December 21, 2016
UNITED FIRE & CASUALTY COMPANY, Plaintiff-Appellant,
CEDARS SINAI MEDICAL CENTER and SEQUETOR, INC., Defendants-Appellees.
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).
Preservation of Error
and Sequetor argue United Fire did not preserve its claims
regarding Maxwell's involvement in the reviewer-selection
process or her alleged bias because United Fire continued
communicating with her during the process and failed to
question her involvement in its briefs to the agency.
Cedars-Sinai and Sequetor also argue United Fire failed to
preserve error on the issues of standing and accord and
satisfaction because the contested case proceeding was
limited to challenging the 10.3-review process and neither
legal issue was raised before the reviewer. See Iowa
Admin. Code r. 876-4.46(3) ("The issues of the contested
case proceeding shall be limited to the dispute considered in
rule 876-10.3 . . . .").
agree United Fire did not preserve error on its claims
involving Maxwell. The question whether she had authority to
appoint a reviewer calls for an interpretation of agency
rules, a matter within the agency's sound discretion.
See Young, 867 N.W.2d at 842. Because United Fire
did not object to Maxwell's involvement during the 10.3
review or the contested case proceeding, the agency had no
chance to weigh in on the proper interpretation of its own
rules. United Fire first raised claims concerning Maxwell
before the district court. The judicial review hearing was
too late to flag these new concerns. See KFC Corp. v.
Iowa Dep't of Revenue, 792 N.W.2d 308, 329 (Iowa
standing and accord and satisfaction, we are skeptical
whether United Fire properly preserved error on those legal
issues through the informal-dispute-resolution process. But
because United Fire presented the issues before the agency
and obtained a substantive determination, we opt to reach
those issues here. See generally State v. Taylor,
596 N.W.2d 55, 56 (Iowa 1999) (noting serious preservation
problems but proceeding to address merits).
Did procedural errors prejudice United Fire?
Fire argues it was prejudiced by several alleged procedural
errors in the 10.3 review and contested case proceeding.
United Fire attacks the agency's retention of Kauffman,
its refusal to allow United Fire to submit evidence related
to legal issues, and its acceptance of late filings from
Cedars-Sinai and Sequetor. We address each argument in turn.
Fire contends the agency should have dismissed Kauffman due
to a conflict of interest. See Botsko v. Davenport Civil
Rights Comm'n, 774 N.W.2d 841, 848 (Iowa 2009)
(noting "[d]ue process always involves . . . a
constitutional floor of a 'fair trial in a fair
tribunal'" (citation omitted)). United Fire
highlights three facts to illuminate the alleged conflict.
First, Kauffman worked for Cedars-Sinai from 1990 to 1997.
Second, at the time he performed the 10.3 review, Kauffman
was contracting with a collections agency that provided
services to Cedars-Sinai. Third, language in Kauffman's
opinion suggests a lack of objectivity, particularly the
designation of "witness for the lien claimant"
typed under his signature.
and Sequetor respond Kauffman's relationship with the
hospital twenty years ago should not disqualify him from
acting as a reviewer. They also point to his affidavit, which
denies a direct relationship with Cedars-Sinai. They dismiss
United Fire's complaints about the objectivity of
Kauffman's opinion, noting: "It seems quite clear
that Kauffman either used a form or made a couple of clerical
errors during the preparation of his report." Moreover,
they contend the substance of Kauffman's report, such as
his consideration of United Fire's "preferred
medical bill calculation, " demonstrates Kauffman
understood his role as independent reviewer.
review of the record does not reveal a conflict of interest.
