1998 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-13-1998

Sullivan v. Barnett

Precedential or Non-Precedential:

Docket 96-2140

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Recommended Citation

"Sullivan v. Barnett" (1998). 1998 Decisions. Paper 46.

http://digitalcommons.law.villanova.edu/thirdcircuit_1998/46
Filed March 13, 1998 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 96-2140 

DELORES SCOTT SULLIVAN; WILLIAM BATTLE; 

ANTHONY CANCILA; CHARLES MATTHEWS; 

CHRISTOPHER COSTELLO; LISA LEX; SUSAN HANSEN, 

On Their Own Behalf and on Behalf of All Similarly 

Situated Class Plaintiffs; PHILADELPHIA AREA PROJECT 

ON OCCUPATIONAL SAFETY AND HEALTH; THE 

PHILADELPHIA FEDERATION OF TEACHERS, Local 3, 

AFL-CIO 

v. 

ROBERT BARNETT, Secretary of Labor and Industry for

the Commonwealth of Pennsylvania; FRANK BEAL, 

Director of the Pennsylvania Bureau of Workers 

Compensation; CONSTANCE B. FOSTER, Insurance 

Commissioner for the Commonwealth of Pennsylvania; 

CATHERINE BAKER KNOLL, Treasurer, Commonwealth of 

Pennsylvania; JOHN P. O'MALLEY, Director, State 

Workers' Insurance Fund; AMERICAN MANUFACTURERS 

MUTUAL INSURANCE COMPANY; CIGNA CORPORATION; 

CONTINENTAL CASUALTY COMPANY; USF&G 

INSURANCE COMPANY; ZURICH AMERICAN INSURANCE 

COMPANY; SCHOOL DISTRICT OF PHILADELPHIA; 

JOHNNY J. BUTLER, Secretary of Labor and Industry of 

the Commonwealth of Pennsylvania; RICHARD A. 

HIMLER, Director of the Pennsylvania Bureau of Workers 

Compensation; COMMERCIAL UNION INSURANCE 

COMPANY; DONEGAL MUTUAL INSURANCE COMPANY; 

HARTFORD INSURANCE COMPANY 
 Delores Scott Sullivan, William Battle, Louis 

 Baumgartner,* Anthony Cancila, William C. 

 Dillon,* Terrence Ervine,* Charles Matthews,

 Christopher Costello, Lisa Lex, Susan Hansen, 

 Philadelphia Area Project on Occupational Safety 

 and Health and Philadelphia Federation of 

 Teachers, 

 Appellants 

*pursuant to Rule 12(a) FRAP 

On Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

(D.C. No. 95-cv-00201) 

Argued Thursday, September 11, 1997 

BEFORE: MANSMANN, NYGAARD and GARTH, Circuit Judges

(Opinion filed March 13, 1998) 

 Lorrie McKinley (Argued) 

 McKinley & Vonier 

 1333 Race Street 

 Philadelphia, PA 19107 

 Attorney for Appellants Delores Scott 

 Sullivan, William Battle, Anthony 

 Cancila, Louis Baumgartner and 

 Class Plaintiffs 

 2 
 Alan B. Epstein 

 Jablon, Epstein, Wolf & Drucker 

 The Bellevue, Ninth Floor 

 Broad Street at Walnut 

 Philadelphia, PA 19102 

 Attorneys for Appellants 

 Charles Matthews, Christopher 

 Costello, Lisa Lex, Terrence Ervine, 

 William C. Dillon, Susan Hansen, 

 and Class Plaintiffs 

 Thomas J. O'Brien 

 Galfand, Berger, Lurie, Brigham, 

 Jacobs, Swan & Jurewicz 

 1818 Market Street, Suite 2300 

 Philadelphia, PA 19103 

 Attorneys for Appellant 

 Philadelphia Area Project on 

 Occupational Safety and Health 

 Linda M. Martin 

 Ralph Teti 

 Willig, Williams & Davidson 

 1845 Walnut Street, 24th Floor 

 Philadelphia, PA 19103 

 Attorneys for Appellant/Intervenor 

 The Philadelphia Federation of 

 Teachers Local 3, AFL-CIO 

 3 
 D. Michael Fisher 

 Attorney General 

 Susan J. Forney (Argued) 

 Senior Deputy Attorney General 

 Calvin R. Koons 

 Senior Deputy Attorney General 

 John G. Knorr, III 

 Chief Deputy Attorney General 

 Chief, Litigation Section 

 Office of the Attorney General 

 of Pennsylvania 

 Department of Justice 

 Strawberry Square, 15th Floor 

 Harrisburg, PA 17120 

 Attorneys for Appellees 

 Robert Barnett, Secretary of Labor 

 and Industry for the Commonwealth 

 of Pennsylvania; Frank Beal, Director 

 of the Pennsylvania Bureau of 

 Workers Compensation; Constance B. 

 Foster, Insurance Commissioner for 

 the Commonwealth of Pennsylvania; 

 Catherine Baker Knoll, Treasurer, 

 Commonwealth of Pennsylvania; 

 John P. O'Malley, Director, State 

 Workers' Insurance Fund; Johnny 

 Butler, Secretary of Labor and 

 Industry of the Commonwealth of 

 Pennsylvania; Richard A. Himler, 

 Director of the Pennsylvania Bureau 

 of Workers Compensation 

 4 
 Arthur Makadon 

 Robert McL. Boote (Argued) 

 Burt M. Rublin 

 Cecelia E. Henry 

 Ballard, Spahr, Andrews & Ingersoll 

 1735 Market Street, 51st Floor 

 Philadelphia, PA 19103-7599 

 Attorneys for Appellees 

 American Manufacturers Mutual 

 Insurance Company, CIGNA 

 Corporation, Continental Casualty 

 Company, USF&G Insurance 

 Company, Zurich American Insurance 

 Company, Commonwealth Union 

 Insurance Company 

 Patricia F. Kerelo 

 Jan M. Ritchie 

 Schubert, Bellwoar, Cahill & Quinn 

 1400 Two Penn Center Plaza 

 Philadelphia, PA 19102-1890 

 Stephen J. Springer 

 Jeffrey D. Hutton 

 Rawle & Henderson 

 One South Penn Square 

 The Widener Building 

 Philadelphia, PA 19107 

 Pamela Tobin 

 Labrum and Doak 

 1818 Market Street, Suite 2900 

 Philadelphia, PA 19103 

 Attorneys for Appellee, 

 School District of Philadelphia 

 Robert E. Kelly, Jr. 

 Duane, Morris & Heckscher 

 305 North Front Street 

 P.O. Box 1003 

 Harrisburg, PA 17108-1003 

 Attorneys for Appellee Donegal 

 Mutual Insurance Company 

 5 
 Mark F. Horning 

 Shannen W. Coffin 

 Steptoe & Johnson, LLP 

 1330 Connecticut Avenue, N.W. 

 Washington, D.C. 20036 

 Craig A. Berrington 

 Bruce C. Wood 

 American Insurance Association 

 1130 Connecticut Avenue, N.W. 

 Washington, D.C. 20036 

 Attorneys for Amicus Curiae 

 American Insurance Association 

 Michael W. Jones, Esq. 

 Michael I. Levin & Associates 

 1800 Byberry Road 

 1402 Masons Mill Business Park 

 Huntingdon Valley, PA 19006 

 Attorneys for Amici Curiae School 

 Boards Association Insurance Trust 

 and Pennsylvania Pooled Risk 

 Insurance for Municipal Entities 

 Workers' Compensation Trust 

OPINION OF THE COURT 

GARTH, Circuit Judge: 

The issue we must address on this appeal is whether

Pennsylvania's Workers' Compensation Act, 77 Pa. Const. 

Stat. Ann. S 531(5) and (6) (West Supp. 1997), which 

provides for the supersedeas of an employee's medical 

benefits without prior notice or an opportunity to be heard, 

violates the requisites of procedural due process. We hold 

that it does. Accordingly, we reverse. 

I. 

The Pennsylvania Workmen's Compensation Act ("the 

Act"), 77 Pa. Const. Stat. Ann. S 1 et seq., establishes a 

 6 
compulsory insurance system for employers that provides 

compensation to employees who sustain work-related 

injuries and occupational diseases without regard to an 

employee's negligence. See 77 Pa. Const. Stat. Ann. S 431. 

To guarantee the payment of an employee's claims, the Act 

requires employers to obtain insurance -- either through a 

private insurance carrier or through the State Workmen's 

Insurance Fund ("SWIF ") -- or to self-insure. See id. S 501. 

When an employer purchases insurance, the insurance

company assumes the employer's statutory liabilities. See 

id. SS 501, 701. 

On July 2, 1993, the Pennsylvania legislature amended 

the Act by enacting Act 44. The purpose of Act 44 was to 

contain the spiraling costs of medical treatment for workrelated injuries. Codified at 77 Pa. Const. Stat. Ann. 

S 531(5) and (6), Act 44 created a utilization review process 

under which the reasonableness and/or necessity of an 

employee's medical treatment could be reviewed. It is these 

provisions of Act 44 which create the utilization review 

process and the corresponding supersedeas that are 

challenged in this action. Utilization review is a process 

whereby medical providers assess the reasonableness or 

necessity of current, prospective, or past medical treatment. 

Section 531(5) provides the mechanism by which 

utilization review is invoked. It states in pertinent part: 

 The employer or insurer shall make payment and 

 providers shall submit bills and records in accordance 

 with the provisions of this section. All payments to 

 providers for treatment provided pursuant to this act 

 shall be made within thirty (30) days of receipt of such 

 bills and records unless the employer or insurer 

 disputes the reasonableness or necessity of the 

 treatment provided pursuant to paragraph (6) . . . . 

