                                  [J-74-2015]
                   IN THE SUPREME COURT OF PENNSYLVANIA
                               MIDDLE DISTRICT

                 SAYLOR, C.J., EAKIN, BAER, TODD, STEVENS, JJ.

DOCTOR’S CHOICE PHYSICAL          : No. 146 MAP 2014
MEDICINE & REHABILITATION CENTER, :
P.C. (LASELVA),                   : Appeal from the Order of the Superior
                                  : Court at No. 1419 MDA 2013 dated
           Appellee               : 5/2/14 reconsideration denied 6/25/14
                                  : reversing the 6/21/13 order and
                                  : vacating judgment entered 8/7/13 of the
           v.                     : Dauphin County Court of Common
                                  : Pleas, Civil Division, at No. 2008 CV
TRAVELERS PERSONAL INSURANCE      : 16124 and remanding
COMPANY,                          :
                                  :
           Appellant              : ARGUED: October 7, 2015




                                        OPINION


MR. CHIEF JUSTICE SAYLOR                               DECIDED: December 21, 2015


      This appeal concerns ongoing controversy over the availability of attorneys’ fee

awards against insurance companies that have invoked the peer-review provisions of

the Motor Vehicle Financial Responsibility Law, which also was the context of this

Court’s recent decision in Herd Chiropractic Clinic v. State Farm Mutual Automobile

Insurance Co., 619 Pa. 438, 64 A.3d 1058 (2013).

      In 2004, Angela LaSelva sustained injuries in a motor vehicle accident. She

treated with David G. Novatnak, D.C., a licensed chiropractor practicing with Appellee

Doctor’s Choice Physical Medicine and Rehabilitation Center, P.C. (“Provider”).

Provider submitted invoices for the services directly to Ms. LaSelva’s first-party benefits

insurance carrier, Appellant Travelers Personal Insurance Company (“Insurer”), as
required per the Motor Vehicle Financial Responsibility Law.1 See 75 Pa.C.S. §1797(a).

See generally Herd, 619 Pa. at 440, 64 A.3d at 1060 (relating that Section 1797(a) of

the MVFRL requires providers to seek remuneration directly from insurance carriers and

bars provider recourse against covered patients relative to the difference between the

provider’s ordinary charges and those paid by insurers).

      Insurer later requested peer review through IMX Medical Management Services

(“IMX”), a peer review organization (“PRO”).       See 75 Pa.C.S. §1797(b)(1).       See

generally Herd, 619 Pa. at 441, 64 A.3d at 1060 (explaining that the MVFRL establishes

a process by which insurers may contest their obligations to fund treatment via

implementation of a “peer review plan,” entailing contracts with “peer review

organizations” approved by the Insurance Department to evaluate the reasonableness

and necessity of treatment). IMX, in turn, enlisted Mark Cavallo, D.C., to conduct the

peer review, and Dr. Cavallo issued a report deeming certain of the treatments provided

by Dr. Novatnak to have been unnecessary.         Based on this report, Insurer denied

reimbursement for the treatment aspects couched as excessive.

      Provider opposed this withholding and commenced a civil action against Insurer

in the court of common pleas.      Among other things, the complaint alleged that all

treatments undertaken through Provider were reasonable and necessary and that the

review conducted by IMX did not comport with the mandates of Section 1797 of the

MVFRL. Furthermore, Provider asserted that IMX failed to comply with requirements of

the Pennsylvania Code directing PROs to apply national or regional norms in their

determinations or, where such norms do not exist, to establish written criteria to be used

in conducting reviews. See 31 Pa. Code §69.53(e). As relevant here, the complaint


1
  Act of Feb. 12, 1984, P.L. 26, No. 11 (as amended 75 Pa.C.S. §§1701-1799.7) (the
“MVFRL”).


                                     [J-74-2015] - 2
included a specific demand for attorneys’ fees per Section 1797(b)(6) of the MVFRL,

which prescribes:

             If, pursuant to paragraph (4), a court determines that medical
             treatment [was] medically necessary, the insurer must pay to
             the provider the outstanding amount plus interest at 12%, as
             well as the costs of the challenge and all attorney fees.
75 Pa.C.S. §1797(b)(6) (emphasis added). Material to the present case, the cross-

referenced paragraph -- Section 1797(b)(4) -- pertains only to court challenges of carrier

withholdings where “the insurer has not challenged [the reasonableness or necessity of

treatment] before a PRO.” Id. §1797(b)(4) (emphasis added).

