Loose v. W.C.A.B. (John H. Smith Arco Station)

• Decision Date: 31 December 1991
• Citation: 601 A.2d 491,144 Pa.Cmwlth. 332
• Parties: Kerry L. LOOSE, Petitioner, v. WORKMEN'S COMPENSATION APPEAL BOARD (JOHN H. SMITH ARCO STATION), Respondent.
• Court: Pennsylvania Commonwealth Court

Page 491

601 A.2d 491

144 Pa.Cmwlth. 332

Kerry L. LOOSE, Petitioner, v. WORKMEN'S COMPENSATION APPEAL BOARD (JOHN H. SMITH ARCO

STATION), Respondent.

Commonwealth Court of Pennsylvania.

Submitted on Briefs April 12, 1991.

Decided Dec. 31, 1991.

Harvey S. Miller, for petitioner.

Michael W. Davis, for respondent.

Before SMITH and PELLEGRINI, JJ., and SILVESTRI, Senior Judge.

SILVESTRI, Senior Judge.

Kerry L. Loose (Loose) petitions for review of an order from the Workmen's Compensation Appeal Board (Board) which affirmed the decision and order of the referee and dismissed his appeal.

On April 15, 1986, Loose suffered a work-related back injury while employed as a mechanic for John H. Smith Arco Station (Employer). A notice of compensation payable was filed on December 8, 1986. On January 19, 1987, Loose and the Employer entered into total and partial disability compensation agreements. On December 22, 1988, the Employer filed a termination petition alleging that Loose was no longer disabled from any work-related injury and his compensation should cease accordingly. Loose filed a petition for penalties on April 10, 1989 alleging that the Employer or its insurance carrier had unilaterally refused to pay reasonable and necessary medical expenses provided by the Community Hospital of Lancaster (hospital) as required by Section 306(f)(2)(ii) of The Pennsylvania Workmen's Compensation Act ¹ (Act), 77 P.S. § 531(2)(ii). The Employer filed a timely answer. The two petitions were consolidated and the matter was heard before the referee on February 22, 1989 and May 23, 1989.

By order dated October 17, 1989, the referee 1) granted the Employer's petition and terminated Loose's compensation effective August 2, 1988; 2) directed the Employer to pay Loose's medical expenses for the hospital admission of April 18, 1988 through April 24, 1988; and 3) dismissed Loose's petition for penalties. The Board, finding the referee's decision to be supported by substantial evidence, dismissed Loose's appeal.

In his petition for review to this Court, Loose does not challenge the Board's affirmance of the referee's decision to terminate his compensation. Loose only raises the following issues for our review: 1) whether the Board committed an error of law by upholding the referee's decision to allow the Employer's insurance carrier to unilaterally and retroactively terminate its obligation to pay reasonable and necessary medical bills; and 2) whether the Board erred in upholding the referee's dismissal of the penalty petition. For the reasons hereinafter stated, the order of the Board is reversed. ²

Dr. George Kent (Dr. Kent) testified that Loose suffered from osteogenesis imperfecta, a congenital condition commonly known as brittle bones. Dr. Kent also testified that Loose was hospitalized for ten weeks from April 18, 1988 through June 24, 1988 as a result of his work-related back injury. Dr. Robert C. Steinman (Dr. Steinman) testified, by way of deposition, that he examined Loose on August 2, 1988 and by that time Loose had recovered from any effects of his August 15, 1986 accident at work. Dr. Steinman also testified that Loose's ongoing medical problems relate to his pre-existing congenital condition. Loose testified that the Employer or its insurance carrier failed to pay his medical expenses for the ten week hospital admission. Dr. Steinman further testified that the hospitalization in question was not necessary or reasonable for treatment of Loose's work-related injury except for the first week in the hospital.

The referee found that the admission of April 25, 1988 through June 24, 1988 was not necessary nor reasonable and thus concluded that the Employer was only obligated to make payment of the medical expenses from April 18, 1988 through April 24, 1988, the first week of the stay. Loose asserts that the Employer never sought review of the medical bills and argues that the Board and the referee erred in refusing to order payment of all of the medical expenses for the entire hospital admission. Loose essentially argues that the Board committed an error of law by affirming the referee's retroactive termination of his medical benefits. The Board determined that since the referee found that certain medical expenses submitted by Loose were unreasonable, the Employer should not be forced to pay them. We disagree.

An employer may challenge the necessity of continuing medical expenses by filing a petition for review pursuant to Section 306(f)(2)(ii) of the Act, which provides as follows:

(ii) The employer shall have the right to petition the department for review of the necessity or frequency of treatment or reasonableness of fees for services provided by a physician or other duly licensed practitioner of the healing arts. Such a petition shall in no event act as a supersedeas, and during the pendency of any such petition the employer shall pay all medical bills. 77 P.S. § 531(2)(ii).

