Jurisdiction

Medical claim petitions comprise an increasingly large percentage of New Jersey workers’ compensation claims with over 5,000 being filed in 2023 alone.  One of the problem areas remains jurisdictional issues when a New York or Pennsylvania workers’ compensation case is referred to New Jersey just for a one-time medical procedure. The recent case of Hudson Regional Hospital v. New Hampshire Insurance Co., No. A-0978-21 (App. Div. November 16, 2023) presents an interesting procedural twist in this complicated area of law.

Hudson Regional Hospital in Secaucus, New Jersey provided treatment to five New York residents for injuries that took place in New York while working for their New York employers.  The hospital applied for compensation for the medical treatment of these five patients from the New York Workers’ Compensation Board, which awarded compensation based on the New York fee schedule.  The amount reimbursed to the hospital was less than the charges.  Under Section 13 of the New York Workers’ Compensation Law, medical providers must write off the unpaid balance after fee schedule payments, but the provider can also dispute the compensation awarded by the New York Workers’ Compensation Board through an arbitration procedure.  In this case Hudson Regional did not dispute the compensation for treatment of the five payments through the New York Board.

Instead, Hudson Regional decided to file claims in the New Jersey Division of Workers’ Compensation seeking reimbursement under the New Jersey Workers’ Compensation Act, which does not have a fee schedule.  Hudson Regional argued that they could file in New Jersey because the medical procedure took place in New Jersey.  Since New Jersey has no fee schedule, the state bases payments for physicians, surgeons, and hospitals on services that are “reasonable and based upon the usual fees and charges which prevail in the same community for similar physicians’, surgeons’ and hospital services.”  Hudson Regional sought to be paid the difference between payments under the New York Workers’ Compensation Board and the hospital’s billed charges.

All the New Jersey medical claim petitions were dismissed for lack of jurisdiction since the only connection to New Jersey was the location of the medical procedures.  These were New York workers’ compensation cases in every respect. Hudson Regional did not appeal the dismissals of their medical claim petitions to the Appellate Division.

What happened next makes this case very unusual.  The hospital decided to file a complaint in the New Jersey Law Division against New Hampshire Insurance Company alleging that the five patients were third-party beneficiaries under the insurance policies New Hampshire Insurance issued to their employers.  Hudson argued that the patients were entitled to workers’ compensation benefits under the New Jersey Workers’ Compensation Act, which pays much higher medical benefits to providers than under the New York fee schedule.  The complaint further alleged that New Hampshire Insurance breached the contractual rights of the five patients, was unjustly enriched and engaged in bad faith and unfair claim settlement practices.  The complaint sought payment of $386,961.32.

The trial court agreed with New Hampshire Insurance that the civil complaint had no basis in law whatsoever because the New Jersey Division of Workers’ Compensation has exclusive jurisdiction over claims for reimbursement for medical treatment arising from work-related injuries.  Hudson Regional appealed this decision.  The Appellate Court agreed with the trial judge in its holding that the New Jersey Division has exclusive jurisdiction on issues pertaining to disputes over medical treatment arising from workers’ compensation. The Court rejected the breach of contract suit with some blunt language: “An employee who receives an unfavorable decision from the Division cannot circumvent the comprehensive statutory structure enacted by the Legislature to address work-related claims by filing a suit alleging breach of contract in the Superior Court against their employers’ workers’ compensation carrier seeking workers’ compensation benefits denied by the Division.” 

Having found against Hudson Regional, the Court went on to consider the case of D’Ascoli v. Stieh, 326 N.J.  Super. 499 (App. Div. 1999).  In that case a Pennsylvania resident, employed by a Pennsylvania employer, suffered an injury while working in Pennsylvania but sought treatment in New Jersey from a New Jersey surgeon.  The patient agreed in writing to pay the fees for services for the New Jersey surgeon, regardless of insurance coverage.  The Court read the D’Ascoli case as supporting the right of a New Jersey medical provider to file an action in the Superior Court against an out-of-state patient to recover fees for medical services that were provided for a work-related injury, “even if that patient received workers’ compensation benefits in their home state.” The Court observed that Hudson Regional also had obtained an assignment of workers’ compensation benefits from each of the five patients but chose not to sue the patients.  Rather, Hudson Regional sued New Hampshire Insurance, which the Court said violated the New Jersey Workers’ Compensation Act.

This case is very helpful to practitioners and employers. Hudson Regional no doubt anticipated that an appeal on jurisdictional grounds would have failed.  There have already been decisions in New Jersey making clear that where the only contact with New Jersey is the location of the medical procedure, New Jersey does not have jurisdiction over a medical claim petition.  So, the hospital tried a novel end run with a suit against the workers’ compensation carrier for breach of contract.  That approach has now been soundly rejected.  The hospital could have sued the five individual patients under the above D’Ascoli case for the difference.  There were, however, likely several reasons that the hospital did not want to sue the patients.

It is an understatement to say that there is something unseemly about this recurrent scenario:  a New York resident is injured in New York, works in New York, is hired in New York, and gets treated in New York for his or her work-related injury.  Then the worker is abruptly referred to New Jersey for a medical procedure.  The medical provider then applies for compensation from the New York Board, receives that compensation, and turns around and seeks additional compensation under New Jersey law for the difference between the New York fee schedule payment and the much more generous “usual and customary” non-fee schedule reimbursement in New Jersey.  When the medical provider’s request for additional payments under New Jersey law is rejected, the provider retains counsel and files a medical claim petition in New Jersey.

These attempts to file medical claim petitions in New Jersey on New York cases are unfair and costly to employers, third party administrators and carriers. The referral itself to New Jersey exclusively for the medical procedure must also be puzzling to New York injured workers because all their treatment took place in New York until the procedure and New York City has a widely acclaimed private and public health care system.  Why does this scenario keep happening? The seminal difference between the two states is that New York provides fairly modest reimbursements to medical providers under their state’s  fee schedule, while New Jersey provides among the highest medical reimbursements in the nation. The reimbursement can sometimes be five or ten times higher in New Jersey than New York.

One must wonder how many carriers, third party administrators and employers have unwittingly paid more money on such medical claim petitions, not realizing that there is no New Jersey jurisdiction at all when the only contact in New Jersey is the location of the medical procedure.

The post Medical Provider Cannot Sue Workers’ Comp Carrier for Breach of Contract to Get Around New Jersey’s Exclusive Remedy for Medical Disputes appeared first on NJ Workers' Comp Blog.