haylett v. Ohio Bur. of Workers’ Comp., 87 Ohio St.3d 325, 1999-Ohio-134.]
THE STATE EX REL. HAYLETT v. OHIO BUREAU OF WORKERS’ COMPENSATION ET AL.
[Cite as State ex rel. Haylett v. Ohio Bur. of Workers’ Comp. (1999), 87 Ohio St.3d
325.]
Workers’ compensation — Managed care organization program enacted in R.C.
4121.44 and 4121.441 does not violate Section 35, Article II of the Ohio
Constitution.
The managed care organization program enacted in R.C. 4121.44 and 4121.441
does not violate Section 35, Article II of the Ohio Constitution.
(No. 98-675 – Submitted May 18, 1999 — Decided December 29, 1999.)
IN MANDAMUS and PROHIBITION.
In 1993, the General Assembly enacted R.C. 4121.44 and 4121.441, which
established a health plan system for Ohio’s Bureau of Workers’ Compensation
(“BWC”) called the Health Partnership Program (“HPP”). The HPP is a
comprehensive managed care program administered by the BWC to provide
medical, surgical, nursing, drug, hospital, and rehabilitation services and supplies
to employees for injuries or occupational diseases that are compensable under R.C.
Chapters 4123, 4127, or 4131.
An integral part of the HPP is the use of managed care organizations
(“MCOs”), private entities that contract with the BWC to provide medical
management and cost containment services. Each MCO has a network of business
partners that provides a full range of medical services and supplies, including
specialized services. Ohio Adm.Code 4123-6-041.
Relator-claimant, Duetta Haylett, was injured at work on September 20,
1994. She filed a workers’ compensation claim that was allowed. Following her
injury, Haylett received chiropractic treatments from James Viers, D.C., which
were paid by the BWC.
Respondent Anthem Blue Cross and Blue Shield, Inc. (“Anthem”) is a
certified MCO that contracted with Haylett’s employer to manage the medical
aspect of Haylett’s workers’ compensation claim. In early 1998, Anthem
conducted a utilization review of the chiropractic treatment that Haylett was
receiving. In a utilization review, the MCO assesses the employee’s medical care
in terms of medical necessity, the appropriateness of the place, level, and duration
of care, and the frequency or quality of the services being provided. Ohio
Adm.Code 4123-6-01(U). On February 9, 1998, Anthem notified Haylett and Dr.
Viers that “it appears that chiropractic services that [Haylett is] receiving are not
medically necessary.” The letter further informed Haylett and Dr. Viers that fees
for further treatments would not be reimbursed. Anthem enclosed a dispute
resolution form with the letter to enable Haylett to readily appeal the decision.
Within three days, Anthem contacted Haylett’s chiropractor with
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recommendations for other treatment that may have been appropriate for her
allowed conditions.
Haylett initiated Anthem’s dispute resolution process on February 18, 1998.
Within a week, Anthem arranged another chiropractic review. That chiropractor
also concluded that Haylett’s chiropractic care was not medically necessary for her
allowed conditions.
On March 3, 1998, Haylett filed for a second level of review in Anthem’s
dispute resolution process. Another review was conducted on March 4, 1998, by a
different chiropractor, who also concluded that Haylett was not benefiting from her
chiropractic treatments. On March 9, 1998, Anthem informed Haylett and Dr.
Viers of the results of the second level of the dispute resolution process.
On March 13, 1998, counsel for Haylett referred Haylett’s claim to the BWC
for an independent review. On March 31, 1998, the BWC issued an order that
disallowed the requested chiropractic treatment. Haylett appealed to the Industrial
Commission. Following a hearing on June 1, 1998, the district hearing officer
granted Haylett’s appeal and vacated the previous BWC order. The district hearing
officer did not approve Haylett’s request for unlimited treatments but did authorize
two chiropractic treatments per month for three months.
While her administrative appeal was pending before the Industrial
Commission, Haylett filed for a writ of mandamus and a writ of prohibition. She
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seeks to compel respondents BWC and Industrial Commission to prevent MCOs
from “terminating” medical treatment and benefits and from following the
mandatory dispute resolution process for MCOs in Ohio Adm.Code 4123-6-16.
This cause is now before this court as an original action in mandamus and
prohibition.
__________________
Stewart Jaffy & Associates Co., L.P.A., Stewart R. Jaffy and Marc J. Jaffy,
for relator, and urgins issuance of the writs for amicus curiae, Ohio AFL-CIO.
