Surgical Centers

Another big battle brewing

The North Carolina Association of Self-Insurers is teaming up with major business interests to defeat demands by ambulatory surgical centers for much higher fees than approved by the North Carolina Industrial Commission.

Surgical Care Affiliates, which manages seven ambulatory surgical centers in North Carolina, contends the Industrial Commission's maximum fee schedule is invalid because the agency did not comply with the state's rule-making requirements when it imposed the fee schedule in 2015.

The surgical centers won a court ruling against the commission in August 2016 but, thanks to opposition by business interests, the matter is effectively at a standstill as the various parties struggle towards a solution.

The Industrial Commission says it adopted a Medicare-based fee schedule at the direction of the General Assembly. The agency notes that in states that allow both ambulatory surgical centers and outpatient hospital facilities to be reimbursed using Medicare's outpatient hospital rates, the average fee percentage allowed for ambulatory surgical centers is about 128% above Medicare rates. "Notably, SCA is requesting 210% of current Medicare outpatient hospital rates for dates of services in 2016, and 200% of current Medicare outpatient rates in 2017 and beyond," the commission says. It warns rate increases of that magnitude would raise workers' compensation premiums in North Carolina by anywhere between $21 million and $28 million.

The surgical centers successfully argued in Wake County Superior Court that the General Assembly mandated new fee schedules only for hospitals and physicians and, because the surgical centers are legally distinct from hospitals, the Industrial Commission did not have statutory authority to impose new fee schedules on them. The commission retorts it give ample notice of its rulemaking, including a notice of a public hearing and written comment period, but received no comments or objections from the surgical centers.

If the surgical centers prevail, employers and insurers may be forced to revisit payments made to the centers to make up the difference between what the Industrial Commission approved and what the surgical centers want. As things stand now, Superior Court Judge Paul Ridgeway has placed a stay on his decision until the matter is resolved by an appellate court, or perhaps the General Assembly.

The Industrial Commission is moving towards putting a temporary rule in place and has scheduled a public hearing on November 18. The agency says the purpose of the temporary rule is that should the surgical centers prevail, the period of time subject to a retroactive review by employers and insurers will be limited to April 1, 2015 to December 31, 2016, providing certainty regarding medical costs for 2017 and beyond.

Earlier in the summer, a coalition of major business interests agreed to pool resources to fund a collective amicus brief and to work towards a settlement. Groups joining the North Carolina Association of Self-Insurers include: North Carolina Chamber, North Carolina Farm Bureau and Affiliated Companies, North Carolina Home Builders Association, North Carolina League of Municipalities, North Carolina Manufacturers Alliance, North Carolina Retail Merchants Association, and Forestry Mutual Insurance Company, and other major insurers.

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A New Wrinkle at the Commission

The recent decision by the North Carolina Court of Appeals in Bentley v. Piner could cause havoc at the state's Industrial Commission.

On September 20, 2016 a three-member panel of the appellate court essentially voided an opinion and award from the full commission because the deputy commissioner who conducted the evidentiary hearing was not the deputy commissioner who issued the eventual opinion and award. The court held that G.S. 97-84 is clear the deputy who hears the case must be the one who issues the eventual opinion.

In Bentley, the defendants were contesting the claimant's employment status with the defendant employer. The case was assigned to Deputy Commissioner Vilas, who decided to bifurcate the employment issue from the remaining issues in the case. The case was set for hearing on December 5, 2014, when Deputy Commissioner Vilas knew her term ended effective February 1, 2015 and indicated she would attempt to issue a decision before she left.

However, she was unable to do so and the case was transferred to Deputy Commissioner Shipley who issued an opinion on February 16, 2015 finding that the claimant was not an employee of the defendant employer. The Full Commission subsequently affirmed that decision, but the Court of Appeals vacated the decision on grounds noted above.

The defendants argued the Full Commission is the ultimate arbiter of the credibility of witnesses and transfer of the case between deputy commissioners should not matter. The court rejected this argument.

There are literally hundreds of cases currently pending at the Industrial Commission that involve the exact situation mentioned above and may therefore have to be retried before a Deputy Commissioner. The agency and various other parties are exploring other options, including the possibility of allowing the parties to mutually agree a Deputy Commissioner could render a decision despite not having handled the initial hearing.