Crowell v. Indus. Claim Appeals Office

  

The Colorado Court of Appeals this week issued a decision on the extent of penalties that can be imposed for improper Rule 16 denials of prior authorization requests.   The court determined that a penalty for an improper denial is not just limited to a one-time or one-day penalty, but instead is subject to a daily and continuing penalty until the violation is corrected or cured.     

 

In Crowell, claimant's authorized treating provider submitted a prior authorization request for surgery.  The following day, respondents denied the request based on non-medical reason, specifically stating that the surgery was not designed to cure or relieve the effects of the industrial injury. Respondents did not provide a medical opinion to support the denial. Claimant then sought an order requiring the surgery and for penalties against Respondents for violation of Rule 16. The ALJ found that respondents did not properly deny the request for prior authorization under Rule 16 because respondents were essentially denying the procedure for medical reasons, which under the rule required a documented medical opinion. The ALJ imposed a one-day penalty of $500 against respondents.

 

Claimant appealed arguing that the penalty is not a one-time violation and is in fact a continuing violation of 184 days (beginning seven days after the request for prior authorization and continuing until the ALJ awarded the surgery). The Court of Appeals agreed and held that the violation constitutes an ongoing violation and remanded the case to the ALJ to impose a daily penalty for 184 days.

 

The legal effect of this decision is that violations under Rule 16 can now be considered an ongoing and continuing penalty, similar to a delay in filing an admission, failing to timely provide a medical report to claimant, late payment of indemnity benefits, etc.  Therefore, failure to correctly deny a prior authorization request can now potentially result in significant penalties of up to $1,000 per day, for every day the violation exists.    

 

If you wish to access the complete opinion from the Colorado Court of Appeals, please click on the case name above.