State News : Pennsylvania

Background

The facts are as follows: Pharmacy filed the Application with the Bureau, and Insurer replied that the prescriptions were the product of a prohibited self-referral, and the Applications were assigned to Hearing Officer. Claimant’s treating physician wrote or supervised the prescriptions for the medications at issue, and acknowledged they have a financial interest in Pharmacy. Pharmacy’s founder, Phillip Shin, testified he owns and serves as managing member of an employee leasing company called Induction Works, which employs the pharmacists who work at Pharmacy, and a management company called Medicine Works. The Hearing Officer found as fact that the business of Shin’s enterprises were commingled. Ultimately, the Hearing Officer concluded the Insurer met its burden of proving a prohibited self-referral because the physician who wrote the prescriptions had an admitted financial interest in Pharmacy. He explained that though pharmacists and pharmaceutical supplies are not specifically mentioned in the anti-referral provision, “goods and services” captures prescriptions for medications.

700 Pharm. v. Bur of WC (State Workers' Ins. Fund) - No. 100 MAP 2024

Summary

Section 306(f.1)(3)(iii) of Act 44 amending the Workers’ Compensation Act, commonly referred to as the Anti-Referral Provision, states that it is unlawful for a provider to refer a person for laboratory, physical therapy, rehabilitation, chiropractic, radiation oncology, psychometric, home infusion therapy or diagnostic imaging, goods or services pursuant to this section if the provider has a financial interest with the person or in the entity that receives the referral. The consolidated appeals have presented to the Court the issue of whether the Anti-Referral Provision’s prohibition on self-referrals is limited to the eight enumerated categories of services of if the phrase “good or services” acts as a catch-all category. The Supreme Court held self-referrals were limited to the enumerated list, therefore reversing the holding of the Commonwealth Court.

The Supreme Court reasoned that the Commonwealth Court adopted its prior determination that the Anti-referral Provision could be read as “it is unlawful for a provider to refer a person for . . . goods or services.” However, this interpretation only appears reasonable if the phrase “good and services” is read in isolation, but the Supreme Court interprets statutory language in reference to the context which it appears. The proper reading of the Anti-Referral Provision’s plain language is that the phrase “goods or services” modifies the enumerated medical services such that it is necessary to read “good or services” after each enumerated service. For example, “it is unlawful for a provider to refer a person for physical therapy… good or services pursuant to this section.” The Court found this was the only interpretation that gives effect to the entirety of the Anti-Referral Provision, and plain language of the statute makes clear the General Assembly did not intend for “good or services” to be a catchall category.

The Court further found that if the General Assembly intended “goods and services” to be included in the list of the eight enumerated services, it would have place an “or” between “diagnostic imaging” and “good and services” to create a list of nine alternative categories of prohibited self-referrals. The Court rejected the notion, as found in Justice McCaffery’s dissent, that the Provision was not ambiguous. The Court noted that only when the plain language of the statute is not explicit may they consider other matters to ascertain the legislature’s intent, such as the mischief to be remedied.

Finally, other provisions of Section 306(f.1)(3) support the Court’s interpretation that self-referrals for prescription drugs and professional pharmaceutical services are not included in the Anti-Referral Provision’s ban. The omission of language regarding prescription drugs and professional pharmaceutical services in the Anti-Referral Provision while including such language in the provision addressing reimbursement is significant in showing the General Assembly did not intend to include prescription drugs and professional pharmaceutical services in the prohibition. Under the circumstances, omitting those services from the Provision supports the Court’s conclusion that those services are not included in the Anti-Referral Provision’s self-referral prohibition.

Dissent

Justice Wecht: Justice Wetch finds that a statute cannot be unambiguous if a “proper reading” requires ignoring part of it and that the Majority’s interpretation is plausible only if one ignores the provision’s punctuation. Justice Wetch specifically contends that the last two items on the list (“goods and services”) should not be treated as a single qualifying phrase that modifies the preceding list items, and that “goods” and “services” are the last two list items. He further conceded that the legislature did not need to include the first eight example of prohibited self-referrals as the last two are broad enough to encompass the first eight. Though odd, it is not unheard of for the General Assembly to engage in surplusage. 

