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Accident Compensation Cases


Judgment Text

This is an application for review of decisions of the Accident Compensation Corporation (the Corporation) in respect of fees payable to physiotherapists under the Accident Compensation Act 1982. In brief the issue concerns whether the Corporation is discharging its statutory duty to pay the cost of physiotherapy treatment for people covered by the accident compensation scheme. 
The Accident Compensation Act 1972 introduced a comprehensive “no fault” accident compensation scheme in substitution for the previously existing common law rights and workers' compensation legislation and created the Accident Compensation Commission (now Corporation) to administer that scheme. The Act was replaced in 1982 by the consolidation measure which is in force now. The present Act provides in Part V for the payment to persons injured by accident of earnings related compensation and in Part VI for the payment to such persons of other compensation. In particular, for present purposes, it provides for payments in respect of medical treatment. Those payments are payable in the first instance to the injured person. There is provision, however, for payment to be made direct to the person supplying the treatment (generally referred to as the health care provider). It is this provision which forms the basis of the present proceeding. In very brief summary it is the case for the plaintiff Society that payments to physiotherapists for services supplied to injured persons are required, in terms of the Act, to be made at a rate consistent with fees charged generally by physiotherapists throughout the country. The Corporation's response is that it is entitled to take many other factors into account and in that way to arrive at payments on a lower basis. 
This case turns upon the interpretation to be given to the relevant parts of s 75 of the Act. Those parts are: 
“75. (1) Subject to any regulations made under this Act, where a person suffers personal injury by accident in respect of which he has cover, if, as a result of the personal injury, he requires to obtain a medical certificate for the purposes of this Act, or requires any treatment to which this section applies, the Corporation shall pay the cost thereof so far as — 
That person is not entitled to any benefit under Part II of the Social Security Act 1964 in respect thereof; and 
The Corporation considers that the amount to be paid by it is reasonable by New Zealand standards taking into account any contribution made by the Corporation under subsection (3) of this section. 
(6) Subject to any regulations made under this Act, upon receipt by the Corporation of a statement by a person in New Zealand duly qualified to provide radiological or physiotherapy services or other paramedical services, given in a form approved by the Corporation, — 
Certifying as to any such services (being services which he was duly qualified to provide) afforded by him personally or by or under the direct supervision of himself or another person duly qualified to provide the services, and the amount claimed in respect thereof; and 
Certifying that the person to whom the services were afforded was referred by a registered medical practitioner as a case of personal injury by accident; and 
Containing the name and address of that person and such other information as may be required by that form to be furnished — the Corporation may, if it thinks fit, notwithstanding anything in this Act, pay the amount so claimed for the services or so much thereof as it considers it is reasonable for it to pay by New Zealand standards without further inquiry as to whether or not the services were required as a result of personal injury by accident in respect of which the person to whom the services were afforded had cover and without further inquiry as to whether he was entitled to compensation under this Act. ”
The 1972 Act in s 111, which was the forerunner of the present s 75, did not contain what is now subsection (6) and so provided only for payments to be made by way of compensation directly to the injured persons. As I understand it, however, the practice quickly developed of the claims for payment being made by the health care provider on behalf of the injured persons and for payments being made in bulk in that way. That practice was recognised in 1975 when the predecessor of the present subs (6) was enacted in the 1975 amendment. This subsection has become known as the bulk billing provision. 
Prior to 1979 the Corporation paid physiotherapy fees on the basis of the bills submitted to it. By reason of the sheer volume of the claims being received it became necessary for some more convenient method to be adopted and this found its form in an administrative device known as the annotation line. That device was applied to bulk billing by all health care providers. It happens that it is the physiotherapists who are the first to bring the system under scrutiny. This no doubt arises out of the fact that, by the nature of the services they supply, the physiotherapists are dealing to a much larger extent with persons injured by accident than any other health care provider. The evidence indicated that approximately 80% of all private physiotherapist services are provided to accident victims as against approximately 20% of general practitioner consultations. It is also the case that the total number of claims in respect of physiotherapy treatment has increased dramatically over the last few years. The cost of the whole accident compensation scheme has also increased to such an extent that fears have been expressed as to the ability of the scheme to meet its commitments and the scheme is presently under complete review by the Law Commission. 
The Corporation had adopted the practice of disseminating information about its operations by means of Medical Information Bulletins. It was in Medical Information Bulletin No. 10 (MIB 10) published in August 1981 that formal notification was first given of the annotation line although it had operated prior to that. The relevant parts for present purposes of MIB 10 are: 
“ … The Corporation accepts the principle of paying a ‘fee commensurate with service’. To avoid the administrative burden of having to examine all accounts in detail it will, however, from time to time, fix an annotation line in consultation with the profession. The current annotation line ($6.75 inclusive of Health Benefit) is agreed by both the Corporation and the profession as being a reasonable charge for a routine or standard physiotherapy service. 
