Pa. court allows civil suit for unpaid workers’ comp benefits
Can a healthcare provider can pursue a claim against an insurer for unpaid medical bills for injured workers receiving workers’ comp benefits?
A recent Pennsylvania court case examined whether a medical provider would be allowed to pursue a civil suit against an insurer for unpaid workers’ compensation benefits.
In Elite Care RX v. Premier Comp Solutions, No. 25 WAP 2023, the Pennsylvania Supreme Court was asked to address where a health care provider can pursue a claim against an insurer for unpaid medical bills incurred by injured workers receiving workers’ compensation benefits. Must a provider go through the administrative processes of Pennsylvania’s Workers’ Compensation Act (the act), or could it pursue a civil lawsuit?
The court was evenly divided on whether the Pennsylvania Superior Court’s ruling that a civil lawsuit was the appropriate path should be affirmed. Thus, the Superior Court’s ruling was left intact via a one-sentence per curiam order.
(Justice Daniel McCaffery did not take part in the consideration or decision of the matter, which left six justices to decide the case.)
By affirming the Superior Court’s ruling, the Pennsylvania Supreme Court has opened the door for medical providers and other players in the commonwealth’s workers’ compensation system to go outside that system to hold employers and insurers accountable when they violate Pennsylvania law and their contractual obligations by not paying for injured workers’ covered medical expenses or their lost wages.
A primer on fee disputes under the act
When a disagreement arises over payment of a workers’ compensation claimant’s medical expenses under the act, which includes medication and medical supplies, there are three ways to litigate the dispute.
First, a utilization review allows employers and insurers to challenge the reasonableness or necessity of a billed treatment, or health care providers to secure pre-approval from an insurer for a medical treatment.
Second, penalty petitions allow a claimant to challenge what they argue is their employer’s failure to satisfy its obligations under the Act to pay necessary medical expenses.
The third way, which was at issue in Elite Care RX, is the fee review process. This process, governed by Subsection 306(f.1)(5) of the act, allows health care providers to challenge the amount or timeliness of payments from insurers for a particular treatment. They must file a fee review application within 30 days of receiving notification of a disputed treatment or 90 days following the original billing date of that treatment.
The commonwealth’s Bureau of Workers’ Compensation (the bureau) initially reviews fee review applications, but either party can request a new hearing before a special fee review hearing officer. The hearing officer’s decision can then be appealed to the Pennsylvania Commonwealth Court. The fee review process is a straightforward process with limited scope, focusing solely on the amount and timeliness of payment.
Pre-’Elite Care RX’ case law regarding fee reviews
The existing case law before the Elite Care RX decision was marked by a series of three Commonwealth Court rulings in the 2010s that complicated fee review jurisprudence. The court held in its rulings that the Bureau and its fee review hearing officers lacked jurisdiction to consider whether an entity is a healthcare provider under the act—a threshold issue. These holdings appeared to conflict with the Pennsylvania General Assembly’s intent when it created the fee review process.
In 2019, the Commonwealth Court in Armour Pharmacy v. Bureau of Workers’ Compensation. Fee Review Hearing Office, 206 A.3d 660, overturned this line of fee review precedent. The court held that when an employer challenges a fee determination because the treatment was not rendered by a “provider” as that term is defined in the act, that question must be decided through a fee review. The court added that its holding did not expand the scope of fee reviews beyond the timeliness and amounts of payments to providers.
The ‘Elite Care RX’ case
The Elite Care RX case was a dispute between insurers and Elite Care, RX, LLC, a billing agent for some of the medical providers who purchased claims from Patient Direct RX, a home delivery pharmacy. When Patient Direct fills an injured worker’s prescription, it sells to the treating physician who wrote the prescription the right to bill the appropriate workers’ compensation insurer for the medication. Insurers denied payment for 110 different injured employees’ medications submitted through Elite Care RX’s invoices, resulting in almost $550,000 in unpaid prescriptions.
The insurers took the position that Elite Care RX is not a provider under the act. In response, Elite Care RX brought several fee-review proceedings, prevailing in many of them. The insurers appealed some of those, arguing the bureau lacked jurisdiction to determine Elite Care RX’s status as a provider (despite the Commonwealth Court’s 2019 ruling in Armour Pharmacy). Several hearing officers agreed.
Elite Care RX did not appeal the adverse decisions to the Commonwealth Court as provided in the act. Instead, it filed a civil lawsuit against the insurers alleging fraud, civil conspiracy, and unjust enrichment, and also sought a declaratory judgment that it is a provider under the act. The insurers, despite their earlier arguments during the fee-review proceedings, filed preliminary objections claiming the trial court lacked subject-matter jurisdiction to hear the dispute because the Act provided the exclusive remedy for such disputes.