77 Pa. Const. Stat. Ann. S 531(5) (West 1997) (emphasis 

added). Hence, an employer or insurer must pay an 

employee's medical expenses within thirty (30) days of 

receipt of the medical bills unless the employer or insurer 

requests utilization review. The decision to invoke

utilization review is made independently by the employer or 

insurer. 

 7 
A. 

Section 531(6) outlines the utilization review process. 

Section 531(6) provides: 

 . . . disputes as to reasonableness or necessity of 

 treatment by a health care provider shall be resolved in 

 accordance with the following provisions: 

 (I) The reasonableness or necessity of all treatment 

 provided by a health care provider under this act may 

 be subject to prospective, concurrent or retrospective 

 utilization review at the request of an employe[sic], 

 employer or insurer. The department shall authorize 

 utilization review organizations to perform utilization 

 review under this act. Utilization review of all treatment 

 rendered by a health care provider shall be performed 

 by a provider licensed in the same profession and 

 having the same or similar specialty as that of the 

 provider of the treatment under review. Organizations 

 not authorized by the department may not engage in 

 such utilization review. 

 (ii) The utilization review organization shall issue a 

 written report of its findings and conclusions within 

 thirty (30) days of a request. 

 (iii) The employer or the insurer shall pay the cost of 

 the utilization review. 

 (iv) If the provider, employer, employe [sic] or insurer 

 disagrees with the finding of the utilization review 

 organization, a petition for review by the department 

 must be filed within thirty (30) days after receipt of the 

 report. The department shall assign the petition to a 

 workers' compensation judge for a hearing or for an 

 informal conference under [77 Pa. Const. Stat. Ann. 

 S 711.1]. The utilization review report shall be part of 

 the record before the workers' compensation judge. The 

 workers' compensation judge shall consider the 

 utilization review report as evidence but shall not be 

 bound by the report. 

77 Pa. Const. Stat. Ann. S 531(6). 

Thus, utilization review is invoked when an employee, 

 8 
employer, or insurer requests review of specific medical 

treatment performed.1 The party seeking review submits its 

request to the Bureau of Workers' Compensation ("the 

Bureau") on a Bureau-prescribed form entitled "Utilization 

Review: Initial Request" ("Initial Request"). The Bureau 

reviews the Initial Request to ensure that it is properly 

completed -- i.e., that all information required by the form 

is provided. See 34 Pa. Code S 127.452. The Bureau's 

review of the Initial Request does not address the legitimacy 

or lack thereof of the request for utilization review. 

If the Initial Request is improperly completed (i.e., does 

not provide all pertinent information requested by the 

form), the Bureau denies the request for review and sends 

the form back to the party. If the Initial Request is 

completed properly, the request is approved and the party 

requesting review must serve a copy of the Initial Request 

upon the remaining interested parties, including the 

employee, the employer, the insurer, and the health care 

provider, as appropriate. See 34 Pa. Code S 127.452. 

At this point, according to the Act's regulations, an 

employer or insurer with a Bureau-approved request may 

suspend payment for the medical treatment in question. 

See id. S 127.208.2 The Act does not require -- but permits 

-- suspension of medical benefits. In addition, medical 

_________________________________________________________________ 

1. An employee is not likely to request utilization review, however, 

because the invocation of that process can result in the termination of 

the employee's medical benefits pending such review. 

2. Section 127.208 of the regulations pertinent to the Act provides in 

part: 

 (e) The 30-day period in which payment shall be made to the 

 provider may be tolled only if review of the reasonableness or 

 necessity of the treatment is requested during the 30-day period 

 under the UR provisions . . . . The insurer's right to suspend 

 payment shall continue throughout both the initial review and the 

 reconsideration review of the UR process. The insurer's right to 

 suspend payment shall further continue beyond the UR process to 

 a proceeding before a Workers' Compensation judge, unless there is 

 a UR determination made at reconsideration that the treatment is 

 reasonable or necessary. 

34 Pa. Code S 127.208(e) (1996). 

 9 
providers are not forbidden from continuing to furnish 

medical services to employees who are subjected to such 

review, although any such treatment is rendered with the 

risk that the medical provider ultimately may not be 

compensated depending upon the resolution of the 

utilization review. Furthermore, although the employee is 

given notice that the Initial Request for utilization review 

has been filed, there is no indication on that form that an 

employee's medical benefits may be terminated for and 

during the disputed treatment. Further, the Initial Request 

does not provide any information or explanation regarding 

what utilization review entails. 

After a request for review is properly filed, the Bureau 

randomly assigns the case to a Utilization Review 

Organization ("URO"),3 and the Bureau again notifies all 

interested parties that the case has been assigned by 

sending out a Notice of Assignment form. See 34 Pa. Code 

S 127.453. The Notice of Assignment is a copy of the notice 

that is sent to the URO, advising the URO that a particular 

case has been assigned to it. The Notice of Assignment, like 

the Initial Request, does not inform employees that their 

medical benefits may be suspended nor does it advise 

employees of procedures under which their suspension may 

be protested. 

The review process is narrowly tailored to the task of 

determining whether specific medical treatment is or was 

reasonable or necessary. Utilization review is conducted by 

a health care provider4 who has "the same or similar 

_________________________________________________________________ 

3. "Utilization Review Organizations" are defined as 

 those organizations consisting of an impartial physician, surgeon 

or 

 other health care provider or a panel of such professionals and 

 provides as authorized . . . for the purpose of reviewing the 

 reasonableness and necessity of a health care provider pursuant to 

 section 531(6). 

77 Pa. Const. Stat. Ann. S 29 (West 1997). 

4. A "health care provider" is defined as 

 any person, corporation, facility or institution licensed or 

otherwise 

 authorized by the Commonwealth to provide health care services, 

 including, but not limited to, any physician, coordinated care 

 10 
specialty" as the provider who conducted the treatment in 

question. See 77 Pa. Const. Stat. Ann. S 531(6)(i).

Accordingly, the reviewer must apply generally accepted 

treatment protocols to assess the reasonableness or

necessity of the questioned treatment. See 34 Pa. Code 

S 127.467. The URO may not request, seek, or obtain

independent medical examinations or reports. See id. 

S 127.461. Rather, the review is solely based upon the 

medical records of the treating medical provider and any 

discussions that the URO has had with the medical 

provider concerning the treatment. See id. SS 127.461, 

127.469.5 Lastly, the URO's role is narrowly defined to 

address exclusively whether the medical treatment in 

question is reasonable and/or necessary. See 34 Pa. Code 

S 127.470. 

The URO must assume that the employee's medical 

condition is a work-related injury. See id. In addition, the 

URO does not consider whether the employee is still

disabled, whether the employee has obtained maximum

medical improvement, or whether the fees charged are 

reasonable. As noted, the URO's exclusive function is to 

determine the reasonableness or necessity of the prescribed 

treatment in question. 

The URO must issue a report of its findings and 

conclusions within thirty (30) days of a request. 6 See 77 Pa. 

_________________________________________________________________ 

 organization, hospital, health care facility, dentist, nurse, 

 optometrist, podiatrist, physical therapist, psychologist, 

chiropractor 

 or pharmacist and an officer, employe [sic] or agent of such person 

 acting in the course and scope of employment or agency related to 

 health care services. 

77 Pa. Const. Stat. Ann. S 29. 

5. The URO must give the treating medical provider an opportunity to 

discuss the challenged treatment. See 34 Pa. Code S 127.469. Neither 

the statute nor the regulations make any provision for giving the affected 

employee the same opportunity. 

6. The regulations provide that the URO must complete the review and 

make a determination within thirty (30) days of receiving the medical 

provider's records or within thirty-five (35) days of the date that the 

URO 

received the Notice of Assignment, whichever is earlier. See 34 Pa. Code 

S 127.465. 

 11 
Const. Stat. Ann. S 531(6)(ii). The written report must 

contain findings, conclusions, and citations to generally 

accepted treatment protocols and medical literature, as 

appropriate. See 34 Pa. Code S 127.472. The URO sends 

the report to the Bureau which then sends a copy to all 

interested parties. See id. S 127.476. The employer or 

insurer pays for the initial utilization review. See 77 Pa. 

Const. Stat. Ann. S 531(6)(iii); 34 Pa. CodeS 127.477. 

B. 

Originally, Act 44 permitted reconsideration of the URO's 

determination if filed within thirty (30) days of the URO's 

report. See 77 Pa. Const. Stat. Ann. S 531(6)(iv). The review 

on reconsideration mirrored the initial utilization review 

except that a different URO conducted the review and the 

Bureau advanced the costs of reconsideration and 

subsequently billed the losing party. See 34 Pa. Code 

S 127.514. Thus, as with the utilization review, an employee 

could not testify before a URO concerning the medical 

treatment on reconsideration. Further, parties were not 

notified before invoking reconsideration review that they 

would be billed for the costs of reconsideration review if 

they lost. 

If a party disagreed with the URO's determination on 

reconsideration, it could file a Petition for Review with the 

Bureau for de novo review before a Workers' Compensation 

Administrative Law Judge ("ALJ"). If the employee prevailed 

upon reconsideration, the supersedeas was lifted pending 

this de novo hearing. If the employee lost the 

reconsideration review, the supersedeas remained in effect. 

See id. S 127.208(f). 

