Defense Digest, Vol. 31, No. 1, March 2025

Reimbursement of Pennsylvania Department of Human Services Lien Is Found Not Automatic by Pennsylvania Commonwealth Court

By
Daniel W. Deitrick

Key Points:

  • No formal liability for payment of work-related medical expenses is triggered on the part of the employer/insurer until such expenses are properly submitted in accordance with the terms and provisions of the Pennsylvania Workers’ Compensation Act and the Medical Cost Containment Regulations. 
  • The terms of the Workers’ Compensation Act place the burden on the claimant and their health care providers to produce and submit proper billing forms and related medical records to employers/insurers when seeking payment for medical expenses for compensable work injuries, even where the injured worker is a Medicaid recipient and a lien is asserted.

The Pennsylvania Commonwealth Court has addressed the circumstances under which a defendant’s liability to reimburse expenses incurred for medical treatment, including a Department of Human Services (DHS) lien, is formally triggered. In its precedential holding in Dura-Bond Coating, Inc. v. Ryan Marshall and PI&I Motor Express (WCAB), 328 A.3d 559 (Pa. Cmwlth. 2024), the court held that any obligation on the part of the defendant to pay for medical expenses, including a DHS lien, is not formally established until proper submission of same by the health care provider in accordance with the Medical Cost Containment Regulations and Reduction Provisions of the Pennsylvania Workers’ Compensation Act. In summary fashion, the court held the insurer was not required to pay any such medical expenses “unless and until the bills in question are submitted to them.”

Procedurally, the facts giving rise to the claim were not in dispute. Ryan Marshall, the claimant, sustained an injury while in the course of his employment on June 27, 2014, which resulted in amputation of both of his lower extremities, as well as related injuries. Litigation ensued, involving issues that included the proper employer for purposes of the Workers’ Compensation Act, culminating in a decision and order of the workers’ compensation judge deeming Dura-Bond and PI&I to be the claimant’s statutory employers. The former entity was ordered to pay the full amount of workers’ compensation benefits with entitlement to indemnification from the latter. Consequently, Dura-Bond reimbursed a health lien asserted by DHS for medical expenses paid on the claimant’s behalf up until that date. 

Thereafter, the claimant’s treating health care providers continued to remit medical expenses to DHS. DHS, in turn, continued to pay the claimant’s medical expenses, including both medical treatment causally connected to the work injury and treatment not formally deemed to have been work-related. Dura-Bond was ultimately notified by DHS of its lien, which eventually reached a figure exceeding $153,000. 

A review petition was ultimately filed by PI&I, which Dura-Bond joined, due to the aforementioned DHS lien. The petition averred the claimant failed to ensure that the health care provider(s) formally submitted all medical expenses in accordance with Section 306(f)(1) of the Workers’ Compensation Act, governing the payment process for medical expenses that are or have been deemed causally connected to the work injury. 

The workers’ compensation judge granted the review petition, finding that the health care providers—and DHS—were, or should have been, aware the employer was liable for the claimant’s medical expenses but continued to submit medical expenses directly to DHS. The judge, while recognizing the employer’s statutory duty to reimburse the lien asserted by DHS under Section 1409 of the Fraud and Abuse Control Act (FACA), specifically concluded that employers “are not obligated to reimburse the DHS lien…unless and until the bills in question are submitted to them for review, payment, denial, and/or utilization review in accordance with the…Act.” 

On the claimant’s appeal to the Workers’ Compensation Appeal Board, the Board reversed, finding the erroneous submission of the claimant’s medical expenses to DHS did not invalidate DHS’s entitlement to repayment. Thereafter, the employers appealed to the Commonwealth Court.

