Due Process; Pennsylvania Workers’ Compensation Act; Non-Healthcare Provider’s Right to Intervene in Utilization Review of Treatment

Keystone Rx LLC v. Bureau of Workers’ Comp. Fee Rev. Hearing Off., 223 A.3d 295 (Pa. Cmwlth. 2019), allocatur granted Sept. 1, 2020, appeal dockets 27 & 28 EAP 2020

The Pennsylvania Supreme Court granted review to consider Commonwealth Court’s creation of a new rule that, as of December 12, 2019, non-healthcare providers of medical supplies are entities with standing and the right to intervene in the Workers’ Compensation Act’s Utilization Review (UR) process.

A pharmacy, Keystone Rx, dispensed medications to Claimant, including compound creams, prescribed by Dr. Bradley Ferrara, and billed the insurer, AmeriHealth Casualty Services. The Medical Fee Review Section concluded that Keystone Rx was due payment for the medications and compound creams. Thereafter, a UR Determination, in which Keystone Rx was not permitted to participate, found Dr. Ferrara’s treatment was neither reasonable nor necessary. The Medical Fee Review Hearing Officer then vacated the administrative determinations of the Bureau’s Medical Fee Review Section and dismissed two applications for fee review filed by Keystone Rx. Keystone Rx appealed the dismissals to the Commonwealth Court. On appeal, Keystone Rx conceded that a Pharmacy may initiate only an action disputing the amount or timeliness of payment under Section 306(f.1)(5) but not one challenging the reasonableness or necessity of treatment under Section 306(f.1)(6) of the Pennsylvania Workers’ Compensation Act; however, Keystone Rx argued that the Hearing Office’s reliance on the UR determination results in an improper deprivation of its due process rights with respect to payment for the prescriptions. In support, Keystone Rx relied on the court’s decisions in Armour Pharmacy v. Bureau of Workers’ Comp. Fee Review Hearing Off. (National Fire Insurance Co. of Hartford), 192 A.3d 304 (Pa. Cmwlth. 2018) (Armor I), wherein the court held that an employer could not use a Compromise and Release (C&R) agreement, to which the pharmacy was not party, to deprive it of its right to payment under the Act and Armour Pharmacy v. Bureau of Workers’ Comp. Fee Review Hearing Off. (Wegman’s Food Markets, Inc.), 206 A.3d 660 (Pa. Cmwlth. 2019) (en banc) (Armour II), wherein the court noted that “the polestar of Armour I is that the Act must be construed in accordance with due process of law” to hold that the Hearing Office has jurisdiction to determine the pharmacy’s provider status. Slip op. at 7.

Commonwealth Court affirmed the dismissal of Keystone Rx’s fee petitions. The court found Armour I was distinguishable because that case involved a deprivation of property rights where the parties resolved the claim by a C&R agreement and attempted to exclude payments to a pharmacy, which were already judicially determined to be owed; whereas, the provider’s treatment in Keystone Rx’s case was determined to be neither reasonable nor necessary. Likewise, the court noted that Armour II only allowed the Medical Fee Review Hearing Officer to determine a pharmacy’s provider status and did not expand the scope of the fee review process to allow officers to determine the reasonableness and necessity of treatment. Thus, the court concluded that, under Armour II, the Hearing Officer was bound by the Utilization Review Determination to deny Keystone Rx’s appeal. However, the court acknowledged “that there are due process issues for providers such as Pharmacy that are precluded from participating in the UR process but nonetheless are bound by the results that follow them to the fee review process at issue herein” and went on to create the following new rule for UR procedures occurring after the date of the court’s December 12, 2019 opinion:

… where an employer, insurer, or an employee requests UR, a provider which is not a “health care provider” as defined in the Act, such as a pharmacy, testing facility or provider of medical supplies, must be afforded notice and an opportunity to establish a right to intervene under the usual standards for allowing intervention. Although this Court may not usurp the powers of the General Assembly and exceed the parameters of legislation pertaining to medical cost containment, it bears repeating that the polestar of Armour I is that the Act must be construed in accordance with due process of law. Armour II, 206 A.3d at 667.

Slip op. at 8.

The Supreme Court granted allocatur on the following issues presented by the insurer:

(1) Did the Commonwealth Court exceed the scope of its authority and substitute its judgment for that of the Pennsylvania Legislature when it promulgated a new rule which mandates non-healthcare providers are entities with standing and the right to intervene in the Workers’ Compensation Act’s Utilization Review process?

(2) Did the Commonwealth Court err when it gave non-healthcare providers via the right to void at any time, a Utilization Review Determination regarding the reasonableness and necessity of the care of the physician who wrote the prescription which led to the non-healthcare provider providing a good or service to the injured worker?

The Supreme Court also granted review on the following issue as stated by the Bureau of Workers’ Compensation Fee Review Hearing Office:

Whether the Commonwealth Court violated the separation of powers doctrine by engrafting a new requirement onto the Pennsylvania Workers’ Compensation Act’s process for conducting utilization review of treatment by a health care provider by prospectively directing that non-treating entities be given notice and an opportunity to intervene in utilization reviews?

For more information, contact Kevin McKeon or Dennis Whitaker.