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Cva, Inc. and State Workers' Insurance Fund v. Workers' Compensation Appeal Board (Riley

October 14, 2011


The opinion of the court was delivered by: Mary Hannah Leavitt, Judge

Submitted: April 1, 2011



CVA, Inc. and its insurer, the State Workers' Insurance Fund (collectively, Employer), petition for review of an adjudication of the Workers' Compensation Appeal Board (Board) granting the penalty petition filed by Charles Riley (Claimant). In doing so, the Board affirmed the Workers' Compensation Judge's (WCJ) determination that Employer violated the Workers' Compensation Act*fn1 (Act) by unilaterally refusing to pay Claimant's medical bills. Finding no error, we affirm.

Claimant sustained a work-related injury on October 18, 2007, when he fell to the ground while getting out of his truck. Employer accepted liability for a left knee injury.*fn2 In March 2009, Claimant filed a penalty petition alleging that Employer violated the Act because it refused to pay Claimant's medical bills from Bristol Family Practice and Medical Center (Provider). Employer filed an answer denying the allegations.

The matter was assigned to a WCJ who held one hearing. Both parties appeared but no testimony was taken. The WCJ informed the parties that they had three months to submit their evidence and briefs, and then the record would be closed.

In support of his petition, Claimant submitted HCFA billing statements that were sent to Employer for numerous Therapeutic Magnetic Resonance (TMR) treatments administered from May 2008 to June 2009. Attached to the billing statements were medical reports documenting Claimant's condition and his response to the treatments. Claimant also offered denial letters from Employer. In some cases, Employer denied the bills for the stated reason that the "[d]ocumentation does not support charges as billed." Reproduced Record at 26a (R.R. ___). In other cases, Employer stated that "[d]ocumentation does not support billing of a radiology code." R.R. 54a. In yet other instances, Employer denied payment stating that "it has been determined that the current medical treatment is not causally related to the original accepted work injury." R.R. 64a. On February 19, 2009, Employer began changing the procedure codes on some submitted bills and paying a lesser amount, a process known as "downcoding."*fn3

Employer objected to Claimant's documents as hearsay, but the WCJ overruled the objection. Employer also submitted a motion to dismiss the penalty petition, which was denied. Employer presented no evidence in defense of the penalty petition and did not submit a brief to the WCJ.

The WCJ found that Claimant's evidence showed that Provider treated Claimant for his left knee injury from May 12, 2008, through June 15, 2009. Medical treatment notes documenting Claimant's progress and receipt of TMR treatments and appropriate HCFA billing forms were forwarded to Employer for payment but denied. By February 2009, Employer began paying a lesser amount than Provider had billed on the basis of its downcoding. The WCJ noted that Claimant was not seeking a penalty on the downcoded bills because the dispute over the amount of payment was between Provider and Employer and had to be resolved through the fee review process. However, the WCJ found that after February 2009, Employer had, without explanation, refused to pay some bills, even though the medical treatment remained the same. The total outstanding balance of unpaid medical bills was $140,876. The WCJ pointed out that Employer did not file a utilization review request or seek an independent medical examination or records review.

Based on these findings, the WCJ concluded that Employer violated the Act by unreasonably delaying payment of medical treatment, and he assessed a 50 percent penalty. The WCJ further concluded that Employer did not present a reasonable contest and awarded quantum meruit attorney's fees to Claimant's counsel. Employer appealed, and the Board affirmed. Employer then petitioned for this Court's review.*fn4

On appeal, Employer argues that Claimant's penalty petition should have been denied because his documentary evidence was legally insufficient to prove a violation of the Act. Specifically, Employer asserts that Claimant's inadmissible hearsay evidence did not establish that the medical treatment at issue was causally connected to his work injury, let alone reasonable and necessary. Employer also contends that the WCJ violated Employer's due process rights by denying it the right to present evidence. Finally, Employer argues that the WCJ assessed an excessive and disproportionate penalty.

In a penalty petition proceeding, the claimant has the burden of proving that a violation of the Act occurred. Shuster v. Workers' Compensation Appeal Board (Pennsylvania Human Relations Commission), 745 A.2d 1282, 1288 (Pa. Cmwlth. 2000). An employer is obligated to pay for reasonable medical expenses that are causally related to the work injury. Listino v. Workmen's Compensation Appeal Board (INA Life Insurance Company), 659 A.2d 45, 47 (Pa. Cmwlth. 1995). Under Section 306(f.1)(5) of the Act, 77 P.S. §531(5), the employer must pay the claimant's medical bills within 30 days of receiving them, unless the employer disputes the reasonableness and necessity of the treatment.*fn5 If the employer believes that the treatment is not reasonable and necessary, it must submit the bills for a utilization review or face the possibility of a penalty. Hough v. Workers' Compensation Appeal Board (AC&T Companies), 928 A.2d 1173, 1180 (Pa. Cmwlth. 2007). In addition, if the employer refuses to pay bills because it believes they are not causally related to the work injury, the employer runs the risk of being assessed a penalty if the WCJ determines that they are, in fact, causally related. Listino, 659 A.2d at 48.

Employer argues that Claimant did not meet his burden of proving that a violation of the Act occurred. The only evidence submitted by Claimant was hearsay, i.e., HCFA billing statements and reports. Employer contends that Claimant was required to present medical testimony, not just reports, to prove that the bills were causally related to his work injury.*fn6

Section 422(c) of the Act, 77 P.S. §835, allows the use of medical reports in any litigation involving 52 weeks or less of disability.*fn7 In those cases, the WCJ is permitted to base findings of fact on the information in the reports. That is what occurred here. The WCJ found that the TMR treatments were for ...

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