Does the Pennsylvania Workers’ Compensation Act’s exclusivity provision divest a trial court of jurisdiction over causes of actions where the parties to a lawsuit are an employer’s insurers and a provider’s billing agent?
Elite Care RX, LLC v. Premier Comp Solutions, LLC, 296 A.3d 29 (Pa. Super. 2023), allocatur granted Oct. 24, 2023, appeal docket 25 WAP 2023
In this case, the Supreme Court will consider the “exclusivity provision” of the Pennsylvania Workers’ Compensation Act (WCA), which provides:
The liability of an employer under [the WCA] shall be exclusive and in place of any and all other liability to such employes, his legal representative, husband or wife, parents, dependents, next of kin or anyone otherwise entitled to damages in any action at law or otherwise on account of any injury or death as defined in section 301(c)(1) and (2) or occupational disease as defined in section 108.
77 P.S. § 481(a).
Elite Care RX, LLC (Elite), a billing agent for licensed healthcare providers filed suit against workers’ compensation insurers, Premier Comp Solutions, LLC; Laundry Owners’ Mutual Liability Insurance Association; Lackawanna Casualty Company; and Brick Street Mutual Insurance Company (Insurers), for declaratory relief, fraud, civil conspiracy, and unjust enrichment based on Insurers refusal to pay providers for prescriptions received by covered employees. Insurers filed preliminary objections arguing, inter alia, that the trial court lacks subject-matter jurisdiction because Section 481 of the WCA provides the Bureau of Workers’ Compensation with exclusive jurisdiction over Elite’s suit, because the prescriptions at issue treat work-related injuries covered by the Act. Superior Court summarized the factual and procedural background as follows:
According to Elite Care, Insurers offer workers’ compensation insurance to employers to cover the costs of treatment and medication under the Workers’ Compensation Act for employees who suffer work-related injuries. Complaint at ¶8. The employees may choose to fill their prescriptions to treat these injuries through Patient Direct Rx, a home-delivery pharmacy. Id. at ¶12. After Patient Direct Rx fills the prescriptions, certain licensed health care providers (“Providers”) purchase the claims arising from these prescriptions (i.e., the right to bill and collect from the insurance carrier) from Patient Rx for fair-market value. Id. at ¶14. The Providers are then legally entitled to collect payment for the prescriptions from the insurance carrier and bear the risk of collection. Elite Care (a separate entity) serves as billing agent for the Providers and ensures their accounts receivable are properly paid. Id. at ¶16.
Elite Care avers that it has implemented this practice of collecting on behalf of healthcare providers throughout the country, without issue or objection by other insurers. Id. at ¶18. Even within Pennsylvania, all insurance companies (other than Insurers) reimburse Elite Care the price of employees’ prescriptions without objection. Id. at ¶19. As such, Elite Care claims that Insurers are intentionally and wrongfully refusing to pay for prescriptions that the covered employees have received and for which payment is due. Id. at ¶21. Elite Care contends that, when this lawsuit began, Insurers owed $548,035.28 in prescription fees for 110 different employees and that figure continues to accrue as more bills are being improperly denied. Id. at ¶ 38.
After negotiations stalled, Insurers indicated that Elite Care’s “exclusive remedy” was through an Application for Fee Review in the Pennsylvania Bureau of Workers’ Compensation (“Bureau”). Id. at ¶ 29. Hence, Elite Care filed an Application for Fee Review before the Bureau’s Medical Fee Review Section. When the Medical Fee Review Section began ruling in favor of Elite Care, Insurers appealed those rulings “to a [Fee Review] Hearing Officer and argued that the Fee Review [Section] lacked jurisdiction over this issue of whether Elite Care was an agent of these providers.” Id. at ¶ 32. The Hearing Officer issued opinions and orders holding that the Fee Review Section lacked subject-matter jurisdiction and advised “that Elite Care may wish to pursue other remedies, which may be available outside of the fee-review process.” Id. at ¶ 33.
Based on the administrative adjudication that the Medical Fee Review Section lacked subject-matter jurisdiction, Elite Care filed the instant civil action. Elite Care’s complaint included counts of declaratory judgment, fraud, civil conspiracy, and unjust enrichment.
