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Steel Creations v. Injured Workers Pharmacy

Supreme Court of Kentucky

August 24, 2017

STEEL CREATIONS BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; PRESTON HIGHWAY METERED CONCRETE, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; MURRAY ELECTRONICS, BY AND THROUGH KESA, THE KENTUCKY WORKERS COMPENSATION FUND; FAMILY ALLERGY AND ASTHMA, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; AND SAMARITAN ALLIANCE, BY AND THROUGHKESA, THE KENTUCKY WORKERS' COMPENSATION FUND APPELLANTS
v.
INJURED WORKERS PHARMACY; KEVIN KERCH; DONALD GRAMMER; KEM BARNES; RITA MERRICK; SHAUNA LITTLE F/K/A HARDIN; HON J. LANDON OVERFIELD, CHIEF ADMINISTRATIVE LAW JUDGE; WORKERS' COMPENSATION BOARD; AND JACK CONWAY, ATTORNEY GENERAL APPELLEES AND INJURED WORKERS PHARMACY; KEVIN KERCH; DONALD GRAMMER; AND KEM BARNES CROSS-APPELLANTS STEEL CREATIONS BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; PRESTON HIGHWAY METERED CONCRETE, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; MURRAY ELECTRONICS, BY AND THROUGH KESA, THE KENTUCKY WORKERS COMPENSATION FUND; FAMILY ALLERGY AND ASTHMA, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; SAMARITAN ALLIANCE, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; JACK CONWAY, ATTORNEY GENERAL; DWIGHT LOVAN, COMMISSIONER, DEPARTMENT OF WORKERS' CLAIMS; HON. J. LANDON OVERFIELD, CHIEF ADMINISTRATIVE LAW JUDGE; WORKERS' COMPENSATION BOARD; RITA MERRICK; AND SHAUNA LITTLE (HARDIN) CROSS-APPELLEES

         ON APPEAL FROM COURT OF APPEALS CASE NOS. 2015-CA-000218-WC, 2015-CA-000392-WC & 2015-CA-000422-WC WORKERS' COMPENSATION BOARD NOS. 03-WC-69871, 03-WC-73193, 04-WC-02145, 06-WC-00502, & 07-WC-80884

          COUNSEL FOR APPELLANTS/GROSS-APPELLEES, STEEL CREATIONS, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; MURRAY ELECTRONICS, BY AND THROUGH KESA, THEKENTUCKY WORKERS' COMPENSATION FUND; FAMILY ALLERGY AND ASTHMA, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; AND SAMARITAN ALLIANCE, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND: Joseph L. Ardery Griffin Terry Sumner Frost Brown Todd, LLC James Gordon Fogle Fogle Keller Purdy, PLLC.

          COUNSEL FOR APPELLANT/CROSS-APPELLEE, PRESTON HIGHWAY METERED CONCRETE, BY AND THOUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND: Joseph L. Ardery Griffin Terry Sumner Frost Brown Todd, LLC James Gordon Fogle Fogle Keller Purdy, PLLC Natalie Laszkowski Fulton & Devlin, LLC.

          COUNSEL FOR APPELLEE/CROSS-APPELLANT, INJURED WORKERS' PHARMACY: Charles E. Jennings Eric M. Lamb Lamb & Lamb, PSC.

          COUNSEL FOR APPELLEES/CROSS-APPELLANTS, KEVIN KERCH AND DONALD GRAMMER: Charles E. Jennings.

          COUNSEL FOR APPELLEE/CROSS-APPELLANT, KEM BARNES: Jeffery Roberts Roberts Law Office.

          COUNSEL FOR APPELLEE/CROSS-APPELLEE, RITA MERRICK: McKinnley Morgan Morgan Collins & Yeast.

          COUNSEL FOR APPELLEE/CROSS-APPELLEE, SHAUNA LITTLE F/K/A HARDIN: Paul Guthrie.

          COUNSEL FOR APPELLEE/ CROSS-APPELLEE, JACK CONWAY, ATTORNEY GENERAL: Andy Beshear Attorney General of Kentucky James Robert Carpenter Assistant Attorney General.

          COUNSEL FOR AMICUS CURIAE, INSURANCE INSTITUTE OF KENTUCKY: Kenneth J. Dietz Lucas & Dietz, PLLC

          COUNSEL FOR AMICUS CURIAE, KENTUCKY ASSOCIATION OF GENERAL CONTRACTORS: Gregory Lonzo Little Ferreri Partners PLLC

          OPINION

          KELLER JUSTICE.

         This matter arose from five separate medical fee disputes filed by KESA, the Kentucky Workers' Compensation Fund, on behalf of its insureds-Steel Creations, Preston Highway' Metered Concrete, Murray Electronics, Family Allergy and Asthma, and Samaritan Alliance. The disputes were filed against the Injured Workers' Pharmacy (IWP) and the insureds' employees/former employees-Kevin Kerch, Donald Grammer, Kem Barnes, Rita Merrick, and Shauna Little (Hardin), all of whom had their prescriptions filled by IWP. This litigation has involved three primary issues: (1) whether a pharmacy/pharmacist is a medical provider; (2) whether an injured worker is entitled to choose which pharmacy he or she uses to fill prescriptions or whether that "choice" belongs to the employer or its insurer; and (3) how to interpret the pharmacy fee schedule. The Chief Administrative Law Judge (CALJ) found that a pharmacy/pharmacist is a medical provider, which entitles an injured worker to choose where to have his or her prescriptions filled. The CALJ also found the pharmacy fee schedule is based on the amount a pharmacist pays a wholesaler for medication, and that IWP is entitled to interest on any underpayment by KESA. Finally, the CALJ found that KESA had brought its medical fee disputes "without reasonable ground and without reasonable medical or factual foundation." Therefore, the CALJ ordered KESA to pay the entire cost of the proceedings to IWP, Kem Barnes, Kevin Kerch, and Donald Grammer.[1] The Workers' Compensation Board (the Board) reversed the CALJ's award of costs but otherwise affirmed. The Court of Appeals affirmed the Board. For the following reasons, we affirm in part, vacate in part, and remand.

