On December 21, 2015, the justices of the Supreme Court of Pennsylvania unanimously reversed a Superior Court decision that had awarded approximately $39,000 in attorneys’ fees to health care provider Doctor’s Choice Physical Medicine & Rehabilitation Center, based on what the intermediate appeals court had deemed an invalid peer review. The Supreme Court held that it is sufficient for an insurance carrier to submit a health care provider’s invoices to a peer-review organization (PRO) to challenge treatment as unnecessary and deny reimbursement under the Pennsylvania Motor Vehicle Financial Responsibility Law (MVFRL).

The Supreme Court focused its decision on the definition of a peer-review challenge by an insurer and agreed with the insurer that a conventional understanding of the word “challenge” was appropriate. Citing its own 2013 holding in Herd Chiropractic v. State Farm Mutual Automobile Insurance for the proposition that fee shifting cannot occur without express statutory authorization, the court said that the MVFRL fails to expressly authorize attorneys’ fees.

“Like Herd, this case centers upon whether there is ‘explicit’ statutory authorization within Section 1797 [of the MVFRL] for fee shifting where a carrier has tendered a timely challenge to the reasonableness or necessity of treatment to a [peer-review organization],” Chief Justice Thomas G. Saylor wrote for the court. “Upon review, we agree with Insurer and its Amici that there is no such explicit authorization.”

The case stemmed from Angela LaSelva’s 2004 motor vehicle accident, for which she treated with David G. Novatnak, a licensed chiropractor at Doctor’s Choice. Before treatment ended, Travelers Personal Insurance Co. submitted the Provider’s bills for a peer review. The PRO responsible for the peer review was IMX Medical Management Services. IMX enlisted Dr. Mark Cavallo to conduct the peer review, and he determined that treatment after June 9, 2005, was not reasonable or necessary. Travelers subsequently denied coverage for treatment following June 9, 2005.

Doctor’s Choice filed suit against Travelers alleging that the treatments were reasonable and necessary and that Dr. Cavallo’s review did not comport with the mandates of Section 1797 of the MVFRL, nor the Pennsylvania Code, which requires PROs to apply national or regional norms, Saylor said.

Section 1797 allows for the award of attorney fees if a court determines treatment, but only where “‘the insurer has not challenged’” the necessity before a PRO, Saylor said.

After a bench trial in Dauphin County, the trial court held in favor of Doctor’s Choice and included an award of attorneys’ fees. During the pendency of Travelers’ post-trial motion, the Supreme Court decided the Herd case, holding that Section 1797 does not serve as a basis for attorneys’ fees on provider challenges to peer-review determinations. In light of that decision, the trial court vacated its earlier award of attorneys’ fees, and the Superior Court then reversed that decision.

The Superior Court determined that because Dr. Cavallo’s review did not comport with statutory and regulatory requirements, Travelers had not challenged the reasonableness and necessity of treatment before a PRO, Saylor said, “even though the carrier did in fact submit relevant treatment records to a PRO for review in a timely fashion.”

Travelers argued that it challenged the invoices when it submitted them to a PRO for peer review based on a plain interpretation of the statute. In addition, Travelers argued that claims by Doctor’s Choice of bias in the peer-review process were misdirected and should be raised before the legislature, rather than the courts. The Supreme Court agreed.

“There simply is no express language in the statute signifying that a ‘challenge’ necessarily encompasses ensuing, completed, valid review,” Saylor said, noting that fee shifting is a “discrete facet,” not the “overarching thrust,” of Section 1797.

“The Superior Court’s construction of the statutory term ‘challenged before a PRO’ as necessarily ‘encompassing a valid completed peer review’…does not reflect direct application of explicit language”, Saylor said. The Supreme Court believed the intermediate court’s broader construction of the concept of challenge was policy driven. Citing to its decision in Herd, the Supreme Court reiterated that such policy considerations are best left to the legislature.

In addition, the Supreme Court criticized the intermediate court’s decision insofar as it asserted “without any developed explanation, that a plain-meaning interpretation of the word ‘challenged’ as it appears in Section 1797(b)(4) would render the remaining provisions of the Statute concerning the actual determinations of PROs meaningless.” According to the intermediate court, this would yield an “absurd” result. “Respectfully”, however, the Supreme Court held that it was “the Superior Court’s cryptic pronouncement of ‘absurdity’ that lack[ed] foundation.”

In conclusion, the court held that although it remains cognizant of the shortcomings of the peer-review regime, it refuses to deviate from conventional statutory interpretation to advance directed policy aims. “We have no reasonable means…of assessing the degree to which these [shortcomings] may be offset by the benefits of cost containment and potentially lower insurance premiums available to the public at large. Rather, the Legislature is invested with the implements to conduct investigations, hearings, and open deliberations to address such salient policy matters,” Saylor said.

Questions about the opinion, or how it may affect the handling of your first party case, can be directed to Ernest F. Koschineg and/or Jessica M. Heinz, at (610) 567-0700 or Ekoschineg@c-wlaw.com / Jheinz@c-wlaw.com.