Court Opinion

ID: 9885832
Source: CourtListenerOpinion
Date Created: 2023-10-06 15:09:57.363426+00
Date Added: 2024-06-11T14:23:36.278214
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Bernice Bennett,                          :
                          Petitioner      :
                                          :
                   v.                     :   No. 1454 C.D. 2022
                                          :   Submitted: September 11, 2023
Jeld Wen, Inc. (Workers’                  :
Compensation Appeal Board),               :
                         Respondent       :

BEFORE:      HONORABLE RENÉE COHN JUBELIRER, President Judge
             HONORABLE MICHAEL H. WOJCIK, Judge
             HONORABLE MARY HANNAH LEAVITT, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION BY
PRESIDENT JUDGE COHN JUBELIRER                             FILED: October 6, 2023

      Bernice Bennett (Claimant) petitions for review of the December 13, 2022
Order of the Workers’ Compensation Appeal Board (Board) in which the Board
vacated the decision of Workers’ Compensation Judge (WCJ) Wayne Fegley (WCJ
Fegley) granting Claimant’s Penalty Petition and denied and dismissed the Penalty
Petition. WCJ Fegley had assessed a 15% penalty against Jeld Wen, Inc. (Employer)
based on its failure to pay Omni Pharmacy Services (Pharmacy) for a prescription
compound cream, which Employer had been ordered to pay in unappealed
determinations by the Fee Review Hearing Office (Hearing Office). WCJ Fegley
also ordered Employer to pay unreasonable contest attorneys’ fees as litigation costs,
which the Board also vacated and then denied.1 On appeal, Claimant argues the
Board erred in vacating WCJ Fegley’s assessment of penalties and unreasonable
contest attorneys’ fees and then denying the Penalty Petition based on its granting
Employer a de novo hearing and allowing Employer to challenge, nunc pro tunc, the
unappealed determinations of the Hearing Office. Because we discern no error or
abuse of discretion in the Board granting a de novo hearing to address after-
discovered evidence relevant to the penalty proceedings or in relying on that after-
discovered evidence to deny the Penalty Petition and Claimant’s request for
unreasonable contest attorneys’ fees, we affirm.

I.     BACKGROUND
       While the facts in this matter are undisputed, the procedural background is
unusual. Claimant sustained a work-related injury in 2010, for which she received
ongoing wage loss and medical benefits. By a Compromise and Release Agreement
(C&R Agreement) approved by WCJ Fegley on October 19, 2017, “the parties . . .
resolved the wage loss and specific loss claims relative to Claimant’s work injury.”
(WCJ Fegley July 8, 2020 Decision (July 2020 Decision), Finding of Fact (FOF)
¶ 1.) The C&R Agreement indicated that Employer and its insurance carrier/third-
party administrator (Carrier) reserved the right to either continue administering
Claimant’s medical benefits in accordance with the Workers’ Compensation Act2
(Act) or to fund a Centers for Medicare & Medicaid Services (CMS)-approved

       1
          WCJ Fegley also granted in part Employer’s Petition to Review Utilization Review
Determination (UR Petition), finding that the compound cream was not reasonable and necessary
on and after November 18, 2018, but that the other treatment Claimant received from Robert J.
Corba, D.O., was reasonable and necessary. The Board affirmed this determination, and Claimant
did not appeal.
        2
          Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.4, 2501-2710.

                                              2
Medicare Set-Aside Arrangement (MSA).                 (Id.)   There was no evidence that
Employer funded a CMS-approved MSA for Claimant. (Id.)
       Claimant obtained treatment for her work-related injuries from Robert J.
Corba, D.O. (Dr. Corba), who prescribed, among other medicines, a compound
cream. (Id. ¶¶ 7a, 12e.) Pharmacy distributed the compound cream to Claimant via
mail and submitted bills to Carrier seeking payment for service dates beginning July
11, 2016, through January 3, 2018. (Id. ¶¶ 9-10.) When Carrier did not issue
payment, Pharmacy filed Fee Review Applications with the Medical Fee Review
Section of the Bureau of Workers’ Compensation (Bureau). (Id.) Ultimately, 12
administrative determinations were issued, “dated from December 8, 2016[,] to
October 30, 2017,” ordering payment of the bills with interest, which Employer did
not appeal. (Id. ¶¶ 9-10.) Employer made no payments to Pharmacy for those dates
of service. On May 9, 2018, Claimant’s counsel sent a letter to Employer’s counsel,
along with the 12 unappealed administrative decisions, requesting payment. (Id.
¶ 9.) Employer continued to deny payment. Pharmacy advised Claimant in early
2018 that it would no longer send her the compound cream because it had not been
paid. (Id. ¶ 7b.) On September 20, 2018, Claimant filed the Penalty Petition, to
which Employer filed an answer denying that it was liable for penalties.

       A. Proceedings Before WCJ Fegley
       WCJ Fegley held several hearings at which Claimant testified3 and the parties
introduced documentary evidence. At the first hearing, Employer argued it was not
liable for penalties, or for the underlying bills, because it believed Dr. Corba had a
financial interest in Pharmacy, making the bills the product of a prohibited self-

       3
          Claimant’s testimony, which described her work-related injuries and the relief she
received from using the compound cream, is not relevant to the issues presently before this Court.

