Workers’ Compensation · Primary-source case analysis

Kunz: A Surgery Center Must Prove Its Fee Is Reasonable

By Aneeta Mishra and Timothy Chan

Published May 13, 2026 · Updated October 18, 2026

Decision: Kunz v. Patterson Floor Covering, No. SJO 0224503 (WCAB Dec. 5, 2002) (en banc).

A surgery center billed $9,712 for a carpet installer’s knee operation. The insurer paid $1,810, and the trial judge disallowed the remaining $7,902 lien because medical necessity had not been proved. Kunz returned the dispute for a properly developed record; it did not award the billed balance. Its 2002 facility-fee discussion must also be read with later fee schedules and the clarification in Tapia. Kunz, pages 3–5, 14–15.

The lien claimant carried the burden

The center needed to establish the legal and factual basis for payment. Under the version of section 4603.2 addressed in Kunz, the billing rules required treatment provided or authorized by the properly selected treating physician, together with a documented, itemized bill and required reports or authorizations. Procedure codes described the operation but did not necessarily explain the facility’s own room, staff, equipment or recovery services. Kunz, pages 9–11.

The insurer’s failure to specify a medical-necessity objection did not waive that defense, although delayed objections could still have other consequences. Here, however, the broadly framed trial issues and lack of an earlier specific objection had left the center reasonably unprepared to address necessity. The Board gave it an opportunity to supply that proof on remand. That outcome was not automatic payment for an unanswered bill. Kunz, pages 5–9.

A bill was evidence; later clarification rejected automatic full payment

Kunz discussed a bill as an initial showing of the amounts normally accepted in the absence of persuasive contrary evidence. But usual payment and reasonable value were not identical questions. The Board warned that neither the center’s own accepted fee nor an inpatient comparison necessarily determined the reasonable fee for the outpatient service. Kunz, pages 13–14.

The later en banc decision Tapia v. Skill Master Staffing (2008), pages 5–10, made the limit explicit: Billing alone did not prove reasonableness, and a facially unreasonable bill did not have to be allowed in full even without rebuttal evidence. Do not read isolated language in Kunz as shifting the ultimate burden to the insurer or requiring an automatic award.

Fee-schedule coverage depended on the service

For the 2001 surgery at issue, physician services were subject to the official fee schedule even when provided at an outpatient facility; the facility fee was generally outside that schedule. Kunz, pages 11–13. That historical distinction is not a current exemption for every surgery-center bill.

The present outpatient hospital and ambulatory surgical center rule, section 9789.32(a)–(d), applies fee-schedule rules according to the service and its date. It covers qualifying facility services and directs providers to other applicable parts of the official schedule for specified goods and professional services outside that particular facility schedule. Identify the actual service, provider and service date before treating a bill as an open-market reasonable-value dispute.

Reasonableness could be shown with market evidence

Kunz identified payments actually accepted—not simply prices listed on an invoice—as useful evidence. Those comparisons could include the center’s own negotiated non-workers’ compensation rates and amounts accepted by other inpatient or outpatient providers in the same area. They still needed to be relevant to the services being valued. Kunz, pages 13–14.

For this record, the immediate task was to establish necessity, document what the center itself supplied and then support the amount claimed. A stack of operation codes could not answer all three questions. The Board rescinded the trial decision and returned the matter for further proceedings; it did not select a final reasonable fee. Kunz, pages 9–11, 14–15.

Key takeaways

• Obtain evidence of accepted fees, not merely billed charges.
• Identify which services fall within the official fee schedule.
• Check the documented authorization and billing prerequisites applicable to the service date.
• Build a record that supports or rebuts the claimed facility amount.