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Furnival State Machinery v. Workers' Compensation Appeal Board8/10/2000
ARGUED: June 5, 2000
In this case, we are asked to determine whether a cost containment statute directed at workers' compensation providers implicitly alters the Workers' Compensation Act's subrogation statute. We hold that it does not. Claimant James Slye suffered a work-related injury on February 7, 1992, and subsequently required ankle replacement surgery. At the time, employer refused to pay for the surgery, claiming that it was not work related. Slye, not wishing to wait for a final determination, underwent the ankle replacement during the course of litigation, utilizing a separate third-party insurance plan which paid the medical provider $34,869.51, the full cost of the surgery. Subsequently, employer chose to accept liability and therefore agreed to reimburse Slye's third-party health insurance carrier. Employer's workers' compensation insurance carrier, however, only paid the third-party insurer $14,435.34. Slye's third-party insurer is now suing for the difference.
Under the "Act 44" amendment to the Workers' Compensation Act, the legislature has attempted to contain costs by limiting the amount which may be charged for workers' compensation expenses. Section 306(f.1)(3)(i) now provides in pertinent part:
(3)(i) For purposes of this clause, a provider shall not require, request or accept payment for the treatment, accommodations, products or services in excess of one hundred thirteen per centum of the prevailing charge at the seventy-fifth percentile; one hundred thirteen per centum of the applicable fee schedule, the recommended fee or the inflation index charge; one hundred thirteen per centum of the DRG payment plus pass-through costs and applicable cost or day outliers; or one hundred thirteen per centum of any other Medicare reimbursement mechanism, as determined by the Medicare carrier or intermediary, whichever pertains to the specialty service involved, determined to be applicable in this Commonwealth under the Medicare program for comparable services rendered. 77 P.S. § 531(3)(i) (emphasis added).
The Department of Labor and Industry then promulgated the following regulation to enact this new provision:
(a) Generally, medical fees for services rendered under the act shall be capped at 113% of the Medicare reimbursement rate applicable in this Commonwealth under the Medicare Program for comparable services rendered. The medical fees allowable under the act shall fluctuate with changes in the applicable Medicare reimbursement rates for services rendered prior to January 1, 1995. Thereafter, for services rendered on and after January 1, 1995, medical fees shall be updated only in accordance with §§ 127.151--127.162 (relating to medical fee updates). 34 Pa. Code § 127.101(a).
It is undisputed that the $14,435.34 paid by the workers' compensation insurer represents 113% of the Medicare reimbursement rate, as provided in Regulation 127.101.
Relying upon this regulation, the Workers' Compensation Judge (WCJ) disallowed any subrogation above the $14,435.34 paid. The WCJ held:
I conclude as a matter of law that the third party carrier asserting a subrogation/ reimbursement claim against the workers' compensation carrier is not entitled to be reimbursed by the worker's compensation carrier in any amounts greater than those amounts allowed under Section 306(f.1)(3) of the Act; but that the third party carrier may have a cause of action to recover overpayments from the medical providers pursuant to the mandate of Sections 306(f.1)(3) and (7) of the Act. It is apparent to me that above-cited Section was intended to and does in fact limit the liability exposure of carriers who insure employers against
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