                                                3
referral. (WCJ Fegley October 23, 2018 Hearing Transcript (October 2018 Hr’g Tr.)
at 7, Certified Record (C.R.) Item 21.) Employer observed that, under the Act, it
had the right to request additional information from providers when they submitted
bills, it had repeatedly requested information regarding Dr. Corba’s relationship with
Pharmacy, as well as additional information, and Pharmacy never responded to those
requests. (Id. at 8.) Employer submitted those letters in support of its defense at a
later hearing. (Employer’s Exhibit (Ex.) D-01, Reproduced Record (R.R.) at 68a-
147a; July 2020 Decision FOF ¶ 11.) Claimant responded that if Employer thought
there was a conflict, it should have indicated that in its denials and during the
subsequent fee review process, which Employer did not do. (October 2018 Hr’g Tr.
at 8.) Claimant thereafter introduced the 12 unappealed Hearing Office decisions
directing Employer to pay Pharmacy and her letter to Employer requesting that the
bills be paid. (Claimant’s Exs. C-02–C-14, C.R. Items 31-43.)
      Employer attempted to depose Dr. Corba and obtain information from
Pharmacy and potentially related business entities and individuals about Dr. Corba’s
relationship with Pharmacy, and, ultimately, received a subpoena from WCJ Fegley
for that purpose. (WCJ Fegley April 13, 2019 Hearing Transcript at 7-9, C.R. Item
22.) Although properly served, Employer received no response to the subpoenas.
(Id. at 7-8.) At Employer’s request, WCJ Fegley issued an interlocutory order on
May 2, 2019, finding that Dr. Corba, Pharmacy, and the others had failed to respond
to the duly served subpoenas and advising them that their continued failure to
comply “risks penalties set forth in Section 436 of the Act[, 77 P.S. § 992,4] including
contempt of court.” (C.R. Item 5.) They still did not respond to the subpoenas.

      4
          Section 436 was added by Section 3 of the Act of February 8, 1972, P.L. 25.

                                                4
      Employer eventually filed a petition to enforce the subpoenas in the Court of
Common Pleas of Montgomery County (common pleas or court). (WCJ Fegley June
25, 2019 Hearing Transcript at 7-9, C.R. Item 23.) Employer advised WCJ Fegley
that it needed the responses to those subpoenas for its defense to the Penalty Petition
but also indicated that there was a separate, ongoing fee review proceeding involving
the same parties but different dates of services in which it might be able to receive
the needed information through stipulation. (Id. at 8-10.) At a subsequent hearing,
Employer informed WCJ Fegley that it had sought enforcement of the subpoenas in
common pleas and was waiting for a decision and that the separate fee review
proceeding had not yet been completed. (WCJ Fegley November 26, 2019 Hearing
Transcript at 8-9, C.R. Item 25.) WCJ Fegley responded that Employer did not
request the subpoenas until late into the litigation and its attempts to enforce those
subpoenas had been delayed. (Id. at 9.) Thus, he advised Employer that the record
would not be held open forever. (Id. at 9-10.)
      Employer subsequently sought to introduce additional evidence related to a
stipulation entered in the separate fee review hearing, and Claimant objected. (WCJ
Fegley February 18, 2020 Hearing Transcript at 5-6, C.R. Item 26.) Employer
indicated that common pleas denied its enforcement request and that it had received
a stipulation by Pharmacy’s counsel agreeing that, for the purpose of that fee review
proceeding and those service dates at issue, Dr. Corba had an ownership interest in
Pharmacy. (Id. at 6-8.) Employer stated that Hearing Officer David Torrey (Hearing
Officer Torrey) had not issued a decision in that matter yet. (Id. at 8.) Employer
maintained that, although the dates differed, the stipulation was relevant to and
admissible for the Penalty Petition proceedings, particularly given “the evidentiary
stonewalling from the prescribing physician Dr. Corba as well as [] Pharmacy.” (Id.

                                          5
at 8-9; Employer’s Ex. D-07 at 2, C.R. Item 57.)                  Claimant objected to the
stipulation’s admission because it did not relate to the dates at issue in the Penalty
Petition and, therefore, was irrelevant. (Id. at 9-11.) WCJ Fegley sustained the
objection, and the stipulation was not admitted. (Id. at 11.) WCJ Fegley indicated
the record would close on March 5, 2020. (Id. at 16.) Employer subsequently sought
to reopen the record to introduce Hearing Officer Torrey’s Fee Review Decision
dated May 20, 2020. (WCJ Fegley Interlocutory Order, July 6, 2020, C.R. Item 9.)
WCJ Fegley denied the request, noting the record closed on March 5, 2020, and the
parties had already filed their briefs. (Id.)
      Two days after denying Employer’s request, WCJ Fegley issued the July 2020
Decision finding that Claimant had met her burden of proving that Employer
violated the Act. Specifically, WCJ Fegley found:

      19. Based on a review of all the evidence presented in this case, this
      Judge finds that [Employer] violated Sections 306[(f.1)] and 430 of the
      . . . Act[, 77 P.S. §§ 531 (requiring timely payment for reasonable and
      necessary medical treatment), 971 (providing that an employer that
      refuses to make payment ordered in a decision without seeking relief
      via petition or supersedeas is subject to penalties),] based on its failure
      to timely pay for Claimant’s [] compound cream for dates of service
      from July 11, 2016, through January 3, 2018, which were the subject of
      the . . . administrative decisions submitted in this case. This Judge notes
      that . . . administrative decisions of record in this case approved these
      prescriptions for Claimant’s [] compound cream and were not appealed
      for a hearing before a fee review hearing officer. [Employer] filed no
      Request for Utilization Review of these prescriptions until March 2019.
      This Judge finds that Claimant is entitled to an award of [p]enalties
      pursuant to Section 435 of the Act[, 77 P.S. § 991.5] This Judge further
      finds that an appropriate [p]enalty for the foregoing violation is a [15%]
      penalty, considering the severity of the violation and the length of time
      that it has failed to make payment on the foregoing prescriptions. The
      [15%] penalty shall be payable on the late paid or outstanding
      prescription bills for [] compound cream identified in the . . .

      5
          Section 435 was added by Section 3 of the Act of February 8, 1972, P.L. 25.

                                                6
      administrative decisions for dates of service from July 11, 2016,
      through January 3, 2018, plus on the 10% statutory interest calculated
      on the same. . . .

      ....

      23. This Judge finds that [Employer] did not present a reasonable
      contest with respect to the Penalty Petition based upon the evidence of
      record. Claimant submitted a quantum meruit attorney fee bill exhibit
      into evidence, which established that Claimant’s counsel performed
      [20] hours of work in this litigation and charged an hourly rate of
      $200.00 . . . for a total quantum meruit attorney fee bill of $4,000.00.
      This Judge has considered the complexity of the issues and the amount
      of work involved in this case, which involved filing a Petition and
      attending many hearings, presenting witness testimony, collecting and
      presenting exhibits, and preparing a brief and proposed findings of fact
      and conclusions of law. This Judge is also familiar with the skills and
      qualifications of Claimant’s counsel, who has appeared before [me] in
      numerous cases. This Judge finds that the foregoing unreasonable
      contest fee is reasonable for the work performed.

(July 2020 Decision, FOF ¶¶ 19, 23.) In addition, WCJ Fegley ordered Employer to
“pay for Claimant’s [] compound cream prescriptions for dates of service from July
11, 2016, through January 3, 2018, [plus] 10% statutory interest. . . .” (July 2020
Decision, Order ¶ 1.)

      B. Appeal to the Board
      Employer appealed to the Board and filed a “Petition for Hearing De Novo
Before the Board or a WCJ” (Petition for Hearing), “based on after-discovered
evidence and alleged improper conduct by a party in interest,” pursuant to Section
425 of the Act, 77 P.S. § 856. (Board’s December 16, 2021 Opinion (Board 2021
Op.) at 1, 7-8.) The Board granted the Petition for Hearing, setting forth the
background of the litigation up to that point and including additional facts submitted
in support of Employer’s request for a de novo hearing.

                                          7
      The Board concluded that a de novo hearing under Section 425 was warranted
“to address the issue of a prohibited self-referral and to allow for submission of
Hearing Officer Torrey’s Fee Review Decision into evidence.”              (Id. at 7-8.)
According to the Board, while employers are required to pay for all reasonable and
necessary medical treatment for a work-related injury, pursuant to Section 306(f.1)
of the Act, Section 306(f.1)(3)(iii) “prohibits referrals of workers’ compensation
claimants by health care providers for medical services . . . to entities in which the
providers have a financial interest.” (Board December 2021 Op. at 8 (quoting
Eighty-Four Mining Co. v. Three Rivers Rehab., Inc., 721 A.2d 1061, 1063 (Pa.
1998)).) Pursuant to that subsection, “[n]o claim for payment shall be presented by
an entity to any individual, third-party payer or other entity for a service furnished
pursuant to a referral prohibited under this section.” 77 P.S. § 531(3)(iii). The Board
concluded that while Claimant had established that there were unpaid bills,
Employer consistently defended its actions, arguing that the bills were not payable
because of the relationship between Dr. Corba and Pharmacy and asserting that its
attempts to obtain the information of that relationship were consistently rebuffed.
      The Board explained:

      The evidence that was submitted in this case supports [Employer’s]
      assertions that [] Pharmacy has long failed or refused to respond to
      [Employer’s] letters requesting information about Dr. Corba’s possible
      financial interest in [] Pharmacy, and that both [] Pharmacy and Dr.
      Corba failed or refused to comply with the subpoenas . . . seeking the
      same information for the billing period in question . . . . In addition, []
      Pharmacy represented to the . . . [c]ourt . . . presiding over [Employer’s]
      subpoena enforcement action that [] Pharmacy had already complied
      with [] WCJ[ Fegley’s] subpoena because the information it provided
      during the fee review litigation, including the stipulation of Dr. Corba’s
      financial interest in [] Pharmacy “on the dates of service at issue” in the
      fee review, overlapped with the information sought through the . . .
      subpoena. However, as illustrated by the fact that Claimant objected to

                                          8
      the stipulation coming into evidence in this proceeding on the basis that
      it covered different dates of service than those at issue in the Penalty
      Petition, [] Pharmacy’s representation to the [] court [] was incorrect.
      We do not know whether [] Pharmacy’s act of supplying incorrect
      information to the . . . [c]ourt [] was the result of a mistake or something
      more “nefarious” as the term is used in the Act. Regardless, it is clear
      to th[e] Board that Dr. Corba and [] Pharmacy both have stymied
      [Employer’s] efforts to gather information needed to arrive at the truth
      and potentially present its defense that the bills for the compound cream
      were not payable because they were the result of a prohibited self-
      referral. This occurred in more than one forum. In light of the contents
      of the stipulation by [] Pharmacy and the Fee Review Decision by
      Hearing Officer Torrey, we agree with [Employer’s] characterization
      of this behavior as evidentiary stonewalling so as not to disclose to
      [Employer] or [] WCJ [Fegley] the documentation or information
      necessary to either dispel or confirm the existence of a prohibited self-
      referral, and we deem this conduct to be “improper conduct by any
      party in interest” as contemplated by Section 425 of the Act.