Even if the medical services provided were ultimately 

found to be reasonable and/or necessary, an employee's 

benefits could be suspended for a considerable length of 

time pending the initial utilization review, reconsideration, 

and de novo review by an ALJ. While the Act requires the 

initial utilization review to occur within thirty (30) days of 

a request, see 77 Pa. Const. Stat. Ann. S 531(5)(ii), and 

reconsideration to be filed within thirty (30) days of the 

URO's determination and decided within 30-35 days 

 12 
thereafter, see 34 Pa. Code S 127.508, there is no timeframe specified for adjudication and resolution before the 

ALJ. Accordingly, employees could have waited months or 

even years without medical benefits before the 

reasonableness or necessity of their treatment was resolved. 

In 1996, the Act was amended yet again by Act 57. Act 

57 streamlined the utilization review process by eliminating 

the reconsideration process, thereby allowing for faster de 

novo review by an ALJ. Thus, after the initial URO issues 

its decision, the losing party no longer need seek 

reconsideration by another URO, but rather may petition 

for de novo review by an ALJ. Under Act 57, if the initial 

URO rules in favor of the employee, the supersedeas is 

lifted pending the ALJ's review. If the URO rules against the 

employee, the supersedeas remains in effect until after the 

ALJ renders his/her decision. See id. S 127.208(e). In all 

other material respects the provisions of Act 44 remained in 

effect and are not challenged here. 

II. 

The Plaintiffs (hereinafter, collectively "Sullivan") in the 

present S 1983 case are ten individual employees7 and two 

organizations representing employees who claim that their 

medical benefits were suspended without regard to due 

process: the Philadelphia Area Project on Occupational 

Safety and Health ("PhilaPOSH"),8 and the Philadelphia 

Federation of Teachers ("PFT").9 Sullivan claims that the 

amendments to the Act violated the Plaintiffs' constitutional 

right to due process under the Fourteenth Amendment by 

_________________________________________________________________ 

7. The Plaintiffs-Appellants are Delores Scott Sullivan, William Battle, 

Louis Baumgartner, Anthony Cancila, William C. Dillon, Terrence Ervine, 

Charles Matthews, Christopher Costello, Lisa Lex, and Susan Hansen. 

8. PhilaPOSH is a non-profit organization comprised of over 2000 unions 

and individual members, representing approximately 300,000 workers in 

Southeastern Pennsylvania. PhilaPOSH advocates for occupational safety 

and the rights of injured workers. Plaintiffs alleged that several members 

of PhilaPOSH had been directly affected by the utilization review 

procedures challenged in this litigation. See Am. Compl. at P 15. 

9. In its order dated March 30, 1995, the district court permitted the PFT 

to intervene as a plaintiff in this action. 

 13 
permitting their employers and/or insurers to suspend the 

payment of their workers' compensation medical benefits 

without prior notice and without affording them an 

opportunity to be heard.10 Sullivan filed the amended 

complaint in this action on May 21, 1996, three months 

before the amendments in Act 57 rescinding 

reconsideration review took effect. 

The Defendants in this action include various state

officials responsible for administering the Act ("the 

Commonwealth Defendants"),11 the director of SWIF,12 the 

School District of Philadelphia ("the School District"), and 

several insurance companies.13 

The insurance company defendants and the School 

District moved to dismiss the complaint on the grounds 

that there was no state action involved in suspending 

Sullivan's medical benefits.14 Sullivan filed a motion for 

partial summary judgment on the issue that the insurers 

_________________________________________________________________ 

10. The Fourteenth Amendment provides, in pertinent part: 

 Section 1. All persons born or naturalized in the United States, 

and 

 subject to the jurisdiction thereof, are citizens of the United 

States 

 and the State wherein they reside. No State shall make or enforce 

 any law which shall abridge the privileges or immunities of 

citizens 

 of the United States; nor shall any State deprive any person of 

life, 

 liberty, or property, without due process of law; nor deny to any 

 person within its jurisdiction the equal protection of the laws. 

U.S. Const. amend. XIV, S 1. 

11. The state officials are the Secretary of Labor and Industry, Robert 

Barnett (Appellees name Johnny Butler in this position); Director of 

Pennsylvania's Bureau of Workers' Compensation, Richard Himler; 

Insurance Commissioner for the Commonwealth of Pennsylvania, Linda 

Kaiser; and Treasurer for the Commonwealth, Catherine Baker Knoll. 

12. The Director of SWIF is Ralph Chase. 

13. The insurance companies involved in this action are American 

Manufacturer's Mutual Insurance Company, Cigna Corporation, 

Continental Casualty Company, USF&G Insurance Company, and Zurich 

American Insurance Company. 

14. The insurance company defendants contended that there was no 

state action with respect to the private decisions that they made. The 
School District claimed that there was no state action because it did not 

participate in the decision-making process concerning the invocation of 

utilization review (and corresponding termination of medical benefits) 

because it contracted out the payment of its medical liabilities under the 

Act to a private company which is not a party to the present action. See 

Sch. Dist.'s Mem. in Supp. Mot. to Dismiss at 1-4 (district court docket 

# 11, 12). 

 14 
and the School District were state actors subject to the 

constraints of due process. In its opinion and order dated 

January 24, 1996, the district court ruled that the private 

insurers were not state actors, but at that time did not 

decide the state action issue with respect to the School 

District as the record was incomplete and more discovery 

was needed. See Sullivan v. Barnett, 913 F. Supp. 895 (E.D. 

Pa. 1996) (hereinafter, "Sullivan I"). 

On May 28, 1996, Sullivan moved for class certification 

to represent the class of workers who have had or will have 

their medical benefits suspended under Pennsylvania's 

utilization review procedures without advance notice or an 

opportunity to be heard prior to supersedeas of benefits 

under section 531(5) and (6). See Am. Compl. at P 17. 

Holding that the supersedeas provisions did not offend due 

process, the district court dismissed the complaint with 

respect to the Commonwealth Defendants and the School 

District by orders dated November 7, 1996, see Sullivan v. 

Butler, 1996 WL 654032 (E.D. Pa. Nov. 7, 1996) 

(hereinafter, "Sullivan II"), and December 13, 1996, 

respectively, without certifying the plaintiff-class. This 

appeal followed. 

We have jurisdiction over this appeal pursuant to 28 

U.S.C. S 1291. Our review over the district court's rulings is 

plenary. See Weiner v. The Quaker Oats Co., 129 F.3d 310, 

315 (3d Cir. 1997). 

III. 

In order for Sullivan to prevail on her claims that the Act 

does not provide adequate notice nor an opportunity to be 

heard before her benefits are terminated, the Defendants 

must be held to be state actors or to be acting under color 

of state law.15 

_________________________________________________________________ 

15. Section 1983 provides a cause of action to individuals who have been 

deprived of a federal right by a person acting "under color of state law." 

See Groman v. Township of Manalapan, 47 F.3d 628, 633 (3d Cir. 1995). 

The "under color of state law" requirement ofS 1983 and the "state 

action" element of the Fourteenth Amendment have been interpreted to 

be "identical in most contexts," Id. at 639 n.15; see also Lugar, 457 U.S. 

 15 
The Commonwealth does not dispute that it is a state 

actor, and indeed, it would be hard-pressed to do so in light 

of the fact that it was the Commonwealth that enacted the 

supersedeas provisions of 77 Pa. Const. Stat. Ann. S 531(5) 

and (6) which deprive Sullivan of the Workers' 

Compensation medical benefits to which she is entitled. Nor 

has SWIF disputed the fact that it is a state actor. See 

Commonwealth Br. at 20 n.12; see also Rumph v. State 

Workmen's Ins. Fund, 964 F. Supp. (E.D. Pa. 1997); 

Baksalary v. Smith, 579 F. Supp. 218, 230 (E.D. Pa. 1984). 

Further, the School District apparently does not now 

contest that it is a state actor, as it has not briefed the 

issue on appeal.16 The insurers, however, deny that their 

actions in invoking relief under the supersedeas provisions 

appurtenant to the utilization review process constitute 

state action. We cannot agree. 

State action has been characterized as one of the most 

troublesome issues of constitutional law. See Henry C. 

Strickland, The State Action Doctrine and the Rehnquist 

Court, 18 Hastings Const. L.Q. 587, 588 (1991). Various 

cases have led to differing results in factual scenarios that, 

at least upon first impression, appear to be similar. 

Compare Mark v. Borough of Hatboro, 51 F.3d 1137 (3d Cir. 

1995) (concluding that state action existed in context of 

volunteer fire department), with Groman v. Township of 

Manalapan, 47 F.3d 628 (3d Cir. 1995) (holding that state 

action did not attach to actions of a volunteer first aid 

_________________________________________________________________ 

at 935 n.18. Thus, private parties can be held liable for the alleged due 

process violations only if "it can be fairly said that the [government] is 

responsible for the specific conduct of which the plaintiff complains" -- 

here, the suspension of employees' Workers' Compensation medical 

benefits. Edmonson v. Leesville Concrete Co., 500 U.S. 614, 632 (1991) 

(O'Connor, J. dissenting) (quoting Blum v. Yaretsky, 457 U.S. 991, 1004) 

(1982). 

16. In Sullivan I, the district court initially denied the School 

District's 

motion to dismiss premised upon the state action issue. See Sullivan I, 

913 F. Supp. at 905. However, because the district court held that the 

supersedeas provisions of the Act did not violate procedural due process 

in Sullivan II, the district court did not ultimately find it necessary to 

reach the state action issue with respect to the School District. 

 16 
squad). Indeed, the state action inquiry necessarily depends 

upon the factual contexts in which the controversies arise. 