Where the fee for the service provided is equal to or less than the annotation line, the Corporation will meet the cost of treatment without further enquiry. It is expected that the bulk of treatments, approximately 70%, will attract a charge equal to or less than the annotation line. Therefore, the Corporation expects that only 30% of fees submitted by physiotherapists will require annotation to ensure that the charges submitted are reasonable by New Zealand standards. …  
During discussion with the profession, the Corporation proposed that a 15-minute treatment by a physiotherapist on a one-to-one basis would attract a fee up to the annotation line. Where, however, the nature of the treatment provided or the time spent in giving treatment on a one-to-one basis, would justify a higher fee, suitable annotation will be required. …  
In the majority of instances, services will be of a routine or standard nature and the cost will be at or below the annotation level so no annotation will be necessary. Nor is annotation necessary for specialist services charged at less than $6.75. 
Annotation will be required in every case where the total treatment charge exceeds $6.75 (inclusive of Health Benefit). It may be that more than 15 minutes of the physiotherapist's personal time has been spent in treating the patient or that a service of a specialist nature has been provided. There is ample scope to claim a fee commensurate with the service given provided that the charge made is reasonable by New Zealand standards and that the annotation clearly indicates what treatment has been given. However, there is no justification for claiming higher than the annotation level for routine or standard services. …  
The Corporation has given an undertaking to the profession that the annotation line will be reviewed on a regular basis, at least annually. It accepts that a regular review of such an administrative device is essential if it is to operate effectively. …  ”
The matters of significance in this bulletin are: 
The basic feature was to be a set fee for a routine or standard service. 
The routine or standard service was to be a 15-minute treatment on a one-to-one basis. 
Any claim for a fee up to the set fee (or annotation line) for a routine or standard service would be met without further enquiry. 
Any fee claimed in excess of the annotation line required to be justified by an annotation describing the treatment given. 
Where there was appropriate annotation and the fee charged was reasonable by New Zealand standards it would be met. 
The annotation line would be reviewed on a regular basis. 
This arrangement was accepted by health care providers (and in particular by the physiotherapists) and no complaint is made about it as an administrative device. Until August 1985 the annotation line was reviewed and increased fairly regularly. Although the Corporation insists that the increases in the line made over that period were unrelated to inflation it happens that they bear a fairly close approximation to the figures for inflation. Until 1985 fees charged which were above the annotation line and appropriately annotated were given individual consideration and generally approved for payment. 
In August 1985 the way in which the system was operated was changed. This change was promulgated in Medical Information Bulletin No. 46 (MIB 46). This stated that the physiotherapists' annotation line was increased to $11.50 as from 1 August 1985 and that this annotation line would meet approximately 95% of fees charged throughout New Zealand for normal or routine services. Those parts of MIB 46 of particular relevance are: 
“ … In the majority of instances, physiotherapy services will be of a routine or standard nature, and the cost will be at or below the annotation level. 
Fees which do not exceed the annotation line will be accepted without annotation as being reasonable by New Zealand standards. 
A study of claims submitted to the Corporation shows that as many as 97% of treatments are no more than normal or routine. However, practitioners continue to annotate their claims with an apparent view to obtaining a higher fee notwithstanding that the service was of a routine nature and contained no special features. 
The use of annotations to try to persuade the Corporation to pay a higher fee for a normal standard service, is a misuse of the system. In such cases, the Corporation will pay only the annotation line fee for such a consultation. …  
If a physiotherapist provides a service which is out of the ordinary or additional to what is normal or routine, and considers that a fee higher than the annotation line is appropriate, details of the service rendered should be supplied to permit the Corporation to assess whether the fee is commensurate with the service and reasonable by New Zealand standards. 
more than one distinct pathology has been identified, or 
emergency out-of-hours physiotherapy is required, or 
domiciliary physiotherapy services have to be provided, 
the referring doctor should indicate that special feature in the body of his referral if an enhanced fee is to be met by the Corporation. Other certification may be acceptable to the Corporation. The Corporation will pay an enhanced fee in such cases. …  ”
The changes which the bulletin introduced were accordingly: 
The insistence that the large majority of services were to be regarded as routine or standard. 
The limitation of fees above the annotation line to three stated categories, namely, multiple pathologies, emergency out-of-hours treatment, and domiciliary services. 
