Workers First Pharmacy Services, LLC v. Bureau of WC Fee Review Hearing Office (Cincinnati Ins. Co.)

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Workers First Pharmacy :
Services, LLC, :
Petitioner :
:
v. : No. 1619 C.D. 2018
: Argued: June 3, 2019
Bureau of Workers’ :
Compensation Fee Review Hearing :
Office (Cincinnati Insurance :
Company), :
Respondent :

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE ROBERT SIMPSON, Judge
HONORABLE ELLEN CEISLER, Judge

OPINION
BY PRESIDENT JUDGE LEAVITT FILED: August 7, 2019

Workers First Pharmacy Services, LLC, (Pharmacy) petitions for
review of an adjudication of the Bureau of Workers’ Compensation, Fee Review
Hearing Office (Hearing Office) that vacated three fee review determinations by the
Bureau’s Medical Fee Review Section. In a Compromise and Release (C&R)
Agreement between Miguel Martinez (Claimant) and American Business Support
(Employer), Employer denied that Claimant suffered a work injury but, nevertheless,
agreed to compensate Claimant. The Hearing Office concluded it lacked jurisdiction
over Pharmacy’s fee review applications because Employer did not accept liability
for the work injury in the C&R Agreement. Pharmacy argues that Employer cannot
use a C&R Agreement to deprive Pharmacy of payment for medical services it
provided to Claimant. We vacate and remand.
 Background
On May 16, 2017, Claimant filed a claim petition pursuant to the
Workers’ Compensation Act (Act),1 alleging that he suffered a work injury to his
head, neck, back and left shoulder. Specifically, Claimant alleged that on November
12, 2016, while moving a cabinet, his hand truck got caught in carpeting causing the
cabinet to fall on him. On January 16, 2017, Employer filed a notice of workers’
compensation denial with the Bureau of Workers’ Compensation, stating Claimant
did not suffer a work injury.
On May 15, 2017, Gerald E. Dworkin, D.O., of the Pain and Spine
Treatment Center, prescribed Claimant several medications, only two of which are
relevant here. On May 17, 2017, Pharmacy dispensed 177.2 units of Lidocaine 5
percent Ointment, for which it billed Employer, by its insurer Cincinnati Insurance
Company (Insurer), $1,909.95, and 300 units of Diclofenac 1.5 percent Topical
Solution, for which it billed Insurer $3,249.99. On June 8, 2017, Pharmacy
dispensed 177.2 units of Lidocaine 5 percent Ointment and billed Employer
$1,909.95. On June 19, 2017, Pharmacy dispensed 300 units of Diclofenac 1.5
percent Topical Solution, for which it billed Employer $3,249.99.
Employer denied payment on all three invoices for the stated reason
that Claimant did not sustain a work injury. In response, Pharmacy filed three fee
review applications. The Medical Fee Review Section denied Pharmacy’s
applications regarding the May 17 and June 19 invoices as premature because
Employer had contested liability for the alleged work injury. Regarding the June 8
invoice, the Medical Fee Review Section found that Employer owed Pharmacy

1
Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.4, 2501-2710.
2
$1,650 (110 percent of the average wholesale price), plus interest for an untimely
payment.2
Employer requested a hearing to contest all three fee review
determinations even though it had only received an adverse determination regarding
the June 8 invoice. Employer argued that the Medical Fee Review Section lacked
jurisdiction over Pharmacy’s fee review applications because Employer had no
liability for Claimant’s injuries.
At a January 17, 2018, hearing before the Hearing Office, the parties
agreed that Employer had denied liability for Claimant’s injuries. They also agreed
that a hearing was scheduled before the Workers Compensation Judge (WCJ) on
February 21, 2018, and there was a possibility of settlement. The Hearing Office
continued the fee review contest in light of the scheduled WCJ hearing.
On February 21, 2018, Employer and Claimant presented a C&R
Agreement to the WCJ. Therein, Employer agreed to pay Claimant $37,500 in
settlement of “his workers’ compensation claim for past, present, and/or future
indemnity and future health care benefits/medical benefits[.]” C&R, ¶19;
Reproduced Record at 22a (R.R. __). Paragraphs 10 and 10(r) of the C&R
Agreement stated, in pertinent part:

This is a resolution of a disputed claim. The mere fact that the
parties are entering into this resolution should not be construed
by Claimant, this Court or any other person or entity that
[Employer] is in any manner legally obligated for any of the
payments being made pursuant to this [C&R] Agreement. To the
contrary, [Employer] vigorously denies and disputes any and all
allegations that have been made by the Claimant in any of the
Claimant’s Petitions.