See Lugar v. Edmondson Oil Co., 457 U.S. 922, 939 (1982); 

Jackson v. Wilmington Parking Auth., 365 U.S. 715, 722 

(1961) ("Only by sifting through facts and weighing

circumstances can the nonobvious involvement of the State 

in private conduct be attributed its true significance."); 

Groman, 47 F.3d at 639 n.16. To compound the confusion 

surrounding a state action examination, courts have

employed various tests and standards that have been

anything but a model of clarity. See Edmonson v. Leesville 

Concrete Co., 500 U.S. 614, 632 (1991) (O'Connor, J. 

dissenting) ("Unfortunately, [Supreme Court] cases deciding 

when private action might be deemed that of the state have 

not been a model of consistency."). 

In order to analyze the state action issue before us, it is 

critical to place the insurer's role within the Workers' 

Compensation system in its proper context. The Act 

provides no-fault compensation to all employees within the 

Commonwealth for all injuries sustained during the course 

of one's employment. In exchange for this guarantee of 

automatic compensation for wage loss and medical costs 

without regard to proof or fault, employees lost their right 

to sue their employers in tort. See Winterberg v. 

Transportation Ins. Co., 72 F.3d 318 (3d Cir. 1995). The Act 

abolishes an employer's common law defenses and strips 

an employee of his/her right to sue upon common law

causes of action. Thus, the Workmen's Compensation 

scheme in Pennsylvania has been held to be the exclusive 

remedy available to an injured worker. See 77 Pa. Const. 

Stat. Ann. S 481(a).17 Cf. Travelers Indemnity Co. v. 

DiBartolo, 131 F.3d 343, 350-51 (3d Cir. 1997) (holding an 

employer's voluntary purchase of uninsured motorist

coverage is a fringe benefit since it is no longer mandated 

_________________________________________________________________ 

17. 77 Pa. Const. Stat. Ann. S 481(a) states, in pertinent part: 

 The liability of an employer under this act shall be exclusive and 

in 

 the place of any and all other liability to such employes [sic] . . 

. or 

 anyone otherwise entitled to damages in any action at law or 

 otherwise on account of any injury or death . . . . 

77 Pa. Const. Stat. Ann. S 481(a) (West 1992). 

 17 
by state law and, thus, is not subject to the exclusivity 

provision of the Workmen's Compensation Act). The system 

is mandatory; an employee cannot opt-out of Pennsylvania 

Workers' Compensation scheme. See 77 Pa. Const. Stat. 

Ann. S 461 (historical notes). 

The benefits provided to employees under the Act are a 

constitutionally protected entitlement. None of the parties 

disputes this. See, e.g., Sullivan II at 4; see also Baksalary, 

579 F. Supp. at 224-225. The Commonwealth has created 

this entitlement, and the Commonwealth guarantees that 

these benefits will be paid to an injured employee.18 

In creating and executing this system of entitlements, the 

Commonwealth has enacted a complex and interwoven 

regulatory web enlisting the Bureau, the employers, and 

the insurance companies. The Commonwealth extensively 

regulates and controls the Workers' Compensation system. 

Although the insurance companies are private entities, 

when they act under the construct of the Workers' 

Compensation system, they are providing public benefits 

which honor State entitlements. In effect, they become an 

arm of the State, fulfilling a uniquely governmental 

obligation under an entirely state-created, self-contained 

public benefit system. It is a "system which the government 

alone administers." Edmonson, 500 U.S. at 622. Thus, we 

conclude the insurance companies are a partner or an arm 

of the State in implementing legislation that administers 

constitutionally protected entitlements which the 

Commonwealth has enacted as a matter of policy. 

The right to invoke the supersedeas, or to stop payments, 

is a power that traditionally was held in the hands of the 

State. When insurance companies invoke the supersedeas 

(i.e., suspension) of an employee's medical benefits, they 

compromise an employee's State-created entitlements. The 

_________________________________________________________________ 

18. The Commonwealth guarantees that Workmen's Compensation 

benefits will be paid by imposing a statutory obligation upon the 

employer to pay for all work-related injuries of his/her employees. If the 

employer's insurance company becomes insolvent, however, the Workers' 

Compensation Security Fund, a fund administered and created by the 

Commonwealth, assumes the responsibility of paying the benefits to 

eligible employees. See 77 Pa. Const. Stat. Ann. S 1053. 

 18 
insurers have no power to deprive or terminate such

benefits without the permission and participation of the 

Commonwealth. More importantly, however, the 

Commonwealth is intimately involved in any decision by an 

insurer to terminate an employee's constitutionally

protected benefits because an insurer cannot suspend 

medical payments without first obtaining authorization 

from the Bureau. However this authorization may be 

characterized, any deprivation that occurs is predicated 

upon the State's involvement. 

There is little difference between the approval required 

here and that necessary for utilizing a peremptory 

challenge, see, e.g., Edmonson, 500 U.S. at 622, or for 

employing a nonclaim statute with the assistance of the 

probate court. See, e.g., Tulsa Prof 'l Collection Serv. v. Pope, 

485 U.S. 478 (1988). "The [Bureau] is intimately involved 

throughout, and without that involvement" the supersedeas 

could not operate. Id. at 487. Further, the supersedeas 

lacks the self-executing characteristic that might otherwise 

render due process concerns irrelevant. To the contrary, the 

supersedeas provisions at issue are not self-executing, and 

without the Commonwealth's involvement and approval, the 

insurance companies would be precluded from suspending 

medical benefit payments -- an aspect of the Workmen's 

Compensation procedure which they had desired. 

Accordingly, we hold that the private insurance companies 

are state actors when they invoke the supersedeas 

provisions under S 531(5) and (6). 

Our decision is consistent with West v. Atkins , 487 U.S. 

42 (1988). There, the Court held that a private physician 

under contract with the State of North Carolina to provide 

medical services to prison inmates acted under color of 

state law even though the doctor was not directly employed 

by the State. In West, the State was under an affirmative 

obligation to provide medical care to inmates. The State 

delegated that responsibility to a part-time contract 

physician, who assumed the State's obligation. Under these 

circumstances, the Court held that state action attached to 

the actions of the private doctor such that the prisoner 

could maintain a S 1983 cause of action against the doctor. 

 19 
That the doctor exercised professional judgment and

discretion independent of the State was insufficient to 

relieve him of his constitutional obligations. See id. at 52. 

The Court emphasized that "[i]t is the physician's function 

within the state system, not the precise terms of his 

employment, that determines whether his action can fairly 

be attributed to the State." Id. at 55-56. "[T]he dispositive 

issue concerns the relationship among the State, the 

physician, and the prisoner." Id. at 56 (emphasis added). 

Similarly, in this case, examining the relationship among 

the Commonwealth, employer, and the insurance 

companies, we have concluded that the actions of the 

insurers constitute state action. The employers are under 

an affirmative obligation to insure their employees for workrelated accidents. This obligation is expressly assumed by 

the insurance companies when an employer purchases 

insurance, see 77 Pa. Const. Stat. Ann. SS 501, 701, and is 

assumed by the Commonwealth if and when a insurer 

becomes insolvent.19 Like the constitutional right involved 

in West, the employees under the Act have a 

constitutionally protected entitlement in receiving their 

Workers' Compensation medical benefits. In addition, like 

the prisoner in West, the employees cannot elect to go 

outside the system for medical treatment. Like prisoners, 

they are locked into the system, and any relief that the 

employees obtain is strictly through the program which the 

State has designed. The employees are, in essence, 

prisoners -- albeit beneficiaries -- of the Commonwealth's 

Workers' Compensation system. 

Our conclusion is also consistent with the decision of the 

three-judge district court panel which convened in 

Baksalary v. Smith,20 579 F. Supp. 218 (E.D. Pa. 1984), 

_________________________________________________________________ 

19. See supra note 17. 

20. In Baksalary, a three-judge panel of the district court comprised of 

two district court judges and one Court of Appeals judge, convened 

pursuant to 28 U.S.C. S 2284. In Baksalary, employees contested an 

automatic supersedeas provision under the Act that terminated an 

employee's benefits without notice or a pre-termination opportunity to be 

heard. If an employer or insurer filed a petition which alleged that an 

employee had returned to work at the same or higher rate of pay, or if 

the petition -- accompanied by a physician's affidavit -- alleged that the 

employee had recovered from his/her disability, then the employer or 

insurer could terminate the employee's Workers' Compensation benefits. 

See Baksalary, 579 F. Supp. at 221. 

 20 
which held that the state action mantle falls upon the 

insurers. Baksalary involved a similar challenge to the Act, 

held that the insurers acted under color of state law, and 

accordingly found that there had been a denial of due 

process in violation of the Fourteenth Amendment from the 

invocation of section 413, 77 Pa. Const. Stat. Ann.S 774, a 

similar supersedeas provision. 

We are aware that Baksalary has been criticized by the 

Fifth Circuit in Barnes v. Legman, 861 F.2d 1383 (8th Cir. 

1988), but we do not share the Fifth Circuit's view. Barnes 

concerned a due process challenge to a provision in Texas' 

Workers' Compensation Statute that permitted an 

insurance carrier to terminate medical benefits based upon 

a medical report. As the Barnes decision is predicated upon 

its interpretation of Texas -- as distinct from Pennsylvania 

-- law, it is necessarily inapposite to this case. The Barnes 

court did not explain in detail the procedural involvement 

of Texas in permitting the insurance company to deny an 

employee his/her benefits. Clearly, however, the statutory 

provision permitting the termination of benefits in Barnes 

and the supersedeas provisions at issue here vary 

significantly. In Barnes, for instance, the insurance 

company was not compelled to resume the employee's 

benefits even after a State officer reviewing the case 

recommended that the insurance company reinstate those 

benefits. See Barnes, 861 F.2d at 1384. Thus, the employee 

was left with a cause of action under state law only. 

In addition, it is unclear whether employers and/or

employees can opt-out of Texas' Workers' Compensation 

scheme. In Pennsylvania, as we have stated, they cannot. 

