Thomas, Thomas & Hafer Attorney Chris Scott Prevails in Commonwealth Court on Illegal Self-Referral Fee Review with Far Reaching Implications

TT&H attorney, Christopher Scott, prevailed in a hotly contested case involving illegal self-referrals of doctors who have ownership stakes in pharmacies. The Commonwealth Court affirmed the decision of the Bureau of Workers’ Compensation Fee Review Hearing Office (Judge Torrey acting as a Med Fee Hearing officer) in 700 Pharmacy v. State Workers’ Insurance Fund (SWIF). Chris convinced the Court to affirm Judge Torrey’s decision that the illegal self-referral provision of the Workers’ Compensation Act applied directly to pharmacies, notwithstanding the pharmacy’s argument that the word “pharmacy” is not found in that provision.

Anti-Referral Provision

At issue was whether the prescriptions forming the basis of the fee review applications were correctly denied as being the product of a prohibited self-referral under Section 306(f.1)(3)(iii) of the Act. The Pharmacy argued that the anti-referral provision did not apply to pharmacies or pharmaceuticals because these were not specifically listed in the Act. The court rejected this argument, interpreting the term “goods or services” to include medications. Importantly, the Court found the anti-referral provision was intended to cover a broad range of medical goods and services, including pharmaceuticals​​.

Legislative Intent and Statutory Interpretation

Chris argued the principles of statutory interpretation to convince the Court to conclude that the term “goods or services” in the anti-referral provision encompasses medications. Chris emphasized that the General Assembly intended for the provision to have a broad application to prevent cost inflation and self-dealing in the healthcare sector and the Court agreed. The Court noted that the Department of Labor and Industry’s regulations, which incorporated and follow the federal Stark Amendments, further supported this interpretation. These regulations prohibit self-referral arrangements involving outpatient prescription drugs, aligning with the intent to prevent conflicts of interest in medical referrals​​.

Conclusion

The court found substantial evidence supporting the Hearing Officer’s findings that the prescriptions were indeed the result of a prohibited self-referral, given the financial interest of the prescribing physician in Pharmacy. Thus, the court affirmed the decision to deny and dismiss the fee review applications, concluding that the prescriptions violated the anti-referral provision of the Workers’ Compensation Act​​.

With a massive amount of fee reviews being held in abeyance pending this decision, there were many dollars regarding illegally self-referred prescription medication at play.  This victory is potentially applicable to insurers outside of the workers’ compensation arena regarding the prevention of illegal self-referrals of prescription medication.

For more information on this case, contact Chris Scott at 717.237.7111 or cscott@tthlaw.com.