by Patrick C. Gorman –
Strategic consolidations have become more common in the California workers’ compensation system in recent years, prompting defendants to weigh the pros and cons of consolidated litigation.
So far, most consolidations have been limited to strategic consolidations of medical providers’ liens and costs. However, subsequent consolidations involving ancillary services such as copy services have been assigned to the Special Adjudication Unit, which I detailed in this blog post and commented to WorkCompCentral about in 2019. (See Gemini Duplication SAU10055264; Med Legal LLC SAU9981279; Citywide Scanning SAU8225348; and Med Legal LLC – Kaiser SAU10439563).
Service providers invented the frictional cost dilemma in addressing services purported to be “med-legal,” where not only is the full invoiced amount demanded, but an additional $800.00 or more for a boilerplate petition. It seems the business model of these service providers is to insist on a demand (inclusive of interest, penalty, and costs) at roughly 70% the cost to litigate the dispute, and sometimes at multiples of 30:1 costs over invoiced amount.
On the surface, or a per claim perspective, this appears to be just a few petitions or invoices. However, teeming beneath the service are thousands of petitions and invoices with inflated bills, thus making this a multi-million dollar-a-year niche industry.
In my provision of training and information throughout the state I have promoted the idea of strategic consolidation. As I began to proceed I found a hurdle put in my way by the service providers at every turn in the road. From missed appearances, to dismissed petitions the night before a hearing, outright refusal to produce named and subpoenaed witnesses and what I anticipate will be Petitions for Removal in response to every filing here on, some ancillary service providers have absolutely no appetite for what might come out of a large consolidation and discovery into their business practices.
What is the extent of this cost “leakage?” To what extent are services that were never requested being performed by these service providers? Are invoices issuing for services never performed? If done under the guise of discovery, doesn’t this constitute abuse of process?
While a large strategic consolidation does not have much agility when it comes to quick settlement or discovery, neither does filing petitions to compel discovery in thousands of separate cases. Frictional costs are dramatically reduced, with a few very bright attorneys who can handle this bifurcated issue over a vast caseload. Additionally, strategic consolidation eliminates the frictional cost leverage ancillary service providers have over carriers and administrators; allowing the case to be about the facts and law, instead of an inflated cost-benefit analysis.
Will we see true reform as a result? As more payers in the system travel the path of strategic consolidation, and discovery proceeds, I anticipate that will ultimately be the case. In the meantime any “reform” will be in the form of backroom confidential settlements, so that the status quo can be maintained for as long as possible. Simply put, this is a multi-million dollar practice throughout the industry annually and there will be a significant amount of funding to prevent that from changing.
Please reach out to your strategic litigation partners at Bradford and Barthel if you would like to discuss a strategic consolidation. Gathering the information required with a large strategic consolidation is challenging. We can tailor our services to fit your unique needs and provide all necessary conflict barriers to ensure your interests are not subordinate to another carrier or third-party administrator.
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