from the Iowa District Court for Polk County, Arthur E.
insurer appeals a judicial review order affirming the
medical-fee determination of the workers' compensation
L. Monthei of Scheldrup Blades Schrock Smith P.C., Cedar
Rapids, for appellant.
V. Lorentzen and Chandler L. Maxon of Hopkins & Huebner,
P.C., Des Moines, for appellees.
by Vogel, P.J., and Tabor and Mullins, JJ.
insurer contests a determination by the workers'
compensation commissioner that a California hospital properly
charged more than three million dollars in medical fees
following its extended treatment of a severely injured
construction worker. Because they disagreed over the
reasonable cost of the worker's care, the parties engaged
in the informal dispute resolution procedures set out in Iowa
Code section 85.27(3) (2013) and Iowa Administrative Code
rule 876-10.3. On appeal, United Fire & Casualty Company
challenges several aspects of those procedures, as well as
the commissioner's order that it pay $2, 266, 089.20 to
Cedars-Sinai Medical Center on top of the $940, 195.81
already reimbursed by the insurer.
Fire urges four arguments on appeal. First, the insurer
alleges the commissioner committed procedural errors in
selecting and retaining the medical-fee reviewer, refusing to
allow United Fire to offer evidence related to several legal
issues, and accepting additional evidence and amended filings
from Cedars-Sinai and Sequetor, Inc., the company
Cedars-Sinai hired to recoup the outstanding fees. Second,
United Fire contends Sequetor did not have standing to
initiate the medical-fee review. Third, the insurer claims
Cedars-Sinai is not entitled to additional reimbursement
because United Fire's previous payments were an accord
and satisfaction. Finally, United Fire argues the medical-fee
resolution approved by the commissioner and affirmed by the
district court was irrational and illogical. Because United
Fire failed to preserve error on several of its claims and
cannot show it is entitled to repeat the medical-fee dispute
process, we affirm the judicial review order.
Facts and Prior Proceedings
March 19, 2010, twenty-two-year-old Cody Mills was working on
a California construction project for Alan Stevens
Associates, Inc., an Iowa company insured by workers'
compensation carrier United Fire. Mills fell twenty-five feet
from scaffolding and landed face first on a cement surface.
Mills was transported to Cedars-Sinai, a Los Angeles
hospital, where he received treatment for his catastrophic
head injuries. Over the course of his 131-day hospital stay,
Mills endured more than twenty surgical procedures, including
two craniotomies. Mills required care from the neurosurgical
intensive care unit until April 2010. The hospital discharged
Mills on July 28, 2010, and delivered a medical bill totaling
$5, 314, 001.96 to United Fire.
Fire submitted the hospital bill to its reviewing agency,
Alpha Review, which applied the California Official Medical
Fee Schedule (OMFS) in setting the reimbursable amount at
$939, 455.03. United Fire sent a check in that amount to
Cedars-Sinai on October 11, 2010. After receiving that
initial payment from United Fire, Cedars-Sinai authorized
Sequetor to pursue recovery of the remaining balance on
Mills's medical bill. Approximately one year later, Alpha
Review reexamined the billing, at the hospital's request,
and recommended reimbursement of an additional $740.78 for an
orthopedic device, which United Fire paid to Cedars-Sinai on
November 2, 2011.
22, 2012, Sequetor-on behalf of Cedars-Sinai-sought a
medical-fee determination under the informal dispute
resolution process laid out in Iowa Code section
85.27(3) and Iowa Administrative Code rule
876-10.3. In a letter to Penny Maxwell, a compliance
administrator with the Iowa Workers' Compensation
Commission, Sequetor notified the agency of its intent to use
the 10.3-review process in its capacity as Cedar-Sinai's
"authorized representative." Sequetor nominated
David Stamp, an Iowa attorney, as the person to do the
medical fee review but did not provide any details about
Stamp's qualifications for the position.
Fire responded by letter dated August 15, 2012, and addressed
to Maxwell and Deputy Commissioner James Christenson. Counsel
for the insurer stated in the letter he had planned to file a
motion asking the agency to set deadlines for the 10.3
procedure but learned from a telephone conversation with
Maxwell that formal motions would not be entertained. So
United Fire instead "submitted [its] positions on
scheduling issues via this letter." The letter further
stated: "[W]e would like to make the agency aware that
although this is an informal medical bill dispute proceeding,
this case involves over $4, 000, 000 in dispute and calls for
decisions on complex legal questions which will be addressed
through briefing and the informal review process." The
letter then listed fifteen legal questions, including
inquiries on standing, timeliness, preemption, and choice of
law. Finally, United Fire nominated Paul Thune to serve as
the reviewer, noting: "Mr. Stamp is primarily a
claimants' workers' compensation attorney. Mr. Thune,
on the other hand is a highly experienced mediator, and also
has much experience representing both claimants and
defendants in agency matters."
rejected United Fire's request for Thune and informed the
parties Stamp had been selected to perform the review. But
Stamp contacted Workers' Compensation Commissioner
Christopher Godfrey to express concern the informal review
process would not resolve the parties' dispute. On
October 12, 2012, Stamp advised the parties to file motions
raising their legal and procedural issues directly with
Commissioner Godfrey. But on December 13, before either party
had filed a motion, Commissioner Godfrey directed Stamp to
move forward with the review, reasoning: "The issues
raised [in United Fire's August 15 letter] . . . do not
apply as the process under 876 IAC 10.3 is merely a means to
resolve disputed medical fee claims." Godfrey
reconsidered United Fire's reviewer nominee but
ultimately affirmed the selection of Stamp.
stated: "If this process does not resolve the dispute, a
contested case proceeding may be filed . . . ."