2
It appears Insurer failed to respond to the claim related to the June 8 invoice.
3
 ***

Concerning past medical expenses, all parties acknowledge that
there are past unpaid healthcare expenses. These include, but are
not limited to, Jeanes Hospital, Temple University Physicians
ER, Disston Chiropractic, Temple Family Practice and Dr.
Dworkin. As part and parcel of this settlement, Claimant is
responsible for any past healthcare bills, medical bills,
prescription drug bills or health related matters with limited
exception. Both parties also acknowledge that there are
outstanding bills from [Pharmacy] for topical creams. This is a
denied claim. Nevertheless, [Pharmacy] filed for reimbursement
of its bill through the Fee Review system. In short, the
outstanding bills for topical cream are currently being reviewed
and litigated through the Fee Review system. Those limited
outstanding bills are separate, distinct, and are not part of this
otherwise global resolution for any and all past, present and
future wages together with past, present and future medical.
That is, and by way of clarification, the Fee Review for
[Pharmacy] (attached is a request for hearing to contest the Fee
Review Determination as Exhibit “C”) shall continue. The
instant [C&R] Agreement does not resolve that issue nor will the
Claimant be responsible for any payments to [Pharmacy]
pursuant to the separate Fee Review litigation. Nevertheless,
with that limited exception, the instant settlement for a gross
lump sum of $37,500.00 resolves any and all past, present or
future wages together with any other past, present or future
healthcare bills, medical bills, prescription drug bills including
but not limited to the referenced provider set forth above. Under
no circumstances will [Employer] be responsible for any other
past, present or future healthcare bills (again with the limited
exception of the pending Fee Review matter attached as Exhibit
“C”). That matter shall continue litigation and is not being
resolved by this [C&R] Agreement. However, [Employer] is not
responsible for any past outstanding bills from Jeanes Hospital,
Temple University, Disston Chiropractic, Temple Family
Practice, Dr. Dworkin and any others again with the limited
exception set forth herein.

C&R, ¶¶10 and 10(r); R.R. 21a, 24a (emphasis added).
4
 At the hearing on the C&R Agreement, Claimant testified that
Employer had agreed to settle without accepting liability for his injuries. Claimant
agreed that he would be responsible for any outstanding medical expenses, except
for those related to Pharmacy’s fee review applications. Employer’s counsel
questioned Claimant as follows:

Q. Just a few questions. Your attorney was very thorough.
With respect to the fee review, there’s a fee review currently
open [with Pharmacy]. You understand whatever the fee review
determination eventually comes down with, zero dollars owed,
$1,000 owed, what have you, it’s going to have nothing to do
with you; do you understand that?

A. Okay
Q. Is that okay with you?

A. Yes
Q. So, if it’s deemed that [Insurer] owes an amount of money,
that that will be paid for and you won’t be liable for it; do you
understand that?

A. Yes.
Q. In addition, if the fee review determines that [Insurer] owes
zero dollars, you still won’t be liable for it because [Pharmacy]
won’t be able to bill you directly; do you understand that?