Betty D. Montgomery, Attorney General, and Dennis L Hufstsader, Assistant
Attorney General, for respondent Ohio Bureau of Workers’ Compensation; and
James A. Barnes, Assistant Attorney General, for respondent.
Vorys, Sater, Seymour & Pease, L.L.P., Michael J. Canter and Jacklyn J.
Ford, for respondent Anthem Blue Cross and Blue Shield.
Gallon & Takacs Co., L.P.A., and Theodore A. Bowman, urging issuance of
the writs for amicus curiae, Ohio Academy of Trial Lawyers.
Garvin & Hickey, L.L.C., Preston J. Garvin and Michael J. Hickey, urging
denial of the writs for amici curiae, Ohio Chamber of Commerce, Ohio
Manufacturers Association, Ohio Chapter of the National Federation of
Independent Business, and Ohio Farm Bureau.
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Bricker & Eckler L.L.P., Charles D. Smith, Diane Richards Brey and James
Burnes; Porter, Wright, Morris & Arthur and Theodore G. Fisher, urging denial of
the writs for amici curiae, MCO League of Ohio and Ohio Association of
Managed Care Organizations.
__________________
PFEIFER, J. At issue in this case is the constitutionality of the MCO
program. Haylett argues that the MCO program violates Section 35, Article II of
the Ohio Constitution because it is an improper delegation of authority to a private
entity. We disagree. She also argues that MCOs violate due process when they
terminate a claimant’s medical treatment without providing prior notice and a prior
hearing. We agree that the MCO program as currently administered can lead to
deprivations of due process. However, based on the facts of this case, we
determine that Haylett was not deprived of due process. Accordingly, we deny the
writ.
A statute is presumed to be constitutional and every reasonable presumption
will be made in favor of its validity. State ex rel. Michaels v. Morse (1956), 165
Ohio St. 599, 603, 60 O.O. 531, 533, 138 N.E.2d 660, 664; State ex rel. Dickman
v. Defenbacher (1955), 164 Ohio St. 142, 147, 57 O.O. 134, 137, 128 N.E.2d 59,
63. Accordingly, any doubt as to constitutionality is resolved in favor of the
validity of the statute. Id.
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The HPP/MCO Program
The MCO program was created as part of an overall plan, enacted by the
General Assembly in R.C. 4121.44 and 4121.441, to more efficiently manage the
medical aspects of workers’ compensation claims. A committee composed of
individuals from business, labor, medical providers, and the BWC staff designed
the major components of the HPP, including the MCO program. The committee
included representatives from the AFL-CIO, the Ohio Civil Service Employees
Association, the Communications Workers of America, and the Ohio Trial
Lawyers Association.
On March 28, 1995, the committee reached unanimous agreement on key
aspects of the BWC’s HPP. Following public hearings, the BWC promulgated a
series of administrative rules in Ohio Adm.Code Chapter 4123-6 to implement the
HPP.
Under the new program, the BWC administers the HPP and monitors the
MCO program, including certifying each MCO and individual provider. The BWC
also conducts regular recertification reviews. The BWC exclusively determines
whether a claim is compensable and what conditions are allowed, subject only to
an appeal to the Industrial Commission. Ohio Adm.Code 4123-6-043(A); 4123-6-
045. The BWC authorizes the release of state funds to pay the medical claims.
Ohio Adm.Code 4123-6-043(A); 4123-6-045(A). The BWC works with the MCO,
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the employer, the employee, and the provider to effect a course of treatment that
promotes a safe and speedy return to work. Ohio Adm.Code 4123-6-043(B).
The medical aspect of each claim is managed by an MCO. The MCO must
promptly notify the BWC of an employee’s industrial injury. While the BWC
determines the compensability of a claim, the MCO works “in conjunction with the
employer, employee, attending physician, and the [BWC to] seek a course of
medical or rehabilitative treatment that promotes a safe return to work.” Ohio
Adm.Code 4123-6-043(B).
During the life of a medical claim, the MCO performs utilization reviews, as
in the case of Haylett. Utilization reviews ensure that only medical services and
supplies that are medically necessary for the diagnosis and treatment of allowed
conditions and that are causally related to those conditions will be considered for
payment. The MCO must submit all medical bills to the BWC. Ohio Adm.Code
4123-6-11. The BWC then authorizes payment and sends it to the MCO for
reimbursement to the individual provider.
