Compounding Creams: Penalties on Top of High Costs

07.20.16

Employers are facing an expensive foe in recent years: compound creams. These pain creams are notorious in the workers' compensation world often costing much more than pill counterparts. Claims adjusters are struggling to find a proper way to approach these high-cost prescriptions. The adjuster searching for ways to manage the exposure needs to be cognizant of the potential consequences of his or her choices.

When a worker with an accepted injury is prescribed one of these pain creams, a good practice is for the adjuster to perform due diligence to the extent practicable. The adjuster could start with ensuring the provider is submitting the proper bills and reports. Under the Pennsylvania Workers' Compensation Act (Act), an employer does not have an obligation to pay for treatment until the requisite supporting documentation is received. If the documentation submitted does not really show that the cream is being prescribed for the accepted work injury, the adjuster can request additional information from the provider to make a more informed decision.

One emerging approach by workers' compensation claims adjusters has been the denial of payment of these compound creams, either on the basis of causal relationship, high cost, and/or the experimental nature of these creams. Adjusters need to be aware that a denial of payment for treatment of an accepted injury can lead to imposition of significant penalties.

There is Pennsylvania case law standing for the proposition that it is improper to deny payment or simply not pay medical expenses because the expenses are significant. Case law also says an employer may risk penalties, if expenses are denied as "unrelated" and a Workers' Compensation Judge (WCJ) later determines the expenses are in fact related to and payable for an accepted work injury. Concerning a denial on the basis of novelty or experimental nature, cases also hold that a WCJ does not have jurisdiction to rule on reasonableness or necessity of a treatment that has never gone through utilization review.

The Act provides that in cases of unreasonable or excessive delays, a WCJ is empowered to assess a penalty of up to 50 percent of medical expenses unpaid and payable. For those adjusters considering non-payment on the basis of causality, just to avoid a potential adverse utilization review determination:

Imagine an injured worker is prescribed ongoing compound creams with the adjuster routinely denying each $1,500 prescription every other week. It takes six months for the injured worker's attorney to catch wind that these expenses are being denied on the basis of causation. The attorney files a penalty petition that takes a year and a half to be fully litigated along with other consolidated petitions. By the time the WCJ exercises his or her discretion in finding penalties are payable, because the creams were prescribed for the accepted injury, $54,000 in expenses are outstanding. Was non-payment up front worth the risk of penalties?

Disclaimer: The contents of this post are for informational purposes only, are not legal advice and do not create and attorney-client relationship.

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Ralph Richardson
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rrichardson@wglaw.com

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