Moreover, and perhaps most importantly, it is not clear that 

under Texas law that State involvement was required prior 

to the termination of benefits. See Tex. Workers' 

Compensation Law, art. 8307 S 11 (repealed 1989).21

_________________________________________________________________ 

21. Article 8307, S 11, provides: 

 Association suspending payments. When the association suspends 

 or stops payment of compensation, it shall immediately notify the 

 board of that fact, giving the board the name, number and style of 

 the claim, the amount paid thereon, the date of the suspension or 

 stopping of payment thereon, and the reason for such suspension or 

 stopping. 

Tex. Workers' Compensation Law, art. 8307, S 11 (repealed 1989). 

 21 
Nor do we find other state action authorities to be

persuasive in analyzing the context of Pennsylvania's 

Workmen's Compensation statutory scheme. As we have

previously observed, the factual context in which the 

particular issue arises must be the focus of a state action 

inquiry. Other cases cited by the insurers such as Blum v. 

Yaretsky, 457 U.S. 991 (1982) (finding no state action when 

private nursing homes decided to transfer or discharge 

Medicaid patients without notice or a hearing), RendellBaker v. Kohn, 457 U.S. 830 (1982) (finding no state action 

when private school fired employees despite the fact that 

school was financed from almost exclusively public sources 

and was extensively regulated by government), Flagg

Brothers v. Brooks, 436 U.S. 149 (1978) (finding no state 

action when private warehouseman invoked self-help 

provisions of New York's Uniform Commercial Code by

selling goods entrusted to him), and Jackson v. Metropolitan 

Edison Company, 419 U.S. 345 (1974) (finding no state 

action when privately owned electric utility terminated a 

customer's electric service for nonpayment without a 

hearing), do not, by the very nature of the controversies 

with which they dealt, involve a comprehensive statutory 

scheme similar to that present in this case. 

We therefore conclude that, in the present context of a 

comprehensive state scheme reflected in the Workers' 

Compensation statute of Pennsylvania, the private insurers 

are state actors. The Act mandates compliance by 

employers, employees, and insurance companies and 

inextricably entangles the insurance companies in a

partnership with the Commonwealth such that they become 

an integral part of the state in administering the statutory 

scheme. This relationship more than suffices to satisfy the 

constitutional requisites under the tests -- varied though 

they may be -- for state action. See Blum, 457 U.S. at 1004 

(state action exists if the State has coerced the action or 

provided significant encouragement); Rendell-Baker, 457 

U.S. at 842 (state action exists if there is a symbiotic 

relationship between the state and the private actor); Flagg 

Bros., 436 U.S. at 157-59 (state action exists if private actor 

exercises powers exclusively within the prerogative of the 

State); Jackson, 419 U.S. at 351 (state action exists if a 

sufficiently close nexus between State and private actor is 

 22 
found); Mark, 51 F.3d at 1156 (suggesting courts should 

employ a totality of circumstances approach to state action 

inquiries) (Greenberg, J. concurring). We expressly limit our 

holding here today, however, to the unique context in which 

the instant supersedeas provisions arise.22 

IV. 

We now address the due process issue that is at the

heart of the instant action. 

The gravamen of Sullivan's complaint is that the lack of 

notice afforded under the supersedeas provisions, S 531(5) 

and (6), of the Act violates the procedural due process 

guarantees under the Fourteenth Amendment because 

neither the Initial Request for utilization review nor the 

Notice of Assignment specifically informs an employee that 

the insurer or employer can stop paying for the contested 

medical treatments pending review.23 Although employees 

are notified that their employers or insurers have invoked 

the utilization review process pursuant to 34 Pa. Code 

S 127.452, or are notified that the case has been assigned 

for review to a URO, pursuant to 34 Pa. Code S 127.453(b), 

Sullivan points out that such notification does not provide 

any information or explanation concerning what the 

utilization review process involves. Sullivan also contends 

that neither notification provides any information about 

_________________________________________________________________ 

22. In light of our holding that the private insurance companies are state 

actors and are thus bound by the constraints of due process, we need 

not address the question as to whether a disparate classification 

concerning a public insurer, such as SWIF, and the private insurers 

would violate the Equal Protection Clause of the Fourteenth Amendment. 

23. Neither party disputes the district court's ruling that Workers' 

Compensation benefits are a constitutionally protected property interest 

subject to scrutiny under the Due Process Clause of the Fourteenth 

Amendment. See, e.g., Sullivan II at 4; see also Baksalary v. Smith, 579 

F. Supp. 218, 224-25 (E.D. Pa. 1984) ("We find that when an individual 

must forego the use of his [workers'] compensation benefits for as long 

as one year . . . that individual has undergone the deprivation of a 

constitutionally protected property interest."). Accordingly, we 

concentrate upon whether the procedures afforded to employees under 

the Act comport with the strictures of due process.

 23 
how an employee can contest the underlying allegations 

that serve the basis for the utilization review. Accordingly, 

Sullivan argues that such notification is defective because 

(1) the employee receives no notice that his/her benefits 

may cease pending review, (2) the employee receives no 

meaningful notice prior to the deprivation, and (3) the 

employee is not advised of the procedures under which 

he/she can protest the imminent deprivation. 

The Bureau does not dispute that no notice is provided 

to an employee that his/her medical benefits might be 

suspended. Rather, the Bureau contends that the decision 

to discontinue such benefits (i.e., request a supersedeas) is 

discretionary and is determined solely by the employer or 

the insurer, not the Bureau. Thus, the Bureau maintains 

that it does not have information regarding the status of an 

employees' medical benefits in a utilization review case, and 

accordingly it does not deny employees of procedural due 

process by failing to notify them of such information. The 

Bureau further asserts that this case is not akin to 

Goldberg v. Kelly, 397 U.S. 306, 314 (1970), 24 such that a 

pre-deprivation hearing is required prior to the suspension 

of medical benefits. As a result, the Bureau maintains that 

sufficient process is afforded to employees under the Act. 

"The core of due process is the right to notice and a 

meaningful opportunity to be heard." LaChance v. Erickson, 

___ U.S. ___, 1998 WL 17107 (1998) at 3; see also 

Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 542 

(1985); Memphis Light, Gas & Water Div. v. Craft , 436 U.S. 

1, 13 (1978); Fuentes v. Shevin, 407 U.S. 67, 80 (1972); 

Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 

313 (1950). We will thus address the constitutionality of the 

pre-deprivation notice the employees receive in this case 

and their opportunity to be heard, in turn. 

A. Notice 

"[A]dequate notice detailing the reasons for a proposed 

termination" of a constitutionally protected liberty or 

_________________________________________________________________ 

24. In Goldberg v. Kelly, the Supreme Court held that a pre-deprivation 

evidentiary hearing was required prior to the termination of welfare 

benefits. 

 24 
property interest must be afforded to individuals prior to 

the deprivation. Goldberg v. Kelly, 397 U.S. 254, 267-68 

(1970). Notice must be "reasonably calculated, under all the 

circumstances, to apprise interested parties of the

pendency of the action and afford them an opportunity to 

present their objections." Mullane, 339 U.S. at 314. The 

level of notice required before an individual is deprived of a 

constitutionally protected property interest depends upon 

the particular benefits at issue. "[D]ue process is flexible 

and calls for such procedural protections as the particular 

situation demands." Morrissey v. Brewer, 408 U.S. 471, 

481 (1972). 

In Memphis Light, Gas & Water Division, the Supreme

Court held that a Memphis utility company did not provide 

constitutionally sufficient notice to its customers prior to 

terminating their utilities. Although the utility gave its 

customers notice that their service could be terminated for 

nonpayment of their bill, the company failed to inform its 

patrons of how they could protest or object to charges on 

their bills. The Court concluded that "[n]otice in a case of 

this kind does not comport with constitutional 

requirements when it does not advise the customer of the 

availability of a procedure for protesting a proposed 

termination . . . as unjustified." 436 U.S. at 14-15 (emphasis 

added). 

In Goldberg v. Kelly, the Court considered whether the 

notice provisions of New York City's welfare termination 

process comported with due process. As welfare recipients 

were given seven days advance notice of the impending 

termination, a letter informing them of the precise

questions raised about their continued eligibility and the 

legal and factual bases for the Department of Social 

Services' doubts, and a personal conference explaining the 

same, the Court held that the notice provisions were 

adequate. See 397 U.S. at 268. Similarly, although notice 

was not directly at issue in Mathews v. Eldridge, 424 U.S. 

319, 324 (1976), the Court acknowledged that recipients of 

Social Security disability payments were afforded proper 

notice which included a letter informing them that their 

benefits would be terminated prior to the deprivation, a 

detailed explanation of the reasons for the proposed 

 25 
termination, and the opportunity to submit additional 

evidence to the agency making the determination prior to 

the actual deprivation. 

Moreover, we held in Ortiz v. Eichler, 794 F.2d 889 (3d 

Cir. 1986), that the notice provided by Delaware prior to the 

termination or denial of Aid to Families with Dependent 

Children, Food Stamps, and Medicaid benefits was 

constitutionally deficient because it failed to explain the 

reasons for the state agency's action and did not contain 

the agency's specific calculations utilizing an employee's 

income or financial resources to ascertain his/her eligibility 

in making its determination. See id. at 892, 895. 

The Supreme Court of Iowa confronted a similar problem 

to the one at hand when it considered the notice to which 

an employee was entitled before his/her Workers' 

Compensation benefits were terminated. There, the Court 

held that at a minimum due process required the following: 

 (1) the contemplated termination, 

 (2) that the termination of benefits was to occur at a 

 specified time not less than 30 days after notice, 

 (3) the reason or reasons for the termination, 

 (4) that the recipient had the opportunity to submit 

 any evidence or documents disputing or 

 contradicting the reasons given for termination, 

 and, if such evidence or documents are submitted, 

 to be advised whether termination is still 

 contemplated, 

 (5) that the recipient had the right to petition for 

 review. 