A. Yes.

Notes of Testimony, 2/21/2018, at 10-11 (N.T. __); R.R. 145a-46a. The WCJ
approved the C&R Agreement on February 23, 2018.
On March 1, 2018, Employer sent Pharmacy a letter stating that because
Employer had not accepted liability for Claimant’s injury in the C&R Agreement,
there was no reason to move forward with the fee review proceeding. In response,

5
Pharmacy filed requests for admissions from Employer’s counsel and sought to call
counsel as a witness at the next hearing before the Hearing Office.
On May 24, 2018, the Hearing Office held a conference with the parties.
At the conclusion, the parties were advised that the matter would be decided on the
evidence submitted by the parties, which included the C&R Agreement.
On November 15, 2018, the Hearing Office issued the adjudication on
appeal here. The adjudication vacated the three determinations of the Medical Fee
Review Section and held that Pharmacy’s fee review applications were premature.
The adjudication explained that Employer had denied liability for the work injury
when Claimant filed his claim petition and continued to deny liability in the C&R
Agreement. Because Employer had not been adjudicated liable for the work injury,
the Hearing Office lacked jurisdiction over the fee review contest.
Appeal
Pharmacy petitioned for this Court’s review of the Hearing Office’s
adjudication.3 Pharmacy asserts its due process4 rights were violated because the
C&R Agreement was used to relieve both Employer and Claimant from liability to

3
Our review in medical fee review cases determines whether constitutional rights were violated,
whether an error of law was committed, or whether the necessary findings of fact were supported
by substantial evidence. Pittsburgh Mercy Health System v. Bureau of Workers’ Compensation,
Fee Review Hearing Office (U.S. Steel Corp.), 980 A.2d 181, 184 n.4 (Pa. Cmwlth. 2009).
Regarding questions of law, our scope of review is plenary and our standard of review is de novo.
Sedgwick Claims Management Services, Inc., v. Bureau of Workers’ Compensation, Fee Review
Hearing Office (Piszel and Bucks County Pain Center), 185 A.3d 429, 433 n.2 (Pa. Cmwlth. 2018).
4
The Due Process Clause of the Fourteenth Amendment states as follows:
No State shall make or enforce any law which shall abridge the privileges or
immunities of citizens of the United States; nor shall any State deprive any person
of life, liberty, or property, without due process of law; nor deny to any person
within its jurisdiction the equal protection of the laws.
U.S. CONST. amend. XIV, §1. The Pennsylvania Constitution also provides this protection. PA.
CONST. art. I, §9.
6
Pharmacy. Pharmacy argues that by agreeing to release Claimant from any liability
to Pharmacy, Employer made itself subject to and bound by the fee review process.
Applicable Law
Under Section 306(f.1)(7) of the Act, a claimant has no liability for
medical expenses incurred for treatment of a work injury; it states as follows:

A provider shall not hold an employe liable for costs related to
care or service rendered in connection with a compensable injury
under this act. A provider shall not bill or otherwise attempt to
recover from the employe the difference between the provider’s
charge and the amount paid by the employer or the insurer.

77 P.S. §531(7). The employer must pay a provider for treatment of a work injury,
and the provider may not seek the difference between its charge and the amount paid
by the employer.
In Nickel v. Workers’ Compensation Appeal Board (Agway Agronomy),
959 A.2d 498, 503 (Pa. Cmwlth. 2008), this Court considered the impact of a C&R
agreement upon a claimant’s medical compensation claim. This Court explained that
an employer may deny liability for a work injury in a C&R agreement but voluntarily
agree to pay the claimant’s medical expenses. In such a case, the employer cannot
thereafter contest a fee review determination based on its denial of liability for the
work injury. Id.
Nickel also addressed the narrow scope of a fee review proceeding as
follows:

[T]he fee review process presupposes that liability has been
established, either by voluntary acceptance by the employer or a
determination by a WCJ. Neither the Act nor the medical cost
containment regulations provide any authority for a fee review
officer to decide the issue of liability in a fee review proceeding.
The Department’s regulations, at 34 Pa. Code § 127.255(1), state

7
 that an application for fee review filed by a provider is premature
and will be returned if “[t]he insurer denies liability for the
alleged work injury.” The issue for the fee review officer is the
“amount and timeliness of the payment made by an insurer.” 34
Pa. Code §127.251.