The MCO program has a mandatory dispute resolution process that is
available to employees, employers, and providers. Ohio Adm.Code 4123-6-16.
The MCO is required to provide two levels of independent review that must be
completed within twenty-one days. Ohio Adm.Code 4123-6-16(C). The MCO
must notify the BWC if the dispute has not been resolved within that period of
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time. At that time, the BWC conducts its own independent review and issues an
order. Ohio Adm.Code 4123-6-16(D). Either party may appeal this order to the
Industrial Commission.
Section 35, Article II, Ohio Constitution
Section 35, Article II of the Ohio Constitution provides that “laws may be
passed establishing a state fund to be * * * administered by the state, determining
the terms and conditions upon which payment shall be made therefrom. * * *
Laws may be passed establishing a board which may be empowered to * * *
collect, administer and distribute such fund, and to determine all rights of
claimants thereto.” Section 35, Article II has been interpreted as a permissive
grant of authority to the General Assembly and not a limitation upon its authority.
State ex rel. Michaels v. Morse, supra, 165 Ohio St. at 603, 60 O.O. at 533, 138
N.E.2d at 663.
Haylett contends that Section 35, Article II of the Ohio Constitution was
violated because the BWC transferred its duty to administer the workers’
compensation system to a private entity.
MCOs manage only the medical aspect of state-funded workers’
compensation medical benefits claims. MCOs coordinate treatment plans and
review the plans to ensure that a claimant’s treatment is medically necessary for
the diagnosis and treatment of the allowed conditions. MCOs reimburse medical
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providers with payment received from the BWC. MCOs do not determine the
compensability of claims.
The BWC supervises MCOs and continually monitors and evaluates their
performance. The BWC regularly reviews the certification of each MCO. The
BWC makes the final decision as to payment and issues payment from the State
Insurance Fund to MCOs so they can reimburse individual medical providers.
Any decision by an MCO regarding treatment or payment is nonbinding and
subject to multiple levels of review. The final decision as to any aspect of the
claim lies with the Industrial Commission. Under the MCO program, injured
employees receive the same benefits as under the previous system.
R.C. 4121.62(A)(1) enables the Administrator of Workers’ Compensation to
“[c]ontract with any public or private person for the rendition of rehabilitation
services.” The BWC has contracted with private persons and entities to perform
independent medical examinations and disability assessments, to review medical
files, and to pay hospital bills. The state also contracts with outside financial
advisers for advice concerning and management of money in the state fund.
We do not agree that the MCO program constitutes an attempt to privatize
the state’s workers’ compensation system in violation of Section 35, Article II of
the Constitution. See State ex rel. Turner v. United States Fid. & Guar. Co. of
Baltimore (1917), 96 Ohio St. 250, 117 N.E. 232 (legislation authorizing
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employers to self-insure for workers’ compensation upheld as constitutional). The
state supervises the MCOs and makes the final decision as to the award and
payment of compensation. Further, injured employees are entitled to receive the
same benefits they would have received under the prior system. We hold that the
MCO program is not an improper delegation of authority to a private entity and
therefore does not violate Section 35, Article II of the Constitution on that ground.
Haylett also argues that an MCO can terminate medical treatment and that
the termination can only be appealed by using the mandatory dispute resolution
process. Haylett contends that this process results in delays and hardships that
violate Section 35, Article II.
Under the prior system, the BWC could refuse to authorize payment for
treatment without advance notice or a hearing. BWC claims examiners, who
usually had no formal medical training, conducted medical reviews for
reasonableness and necessity. If the BWC terminated authorization for continued
treatments, the claimant could appeal that decision to the Industrial Commission.
At that time, the claimant was afforded his or her first opportunity to submit
additional evidence or argument. This process normally took several months to
complete.
The MCO dispute resolution process mandates two independent reviews by
medical experts within weeks of the MCO’s initial determination. If the claimant
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receives an adverse decision, the claimant is given an explanation for the denial
and has the opportunity to submit additional evidence. Employers and providers
may also take advantage of this process. Mandatory deadlines ensure that the
dispute resolution process moves quickly.
We do not believe that a dispute resolution process that provides for two
reviews by medical experts over a period of less than a month and that affords a
claimant the opportunity to submit additional information in support of the
treatment requested constitutes a violation of the claimant’s constitutional right to
workers’ compensation benefits. We also do not believe that this non-binding
review system is quasi-judicial in nature.