Auxier v. Woodward State Hospital-School, 266 N.W.2d 139, 

142-43 (Iowa 1978). 

Informed by established precedent, we hold that in the 

case of terminating the medical benefits of a workers' 

compensation employee, at a minimum due process 

requires that employees receive notice that includes (1) 

timely notification that their medical benefits might cease 

prior to the deprivation, (2) an explanation of the reasons 

for the proposed termination, (3) an opportunity to respond 

to the accusations alleged, and (4) information advising 

 26 
them of the availability of the procedures that they may 

utilize to protest the proposed termination. 

In the instant case, the notice that an employee receives 

prior to the termination of his/her medical benefits is 

constitutionally inadequate. While the employee is notified 

by the Initial Request that utilization review has been 

invoked and the reasons upon which the utilization review 

is based, the Initial Request does not explain that a 

supersedeas or suspension of one's medical benefits may 

result nor does it explain what utilization review entails. In 

addition, it does not inform an employee of any procedures 

under which the employee can protest the suspension of 

the medical benefits or contest the merits on which the 

proposed deprivation is based. 

Similarly, the Notice of Assignment does not cure any of 

the above notice deficiencies. The Notice of Assignment is, 

in fact, a copy of the notice to the URO informing the URO 

that a particular case has been assigned. Like the Initial 

Request, the Notice of Assignment does not notify an 

employee that his/her medical benefits may be terminated 

nor does it advise an employee of any procedures under 

which such termination may be challenged. Further, by the 

time the Notice of Assignment is received, the employees' 

medical benefits may have already been suspended, as the 

supersedeas can be invoked and thus a suspension of

benefits effected upon the proper filing of the utilization 

review process. 

That an employee's medical benefits may be suspended 

prior to his/her receiving notice of that termination is 

constitutionally fatal to S 531(5) and (6) under the strictures 

of the Due Process Clause of the Fourteenth Amendment. 

See Carey v. Piphus, 435 U.S. 247, 259 (1978) ("Procedural 

due process rules are meant to protect persons not from 

the deprivation, but from the mistaken or unjustified 

deprivation of life, liberty, or property.") (emphasis added). 

At no time prior to the termination is the employee

informed of any procedure under which he/she can dispute 

the supersedeas. As the employee is not informed of the 

deprivation of his/her medical benefits prior to its taking 

effect, inadequate notice effectively strips an employee of 

 27 
his/her ability or opportunity to protest or minimize 

unjustified deprivations.25 

In Baksalary v. Smith, 579 F. Supp. 218, 233 (E.D. Pa. 

1984), a three-judge panel of the district court held a 

similar supersedeas provision unconstitutional where it 

failed to provide notice to the employee until after the 

benefits had already been terminated. Similarly, we

conclude that S 531(5) and (6), the supersedeas provisions 

pertaining to utilization review of medical benefits, is 

unconstitutional because it fails to provide employees with 

adequate pre-termination notice. 

Our invalidation of this supersedeas provision of the Act 

does not thereby annul other provisions of the Act:

 Under Pennsylvania law, separate provisions of a 

 statute are presumed severable, and any particular one 

 will survive a decision voiding another unless it is so 

 interrelated with the void provision or incomplete 

 without it that the legislature could not have intended 

 it to stand alone. 

Stoner v. Presbyterian Hosp., 609 F.2d 109, 112 (3d Cir. 

1979) (citing 1 Pa. Const. Stat. Ann. S 1925). Thus, under 

our holding today we do no more than sever the "unless" 

clause from S 531(5) of the Act. We are thereby left with a 

statute that reads as follows and that requires employers or 

insurers to make payments in accordance with the 

provision of the Act, but that does not give those employers 

or insurers the discretion or opportunity to invoke the 

supersedeas of an employee's medical benefits: 

 The employer or insurer shall make payment and 

 providers shall submit bills and records in accordance 

 with the provisions of this section. All payments to 

 providers for treatment provided pursuant to this act 

 shall be made within thirty (30) days of receipt of such 

 bills and records. 

_________________________________________________________________ 

25. At oral argument, the Commonwealth conceded that no notice was 

afforded to the employees whose medical benefits were terminated 

pursuant to the supersedeas provisions at issue here. In addition, the 

Commonwealth recognized that providing notice would be "easy" to 

remedy. 

 28 
B. Opportunity to be heard 

Due process requires that "an individual be given an 

opportunity for a hearing before he is deprived of any 

significant property interest." Boddie v. Connecticut, 401 

U.S. 371, 379 (1971) (emphasis in original). The right to be 

heard " `must be granted at a meaningful time and in a 

meaningful manner.' " Fuentes, 407 U.S. at 80 (quoting 

Armstrong v. Manzo, 380 U.S. 545, 552 (1965)). While it is 

undisputed that some sort of hearing is required before an 

individual is finally deprived of a liberty or property 

interest, due process necessitates some sort of pretermination opportunity to be heard regarding the basis of 

the proposed termination. See Loudermill, 470 U.S. at 542 

("Even decisions finding no constitutional violation in 

termination procedures have relied on the existence of some 

pre-termination opportunity to respond.") "The opportunity 

to present reasons, either in person or in writing, why 

proposed action should not be taken is a fundamental due 

process requirement." Id. at 546. 

In the case before us, the employees were not given a 

pre-deprivation opportunity to respond to the proposed 

termination of their medical benefits. Indeed, as we have 

discussed above, they were not even given notice of the 

impending termination. "[The] right to be heard has little 

reality or worth unless one is informed that the matter is 

pending and can choose for himself whether to appear or 

default, acquiesce or contest." Mullane, 339 U.S. at 314. So, 

while the Commonwealth's statutory scheme provides that 

employees be given an opportunity for a post-termination 

evidentiary hearing in the form of a de novo hearing before 

an ALJ, we must address what pre-termination opportunity 

to be heard is required to satisfy the constitutional 

minimum of due process. 

In order to determine the extent of the pre-deprivation 

process, we must consider and balance the following

factors: 

 First, the private interest that will be affected by the 

 official action. Second, the risk of erroneous 

 deprivation of such interest through the procedures 

 used, and the probable value, if any, of additional or 

 29 
 substitute safeguards; and, finally, the government's 

 interest including the function involved and thefiscal 

 and administrative burdens that the additional or 

 substitute procedural requirements would entail. 

Mathews v. Eldridge, 424 U.S. 319, 334-35 (1976). We will 

deal with each factor in turn. 

(1) Private Interest 

The employees' interest is in the uninterrupted payment 

of their medical benefits pending the final administrative 

decision on their cases. Sullivan II at 5. As the district court 

acknowledged, this interest is "without a doubt[,] 

significant." Id. Without receiving her medical treatments, a 

concomitant of having her medical benefits paid to her 

medical provider, Sullivan alleges that she has endured 

longer periods of disability, unnecessary pain, and

functional restriction. See Am. Compl. 

Notwithstanding the employees' significant interest, the 

district court found that these interests were mitigated by 

several factors. First, the district court noted that, unlike 

Goldberg, termination of one's medical benefits would not 

deprive an employee of the very means of his/her 

subsistence. See Sullivan II at 5. The district court also 

concluded that the availability of full remedies mitigates the 

impact of the supersedeas. Id. at 6. For instance, an 

employee whose medical benefits are reinstated on appeal 

by an ALJ is entitled to an award of benefits plus ten (10) 

percent interest. See 77 Pa. Const. Stat. Ann. S 717.1(a) 

(West Supp. 1997). In addition, the prevailing employee 

may recover the costs of litigating his/her right to medical 

benefits. See id. S 996 (West Supp. 1997). 

Additionally, the district court noted -- and the 

Defendants contend -- that the Act does not proscribe a 

medical provider from continuing to treat an employee 

during the utilization review process. Sullivan II at 5 n.4. 

Indeed, in the amended complaint, some of the Plaintiffs 

admit to receiving some medical treatments although such 

treatments were undergoing utilization review. See, e.g., 

App. A-107 (Louis Baumgartner). Further, there is nothing 

in the statute that requires that an employee's medical 

benefits be suspended. See Sullivan II at 8. 

 30 
Finally, the Defendants emphasize that this case is

unlike Goldberg, Mathews, and other traditional due

process cases because the court must not only weigh the 

private interest of Sullivan against the governmental 

interest, but must also consider the conflicting private 

interest of the insurance companies. The insurers have an 

interest in not paying for unnecessary and/or unreasonable 

medical treatment. The Defendants argue this interest is 

significant because once such treatment is paid it cannot 

be recouped from employees or their medical providers even 

if the disputed treatment is found to be unreasonable or 

unnecessary. See Moats v. Workmen's Compensation Appeal 

Bd., 588 A.2d 116, 118 (1991) ("[T]he employer may not 

seek reimbursement from the claimant or be relieved of 

paying past medical bills."). Accordingly, the district court 

held that "a full evidentiary hearing prior to a possible 

temporary suspension of benefits is not an indispensable 

requisite for the process that is due." Sullivan II at 6. 

