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"The Potential Requirement for a Fictitious Name Permit by an Outpatient Surgery Center for Dates of Service Prior to January 1, 2004"

By: Robert B. Hill, Esq.

The adjustment of the lien claims of outpatient surgery centers, particularly before implementation of the official medical fee schedule for facilities of this type effective January 1, 2004, has become a hotly contested issue before the WCAB in light of the published decision in Zenith Insurance Company vs. WCAB, issued March 20, 2006.

In that case, Zenith had entered into a prior Compromise and Release with the applicant, disputing the reimbursement of claims made by several of the applicant’s health care providers, including claims for facility fees sought by the lien claimants.

At a lien conference conducted before this matter being set for Trial, the defendant Zenith informed the Workers' Compensation Administrative Law Judge (“WCALJ”) that it had filed a civil action against the lien claimants and others, alleging among other things that the lien claimants illegally billed for facility fees when they were unlicensed and unaccredited in violation of the Business & Professions Code and the Health & Safety Code. Zenith presented a copy of its civil complaint to the WCALJ, requesting additional time to complete discovery and for the matter to be stayed pending resolution of its civil action. The Pre-Trial Conference Statement (Stipulations and Issues) listed the issues in dispute, including whether the lien claimants engaged in a fraudulent scheme involving billing improprieties. The WCALJ, however, refused to continue the matter and the case proceeded to Trial. Specifically, the WCALJ allowed the liens of Beach Cities and PIT, in the respective amounts of $22,100.00 and $24,000.00.

Zenith then filed a Petition for Reconsideration with the WCAB, arguing (1) that the decision was unjust or unlawful because the WCALJ refused to stay the claims or allow it to present evidence regarding the legal status of the lien claimants; and (2) that the decision was not supported by the evidence because the lien claimants failed to meet their burden of proof that they were licensed or accredited to operate an outpatient facility and thus were not entitled to collect facility fees.

Based on the recommendations of the WCALJ, reconsideration was denied, and a Petition for Writ of Review was sought with the Court of Appeal.

In its decision, the Court of Appeal first acknowledged that the Legislature had recognized that many surgical procedures are performed in numerous types of outpatient settings and determined that, although the health professionals delivering the services are licensed, further quality assurance is needed to ensure that the facilities are safely and effectively performed (Business & Professions Code §2215). To implement this intent, the Health & Safety Code contains regulatory and licensing provisions, governing different types of outpatient settings (Business & Professions Code §2217). Notably, the Court noted that it was illegal to operate an outpatient setting in California, including ambulatory surgical centers and surgical clinics, if the patient setting is not properly licensed or accredited. (Health & Safety Code §§ 12408(c), 12408.1(a), (b), (f) and (g), and 12408.8).

It was the Court’s holding that in workers’ compensation matters, the burden of proof rests on the party or lien claimant “holding the affirmative of the issue” as mandated by Labor Code §§5705 and 3202.5. Also noting a lack of a “great deal of case law on this issue”, it was the Court’s determination that a lien claimant must also prove that its services were properly provided, meaning it complied with applicable licensure or accreditation requirements.

Accordingly, it was the Court's determination that in order to establish the right to reimbursement, the lien claimants bore the burden of proving that they are properly licensed or accredited, contrary to the earlier WCAB determination on this issue, that it was not the burden of the defendant to prove that the lien claimants were not properly licensed and accredited.

Thus, it was the determination of the Court of Appeal that the WCAB award was not supported by substantial evidence.

The Court then went on to indicate that the WCAB finding that the defendant had waived this issue by not raising it, did not in fact obviate the lien claimants' burden of proof, citing Kunz v. Patterson Floor Coverings, Inc. (2002) 67 CCC 1588, 1591.
 
Noteworthy as it pertains to outpatient surgery centers, and when taking into account the requirements under Zenith, is the wording under Business & Professions Code §2285(c), which prior to January 1, 2004 did not exempt an outpatient surgery setting to have a fictitious name permit as provided through the California Medical Board. After January 1, 2004, an amendment to this Section indicated that if such a facility had approved accreditation through "The Institute for Medical Quality," "Accreditation Association for Ambulatory Healthcare," "American Association of Accreditation of Ambulatory Surgery Facilities, Inc.," and "Joint Commission on Accreditation of Healthcare Organizations", that such separate licensing was not required.

This then leaves the important question as to whether such outpatient surgery centers, for dates of services prior to January 1, 2004 (i.e. the date of exemption), were required to have had such a permit to currently have standing to assert their lien claims before the WCAB, in light of the Zenith decision?

Two important cases, Gandhi vs. WCAB (2000) 65 CCC 719 and Continental Medical Center of Paramount, et al vs. WCAB (2000) 65 CCC 162, underscore the need for a physician to have maintained such a permit at the time of the service rendered, to later have standing before the WCAB to assert their lien claim. While not directly on point as it would pertain to outpatient surgery centers (these were medical clinics operating under fictitious names), the analogy to an outpatient surgery center certainly can be made.

An argument which has been asserted by some outpatient surgery centers is that they are providing merely a “facility” service only and not surgeon services, and thus would have been exempt at any time from the requirement for a fictitious name permit, relying in part on their Medicare accreditation. The position would seem to run contrary to the definition of an “ambulatory service center” (ACS) under 42 C.F.R. (Code of Federal Regulations) Part 416.40, subpart C. Contained within those same Regulations, specifically Part 416.2, is the definition of a “ambulatory surgical center or ASC” as follows:

• “…means any distinct entity that operates exclusively for the purpose of providing surgical services to patients not requiring hospitalization, has an agreement with CMS (Centers for Medicare and Medicaid Services) to participate in Medicare as an ASC, and meets the conditions as set forth in subparts B and C of this part.”
 
• “ASC services means facility services that are furnished in an ASC.”

• “Covered surgical procedures means no surgical and other medical procedures that meet the criteria specified in Section 416.65 and are published by CMS in the Federal Register”.

• “Facility services means services that are furnished in connection with covered surgical procedures performed in an ASC, or in a hospital on an outpatient basis.”

By accepting the agreement with the U.S. Department of Health & Human Services as a Medicare approved provider, the defendant may assert that the lien claimant has agreed to its categorization by a Federal Agency as providing a full range of ambulatory surgical services, which otherwise would establish it as a provider required to have a Fictitious Name Permit.

Several cases are currently before the WCAB on this issue. In a recent case still in litigation, where this writer was defense counsel, the trial judge indicated her understanding that if the outpatient surgery center was incorporated under California law, the fictitious name permit was never required, as the ownership of the center is through a corporation rather than a physician. What is interesting here is that when applying this same section to the medical clinic owned by a physician(s), that incorporation of the clinic does not eliminate the need for the fictitious name permit.

Obviously, this coming year will bring a flurry of decisions and appeals on this point which will be the subject of future Newsline article.


 

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