As most workers' compensation practitioners are aware, the utilization review process was one of the main aspects of the medical cost containment provisions of the 1993 amendments to the Workers' Compensation Act. The system acts as a form of peer review, which subjects an injured worker's medical treatment to evaluation by a licensed utilization review organization (URO), and specifically, an independent health care provider within the URO. The reviewing physician is to be of the same field and specialty as the provider under review and will author a report, commenting on the "reasonableness and necessity" of a the treatment in question. This utilization review (UR) determination is then subject to further review in a de novo proceeding by a workers' compensation judge (WCJ) upon appeal by either party. The Act 44 utilization review process is the sole remedy for an employer to dispute the reasonableness and necessity of medical expenses as neither a WCJ nor the Workers' Compensation Appeal Board have subject matter jurisdiction to determine the reasonableness and necessity of medical treatment.

Over the years, there have been many challenges to the UR process that the courts have had to decide. One such dispute even reached the U.S. Supreme Court at one point in American Manufacturers Mutual Insurance v. Sullivan, 526 U.S. 40 (1999), where Chief Justice William Rehnquist held that workers' compensation insurers are not "state actors" under the Fourteenth Amendment to the U.S. Constitution and that the Pennsylvania UR process does not deprive injured workers property within the meaning of that amendment. More mundane challenges have included whether a UR determination is specific to the treatment under review or binding only on the provider under review. (It is the latter).

The latest issue brought before the courts, which has been simmering for the entire 26-year history of the 1993 Act 44 amendments is whether a provider loses its due process rights in a UR proceeding in which it has no direct involvement. The Commonwealth Court, in Keystone Rx v. Bureau of Workers' Compensation Fee Review Hearing Office (Compservices/AmeriHealth Casualty Services), which was decided last month, acknowledged the dilemma and due process implications for health care providers that are precluded from participating in the UR process but are nevertheless bound by the results of the UR determinations, which then affect their rights in the fee review process in which they do enjoy direct involvement.

All providers, even ones that have no direct involvement in the UR process or have no standing to file a penalty petition for an insurer's failure to pay bills can avail themselves of the fee review process. Examples of such providers are pharmacies or durable medical equipment companies, which rely on the prescriptions of the actual providers under review to generate their bills. Under Section 306(f.1)(5) of the act, a provider can challenge the amount and timeliness of payment it receives via fee review. This administrative decision can be appealed to the workers' compensation fee review hearing office, which is akin to a WCJ proceeding and then can be appealed to the Commonwealth Court if additional remedy is sought. However, this fee review process in no way addresses the reasonableness and necessity of the treatment in question, which is reserved exclusively for the UR system. Consequently, when a UR is filed against a pharmacy or other such entity, that company has no way to defend the reasonableness of its treatment. In addition to not having standing to defend its treatment in the UR process, a provider cannot file a penalty petition if bills still go unpaid after a favorable fee review, or following a compromise and release. Keystone Rx has addressed this dilemma head on and resolved it.

Keystone Rx dealt directly with a fee review which had been granted in the provider's favor, ordering payment of a compound cream and some other medication. The fee review hearing office vacated the order, finding that a prior UR had found the creams unreasonable and unnecessary and therefore, not subject to payment for reasons beyond the jurisdiction of the fee review process. To make matter worse, the primary parties resolved the case via compromise and release agreement, directly absolving the employer of the need to pay the outstanding medical bills in question at all. On appeal to the Commonwealth Court, the court affirmed the denial of the fee reviews in question based on the rationale of the hearing office that the medications had previously been found to be unreasonable and unnecessary.

However, the court "created a new rule" going forward. The court stated: Accordingly, we hold that for UR procedures occurring after the date of this 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 act must be construed in accordance with due process of law. The Keystone Rx court relied on two prior provider-friendly decisions it had authored that are colloquially referred to as Armour I and Armour II, after the pharmacy, Armour Pharmacy, which was embroiled in similar cases decided by the Commonwealth Court in 2018 and 2019. In Armour I, the issue was whether a C&R agreement can be used to set aside a fee review determination that an employer owes payment for a particular treatment. There, the court found that a C&R could not be so used, as the parties to a C&R can release each other from liability, but not a third-party provider who had no involvement in the C&R, especially when the medication in that case was actually found to be reasonable and necessary by a UR. Armour II found that the hearing office and a WCJ both have jurisdiction to determine an entity's "provider status" for purposes of the fee review procedures, thereby allowing a pharmacy to avail itself of the administrative remedies of the act.

The recent flurry of cases surrounding providers not directly under utilization review and ones not specifically parties to a compromise and release agreement has created long-sought due process rights for many providers. It is important to adequately consider the rights of all parties involved when negotiating a settlement or litigating a petition to review UR determination. While obviously one's duty is to the injured worker, keep in mind that the claimant always has an interest in ensuring proper payment for health care providers who have helped along the way, not the least of which is continued treatment. Likewise, attempting to cut a provider's otherwise-payable large bill out of a C&R agreement for the expediency of settlement is in tremendously poor form at best, and unethical, at worst. Now, the providers in question have a remedy!

Christian Petrucci, of the Law Offices of Christian Petrucci, concentrates his practice in the areas of workers' compensation and Social Security disability. He also counsels injured workers in matters involving employment discrimination and unemployment compensation benefits.