EagleMed, LLC v. Travelers Ins.

1

EagleMed, LLC, Appellee, v. Travelers Insurance, Appellant.

Nos. 117, 903, 117, 904, 117, 905, 117, 906

Supreme Court of Kansas

May 13, 2022

SYLLABUS BY THE COURT

1. Under the Kansas Workers Compensation Act, K.S.A. 44-501 et seq., those providing health care services to injured workers are bound by medical fee schedules approved by the Director of the Division of Workers Compensation, who statutorily oversees these services to ensure costs, fees, and charges are fair, reasonable, and necessary. The Act authorizes the Director to resolve fee disputes between health care providers and an employer's insurance carrier when they cannot agree on charges for the care and treatment of injured workers.

2. 49 U.S.C. § 41713(b)(1) (2018) of the federal Airline Deregulation Act of 1978 recites in part that states "may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service" of an air carrier providing air transportation. This federal law covers air ambulance services provided to a worker for an injury compensable under the Kansas Workers Compensation Act, K.S.A. 44-501 et seq.

3. Under the Supremacy Clause of Article VI, Clause 2 of the United States Constitution, state laws interfering with or contrary to federal law are invalid.

4. 49 U.S.C. § 41713(b)(1) does not require payment to air ambulance carriers providing services to injured workers covered by the Kansas Workers Compensation Act. That obligation, if any, must come from state law.

5. The 2012 fee schedule approved by the Director of the Division of Workers Compensation requires billings for air ambulance services to be supportable by evidence that the charges are usual and customary. If factual disputes arise, they must be resolved under the Kansas Workers Compensation Act in a manner comporting with 49 U.S.C. § 41713(b)(1) of the federal Airline Deregulation Act of 1978.

Review of the judgment of the Court of Appeals in 56 Kan.App.2d 79 424 P.3d 532 (2018). Appeal from Workers Compensation Board. Opinion filed May 13, 2022. Judgment of the Court of Appeals affirming in part and reversing in part the Workers Compensation Board and remanding with directions is affirmed in part and reversed in part. Decision of the Workers Compensation Board is reversed, and the case is remanded with directions.

William L. Townsley, of Fleeson, Gooing, Coulson & Kitch L.L.C., of Wichita, argued the cause, and Lyndon W. Vix and Nathaniel T. Martens, of the same firm, were with him on the briefs for appellant.

Joshua L. Fuchs, pro hac vice, of Jones Day, of Houston, Texas, and J. Phillip Gragson, of Henson, Hutton, Mudrick, Gragson & Vogelsberg, LLP, of Topeka, argued the cause and were on the briefs for appellee.

James D. Oliver and Sarah E. Stula, of Foulston Siefkin LLP, of Overland Park, and Dale Wainwright, pro hac vice, and Justin Bernstein, pro hac vice, of Greenberg Traurig, LLP, of Austin, Texas, were on the brief for amicus curiae American Property Casualty Insurance Association.

Aaron L. Kite, of Kite Law Firm LLC, of Dodge City, was on the brief for amicus curiae Kansas Livestock Association Risk Management Services, Inc.

OPINION

Biles, J.

This is a consolidated workers compensation appeal arising from billing disputes between EagleMed, LLC, an accredited critical care transportation service operating a fleet of medically equipped aircraft, and Travelers Insurance, a workers compensation insurance carrier. The case has taken a tortuous path as the parties, a state review board, and a Court of Appeals panel grappled with federal law prohibiting states from enacting or enforcing any "law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation." See 49 U.S.C. § 41713(b)(1) (2018). The practical problem concerns how-or even if-those charged with administering our workers compensation system can resolve disagreements like this one without violating federal law. So far, all have strained to fit a congressionally squared peg into the rounded hole available under state law.

The controversy starts with the Kansas Workers Compensation Act, K.S.A. 44-501 et seq., which binds those providing health care services to injured workers, like EagleMed, to medical fee schedules approved by the Director of the Division of Workers Compensation. See K.S.A. 2020 Supp. 44-510i(c). And state law requires the Director to oversee health care provider services to ensure costs, fees, and charges are "fair, reasonable and necessary." See K.S.A. 2020 Supp. 44-510i(c)(2). This supervision includes an administrative process to resolve billing disputes over care and treatment costs for injured workers. See K.S.A. 2020 Supp. 44-510j.