The court, noting this issue was one of first impression, reviewed the employer’s obligation to pay for reasonable and necessary medical expenses that are causally related to treatment for a compensable work injury under Section 306(f.1) of the Workers’ Compensation Act. The employers contended that, until they receive proper documentation commencing their statutory obligation to pay the expenses embodied in the DHS lien, any such obligation on their part is not formally established. Put another way, they argued that FACA and DHS regulations did not supersede their rights under the Workers’ Compensation Act. Conversely, the claimant submitted that the documentation requirements under the Act pertained only to providers, not lien holders—in this case, DHS. 

With respect to an employer’s liability for payment of medical expenses, the court noted that Section 306(f.1)(5) sets forth that the employer/insurer “shall make payment and providers shall submit bills and records in accordance with provisions of this section.” This has been interpreted to establish that an employer’s liability to pay providers for particular medical expenses for treatment incurred does not trigger until they receive and are afforded the opportunity to review medical reports and make an informed determination as to whether the treatments are causally connected to the work injury and are reasonable and necessary. 

However, the court also referenced pertinent provisions of the Medicaid Act, as well as DHS regulations, which prohibit Medicaid from being the primary insurance when a third party is legally liable for the expenses incurred for medical treatment, wherein DHS must “vigorously seek reimbursement from third parties liable for causing injuries to Medicaid recipients,” citing Miller v. Lankenau Hosp., 618 A.2d 1197, 1198 (Pa. Cmwlth. 1992). The court further maintained that DHS regulations require DHS to identify and use third-party liability sources to the fullest extent possible before making payment. Such third-party liability sources include employers and their workers’ compensation insurers. 

The court found that the Workers’ Compensation Appeal Board erred in interpreting FACA to supersede the Worker’s Compensation Act, which would result in employers being unable to challenge causality or reasonableness or necessity of the medical services for which DHS paid. The court further found that the Workers’ Compensation Act does not bar a valid DHS lien from being asserted but, rather, specifies when an employer/insurer must pay same. Specifically, an employer/insurer is responsible for reimbursing a DHS lien, but only when it receives the proper billing forms and related medical reports. 

Furthermore, the court noted the substantial evidence of record supported the workers’ compensation judge’s original finding, that the claimant’s health care providers circumvented Section 306(f)(1) of the Act and DHS paid the provider’s bills despite the workers’ compensation judge’s adjudication regarding the compensability of the work injury itself. Insofar as neither DHS nor the claimant’s providers had offered the employers the statutorily mandated billing forms and medical reports, the employers were deprived of the opportunity to review, reprice, deny, and/or seek utilization review of said expenses. Consequently, it can be asserted that the Act places the onus on the injured worker and his provider(s) to produce proper billing forms and related medical reports, and to formally submit same to the culpable employer once the work injury is deemed compensable. It was noted that, insofar as the claimant’s providers were paid by DHS for all medical treatments, notwithstanding any causal connection, or lack thereof, to the work injury itself, the providers were in possession of no incentive to submit proper billing and medical reports to the proper party, i.e., the employer/insurer. 

Other than the claimant obtaining the billing reports and related medical records from the providers, or having the providers send them directly to the employer/insurer, the court theorized that the parties could alternatively seek a “mutually agreeable solution” that satisfies both Section 306(f)(1) of the Act and Section 1409 of the FACA. As such, the court remanded the matter to the Appeal Board for further remand to the workers’ compensation judge to determine the best way to accomplish this.

Importantly, the court did not issue a specific directive or prospective resolution for proper submission of the medical expenses. One may theorize that the court’s holding places an obligation on the health care provider to properly submit expenses incurred for treatment to the appropriate and liable party, i.e., the employer/insurer. Regardless, the ruling can reasonably be construed to mean that no formal liability is triggered on the part of the employer/insurer until such medical expenses are properly submitted in accordance with the terms and provisions of the Workers’ Compensation Act and Medical Cost Containment regulations. 

*Dan, who works in our Pittsburgh office, is a member of our Workers’ Compensation Department. 

 

Defense Digest, Vol. 31, No. 1, March 2025, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2025 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.