Pennsylvania Medical Providers Ass'n v. Foster

• Decision Date: 19 November 1990
• Citation: 582 A.2d 888,136 Pa.Cmwlth. 232
• Parties: PENNSYLVANIA MEDICAL PROVIDERS ASSOCIATION, Pennsylvania Osteopathic Medical Association, Arnold Sadwin, M.D., Jack A. Danton, D.O., Paul Sedacca, M.D., and Jenkintown Orth-Medics, Inc., Petitioners, v. Constance B. FOSTER, Insurance Commissioner of the Commonwealth of Pennsylvania, and Ernest D. Preate, Jr., Attorney General of the Commonwealth of Pennsylvania, Respondents.
• Court: Pennsylvania Commonwealth Court

Page 888

582 A.2d 888

136 Pa.Cmwlth. 232

PENNSYLVANIA MEDICAL PROVIDERS ASSOCIATION, Pennsylvania Osteopathic Medical Association, Arnold Sadwin M.D., Jack A. Danton, D.O., Paul Sedacca, M.D., and Jenkintown Orth-Medics, Inc., Petitioners, v. Constance B. FOSTER, Insurance Commissioner of the Commonwealth of Pennsylvania, and Ernest D Preate, Jr., Attorney General of the Commonwealth of Pennsylvania Respondents.

Commonwealth Court of Pennsylvania.

Argued June 13, 1990.

Decided Nov. 19, 1990.

Leonard Dubin, with him, Lawerence J. Beaser, George J. Krueger, Ann B. Laupheimer, and Howard A. Burde, Blank, Rome, Comisky & McCauley, Philadelphia, for petitioners.

Michael J. McCaney, Jr., Gordon, McCaney and Gordon, Philadelphia, for intervenors-petitioners, Pennsylvania Chiropractic Soc. and Mario A. Spoto, D.C.

Gregory P. Miller, Sp. Counsel, Philadelphia, with him, Linda J. Wells, Chief Counsel, Victoria A. Reider, Deputy Chief Counsel, Richard J. Enterline and Terrance A Keating, Asst. Counsel, Harrisburg, for respondent, Constance B. Foster, Insur. Com. of the Com. of Pa.

Sandra W. Stoner, Deputy Atty. Gen., with her, John G. Knorr, III, Chief Deputy Atty. Gen., Chief of Litigation Section, and Ernest D. Preate, Jr., Atty. Gen., Harrisburg, for respondent, Ernest D. Preate, Jr., Atty. Gen. of the Com. of Pa.

Ilene W. Shane, Disabilities Law Project, Philadelphia, for amicus curiae, United Cerebral Palsy of Pennsylvania and Families United Seeking Excellence.

Before CRAIG, President Judge, and DOYLE, COLINS, PALLADINO, McGINLEY, SMITH and PELLEGRINI, JJ.

COLINS, Judge.

Before this Court are preliminary objections of respondent, Constance B. Foster, Insurance Commissioner of the Commonwealth of Pennsylvania, to the Petition for Review, filed March 5, 1990, by petitioners, Pennsylvania Medical Providers Association, Pennsylvania Osteopathic Medical Association, Arnold Sadwin, M.D., Jack A. Danton, D.O., Paul Sedacca, M.D. and Jenkintown Orth-Medics, Inc. Petitioners seek to enjoin enforcement of Section 18 of the Act of February 7, 1990, P.L. 8 (Act 6), which substantially amended Section 1797 of the Pennsylvania Motor Vehicle Financial Responsibility Law (Law), 75 Pa.C.S. § 1797 to reduce the costs of automobile insurance by limiting medical benefits payments by insurers of automobiles. The amendments to Section 1797 became effective on April 15, 1990.

Prior to the enactment of Act 6, Section 1797 of the Law read:

A person or institution providing treatment, accommodations, products or services to an injured person for an injury covered by medical or catastrophic loss benefits shall not make a charge for the treatment, accommodations, products or services in excess of the amount the person or institution customarily charges for like treatment, accommodations, products and services in cases involving no insurance.

Following amendment by Act 6, Section 1797 prohibits a person or institution providing treatment, accommodations, products or services to an automobile accident victim for an injury covered by liability or uninsured and underinsured benefits, or first party medical benefits, including extraordinary medical benefits, for a motor vehicle (provider) from requiring, requesting or accepting payment

in excess of 110% of the prevailing charge at the 75th percentile; 110% of the applicable fee schedule, the recommended fee or the inflation index charge; or 110% of the diagnostic-related groups (DRG) payment; whichever pertains to the specialty service involved, determined to be applicable in this Commonwealth under the Medicare program for comparable services at the time the services were rendered, or the provider's usual and customary charge, whichever is less.

75 Pa.C.S. § 1797(a). Section 1797 also establishes a peer review program whereby automobile insurers are required to contract with Peer Review Organizations (PRO's). ¹ The insurer may question whether the treatment, services, products or accommodations provided to an injured person "conform to the professional standards of performance and are medically necessary" by submitting the challenge to a PRO for evaluation. 75 Pa.C.S. § 1797(b)(1).

