Tuesday, May 15, 2012

Permanent Partial Disability: A Process that Defies Logic

         For a couple of years now, I have threatened to write a blog article about the laughable, illogical and completely arbitrary manner in which permanent partial disability awards are handled by the Industrial Commission for Ohio workers’ compensation claims.  It was a threat because everyone in my office knows I how feel about permanent partials and that there was a very good chance that a rational review and a reasoned argument could easily devolve into me ranting about how intellectually dishonest this process is and why employers are naturally repulsed by it.  So, after some research, some outlining, some editing and rewriting, I am prepared to offer my suggestions for reforming the Commission’s processing of permanent partials.  I will allow you, gentle reader, to be the judge of whether this is a well reasoned argument or simply my rant.

            Employers seem to get worked up about some PP awards for seemingly minor, “everyday” types of injuries as well as the way in which hearing officers create compromise awards out of vastly varying opinions regarding injured workers’ impairments.  I wanted to get a sense of what is causing the stir.  Let’s start out by looking at some statistics.  Over the past three fiscal years, the number of overall claims has dropped from 132, 549 in FY 2009 to 116,378 in FY 2011.[1]  The number of lost-time claims dropped from 15,428 to 13,404 over the same span.  Medical costs also dropped from $833,508,906 to $778,853,015 while total compensation was lowered from $1,130,764,997 to $1,053,770,995 in the same three year period.  Of the total compensation, 2009 saw $23,361,375 paid in PP awards.  This went down to $20,353,634 in 2010 and up slightly to $21,033,715 in 2011.  Thus, in a system that paid out nearly $2 billion in 2009 and over $1.8 billion in 2011, permanent partial awards accounted for only about 2% of the compensation paid. 

            When I looked at these numbers, I wondered whether my angst about permanent partials was deserved.  After all, why get so worked up about a form of compensation that amounts to only 2% of the total compensation paid out each year?  But the more I thought about it, I remembered the questions from clients over the years about how the hearing officer could award something (anything) for a four year old bruise, or how they could arrive at 11% when two physicians said 4% and 5% and one claimed 25% based upon range of motion findings.  I concluded that the process should be as fair and evidence-based as possible so that the system seems fair, even if it doesn’t change the total amount paid out by one dollar.[2]  Therefore, I am not looking at the entire permanent partial process.  Others can debate whether there should be PP awards at all or how the Bureau handles them.  The focus of this article is on the process only in those cases when an objection is filed to the BWC tentative order and the matter is referred to the Industrial Commission for resolution. 

            Let’s look then at the system we have today and how we got here.  The statutory language regarding typical PP awards under Revised Code 4123.57(A) is simple and straightforward enough. 

The district hearing officer…shall determine the percentage of the employee’s permanent disability…based upon the condition if the employee resulting from the injury…and causing impairment evidenced by medical of clinical findings reasonably demonstrable.(emphasis added.)

From this it certainly sounds like the Commission is committed to awarding PP based upon objective evidence, doesn’t it?

Hoover requires “some evidence”

            The case of State ex rel. Hoover Universal, Inc. v. Indus. Comm. (10th Dist. 1985), 26 Ohio App.3d 175 seemed to advance the notion of objective evidence controlling PP awards.  Unfortunately, the holding and lessons from Hoover seemed to have been lost.  In Hoover, the Commission granted a 25% PP based upon findings that were subjective.  In fact, the examining physician noted that the injured worker was objectively normal.  The court granted the employer’s request for a writ reasoning that “reasonably demonstrable” requires objective evidence and a complete lack of objective evidence for the award can not satisfy the statute.  The court noted the normal deferral to the Commission to evaluate evidence but reminded the Commission of the “some evidence” rule and that its decision must be based upon “some evidence” in order to withstand scrutiny.

            The court noted that “…[w]here there is no evidence upon which the Commission could have based its factual conclusion an abuse of discretion in present and mandamus becomes appropriate.” State ex rel. Hutton v. Indus. Comm. (1972), 29 Ohio St.2d 9.  Remember this point and see how it was since cast aside by the same court.

