Supreme Court Strikes Down IRE Process as Unconstitutional

Wednesday, June 21, 2017 | 0

The Pennsylvania Supreme Court on Tuesday struck down the state’s impairment rating evaluation process as unconstitutional.

IREs were governed by Section 306(a.2) of the Workers' Compensation Act. The Supreme Court, affirming an earlier decision by the Commonwealth Court, found the statute contained an impermissible delegation of legislative authority to the American Medical Association.

According to both the high and appeals courts, the problematic provision is the requirement that doctors use the “most recent” version of the AMA Guides for the evaluation of permanent impairment in rating a worker’s disability. 

The high court reasoned that this language allows each updated version of the guides to “automatically have the force and effect of law once published,” which gives the AMA “de facto, unfettered control” over the methodology for determining the benefits an injured worker can receive.

Since excising the references to the guides would render the remainder of Section 306(a.2) “incomprehensible,” the court said the entire statute was void.

Claimants’ attorney Tom Baumann of Abes Baumann had advanced the constitutional challenge on behalf of Derry Area School District employee Mary Ann Protz. Baumann said he believed “IREs are dead going forward.” Though he acknowledged it was possible that the legislature could pass new laws to resurrect the process, Baumann said “that’ll have to be a discussion for another day.”

Tuesday’s decision is going to require “a lot of lifting, for both sides of the bar,” as they figure out how the rule from Protz v. WCAB is going to affect other workers who have gone through the IRE process.

The process would begin with a request by an employer for a worker to attend an examination to assess the extent of the disability after the employer has paid 104 weeks of total disability benefits.

If the examiner issues the worker a rating of less than 50% using the “most recent” version of the AMA guides, then the employer can have the worker reclassified as partially disabled.

A worker’s entitlement to partial disability benefits is capped at 500 weeks, so securing an IRE report assigning a worker an impairment rating below 50% gives the employer a way to close out its liability for a claim.

The claimants’ bar has long been critical of this IRE process because it is very difficult for a worker to receive a rating higher than 50%, although it is possible to get higher or lower ratings, depending on which version of the AMA guides is used.

The AMA guides were first published as a series of articles in the Journal of American Medical Association in 1958. A compilation of these articles was released for the first time in book form in 1971.

The AMA provided a revised version of the guides in 1984, then again in 1989, 1991, 1993 and 2001. The latest version, which is the sixth edition, came out in 2007. 

When Dr. Jeffrey Moldovan conducted an assessment of Protz in October 2011, he used the sixth edition of the guides to assign her a 10% impairment rating. A workers’ compensation judge granted the school district’s petition to reclassify Protz as partially disabled.

Protz unsuccessfully appealed this ruling to the Workers’ Compensation Appeal Board before taking her case to the Commonwealth Court.

Two years ago, a divided Commonwealth Court found Section 306(a.2) was unconstitutional because it puts "unchecked discretion completely in the hands of a private entity.”

But the Commonwealth Court reasoned that the problem with the statute was that it was "proactively adopting” whatever standards the AMA came up with in future editions, “sight unseen.” Since the General Assembly was presumably aware of the contents of the fourth edition of the guides, which was the “most recent” version when Section 306(a.2) was enacted in 1996, the Commonwealth Court decided that that edition of the guides could be used for IREs.

The Supreme Court explained that the Pennsylvania Constitution prohibits the General Assembly from delegating “the power to make law” to any other branch of government, or to any other body.

This non-delegation doctrine “does not prevent the General Assembly from adopting as its own a particular set of standards which already are in existence at the time of adoption,” the court said, but it “prohibits the General Assembly from incorporating, sight unseen, subsequent modifications to such standards without also providing adequate criteria to guide and restrain the exercise of the delegated authority.”

Such guidance and restraint are absent from Section 306(a.2), the court said. The statute leaves the AMA free to “concoct a formula that yields impairment ratings which are so inflated that virtually every claimant would be deemed to be at least 50% impaired,” or “draft a version of the guides guaranteed to yield impartment ratings so minuscule that almost no one who undergoes an IRE clears the 50% threshold,” or “do anything in between those two extremes.”

The court also noted the fact that the AMA is a private entity, “isolated from the political process” and “shielded from political accountability.” The court said it was neither endorsing nor rejecting the idea that the delegation of authority to a private actor is per se unconstitutional, because it didn’t have to reach that issue. “Section 306(a.2) could not withstand constitutional scrutiny even if the AMA were a governmental body,” the court said.

The court went on to find Section 306(a.2) also could not be read as an implicit adoption of the fourth edition of the guides.

“It beggars belief that the General Assembly would have used the words ‘most recent edition’ when it really meant ‘Fourth Edition,’” the court opined.

But, because the “most recent edition” language provides “critical context” to the assessment of impairment, the court said the entirety of Section 306(a.2) had to be voided.