While Kauffman performed collections work for Cedars-Sinai in
the past, he no longer had any direct involvement with the
hospital when he performed the 10.3 review. In addition,
Kauffman had a history of performing reviews for both lien
claimants and defendants, as well as acting as an independent
bill reviewer. Although the signature line of Kauffman's
opinion indicates he was a witness for Cedars-Sinai, that
misdesignation can be explained as a clerical error,
particularly considering Kauffman's signed
"Independent Bill Review Affidavit, " in which
Kauffman declares "non-association with the parties
and/or collection agents in this case." Further, the
substance of Kauffman's report does not suggest he
misunderstood his role but, rather, demonstrates an objective
analysis of three methods for determining a reasonable
medical fee. Accordingly, Deputy Christenson did not commit
procedural error in retaining Kauffman as the reviewer.
of Legal Questions.
Fire next alleges the agency violated its right to procedural
due process by refusing-within the
informal-dispute-resolution process-to allow the insurer to
submit evidence and brief several legal questions listed in
the insurer's August 15, 2012 letter. United Fire
complains its ability to litigate these questions was stymied
because Iowa Administrative Code rule 876-4.46 allows only
the evidence and issues submitted during the rule 10.3
process to be considered in the contested case
Fire did not preserve error on a claim of procedural due
process. See Top of Iowa Coop. v. Sime Farms, Inc.,
608 N.W.2d 454, 470 (Iowa 2000) (holding appellate court may
consider error preservation on its own motion). The insurer
did not allege a denial of due process during the pendency of
the rule 10.3 review, nor did it raise that claim in the
contested case proceeding. And even assuming United Fire has
preserved error, we disagree with its assertion due process
requires parties who dispute a medical fee be allowed to
present testimony and legal argument in the context of the
"full panoply" of procedural due process rights is
not necessary for an administrative hearing to pass
constitutional muster. See Baker v. Emp't Appeal
Bd., 551 N.W.2d 646, 648 (Iowa Ct. App. 1996). "The
fundamental requirement of due process is the opportunity to
be heard 'at a meaningful time and in a meaningful
manner.'" Id. (quoting Mathews v.
Eldridge, 424 U.S. 319, 333 (1976)). The hearing before
Deputy Christenson was a contested case governed by chapter
17A, which contains provisions ensuring parties are afforded
due process. See Mauk v. State Dep't of Human
Servs., 617 N.W.2d 909, 912-13 (Iowa 2000); see
also Iowa Admin. Code r. 876-4.46(2). Section 17A.12(4)
mandates in a contested case proceeding, "[o]pportunity
shall be afforded all parties to respond and present evidence
and argument on all issues involved."
a provider or responsible party with a medical-fee dispute
may initiate a contested case, that party must follow the
informal-dispute-resolution procedure in rule 10.3.
See Iowa Admin. Code rr. 876-10.3(1), -4.46(2). The
appointed reviewer considers information from the parties and
determines "the amount that is reasonable and
necessary." Iowa Admin. Code r. 876-10.3(3)(d)-(e). If
the 10.3 proceedings do not resolve the matter, the aggrieved
party may initiate a contested case proceeding. Iowa Admin.
Code r. 876-4.46(2). But the parties may not submit
additional evidence in the contested case proceeding unless
"there exists additional material evidence, newly
discovered, which could not with reasonable diligence be
discovered and produced." Iowa Admin. Code r.
876-4.46(3). Moreover, the issues in the contested case are
"limited to the dispute considered in rule
after Sequetor initiated the 10.3 review, United Fire sent a
letter to the agency requesting deadlines for the
informal-dispute-resolution proceedings. United Fire asserted
the 10.3 review invoked "complex legal questions"-
including jurisdiction, notice, statute of limitations, and
choice of law-which would "take substantial preparation
time" for the parties. In response to reviewer
Stamp's qualms about addressing those legal questions,
Commissioner Godfrey opined such issues fell outside the 10.3
review. Consistent with Godfrey's position, after
Kauffman's appointment, Deputy Christenson denied United
Fire's request to present testimony and limited the
information United Fire could submit to "objective
materials regarding the billing in this matter, "
reasoning Kauffman was "an expert reviewer, " not
"a finder of fact." In the contested case
proceeding, United Fire resurrected one legal question from
its August 15, 2012 letter-standing-as well as the issue of
accord and satisfaction-raised in its December 14, 2012
motion. But United Fire did not present argument on the other
legal issues or contest the agency's limitation on
evidence it was allowed to submit to Kauffman.
parties have recognized, the case law discussing informal
resolution of medical-fee disputes under rule 10.3 is
negligible. Further, the facts of this case do not fit neatly
within the plain language of that rule. Against that
backdrop, it is not surprising the parties present two
fundamentally different positions on how the 10.3 review
should have proceeded here.