In response, Insurers filed various preliminary objections, one of which alleged the trial court lacked subject-matter jurisdiction over the legal issues raised in the complaint. Following oral argument, the trial court overruled Insurers’ preliminary objections. Regarding subject-matter jurisdiction, the court determined this case was not a workers’ compensation matter, but rather a claim for damages based on allegations of conspiracy and fraud. The trial court refused to certify its order for an immediate appeal, and Insurers filed a timely Petition for Permission to Appeal.
On October 30, 2020, this Court granted review of the following issue:
Because the issues raised by the complaint … have, as their ultimate basis, injuries compensable under the act, must they be decided by a workers’ compensation judge or a fee-review Hearing Officer and not by the court of common pleas?
Insurers’ Brief at 7 (capitalization removed).
Slip op. at 2-6. A three-judge panel of Superior Court unanimously affirmed the trial court’s decision that the trial court had jurisdiction over the action. Thereafter, upon petition of the Insurers, Superior Court granted en banc review.
Superior Court held that the Worker’s Compensation Act does not divest trial courts of that jurisdiction over causes of actions where, as here, the parties to a lawsuit are an employer’s insurers and a provider’s billing agent. Superior Court reasoned that the Act does not provide for an administrative proceeding by or against putative healthcare providers to workers’ compensation claimants or their billing agents in the Bureau of Workers’ Compensation. Thus, Superior Court concluded that the Act does not divest a trial court of subject-matter jurisdiction over Elite’s suit because, entities such as billing agents like Elite and its healthcare provider clients had no standing before the Bureau because the WCA did not confer it upon them. Addressing the en banc decision of Commonwealth Court in Armour Pharmacy v. Bureau of Workers’ Comp. Fee Rev. Hearing Office, 206 A.3d 660, 666 (Pa. Cmwlth. 2019) (en banc) (concluding that claims made by a pharmacy were within the exclusive jurisdiction of the Bureau under the WCA), the majority decision reasoned Commonwealth Court created jurisdiction where the Act had not:
In its administrative scheme, the WCA provides a remedy for employees with unpaid claims to seek recourse before a Worker’s Compensation Judge. A claimant can file a petition to establish an insurer’s liability to a billing agent, such as a review petition or a penalty petition. See Armour Pharmacy v. Bureau of Workers’ Comp. Fee Rev. Hearing Office, 206 A.3d 660, 666 (Pa. Cmwlth. 2019) (en banc). Indeed, the court in Armour Pharmacy stated, “claimants have an incentive to file a petition on behalf of a provider, because when an insurer violates the WCA by failing to make proper payment to a medical provider, the penalty is payable to the claimant.” Id. (citing Selective Insurance Co. of Am. v. Bureau of Workers’ Comp. Fee Rev. Hearing Office, 86 A.3d 300 (Pa. Cmwlth. 2014)). However, regarding putative providers and billing agents (like Elite Care), the Armour Pharmacy Court found an “absence of a direct statutory remedy” for such entities. Id.
In Armour Pharmacy, an employer challenged the authority of the Fee Review Section to award reimbursement to the pharmacy on the grounds that it was not a “provider” under the WCA. The employer further challenged the jurisdiction of the Hearing Officer to determine whether the pharmacy was a provider. Based on Selective Insurance, supra, the Hearing Office ruled that it lacked jurisdiction over the legal issue of whether the pharmacy was a provider and dismissed the pharmacy’s fee-review petitions. The pharmacy petitioned for review of that determination before the Commonwealth Court and argued that its due process rights would be denied if the Bureau did not adjudicate its status as provider under the WCA. The pharmacy asserted that the language of the WCA did not give putative providers a procedure to adjudicate their rights. The Armour Pharmacy Court agreed.
The court also acknowledged that it could not expand the scope of a fee review to create a remedy for those entities, because enlarging the scope of the WCA is a matter “for the legislature assuming there is a need for a provider to have another remedy.” Id. Critically, the court also observed that, if a party believes “the other is effecting a fraud, it can pursue that claim in a legal action, such as a declaratory-judgment action.” Id. at 667.
