Doctors’ Referrals to Pharmacy they had Stake in didn’t Violate Pa. Anti-referral Law

Case File

The Pennsylvania Supreme Court found that physicians' referring workers' compensation claimants to a pharmacy in which the physicians had a financial interest didn't violate the state's anti-referral statute because "prescription drugs" and "pharmaceutical services" didn't appear in the language of the law.

Case

700 Pharmacy v. Bureau of Workers' Compensation Fee Review Hearing Office, Nos. 97 MAP 2024, 98 MAP 2024, 99 MAP 2024, 100 MAP 2024, 101 MAP 2024

What Happened?

Two doctors were the treating physicians for several patients who had sustained injuries arising during the course of the patients' employment. As a result of their work-related injuries, the patients were receiving workers' compensation benefits under Pennsylvania's Workers' Compensation Act and were considered claimants.

As part of the claimants' treatment plans, the doctors wrote prescriptions that were filled by a pharmacy. The State Workers' Insurance Fund, which was the carrier for the claimants' respective employers, refused to pay for the claimants' prescriptions. In response, the pharmacy filed fee review applications in the Bureau of Workers' Compensation Medical Fee Review Office.

In response to the pharmacy's petitions, the Fund asserted that it was not required to pay for the prescriptions pursuant to an anti-referral provision in Pennsylvania law because the prescriptions were the result of unlawful self-referrals.

Before a hearing officer, the doctors stipulated that they had a financial interest in the pharmacy, but the pharmacy contended that the treatments in question did not have their genesis in prohibited self-referrals for prescription drugs and pharmaceutical services.

The hearing officer rejected this argument, finding that while the anti-referral provision does not specifically identify prescription drugs, prescriptions for medications are plainly captured within the statute's inclusion of "goods or services."

The pharmacy appealed to the Commonwealth Court, arguing that the anti-referral provision's bar on self-referrals applied only to the categories of services specifically enumerated in the statute and that since prescription drugs and professional pharmaceutical services were not among those enumerated categories, they were not encompassed within the anti-referral provision's ambit.

The Commonwealth Court rejected the pharmacy's argument. Following the legal principle of "ejusdem generis," which directs that "where general words follow the enumeration of particular classes of persons or things, the general words will be construed as applicable only to persons or things of the same general nature or class as those enumerated, the court determined that prescription drugs and professional pharmaceutical services "fell comfortably" within the anti-referral provisions "goods or services" catchall.

The pharmacy appealed to the Pennsylvania Supreme Court, which took up the issue of whether, because the anti-referral provision neither included nor referred to prescription drugs or professional pharmaceutical services, the pharmacy was entitled to payment for prescription drugs and pharmaceutical services provided to claimants whose physicians had a financial interest in the pharmacy.

Rule of Law

Under the anti-referral provision of Pennsylvania workers' compensation law, it is unlawful for a provider to refer a person for laboratory, physical therapy, rehabilitation, chiropractic, radiation oncology, psychometric, home infusion therapy or diagnostic imaging, goods or services pursuant to this section if the provider has a financial interest with the person or in the entity that receives the referral.

What the Pennsylvania Supreme Court Said

According to the Pennsylvania Supreme Court, the plain language of the statute evidences that the ban on self-referrals is limited to the enumerated list. The Pennsylvania Supreme Court faulted the Commonwealth Court for reading "goods or services" in isolation.

"The proper reading of the anti-referral provision's plain language is that the phrase 'goods or services' after each enumerated service," the Pennsylvania Supreme Court wrote. "The plain language of the statute did not intend for 'goods or services' to be a catchall category bringing non-enumerated medical services within the anti-referral provision's prohibition on self-referrals."

The Pennsylvania Supreme Court reasoned that the enumerated services constituted a list of eight alternative services for which providers are prohibited from providing self-referrals and not eight alternative services followed by an additional catchall category.

"In the context of the self-referral provision, the enumerated services amount to a list of alternatives that together are modified by the phrase 'goods or services,'' the Pennsylvania Supreme Court wrote. "If, instead, the General Assembly intended 'goods or services' to be included in that list, it would have placed the 'or' between 'diagnostic imaging' and 'goods or services,' thus creating a list of nine alternative categories of prohibited self-referrals."

Verdict: The Pennsylvania Supreme Court reversed the holding of the Commonwealth Court.

Takeaway

The words "goods and services" in the Pennsylvania Workers' Compensation Act isn't a catchall" in the law's self-referral provision but modifies the enumerated services in the statute.

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