The trial court overruled these objections. A Superior Court panel unanimously affirmed the trial court. After the insurer successfully petitioned the Superior Court for an en banc review, the en banc court affirmed the trial court as well. The en banc court provided three rationales: Elite Care RX’s common-law causes of action predated the act, nothing in the act grants the bureau jurisdiction over Elite Care RX’s tort claims, and the court did not follow Armour Pharmacy because it determined the Commonwealth Court “legislated from the bench” and “manufactured” an “administrative proceeding for a putative provider to seek redress within the bureau.”
The Pennsylvania Supreme Court’s one sentence per curiam order in the case simply stated that “the court being evenly divided, the order of the Superior Court is affirmed.” Justices David Wecht and Kevin Dougherty each wrote additional opinions.
Writing in support of reversing the Superior Court, Wecht held that “the decision below plainly conflicts with the act’s exclusive remedy provision, which this court has held ‘extends to the workers’ compensation insurance carrier, protecting the insurer to the full extent of the employer’s protection.’” He added that because the act provides employers/insurers’ obligations to pay claimants’ medical expenses in the first place, the act and the system it created “is the exclusive forum for resolving both payment disputes and alleged mismanagement of workers’ compensation claims.”
Wecht dismissed each of the Superior Court’s three bases for its decision, and endorsed Armour Pharmacy’s holding that the bureau has jurisdiction to decide provider status and that the act does not explicitly preclude the bureau from deciding the threshold issue of an applicant’s provider status. Thus, he held that the Superior Court misinterpreted Subsection 306(f.1)(5) of the act, that Elite Care RX’s sole remedy lies in the administrative realm, and that he would reverse the Superior Court’s decision.
Dougherty, in his opinion in support of affirmance, agreed that the Superior Court misinterpreted Subsection 306(f.1)(5) of the act. But he would have affirmed the Superior Court’s decision and allowed Elite Care RX’s civil action based on the doctrine of judicial estoppel.
Dougherty focused on the actions of the insurers throughout the dispute. A representative of the insurers advised Elite Care RX to file an application for fee review with the bureau if it disagreed with the insurers’ position that it was not a provider. When Elite Care RX did, the insurers then appealed the decisions favoring Elite Care RX to hearing officers, arguing the fee review process lacked jurisdiction over this question. When hearing officers ruled against Elite Care RX and advised it that it may wish to pursue other remedies outside of the fee review process, Elite Care RX did so by filing a civil action. Yet, the insurers filed preliminary objections alleging the trial court lacked subject-matter jurisdiction because Elite Care RX was required to go through the commonwealth’s workers’ compensation system to receive payment.
Dougherty held that judicial estoppel barred the insurers from advancing their lack-of-jurisdiction argument before the Pennsylvania Supreme Court because they assumed inconsistent positions throughout the litigation. Finding it “apparent that the insurers continuously changed course only to avoid liability, … rather than reward them for their gamesmanship, I would … hold they are judicially estopped from challenging the trial court’s jurisdiction over Elite Care RX’s civil action.”
Affirmance opens courthouse doors to players in the Commonwealth’s worker’s compensation system
Even though half of the justices hearing the case believed the act’s fee review process is the appropriate venue for the insurers to challenge whether Elite Care RX is actually a “provider” under the act, the affirmance of the Superior Court’s decision that Elite Care RX could pursue its civil lawsuit against the insurers presumably opens a new avenue through which players in the commonwealth’s workers’ compensation system can pursue common-law torts against employers and insurers in connection with their misdeeds.
Besides medical providers like Elite Care RX taking insurers to court, injured workers and claimants may also be able to do so when they do not receive the benefits due to them under the act and as ordered by a workers’ compensation judge, the Workers’ Compensation Appeals Board or a civil judge. This means that the gamesmanship that insurers often engage in, as Dougherty noted happened in this case, could come back to haunt them. This would include the many times we at Pond Lehocky Giordano have seen insurers talk out of both sides of their mouths and have unclean hands in situations where they claim another party is at fault.
This additional avenue for relief could even extend to liens under Section 319 of the act, which requires claimants to reimburse insurers for workers’ compensation benefits under some circumstances when they’ve settled a claim regarding a third party’s conduct that led to their injury. When insurers act in ways that prejudice a claimant’s attempt to settle a third-party claim or satisfy a lien, they could be liable for a common-law tort.
Given that the ink on this decision is barely dry, we will have to wait and see how hearing officers, the Commonwealth Court, and the Superior Court will interpret and apply this decision. But it certainly seems as though players in the commonwealth’s workers’ compensation system have a path outside that system to bring common-law tort claims against employers and insurers who shirk their legal and contractual obligations regarding payment of workers’ compensation benefits.
It would surprise no one in the commonwealth’s workers’ compensation claimants’ bar if employers’ and insurers’ bad faith behavior costs them dearly when that behavior gives rise to civil claims that could get tried to juries.
Samuel H. Pond is the managing partner of Pond Lehocky Giordano LLP, the largest workers’ compensation and social security disability law firm in Pennsylvania, and one of the largest in the U.S. He can be reached at spond@pondlehocky.com. Opinions are the author’s own.