      After conducting a bench trial, the common pleas court entered a verdict in

Provider’s favor, encompassing an award of attorneys’ fees of approximately $39,000.2

In its supporting analysis, the common pleas court initially expressed substantial

misgivings about the peer-review process, as follows:

             The peer review process established under the MVFRL has
             long been viewed with suspicion by our courts. The
             Pennsylvania Supreme Court has discerned that because
             only the insurer participates in the peer review process, any
             claim of neutrality is suspect. The Court stated, “the
             detachment and neutrality required of a fact-finder is
             conspicuously absent in the contractual relationship between
             a PRO and an insurer.” Terminato v. Pennsylvania National
             Ins. Co., [538 Pa. 60, 68,] 645 A.2d 1287, 1291 ([] 1994). . . .
             The insurance company initially pays the PRO for its
             services and the insured plays no role in the selection
             process, further confirming that PROs have a strong
             financial incentive to appear fair in the eyes of the insurance
             company. As such, the Courts have determined that a PRO
             does not have the characteristics of an independent body for
             which the Legislature would seek judicial deference. [See

2
  The principal amount of the award was approximately $28,000. Statutory interest of
twelve percent was also awarded, as well as costs.


                                     [J-74-2015] - 3
              Lehman v. State Farm Ins. Cos., 140 P.L.J. 78, 82 (C.P.
              Allegheny 1992)].
Doctor’s Choice Physical Med. & Rehab. Ctr., P.C. v. Travelers Pers. Ins. Co., No. 2008

CV 16214, slip op. at 4-5 (C.P. Dauphin Dec. 13, 2012). According to the court, the

circumstances at hand present “a classic example of that well-founded suspicion[.]”

Id. at 5.

        The common pleas court then specifically rejected Dr. Cavallo’s report and

associated opinions for various reasons, including his failure to proceed according to

national or regional norms or pre-established written criteria. See, e.g., id. at 7 (“It was

apparent to the Court during the trial that IMX and Dr. Cavallo had not complied with

Section 69.53(e) governing PRO standards for operation, thus rendering Dr. Cavallo’s

peer review report not only invalid but a clear abuse of the peer review procedure[;] . . .

likewise [the report] displayed a rather blatant disregard by IMX for even minimal

safeguards for fairness and accuracy envisioned by the Act.”). Moreover, the court

determined that all treatments rendered by Dr. Novatnak were reasonable and

necessary in providing essential management of the pain deriving from Ms. LaSelva’s

injuries.

        The verdict against Insurer pre-dated the issuance of this Court’s decision in

Herd, which held that Section 1797 of the MVFRL does not serve as a basis for

attorneys’ fee awards on provider challenges to peer-review determinations. See Herd,

619 Pa. at 451, 64 A.3d at 1066. The carrier invoked Herd during the post-trial motions

process, and, in response, the common pleas court vacated the award of attorneys’

fees. In its order, the court deemed itself bound by Herd but nonetheless took the

opportunity to reiterate its position that the review conducted by Dr. Cavallo was “devoid

of any validity,” such that “no valid peer review was ever accomplished.” Order dated

June 21, 2013, in Doctor’s Choice, No. 2008 CV 16214, at 2. Additionally, the court


                                      [J-74-2015] - 4
opined as follows:    “[T]his patently unjust result is solely within the purview of the

General Assembly to remedy, and we encourage our Legislature to immediately

address this matter.” Id. at 3.

       On appeal, the Superior Court reversed the decision to strike the fee award. See

Doctor’s Choice Physical Med. & Rehab. Ctr., P.C. (LaSelva) v. Travelers Pers. Ins.

Co., 92 A.3d 813 (Pa. Super. 2014). Centrally, the intermediate court focused on the

common pleas court’s determination that no valid peer review determination had been

realized, given Dr. Cavallo’s failure to ground his analysis in national norms, regional

norms, or pre-established written standards as required per Section 69.53(e) of the

Pennsylvania Code. See, e.g., id. at 817-18. In such circumstance, the court reasoned,

fee-shifting was required by Section 1797(b)(6), notwithstanding Herd.

       The Superior Court acknowledged that, per the plain-meaning interpretation of

Section 1797 applied in Herd, “only an insurer’s refusal to pay that is not based on a

peer review determination under Section 1797(b) implicates [an] attorney fee award[.]”