Fire asserts it should have had the opportunity to present
its legal arguments and corresponding evidence to the 10.3
reviewer. In support of this assertion, United Fire
characterizes the scope of the medical-fee dispute broadly,
noting: "The reasonableness of the charges submitted by
Cedars-Sinai inevitably depends on resolution of the legal
issues raised by United Fire in its August 15, 2012
letter." According to United Fire, regardless of whether
Kauffman was qualified to evaluate legal arguments, the
agency should have allowed the insurer to present them to the
reviewer because, under rule 4.46(3), that was the only way
United Fire could preserve the issues for the contested case
and Sequetor advocate a narrower scope for a medical-fee
dispute, contending the reviewer was limited to deciding the
reasonable value of services the hospital rendered. They
contend it would have been inappropriate for Kauffman-who was
an expert in medical billing, not the law-to consider legal
issues. Under their interpretation, the collateral legal
questions raised by United Fire could not be resolved in the
rule 10.3 review, contested case, or judicial review
interpretation advanced by Cedars-Sinai and Sequetor more
clearly reflects the language of the statute and rules. The
informal dispute resolution is intended to settle
disagreements over the necessity of services or
reasonableness of charges. Iowa Admin. Code r. 876-10.3(2).
The task of a reviewer is to determine the necessity of
services, or in this case, the reasonableness of the hospital
charges. Iowa Admin. Code r. 876-10.3(3). We defer to the
agency's view that the 10.3 reviewer's task does not
extend to resolving the legal issues presented by United
Fire. See Young, 867 N.W.2d at 842.
Indeed, allowing the parties to present legal arguments to a
reviewer who isn't equipped to evaluate those claims
would create confusion and uncertainty regarding the
reviewer's fee determination. Accordingly, we affirm on
Fire also contends Deputy Christenson gave Cedars-Sinai and
Sequetor an unfair advantage by allowing them to submit an
untimely answer and amended brief. United Fire initiated the
contested case proceeding on March 14, 2014. Under rules
4.46(5) and (6), Cedars-Sinai and Sequetor were required to
submit their response and brief within thirty days of the
date of service of the request for contested case proceeding.
Adhering to this timeframe, on March 31, Sequetor and
Cedars-Sinai filed a "rebuttal" through a
representative not licensed to practice law in Iowa.
Fire argued Cedars-Sinai and Sequetor needed to obtain
counsel and amend their response to conform to the rules. On
May 16, counsel appeared for Sequetor and Cedars-Sinai and
requested a thirty-day stay, which the agency granted. Twenty
days after the expiration of the stay, on July 11, Sequetor
and Cedars-Sinai filed an answer and amended brief. United
Fire moved to strike those filings. Deputy Christenson denied
the motion to strike, characterizing the answer and brief as
amended filings that related back to the timely filed
rebuttal. The deputy reasoned amendment to a pleading should
be freely granted and found the amendments did not prejudice
United Fire. See Iowa Admin. Code r. 876-4.9(5).