MCOs do not usurp the power and authority of the state to administer the
State Insurance Fund or to determine the terms and conditions of payment.
Accordingly, we hold that the statutory scheme authorizing the MCO program
does not violate Section 35, Article II of the Ohio Constitution.
Due Process
The Fourteenth Amendment to the United States Constitution prohibits any
state from depriving “any person of life, liberty, or property, without due process
of law.” Section 16, Article I of the Ohio Constitution states that “every person,
for an injury done him in his land, goods, person, or reputation, shall have remedy
by due course of law.”
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In a due process challenge pursuant to the Fourteenth Amendment, the first
inquiry is whether a protected property or liberty interest is at stake. Am. Mfrs.
Mut. Ins. Co. v. Sullivan (1999), 526 U.S. 40, 119 S.Ct. 977, 989, 143 L.Ed.2d
130, 149; Mathews v. Eldridge (1976), 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18.
R.C. 4123.54 states that “[e]very employee, who is injured * * * is entitled
to receive * * * compensation for loss sustained on account of the injury * * * as *
* * provided by this chapter.” (Emphasis added.) Thus, it is apparent that Haylett
is entitled to, and therefore has a property interest in, her workers’ compensation
medical benefits to the extent that they are compensable pursuant to R.C. Title 41.
R.C. 4123.66 provides that the Administrator of Workers’ Compensation
shall pay for medical services that “he deems proper” and instructs the
Administrator to adopt rules that govern the furnishing of payment for medical
services. Accordingly, we turn to the Ohio Administrative Code to determine
when an injured worker becomes entitled to benefits.
Ohio Adm.Code 4123-3-09(C)(3) provides that “[t]he burden of proof is
upon the claimant (applicant for workers’ compensation benefits) to establish each
essential element of the claim by preponderance of the evidence.” Among other
things, the applicant must prove that the applicant has a right to file for workers’
compensation benefits, that the application was filed on time, that the alleged
injury or occupational disease was sustained or contracted in the course of
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employment, and “[a]ny other material issue.” Ohio Adm.Code 4123-3-09(C)(3).
To be considered for payment, medical supplies and services must be “medically
necessary for the diagnosis and treatment of conditions allowed in the claim, [be]
causally related to the conditions allowed in the claim, and [be] rendered by a
health care provider.” Ohio Adm.Code 4123-6-25(A).
The BWC has not argued that Haylett did not comply with these
requirements; indeed, the BWC had been paying for treatment for Haylett since
late 1994. Instead, the BWC argues that Haylett must prove that she is entitled to
ongoing medical benefits, citing Ohio Adm.Code 4123-3-09(C)(1) and (3)(e).
Nothing in these sections, or, as far as we can discern, anything else in the
statutory scheme, states that a claimant has an ongoing obligation to establish
eligibility for workers’ compensation medical benefits.
Ohio Adm.Code 4123-3-09(C)(4) does provide that the BWC may “at any
point in the processing of an application of benefits, require the employee to
submit to a physical examination or may refer a claim for investigation.” This
section and the subsequent sections of Ohio Adm.Code 4123-3-09 appear to be
focused on the original application for benefits. Accordingly, we do not see them
as imposing an ongoing obligation on a claimant.
In State ex rel. Jeep Corp. v. Indus. Comm. (1991), 62 Ohio St.3d 64, 66,
577 N.E.2d 1095, 1097, we stated that a “claimant has the burden of supplying
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medical evidence to support a temporary total disability.” However, a significant
factor in that case was the fact that the claimant’s own doctor did not believe that
the claimant was temporarily and totally disabled. Id. In this case, Haylett’s
medical care provider believes that she needs ongoing medical attention.
Accordingly, Jeep Corp. does not control this case.
The BWC describes the current situation as a “refusal to authorize future
medical treatment” and not a termination of medical benefits. (Emphasis sic.) It
states that the distinction is significant; we see the distinction as being without a
difference. Haylett began receiving workers’ compensation medical benefits in
late 1994, and whatever you term the MCO’s subsequent action, the result was the
same — Haylett was no longer receiving medical benefits. We conclude that upon
satisfying all initial requirements for receiving workers’ compensation medical
benefits, Haylett became entitled to receive those benefits pursuant to R.C.