Yet federal law seems to set air ambulance services apart from the Division's usual-and more cost conscious-supervision. See EagleMed LLC v. Cox, 868 F.3d 893, 898, 907 (10th Cir. 2017) (holding federal law preempted Wyoming's workers compensation statute limiting air carriers to "reasonable" rates "not in excess of" a designated rate schedule). But see Texas Mutual Insurance Co. v. PHI Air Medical, LLC, 610 S.W.3d 839, 843 (2020) (holding "the ADA does not preempt Texas's general standard of fair and reasonable reimbursement as applied to air ambulance services, nor does it require that Texas compel private insurers to reimburse the full charges billed for those services"), cert. denied 141 S.Ct. 2565 (2021). So with an eye toward federal law, the Director approved a 2012 fee schedule providing air ambulance service reimbursements in Kansas "will be limited to usual and customary charges as per 49 U.S.C. Section 41713(b) of the Federal Aviation Act."

The struggle here focuses on what to make of this when neither the schedule nor the federal law it references defines "usual and customary charges." The Workers Compensation Appeals Board ultimately decided it had no jurisdiction to determine the reasonableness of air ambulance charges that would reduce the amount owed, so it made no factual determination whether the disputed billings were usual and customary charges. Instead, it just ordered Travelers to pay in full. EagleMed, LLC v. Travelers Ins., No. 8, 500, 703, 2017 WL 2470942, at *6 (Kan. Work. Comp. App. Bd. 2017). But a Court of Appeals panel disagreed with that approach. It held the Board could not force Travelers to pay anything, so it remanded the case with directions to dismiss the dispute without administrative resolution, presumably for the parties to fight this out somewhere else. EagleMed, LLC v. Travelers Ins., 56 Kan.App.2d 79, 91, 424 P.3d 532 (2018) ("Nothing in this opinion should be deemed to limit the parties to pursue any other legal remedies they may have available to them to resolve their dispute.").

We take a different tack, recognizing that one obvious legislative purpose for our state's workers compensation system is to protect both employers and employees from financial losses arising from work related injuries. See K.S.A. 2020 Supp. 44-501b(a) (directing the law "be applied impartially to both employers and employees in cases arising thereunder"). In our view, an administrative order blindly requiring Travelers-or any insurance company standing in an employer's place-to just pay an air carrier whatever it wants with no accountability conflicts with this legislative purpose and could put the agency's imprimatur on even a duplicitous billing. This undermines the interests of those who rely on our state's workers compensation system to care and treat injured workers.

By the same token, 49 U.S.C. § 41713(b)(1) (2018) requires something short of the agency's express regulation of air carrier pricing. And all agree Kansas must comport with 49 U.S.C. § 41713(b)(1) because under the Supremacy Clause of Article VI, Clause 2 of the United States Constitution, state laws interfering with or contrary to federal law are invalid. Board of Miami County Comm'rs v. Kanza Rail-Trails Conservancy, Inc., 292 Kan. 285, 294, 255 P.3d 1186 (2011). But what, if anything, can squeeze into the remaining administrative space?

EagleMed suggests the 2012 fee schedule would not violate federal law if "usual and customary charges" are defined from the air carrier's sole perspective. In its view, interpreting the schedule this way prevents substituting a state agency's "own substantive standards" for the carrier's market-based judgment about its rates and services and would not require it to accept a lower price based on state law considerations of "decency, fairness, or reasonableness." EagleMed may be right.

But the Board has yet to decide whether EagleMed's billings are "usual and customary charges" as the 2012 schedule specifies, so we are left to wonder whether other perspectives may exist to make the required factual determination. And deciding that will require the Board to reconcile compliance with 49 U.S.C. § 41713(b)(1) with the legislative purposes underlying our workers compensation system. See K.S.A. 2020 Supp. 44-501b(a); K.S.A. 2020 Supp 44-510i(c)(1) (providing schedule of maximum fees "shall promote health care cost containment and efficiency with respect to the workers compensation health care delivery system, and shall be sufficient to ensure availability of such reasonably necessary treatment, care and attendance to each injured employee to cure and relieve the employee from the effects of the injury"). At one point, the Board appeared headed down this path when it instructed its hearing officer to determine "whether the charges made by EagleMed are usual and customary under the [federal] ADA." EagleMed, LLC v. Travelers Ins., No. 8, 500, 703, 2016...