There can be little doubt that these changes were designed to try and curb an increasing burden on the Corporation and it is acknowledged, on behalf of the Corporation, that the decision made in MIB 46 was, in part at least, a cost containment measure. 
The present proceeding arises out of the fact that the annotation line fixed by MIB 46 has remained unchanged ever since and that, with isolated exceptions, every claim for a fee charged above the annotation line (other than in the three stated categories) has been refused. In particular, the Corporation has refused to recognise that there are any specialist services in a physiotherapist's practice. The plaintiff Society says that certain services such as manipulative therapy and hand therapy require extra training and skill and ought to be rewarded by payments above the annotation line. The Corporation's attitude, as expressed by its Deputy Managing Director, Mr Morel, was that it is the general medical practitioner who determines the type of physiotherapy required and that all physiotherapy treatment is to be regarded as at a single level of skill. 
The only further change which has occurred was in Medical Information Bulletin No. 57 (MIB 57) published in April 1987 in which it was accepted that a charge could be made for a higher fee where extra time had been involved, but there was introduced a requirement that any annotation must be in the form of a detailed letter, an example of which was set out. Previously the annotation had been in the form of a note written on the claim form. It seems that many of these were difficult to decipher and lacking in sufficient detail. Strong exception has been taken by the physiotherapists to the requirement for a formal letter as it is said that this imposes an unreasonable burden on an already busy practitioner. This is not a matter requiring review by this Court. In essence, however, the plaintiff Society claims that the failure to increase the annotation line and the refusal to consider or approve virtually any fee above the line except for the three stated categories, and now for extra time, amounts to a failure by the Corporation of its statutory duty and so is reviewable. 
A substantial number of affidavits of practising physiotherapists have been filed in order to show the effect on them of the matters complained of and the general level of fees now being charged. The result of the annotation line not being increased has been that physiotherapists have increased their fees but have had to recover from the injured persons the balance above what the Corporation will pay. This process of surcharging is again something to which the physiotherapists object since the resentment which is expressed by the patients is directed against the physiotherapists rather than against the Corporation. 
Many attempts have been made to persuade the Corporation to increase the annotation line. In February 1986 the Corporation undertook, as an interim measure, to increase the line by $1. This was evidently as a result of reports by its Chief Medical Adviser recommending an increase. The promised increase was not, however, made. In October 1986 the Corporation's Board approved an increase of 15% in the annotation line. This was never implemented and the plaintiff's case is that the decision was reversed under pressure from Treasury. 
The application for review is brought also upon a second and separate ground. This relates to the refusal of the Corporation to reimburse to certain physiotherapists the cost incurred by them in the use of Silicon Gel and Silicon Oil. These are materials used by only a small number of physiotherapists. They are used for the treatment of hand injuries, particularly open wounds, burns and scars following plastic surgery. The materials are expensive. Silicon Gel at present costs about $114 per dozen sheets. A separate sheet is used for each patient and lasts that patient approximately two weeks. It is not reusable. Silicon Oil costs about $90 per container. Each container has sufficient oil to treat three patients. It can only be reused if sterilised in a steriliser which costs about $16,900. 
The Corporation has been asked to meet the costs of these materials but in two separate decisions made on 11 April and 19 May 1986 respectively it declined to do so. No reasons were given for that decision but the evidence of Mr Morel was that the decisions were made mainly on the advice of the Corporation's Consultant Physiotherapist, Mr Stokes. The latter's evidence was that he had advised against payment for these materials. In the case of Silicon Oil he considered it was used bit by bit and could be reused if sterilised. He acknowledged that Silicon Gel could not be reused. It was his view that if a physiotherapist chose to use these materials then they should be regarded as a normal practice expense. The Corporation has been prepared to reimburse physiotherapists and other health care providers for their more major items of expenditure but not for minor ones such as bandaids, cotton buds and the like. It is very difficult to understand what reasoning there may be behind the decisions of the Corporation as to Silicon Gel and Oil. In guidelines issued by the Corporation to its staff to be given effect as from 1 August 1985 there appears this passage: 
“Supportive Materials 
Supportive materials needed as treatment (e.g. collars, braces, strapping) should be described by way of annotation and will be refunded at cost price. Minor items such as bandaids, liniments and jellies are not claimable in this way, but are considered as being covered by the treatment fee. ”
It is the plaintiff's case that the Corporation has failed to apply these guidelines in the case of Silicon Gel and Oil. 
In answer to the plaintiff on both grounds of its claim, the Corporation contends that it has acted correctly and within the scope of its duty under the Act. The Corporation has contended also that, in any event, s 101 (4) of the Act prevents the Court from reviewing the individual fees decisions which have been made. 