Petitioners filed a Petition for Review addressed to the Court's original jurisdiction challenging the constitutionality of Act 6. Petitioners seek declaratory and injunctive relief in three counts. Count I alleges that Section 1797(a) of the Law is unconstitutional on its face and as applied to petitioners because by using Federal Medicare allowances as a basis by which to calculate provider reimbursement, the General Assembly has improperly delegated to the Federal Government its exclusive power to regulate the automobile insurance system in Pennsylvania, in violation of Article II, § 1 of the Pennsylvania Constitution. ² Count II alleges that Section 1797(a) and Section 1797(b) are unconstitutionally vague and ambiguous and violate the due process clause of the Fourteenth Amendment to the United States Constitution, and Article I, § 1 of the Pennsylvania Constitution. Count III alleges that the peer review provisions of Section 1797(b) are facially violative of the Fourteenth Amendment due process clause of the United States Constitution and Article I, § 1 of the Pennsylvania Constitution. It is alleged, inter alia, that these provisions allow private common nongovernmental PRO's with financial interests aligned with the insurer to control the amount the insurer pays a provider for treatment, accommodations, medical products or services provided for injuries covered by automobile insurance benefits without providing for any judicial review if the provider's charges are denied; that these provisions allow an insurer indefinitely to withhold payment from a provider for services rendered without providing for any judicial intervention; and that they provide the Insurance Commissioner with authority to approve PRO's without any standards or guidelines. The petition was supplemented with an application for special relief, which petitioners filed on March 14, 1990.

On March 27, 1990, the Pennsylvania Medical Society also filed a Petition for Review and Motion for Preliminary Injunction challenging the constitutionality of Section 1797. ³ These matters were not consolidated; however, the Court held joint hearings on the requests for special relief, due to the fact that they dealt with a common issue. Respondent, Attorney General, filed preliminary objections March 27, 1990, which were sustained and the Petition for Review was dismissed against the Attorney General by order dated June 1, 1990. The subject preliminary objections were filed by Respondent, Insurance Commissioner, on April 4, 1990. An amicus curiae brief was filed on behalf of United Cerebral Palsy of Pennsylvania and Families United Seeking Excellence on April 9, 1990. By order dated April 11, 1990, the Court granted a petition to intervene filed by the Pennsylvania Chiropractic Society and Mario A. Spoto, D.C.

Following the joint hearings, the Court issued identical orders on April 11, 1990, which, in essence, enjoined the respondent Commissioner from implementing or enforcing any portion of Section 1797(a) of the Law, but denied the petitioners' requests for relief concerning Section 1797(b). Respondent Commissioner appealed to the Pennsylvania Supreme Court, which served as an automatic supersedeas to this Court's order pursuant to Pa.R.A.P. 1736(b). ⁴ Petitioners filed a motion to vacate the automatic supersedeas, pending appeal, pursuant to Pa.R.A.P. 1732, which was granted from the bench on April 16, 1990, followed by written order dated April 17, 1990 and supported by an unreported opinion filed April 20, 1990. The Supreme Court, on April 19, 1990, reimposed the automatic stay pending appeal, temporarily staying this Court's April 17, 1990 order. An order was also issued by this Court April 23, 1990, postponing a hearing on petitioners' motion for a permanent injunction until further order of the Court.

Respondent Commissioner's preliminary objections contain demurrers to Counts I, II and III of the Petition for Review, averring that petitioners failed to state a cause of action because they have not alleged facts sufficient to prove the allegations set forth therein. Further, respondent avers that petitioners failed to join insurers writing automobile insurance in Pennsylvania as necessary parties to obtain declaratory relief and, therefore, that this Court lacks jurisdiction under the Declaratory Judgments Act. ⁵

In ruling on a demurrer, the Court must accept as true all well-pleaded allegations in the petition for review and all inferences reasonably deduced therefrom. Bryson v. Solomon, 97 Pa.Commonwealth Ct. 530, 510 A.2d 377 (1986) petition for allowance of appeal denied, 519 Pa. 668, 548 A.2d 257 (1988). We will sustain a demurrer only when it appears with certainty that the law permits no recovery if the facts are as pleaded. Id.

Respondent first maintains that there has been no improper delegation of power to the Federal government in Section 1797(a). The General Assembly merely chose to incorporate a Federal standard or method of calculation into Section 1797, which is a legitimate exercise of its legislative function. Commonwealth v. Warner Brothers Theatres, Inc., 345 Pa. 270, 27 A.2d 62 (1942); East Suburban Press, Inc. v. Township of Penn Hills, 40 Pa.Commonwealth Ct. 438, 397 A.2d 1263 (1979). Section 1797(a) does not empower the Federal government with law making authority over Pennsylvania automobile insurance reform and, therefore, is not violative of Article II, Section 1 of the Pennsylvania Constitution. Accordingly, we grant respondent's demurrer to Count I of the Petition for Review. ⁶

Respondents next argue that petitioners have failed to present facts sufficient to show that the provisions of Section 1797 are unconstitutionally vague or ambiguous. It is respondent's position that petitioners...