Fire challenges the deputy's characterization of the
brief as a pleading and asserts the deputy's allowance of
the amendment conflicts with the requirement under rule
4.46(8) that the commissioner review the contested case sixty
days after it is filed. United Fire further argues it was
prejudiced by the amended filings because they
"addressed additional legal arguments not included in
their original brief."
the district court, we conclude the agency did not abuse its
discretion in allowing the additional filings. The answer was
an amended pleading, and as Deputy Christenson reasoned,
amendments to pleadings should be freely granted when it is
just to do so. See Estate of Kuhns v. Marco, 620
N.W.2d 488, 491 (Iowa 2000). While we agree with United Fire
that a brief is not a pleading, that distinction does not
mean a party may never amend a brief. United Fire does not
cite authority for its proposition that a party may not amend
a brief, nor does United Fire specify how it was unfairly
prejudiced by the allowance of the additional filings.
Accordingly, we decline to grant relief on this
Did Sequetor have standing to initiate the 10.3
Fire argues Sequetor could not initiate a 10.3 review because
it is not a "provider" within the meaning of Iowa
Administrative Code rule 876-10.3(2). Iowa Code section
85.27(3) authorizes the workers' compensation
commissioner to establish rules to resolve medical-fee
disputes between employers, insurance carriers, and health
service providers. In accordance with the statute, the
commissioner enacted rule 10.3, which allows a provider or a
party liable for payment of medical services to submit the
dispute for review. See generally Iowa Admin. Code
r. 876-10.3. Rule 10.3(2) defines "provider" as
"any person furnishing surgical, medical, dental,
osteopathic, chiropractic, podiatric, physical
rehabilitation, nursing, ambulance, hospital services and
supplies, crutches, artificial members and appliances."
Deputy Christenson concluded Sequetor was an agent of
provider Cedars-Sinai, and accordingly, Sequetor had standing
to initiate the 10.3 review.
no error in the agency's decision Sequetor had authority
to initiate informal dispute resolution proceedings under
rule 10.3. Cedars-Sinai, a provider within the
meaning of rule 10.3(2), authorized Sequetor to act on its
behalf in resolving the fee dispute. The agency's
interpretation of the term "provider" as including
an agent of a provider was reasonable. Moreover, United Fire
does not claim to have suffered any prejudice by Sequetor
initiating the 10.3 review instead of Cedars-Sinai.
Did United Fire prove accord and satisfaction?
Fire next argues it has demonstrated accord and satisfaction,
which prevents Cedars-Sinai and Sequetor from seeking
additional payment. Accord and satisfaction discharges a
claim when "the parties agree to give and accept
something in settlement of the claim and perform the
agreement." Robinson v. Norwest Bank, Cedar Falls,
N.A., 434 N.W.2d 128, 130 (Iowa Ct. App. 1988). Iowa
Code section 554.3311, which codifies this principle,
provides in relevant part:
1. If a person against whom a claim is asserted proves that
that person in good faith tendered an instrument to the
claimant as full satisfaction of the claim, the amount of the
claim was unliquidated or subject to a bona fide dispute, and
the claimant obtained payment of the instrument, the
following subsections apply.
. . . .
4. A claim is discharged if the person against whom the claim
is asserted proves that within a reasonable time before
collection of the instrument was initiated, the claimant, or
an agent of the claimant having direct responsibility with
respect to the disputed obligation, knew that the instrument
was tendered in full satisfaction of the claim.
support of its claim,  United Fire points to the lack of
communication from Cedars-Sinai for more than a year after
United Fire's initial $939, 455 payment and the following
notation from November 30, 2011, in an account history
report: "Add'l pmt posted to acct in the amt of
$740.78. . . . Pmt is 20% of fee schedule reimb as required .
. . . No add'l charges required to be pd."
