Title: Pearson v. P. C. Buckner Steel Erection Co

State: north-carolina

Issuer: North Carolina Supreme Court

Document:

IN THE SUPREME COURT OF NORTH CAROLINA
No. 452PA97
FILED: 8 MAY 1998
RICHARD D. PEARSON,
Employee-Plaintiff
v.
C.P. BUCKNER STEEL ERECTION COMPANY, 
Defendant-Employer, 
and 
LIBERTY MUTUAL INSURANCE COMPANY, 
Defendant-Carrier 
-------------------- 
CARY HEALTH CARE CENTER, INC., d/b/a CARY MANOR NURSING HOME,
Intervenor
On discretionary review pursuant to N.C.G.S. § 7A-31 of
a decision of the Court of Appeals, 126 N.C. App. 745, 486 S.E.2d
723 (1997), reversing an order of the Industrial Commission
entered 19 December 1995.  Heard in the Supreme Court 10 March
1998.
The Jernigan Law Firm, by Leonard T. Jernigan, Jr., and
N. Victor Farah, for plaintiff-appellant; and Lore &
McClearen, by R. James Lore, for intervenor-appellant
Cary Health Care Center, Inc.
Hedrick, Eatman, Gardner & Kincheloe, L.L.P., by
Jeffrey A. Doyle, for defendant-appellees.
FRYE, Justice.
The issue presented by this case of first impression 
is whether an employer who denies liability but is ordered to pay
medical expenses under the Workers’ Compensation Act (Act) may
fulfill this obligation by merely reimbursing Medicaid where
Medicaid has paid medical providers a portion of the cost of
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treatment or whether the employer must also pay medical providers
the difference between the amount covered by Medicaid and the
full amount authorized by the Act under the Industrial Commission
(Commission) fee schedule for medical expenses.
This case arises out of an accident on 4 May 1992 in
which plaintiff fell while at work at a construction site and
sustained severe injuries resulting in quadriplegia.  Although
defendant-employer denied liability, by an opinion and award
entered 7 February 1995, the Commission concluded that the
accident arose out of and in the course of plaintiff’s
employment.  Defendants were ordered to pay all of plaintiff’s
reasonable and necessary medical expenses, in addition to $299.67
per week in temporary total disability compensation.  Defendants
did not appeal this decision of the Commission.
On 6 November 1995, plaintiff’s attorney notified the
Commission that defendants had reimbursed Medicaid for amounts
paid for plaintiff’s medical care but refused to pay medical
providers for the difference between their full charges and the
amounts paid by Medicaid.  On 8 November 1995, Cary Health Care
Center, Inc. (Cary Health), which had provided medical services
to plaintiff and received partial payment from Medicaid, moved to
intervene and appear before the Commission and to require
defendant-carrier to pay plaintiff’s outstanding medical bills. 
Cary Health was allowed to intervene by order of the Commission
filed 28 November 1995.  The Commission treated plaintiff’s
letter as a motion for an order directing defendants to pay the
medical providers the difference between the fees allowed under
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the Commission’s fee schedule and the amounts paid by Medicaid. 
By an order dated 19 December 1995, the Commission granted
intervenor’s motion and ordered defendant-carrier to pay
intervenor $49,883.81 for medical treatment provided to
plaintiff.  The Commission also granted plaintiff’s motion,
ordering defendant-carrier to pay plaintiff’s other medical care 
providers the difference between the Medicaid amounts already
reimbursed and the amount allowable for medical expenses under
the Act, and ordered defendant-carrier to pay the cost of the
action, including attorneys’ fees, pursuant to N.C.G.S. § 97-88.
Defendants moved the Commission to reconsider its
order; for an evidentiary hearing; and, in the alternative, to
amend its order.  These motions were denied on 6 March 1996, and
defendants appealed to the Court of Appeals.  The Court of
Appeals reversed the Commission, holding that, by reimbursing
Medicaid, defendants’ responsibility for past medical expenses
under the 7 February 1995 opinion and award had been met.  The
Court of Appeals further reversed the Commission’s 19 December
1995 award of attorneys’ fees to plaintiff and intervenor.  On
6 November 1997, this Court allowed plaintiff and intervenor’s
joint petition for discretionary review.
As an initial matter, we must address defendants’
contention that the Commission lacked subject matter jurisdiction
to enter its orders of 19 December 1995 and 6 March 1996.  