Id.
Accordingly where a C&R agreement establishes an employer’s
“responsibility” for medical bills, a fee review application is not “premature on the
ground that liability had not yet been established or accepted.” Id. (emphasis in
original).5 We explained as follows:

In the case of a C & R agreement where the employer denies
liability, but nevertheless agrees to remain responsible for
[c]laimant’s reasonable and necessary medical expenses, the
[Hearing Office] may proceed so long as the parties agree that
the bills are related to the work injury. In other words, in this
scenario, the only issue is the amount of the bill; the [hearing]
officer is not called upon to make credibility determinations or
legal judgments with regard to an insurer’s liability for a
particular injury or treatment. In that circumstance, the employer
agrees, in compromise, to pay the medical bills irrespective of
liability, i.e., [e]mployer’s responsibility for the medical bills is
assumed.

Id.
In Armour Pharmacy v. Bureau of Workers’ Compensation Fee Review
Hearing Office (National Fire Insurance Company of Hartford), 192 A.3d 304 (Pa.
Cmwlth. 2018), this Court again addressed the interplay of a C&R agreement and a
fee review proceeding. In that case, a utilization review organization determined

5
Nickel was not a fee review case. There, the claimant filed a penalty petition based on the
employer’s failure to pay outstanding medical bills in accordance with the C&R agreement.
Ultimately, penalties were not awarded because the medical provider had accepted reimbursement
from the claimant’s secondary insurer, the Department of Public Welfare.
8
that a compound medical cream prescribed to the claimant was reasonable and
necessary to treat his accepted work injury. Armour Pharmacy dispensed the cream
and, after the employer refused to pay for it, filed a fee review application. The
Medical Fee Review Section determined that the employer was liable. The employer
appealed and, while the appeal was pending, the claimant and the employer entered
into a C&R agreement. Pursuant to the agreement, the employer accepted liability
for all past medical expenses incurred, with the exception of the compound medical
cream dispensed by Armour Pharmacy. The C&R agreement also stated that the
claimant was not liable to reimburse Armour Pharmacy.
The Hearing Office held that the C&R agreement divested it of
jurisdiction. Further, because the C&R agreement extinguished the employer’s
liability for the compound medical cream, the Hearing Office vacated the fee
determinations that directed the employer to pay Armour Pharmacy.
This Court vacated the adjudication of the Hearing Office and
remanded for a hearing on the employer’s challenge to the Medical Fee Review
Section’s fee determinations. We held that “[a] C&R agreement, to which a provider
is not a party, cannot be used to deprive a provider of the review procedures and
excuse the employer from paying the provider.” Armour Pharmacy, 192 A.3d at
312. “To hold otherwise would eviscerate Section 301(f.1)(5) and (6) of the Act and
violate the due process of law guaranteed to providers.” Armour Pharmacy, 192
A.3d at 312.6

6
The Act establishes specific procedures for resolving disputes between a provider and an
employer regarding payment for a claimant’s medical treatment. Section 301(f.1)(5) of the Act
states:
The employer or insurer shall make payment and providers shall submit bills and
records in accordance with the provisions of this section. All payments to providers
for treatment provided pursuant to this act shall be made within thirty (30) days of
9
 Analysis
As noted, a claimant is not responsible for the cost of treatment of work-
related injuries. Section 306(f.1)(7) of the Act, 77 P.S. §531(7). Here, Employer
promised Claimant that he would not be liable for Pharmacy’s bills, regardless of
the outcome of the litigation on the fee determinations. As established in Armour
Pharmacy, 192 A.3d at 312, the parties to a C&R agreement cannot use the