Fire has not demonstrated an accord and satisfaction. As
Deputy Christenson observed: "There is no indication in
the record that Sequetor or Cedars-Sinai knew that the check
for $939, 455.03 was tendered in full satisfaction of the
bills at issue." Neither the lack of communication nor
the account-history notation is adequate to prove accord and
satisfaction under section 554.3311(4). That subsection
requires knowledge the check was being tendered in full
satisfaction of the claim before the hospital sought
collection. Neither the lack of communication nor the
relevant note, written more than one year after the initial
payment and weeks after the second payment, shows the
hospital had such knowledge before seeking payment of the
Is the medical-fee decision irrational and
United Fire argues the medical-fee decision was irrational
and illogical because Kauffman's opinion was incorrect
under California law. United Fire contends:
"Kauffman's opinion indicates he decided the
reasonableness of the charges under California law, "
but the methodology he employed-averaging three different
calculations-is not proper under that state's regulatory
scheme. Thus, according to United Fire, Kauffman's
opinion is not reasonable, and the agency endorsement of his
opinion was irrational and illogical.
and Sequetor respond that Iowa law, not California law,
governs the reasonableness of the medical fee. Rule 10.3 does
not specify the methodology a bill reviewer must undertake.
See Iowa Admin. Code r. 876-10.3(3)(e) ("[The
determination] shall be in writing and specify the facts
relied upon. The person making the review may choose any
amount to set the reasonableness of a charge."). They
argue Kauffman's methodology was sound considering the
urgency of Mills's injury and the extraordinary
circumstances surrounding his long hospitalization.
review discussed three methodologies for determining a
reasonable payment. First, Kauffman examined the analysis
used by Alpha Review that resulted in United Fire's
payment of $939, 455.03. Kauffman indicated this methodology
was based upon a DRG (Diagnosis Related Group)
analysis representing an average length of stay
of 31.6 days. But Mills "was treated for 131 days
leaving 99.4 days of medical services for which reimbursement
appears to be missing from the defendant's payment for
the medical services provided by Cedars Sinai." Kauffman
also faulted this methodology because it did not take into
consideration Mills's trauma designation or his
"need of intensive inpatient care." Because of
this, Kauffman looked at another method based upon a per diem
rate,  which he advised would have been proper
under California law. Under this second method, the payment
would have totaled $3, 894, 576.10. Finally, Kauffman offered
a third approach based upon an evidentiary study from 2009
prepared for the California commission on health, safety and
workers' compensation. Kauffman opined that according to
that study, "the average reimbursement rate for the
services provided for the same or similar services are
exempt from the inpatient fee schedule and are to be
reimbursed at 90% of billed
charges." Under this method, the total payment
would have been $4, 782, 601.70. Kauffman concluded
Cedars-Sinai "can analogize from the reasoning described
in this analysis and should be reimbursed the calculated
average of the methodologies discussed."
the medical-fee determination neither irrational nor
illogical. Under rule 10.3(3)(e), the reviewer has
considerable discretion in choosing a methodology. The rule
requires the fee determination "be in writing and
specify the facts relied upon" but apart from that
"[t]he person making the review may choose any amount to
set the reasonableness of a charge." Iowa Admin. Code r.
876-10.3(3)(e). Regardless whether Kauffman's approach
followed California law, his determination-which employed
three coherent methodologies for determining a reasonable
medical fee-fit logically within the expansive language of
we affirm the judicial review decision.
 Iowa Code section 85.27(3) states, in
[C]harges believed to be excessive or unnecessary may
be referred by the employer, insurance carrier, or health
service provider to the workers' compensation
commissioner for determination, and the commissioner may
utilize the procedures provided in sections 86.38 and 86.39,
or set by rule, and conduct such inquiry as the commissioner
deems necessary. . . . A health service provider rendering
treatment to an employee whose injury is compensable under
this section agrees to be bound by such charges as allowed by
the workers' compensation commissioner and shall not
recover in law or equity any amount in excess of charges set
by the commissioner. . . . A health service provider shall
not seek payment for fees in dispute from the insurance
carrier or employer until the commissioner finds, pursuant to
informal dispute resolution procedures established by rule by
the commissioner, that the disputed amount is
 Rule 876-10.3(3)(d) states:
If the provider does not agree to accept the amount of
the charge the responsible party agrees to pay, . . . . [t]he
provider and the responsible party shall submit the dispute
to a mutually agreed upon person for review. . . . If the
provider and the responsible party cannot agree upon the
person to make the review, they shall, within 90 days of time
the provider notified the responsible party of the
disagreement, each recommend to the workers' compensation
commissioner one person to do the review. . . . The selected
person or persons shall review information submitted by the
provider and the responsible party and make a
 The certificate of service indicates
United Fire mailed the motion on December 13, the date of
Commissioner Godfrey's letter. It is unclear in our
record whether United Fire had received the
commissioner's letter before it sent the motion.
