by Mark Larson

Chicago-based medical providers are starting to file lawsuits against workers’ compensation insurers for interest payments on overdue bills of 1% a month, or 12% annually, which they’re entitled to, according to state workers’ compensation regulations.

Eugene Keefe, a workers’ compensation defense attorney in Chicago, said he’s seen seven to 10 lawsuits filed by one company − which he declined to identify for legal defense reasons − since October.

Based on what he’s seen so far, he said, “I do believe it’s a trend.”

At the same time, Keefe said it is his firm’s opinion that the state Workers’ Compensation Act doesn’t allow for such litigation.

“The rights and interests of a medical provider flow through the patient − their rights should be against only their patient,” wrote Keefe.

But litigation by providers is happening anyway, he said, adding the legal action is something “we feel the workers’ compensation claims community should be aware of.”

The suits are based on a 2011 amendment to the Illinois Workers’ Compensation Act, Section 8.2(d)(3), which states if a medical bill isn’t paid within 30 days, it will incur an interest rate of 1% a month.

Department of Insurance Director Andrew Boron in December 2012 sent out a warning letter about the new interest rate to all insurance companies and claims administrators who adjust workers’ compensation claims in Illinois “of their duty to comply” with the overdue bill interest rate rule.

Medical providers apparently didn’t start to notice their legal option to collect the interest until October. That’s when Keefe first noticed lawsuits filed to recover the bill settlement amounts, with the 1% interest per month tacked onto those amounts, he said.

Providers and medical groups have already warned of their concerns about other 2011 workers’ compensation system reforms arising from HB 1698, which cut all reimbursement rates by 30%. The intent of the bill was to better define the fee schedule, Bill McAndrew, senior director of finance for the Illinois Hospital Association, told WorkCompCentral in October. But some resulting drops in fee reimbursements were below the Medicare reimbursement rate, according to Jason Keller, a workers’ compensation Medical Fee Advisory Board member who is also legislative director for the AFL-CIO.

Keefe said the statute allowing 1% interest on overdue medical bills doesn’t indicate if the interest is simple or compounded. He advises clients to treat it as “simple interest which starts on the date you have ‘required data elements,'” on an overdue bill.

The interest regulation can add up to a good chunk of change on large overdue bills, Keefe said, noting a $100,000 surgical bill that isn’t paid for 20 months while the litigation is pending before the Illinois Workers’ Compensation Commission means an additional $20,000 would be owed under state law.

Any dispute about the overdue bill interest rate, said Keefe, is clear cut: “Whoever agrees to pay such bills at the time of settlement, implicitly or explicitly agrees to also pay statutory interest under the law.”

David Donn, a San Francisco-based managed-care consultant, agrees that providers should be paid on time for their services. But he also sees the 1% per month, or 12% annual interest rate, as too high.

“You can’t get 12% (annually) on your cash today,” he said. “You’re lucky if you can get a point or two.”

Donn said a 6% rate would be “more reasonable,” noting the steep interest may work as an incentive to get more bills paid on time.