Despite those acknowledgements, the Armour Pharmacy Court held that before a claim can go to fee review, a hearing officer must determine the legal issue of who is a “provider” under the WCA. “Whether an entity is a ‘provider’ has been considered a question of employer liability and, thus beyond the scope of a fee-review proceeding.” Id. at 666. The court stated that, when an “employer challenges a fee determination of the Medical Fee Review Section for the stated reason that the medical service was not rendered by a ‘provider’ within the meaning of the WCA, that threshold question must be decided by the Hearing Office.” Id. Significantly, the issue could not be decided by the Medical Fee Review Section.
Thus, although the WCA creates no administrative proceeding for a putative provider to seek redress within the Bureau, the Commonwealth Court manufactured one. That court remanded the matter to the Hearing Office for a determination of whether the billing agent was a provider within the meaning of the WCA. In doing so, the Armour Pharmacy Court created jurisdiction in the Bureau even though the legislature had not.
Respectfully, in our view, the Commonwealth Court lacked the power to graft an extra-statutory scheme onto the WCA for the benefit of the putative provider. The Supreme Court of Pennsylvania has held that, under 1 Pa.C.S.A. § 1923, courts may not add to a statute, because this “expands its application” in a manner that the legislature did not intend. Crown Castle NG E. LLC v. Pennsylvania Pub. Util. Comm’n, 660 Pa. 674, 234 A.3d 665, 682 (2020). When “the language of a statute is clear and unambiguous, a court may not add matters the legislature saw fit not to include under the guise of construction.” Mohamed v. Com., Dep’t of Transp., Bureau of Motor Vehicles, 615 Pa. 6, 40 A.3d 1186, 1194–95 (2012).
Slip op. at 7-10. As to the four specific causes of action asserted by Elite, Superior Court concluded that each fell within the courts’ (not the Bureau’s) jurisdiction:
In this case, Elite Care has asserted four causes of action. We begin with its statutory cause of action for declaratory judgment. In the Declaratory Judgment Act, the General Assembly dictates that “Courts of record, within their respective jurisdictions, shall have power to declare rights, status, and other legal relations whether or not further relief is or could be claimed.” 42 Pa.C.S.A. § 7532 (emphasis added). This statute makes no mention of the Bureau. By the plain language of Section 7532, the legislature clearly vested jurisdiction over declaratory-judgment actions in the courts of records, i.e., the courts of the common pleas and the Commonwealth Court (when sitting in its original jurisdiction).
The Declaratory Judgment Act further identifies who may file an action for relief:
Any person interested under … contract, or other writings constituting a contract, or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise, may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise, and obtain a declaration of rights, status, or other legal relations thereunder.
42 Pa.C.S.A. § 7533.
Here, Elite Care is an interested party to its contracts with various Providers. Its rights and legal relations are affected by Insurers’ actions in denying those Providers payment for the prescriptions at issue. Elite Care seeks a determination of its rights to be paid on behalf of Providers, under its contracts, as their billing agents. Thus, Elite Care is a person interested in certain contracts with the Providers, and, therefore, it may request declaratory relief under the Declaratory Judgment Act.
And, as noted, the court of common pleas is the court of record for such an action to declare rights, status, and other legal relations whether further relief is or could be claimed. 42 Pa.C.S.A. § 7532.
Slip op. at 11-12.
In concurring opinion, Judge McLaughlin, joined by Judge Murray, found it unnecessary to consider Commonwealth Court’s decision in Armour, but instead the Supreme Court’s decision in Franczyk v. The Home Depot, Inc., 292 A.3d 852 (Pa. 2023), which held that whether an injury alleged in a lawsuit is subject to the exclusivity provision of the Workers’ Compensation Act turns on whether “the asserted injury … is ‘intertwined’ inextricably with the workplace injury.” Slip op. at 2, quoting Franczyk slip op. at 8. Judge McLaughlin noted that the Court drew a contrast in Franczyk between its prior decisions in Martin v. Lancaster Battery Co., Inc., 530 Pa. 11, 606 A.2d 444 (1992), and Kuney v. PMA Insurance Co., 525 Pa. 171, 578 A.2d 1285 (1990) (“Kuney II”), reasoning that:
In Martin, an employee sustained extensive exposure to lead at his work. Martin, 606 A.2d at 448. His employer tested employees on a regular basis for lead content in their blood. Over several years, the employer willfully and intentionally withheld test results from him or gave him altered results. Id. The employer closely monitored lead levels in employees’ blood and reported the results to them so that those with elevated levels of lead could transfer to areas of work where they would not be exposed to lead. Id. The plaintiff was then diagnosed with chronic lead toxicity, lead neuropathy, and other ailments. Id. at 446. His condition would have been substantially better if his employer had not engaged in the deception. Id.