There are six separate issues for determination, namely: 
The extent of the Corporation's duty under s 75. 
Whether the Corporation has been in breach of that duty. 
Whether the decision of 1 August 1985 was bad. 
Whether the decisions as to Silcon Gel and Oil were in breach of the Corporation's duty. 
Whether s 101 (4) prevents the Court from reviewing the individual fees decisions. 
The relief, if any, which should be granted. 
I deal with these matters in turn. 
It should be mentioned at the outset that the words “subject to any regulations made under this Act” which appear in both subss (1) and (6) have no bearing on the matters now in issue. This was accepted by both counsel and I make no further reference to them. 
There are two main questions which require determination — 
Whether the present issue depends primarily upon the application of subs (1) or subs (6) of s 75. 
The interpretation to be given to the words “reasonable by New Zealand standards”
(a) Subsection (1) or (6) 
This question is at the very heart of the differing submissions of the parties. For the plaintiff it is said that the matter is governed by subs (1) which creates the primary duty to pay. For the Corporation the submission is that once the physiotherapist chooses to take advantage of the bulk billing provisions of subs (6) then that subsection is determinative of the basis of payment. I do not think that submission is correct. 
There can, I consider, be no doubt that the primary obligation to pay arises under subs (1). This is the provision which, so far as the cost of medical treatment is concerned, encapsulates the accident compensation scheme. In my view, when construing this statute it is necessary at all times to bear in mind the purpose for which it was passed. It was to provide, in substitution for previously existing rights to claim damages or workers' compensation, an obligation on the State (as represented by the Corporation) to compensate those injured on a comprehensive basis and without reference to fault. It was, as I have understood it, a form of statutory insurance. I regard it as wrong to approach an interpretation of the Act upon the basis that Parliament may have intended to provide that substituted measure only to the extent that the Corporation's current resources permitted. It is, I think, basic to the legislation that Parliament has imposed upon the Minister the duty of providing, by means of levies, the necessary resources and has left it to the Corporation to administer those resources. I will return more specifically to this theme later. 
Mr Upton's submission was that, while subs (1) may create a primary duty, it was a provision expressly designed to compensate the individual person seeking reimbursement of medical charges, and that once the so-called bulk billing provisions of subs (6) were invoked then the matter of payment was to be determined solely by reference to that subsection. The way Mr Upton put it was that when a physiotherapist sends in a bulk billing statement that acts as a trigger. On receipt of the statement by the Corporation the person claiming, that is, the physiotherapist, is locked into s 75 (6) which the Corporation is then entitled to use as a code. I do not think that is correct. 
It was accepted by both counsel that the primary duty on the Corporation to pay arose under subs (1). Indeed, in the 1972 Act this was the only provision creating that duty. It was only later that subsection (6) was added and I am satisfied that it was added as a matter of administrative convenience because of the sheer size of the task which had become involved. Whatever the reason for it. I am unable to conclude that the enactment of subs (6) altered in any way the primary duty. Mr Upton argued that the use of subs (6) may have had some disadvantages for the physiotherapist but it also had advantages and that if the physiotherapist elected to use subs (6) then he or she had to accept the consequences which flowed from that. As Mr Upton put it, “The choice is their's, either to use subs (1) with individual considerations and decisions on each account, or to use subs (6).” That seems to me to start from a false premise. The choice is not that of the physiotherapist at all. The physiotherapist may initiate the procedure by tendering a bulk statement, but the subsection is clear that upon receipt of such a statement in approved form the Corporation may pay the amount so claimed or a lesser amount. Plainly the physiotherapist has no right to require that payment be made on the basis of a bulk statement. This means, I think, that the primary obligation remains under subs (1). This view is consistent with the fact that the right to receive payment is at all times that of the injured person. Nowhere in the Act does it purport to confer a right to compensation on the health care provider. The Act contemplates that the health care provider will be expected to make a charge against the patient and then provides a means by which the patient may be compensated in respect of that charge. To the extent that this process can be the more readily and quickly achieved by bulk billing the provisions of subs (6) have been made available. 