(Board Op. at 9-10.)
      The Board noted that Claimant did not “seem to dispute the occurrence of
evidentiary ‘stonewalling’ or delay and subsequent evidence of a prohibited self-
referral” but argued that a de novo hearing should be denied because neither Dr.
Corba nor Pharmacy was a party in interest and that Employer could have raised
these issues through the fee review process. (Id. at 11-12.) The Board rejected both
positions.
      As to the first argument, the Board held that while any penalty would be paid
to Claimant, WCJ Fegley directed Employer to pay Pharmacy tens of thousands of
dollars, allowing for the potential that Dr. Corba and Pharmacy would “reap a
financial benefit from Claimant’s Penalty Petition.”        (Id.)   The Board further
explained that the treatment provided and remedies prescribed arose under the Act,
which the Board is required “to maintain the integrity of its administration,” and that
any penalty award to Claimant is tied to the potential improper conduct of her

                                           9
physician and pharmacy. (Id.) The Board concluded that, if the improper conduct
was confirmed, it would decline “to allow financial benefit from it.” (Id.)
       As to the second argument, the Board held

       that despite the forum and any possible deficiencies in [Employer’s]
       procedural steps, the conduct of Dr. Corba and [] Pharmacy
       surrounding [Employer’s] efforts to gather information about a possible
       prohibited self-referral as well as their stipulated act of actually
       engaging in a prohibited self-referral arrangement is relevant because
       again, they potentially stood to profit financially from the Penalty
       Petition. In short, [the Board] decline[d] to penalize [Employer] for
       possible procedural mistakes and at the same time reward Dr. Corba
       and [] Pharmacy for their own improper conduct. Dr. Corba and []
       Pharmacy stipulated, and Hearing Officer Torrey so ruled, that [they]
       violated the Act by submitting bills to [Employer] for the period of
       September [2018] to November 2018 and forward that were the product
       of a prohibited self-referral, and [Employer’s] attempts to confirm that
       the same illegal relationship existed for July 2016 to January 2018 were
       stymied.

(Id. at 12.)
       The Board observed that the matter before it was “undoubtedly an unusual
one.” (Id.) But, “[b]ased on the improper conduct of Dr. Corba and [] Pharmacy[,]
including evidentiary stonewalling and the existence of a prohibited self-referral in
this and the related Fee Review case, [the Board] conclude[d] this is ‘the rare case
that meets [the] criteria’” set forth in Section 425. (Id. (quoting Giant Eagle, Inc. v.
Workmen’s Comp. Appeal Bd. (Bensy), 651 A.2d 212, 218 (Pa. Cmwlth. 1994)).)
Thus, “in the interest of justice,” the Board vacated WCJ Fegley’s grant of the
Penalty Petition and award of unreasonable contest fees and ordered a de novo
hearing before the Board, after which the Board would decide the issue of the Penalty
Petition. (Id. at 12-13.)

                                          10
       C. Remand Proceedings and Board Remand Opinion
       The Board assigned WCJ Patrick Sheldon (WCJ Sheldon) to hold the de novo
hearings on the Board’s behalf. At those hearings, Employer introduced a June 13,
2022 Statement of Financial Interest (SOFI), signed by Pharmacy’s legal counsel,
that was captioned as being related to this specific matter. The SOFI stated, in
pertinent part, that “Dr. Corba had a financial interest in [] Pharmacy on the dates of
service at issue in this dispute.”6 (Employer’s Ex. D-10, R.R. at 183a.) Claimant
did not submit evidence at the de novo hearing. WCJ Sheldon rendered findings of
fact summarizing the procedural history and the evidence offered on remand,
including:

       10. The June 13, 2022 [SOFI] was uncontested and was admitted
       without objection. As a statement relative to financial interest in []
       Pharmacy prepared by its attorney, it is credible. Based upon the
       credible [SOFI] submitted during the de novo hearing, I find as fact that
       Dr. [] Corba had a financial interest in [] Pharmacy during the time
       period covered by Claimant’s Penalty Petition, specifically July 2016
       to January 2018.

(WCJ Sheldon’s De Novo Hearing FOF ¶ 10.) WCJ Sheldon’s findings were
submitted to the Board for its consideration.

       6
           The SOFI also stated:

       For the purposes of this dispute only, [] Pharmacy stipulates that it is not protected
       by the Stark Act[, 42 U.S.C. § 1395nn,] and/or the Safe Harbor regulations
       promulgated under the Medicare and Medicaid Patient and Program Protection Act
       at 42 U.S.C.[] § 1320a-7b(1) and (2), published at 42 C[.]F[.]R[.] [§] 1001.952
       (relating to exceptions), and all exceptions to the Stark [A]mendments to the
       Medicare Act at 42 U.S.C.[] § 1395nn, and all regulations promulgated there.