Yellow Freight endorses compromise awards

            There are plenty of cases involving permanent partial disputes.  It appears that the first time the Ohio Supreme Court squarely addressed the issue of the Commission hearing officers making compromise awards was in State ex rel. Yellow Freight System, Inc. v. Indus. Comm., 97 Ohio St.3d 179, 202 Ohio 5811.  This case involved a C92A filed for an increase award in a 1992.  The claimant had previously received a 2% award for the same shoulder in the claim.[3] The state doctor opined a 9% impairment or a 7% increase.  The claimant’s medical evidence found a 15% impairment while the employer’s physician opined 1% impairment.  The Commission ultimately awarded 7% PP, a 5% increase.

            The Court’s entire treatment of the issue of compromise awards is contained in the final paragraph of the per curiam opinion. Although Yellow Freight challenged the compromise award, they did so only partially.  Yellow Freight asserted that a compromise award was improper where one physician found an increase but the other did not.  However, Yellow Freight generally accepted “the Commission’s right to employ compromise logic”.  Oh, I wish they didn’t.  After taking the employer to task for making its argument without citing authority in support, the Court defends the practice of the Commission making compromise awards based not upon a reasoned legal analysis but because the Commission “has used this approach for years” and to prohibit the Commission from making compromises “is nonsensical and certainly does not correct any perceived unfairness to employers”.  This is the rationale to support the Commission’s practice?  “Hey, they’ve been doing it that way for a long time and it’s just nonsense to suggest otherwise.”

            If you are like me, take a deep breath at this point.  Squeeze the stress ball you got at that seminar a few years back.  Do yoga or something that will calm you down and then come back. 

            Better? Okay.  So you see the complete lack of logic in the Court’s reasoning, right?  It’s not just me, is it?  Any argument primarily advanced by “But that’s how it’s been done for years” is probably lacking.  When the follow up argument is simply to call the opposing position “nonsense”, without any reasoning whatsoever, you know the Court simply didn’t want to upset the Commission’s system of processing permanent partial applications.  Perhaps that is why we got an opinion for which no individual justice wanted to take credit.

            The problem with the compromise award is that it is really based upon no evidence.  After all, there was not a single piece of evidence in the Yellow Freight case in which an expert, a physician, opined that the claimant’s impairment was 7%.  The only person who found 7% impairment was a hearing officer.  Even if all three of the opinions considered were based upon objective evidence, not subjective findings, and thus were based upon reasonably demonstrable evidence, where was there some evidence of a 7% impairment.  There was none.  There was evidence of a 15%, a 9% and a 1% impairment.  There was no evidence of a 7% impairment.

Tenth District supports compromise awards

            In the wake of Yellow Freight, the Tenth District Court of Appeals (where mandamus cases against the Commission are filed) is not going to change its position regarding the Commission’s practice of issuing compromise awards.  In State ex rel. Wrenn v. Kroger Company (10th Dist.), 2003 Ohio 6470, the Magistrate noted that “[o]rdinarily, when the relied upon medical reports present a range of percentages, the commission does not abuse its discretion by choosing a percentage within the range of those percentages, and there is no requirement, in that situation, that the commission explain why it has selected the percentage chosen.” Id. at P34.  Of course, the only Ohio Supreme Court decision cited as support for this proposition is Yellow Freight which, as we’ve seen, cited no authority or rationale.  The Tenth District continues to hold to this position today as evidenced by its repeated citations to this self-conceived notion, most recently in State ex rel. Houston v. Mental Health Millcreek Children’s Psych. Hosp. (10th Dist.), 2011 Ohio 3594.

What can be done?

