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A New Published Opinion from a (Soon to Be) New and Improved Court of Appeals

by | Mar 31, 2021 | The Virginia Appellate Lawyer’s Court of Appeals of Virginia Blog |

Yesterday, the Court of Appeals issued its first published opinion in three weeks.  Today, Governor Northam signed into law Senate Bill 1261, the legislation that will expand the jurisdiction of the Court of Appeals and make all appeals to the Court by right (rather than by petition for criminal cases) as well as add six new judges to the Court.  While that very frightening prospect is in the distant future (January 1, 2022), let us turn our attention to the more present (if no less frightening for the typical practitioner of the legal arts) of Workers’ Compensation. In Summit Pharmacy Inc. v. Costco Wholesale (R) and Costco Wholesale Corporation we delve into one of the more arcane areas of this arcane area of the law as the Court of Appeals answers the burning question: Are Pharmacies Health Care Providers?  Now this may seem an obvious question to ask when a law provides for payments to be made to “Health Care Providers” by employers (or their insurance carriers, though in this case Costco, the employer, is self-insured) on behalf of injured employees, it apparently has never come up before.

How it came up is an interesting scenario.  Summit Pharmacy filled prescriptions for an employee of Costco — let’s call her Ryan Dove, because that is her name now though previously, she was Ryan Burke) — who suffered an injury by accident while an employee of Costco.  This was back in 2011 and early in 2012, Dove received an order awarding her Workers’ Compensation benefits that included “reasonable, necessary and authorized medical treatment.”  Summit filled a total of eight prescriptions for Dove related to her injury in 2014 at a total cost of $3,299.26.

[Editor’s note: Here is a tip to anyone who represents employers — point out that the major downside to self-insuring for workers’ compensation is the loss of access to deeply discounted medical billing rates that are negotiated by insurance carriers — a large employer like Costco might have avoid these charges by negotiating (or hiring a third party to do so) on its behalf.  However, whether insured or self-insured, employers cannot require injured workers to seek “in-network” care (or use prescription discount programs like GoodRX®, so it is possible that even with insurance, the prescriptions from this pharmacy might have been “rack rate.”].

Costco paid all but $881.36 of Summit’s claims.  The opinion does not say why Costco didn’t pay the remaining balance.  It may be that Summit failed to submit all the bills or didn’t supply required documentation, or perhaps Costco was somehow at fault.  In any case, whatever the reason, Summit waited more than four years to seek an order from the Commission for the balance due.

Four years?  Perhaps that fact suggest that the hypothesis that Summit was no diligent in billing is not too far off the mark.  Now here’s a little lesson in Workers’ Compensation practice — do not look to or rely on statutes of limitation in Title 8.01 to determine when a cause of action arises on a claim of unpaid Workers’ Compensation benefits.  Like most actions governed by administrative law, you must look to the enabling legislation or rules and regulations of the administrative agency to determine the appropriate procedures and limitations periods.  In this case, a claim on an open account from a health care provider — normally a contract matter in civil cases with up to a five-year statute of limitations — is subject to a limitation period of one year from the date of the last payment received.

But wait, says Summit, pharmacies are not health care providers (at least not as defined by the Workers’ Compensation Act).  In a hearing before a deputy commissioner, this argument was rejected, but — for reasons not explained in the opinion — the commissioner nonetheless awarded Summit $522.50, which Costco did not subsequently contest, in an opinion and ordered dated March 12, 2020.  The most likely reason is that this amount was the subject of a timely claim.  Regardless of the reason, Summit is now out only $358.86.  So, was Summit satisfied with this partial victory (the question is rhetorical, as we would not be here otherwise)?

Summit first sought a reconsideration from the commissioner, asserting that Costco was procedurally barred from seeking the protection of the statute of limitations.  The commissioner rejected this argument (the nature of which is not known for reasons that will soon become clear) in an order dated March 23, 2020.  Summit then sought a review of “the Opinion and findings of Deputy Commissioner Kennard, dated March 12,2020 relative to the Deputy’s Application of VA Code 65.2-605.1 to the Provider’s claims.” Now, you may be wondering at this point whether the express reference to the March 12 order will prove significant (or if you weren’t already, you are now).  Hint: it will.

The Commission first address the “are pharmacies health care providers,” by noting that it had always considered them to be so.  While this fact alone is not sufficient to bind the Commission or the courts, it certainly falls within the prerogative of an agency to interpret its own rules and procedures.  The rub is that nothing in the legislation or the Commission’s rules and regulations expressly excludes pharmacies from the category.  Moreover, one could make a good argument that the mere fact that drugs can only be dispensed by a licensed pharmacist and that the pharmacist must be present and available for consultation that the pharmacy is not merely a dispenser of drugs.

Now we turn to the next issue — whether Costco was required to jump through those procedural hoops to claim protection of the statute of limitation.  The answer is — we don’t care because the specific issue raised by Summit was the ruling in the March 12, 2020 order, not the subsequent March 23, 2020 order on the motion for reconsideration, where the claim was first addressed.

Summit appealed to the Court of Appeals, which affirms the Commission on all counts.  The opinion itself goes into to significant detail on why a pharmacy is a health care provider, and if you are genuinely curious, feel free to read all about it.  Likewise, the Court of Appeals finds that the specificity of the issue raised by Summit before the Commission constituted a wavier for the issue raised on reconsideration before the deputy commissioner.

Now, many may be wondering why Summit was so intent on collecting that $358.86?  Clearly, the expense of collecting that amount (or even the $881.36) was far more than the potential recovery. When someone is willing to spend so much to gain so little, you can almost assuredly guess that it is not “about the principle.”  Yes, I have known litigants who will spend thousands in a sincere belief that the light was green, not red, but here we are talking about a business decision — and no one stays in business long fighting for “principle” at $400 an hour (there are much cheaper ways to act on principle).  So why?  This is just an educated guess — but I think this was likely a test case to see whether pharmacies would be able to bypass not just the statute of limitations on claims by health care providers, but other requirements of the Workers’ Compensation Act and the Commissions regulations.

So, will Summit seek a writ in the Supreme Court?  Possibly, if the issue really is about more than just $358.86.  In case you are wondering how Summit would get around the jurisdictional limit of the Supreme Court of Virginia, which is $500, the answer is again that when dealing with administrative law, you don’t look to Title 8.01 — the jurisdictional limit applies only to appeals from the circuit courts.