The district court mischaracterized the nature of 

Sullivan's interest, and in so doing, minimized the severity 

of the deprivation at issue. The district court apparently 

viewed the medical benefits as more akin to a pecuniary 

interest, and not an interest in the relief that the medical 

treatment provides to injured employees. The remedies that 

the Act provides to an employee whose medical benefits are 

unjustly terminated provide merely superficial redress as 

they focus upon a monetary interest as distinct from a 

medical interest in one's well-being. Further, as medical 

benefits are typically terminated upon invocation of 

utilization review, the employee does not receive any 

medical treatment pending review and thus there may be 

no medical costs to reimburse upon a determination that 

the medical treatments were, in fact, reasonable and 

necessary. Once the supersedeas is invoked, it can take 

several months before the URO reaches its decision and -- 

before the reconsideration process was rescinded-- even 

longer if reconsideration review was requested. 26 Although a 

_________________________________________________________________ 

26. Although the URO is required to render a decision within thirty (30) 

days of the receipt of the employee's medical records or sixty (60) days 

from the date of assignment, in the amended complaint, Sullivan alleges 

 31 
monetary award may compensate an individual forfinancial 

losses, a monetary award cannot be deemed an adequate, 

effective, or appropriate substitute for relieving an 

employee's disability or pain. Nor can it be a substitute for 

necessary medical care. Hence, we are persuaded that the 

employees' private interest in receiving uninterrupted 

medical benefits is a weighty and significant factor in the 

pre-termination calculus. 

(2) Risk of Erroneous Deprivation 

The district court held that the risk of erroneous 

deprivation in the instant case was slight. The utilization 

review process considers only medical reports provided 

directly by the treating physician and related specifically to 

certain questioned medical procedures and treatments; no 

independent medical reports are consulted. The reviewer is 

a physician in the same profession and with the same 

specialty as the treating physician, and the reviewer is only 

permitted to apply generally accepted medical protocols to 

determine whether the questioned treatment is reasonable 

or necessary. The district court acknowledged -- and 

Defendants argue -- that medical reports are unbiased, 

objective, and trustworthy, and thus, the problems 

associated with credibility of witnesses are not present such 

that a pre-deprivation hearing would be helpful. In

addition, as reconsideration review has been eliminated by 

Act 57, an employee can receive a de novo evidentiary 

hearing before an ALJ more quickly than before. 27 As a 

result, the district court held that additional safeguards 

_________________________________________________________________ 

that this time frame is often not adhered to. See Am. Compl. P 66. The 

length of the deprivation here further supports our conclusion that the 

private interests are significant. See Mathews , 424 U.S. at 341 ("the 

possible length of wrongful deprivation of . . . benefits is an important 

factor in assessing the impact of official action on the private 

interests.")(internal quotations and citation omitted); see, e.g., 

Baksalary, 

579 F. Supp at 224 (stating that resolution of case typically took one 

year or more). 

27. Most of the Plaintiffs before us were subjected to the reconsideration 

review process as the termination of their medical benefits occurred prior 

to the amendment to the Act. See Am. Compl. PP 102, 105, 129, 163, 

181, 198, 216, 254. 

 32 
were not necessary to protect an injured employee from 

being deprived of one's constitutionally protected property 

interest in receiving medical benefits. We disagree. 

Contrary to the district court's conclusions, we believe 

that the risk of erroneous deprivation is significant and that 

additional safeguards can meaningfully minimize the risk of 

wrongful termination of one's medical benefits. As we stated 

above, employees receive no notice that a supersedeas of 

their medical benefits will likely result upon the invocation 

of utilization review. They are given no pre-deprivation 

opportunity to be heard either in writing or in person; they 

are not advised of how they can protest or dispute the 

underlying allegations that their medical treatments are 

unreasonable or unnecessary. Although the employee's 

physician must be given an opportunity to discuss the 

employee's treatment, see 34 Pa. Code S 127.469, we are 

hard-pressed to believe that the portrait of the employee's 

illness and treatment is complete without a statement or 

other input from the employee himself. 

The district court seems to have equated the teaching of 

Mathews that an evidentiary hearing is not necessarily 

required prior to the deprivation of a constitutionally 

protected interest with the notion that no pre-termination 

process need be afforded at all. We have come to a different 

conclusion. Due process dictates that employees have some 

sort of pre-deprivation opportunity to respond before the 

supersedeas takes effect so as to guard against an 

erroneous deprivation of benefits. 

(3) Governmental Interest 

The governmental interest that must be considered is 

ensuring that only truly disabled individuals are receiving 

reasonable and necessary medical treatment. Sullivan II at 

8. The government also has an interest in containing the 

rising costs of medical care and insurance payments. 

Indeed, cost containment is the purpose behind the 

supersedeas provisions in question here. Further, the 

government has an interest in conserving its scarcefiscal 

and administrative resources, and an increase in predeprivation procedures may well be an added burden upon 

those resources. While we agree that such legitimate 

 33 
interests exist, we are also aware that the government has 

an interest in not wrongfully depriving medical benefits to 

disabled individuals and ensuring that employees who 

reasonably and legitimately need medical care under the 

Act will continue to receive it. On balance, therefore, we are 

not convinced that any governmental interest outweighs the 

private interest we have discussed above and which favors 

Sullivan. Thus, we conclude that the denial of any predeprivation process cannot be sustained. 

C. What Process is Due 

Now that we have weighed the three factors under the 

Mathews analysis, and concluded that S 531(5) and (6) do 

not adequately suffice to protect Sullivan's due process 

interests, we must decide how much process to afford 

employees receiving medical benefits under the Act prior to 

the termination of such benefits. 

In only one case, Goldberg v. Kelly, 397 U.S. 306 (1970), 

which involved subsistence welfare benefits, has the Court 

required a full evidentiary hearing prior to the deprivation. 

In contrast, in Mathews, the Court concluded that an 

evidentiary hearing was not necessary before an individual 

was deprived of his/her Social Security benefits because, 

unlike the welfare benefits at issue in Goldberg, the 

disability payments were less likely to be the individual's 

sole source of income. The Court held that notice of the 

proposed reasons for the termination and advice as to how 

the recipient could obtain and submit additional 

information prior to the termination was sufficient to 

comport with pre-deprivation due process procedure.

Similarly, in Loudermill, the Supreme Court determined 

that due process required that a tenured public employee 

be given oral or written notice of the charges against 

him/her, an explanation of the employer's evidence, and an 

opportunity to present her position prior to termination of 

her position. See 470 U.S. at 546. 

While we believe that additional procedural safeguards 

will cure the problems currently at issue with the 

supersedeas provisions, due process does not require a 

Goldberg-style evidentiary hearing prior to the deprivation 

of medical benefits. Utilization review is premised upon 

 34 
"routine, standard, and unbiased medical reports," 

Mathews, 424 U.S. at 344 (quoting Richardson v. Perales, 

402 U.S. 389, 404 (1971)), from the treating physician, 

reviewed by a physician in the same specialty who assesses 

the case based upon generally accepted medical protocols, 

principles, and practices. Issues of credibility and veracity 

are less likely to be an issue in such a case. Accordingly, 

the potential benefit of a pre-termination evidentiary 

hearing -- or even an oral presentation to the medical 

reviewer -- is substantially less in this context than in a 

Goldberg-context. See, e.g., Mathews, 424 U.S. at 344-45. 

Nevertheless, we think that at a minimum the employee 

should be granted the opportunity to present additional 

evidence such as his/her personal testimony in writing as 

to the reasonableness and necessity of the disputed

treatment, as this could significantly lessen the risk of 

erroneously depriving an employee of his/her medical 

benefits. This may be particularly true for the recipient of 

unorthodox, naturopathic, or non-traditional medical 

treatments -- such as, for example, acupuncture or 

chiropractic manipulation. Without some sort of indication 

from the very individual who is receiving the questioned 

medical treatment as to its success or the employee's 

improvement, the risk of erroneously terminating an

employee's medical benefits is too high. 

We are ever mindful of the fact that the supersedeas 

provision contested in this case applies only to disabled 

workers who may experience chronic pains over the course 

of several years. Many of these workers may be disabled for 

life. The personal written submission of such disabled 

workers is critical to assessing the relative benefits that a 

particular treatment or practice might have. While reading 

medical reports and reviewing patients' charts might appear 

to show relatively slight improvement, suggesting that the 

medical treatment is unreasonable or unnecessary, a

particular treatment might be the only medical treatment 

that alleviates an individual's pain or mitigates the severity 

of his/her symptoms. As the utilization review process 

concerns itself only with the specific medical practice that 

is being challenged, see 34 Pa. Code S 127.470, the

reviewing physician may have little or no perspective as to 

 35 
how a particular treatment is benefitting the patient in the 

context of the overall medical care that the employee has 

undergone during the course of his/her disability. 28 The 

opportunity for the employee to present his/her side of the 

story -- to introduce his/her own personal account as to 

how the particular treatment has ameliorated his/her 

condition -- may be highly relevant to the URO's 

determination and may not be adequately reflected or 

documented in the medical reports. 

Cognizant of the governmental interest, we believe that 

this additional procedural safeguard of permitting an 

employee to submit his/her personal account in writing of 

the reasonableness or necessity of the disputed medical 

treatment would not prove unduly onerous or 

administratively burdensome or costly to implement. To the 

contrary, the present procedures could remain intact but 

with the exception that the employee be notified at a 

meaningful time and in a meaningful manner (prior to the 

termination of his/her medical benefits) that he/she can 

submit, if he/she so chooses, a letter or a statement to the 

URO regarding the reasonableness or necessity of his/her 

medical treatment. The reviewing physician could then 

consider the employee's account as part of the evidence 

considered when making his/her determination. We are not 

persuaded that this type of evidence would pose a problem 

for the reviewing physician, as doctors regularly make 

judgments about the course of treatments depending upon 

the input from their patients. The reviewing physician as 

part of the utilization review process would simply consider 

the employee's account of the medical treatment before 

rendering judgment. 

