EIGHTY-FOUR MIN. v. THREE RIVERS REHAB.
Citation | 554 Pa. 443,721 A.2d 1061 |
Parties | EIGHTY-FOUR MINING COMPANY, Appellee, v. THREE RIVERS REHABILITATION, INC., Appellant. |
Decision Date | 21 December 1998 |
Court | Pennsylvania Supreme Court |
Paul F. Laughlin, Pittsburgh, for Three Rivers Rehabilitation.
Elizabeth B. Metz, Harrisburg, for Health Law & Policy, Amicus.
Phyllis T. Procopio, George H. Thompson, Pittsburgh, for Eighty-Four Min.
Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO, NEWMAN and SAYLOR, JJ.
We granted review in this matter to resolve whether the Anti-Referral provision of Section 306(f.1)(3)(iii) of the Pennsylvania Workers' Compensation Act1 (Act) precludes payment for in-office physical therapy prescribed by a physiatrist2 and performed by a physiotherapist,3 both of whom the physiatrist's professional corporation employed.
Joseph Sciulli (Sciulli) sustained work-related injuries while employed as a coal miner by Eighty-Four Mining Company (Eighty-Four Mining). Afterwards, Sciulli sought treatment with Dr. William W. Frost, Jr. (Dr. Frost), a board certified physiatrist. Sciulli's first visit to Dr. Frost occurred on January 17, 1994 at Dr. Frost's only office, which was within a self-contained medical facility operated by Three Rivers Rehabilitation, Inc. (Three Rivers) in Washington, Pennsylvania.
Although Dr. Frost incorporated Three Rivers and was the sole owner of the professional corporation, he was also an employee of Three Rivers. As the only physician on staff at Three Rivers, Dr. Frost supervised all patients treated by the Three Rivers staff for physical therapy, including those under his care and those referred to Three Rivers by other physicians. Dr. Frost retained and exercised his authority to make changes or refinements to a patient's physical therapy program. Three Rivers paid the rent for all of its office space, including the office occupied by Dr. Frost. Three Rivers' billing department handled all billing, whether for treatment provided by Dr. Frost or other Three Rivers staff.
Dr. Frost obtained extensive medical history of Sciulli and performed a physical examination. Trained Three Rivers technicians then performed tests to determine the extent of Sciulli's injuries. Dr. Frost reviewed the results of the tests and diagnosed Sciulli's injury. Dr. Frost then recommended a treatment plan of physical therapy for Sciulli. Three Rivers evaluated Sciulli, a staff physiotherapist provided physical therapy to him in the facility of Three Rivers, and they sent all of Sciulli's medical bills to Eighty-Four Mining for payment. After approximately three weeks of physical therapy, Sciulli returned to work without limitations. Eighty-Four Mining believed that the bills resulted from a prohibited self-referral and refused to pay them.
On March 7, 1994, Three Rivers filed a timely application for fee review with the Bureau of Workers' Compensation, pursuant to Section 306(f.1)(5) of the Act.4 The Workers' Compensation Board (Board) rendered an administrative decision on February 3, 1995 that Eighty-Four Mining was untimely in its payment of the medical bills of Three Rivers. Eighty-Four Mining requested an appeal conference concerning the administrative decision. The Board assigned the medical fee review application to a hearing officer.
On May 3, 1996, after conducting a full hearing, the hearing officer determined that Three Rivers did not violate the Act when it provided Sciulli with physical therapy prescribed by Dr. Frost. Although the hearing officer acknowledged the existence of regulations governing self-referrals,5 she ultimately did not rely on the 1995 regulations. Instead, the hearing officer ruled that because Dr. Frost and Three Rivers were not separate entities, no unlawful referral occurred. The hearing officer granted the fee review application and ordered Eighty-Four Mining to pay Sciulli's medical bills.
Eighty-Four Mining filed a timely appeal to the Commonwealth Court, alleging that the hearing board erred as a matter of law by directing payment to Three Rivers. The Commonwealth Court reversed, finding that Dr. Frost illegally conducted a self-referral, which Section 306(f.1)(3)(iii) of the Act expressly prohibits. We granted this appeal to decide only if the Act precludes payment for an in-office physical therapy treatment prescribed by a physiatrist and performed by a physiotherapist, both employed by the physiatrist's professional corporation.
Section 306(f.1)(3)(iii), contained in the 1993 amendments to the Worker's Compensation Act, commonly referred to as Act 44, is a medical cost containment provision. On August 31, 1993, Section 306(f.1)(3)(iii), also known as the Anti-Referral provision, became effective. The Anti-Referral provision prohibits referrals of workers' compensation claimants by health care providers for medical services, including physical therapy, to entities in which the providers have a financial interest. Section 306(f.1)(3)(iii) states, in pertinent part:
Notwithstanding any other provision of law, 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. It is unlawful for a provider to enter into an arrangement or scheme such as a cross-referral arrangement, which the provider knows or should know has a principal purpose of assuring referrals by the provider to a particular entity which, if the provider directly made referrals to such entity, would be in violation of this section. No claim for payment shall be presented by an entity to any individual, third-party payer or other entity for a service furnished pursuant to a referral prohibited under this section.
77 P.S. § 531(3)(iii). Neither the terms of this Anti-Referral provision nor the Act, in its entirety, was clear about whether the ban on physician self-referrals included physician prescriptions for in-office physical therapy.
On August 28, 1993, the Department of Labor and Industry (Department), Bureau of Workers' Compensation, published a notice intended to give instructions on the Department's interpretation of the Anti-Referral provision and other portions of the Act, which would become effective in three days. The preamble to the notice states:
23 Pa. Bull. 4185 (Aug. 28, 1993). Therefore, the Department used the notice to establish temporary guidance to all interested parties until it could promulgate final regulations to implement the 1993 amendments to the Act.6
The notice specifically addressed the Anti-Referral provision and carved out certain exceptions that the Department intended to recognize. The Department stated that the following exceptions would apply:
23 Pa. Bull. 4188 (Aug. 28, 1993). With that notice, the Department announced that it would be incorporating by reference certain Federal laws aimed at containing rapidly rising medical costs. The Stark Amendments to the Federal Medicare and Medicaid Acts are particularly pertinent to the facts in this case.
Congress first enacted the Stark Amendments on December 19, 1989. The original Stark Amendments, known as Stark I, prohibited a physician from making referrals for clinical laboratory services to entities in which the physician had a financial interest.7 42 U.S.C.A. § 1395nn(a)(1). On January 1, 1992, the self-referral ban in Stark I became effective. On August 10, 1993, Congress again amended the Stark Amendments. The 1993 Stark Amendments, known as Stark II, extended the self-referral ban to several designated health services, including physical therapy services.8
Congress also provided several exceptions to the self-referral ban in the Stark Amendments, which...
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