         I. BACKGROUND.

         The factual bases for the underlying individual claims are not dispositive of this appeal. However, they bear mentioning and we briefly summarize each claim below. Before doing so, we note that the underlying five claims were not consolidated but were assigned to the CALJ and joined for litigation purposes. Because the claims were not consolidated, the parties filed essentially the same evidence in each of the individual claims.[2] We address that jointly filed evidence separately after our summary of the individual claims.

         A. Rita Merrick

         Merrick, who worked for Family Allergy and Asthma Associates, suffered a work-related back injury on December 10, 2003. She subsequently underwent lumbar spine surgery and an Administrative Law Judge (ALJ) awarded her medical expense benefits and income benefits based on a 26.455 permanent disability rating with entitlement to the three times multiplier pursuant to Kentucky Revised Statute (KRS) 342.730(1)(c)1. Following the ALJ's award, the parties filed several motions to reopen, culminating in the motion KESA filed on March 31, 2010, which is the subject of this appeal.

         In its motion, KESA stated that it had provided Merrick with a medical card that permitted her to "conveniently purchase prescription drugs at the local pharmacies at a contracted price." KESA also stated that it had advised Merrick that the medical card was provided through a program administered by M. Joseph Medical (M. Joseph) and that KESA would only pay prescription bills submitted through the M. Joseph program.

         According to KESA, it had an agreement with M. Joseph which enabled KESA to reimburse Merrick's pharmacy "at a potentially lower price than what is required in the administrative regulation's fee schedule for prescription drugs." KESA noted that Merrick was not getting her prescriptions filled through the M. Joseph program but was getting them filled through IWP. KESA sought an order requiring Merrick to participate in the M. Joseph program.

         In her response, Merrick stated that she had difficulty getting her prescriptions timely filled when going through KESA or a KESA required pharmacy. However, she experienced no such problems when getting her prescriptions filled through IWP. The ALJ granted KESA's motion and reopened Merrick's claim.

         During the course of the litigation, Merrick testified that, when she presented a prescription at a KESA approved pharmacy, she had to wait while the pharmacist obtained authorization from KESA to fill it. This often resulted in multiple trips to the pharmacy, phone calls to the adjuster at KESA, and delays in getting her prescriptions filled that could extend to several days. As a result, Merrick contacted her attorney, who referred her to IWP. Once-Merrick switched to IWP, she began getting her prescriptions through the mail, and she did not experience any delays.

         B. Donald Grammer

         Grammer suffered a neck injury while working for Preston Highway Metered Concrete. He underwent a two-level cervical fusion and the ALJ awarded medical expense benefits and income benefits based on a 35% permanent impairment rating enhanced by the three times multiplier in KRS 342.730(1)(c)1. Citing the same reasons it cited "in Merrick's claim, KESA filed a motion to reopen Grammer's claim to contest his use of IWP to fill his prescriptions. The ALJ granted KESA's motion, and during the course of the subsequent litigation, Grammer testified that he switched to IWP to fill his prescriptions because he had experienced delays when using a KESA-preferred pharmacy. As did Merrick, Grammer testified that he often had to wait to get his prescriptions filled because the KESA-preferred pharmacist had to get authorization, a delay he did not experience with IWP.

         C. Shauna Little (Hardin)

         Little, a registered nurse, suffered a work-related neck injury and underwent a two-level cervical discectomy and fusion. An ALJ awarded Little medical expense benefits and income benefits based on a 27% permanent impairment rating enhanced by the three times multiplier in KRS 342.730(1)(c) 1. Three years after the ALJ rendered the opinion, KESA filed a motion to reopen Little's claim to contest medical expenses citing the same reasons it cited in the Merrick and Grammer claims. The ALJ granted KESA's motion but Little, who failed to appear at her deposition and who filed no evidence, did not actively participate in this litigation.

         D. Kern Barnes

         Barnes suffered a work-related low back injury and settled his claim for a lump sum based on a 5% permanent impairment rating. The settlement provided that Barnes's employer would remain liable for medical expenses. Slightly less than four years after the settlement, KESA filed a motion to reopen Barnes's claim citing the same reasons it cited in the Little, Merrick, and Grammer claims. The ALJ granted KESA's motion, and Barnes testified about the difficulties he had getting his prescriptions filled before he switched to IWP.

         E. Kevin Kerch

         Kerch suffered a work-related left upper extremity injury in July 2007. In February. 2009, the parties settled Kerch's claim based on a 24% permanent impairment rating and provided that Kerch's employer would remain liable for medical expense benefits. Approximately a year later, KESA filed a medical fee dispute contesting Kerch's use of IWP to fill his prescriptions, which the ALJ granted. As did the ...


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