Defendants’ position is that while the Commission has authority
to determine the fees of health-care providers and approve the
providers’ charges, it exceeds the Commission’s statutory
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jurisdiction to make a determination as to whether a health-care
provider may receive payment pursuant to workers’ compensation
laws subsequent to accepting payment from Medicaid.
The jurisdiction of the Commission is limited and
conferred by statute.  See Clark v. Gastonia Ice Cream Co., 261
N.C. 234, 238, 134 S.E.2d 354, 358 (1964); Letterlough v. Akins,
258 N.C. 166, 168, 128 S.E.2d 215, 217 (1962).  Section 97-91 of
the North Carolina General Statutes provides that “[a]ll
questions arising under [the Workers’ Compensation Act] . . .
shall be determined by the Commission, except as otherwise herein
provided.”  N.C.G.S. § 97-91 (1991).  Thus, it is well
established that the Commission is not a court with general
implied jurisdiction.  See Hogan v. Cone Mills Corp., 315 N.C.
127, 137, 337 S.E.2d 477, 483 (1985).  However, the Commission
“possesses such judicial power as is necessary to administer the
Workers’ Compensation Act.”  Id. at 138, 337 S.E.2d at 483.  This
Court has recognized that the General Assembly intended the
Commission to have continuing jurisdiction of proceedings begun
before it.  Id. at 139, 337 S.E.2d at 484.  We believe that the
Commission’s “supervisory power over its judgments,” id. at 140,
337 S.E.2d at 485, includes the authority to enter orders to
enforce those judgments.  The authority to set and approve
medical fees is granted to the Commission by statute.  N.C.G.S.
§§ 97-26(a), -90(a) (Supp. 1997).  Having found that defendants
are liable for plaintiff’s reasonable and necessary medical
expenses, the Commission retains jurisdiction over the case to
determine which expenses must be paid and in what amount.
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Defendants contend that the Commission did not have
statutory jurisdiction to determine whether a medical provider’s
agreement with Medicaid precludes that provider from receiving
payment pursuant to workers’ compensation law subsequent to
accepting payment under Medicaid.  The primary issue, defendants
argue, involves the interpretation and application of federal and
state statutes and regulations enacting and implementing the
Medicaid program.  In this way, defendants frame the issue as a
collateral dispute outside the scope of the Commission’s
jurisdiction.  Defendants rely on Eller v. J&S Truck Servs., 100
N.C. App. 545, 397 S.E.2d 242 (1990), disc. rev. denied, 328 N.C.
271, 400 S.E.2d 451 (1991), in which the Court of Appeals held
that, despite its authority to approve attorneys’ fees under
N.C.G.S. § 97-90, the Commission’s jurisdiction did not extend to
cover a dispute between the plaintiff’s attorneys over the
division of those fees.  We do not find Eller persuasive.   
In this case, on 7 February 1995, the Commission
ordered defendants to pay the reasonable and necessary medical
expenses of plaintiff.  Defendants did not appeal from that
award.  Approximately nine months later, plaintiff’s attorney
informed the Commission by letter that “[a] dispute has arisen
between the parties regarding the extent to which the defendants
are liable for past medical.”  The Commission treated plaintiff’s
letter as a motion to, in effect, require defendants to comply
with the February opinion and award by paying the full amount
owed pursuant to the Act.  The issue before the Commission in
this case is not analogous to the disagreement between the
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plaintiff’s attorneys over the division of a lump sum awarded as
fees in Eller.  Here, the Commission was required to determine
whether defendants had fulfilled their obligation to pay
reasonable and necessary medical expenses under a duly entered
award.  We conclude that the Commission acted properly to enforce
its earlier judgment and that it did not exceed the scope of its
statutory authority.  On this issue, we affirm the Court of
Appeals.
We now come to the substance of this case:  whether an
employer who denies liability but is ultimately ordered to pay an
employee’s medical expenses under this state’s workers’
compensation law may fulfill this obligation by reimbursing
Medicaid for amounts paid to medical providers for a portion of
the cost of the employee’s medical treatment.  We begin by
reviewing the relevant statutory schemes.