(Employer’s Ex. D-10 ¶ 1, R.R. at 183a.) The import of this stipulation is that it removes the self-
referral from the exceptions to the Act’s prohibition against self-referrals for those that fall within
the federal Safe Harbor regulations and the Stark Amendments. See Eighty-Four Mining Co., 721
A.2d at 1064.

                                                 11
       Adopting WCJ Sheldon’s findings as its own and incorporating its 2021
Opinion and Field Office Order into its final opinion, the Board issued its final
opinion on the Penalty Petition. As it did in its initial determination, the Board
concluded that Claimant established that there were unpaid medical bills related to
Dr. Corba’s treatment and Pharmacy’s disbursement of the compound cream.
(Board’s December 13, 2022 Opinion (Board’s 2022 Op.) at 7.) Thus, the burden
shifted to Employer to show no violation of the Act occurred. Based on the evidence
presented at the hearing de novo, the Board found that Dr. Corba had a financial
interest in Pharmacy during the relevant time period and, “[a]s a result, the bills in
question . . . were not payable because the arrangement between Dr. Corba and []
Pharmacy was a prohibited self-referral under the Act.” (Id. at 7.) Accordingly, the
Board held, Employer established that it had not violated the Act, and the Board
denied and dismissed the Penalty Petition. (Id. at 7, Order.) Having denied the
Penalty Petition, the Board explained Employer was not required to pay Pharmacy’s
bills or the penalty, and its contest of the Penalty Petition was necessarily reasonable
precluding attorneys’ fees under Section 440 of the Act, 77 P.S. § 996. 7 Claimant
now petitions this Court for review.8

II.    ISSUES ON APPEAL
       Claimant presents the following issues for this Court’s review:

       7
          Section 440 was added by Section 3 of the Act of February 8, 1972, P.L. 25.
       8
          This Court’s scope of review “is limited to determining whether necessary findings of
fact are supported by substantial evidence, whether an error of law was committed, or whether
constitutional rights were violated.” Elberson v. Workers’ Comp. Appeal Bd. (Elwyn, Inc.), 936
A.2d 1195, 1198 n.2 (Pa. Cmwlth. 2007).

                                              12
      I.    Whether the . . . Board usurped the jurisdiction of the [] Hearing
      Office by granting a de novo hearing and allowing appeals nunc pro
      tunc of unappealed decisions of the Bureau[.]

      II.   Whether the . . . Board erred in reversing [WCJ Fegley’s]
      assessment of penalties and counsel fees as a cost[.]

(Claimant’s Brief (Br.) at 4 (emphasis added).)
      As to the first issue, Claimant argues that the Board erred and exceeded its
jurisdiction by allowing what were, effectively, untimely appeals of the 12
administrative decisions directing Employer to pay Pharmacy’s bills between July
2016 and January 2018, when it approved the Section 425 de novo hearing. Those
unappealed administrative decisions, Claimant maintains, became final and binding
and required Employer to pay those bills. According to Claimant, Employer should
have raised the issue of whether the bills were the result of a prohibited self-referral
in either appeals of those decisions or via the process set forth in Section 127.302 of
the Bureau’s regulations, 34 Pa. Code § 127.302, not in penalty petition proceedings.
Claimant further asserts Employer fully litigated the Penalty Petition before WCJ
Fegley and “was not stymied from getting any evidence at all,” and its failure to
obtain information from Dr. Corba and Pharmacy was the result of its own inaction.
(Claimant’s Br. at 9-10.) Therefore, Claimant argues, there was no basis for the
Board to order a de novo hearing.
      As to the second issue, Claimant argues that because the Board erred in
ordering the de novo hearing and considering the additional evidence presented, it
was error for the Board to effectively reverse WCJ Fegley’s decision granting the
Penalty Petition and assessing unreasonable contest fees. According to Claimant,
WCJ Fegley did not err or abuse his discretion in finding that Employer violated the
Act by not complying with the unappealed administrative determinations directing

                                          13
it to pay Pharmacy without legal or factual justification or in finding that Employer’s
contest of the Penalty Petition was unreasonable.
      Employer responds that, at the heart of this matter, is the undisputed fact that
the bills at issue were the result of a prohibited self-referral, making those bills if not
null and void, then at least not payable under Section 306(f.1)(3)(iii) of the Act and
Section 127.301(a), (b) of the Bureau’s regulations, 34 Pa. Code § 127.301(a), (b).
According to Employer, the Board properly vacated WCJ Fegley’s decision and
granted a Section 425 de novo hearing because Employer’s repeated attempts, in
multiple forums, to obtain the information necessary to determine whether there was
the prohibited self-referral were ignored and/or actively stymied by Pharmacy and
Dr. Corba for years. As to the 12 administrative decisions, Employer points out that
Pharmacy did not disclose Dr. Corba’s financial interest to the Bureau when it filed
its fee review applications and, because Pharmacy ignored Employer’s attempts at
obtaining information about that relationship, it is unclear how Employer could
properly defend itself in those abbreviated proceedings. Employer maintains that,
even when Pharmacy and Dr. Corba finally admitted that there was a financial
relationship in the separate fee review proceedings, they did so in a manner that
precluded its use in the present litigation. Under these circumstances, Employer
argues, the Board’s ordering a Section 425 de novo hearing and denying the Penalty
Petition based on the evidence presented therein was not erroneous but “just and
proper.” (Employer’s Br. at 13-15.) Finally, Employer contends Claimant is not
entitled to relief because she comes to court with “unclean hands” based on the
actions of Pharmacy and Dr. Corba. (Id. at 20-22.)