The Martin Court concluded that the claim for the aggravation of the lead toxicity was not subject to the exclusivity provision. The Court found that the claimed injury was separable from the work injury:
There is a difference between employers who tolerate workplace conditions that will result in a certain number of injuries or illnesses and those who actively mislead employees already suffering as the victims of workplace hazards. … The aggravation of the [physical] injury arises from and is related to the fraudulent misrepresentation of the employer.
Id. at 448. As the Supreme Court explained in Franczyk, the lawsuit was permissible in Martin because “the employee was not seeking compensation for the initial exposure but rather for the distinct (and preventable) aggravation of the original injury—an injury unto itself.” Franczyk, 2023 WL 2992700, at *7.
In Kuney II, however, the Court did not find the injuries separable. There, the Court framed the issue before it as whether the employer’s immunity under the WCA protects its workers’ compensation insurer if it allegedly “engaged in fraud and deceit to deprive an injured employee of his workers’ compensation benefits.” Kuney II, 578 A.2d at 1285. The employee there had sued the employer’s insurer for bad faith, claiming he had emotional distress injuries allegedly distinct from his workplace injury. See Franczyk, 2023 WL 2992700, at *8 n.50. The Court pointed out that the WCA provides a remedy of 10% interest for due and unpaid compensation. Id. at 1286. Because the employee’s claim boiled down to an allegation that “the insurance company wrongfully delayed his receipt of compensation benefits,” the Court concluded that “the employee was limited to the remedies provided within the framework of the” WCA. Id. at 1287, 1288.
The Court in Franczyk also cited this Court’s decision in Santiago v. Pennsylvania National Mutual Casualty Insurance Co., 418 Pa.Super. 178, 613 A.2d 1235 (1992). There, this Court relied on Kuney II to hold that the WCA’s exclusivity provision barred an employee’s suit for an insurer’s bad faith in settlement negotiations, as “completely intertwined with the original injury.” Id. at 1243.
The Franczyk Court synthesized these cases and concluded that the employee’s “asserted injury” there was likewise “ ‘intertwined’ inextricably with the workplace injury.” Franczyk, 2023 WL 2992700, at *8. The Court explained that allowing the suit would necessitate a “trial within a trial” of the underlying claim against the dog owner, in effect requiring the employer defendants “to litigate precisely the sort of claim that the WCA is supposed to prevent.” Id. The Court added that the trial court would also likely have to consider the effect of the employer’s subrogation right on any recovery in the underlying suit, as well as whether to reduce accordingly any verdict against the employer. Id. The Court acknowledged Martin, which it said “arguably softened” Kuney II’s holding. Id. at *8 n.50. The Franczyk Court to pains to clarify, however, that it did not “aim to abrogate Martin,” adding that it did “not presume to anticipate or foreclose claims arising in future cases that an appellate court finds more like Martin than Kuney II or this case.” Id.
Concurring slip op. at 2-5. Based on the Supreme Court’s analysis, the concurring opinion concluded that:
… this case is “more like Martin than Kuney II.” The injuries here are “truly separable” because in this case we are faced with a lawsuit between strangers to the employment relationship for fraudulent conduct to evade payment of bills. Elite Care has sued for Appellants’ failure to pay for medications that patients/employees undisputedly received, by alleged use of a fraudulent scheme. The suit is not for the unpaid bills themselves, “but rather for the distinct (and preventable) aggravation of the original injury”—the alleged fraudulent scheme to avoid paying the bills.
