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COMMONWEALTH COURT ISSUES DECISION ADDRESSING PREAUTHORIZATION OF MEDICAL TREATMENT

By Rhonda A. Rudman, Esquire

In a decision filed on September 25, 2002, the Commonwealth Court of Pennsylvania

The facts of McLaughlin are not unusual. Claimant sustained a lower back injury on February 29, 1996 while lifting furniture in the course of his employment. In a decision dated December 1, 1997, the Workers' Compensation Judge (WCJ) awarded disability benefits for the work injury. The Commonwealth Court does not address the issue of how the injury was described in the WCJ's initial decision. The Court does note that the WCJ accepted the opinions of Drs. Michael Cohen, a neurologist and Mitchell Krause, a family practitioner.

Defendant filed a Petition for Termination/Modification/Suspension and Review of Medical Treatment on June 2, 1999 alleging that Claimant had fully recovered from his work injury.

Subsequently, Dr. Cohen recommended surgery which was scheduled to take place on September 10, 1999. On September 1, 1999, the hospital called the insurance carrier to obtain preapproval.

The claims representative wrote a letter to the hospital stating:

This will confirm our telephone conversation of September 1, 1999 whereby, I advised you that I am denying the surgical procedure which has been scheduled for September 10, 1999.

As discussed, we had Darran McLaughlin examined on May 20, 1999. Our examining physician indicated that the claimant's incident of February 29, 1996 has resolved, but remains to be effected [sic] by the pre-existing degenerative disc disease of the lumbar spine at 2 levels.

Based on this information, a Termination Petition has been filed and its presently pending before Judge John Liebau.

Since this case is presently in litigation, I am not authorizing any treatment. This case will go to a decision.

On September 9, 1999, the Claimant filed a Petition for Utilization Review (UR) regarding the treatment of Dr. Krause as of May 4, 1999. On September 28, 1999, Claimant filed a Petition for Penalties alleging that the Employer refused to pay medical benefits and intentionally engaged in a course of conduct effectively preventing him from being admitted to the hospital for the surgery recommended by his treating physician.

The WCJ issued a decision on November 13, 2000. The WCJ denied Defendant's Termination/Suspension/Modification and Review Petitions. The Judge did find that the medical treatment provided by Dr. Krause was reasonable and necessary granting Claimant's UR Petition. The Judge further ordered the Defendant to pay for Claimant's medical treatment related to the work injury including the surgery that was scheduled for September 10, 1999, but not performed due to Employer's refusal to grant preapproval. The WCJ found that the Employer's failure to authorize the scheduled surgery without challenging its reasonableness or necessity in a properly filed UR Determination constituted a violation of the Act and 20% penalties were awarded. The WCJ again accepted the testimony of Claimant's medical experts Drs. Krause and Cohen and rejected the testimony of Defendant's medical expert.

The Workers' Compensation Appeal Board reversed the decision of the WCJ regarding the award of penalties.

The Commonwealth Court then affirmed the WCJ's award of penalties. The Court quoted Section 306 (f.1)(1)(i) of the Pennsylvania Workers' Compensation Act (Act) which provides that the Employer shall pay for reasonable, surgical and medical services. The Court cited case law outlining that the Employer may not unilaterally stop making benefit payment in the absence of a final receipt, an agreement, a supersedeas or any other Order of the WCJ authorizing such action. The Court then misconstrued the carrier's letter to the hospital stating several times that the carrier indicated it would not pay for any treatment. Thus, the Court concluded Employer's conduct of unilaterally ceasing medical benefit payment pending its Petitions, without obtaining a supersedeas or any other prior authority to do so, or challenging the reasonableness or necessity of the scheduled surgery in a properly filed UR Determination Petition, constitutes a clear violation of its ongoing obligation to provide reasonable and necessary surgical and medical services imposed by Section 306 (f.1)(1) of the Act and the WCJ's December 1, 1997 decision.

The Commonwealth Court did address the Board's decision and Employer's argument that Section 306 (f.1)(5) of the Act only requires the Employer to make payment for treatment within 30 days after receiving medical bills and records from the provider and that the Employer has no obligation to precertify or preapprove a scheduled treatment or seek a prospective UR Determination to dispute the reasonableness or necessity of such treatment. The Court concluded that the Employer's argument was disingenuous. The Court stated that Section 306 (f.1)(2) and (5) of the Act are only applicable where the Claimant has actually received medical treatment from the providers generating bills and records. The Court stated by refusing to authorize the scheduled surgery and indicating it would not pay for Aany treatment the Employer effectively prevented Claimant from receiving the treatment recommended by his treating physician. The Court added that the party disputing the reasonableness or necessity of treatment must seek a prospective, concurrent or retrospective UR Determination and cited the case of AT&T v. WCAB (DiNapoli), 728 A.2d 381 (PA Commw. 1999) in support of this statement.

The Commonwealth Court in McLaughlin makes several critical errors. As referenced above, the Court misconstrues the letter of the Employer that it will not preauthorize treatment to mean that the Employer refuses to pay for any and all treatment incurred. It is a common procedure in workers' compensation to refuse to preauthorize treatment, yet continue to pay for treatment during the pendency of litigation.