receipt of such bills and records unless the employer or insurer disputes the
reasonableness or necessity of the treatment provided pursuant to paragraph (6).
The nonpayment to providers within thirty (30) days for treatment for which a bill
and records have been submitted shall only apply to that particular treatment or
portion thereof in dispute; payment must be made timely for any treatment or
portion thereof not in dispute. A provider who has submitted the reports and bills
required by this section and who disputes the amount or timeliness of the payment
from the employer or insurer shall file an application for fee review with the
department no more than thirty (30) days following notification of a disputed
treatment or ninety (90) days following the original billing date of treatment. If the
insurer disputes the reasonableness and necessity of the treatment pursuant to
paragraph (6), the period for filing an application for fee review shall be tolled as
long as the insurer has the right to suspend payment to the provider pursuant to the
provisions of this paragraph. Within thirty (30) days of the filing of such an
application, the department shall render an administrative decision.
77 P.S. §531(5) (emphasis added). “Paragraph (6)” states, in relevant part, as follows:
[D]isputes as to reasonableness or necessity of treatment by a health care provider
shall be resolved in accordance with the following provisions:
(i) The reasonableness or necessity of all treatment provided by a
health care provider under this act may be subject to prospective,
concurrent or retrospective utilization review at the request of an
employe, employer or insurer. The [D]epartment [of Labor and
Industry] shall authorize utilization review organizations to perform
utilization review under this act. Utilization review of all treatment
rendered by a health care provider shall be performed by a provider
licensed in the same profession and having the same or similar
specialty as that of the provider of the treatment under review.
Organizations not authorized by the department may not engage in
such utilization review.
77 P.S. §531(6)(i) (emphasis added).
10
agreement to release themselves from liability to a provider who did not participate
in the agreement.
Employer argues Armour Pharmacy is distinguishable because in that
case the employer had accepted liability for the work injury. Here, by contrast,
Employer did not accept liability for the work injury in the C&R Agreement.
However, Nickel has established that an employer can deny liability for a work injury
but nevertheless accept responsibility for medical expenses for that contested injury.
Notwithstanding its position that there has not been a work injury, the question, then,
is whether Employer has accepted “responsibility” for Pharmacy’s invoice. We
conclude that it has.
The C&R Agreement states that litigation of Pharmacy’s bills would
continue in the fee review system and that Claimant would not be responsible for
any payments to Pharmacy resulting from that litigation. C&R ¶10(r); R.R. 24a. At
the hearing before the WCJ, Employer’s counsel related to Claimant:

Q. Just a few questions. Your attorney was very thorough.
With respect to the fee review, there’s a fee review currently
open [with Pharmacy]. You understand whatever the fee review
determination eventually comes down with, zero dollars owed,
$1,000 owed, what have you, it’s going to have nothing to do
with you; do you understand that?

A. Okay
Q. Is that okay with you?

A. Yes

Q. So, if it’s deemed that [Insurer] owes an amount of money,
that that will be paid for and you won’t be liable for it; do you
understand that?

A. Yes.

11
 Q. In addition, if the fee review determines that [Insurer] owes
zero dollars, you still won’t be liable for it because [Pharmacy]
won’t be able to bill you directly; do you understand that?

A. Yes.

N.T. 10-11; R.R. 145a-46a.
In sum, Employer accepted full liability for the debt to Pharmacy.
Employer’s counsel told Claimant that even if Employer was found not liable,
Pharmacy could not hold Claimant responsible for the debt. Stated otherwise,
Employer accepted “responsibility” for the debt to Pharmacy when it released
Claimant from any obligation to pay Pharmacy in the C&R Agreement.
Accordingly, the Hearing Office has jurisdiction to decide the three fee review
contests.
Conclusion
For all the above reasons, the order of the Hearing Office is vacated and
the matter is remanded to the Hearing Office for a hearing on the merits of the three
fee review contests.
_____________________________________
MARY HANNAH LEAVITT, President Judge

12
 IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Workers First Pharmacy :
Services, LLC, :
Petitioner :
:
v. : No. 1619 C.D. 2018
:
Bureau of Workers’ :
Compensation Fee Review Hearing :
Office (Cincinnati Insurance :
Company), :
Respondent :

ORDER

AND NOW, this 7th day of August, 2019, the order of the Bureau of
Workers’ Compensation Fee Review Hearing Office (Hearing Office), dated
November 14, 2018, is VACATED and the matter is REMANDED to the Hearing
Office in accordance with the attached opinion.
Jurisdiction relinquished.

______________________________________
MARY HANNAH LEAVITT, President Judge