                                            14
III.   DISCUSSION
       The present matter presents a unique factual scenario that represents the
convergence of multiple provisions of the Act, including the invocation of the rarely
used Section 425, which authorizes the Board to take the extraordinary step of
holding a de novo hearing and rendering a decision on a petition as fact finder.
       Section 435(d) of the Act authorizes the assessment of penalties against an
employer who violates the Act or the Bureau’s regulations. 77 P.S. § 991(d).9
Claimants seeking the imposition of a penalty bear the initial burden of proving that
a violation of the Act or the regulations has occurred. Shuster v. Workers’ Comp.
Appeal Bd. (Pa. Hum. Rels. Comm’n), 745 A.2d 1282, 1288 (Pa. Cmwlth. 2000). If
the claimant meets this initial burden, “the burden then shifts to the employer to
prove it ha[s] not” violated the Act. Id. Even if a violation of the Act or the
regulations is established, the imposition of a penalty is not mandatory but falls
within the discretion of the fact finder. Candito v. Workers’ Comp. Appeal Bd. (City
of Philadelphia), 785 A.2d 1106, 1108 (Pa. Cmwlth. 2001). Accordingly, this Court
“will not overturn a penalty [decision] on appeal absent an abuse of discretion,”
which “is not merely an error of judgment, but among other reasons, occurs where
the law is misapplied in reaching a conclusion.” Id.
       The violation here is premised on Employer’s failure to pay Pharmacy
pursuant to Section 306(f.1)(1)(i), which relevantly states that employers are to
“provide payment for reasonable surgical and medical services [and] services
rendered by . . . other health care providers . . . as and when needed.” 77 P.S.

       9
         Section 435(d) relevantly states, “[t]he [D]epartment [of Labor and Industry], the [B]oard,
or any court which may hear any proceedings brought under this [A]ct shall have the power to
impose penalties as provided herein for violations of the provisions of this [A]ct or such rules and
regulations or rules of procedure[.]” 77 P.S. § 991(d).

                                                15
§ 531(1)(i). The failure to pay medical bills is a violation of the Act that can warrant
the assessment of penalties. Loose v. Workmen’s Comp. Appeal Bd. (John H. Smith
Arco Station), 601 A.2d 491, 493-94 (Pa. Cmwlth. 1991).
      It is undisputed that Claimant established that Employer, through Carrier, did
not provide payment for the services provided by Pharmacy, the compound cream,
for the period between July 2016 and January 2018, notwithstanding that it was
presented with the bills and administrative determinations directing the payment of
those bills. Such non-payment would be a violation of the Act. Id. Thus, the burden
shifted to Employer to demonstrate that it did not violate the Act. Shuster, 745 A.2d
at 1288.
      Throughout these penalty proceedings, Employer consistently argued that it
had no liability for the unpaid bills, notwithstanding the administrative
determinations, because the bills were never payable as they were the result of a self-
referral prohibited by Section 306(f.1)(3)(iii). That provision states:

      (iii) Notwithstanding any other provision of law, it is unlawful for a
      provider to refer a person for laboratory, physical therapy,
      rehabilitation, chiropractic, radiation oncology, psychometric, home
      infusion therapy or diagnostic imaging, goods or services pursuant to
      this section if the provider has a financial interest with the person
      or in the entity that receives the referral. . . . . No claim for
      payment shall be presented by an entity to any individual, third-
      party payer or other entity for a service furnished pursuant to a
      referral prohibited under this section.

77 P.S. § 531(3)(iii) (emphasis added). The Bureau’s regulations reiterate this
prohibition against self-referrals and against submitting claims for payment that
were the result of a self-referral. 34 Pa. Code § 127.301. “The intent of Section
306(f.1)(3)(iii) . . . was to contain costs by preventing physicians from acting in their
own self-interest.” Eighty-Four Mining, 721 A.2d at 1067.

                                           16
       Employer attempted to obtain the evidence to establish this prohibited self-
referral for years. When Pharmacy submitted its bills for payment, Employer
repeatedly attempted to obtain information from Pharmacy about whether Dr. Corba
had a financial interest in Pharmacy, as permitted by Section 127.206 of the Bureau’s
regulations, 34 Pa. Code § 127.206.10 (Employer’s Ex. D-01, R.R. at 68a-146a.)
Each time Pharmacy did not respond. This is not disputed. Employer similarly
sought evidence from, among others, Dr. Corba and Pharmacy to aid its defense of
the Penalty Petition via subpoenas, but they similarly did not respond to the
subpoenas. This is not disputed. When Employer obtained an interlocutory order
from WCJ Fegley warning Dr. Corba and Pharmacy that failure to respond to the
subpoenas could lead to contempt of court, they did not respond. This is not
disputed. When Employer sought enforcement of the subpoenas before common
pleas, Pharmacy indicated that the stipulation from the separate fee review
proceedings overlapped with what was sought in the subpoenas, which it did not.
This is not disputed. Finally, when Employer requested that WCJ Fegley reopen the
record to present additional evidence that confirmed the relationship between Dr.
Corba and Pharmacy, which had been unavailable previously, WCJ Fegley would
not do so.
       In an effort to meet its burden of proving its defense to the Penalty Petition
and show that WCJ Fegley’s decision granting the Penalty Petition was the result of
improper conduct of interested parties, specifically, Dr. Corba and Pharmacy,
Employer invoked, and the Board granted, a de novo hearing under Section 425.
That section states:

       10
           This regulation states: “Insurers may request additional documentation to support
medical bills submitted for payment by providers, as long as the additional documentation is
relevant to the treatment for which payment is sought.” 34 Pa. Code § 127.206.

                                            17
      If on appeal it appears that the [WCJ’s] award or disallowance of
      compensation was capricious or caused by fraud, coercion, or other
      improper conduct by any party in interest, the [B]oard may, grant a
      hearing de novo before the [B]oard, or one or more of its members or
      remand the case for rehearing to any [WCJ]. If the [B]oard shall grant
      a hearing de novo, it shall fix a time and place for same, and shall notify
      all parties in interest.

      As soon as may be after any hearing by the [B]oard, it shall in writing
      state the findings of fact, whether those of the [WCJ] or its own, which
      are basic to its decision and award or disallow compensation in
      accordance with the provisions of this [A]ct.

77 P.S. § 856 (emphasis added). “Whether to grant or deny a rehearing is within the
discretion of the Board, and our scope of review is limited to determining whether
the Board abused that discretion.” Giant Eagle, Inc., 651 A.2d at 217. “[A] proper
ground for rehearing” under this provision “is to afford the applicant an opportunity
to adduce [evidence] not offered at the original hearing because it was not then
available.” Douglas v. Workmen’s Comp. Appeal Bd. (Bethlehem Mining Co.), 377
A.2d 1300, 1302 (Pa. Cmwlth. 1977). The Board has “broad power to grant
rehearing when justice so requires.” Abington Mem’l Hosp. v. Workmen’s Comp.
Appeal Bd. (Wyche), 616 A.2d 767, 771 (Pa. Cmwlth. 1992).
      Under these facts, we cannot say that the Board abused its discretion in
granting, “in the interest of justice,” a de novo hearing under the authority of Section
425 or in concluding that this was a “‘rare case that meets [the] criteria’” of that
provision. (Board 2021 Op. at 12 (quoting Giant Eagle, Inc., 651 A.2d at 218)
(alteration in original).) Rather, we agree with the Board that the record in this
matter demonstrates “improper conduct by any party in interest,” which
encompasses Dr. Corba and Pharmacy, based on the “evidentiary stonewalling” that
occurred in multiple forums “that stymied [Employer’s] efforts to gather information

                                          18
needed to arrive at the truth” and potentially present a meritorious defense to the
Penalty Petition. (Id. at 10.) Further, in Pasquarelli v. Workmen’s Compensation
Appeal Board (Western Electric), 567 A.2d 792, 794-95 (Pa. Cmwlth. 1989), we
upheld the holding of a de novo hearing under Section 425 to allow an employer to
offer newly discovered evidence that the claimant fraudulently withheld or
misrepresented relevant information as to the cause of his disability and potential
additional earnings because “the [WCJ] . . . [was] provided with incomplete
information . . . and thus was deprived of an opportunity to render judgment with
full knowledge of” the relevant facts. Here, WCJ Fegley was not provided with
complete information as to the relationship between Dr. Corba and Pharmacy, closed
the record before that information could be obtained, and, therefore, “was deprived
of an opportunity to render judgment with full knowledge of” the relevant facts. Id.
The Board, in denying the Penalty Petition did so with “full knowledge of” the
relevant facts, id., which was that the bills presented to Employer by Pharmacy were
the result of a prohibited self-referral and, therefore, not payable. Accordingly, the
Board did not exceed its authority or abuse its discretion in granting the Section 425
de novo hearing or by rendering a decision based on the evidence presented therein.
      To the extent Claimant’s arguments could be viewed as challenging the
evidence presented as being extraneous to the Penalty Petition and, therefore,
improperly considered, we disagree. In determining whether to impose a penalty,
the fact finder may not rely on factors that are extraneous to a violation, such as the
underlying award of benefits being a “close call.” Thomas v. Workers’ Comp.
Appeal Bd. (Delaware Cnty.), 746 A.2d 1202, 1206 (Pa. Cmwlth. 2000). However,
if an employer violates the Act by, for example, not making payments based on a
belief that payments were not required, and, subsequently presents evidence “of