Perhaps, the facts are not clearly stated in the decision. For example, where Claimant filed a Utilization Review as of May 4, 1999 in regard to the treatment of his treating physician as well as filed a Petition for Penalties alleging that his Employer refused to pay for medical benefits, maybe the Employer did cease paying for any and all treatment. [1] However, this is not clear from the facts and without clarification the Court's decision could be construed to mean that merely denying preauthorization is a violation of the Act.

The Court's interpretation of case law is also an error. The Court states that the Employer unilaterally ceased making medical benefit payment without supersedeas or final receipt. However, Judges are not in power to grant supersedeas regarding ongoing medical treatment and even if Claimant had signed a final receipt the Employer would have some responsibility for payment of ongoing medical bills.

The Court also implies that Employers actions would have been proper if a prospective Utilization Review had been filed. However, in the instant case, the Employer denied payment for the surgery on a causal relationship basis. The letter of the carrier outlines that Claimant fully recovered from the work injury, but remains effected by the pre-existing degenerative disc disease of the lumbar spine at 2 levels. The Bureau has consistently held and most WCJs agree that Utilization Review does not address causation.

The effect of McLaughlin is frightening. Given the Courts failure to adequately outline the factual background, as well as its misconstruction of case law, the decision could be construed to mean that an Employer violates the Act when failing to preauthorize treatment. As referenced earlier, it is common practice in Pennsylvania to refuse to preauthorize medical treatment especially where the Employer has evidence that such treatment is not causally related to the work injury. Certainly, there is risk for penalties if treatment is undertaken, the Employer refuses to pay for treatment and treatment is later found to be causally related to the work injury. This may be the situation of McLaughlin, but it is not clearly outlined. However, cases do recognize that penalties are not warranted where treatment is eventually deemed to be nonwork related. See King v. WCAB (Wendell H. Stone Co.), 572 A.2d 845 (PA Commw. 1990); Sciulli v. WCAB (Health Center Hospital Service Corp.), 615 A.2d 920 (PA Commw. 1992); and Buczynski v. WCAB (Richardson-Vicks, Inc.), 576 A.2d 421 (PA Commw. 1990).

Our recommendation would not be to preauthorize any and all treatment requested. We see crazy requests for experimental, avant gaurd or disreputed treatment such as papaya injections. Moreover, case law is inconsistent with McLaughlin where the Commonwealth Court has recognized that the Employer can refuse to pay for treatment not causally related to the work injury.

However, it certainly would be wise not to refuse to preauthorize any treatment in all circumstances. Where surgery does appear to be related to the work injury and recommended preauthorization may be a smart choice. This could insure prompter treatment with prompter recovery. If the carrier is uncertain regarding the reasonableness and necessity of a procedure, a prospective Utilization Review can be effectively utilized.

Thus, you should analyze your claims on a case by case basis. As referenced above, there will be situations where you do not want to pre-authorize treatment and maybe able to successfully litigate the causal relationship of such treatment. Additionally, there will be situations where treatment appears so unreasonable that a prospective utilization review maybe warranted.

If worse comes to worse and preauthorization is denied because you feel that treatment is not reasonable, necessary or causally related to the work injury, there are arguments to be made to distinguish McLaughlin. First, you can emphasize that you have not stopped payment for all treatment related to the work injury and submit a printout regarding payment made so that there is no general unilateral suspension of medical benefits. Additionally, one can argue that in McLaughlin, there was a prior Judge's decision that ordered payment of medical bills and recognized as credible the opinions from the physicians whose treatment was at issue. Moreover, in McLaughlin, the letter of the carrier indicated that surgery was denied rather than limiting itself to a statement that preauthorization was denied.[2] A persuasive argument can be made that McLaughlin is limited to these extreme fact patterns.

In the meantime, we expect or hope that an appeal will be made from the McLaughlin case to the Supreme Court. Of course, the Employer must file Petition for Allowance of Appeal with the Supreme Court and the Supreme Court does not hear all cases. Instead, it limits its judicial review to situations where the Appellate Court below has decided a question of substance not theretofore determined by the Supreme Court; where an Appellate Court has rendered a decision in conflict with other decisions of the Court; or where the question involves an issue of immediate public importance.

We at FKWZ&G will keep you updated regarding any recent developments with the McLaughlin case or other cases that interpret it. Moreover, as always, please feel free to call us should you have any questions about this troublesome and convoluted decision.


1 The Judge's initial decision seems to lend further support for this argument. This is where Dr. Krause submitted medical bills into evidence and argued that treatment was reasonable and necessary. Generally, when bills are attached, it is because they have not been paid. However, this is again not clearly spelled out, even in the Judge's initial decision.

2 Additionally, the original Judge's decision does indicate how the injury was described. Specifically, the Judge indicated that Claimant sustained a chronic lumbar strain superimposed upon an underlying herniated or bulging disc at L5-S1 and upon significant degenerative disc bulge at L4-5 as well as radiculopathy while lifting a paint locker in the course and scope of his employment ... Thus, where the carrier later outlines that the work injury had resolved, but Claimant continues to be effected by pre-existing degenerative disc disease of the lumbar spine at two levels, there is a question as to whether it is attacking the initial description of injury found by the Judge.