            Any employer or group looking to make a change in this process through the courts must know going in that it is an uphill battle.  It is pretty clear that challenging the Commission’s right to make a compromise between two or more medical opinions before the Tenth District is a losing argument.  The employer will need to be prepared to appeal to the Ohio Supreme Court.  While the make up of the Court is different now than in 2002 (five of the seven justices are different), the argument will require an assault on the Court’s faulty logic, or lack thereof, in Yellow Freight.  Would such an argument be successful or would the Court simply shrug its collective shoulders and keep the status quo?  Who knows?  Any employer willing to try, please give me a call.

            A better course of action may be to seek legislative reform through the General Assembly.  A simple change to the statute and accompanying administrative rules could instruct that hearing officers be required to choose from among the valid medical opinions before them.  This would effectively outlaw the practice of creating compromises.  Yet, such a piece of legislation probably will require a larger, more comprehensive piece of workers’ compensation reform legislation with which it would be included.  It’s hard to imagine a reform like this existing as a stand-alone bill.

If changes are made, then what?

            It is all well and good to change a flawed process just because it is intellectually dishonest and to challenge bad case law because it is constructed on a baseless foundation.  But ultimately, employers are going to want to know how making this change will affect the bottom line.  Is this change going to decrease or increase the average permanent partial award?  The honest answer is – I don’t know.  My suspicion is that eventually, it may decrease awards by a small amount.  However, when coupled with the potential to more significantly limit defenses costs on PP matters the advantages of these changes are amplified.

            If hearings officers were required to pick from among two or three opinions rather than adding the numbers and dividing by the number of reports, I predict that we would see the range of percentages in each case shrink considerably.  Instead of the Bureau doctor opining 0% and the claimant’s doctor opining 14% on some claim, we would likely see Bureau doctors finding 5% and claimant’s doctors finding 7%.  This would happen because hearing officers often award something, so they may be reluctant to choose the report that says 0%.  In that case, their only choice may be to choose the inflated 14%.  However, if the Bureau doc comes in with a low, but supportable 5% and the claimant’s examiner still says 14%, then the claimant’s report is very likely to be rejected.  In that case, the claimant has spent money on a report and has no additional money to show for it.  Naturally, claimant’s docs will begin to adjust their findings to a reasonable percentage that has a chance of being accepted.

            So, in the first scenario with a 0% and a 14% opinion, we know that many hearing officers would arrive at an award around 7%.  After all, (0+14) ÷ 2 = 7.  Of course, the employer would likely need to go to hearing before a DHO and possibly before an SHO on recon to get final award.  Without compromise awards, the opinions before the hearing officer are 5% and 7%.  If the hearing officer chooses the 7% award, the employer is no worse off.  But where the parties really win will be when the Bureau issues the tentative order for 5% and no objection is taken. 

The current system encourages claimant’s to object to the tentative order, especially when it is 0%, because they know they can get a ridiculously high opinion and usually get a compromise award that will more than pay for the doctor’s report.  If claimants know they have a small, but reasonable award in hand, they may be less inclined to spend money when the prospect for an increased award is less certain.  No objection by the claimant means no need for hearings or defense IMEs and lower costs associated with litigation for PP awards.  This will be where employers may find savings to improve the bottom line.

Conclusion

            It’s clear that fixing Ohio’s permanent partial process is not a magic bullet that will suddenly make Ohio’s workers’ compensation system more attractive to businesses.  I think it is equally clear that it is flawed both in the process of creating compromise awards and the tenuous legal authority that permits the process to continue.  Whether change comes through the courts or through legislation does not matter.  Simply by eliminating the compromise award, we could reduce litigation costs and the waste of conducting thousands of PP hearings every year.  So there you have it.  Anybody with me?



[1] Statistics taken from BWC Fiscal Year 2011 Report, available online at www.ohiobwc.com.
[2] As explained later, I believe a reformed system would reduce the amount of litigation associated with PP awards.  This would certainly reduce employers’ costs in terms of medical exams and the cost of having counsel at hearings.
[3] Facts were complicated by a 7% award in a 1988 claim that included the same shoulder but other conditions as well.  The 7% award was not apportioned among the allowed body parts.