4123.54. Accordingly, she was protected by due process.
To determine what process is due, it is necessary to consider three factors:
(1) the private interest that will be affected by the official action;
(2) the risk of an erroneous deprivation of that interest through the
procedures used, and the probable value, if any, of additional or substitute
procedural safeguards; and
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(3) the government’s interest, including the function involved and the fiscal
and administrative burdens that the additional or substitute procedural requirement
would entail. Mathews, 424 U.S. at 334-335, 96 S.Ct. at 902-903, 47 L.Ed.2d at
33.
In this case, the interest affected was the continuation of workers’
compensation medical benefits to which Haylett was entitled pursuant to R.C.
4123.54. Those benefits enabled Haylett to procure chiropractic services for
treatment of a chronic health problem.
The risk that Haylett’s medical benefits would be erroneously deprived due
to the MCO appeals process was not great. The process provides for two timely
reviews, a third review by the BWC, and a final appeal to the Industrial
Commission. The primary risk engendered by the system is the loss of time. In
this case, that loss of time was not critical because the deprivation of services did
not endanger Haylett, whose medical need was not life-threatening.1
The governmental interest involved is primarily financial. The MCO
program is designed, at least in part, to minimize the amount expended, while
ensuring that the workers’ compensation system serves its primary function of
meeting the needs of its constituents.
Anthem’s decision to terminate medical benefits was not binding. The
MCO appeals process and the statutory appeals process of R.C. 4123.511 were
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available to Haylett. She ultimately received a hearing, albeit after the initial
termination of benefits. After reviewing the three factors set forth in Mathews and
applying them to this case, we conclude that Haylett was not deprived of due
process. See Caddell v. Ohio Bur. of Workers’ Comp. (1994), 71 Ohio St.3d 300,
302, 643 N.E.2d 1075, 1076 (a deprivation of procedural due process does not
occur when a claimant is initially deprived of a hearing if a hearing is subsequently
provided to the claimant). The Industrial Commission ultimately authorized
limited treatments, and our conclusion is reached irrespective of that decision.
Haylett also argues that Anthem has a vested interest in terminating her
medical treatments so that its decision was biased. This argument is contradicted
by the fact that Anthem’s decisions are not binding and are subject to review by the
Industrial Commission.
Haylett also fails to establish that Anthem’s decision that her chiropractic
treatments were no longer necessary promotes a financial interest of Anthem’s.
Anthem’s MCO fee is not based upon the number of claims pending or closed, nor
is it related to any particular cost-cutting measure. We reject Haylett’s argument
that Anthem’s decision was motivated by an impermissible financial incentive.
Conclusion
A writ of mandamus is an extraordinary remedy. To be entitled to a writ of
mandamus, a relator must establish a clear legal right to the relief requested, a clear
16
legal duty to perform the requested act on the part of the respondent, and no plain
and adequate remedy at law for the relator. State ex rel. Crabtree v. Ohio Bur. of
Workers’ Comp. (1994), 71 Ohio St.3d 504, 510, 644 N.E.2d 361, 367. Haylett
has failed to establish that she has a clear legal right to the relief requested. We,
therefore, deny her request for a writ of mandamus.
For a writ of prohibition to issue, the relator must prove “(1) that the court or
officer against whom the writ is sought is about to exercise judicial or quasi-
judicial power, (2) that the exercise of that power is unauthorized by law, and (3)
that denying a writ will result in injury for which no other adequate remedy exists
in the ordinary course of law.” State ex rel. Keenan v. Calabrese (1994), 69 Ohio
St.3d 176, 178, 631 N.E.2d 119, 121; State ex rel. Ruessman v. Flanagan (1992),
65 Ohio St.3d 464, 465, 605 N.E.2d 31, 33. We deny Haylett’s request for a writ
of prohibition because we find that the MCO program is authorized by law and that
it does not unlawfully exercise quasi-judicial authority.
Writs denied.
MOYER, C.J., RESNICK, F.E. SWEENEY and LUNDBERG STRATTON, JJ.,
concur.
COOK, J., concurs in judgment only.
DOUGLAS, J., dissents.
FOOTNOTE:
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1. We can conceive of circumstances in which a critical medical need could go
unmet because of the MCO appeals process. Under that circumstance, an
expedited process, which allows a claimant to demand an immediate evidentiary
hearing, would be of considerable value.
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