Furthermore, Franczyk’s concerns about the employer becoming embroiled in the sort of litigation the exclusivity provision seeks to prevent will not occur here. No “trial within a trial” will be necessary, the insurer’s subrogation rights will not come into play, and nothing will draw the employer into the litigation.
Concurring slip op. at 5.
Dissenting, Judge Olson explained she would vacate the trial court’s order and hold that Plaintiff’s civil action is barred by the WCA, reasoning that:
…Plaintiff’s claims all seek payment for treatment that was provided under the WCA or compensation for damages caused by Appellants’ alleged intentional mishandling of workers’ compensation claims, both of which occurred while Appellants acted within their roles as workers’ compensation insurers under the WCA. As stated above, the WCA establishes the exclusive forum for resolution of both payment disputes and alleged mismanagement of workers’ compensation claims. See, e.g., 77 P.S. § 531(1)(i) (“[t]he employer shall provide payment in accordance with this section for reasonable surgical and medical services, services rendered by physicians or other health care providers”); Kuney, 578 A.2d at 1288 (“[t]he exclusivity provisions of the [WCA] prohibit a tort action against the insurance carrier for damages caused by the insurer’s allegedly intentional mishandling of the injured employee’s compensation claim”). As such, Plaintiff is bound by the exclusive remedies of the WCA and Appellants enjoy statutory immunity from Plaintiff’s current action before the court of common pleas.
Dissent slip op. at 6. Expressing “no opinion on whether Armour I was correctly or incorrectly decided,” Judge Olson concluded:
…regardless of whether Armour I was correctly decided, the issue of whether Plaintiff is a provider entitled to relief under the WCA can always be decided, under the WCA, by a workers’ compensation judge. Indeed, as the Commonwealth Court explained:
[A c]laimant can file a petition to establish [the i]nsurer’s liability to [a putative provider], such as a review petition or a penalty petition. … Claimants have an incentive to file a petition on behalf of a provider because when an insurer violates the [WCA] by failing to make proper payment to a medical provider, the penalty is payable to the claimant [as a statutory incentive]. The absence of a direct statutory remedy for providers does not mean that [an appellate court] may expand the scope of a fee review to create a remedy. The matter is one for the legislature, assuming there is a need for a provider to have another remedy.
Selective Ins. Co. of Am. v. Bureau of Workers’ Comp. Fee Review Hearing Office (The Physical Therapy Institute), 86 A.3d 300, 305 n.9 (Pa. Cmwlth. 2014) (citations omitted), overruled, in part, by Armour I; see also Armour I, 206 A.3d at 672 (“Our holding does not limit the determination of the status of a ‘provider’ to a fee review proceeding. In appropriate cases, this question may also be determined by a workers’ compensation judge in the course of a claim or penalty petition proceeding”).
Further, and more to the point, even if the determination of whether an entity is a “provider” is beyond the scope of the fee review process, this holding would not diminish Appellants’ statutory immunity from Plaintiff’s tort action, where Plaintiff’s claims either seek payment for treatment that was provided under the WCA or compensation for damages caused by the insurer’s alleged intentional mishandling of the workers’ compensation claim. As explained above, the WCA provides the exclusive forum for resolving both types of disputes and, thus, Plaintiff’s current action is barred by the WCA.
Dissent slip op. at 7-9.
The Pennsylvania Supreme Court will consider:
Can a purported medical provider seeking payment for prescription medication in accordance with the provision of the Pennsylvania Workers’ Compensation Act (hereinafter “WCA”), specifically 77 P.S. § 501(a)(1), and corresponding Medical Cost Containment Regulations (hereinafter “MCCR”), 34 Pa. Code §§ 127.1 –127.755, circumvent the exclusivity provisions of the WCA by initiating litigation outside the forums established by and under the WCA and MCCR for adjudicating such issues? Alternatively phrased, is the liability of the Employer and its Insurer or carrier exclusive in place of any and all other liability, given the WCA provides for an exclusive remedy barring any tort action flowing from a work-related injury?
For more information, contact Kevin McKeon or Dennis Whitaker.