Workers’ Compensation Appeal Board did not err in granting employer’s petition for a de novo hearing to present after-discovered evidence of a medical provider’s prohibited self-referral to a pharmacy that a workers’ compensation judge would not allow.

The claimant settled a 2010 work injury by Compromise and Release Agreement (C&R) in 2017. The C&R stated the employer reserved the right to either continue paying medical benefits or to fund a Medicare Set-Aside (MSA). The claimant continued receiving treatment from a physician who prescribed a compound pain cream. Bills were submitted to the insurance carrier for payment, and when payment was not issued, the pharmacy filed Fee Review Applications. Administrative Determinations were issued, ordering payment of the bills, which the employer did not appeal. Various requests were then made for payment that were denied. The claimant then filed a petition for penalties. 

Before the workers’ compensation judge, the employer argued that it was not liable for payment of the bills or for penalties because it believed the physician had a financial interest in the pharmacy, making it a prohibited self-referral under the Act. The claimant responded by arguing that this position should have been raised at the Fee Review level, which it was not. The employer then attempted to develop more evidence about the self-referral through subpoenas and the deposition of the physician, but their efforts were unsuccessful. The employer sought to introduce a stipulation from the pharmacy’s counsel used in a separate Fee Review proceeding, wherein the physician admitted to an ownership interest in the pharmacy. The employer’s request was denied by the judge, as was a later request to reopen the record to submit a Fee Review Hearing Officer’s decision approving the stipulation. The penalty petition was granted by the judge. 

The employer appealed to the Workers’ Compensation Appeal Board and filed a petition for hearing de novo under Section 425 of the Act. The Board granted the petition to address the issue of the prohibited self-referral and to allow for submission of the Hearing Officer’s decision into evidence. The Board vacated the workers’ compensation judge’s decision granting penalties and unreasonable contest fees and ordered a de novo hearing. A different judge was assigned by the Board to hold the hearing. Ultimately, the second judge found the physician had a financial interest in the pharmacy during the period covered by the claimant’s penalty petition. Based on the evidence presented at the hearing de novo, the Board found the pharmacy bills were not payable due to a prohibited self-referral under the Act and dismissed the penalty petition.

The claimant appealed to the Commonwealth Court, which affirmed the Appeal Board. They noted that the employer had attempted for years to obtain evidence to establish the prohibited self-referral. Further, the employer repeatedly attempted to obtain information from the pharmacy about whether the physician had a financial interest in it, as permitted by Section 127.206 of the Bureau Regulations. The pharmacy, however, failed to respond. According to the court, the employer properly invoked, and the Board properly granted, a de novo hearing under Section 425 of the Act.  

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