Chief Justice Thomas Saylor wrote separately, saying he believed “prospective medical texts cannot be incorporated into a scheme affecting citizens' substantial rights,” so it was unnecessary for the court to consider the extent to which the AMA “might concoct anything” under the discretion it had pursuant to Section 306(a.2).

Justice Max Baer dissented, arguing that the General Assembly was not delegating the authority to make law to the AMA by requiring the use of the "most recent” version of the guides. He said he saw this statutory provision as a simple declaration of a “policy determination to adopt the most up-to-date medical advances as the methodology to be utilized by physicians when evaluating whether to classify a claimant as totally or partially disabled.”

Counsel for the school district, David Dille of Burn White, said Baer’s dissent set forth the arguments he had raised to the Supreme Court. He said he was hoping the court would declare Section 306(a.2) to be “constitutional as written.”

Dille said the ruling leaves attorneys with “lots of issues to spin out,” but he expected the application of the court’s decision to other works will require a “case-by-case analysis."

Michael Sherman, a defense attorney with the Chartwell Law Offices, submitted an amicus brief supporting Dille on behalf of the Greater Philadelphia Executive Claims Council and the Pennsylvania Self-Insurers' Association.

Sherman said he expected “everyone is going to sit back and think about how this affects every category of cases for the next few days.”

As a practical matter, he said the court’s ruling “doesn’t mean a lot immediately,” since the IRE process was a way to change the duration of the benefits being paid to a worker, not the amounts being paid.

Sherman acknowledged that the IRE process generally “was very favorable to employers,” so there will be “a lot of gnashing of teeth,” since this won’t be a remedy for mitigating liability any longer. But it’s still possible for employers to secure a conversion of a worker’s status to partially disabled by making job offers, conducting labor market surveys and providing evidence of the worker’s earning power, he said.

So “the world is not coming to an end,” Sherman said — it’s just going to take more time, more effort and “more paper” for employers to get the change in status they could have gotten through an IRE.

Don Liskay, chairman of the Pennsylvania Chamber of Business and Industry’s Worker’s Compensation Committee, said he believed the court’s ruling is something “the legislature is certainly going to be called upon to address.”

He said he thought the IRE process had the practical effect of “pushing cases to settlement,” and it remains to be seen if that changes. “It could just be that cases are worth more money now,” Liskay said.

Thus, he said, carriers will need “to look at their estimates of future loss and reserves.”  

Dan Siegel, a claimants’ attorney who submitted an amicus brief on behalf of the Pennsylvania Association for Justice in support of Protz, said he believed the court’s ruling should allow “any existing case that has not been finally determined to be reopened and the IRE be set aside.”

If a case has been settled, or the worker’s status has been converted and the worker has received 500 weeks of benefits, Siegel said he didn’t think the Protz decision allows those claimants to get their total disability status reinstated.

Lawrence R. Chaban, a claimants' attorney and past chairman of the Pennsylvania Bar Association Workers' Compensation Section, said he also thought workers who had entered into settlements could not reopen claims.

He said he thought workers who could reopen their claims were those who have not yet had IREs; workers who had an IRE and challenged their rating within 60 days; and workers who are within the 500-week period after having their status converted. Chaban said it’s an open question as to whether workers who are past the 500-week mark can reopen their claims. Figuring out which workers can reopen and which cannot will be the next round of litigation for the state, he said.

Pennsylvania’s use of the AMA Guides is far from unusual. More than 40 states make use of the AMA Guides in their comp systems.

Arizona’s comp laws require that "the latest edition" of the guides be used to rate a worker’s impairments, and in 2011, the state Supreme Court decided that this phrase in Administrative Code Section R20-5- 113(B) meant the most recently published version at the time a worker's impairment was rated.

Even though the sixth edition was published after the promulgation of R20-5- 113(B), the court said the rule was not an improper delegation of authority to the AMA.

By contrast, North Dakota's Supreme Court has said statutory requirement for use of the "most recent" version of the guides refers to the edition in existence when NDCC 65-05-12 was passed in 1989.

Massachusetts has a law that says the availability of benefits must be determined in accordance to the AMA Guides, but it is silent as to which of the six versions should be used. Three years ago the Appeals Court decided it was appropriate for administrative judges to use the sixth edition, as it is the "most up-to-date version."

A dispute is now pending before the Oklahoma Supreme Court about whether its statutory mandate for the use of the "most current edition" of the AMA guides is constitutional.

This issue lies at the heart of three companion cases: Stubblefield v. Oasis Outsourcing, Upton v. City of Tulsa and Hill v. American Medical Response.

In these three cases, attorneys Richard Bell, Michael Green and Bob Burke are arguing that the mandatory use of the AMA Guides is an unconstitutional restraint on ability of administrative law judges to make findings of fact.  

They also contend that the guides serve as an impermissible legislative predetermination of disability, as well as an unlawful delegation of legislative authority to the AMA.

Briefing in the cases has been completed, and the parties are awaiting the court’s ruling.