In sum, we hold that the supersedeas provisions under 

S 531(5) and (6) violate the dictates of due process by not 

_________________________________________________________________ 

28. While we recognize that the regulations require that a URO attempt 

to obtain a complete set of medical records from all of an employee's 

medical providers for a particular injury, see 34 Pa. Code. S 127.462, 

there is no guarantee that all of an employee's records will be located, 

received, and reviewed during the utilization review. In any event, 

medical records provide but one component for consideration before an 

employee is deprived of his/her constitutionally protected interest in 

his/her medical benefits. 

 36 
affording disabled employees notice or an opportunity to be 

heard before their medical benefits are suspended. To 

remedy the procedural defects in the statute, at a 

minimum, an employee must be given: (1) timely and 

reasonable notice of the imminent suspension of the

medical benefits and treatment before the suspension takes 

effect; (2) a description of the reasons why utilization review 

has been invoked; (3) an opportunity and time to submit a 

personal statement in writing regarding the employee's view 

of the reasonableness and/or necessity of the disputed 

medical treatments; and (4) a description of the procedures 

under which the employee can appeal an adverse 

determination. 

V. 

In addition to the deficiencies we have discussed 

regarding the Commonwealth's statutes, we now consider 

whether the regulations governing utilization review provide 

adequate guidance to UROs and ALJs. We hold that they 

do. 

Sullivan claims that the regulations governing utilization 

review fail to provide standards for determining whether the 

contested medical treatment is reasonable or necessary. 

Without such standards, Sullivan contends that the 

decisions by the UROs and ALJs are ad hoc, arbitrary, and 

without any consistency among the various UROs or ALJs 

such that those decisions violate her right to procedural 

due process under the Fourteenth Amendment. We cannot 

agree. 

The district court properly held that the regulations in 

question provide sufficient guidance to reviewing physicians 

and ALJs to comport with due process. As in any case that 

is subject to utilization review, the inquiry solely focuses 

upon whether the medical treatment in question is 

reasonable and/or necessary. See 34 Pa. CodeS 127.470. 

In so doing, the regulations provide that the reviewing 

physician must be of the same specialty as the treating 

physician, see 77 Pa. Const. Stat. Ann.S 531(6)(i), and that 

the reviewer must analyze the disputed treatment in light of 

generally accepted medical protocols. See 34 Pa. Code 

 37 
S 127.467. The reviewing physician may not consider

whether the injury being treated is work-related, whether 

the employee continues to be disabled, whether the 

employee has reached maximum medical improvement, or 

whether the fees assessed for the services provided are 

reasonable. See id. S 127.470. Furthermore, the reviewer 

must provide a detailed opinion in writing that explains the 

basis for his/her determination. See id. S 127.472.

Accordingly, the regulations provide guidelines which serve 

to provide necessary guidance to the reviewing physician 

concerning the appropriate bases for his/her determination 

such that the ultimate determinations are not arbitrary and 

do not discriminate. 

Similarly, the de novo hearings before Workers' 

Compensation ALJs also comport with due process. As in 

any administrative hearing, the ALJ hears testimony, 

considers evidence, and renders decisions consistent with 

the applicable law. At these de novo hearings, an employee 

has the opportunity to present his/her own medical expert, 

the right to cross-examination of the witnesses, and the 

right to present additional evidence to support his/her 

claim. Further, the statute provides that the ALJ shall 

consider -- but is not bound by -- the report from the 

utilization review. See 77 Pa. Const. Stat. Ann. S 531(6)(iv). 

There is no indication that the de novo hearings in the 

utilization review context suffer from any different 

procedure or lack of guidance than any other 

administrative hearing of which we are aware. Accordingly, 

we hold that the regulations provide sufficient guidance to 

the reviewing physicians and the ALJs in evaluating

employees' cases such that the employees' rights to

procedural due process are honored. 

VI. 

We now address whether imposing the costs of 

reconsideration review upon a losing employee -- without 

giving him/her proper notice beforehand -- violates due 

process. 

Before the amendments in Act 57, if either party 

disagreed with the decision rendered by the URO, that 

 38 
party could petition the Bureau for reconsideration review 

within thirty (30) days of receiving the decision. See 34 Pa. 

Code S 127.502(a). Unlike the initial utilization review, 

however, where the employer or insurer paid for the review, 

the Bureau advanced the costs of reconsideration review 

and charged the losing party for the cost thereafter. While 

Act 57 eliminated reconsideration review, Act 57 did not 

become effective until August 23, 1996, nearly three 

months after the amended complaint in this action was 

filed. Thus, most of the Plaintiffs before us were subjected 

to the costs of reconsideration review when they suffered an 

adverse decision upon reconsideration. It is unclear from 

the undeveloped record below, however, whether any of the 

Plaintiffs actually paid these reconsideration fees. 

Sullivan contends that the imposition of a fee upon a 

losing employee violated an employee's right to due process 

because such a fee was imposed without any notice, 

without an opportunity to be heard on the underlying 

contested claim, and without any consideration for the 

employee's ability to pay. There was no in forma pauperis 

status for reconsideration. Sullivan further asserts that 

such a scheme violated the liberty interests of employees 

because one may have foregone reconsideration review 

rather than risk paying the substantial costs of 

reconsideration if he/she lost.29 

We do not decide whether the imposition of costs on

reconsideration without notice violated the dictates of due 

process. As the Act has been amended, reconsideration 

review no longer exists, these fees are no longer imposed, 

and thus, this is not a continuing problem. Further, given 

the undeveloped record, we cannot determine whether any 

of the Plaintiffs, in fact, paid these fees. Accordingly, we 

remand to the district court to determine whether any of 

the Plaintiffs paid the costs of reconsideration, what those 

costs were, and to re-examine the possible constitutional 

difficulties that the imposition of reconsideration fees poses. 

_________________________________________________________________ 

29. The costs of reconsideration review varies. The typical charge is 

several hundred dollars. See Am. Compl. P 77. 

 39 
VII. 

At this juncture, we raise an Eleventh Amendment 

sovereign immunity issue sua sponte as it is relevant to our 

jurisdiction over the Commonwealth Defendants. See V-1 

Oil Co. v. Utah State Dep't of Pub. Safety, 131 F.3d 1415, 

1419 (10th Cir. 1997) (raising Eleventh Amendment 

sovereign immunity sua sponte); Suarez Corp. Indus. v. 

McGraw, 125 F.3d 222, 227 (4th Cir. 1997) ("We believe 

that, because of its jurisdictional nature, a court ought to 

consider the issue of Eleventh Amendment immunity at any 

time, even sua sponte."); Atlantic Healthcare Benefits Trust 

v. Goggins, 2 F.3d 1, 4 (2d Cir. 1993) (raising Eleventh 

Amendment issue sua sponte); Charley's Taxi Radio 

Dispatch Corp. v. Sida of Hawaii, Inc., 810 F.2d 869, 873 

n.2 (9th Cir. 1987) (same); but see Bouchard Transp. Co. v. 

Florida Dep't of Envtl. Protection, 91 F.3d 1445, 1448 (11th 

Cir. 1996) (stating that the "Eleventh Amendment is not 

jurisdictional in the sense that courts must address the 

issue sua sponte"). 

The Eleventh Amendment30 confers sovereign immunity

upon the States such that they cannot be subject to suit in 

district court absent either Congressional intent to abrogate 

that immunity enacted pursuant to a valid exercise of 

power, see Seminole Tribe v. Florida, #6D 6D6D# U.S. ___, 116 S. Ct. 

1114, 1123 (1996), or a State's explicit consent. See Port 

Auth. Trans-Hudson Corp. v. Feeney, 495 U.S. 299, 304 

(1990). The Eleventh Amendment, however, does not 

immunize State officials for actions taken in their individual 

capacities. See Scheur v. Rhodes, 416 U.S. 232, 237-38 

(1974). 

The amended complaint does not make clear whether the 

Plaintiffs have brought suit against the Commonwealth 

Defendants in their official or individual capacities, or both. 

_________________________________________________________________ 

30. The Eleventh Amendment provides: 

 The Judicial power of the United States shall not be construed to 

 extend to any suit in law or equity, commenced or prosecuted 

 against one of United States by Citizens of another State, or by 

 Citizens or Subjects of any Foreign State. 

U.S. Const. amend. XI. 

 40 
We leave this for the district court to decide. If the district 

court determines that the Commonwealth Defendants have 

only been sued in their official capacities, the district court 

-- in its discretion -- may allow the Plaintiffs to amend 

their complaint to include those Defendants in their 

individual capacities. In any event, the district court will be 

obliged to address whether redress can be sought against 

the Commonwealth Defendants in federal court under 

Eleventh Amendment proscriptions. 

VIII. 

In conclusion, we hold that the supersedeas provisions of 

77 Pa. Const. Stat. Ann. S 531(5) and (6), are 

unconstitutional in that they violate an employee's

procedural due process rights by failing to provide adequate 

notice that his/her medical benefits may be suspended 

upon the invocation of utilization review and by not 

granting the employee an opportunity to respond in writing 

before that termination takes effect. We also hold that the 

private insurance companies are state actors and thus may 

be joined in a S 1983 action when they elect to invoke the 

supersedeas provisions to terminate or suspend an 

employee's constitutionally protected interests in receiving 

medical benefits. 

Thus, we will reverse the order of the district court 

dismissing Sullivan's complaint and will remand to the 

district court for further proceedings in accordance with 

this opinion. On remand, among other issues, the district 

court should address the issue of reconsideration fees, the 

question of certifying a class, and for the first time, it 

should consider whether it has subject matter jurisdiction 

over the Commonwealth Defendants in light of Eleventh 

Amendment sovereign immunity. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 41