The Workers’ Compensation Act, N.C.G.S. ch. 97 (1991 &
Supp. 1997), was enacted “in 1929 to both ‘provide swift and sure
compensation to injured workers without the necessity of
protracted litigation,’ and to ‘insure[] a limited and
determinate liability for employers.’”  Charlotte-Mecklenburg
Hosp. Auth. v. N.C. Indus. Comm’n, 336 N.C. 200, 203, 443 S.E.2d
716, 718-19 (1994) (quoting Rorie v. Holly Farms Poultry Co., 306
N.C. 706, 709, 295 S.E.2d 458, 460 (1982)) (alteration in
original).  The rights of the employee and the liability of the
employer under the Act “are founded upon mutual concessions” by
which each party “surrenders rights and waives remedies”
previously available.  Lee v. American Enka Corp., 212 N.C. 455,
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462, 193 S.E. 809, 812 (1937).  “The basic operating principle of
the Act is that an employee is automatically entitled to certain
benefits whenever he suffers either a personal injury by accident
occurring in the course of the employment and arising out of it,
or incurs an occupational disease.”  Charlotte-Mecklenburg Hosp.
Auth., 336 N.C. at 204, 443 S.E.2d at 719.  The Act requires the
employer to provide medical compensation to the injured employee,
and the Commission may order medical compensation if the employer
does not provide it.  Id.; N.C.G.S. § 97-25.
Medicaid, Title XIX of the Social Security Act, 42
U.S.C. §§ 1396-1396v (1994), was enacted by Congress in 1965 to
establish a federal-state cooperative system of providing medical
assistance to “families with dependent children and . . . aged,
blind, or disabled individuals, whose income and resources are
insufficient to meet the costs of necessary medical services.” 
42 U.S.C. § 1396.  Each participating state must develop a plan
for medical assistance which complies with the requirements of
Title XIX.  See Harris v. McRae, 448 U.S. 297, 301, 65 L. Ed. 2d
784, 794 (1980); see also Lackey v. N.C. Dep’t of Human
Resources, 306 N.C. 231, 235, 293 S.E.2d 171, 175 (1982).  North
Carolina has elected to participate in the Medicaid program and
has adopted a state plan for medical assistance.  N.C.G.S. §§
108A-54 to -70.5 (1997); 10 NCAC ch. 26.  Medicaid, as
implemented by the coordinate state plans, is intended only as a
safety net for those unable to otherwise obtain adequate medical
care, and thus, state plans must take steps to ensure that
Medicaid is the payor of last resort.  See, e.g., 42 U.S.C. §
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1396a(a)(25)(A) (directing that a state plan for medical
assistance must provide “that the State or local agency
administering such plan will take all reasonable measures to
ascertain the legal liability of third parties . . . to pay for
care and services”).
The purposes of these two statutory schemes do not
appear to be inconsistent.
Congress has the power to preempt state law by virtue
of the Supremacy Clause of Article 4 of the United States
Constitution.  The United States Supreme Court has stated:
Pre-emption occurs when Congress, in enacting
a federal statute, expresses a clear intent
to pre-empt state law, when there is outright
or actual conflict between federal and state
law, where compliance with both federal and
state law is in effect physically impossible,
where there is implicit in federal law a
barrier to state regulation, where Congress
has legislated comprehensively, thus
occupying an entire field of regulation and
leaving no room for the States to supplement
federal law, or where the state law stands as
an obstacle to the accomplishment and
execution of the full objectives of Congress. 
Pre-emption may result not only from action
taken by Congress itself; a federal agency
acting within the scope of its
congressionally delegated authority may
pre-empt state regulation.
. . . .
The critical question in any pre-emption
analysis is always whether Congress intended
that federal regulation supersede state law.
Louisiana Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 368-69, 90 L.
Ed. 2d 369, 381-82 (1986) (citations omitted).
Defendants contend, and the Court of Appeals agreed,
that federal law controls the outcome of this case because the
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portion of the state medical assistance plan allowing providers
to accept payment from third parties, formerly 10 NCAC 26K
.0006(c) (Apr. 1990), now .0006(e) (Jan. 1996), conflicts with
federal Medicaid regulations.  Defendants assert that intervenor
and other medical-care providers may not receive the outstanding
portion of the cost of plaintiff’s treatment ordered by the
Commission because they previously accepted payment from
Medicaid.  They point to 42 C.F.R. § 447.15, which states that a
participating provider must accept, as payment in full, amounts
paid by the Medicaid agency and any copayment required by the
plan to be paid by the individual.  By invoking this federal
regulation, defendants seek to avoid full compliance with the
order of the Commission that they pay the medical expenses of
plaintiff which the Commission may determine to be reasonable and
necessary.