Id. at 817. Because, however, the common pleas court had determined that the review

conducted by Dr. Cavallo did not comport with the statutory and regulatory requirements

governing the performance of peer review, the intermediate court refused to recognize,

for purposes of Section 1797(b)(4), that Insurer had “challenged [the reasonableness

and necessity of treatment by Dr. Novatnak] before a PRO.” 75 Pa.C.S. §1797(b)(4).

In this regard, the court construed the statutory term “challenged before a PRO” as

necessarily “encompassing a valid completed peer review.” Doctor’s Choice, 92 A.3d at

819 (emphasis added); see also id. at 822.

       In support of this construction, the Superior Court relied on Levine v. Travelers

Property Casualty Insurance Co., 69 A.3d 671, 679 (Pa. Super. 2013) (holding that an

insurer’s denial of payment of provider invoices based on an independent medical


                                     [J-74-2015] - 5
examination concerning a lack of causal relation of an injury to an accident did not

encompass a review of the reasonableness and necessity of subsequent treatments in

the nature of peer review for purposes of Section 1797). In this regard, the intermediate

court read Levine very broadly as establishing that a carrier’s referral of provider

invoices for contested treatment to a PRO “must result in a peer-reviewed determination

upon which an insurer can rely in deciding whether to pay the bills.” Doctor’s Choice,

92 A.3d at 820. Responding to Insurer’s argument that deficiencies in peer review

occasioned by a PRO should not be attributed to insurance carriers, the court

admonished that “insurers are presumed to possess a full understanding of the nature

of a valid peer review and its attendant procedures and requirements.”        Id. at 821

(referencing 31 Pa. Code §69.52(a) and (e)). Moreover, the court noted that carriers

are uniquely positioned to hold PROs accountable for any breaches of their contracts,

see id. at 822; whereas, medical services providers lack any such recourse.

      Finally, the Superior Court indicated that interpreting the phrase “challenged

before a PRO” in Section 1797(b)(4) to mean the simple act of advancing a challenge

would be absurd.     See id. at 821.   The intermediate court opined, without further

explanation, that such interpretation would render the remaining provisions of Section

1797 concerning the actual determinations of PROs meaningless. See id.

      We allowed appeal to evaluate the correctness of the Superior Court’s

construction that Insurer “has not challenged” the reasonableness and necessity of

treatment before a PRO, 75 Pa.C.S. §1797(b)(4), even though the carrier did in fact

submit relevant treatment records to a PRO for peer review in a timely fashion. Our

consideration is plenary. See, e.g., Six L's Packing Co. v. WCAB (Williamson), 615 Pa.

615, 629, 44 A.3d 1148, 1157 (2012).




                                     [J-74-2015] - 6
       Presently, Insurer observes that the word “challenge” is commonly defined as “to

dispute” or “to question.”     Reply Brief for Appellant at 2 (quoting BLACK’S LAW

DICTIONARY 223 (7th ed. 1999)). It is the carrier’s core position that it did precisely that

when it submitted Provider’s invoices to a PRO for peer review. Furthermore, Insurer

maintains that the Superior Court’s contrary construction of the phrase “challenged

before a PRO,” as it appears in Section 1797(b)(4), conflicts squarely with this Court’s

determination that “[t]here is . . . simply no express statutory authorization for fee

shifting on provider challenges to peer-review determinations.” Herd, 619 Pa. at 451,

64 A.3d at 1066.

       From the perspective of Insurer and its amici, the Pennsylvania Defense Institute

and Insurance Federation of Pennsylvania, allocating the consequences of deficiencies

in peer review to the insurance industry effectively requires carriers to oversee the

regulatory compliance of PROs. They observe, however, that the Legislature expressly

has directed such oversight responsibility to the Insurance Department. See Brief for

Appellant at 18 (citing 31 Pa. Code §69.55); accord Brief for Amici Pa. Def. Inst. & Ins.

Fed’n of Pa. at 4 (“[T]he promulgation and amendment, as well as the interpretation, of

regulations connected with the peer review process are within the purview of the

Pennsylvania Department of Insurance which is the sole policing authority of Peer

Review Organizations[.]”). Insurer also cautions that carriers must refrain from involving

themselves in the review process to “avoid potentially biased peer reviews.” Brief for

Appellant at 20; see also id. at 22 (“Once [Insurer] made the referral to IMX, the peer

review process was out of its hands, as it should be.” (citing 31 Pa. Code §69.55(b)(1)));

Brief for Amici Pa. Def. Inst. & Ins. Fed’n of Pa. at 7 (“The Superior Court’s holding

essentially punishes [Insurer] for utilizing an approved PRO, where approval can only

come from the [Insurance] Department.”). In this regard, Insurer also highlights that the


                                      [J-74-2015] - 7
Pennsylvania Code requires PROs to provide a certificate of independence when

applying to the Insurance Department for approval to provide peer review services. See

31 Pa. Code §69.55(b)(1).

      As to the Levine decision, Insurer distinguishes the case as entailing a scenario

in which a carrier had not submitted the specific bills at issue to a PRO for review, but

rather, inappropriately relied upon a prior independent medical examination to deny

payment. See Levine, 69 A.3d at 679. According to Insurer, although this independent

medical examination had been obtained through a PRO, this circumstance was

idiosyncratic and wholly inconsequential to the decision.

