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Don’t Be Fooled: Authorization Guarantees Payment

June 29, 2017 by Catherine Montgomery

A DaisyBill provider recently emailed our headquarters with an interesting scenario. The provider agreed to treat an injured worker, received authorization for services, performed those services, and sent in the bill for their authorized services. Case closed? Not quite – instead of paying the bill, the claims administrator’s (Sedgwick) utilization review (UR) company sent the provider a fax indicating that Sedgwick would not pay for authorized services and implying that the provider was at risk of an audit. Say what?

Here’s the thing: Authorization guarantees payment. It’s part of California law. Per Labor Code 4610.3, once an employer, an employer’s insurer, or Utilization Review Organization authorizes medical treatment, that authorization cannot be undone (emphasis ours):

“[A]n employer that authorizes medical treatment shall not rescind or modify that authorization after the medical treatment has been provided based on that authorization for any reason, including, but not limited to, the employer’s subsequent determination that the physician who treated the employee was not eligible to treat that injured employee.”[1]

Under California’s Utilization Review standards, treatment is considered "authorized" when the decision to approve the RFA is communicated to the requesting physician.

Which brings us back to our client, who received iron-clad authorization, performed services, and sent the bill to Sedgwick for payment. Imagine her surprise when, in lieu of payment, she received a threatening fax from Medical Audit and Review Solutions (MARS), a company that handles UR for Sedgwick and other claims administrators:

“After a physician review of the bill, some questions arose in regards to items on the bill,” the letter begins. “To expedite the payment process and avoid a full review of the available medical documentation, the payor is offering a settlement of the bill. Our usual protocol calls for a complete medical records review and audit when these uncertainties arise.”

It bears repeating – this provider received authorization for services. She is therefore entitled to full payment for those services. Furthermore, she submitted the bill electronically, which means that Sedgwick was mandated to send payment within 15 working days from receipt of the bill. As for that settlement? The proposed amount was just 85% of the total due according to California’s Official Medical Fee Schedule (OMFS). No timeline for payment was given, in spite of the letter’s assurance that agreeing to the settlement would “expedite the payment process” – which was already late.

From where we stand, this is nothing but an intimidation tactic designed to trick providers into accepting partial reimbursement. Our advice? If you receive letters like this after providing authorized services, ignore them. If you aren’t paid the authorized amount, submit a request for second review. Failing that, go to Independent Bill Review. Most importantly, don’t be intimidated. Empty threats like this one crumble when held up to California law.


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[1] Full text of Labor Code 4610.3 here. It is worth noting that, if the authorized treatment “consists of a series of treatments or services, the employer may rescind or modify the authorization only for the treatments or services that have not already been provided.”

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