 The December 14 motion reiterated
several of the questions from the August 15 letter and added
the issue of accord and satisfaction.
 In its appellant's brief, United
Fire claims ex parte communications between Kauffman and
Sequetor also should have been grounds for his dismissal. In
its reply brief, United Fire "concedes rule 876-10.3
does not contain an express prohibition of ex parte
communications" but adds: "[T]he rule does state
the review is to consider information provided by
both parties." United Fire then contends
Kauffman did not consider the information it provided him.
Because United Fire abandons its argument regarding ex parte
communications in its reply brief, we decline to address it.
We also decline to address the argument raised for the first
time in its reply brief that Kauffman did not consider the
information United Fire provided. See Harrington v. Univ.
of N. Iowa, 726 N.W.2d 363, 366 n.2 (Iowa 2007).
 It was not until oral argument that
United Fire formulated an argument challenging the
constitutionality of the agency rules. We decline to consider
this newly raised argument. See Dilley v. City of Des
Moines, 247 N.W.2d 187, 195 (Iowa 1976).
 At oral argument, Cedars-Sinai and
Sequetor clarified that their interpretation did not
completely preclude United Fire from seeking resolution of
its legal claims. Their counsel suggested it may have been
appropriate for United Fire to file a petition for a
declaratory order. Iowa Code section 17A.9 and Iowa Rule of
Administrative Procedure 876-5.1 present a possible avenue
for requesting an agency determination on the proper
procedure for resolving legal claims related to a medical-fee
 We recognize a situation could arise
in which the agency would need to determine a legal
issue related to the construction or applicability of rule
10.3 to comport with due process.
 Even under this more restrictive view,
we cannot conclude the agency denied United Fire a meaningful
opportunity to be heard. United Fire took no steps to have
its legal questions resolved outside the
informal-dispute-resolution process nor did the insurer
attempt to opt out of the rule 10.3 review. Rather, United
Fire acquiesced in the process. While United Fire filed a
motion in December 2012 asking the agency to resolve a number
of the legal questions, after the agency rejected that filing
because there was no original notice or petition on file,
United Fire took no steps to appeal or otherwise secure a
ruling from the agency on those issues.
 United Fire also argues the agency
gave Cedars-Sinai and Sequetor an unfair advantage when it
allowed them to submit additional evidence in the contested
case proceeding related to United Fire's claims of
standing and accord and satisfaction. Because resolution of
the standing issue hinges on the proper construction of rule
10.3 rather than an evidentiary issue, we find any error in
allowing additional evidence was harmless. Similarly, as the
agency did in the contested case proceeding, we can resolve
United Fire's accord-and-satisfaction claim without
reference to the additional evidence. Therefore, we find no
reversible error. See Mohammed v. Otoadese, 738
N.W.2d 628, 633 (Iowa 2007) ("[T]he erroneous admission
of evidence does not require reversal 'unless a
substantial right of the party is affected.'"
(quoting Iowa R. Evid. 5.103(a))).
 United Fire acknowledges no case law
in Iowa addresses a collection agency's ability to
participate in a fee-dispute proceeding but cites to a Texas
case finding a contractual assignee of a healthcare provider
was not a proper party in a workers' compensation
dispute. Tex. Mut. Ins. Co. v. Apollo Enters., No.
03-09-00054-CV, 2009 WL 3486380, at *3 (Tex. Ct. App. Oct.
