Colorado Hospital’s Action in Billing Claimant for Medical Services Warranted Penalty, But Not as a “Continuing” Offense

A Colorado appellate court affirmed the imposition of a $750 penalty for each of eight instances in which a hospital sent invoices to a worker who had sustained work-related injuries and held the penalty should also be assessed for two instances in which the hospital sent the invoices to a collection agency for collection efforts, but also held the hospital’s actions had not been a continuing violation of Colo Rev. Stat. § 8-42-101(4) [Delta Cty. Mem. Hosp. v. Industrial Claim Appeals Office of Colo., 2021 COA 84, 2021 Colo. App. LEXIS 865 (June 17, 2021)]. Accordingly, the hospital was not liable for a daily penalty for the time period involved, which would have resulted in penalties of more than $83,000.

Background

Claimant sustained serious work-related injuries in 2017 while loading a pickup truck. After initially being treated at another hospital, claimant received ongoing treatment for her injuries at Delta County Memorial Hospital (“Delta”). Claimant sought workers’ compensation benefits from her employer, who lacked the required workers’ compensation insurance.

An ALJ ordered the employer to deposit $130,000 with the Division of Workers’ Compensation to secure the payment of all unpaid compensation and benefits awarded. Claimant later testified that to her knowledge the employer never paid any sum to the Division as ordered. Nor did the employer pay claimant’s medical bills.

Claimant provided Delta with a copy of the order requiring the employer to pay the funds into the Division. Having not received payment for the services it rendered, Delta attempted to collect the debt from claimant. It admittedly sent bills directly to her. Claimant’s attorney notified Delta that pursuant to § 8-42-101(4), it was unlawful to bill claimant for its medical services. Delta responded to claimant’s attorney that in as much as the employer had failed to pay funds into the Division, its “only recourse” was to pursue continuing collection efforts against claimant. Soon after receiving the first hospital bill, claimant filed an application for hearing with the division seeking penalties against Delta.

ALJ Found Continuing Violation and $89K Penalty

At the ensuing hearing, Delta’s counsel argued that it had not been properly joined and that penalties therefore could not be imposed against it. Noting that the penalties statute, section 8-43-304(1), may be asserted against an employee, employer, insurer or “any other person,” the ALJ disagreed. The ALJ instead concluded that Delta violated the Act by sending claimant medical bills despite being informed of the ALJ’s October 2018 order finding the claim compensable. Because the ALJ considered Delta’s actions a continuing statutory violation, she imposed penalties of $750 per day for the period of June 13, 2019 through and including October 9, 2019—i.e., from the date Delta’s counsel responded to claimant’s counsel’s letter advising Delta of the October 2018 order and the statutory prohibition against billing claimant through the date of the hearing before the ALJ—a period of 119 days, resulting in a total penalty award of $89,250.

Panel Says Violation was not “Continuing”

On review, the Panel affirmed claimant had properly asserted her penalty claim against Delta, that Delta need not be joined as a party to have penalties imposed against it, and that claimant had pleaded her penalty claim with sufficient specificity. But the Panel concluded that because Delta could not cure its violation after sending the bills, the violation was not “continuing” as the ALJ had found. And because the violations were not continuing, penalties could only be imposed for those dates on which Delta improperly billed claimant. So the Panel remanded the matter to the ALJ for additional findings determining which specific bills violated section 8-42-101(4).

ALJ Finds 10 Violations

On remand, the ALJ found that Delta improperly billed claimant on eight separate occasions. The ALJ also found two additional instances in which Delta had attempted to collect the debt when two bills were forwarded to a collection bureau. The ALJ imposed penalties of $750 per day for each of the ten instances, totaling $7,500 in penalties.

Panel Modifies ALJ’s Findings

The Panel affirmed the imposition of penalties on the eight dates on which Delta sent bills to claimant but set aside that portion of the ALJ’s order awarding penalties for the two bills forwarded to collections. The bills sent to collections, the Panel determined, were beyond the scope of claimant’s application for hearing. Delta and claimant both appealed.

Appellate Court’s Decision

The court disposed of Delta’s jurisdictional arguments, noting in relevant part that Delta had been represented at the hearing by counsel and had made vigorous arguments against the imposition of penalties. It could hardly argue that its due process rights had been violated.

As to claimant’s contention that Delta’s violations were continuing and that the ALJ had failed to provide for the appropriate penalty (i.e., $83,000), the court agreed that claimant had offered ample evidence supporting an award of penalties against Delta not only for the eight instances in which it had billed claimant directly, but also for the two instances in which Delta sent claimant’s bills to a collection agency. Accordingly, there had been ten, not eight violations.

Delta’s Actions Were Not Continuing

The appellate court stressed that the purpose of § 8-43-205, C.R.S. 2020 was to address “ongoing conduct.” Only when the violative conduct was ongoing, was an imposition of a daily penalty required. Quoting prior precedent, the court identified examples of failures to act that would result in daily penalties for continuing violations, including:

• failure to pay medically necessary bills,
• failure to provide medical treatment,
• failure to timely file a final admission of liability,
• failure to provide a medical report to claimant.

The court stressed that the common thread running through these examples was that, in each case, the offense could be corrected by taking the required action. Simply put, indicated the court, the difference between a one-time violation and a continuing violation hinged on whether the violation was subject to being cured by subsequent action.

While claimant had argued Delta’s violations as an ongoing act, the court said claimant had omitted two critical distinctions between the situation at hand and the continuing violations described in Colorado case law. First, Delta did not issue claimant a bill every day. While Delta’s billing process generated several bills and did so until Delta intervened to stop the system, Delta only sent claimant violative bills on eight discrete occasions.

Bill Cannot Be “Unsent”

Second, once a bill was generated and sent, the violative deed had been committed and could not be undone. Sending a bill to a claimant for covered care could not be cured because the bill could not be “unsent.” The court, therefore, concluded that Delta violated section 8-42-101(4) on the dates it or its agent generated and sent a medical bill to claimant, but that it did not commit a continuing violation within the scope of section 8-43-305. As noted above, the court found the Panel had erred when it set aside the penalties for the two occasions in which a bill was forwarded to a collection agency.

The court, therefore, affirmed the Panel’s order holding that daily penalties, but not a continuing violation, could be assessed against Delta. It set aside that portion of the Panel’s order rejecting penalties for the bills sent to a collection agency and it remanded the case to the Panel with instructions to reinstate the ALJ’s award of penalties for the two days collection attempts were instigated against claimant.