See Iowa Admin. Code rr. 876-10.3(4), -4.46. The
next day,  United Fire filed a "motion for
determination of legal issues prior to any review under 876
IAC 10.3, " which was rejected by the agency because
United Fire had not filed an original notice and
withdrew as reviewer on January 30, 2013, without
explanation. In the months that followed, two more selected
reviewers failed to complete the 10.3 process. One withdrew
after a misunderstanding with United Fire regarding mediation
and another declined appointment. In each instance, the
parties submitted their own nominees for a replacement
reviewer, and Maxwell picked Sequetor's candidate.
Finally, on November 5, 2013, the agency selected Alex
Kauffman, the Sequetor nominee who ultimately completed the
10.3 review. United Fire unsuccessfully objected:
As is made plainly eviden[t] by his affidavit, Mr. Kauffman
works for a collections agency, like Sequetor, Inc. who
routinely provides collection services for Cedars Sinai
Medical Center. . . . While Mr. Kauffman might not contract
directly with Cedars Sinai Medical Center, there is an
obvious conflict in Mr. Kauffman's serving as the
"independent reviewer" in this proceeding as he has
an established pattern of financial gain in performing
collection work related to medical services provided by
thereafter, United Fire sent a letter to Kauffman, with a
copy to Sequetor, requesting a scheduling conference. A
Sequetor representative responded that Kauffman had already
completed his review. United Fire, which had not yet
submitted information to Kauffman, objected. In a letter to
Maxwell and Deputy Christenson, United Fire requested another
reviewer replace Kauffman or, alternatively, the agency order
Kauffman to refrain from issuing an opinion until taking
input from United Fire. Deputy Christenson reaffirmed
Kauffman as the reviewer and noted "the attempted
resolution of the medical fee dispute in this matter has gone
on for well over a year." Christenson gave United Fire
fifteen days to submit "objective" materials to
Kauffman but found it "inappropriate to submit testimony
or briefs" to the reviewer. After United Fire submitted
documentation, Kauffman issued his opinion that an additional
$2, 266, 089.20 be reimbursed to Cedars-Sinai.
Fire initiated a contested case proceeding against
Cedars-Sinai and Sequetor. In addition to challenging
Kauffman's findings, United Fire raised issues of
standing, accord and satisfaction, and reviewer bias. After
reviewing the materials provided by the parties, including a
competing opinion on the reasonableness of the medical fees
offered by an expert for United Fire, Deputy Christenson
entered a decision adopting Kauffman's fee determination.
Although the deputy found United Fire had not preserved error
on accord and satisfaction or standing, Christenson proceeded
to address and reject those claims.
judicial review, United Fire renewed the arguments it had
raised before the agency and added claims that Maxwell did
not have authority to select the 10.3 reviewers, Maxwell was
biased in her reviewer selections, and the agency erred in
allowing Cedars-Sinai and Sequetor to submit additional
filings. The district court affirmed the agency decision.
United Fire now appeals.
II. Scope and Standards of Review
review of workers' compensation cases is governed by Iowa
Code chapter 17A. See Hill Concrete v. Dixson, 858
N.W.2d 26, 30 (Iowa Ct. App. 2014). We examine the judicial
review ruling and consider whether we come to the same
conclusions as the district court. Meyer v. IBP,
Inc., 710 N.W.2d 213, 225 (Iowa 2006). If our
conclusions align, we affirm; if not, we reverse. JBS
Swift & Co. v. Hedberg, 873 N.W.2d 276, 279 (Iowa
Ct. App. 2015).
standard of review depends on the aspect of the agency's
decision that forms the basis of the petition for judicial
review." Burton v. Hilltop Care Ctr., 813
N.W.2d 250, 256 (Iowa 2012). United Fire's appellate
claims implicate the agency's findings of fact, its
application of law to fact, the proper construction of rule
10.3, and the insurer's procedural due process rights.
defer to the fact findings of the workers' compensation
commissioner if they are based on substantial evidence.
See Iowa Code § 17A.19(10)(f). Evidence is
substantial when "the quantity and quality of evidence .
. . would be deemed sufficient by a neutral, detached, and
reasonable person, to establish the fact at issue when the
consequences resulting from the establishment of that fact
are understood to be serious and of great importance."
Id. § 17A.19(10)(f)(1). In our review, we ask
not whether the evidence may support a different finding than
that made by the commissioner but whether the evidence
supports the finding the commissioner actually made. See
Larson Mfg. Co. v. Thorson, 763 N.W.2d 842, 850 (Iowa
afford "some degree of discretion" to the
agency's application of law to the facts "but not
the breadth of discretion given to the findings of
fact." Meyer, 710 N.W.2d at 219. When the
agency's decision is based on an incorrect interpretation
of law, we are not bound by those legal conclusions and may
correct them. See id.
defer to the agency's interpretation of law when it has
been clearly vested in the agency's discretion by the
legislature unless it is "irrational, illogical, or
wholly unjustifiable." See Iowa Code §
17A.19(10)(l)-(m). But when the legislature has not
clearly vested the agency with that authority, we review for
correction of legal error. See Ramirez-Trujillo v.
Quality Egg, L.L.C., 878 N.W.2d 759, 768 (Iowa 2016). We
substantially defer to an agency when it interprets its own
regulations, so long as its interpretation does not violate
the rule's plain language. Des Moines Area Reg'l
Transit Auth. v. Young, 867 N.W.2d 839, 842 (Iowa 2015).
to the extent United Fire raises a constitutional claim, our
review is de novo. See ABC Disposal Sys., Inc. v.
Dep't of Nat. Res., 681 N.W.2d 596, 605 (Iowa 2004).