      Responding to criticisms lodged by Provider and its amicus of the peer review

scheme, Insurer asserts that these “seek only to cloud the straightforward issue

presented to this Court, namely, whether the Superior Court improperly interpreted

§1797 to allow attorneys’ fees even when an insurer has ‘challenged’ the treatment at

issue before a PRO, despite the Herd holding.” Reply Brief for Appellant at 3. It is

Insurer’s position that the abstract claims of bias are misdirected, as these sorts of

broader systemic concerns should be raised before the political branch.

      Provider, on the other hand, and its amicus the Pennsylvania Association for

Justice, view fee-shifting as the norm under Section 1797 and the unavailability of fee

awards upon challenges submitted to peer review as “a very narrow exception to the

mandatory award of attorney fees at §1797(b)(4)&(6).” Brief for Appellee at 11. In this

vein, they find it to be entirely appropriate to deem the concept of a “challenge” within

Section 1797(a)(4) as subsuming not only the submission of provider invoices to a

PRO, but also a fully realized, valid peer-review determination. See, e.g., id. at 25

(“Unless all the Legislative and the Insurance Department requirements are met an

analysis is not a peer review.”). Provider and its amicus reference a series of other


                                     [J-74-2015] - 8
statutes as reflecting the proposition that the term “challenge” means “submission of an

issue for proper procedural review and a procedurally correct result.”3

        Provider and its amicus also stress that insurance companies are sophisticated

entities; carriers are required to apprehend the requirements of the written analysis

accomplished as a core facet of the peer review process, see 31 Pa. Code §69.52(a);

they maintain contractual relationships with PROs and can require them to perform valid

peer reviews; and they have the ability to assert breach-of-contract claims if PROs

deliver invalid reports which cause carriers financial harm. Consistent with the Superior

Court’s rationale along these lines, Provider and its amicus emphasize that medical

services providers lack any such remedy, but instead, must sue carriers.

        Additionally, Provider and its amicus strongly differ with Insurer’s contention that

the Superior Court’s decision places carriers in the position of regulating PROs. From

their perspective, material violations of the Pennsylvania Code were apparent from the

face of Dr. Cavallo’s report and were subject to ready apprehension and redress by

Insurer. See, e.g., Brief for Appellee at 21 (“All [Insurer] had to do was a cursory review

by a prudent person familiar with [applicable] [r]egulations to determine the report was

invalid.”).

        Throughout their submissions, Provider and its amicus harken back to the tone of

the Terminato decision questioning the fairness of the peer review process. See, e.g.,

id. at 16 (“The Legislature as a matter of public policy mandated an award of attorney

fees to help the health care provider when confronted with exactly the ‘scorched earth’

tactics insurance carriers use to deny payment of medical bills that are as a matter of

fact reasonable and necessary.” (referencing Herd, 419 Pa. at 458-59, 64 A.3d at 1071

3
  Brief for Appellee at 13 (citing 25 P.S. §3146.8), 53 P.S. §10916.1, 75 Pa.C.S.
§1786(5), 23 Pa.C.S. §2711(c)(3)(i), 20 Pa.C.S. §908(a), and 77 P.S. §774.2); Brief for
Amicus Pa. Ass’n for Justice at 17 (same).


                                      [J-74-2015] - 9
(Baer, J., dissenting))).   It is their position that fee shifting serves as a means for

counteracting bias and, more broadly, ensuring fairer peer review. See, e.g., id. at 33.

Along these lines, Provider asserts that insurance companies often refuse payment as a

tactic to reduce verdicts and the settlement value of personal injury cases. According to

Provider, “[t]his is an extraordinary example of system failure.” Id. at 42.

       In Herd, this Court explained that Pennsylvania law embodies the American rule,

per which there can be no recovery of attorneys’ fees from an adverse party in litigation,

absent express statutory authorization, clear agreement by the parties, or some other

established exception. See Herd, 619 Pa. at 450, 64 A.3d at 1066 (citing Merlino v.

