Request By:
Senator Tom Jensen
21st Senate District
Opinion
Opinion By: Jack Conway, Attorney General; James M. Herrick, Assistant Attorney General
Opinion of the Attorney General
This office has been asked to render an opinion concerning prescription reimbursements for workers' compensation claims. KRS 342.035(1) requires the Commissioner of the Department of Workers' Claims to "adopt a schedule of fees for the purpose of ensuring that all fees, charges, and reimbursements under KRS 342.020 and this section shall be fair, current, and reasonable and shall be limited to such charges as are fair, current, and reasonable for similar treatment of injured persons in the same community for like services, where treatment is paid for by general health insurers. " Pursuant to that statute, the Department has promulgated 803 KAR 25:092, which establishes the workers' compensation pharmacy fee schedule.
Section 2 of 803 KAR 25:092, in essence, requires the employer (or insurance carrier) to reimburse a pharmacist for the wholesale price of a drug plus a five-dollar dispensing fee, "plus any applicable federal or state tax or assessment." Section 4 prohibits "balance billing" by the pharmacy to recover any greater amount from the workers' compensation patient. At issue presently is Section 3(4) of the regulation, which provides:
Any insurance carrier, self-insured employer or group self-insured employer may enter into an agreement with any pharmacy to provide reimbursement at a lower amount than that required in this administrative regulation.
Also of concern is KRS 342.020(1) , which provides in part:
In the absence of designation of a managed health care system by the employer, the employee may select medical providers to treat his injury or occupational disease. Even if the employer has designated a managed health care system, the injured employee may elect to continue treating with a physician who provided emergency medical care or treatment to the employee.
Subsection (4)(b) of that same section similarly provides that where the employer has designated a managed health care system, "[t]he employee shall be allowed choice of provider within the plan."
Senator Tom Jensen has requested an opinion from the Attorney General concerning the following situation:
Presently, a self-insured employer and/or an insurance carrier have made arrangements with pharmacies in and around the area in which the injured employee resides. They include the Walgreens, Rite-Aid[s], CVS, Kroger, etc., as well as the "Mom and Pop locally owned pharmacies. " The arrangement allows the employer and/or carrier to provide the prescribed medication of the physician for treatment due to the injury, at below the present pharmacy's fee schedule promulgated by the Commissioner.
A dispute has arisen because some physicians, who treat the employee, requir[e] the employee to receive his medications from a mail-order prescription pharmacy such as IWP, based in Boston, Massachusetts. The mail-order center then charges the employer/carrier the full fee schedule price, which is generally 25% greater, for the same drug than what the employer/carrier would pay through its arrangement with all other pharmacies in the area in which the employee resides.
The employer/carrier then reimburses the mail-order center at the below fee schedule rate according to the arrangement it had with all other pharmacies. The mail-order center takes the position that they are owed the full fee schedule price and that to reduce the price would infringe upon the employee's right to choose its medical service provider.
Senator Jensen presents the following three questions:
1. [W]hether or not a pharmacy is considered a medical service provider for purposes of "choice" under KRS 342.020, in light of [803 KAR 25:092, Section 3(4)].
2. [D]oes an arrangement made between the employer/carrier and a pharmacy, at below fee schedule prices infringe upon the employee's right to choose a physician for treatment, assuming the employee is not inconvenienced in obtaining his medications on a timely basis?
3. [U]nder an arrangement made between the employer/carrier at less than fee schedule, with the employee's local pharmacy, can the employer/carrier reimburse a mail-order pharmacy charging fee schedule, at the discounted rate that it would pay the local pharmacy under the arrangement made between the employer/carrier and the local pharmacy?
Having found no published cases or previous opinions on this subject, we approach these questions as a matter of first impression.
"Medical provider" is not defined in KRS Chapter 342. Although there is a definition of "medical services" in KRS 342.0011(15) that includes "medical, surgical, dental, hospital, nursing, and medical rehabilitation services, medicines, and fittings for artificial or prosthetic devices" (emphasis added), this is not dispositive of whether a pharmacy is a "medical provider" for purposes of this chapter. KRS 342.020 as a whole is addressed to many aspects of medical care and reimbursement. The numerous references it contains to "medical services" and "provider [s] of medical services" do not appear in the context of provider choice; rather, in that context, the reference is to "medical providers" or simply to a "provider. " Accordingly, we believe there is no controlling statutory definition. 1
"It is a primary rule of statutory construction that no single word or sentence determines the meaning of a statute. Rather, the statute as a whole must be considered."
Lexington Fayette County Food and Beverage Ass'n v. Lexington-Fayette Urban County Gov't, 131 S.W.3d 745, 750 (Ky. 2004). Our reading of the "provider choice" provisions of KRS 342.020 , in context of the whole statute, indicates that pharmacies are not contemplated as being "medical providers" for this purpose. The first sentence quoted above from subsection (1) refers to "medical providers" as those who "treat his injury or occupational disease, " and the second sentence appears to use "physician" as an equivalent term. It is not common to speak of a pharmacy as "treating" an injury or disease, whereas this is commonly said of a physician. Furthermore, in subsection (4)(b), the statute refers to "choice of provider" in the singular, which harmonizes with the following subsection (5):
Except for emergency medical care, medical services rendered pursuant to this chapter shall be under the supervision of a single treating physician or physicians' group having the authority to make referrals, as reasonably necessary, to appropriate facilities and specialists. The employee may change his designated physician one (1) time and thereafter shall show reasonable cause in order to change physicians.
Therefore, whatever else may be included in the meaning of "medical provider" for purposes of employee choice under KRS 342.020, it does not, in our opinion, include a pharmacy.
With regard to the second question posed by Senator Jensen, an arrangement between an employer or insurer and a pharmacy pursuant to Section 3(4) of 803 KAR 25:092 would not infringe upon the employee's right to choose a treating physician. This is simply because of our conclusion above that pharmacies are not to be considered as "medical providers" under KRS 342.020. The fact that a physician may prefer to send patients to a particular pharmacy does not affect an employee's right to choose that physician. We are unaware by what authority physicians can strictly "require" workers' compensation patients to use a specific pharmacy, nor is it immediately apparent why any physician would be motivated to do so. KRS 342.020(9) requires medical providers to disclose any investment interest they may have in an entity to which they make referrals.
As to the third question presented, an employer or insurer cannot require a pharmacy that is not a party to its agreement under 803 KAR 25:092, Section 3(4), to accept reimbursement at a rate below the fee schedule. If that were so, then an agreement made with any pharmacy would have a binding effect on all other pharmacies regardless of their agreement, which is not even implied by the language of the regulation (and could potentially have both constitutional and antitrust ramifications). Regarding the situation in which an employee's treating physician attempts to require the use of a particular pharmacy not covered by an agreement, we note that the "provider choice" provisions of KRS 342.020, as construed herein, do not diminish the employer's right under KRS 342.735(3) to dispute the reasonableness of those pharmaceutical charges through appropriate channels.
CONCLUSION
"Medical provider" under KRS 342.020 does not include a pharmacy for purposes of employee choice, so that the right to select medical providers does not limit an employer's or insurer's ability to make agreements with pharmacies for reimbursement below the fee schedule; such agreements, however, can only bind pharmacies that are parties thereto.
Footnotes
Footnotes
1 Moreover, it is evident that while a pharmacy "provides" medicines in the sense of dispensing them, only a practitioner authorized under KRS 217.015(35) can ultimately "provide" them by writing any necessary prescriptions. OAG 93-36.