29, 2009). In Apollo Enterprises, the workers'
compensation division interpreted a similarly worded
definition of provider to exclude assignees. Id. at
*2. In upholding that decision, the court cited policy
reasons for excluding assignees, including that Apollo bought
medical debt from the provider at a reduced rate:
"[C]ompanies that pay a reduced fee to healthcare
providers and bill the system at a higher rate
'increase costs to the system without adding value to
the system.'" Id. at *5 (citation omitted).
The court continued: "In any event, we need not
speculate as to what the Division's motivation was,
because after concluding that the Division's
interpretation of its own rule is not contrary to statute,
nor contrary to the plain meaning of the rule, nor plainly
erroneous, we defer to the Division's
We find this case to be readily distinguishable.
First, Sequetor did not purchase the debt from Cedars-Sinai.
Instead, Sequetor was assisting Cedars-Sinai with its debt
collection. United Fire does not argue Sequetor's
practices would increase the costs to the system.
Accordingly, the policy concerns of the Texas court are not
applicable. Perhaps more importantly, in the Texas case, the
workers' compensation division construed its rule
differently, and the court deferred to that interpretation.
We find it appropriate to afford the interpretation of our
own workers' compensation division the same
 In its brief, United Fire also
argued it demonstrated accord and satisfaction under section
554.3311(2), which provides "the claim is discharged if
the person against whom the claim is asserted proves that the
instrument or an accompanying written communication contained
a conspicuous statement to the effect that the instrument was
tendered as full satisfaction of the claim." But at oral
argument, United Fire conceded the checks it sent to
Cedars-Sinai did not include a "conspicuous
statement" they were tendered in full satisfaction of
Cedars-Sinai's claim. United Fire also agreed it did not
submit to the agency any written communication that
accompanied the checks containing such a conspicuous
statement. Accordingly, we limit our analysis to subsection
 Alternatively, United Fire contends
it was denied the opportunity to fully present its defense of
accord and satisfaction because the agency allowed only
"objective" evidence. United Fire provided the
reviewer with copies of the checks it had issued to
Cedars-Sinai as well as collection notes. At oral argument,
United Fire conceded there was no "conspicuous
statement" on its payments and identified no other
evidence it could have presented to the agency.
 According to California Code of
Regulations section 9789.21(j), DRG is "the inpatient
classification scheme used by CMS [Centers for Medicare &
Medicaid Services] for hospital inpatient reimbursement. The
DRG system classifies patients based on principal diagnosis,
surgical procedure, age, presence of comorbidities and
complications and other pertinent date."
 Under California Code of Regulations
section 9789.22(j)(1): "The per diem rate is determined
by dividing the maximum reimbursement as determined under
Section 9789.22(1) by the average length of stay . . . for
that specific DRG." Kauffman divided Mills's
DRG-analysis amount ($939, 455.03) by the average length of
stay (31.6 days) to get a per diem rate of $29, 729.59. He
multiplied that rate by the length of Mills's actual stay
(131 days) to arrive at $3, 894, 576.10.
 This approach comes from a section
in the study describing the limitations in its approach to
estimating the impact of new OMFS provisions:
To estimate the impact of the SB 228 OMFS provisions,
the maximum allowable fees using the OMFS rates in effect
when the patient was discharged from the hospital were first
determined. . . . Any hospital for which a composite rate did
not exist in 2003 was assumed to be OMFS-exempt. This
includes both new acute care hospitals and specialty
hospitals that are exempt from the Medicare PPS for general
acute care hospitals. For hospitals and DRGs that were exempt
from the OMFS [in 2003], payment was assumed to be [ninety]
percent of charges. There are several limitations to this
Barbara O. Wynn, Inpatient Hospital Services: An
Update on Services Provided Under California's
Workers' Compensation Program (RAND Ctr. for Health
& Safety in the Workplace, Working Paper No.