eNotes: Workers’ Compensation – January 2024 – Pennsylvania

SIGNIFICANT CASE SUMMARIES

Pennsylvania Case Summaries

Smith v. Warwick School District, et. al. (WCAB)
Commonwealth Court of Pennsylvania
No. 1241 C.D. 2021; No. 1240 C.D. 2021

Decided: December 20, 2023

Allegations of child abuse resulting in psychological injuries are not enough to establish an abnormal working condition.

Background

The Claimant, a teacher for the School District, filed a Claim Petition alleging that she experienced disabling psychological injuries as a result of her Employer accusing her of child abuse. After a complaint was filed with the authorities, the School District conducted an investigation and the Claimant was placed on a five-day suspension without pay. The Workers’ Compensation Judge (WCJ) granted the Claimant’s Claim Petition, finding that she had met her burden of proof to establish a psychological injury. The Employer appealed to the Workers’ Compensation Appeal Board (Board), which reversed the WCJ, concluding that the Claimant had failed to establish an “abnormal working condition,” an issue central to establishing causation for a psychological injury. The Claimant then appealed to the Commonwealth Court, asking the Court to consider whether the Board erred in concluding that the Claimant failed to establish the existence of an abnormal working condition.

Holding

The Court held that the Board did not err in reversing the WCJ when the Board held that the Claimant failed to establish the existence of an abnormal condition in her “mental/mental” claim. When a claimant alleges a mental stimulus causing a mental injury, the claimant must establish (a) that actual extraordinary events occurred at work which caused the trauma or that those specific events can be pinpointed in time, or (b) that abnormal working conditions over a longer period of time caused the injury.

In affirming the Board, the Court reviewed whether an abnormal working condition caused the Claimant’s psychological injury, or whether the Claimant’s subjective reactions to normal working conditions caused the injury. The Court concluded that there was nothing unusual about the filing of a suspected child abuse report, nor was there anything unusual about the Employer placing the Claimant on administrative leave during the subsequent investigation. Specifically, the Court noted that disagreeing with the result of a proper investigation does not transform that investigation into an abnormal working condition.

Takeaway

Psychological injury cases are highly fact-specific. Establishing an “abnormal working condition” is an extremely high burden for the claimant to meet when claiming a mental/mental injury. If you are in a situation where a psychological injury is being claimed, extensive investigation must be conducted before deciding to accept the claim. If there is any question as to compensability, the claim should be denied, forcing the claimant to meet the high burden of proving an “abnormal working condition.”

Questions about this case can be directed to A. Catherine McLaughlin at (412) 926-1421 or cmclaughlin@tthlaw.com.

Federated Ins. Co. v. Summit Pharmacy (Bureau of Workers’ Comp. Fee Rev. Hrg. Office)
Commonwealth Court of Pennsylvania
No. 115 C.D. 2023 (Pa. Cmmw. Ct. Jan. 2, 2024)

Decided: January 2, 2024

Insurance companies can look forward to a more accurate pricing landscape as the Commonwealth Court ditches Red Book pricing for a new schedule based on actual average wholesale prices. This substantial shift promises improved precision and fairness in valuation strategies.

Background

The case involves a Workers’ Compensation dispute where the Claimant received prescription medications through an online pharmacy, leading to a Fee Review. The Fee Review determinations were based on the use of the “Red Book,” a privately published compendium of drug prices. The insurer argued that the Red Book pricing was inflated, seeking to use the National Average Drug Acquisition Cost (NADAC) for reimbursement.

Traditionally, bills were assumed to be paid at 110% of the “Average Wholesale Price” (AWP), with AWP derived from the Red Book. However, it was recognized that Red Book AWP figures, especially for generics, do not accurately reflect the true AWP, sometimes listing prices up to 100 times higher than the actual average wholesale price.

In the underlying case, after the insurer paid pharmacy bills using the NADAC guide, a Fee Review Hearing Officer sided with the pharmacy, directing additional reimbursement based on Red Book values, as the insurer failed to prove proper reimbursement under the relevant regulations, leading the insurer to file the appeal.

Holding

The Commonwealth Court found Red Book values used by the Bureau inconsistent with the statutory language of the Workers’ Compensation Act. It found that the Red Book did not meet the “accuracy” requirement as set forth in prior precedential cases. The order directing reimbursement based on these values was reversed. The case was remanded for further proceedings, with a stay until the Bureau identifies a nationally recognized schedule of AWP for payment disputes. Once fulfilled, a Hearing Officer will conduct an evidentiary hearing and issue a new decision in line with the presented opinion.

Takeaway

This Decision marks a clear triumph for insurance companies, representing a significant and decisive victory in the evolving landscape of the Pennsylvania Workers’ Compensation prescription drug fee review and pharmacy billing system. The system has undergone an unprecedented and momentous shift with this development.

It remains uncertain whether this case will be appealed to the Pennsylvania Supreme Court, but until such time, payers are required to pay exclusively based on the actual AWP published in a precise and nationally recognized schedule, not the Red Book. Further, it remains to be seen whether the NADAC guide will be this new schedule. Until such time, the entire fee review segment of the Bureau of Workers’ Compensation remains in flux. This transformative shift is poised to result in substantial and noteworthy payment reductions, particularly for generic drugs. Insurance companies are encouraged to actively engage in fee review disputes, presenting compelling evidence to ensure precision in the determination of AWP.

Questions about this case can be directed to Christopher Scott at (717) 237-7111 or cscott@tthlaw.com or to Matt Mangapora at (412) 926-1437 or mmangapora@tthlaw.com.