Thus, the Act requires that an employer shall continue payment of a claimant's medical expenses during the pendency of any petition for review of the necessity of such medical expenses and does not allow the employer's petition for review to act as an automatic or discretionary supersedeas. See Fuhrman v. Workmen's Compensation Appeal Board (Clemens Supermarket), 100 Pa.Commonwealth Ct. 577, 515 A.2d 331 (1986), appeal dismissed, 518 Pa. 59, 540 A.2d 267 (1988).

The Employer does not dispute the fact that it unilaterally ceased payment of the medical expenses in question. The Employer's failure to adhere to the requirements of Section 306(f)(2)(ii) by failing to file a petition for review of the reasonableness or necessity of Loose's medical expenses and its unilateral refusal to pay those expenses is a clear violation of the Act. Moats v. Workmen's Compensation Appeal Board (Emerald Mines Corporation), 138 Pa.Commonwealth Ct. 449, 588 A.2d 116 (1991); Brown v. Workmen's Compensation Appeal Board (Borough of New Eagle), 137 Pa.Commonwealth Ct. 575, 587 A.2d 34 (1991); Johnson v. Workmen's Compensation Appeal Board (Albert Einstein Medical Center), 137 Pa.Commonwealth Ct. 176, 586 A.2d 991 (1991).

This Court has determined that the relief afforded by Section 306(f)(2)(ii) is prospective only; that is, a referee may not retroactively authorize an employer to cease paying medical expenses, but can only decide that future medical bills need not be compensated. Johnson, 137 Pa.Commonwealth Ct. at 180-181, 586 A.2d at 993; Boehm v. Workmen's Compensation Appeal Board (United Parcel Services), 133 Pa.Commonwealth Ct. 455, 576 A.2d 1163 (1990). Thus even if the Employer had complied with the Act by submitting a petition to review Loose's medical expenses, the Employer would have been entitled to prospective relief only and was not entitled to cease paying medical expenses already incurred. Id.

Pursuant to Johnson and Boehm, the Board committed an error of law by affirming the referee's retroactive termination of Loose's medical benefits. See Brown, 137 Pa.Commonwealth Ct. at 579, 587 A.2d at 36. Medical benefits may be terminated under Section 306(f)(2)(ii) only as of the date of the referee's determination that future benefits are unnecessary and unreasonable. Id. Accordingly, the Board's order will be reversed with regard to medical expenses pre-dating the referee's decision of October 27, 1989; that part of the Board's order which affirmed the referee's denial of payment of Loose's medical expenses beyond April 24, 1988 will be reversed and the Employer will be directed to pay all said medical expenses.

Loose also contends that the Board erred in upholding the referee's dismissal of the penalty petition. The referee declined to assess penalties against the Employer for its failure to pay the medical expenses incurred prior to the granting of the termination petition. Loose argues that the Employer's failure to pay his medical expenses constituted a violation of the Act warranting the imposition of penalties, pursuant to Section 435 of the Act, 77 P.S. § 991.

Section 435 of the Act provides as follows:

(d) The department, the board, or any court which may hear any proceedings brought under this act shall have the power to impose penalties as provided herein for violations of the provisions of this act or such rules and regulations or rules of procedure:

(i) Employers and insurers may be penalized a sum not exceeding ten per centum of the amount awarded and interest accrued and payable: Provided, however, That such penalty may be increased to twenty per centum in cases of unreasonable or excessive delays. Such penalty shall be payable to the same persons to whom the compensation is payable. 77 P.S. § 991(d)(i) (emphasis added).

This Court has held that an employer's unjustified, unilateral withholding of benefits in violation of the Act triggers the penalty provision at Section 435. Moody v. Workmen's Compensation Appeal Board (Philadelphia Inquirer), 127 Pa.Commonwealth Ct. 65, 560 A.2d 925 (1989); M.A. Bruder & Son, Inc. v. Workmen's Compensation Appeal Board (Harvey), 86 Pa.Commonwealth Ct. 353, 485 A.2d 93 (1984).

We recognize that the referee does have discretion in determining whether to impose penalties under Section 435 of the Act. Magayna v. Workmen's Compensation Appeal Board (Jones & Laughlin Steel Corporation), 115 Pa. Commonwealth Ct. 268, 539 A.2d 952 (1988). The referee found that the hospital bills in question were not reasonable or necessary and concluded that the Employer was not obligated to pay the same, except for the first week of hospitalization. The referee further concluded that since the Employer relied on the testimony of its expert witness in this regard, the imposition of penalties was unwarranted. The Board agreed with the referee's determination that there was a reasonable basis for the Employer to contest the payment of the medical expenses. Whether or not the Employer had a reasonable basis for...