Justice McCaffery: Justice McCaffery contends that under a plain reading of the provision, “goods and services” is a catchall phrase, which includes prescription drugs (goods) and pharmaceutical services (services). He further contends the interpretation of the Majority undermines the undisputed intent of the Anti-Referral Provision, which is “to contain costs by preventing physicians from acting in their own self-interest.” Thus, in his view, “goods and services” unambiguously refers to all goods and services in which the provider has a financial interest. Justice McCaffery notes the “mischief to be remedied” by the Anti-referral Provision was to prevent “physicians from acting in their own self-interest” which favors a broad reading of “goods and services.” He further contends that if the General Assembly intended to prohibit self-referrals for drugs and pharmaceutical services, as the Majority asserts, it could have explicitly done so in Section 306(f.1)(3)(vi) which addresses reimbursements for prescription drugs and pharmaceutical service.

Comparison with the Commonwealth Court

700 Pharmacy (Pharmacy) and State Workers’ Insurance Fund (Insurer) cross-petition for review of the decision denying and dismissing five fee review applications Pharmacy brought in connection with prescriptions it filled for a Claimant. Insurer argued the Hearing Officer erred in concluding Pharmacy, staffed by a pharmacist by an employee leasing agency, amounted to a provider as defined by Section 109 of the Workers’ Compensation Act, with standing to bring a fee review application under Section 306(f.1)(5). Pharmacy argued the Hearing Officer erred in concluding the prescriptions forming the basis of the Applications were the product of an unlawful self-referral under Section 306(f.1)(3)(iii). After review, the Court affirmed.

Insurer argued that because Pharmacist is employed by Induction Works and because employee leasing companies are not providers, Pharmacy is therefore not a provider. Pharmacy uses the employee leasing agreements which provides that Pharmacy directed the employees leased by Induction works, and that Pharmacist was acting on behalf of Pharmacy when he dispensed medications.

Both the Commonwealth Court and Supreme Court agree Pharmacy is considered a provider under the Workers’ Compensation Act and could therefore file a fee review application. The key disagreement between the Courts is the meaning of “goods and services” in relation to

In regard to the Anti-Referral provision, Pharmacy argues that because Section 306(f.1)(3)(iii) does not specifically list pharmacies and pharmaceuticals, the anti-referral provision does not encompass them. Furthermore, Pharmacy cited Fonner v. Shandon, Inc., which states that “where the legislature includes specific language in one section of a statute and excludes it from another section, the language may not be implied where excluded.” The Commonwealth Court found that statutory language could be read as, “it is unlawful for a provider to refer a person for . . . goods or services.” As such, the language suggests the General Assembly did not intent to restrict the ant-referral provision’s sweep only to the specific items enumerated but as broad language. The Court further reasoned that drugs are “goods” for purposes of the Anti-Referral provision, and ultimately that “goods and services” is sufficiently broad to cover drugs and pharmaceutical services.

As mentioned, the Supreme Court held that “goods and services” does not create a catchall category but instead modifies the eight enumerated categories specifically mentioned in the statute. Since pharmacies and prescriptions drugs are not explicitly mentioned in the statute, the Anti-Referral provision is not triggered the present case.

The Courts further disagreed on the statutory interpretation of the statute. The Commonwealth Court looked towards the dictionary definition of “goods,” leading them to find that drugs are “goods” for purposes of the Anti-Referral provision. The Court further found that the enumerated items were wide-ranging topics across medical disciplines, and that drugs and pharmaceutical services fell within the “same general nature or class of those enumerated.”  Where the Commonwealth Court looked towards dictionary definitions, the Supreme Court focused more heavily on the grammatical structure of the provision as well as the context in which the phrase in contention appeared. The Court further looked to the statute’s plain language when interpreting the provision, and considered the general intent of the General Assembly in enacting the Anti-Referral Provision which was to prevent physicians from acting in their own self-interest. However, the Court concluded general intent does not alter the plain language. As such, the interpretation fails to bar referrals for