One might hesitate to take that view if it could be seen that different criteria for determining the amount of payment had been contained in the two subsections, but I do not think that is the case. Under subs (1) the amount which “shall” be paid is the cost of the treatment so far as the Corporation considers that the amount to be paid by it is reasonable by New Zealand standards. Under subs (6) the Corporation “may if it thinks fit” pay the amount claimed or so much thereof as it considers it is reasonable for it to pay by New Zealand standards. Beyond the fact that the one provision is mandatory and the other permissive I do not see any real difference between the two provisions. In each case the amount is to be that which the Corporation considers reasonable by New Zealand standards. The reason for the difference between the mandatory and the permissive is, I think, simply a recognition of the fact that the Corporation can elect whether to pay on the basis of a bulk statement or not. If it does not, then there would have to be individual consideration of each account. Nor do I think the position is any different by reason of the use of the expression “without further enquiry as to whether or not the services were required as a result of personal injury by accident.” I consider that again is an administrative convenience for the Corporation and is simply a recognition that so long as the physiotherapist has certified in terms of subs (6) (b) that the person was referred by a registered medical practitioner as a case of personal injury by accident, that certificate will be accepted. The Corporation is relieved from the responsibility of making further investigation. 
Mr Upton sought to lay stress on the expression in subs (6), “notwithstanding anything in this Act” and he submitted that this indicated that where subs (6) was used it was to be regarded as a code. Again I feel unable to agree. I think those words do no more than to relieve the Corporation from the obligation which may otherwise exist to ensure that only those covered by the Act receive benefits under it. If it had been intended to isolate subs (6) from subs (1) then I think it much more likely that the draftsman would have used some such expression as, “notwithstanding (or in lieu of) the provisions of subs (1)”
I conclude that the present proceeding is to be determined upon the basis of the interpretation to be given to subs (1) and I turn now to that. 
(b) “Reasonable by New Zealand Standards” 
This, in the end, is the matter which is determinative of the case. On behalf of the plaintiff Mr Wild's argument was that the expression “reasonable by New Zealand standards” means “reasonable by the standard of fees charged in New Zealand” or more shortly “reasonable by New Zealand fee standards” and that once it had been decided what is reasonable in that way the Corporation was under a duty to pay the whole of that amount. Mr Upton's argument to the contrary was that the amount to be paid was a matter left by the legislature for the determination of the Corporation and that in making that determination it was entitled and, indeed, obliged to take into account a number of considerations. The argument was that “by New Zealand standards” had simply been used by way of contrast to the standards which may exist in other countries and which needed to be excluded because of the provisions in the Act for payment to persons overseas. 
This argument is a novel one and it is apparent from the evidence that it has not, in the past, been the way in which the Corporation saw its duty. I have already cited from MIB 10 in which it was acknowledged, “The Corporation accepts the principle of paying a fee commensurate with service”, and from MIB 46 the statement, “Fees which do not exceed the annotation line will be accepted without annotation as being reasonable by New Zealand standards.” It seems that what has changed the Corporation's mind is the escalating cost of the scheme and the need to find some other interpretation of its obligations. No doubt it was a similar consideration which prompted the Corporation to ignore findings of the Accident Compensation Appeal Authority which were based on the proposition that the Corporation was obliged to pay a fee which was reasonable by New Zealand standards for the service provided. In a most disturbing departure from accepted practice the Corporation simply decided that those findings were wrong, and in what I feel obliged to characterise as an arrogant disregard for the Appeal Authority, refused to apply them. Notwithstanding all these things I must, of course, decide the matter of interpretation upon principle and certainly not by way of punishment of the Corporation. 
As I have already indicated Mr Upton's argument was that the words “reasonable by New Zealand standards” were merely a reflection of the fact that the scheme provided worldwide cover. Section 26 (2) (b) provides: 
“(2) Subject to this section, — 
To the extent specified in sections 30, 31, and 32 of this Act, all persons who suffer personal injury by accident outside New Zealand, — shall have cover under this Act …  ”
Section 30 provides for cover for New Zealand earners overseas and ss 31 and 32 provide for the cover of New Zealand seamen, airmen and members of the Armed Forces suffering injury outside New Zealand. It was argued accordingly that the phrase “by New Zealand standards” means that the cost of treatment is to be examined against New Zealand standards only, regardless that it may have been incurred in another country. I have to say at once that if this was the intention of Parliament then I should have thought it could readily have been expressed in far clearer terms. 
The same expression is used in s 75 (6) but that subsection appears to me to relate only to services within New Zealand. Mr Upton sought to argue that it was possible to visualise the application of subs (6) to services provided overseas. He said that the expression in subs (6) (a)“another person duly qualified to provide the services” could include someone in another country, and the reference in subs (6) (b) to referral by a registered medical practitioner could also include someone in another country. I think this is tenuous. Subsection (6) is in express terms confined to a statement “by a person in New Zealand” and it seems to me unlikely that Parliament intended to leave it to such a person to certify as to referrals and the provision of services in another country which, once certified, could be accepted without further enquiry. I feel sure that the expression “reasonable by New Zealand standards” means “reasonable by the standard of fees charged in New Zealand”

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