Defendants rely on Evanston Hosp. v. Hauck, 1 F.3d 540
(7th Cir. 1993), cert. denied, 510 U.S. 1091, 127 L. Ed. 2d 215
(1994), in which a hospital filed an action against the Illinois
Department of Public Aid (IDPA), the state Medicaid agency.  The
plaintiff-hospital sought to return a partial payment made by
IDPA for the care of a formerly indigent patient in order to file
a suit against the patient after he won a $9.6 million judgment
in a tort action stemming from his accident.  The United States
Court of Appeals for the Seventh Circuit rejected the hospital’s
attempt to return the Medicaid payment and seek the full amount
of the original bill from the now-solvent patient.  In so
holding, the Evanston court accused the hospital of attempting
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“to turn Medicaid upside down by converting the system into an
insurance program for hospitals rather than for indigent
patients.”  Id. at 544.
We note several distinguishing features of Evanston
that convince us it is not controlling under the circumstances of
the instant case.  Significantly, this is not an action brought
by a provider as an attempt to “get out of” an agreement with
Medicaid.  Additionally, Evanston involved a plaintiff’s recovery
under tort law, not an award pursuant to workers’ compensation
law.  The decisive factor, however, is that the health-care
providers in this case, including intervenor, are not seeking any
additional payment from plaintiff, the patient.  Unlike Evanston,
intervenor and the other health care providers in this case seek
to recover, under the Workers’ Compensation Act, directly from
defendant-carrier, which was obligated by order of the Commission
to pay plaintiff’s reasonable medical expenses.  In the instant
case, the state Medicaid program has already accepted
reimbursement from defendants; Medicaid is now out of the
picture, and it remains the responsibility and duty of the
Commission to determine what medical expenses defendants are
liable for and in what amounts.
Defendants’ position is that plaintiff’s medical-care
providers that accepted Medicaid payments have been paid in full;
thus, defendants’ obligation under the Commission’s opinion and
award was fulfilled by reimbursing Medicaid.  If accepted, this
position would effectively allow employers and workers’
compensation carriers to substitute the Medicaid reimbursement
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rate for the Commission’s fee schedule for medical expenses.  To
construe federal Medicaid statutes and regulations as preempting
the state workers’ compensation law under these circumstances
would permit employers and carriers to reap a financial windfall
in savings on medical expenses by denying liability for workplace
injuries.  This result would clearly undermine a central purpose
of the Act, which is to provide “swift and sure” compensation
without protracted litigation.
We do not find the state Workers’ Compensation Act and
federal Medicaid statutes or regulations to be in conflict. 
Neither do we find that, by establishing the Medicaid program,
Congress expressed a clear intent to preempt state workers’
compensation law or to relieve an employer of any part of its
responsibility to provide medical compensation to an injured
employee.  We have examined the federal Medicaid statutes and
regulations put forth by defendants, and we find no specific
language therein referring to workers’ compensation.  Nor do we
find any language which may reasonably be construed as relieving
an employer from its obligation under state workers’ compensation
law to pay the reasonable medical expenses of an injured
employee.  Enforcement of the Act does not obstruct the
objectives of Congress in enacting Medicaid.  Moreover, it is not
“physically impossible” to comply with both federal Medicaid law
and the state law of workers’ compensation.  Thus, we conclude
that the obligation of defendants to pay the reasonable and
necessary medical expenses of plaintiff, and the ability of
intervenor and other providers to accept such payment, is not
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controlled or preempted by federal Medicaid statutes or
regulations.
We emphasize that there is no dispute in this case that
intervenor and other medical-care providers sought payment from
Medicaid because defendant-employer denied liability for
plaintiff’s injuries, and there is no contention that Medicaid
was billed by intervenor or other providers prior to exploring
the existence of other sources of payment in violation of state
or federal Medicaid law.
For the foregoing reasons, we hold that the
Commission’s 19 December 1995 order directing defendants to pay 
intervenor and plaintiff’s other health-care providers the
difference between the amount reimbursed to Medicaid and the
amount allowable under the Act was a proper exercise of its
authority.  We further hold that the Commission correctly applied
the workers’ compensation law of this State and that such law is
not preempted by federal Medicaid law.  We therefore reverse the
Court of Appeals’ holding that the Commission’s 19 December 1995
order was in error.  Because of this decision, it is unnecessary
to address plaintiff and intervenor’s additional argument that
this appeal was not properly before the Court of Appeals.  We
remand to the Court of Appeals for further remand to the
Industrial Commission for reinstatement of the 19 December 1995
order.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.