                                          19
extenuating circumstances pertinent to the violation,” consideration of that evidence
is not an abuse of discretion. Lakomy v. Workers’ Comp. Appeal Bd. (Dep’t of Env’t
Res. & Pimco), 720 A.2d 492, 496 (Pa. Cmwlth. 1998). For instance, evidence
presented by an employer that a claimant had returned to work without a loss of
earnings as a defense to its cessation of paying wage loss benefits was admissible,
as it would be relevant to an alleged violation. Arnott v. Workmen’s Comp. Appeal
Bd. (Sheehy Ford Sales, Inc.), 627 A.2d 808, 811 (Pa. Cmwlth. 1993).
      Here, the Penalty Petition was based on Employer’s denial of payment, which
was, in turn, predicated on its belief that the bills were the result of a prohibited self-
referral, a belief Employer attempted to confirm with each bill but was prevented
from doing so by Pharmacy’s silence. Thus, evidence that would establish or
confirm Employer’s belief that this was a prohibited self-referral would not be
extraneous to the alleged violation. The credited evidence, as finally provided to
Employer in the SOFI and submitted during the de novo hearings, confirmed the
financial relationship between Dr. Corba and Pharmacy.              Pursuant to Section
306(f.1)(3)(iii) and the Bureau’s regulations, this relationship rendered Dr. Corba’s
referral of Claimant to Pharmacy to fill the compound cream prescription a
prohibited self-referral for which “[n]o claim for payment shall be” made, and
Employer bore no liability for those bills. 77 P.S. § 531(3)(iii); 34 Pa. Code
§§ 127.301(b), 127.302(a); Eighty-Four Mining, Co., 721 A.2d at 1063.
      As for Claimant’s arguments that Employer raised this issue in the wrong
forum or too late as the administrative determinations had become final, we, like the
Board, are not persuaded that Employer’s failure to resolve the self-referral issue
within the fee review process is fatal under these circumstances. Although “an
insurer [that] determines that a bill has been submitted for treatment rendered in

                                            20
violation of the referral standards” is not liable to pay the bills, a provider can
challenge that denial and it is the insurer that has the burden of proving “that a
violation of the self-referral provisions has occurred.” 34 Pa. Code § 172.302.
While Employer believed there was a prohibited self-referral occurring, Pharmacy
thwarted Employer’s efforts to obtain the evidence needed for it to meet its burden
of proof by not responding to Employer’s repeated requests for information. Further,
the actions of Dr. Corba and Pharmacy in the present litigation, which ranged from
ignoring subpoenas to representing to common pleas that the stipulation presented
in the separate fee review application “overlapped” with this matter when it did not,
suggest that they would have been similarly less than forthcoming in the fee review
process. Because it took Employer years to obtain confirmation of the relationship
between Dr. Corba and Pharmacy, i.e., between its initial request for information in
response to the bills beginning in 2016 and the de novo hearings held in 2022, when
Pharmacy finally confirmed Dr. Corba’s financial interest, “we decline to penalize
[Employer] for possible procedural mistakes and . . . reward Dr. Corba and []
Pharmacy for their own improper conduct.” (Board 2021 Op. at 12.)
      Having concluded that the Board did not abuse its discretion in granting the
Section 425 de novo hearing or in denying the Penalty Petition on the basis that the
unpaid bills were the result of a prohibited self-referral and, therefore, not payable
under Section 306(f.1)(3)(iii), we find Claimant’s argument that the Board erred in
reversing the award of unreasonable contest attorneys’ fees necessarily fails. To be
eligible for unreasonable contest attorneys’ fees under Section 440(a) of the Act, the
claimant seeking the fees must prevail “in whole or in part.” 11 77 P.S. § 996(a).

      11
           Section 440(a) provides, in its entirety:

(Footnote continued on next page…)

                                                  21
WCJ Fegley awarded those fees based on his conclusion that Employer’s contest of
the Penalty Petition was unreasonable. However, Claimant did not ultimately
prevail “in whole or in part” on the Penalty Petition; Employer did, and, therefore,
the Board did not err in not awarding Claimant unreasonable contest fees under
Section 440(a).

IV.    CONCLUSION
       Because we conclude the Board did not abuse its discretion or err in granting
the Section 425 de novo hearing under these highly unusual circumstances, or in
relying on the evidence presented therein that confirmed the unpaid bills were the
result of a prohibited self-referral for which no claim for payment could be made
under Section 306(f.1)(3)(iii), we affirm the Board’s denial of the Penalty Petition
and Claimant’s request for unreasonable contest attorneys’ fees.

                                             __________________________________________
                                             RENÉE COHN JUBELIRER, President Judge

       In any contested case where the insurer has contested liability in whole or in part,
       including contested cases involving petitions to terminate, reinstate, increase,
       reduce or otherwise modify compensation awards, agreements or other payment
       arrangements or to set aside final receipts, the employe or his dependent, as the
       case may be, in whose favor the matter at issue has been finally determined in
       whole or in part shall be awarded, in addition to the award for compensation, a
       reasonable sum for costs incurred for attorney’s fee, witnesses, necessary
       medical examination, and the value of unreimbursed lost time to attend the
       proceedings: Provided, That cost for attorney fees may be excluded when a
       reasonable basis for the contest has been established by the employer or the insurer.

77 P.S. § 996(a) (emphasis added).

                                               22
       IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Bernice Bennett,                        :
                        Petitioner      :
                                        :
                   v.                   :   No. 1454 C.D. 2022
                                        :
Jeld Wen, Inc. (Workers’                :
Compensation Appeal Board),             :
                         Respondent     :

                                     ORDER

      NOW, October 6, 2023, the Order of the Workers’ Compensation Appeal
Board, entered in the above-captioned matter, is AFFIRMED.

                                      __________________________________________
                                      RENÉE COHN JUBELIRER, President Judge