Delaware Cnty., 556 Pa. 422, 425, 728 A.2d 949, 951 (1999)). Like Herd, this case

centers upon whether there is “explicit” statutory authorization within Section 1797 for

fee-shifting where a carrier has tendered a timely challenge to the reasonableness or

necessity of treatment to a PRO. Id. at 450-51 nn.10 & 11, 64 A.3d at 1066 nn.10 & 11

(emphasis added). Upon review, we agree with Insurer and its amici that there is no

such explicit authorization.

       The Superior Court’s construction of the statutory term “challenged before a

PRO” as necessarily “encompassing a valid completed peer review,” Doctor’s Choice,

92 A.3d at 819 (emphasis added), does not reflect direct application of explicit

language. Along these lines, as Insurer has explained, a conventional understanding of

the word “challenge” is more modest. See generally 1 Pa.C.S. §1921(b) (explicating

that, when the words of a statute are clear and free from ambiguity, their plain meaning

is the governing indication of legislative intent). Moreover, the term is otherwise plainly

utilized within Section 1797 merely to signify a carrier’s submission of provider invoices

to a PRO for review. See, e.g., 75 Pa.C.S. §1797(b)(1) (establishing a general rule that

a “challenge” must be made to a PRO within ninety days of the insurer’s receipt of a


                                      [J-74-2015] - 10
provider’s bill for treatment or services); id. §1797(b)(3) (delineating that, if an insurer

“challenges” provider invoices within thirty days of receipt, the carrier need not tender

payment pending a determination by the PRO).

       Even within the four corners of Section 1797(b)(4), provider challenges and

insurer challenges bear parallel treatment. See 75 Pa.C.S. §1797(b)(4) (“A provider of

medical treatment . . . may challenge before a court an insurer’s refusal to pay for past

or future medical treatment . . ., the reasonableness or necessity of which the insurer

has not challenged before a PRO.” (emphasis added)). In either event, there simply is

no express language in the statute signifying that a “challenge” necessarily

encompasses ensuing, completed, valid review.4

       In substance, we believe that the Superior Court’s broader construction of the

concept of a challenge was policy driven. However, as this Court explained in Herd:

              [F]ee shifting raises a host of mixed policy considerations in
              and of itself, which this Court has found are best left to the
              General Assembly, in the absence of contractual allocation
              or some other recognized exception to the general,
              American rule. The Legislature’s failure to adjust Section
              1797 over time as imperfections have been revealed by
              experience, while unfortunate, does not alter the functions
              ascribed to our respective branches of government.
              Accordingly, in the absence of a demonstrated constitutional
              infirmity, courts generally must apply plain terms of statutes

4
  We recognize that, in one instance, Section 1797 utilizes the term “challenge” as a
broader shorthand encompassing the services of provider attorneys in advancing and
vindicating a court challenge. See 75 Pa.C.S. §1797(b)(6). We have previously noted,
however, that Section 1797 is not clearly written throughout. See Herd, 619 Pa. at 451,
64 A.3d at 1066. Given the strict principle of statutory interpretation applicable to fee
shifting, however, ambiguities militate in Insurer’s favor here. Accordingly, the
unconventional usage of the concept of a challenge in Section 1797(b)(6) does not
impact its more ordinary application in the previous subsections of the statute or
otherwise segue into an explicit authorization of attorneys’ fees in scenarios in which
carriers have commenced timely peer-review challenges.


                                     [J-74-2015] - 11
              as written; they are to confine their efforts to effectuate
              legislative intent – above and beyond the prescription of
              written laws – to ambiguous provisions; and they are to
              enforce the longstanding responsibility allocated to the
              policymaking branch to provide for fee shifting, when it is
              deemed appropriate, through explicit pronouncements.
Herd, 619 Pa. at 451-52, 64 A.3d at 1066-67.

      As noted above, the Superior Court also asserted, without any developed

explanation, that a plain-meaning interpretation of the word “challenged” as it appears in

Section 1797(b)(4) would render the remaining provisions of the statue concerning the

actual determinations of PROs meaningless. See Doctor’s Choice, 92 A.3d at 821. In

point of fact, however, every provision within Section 1797 addressing determinations

retains meaning while according “challenge” its ordinary connotation. For example, an

insurer may request a reconsideration of a PRO’s initial “determination” per Section

1797(b)(2). 75 Pa.C.S. §1797(b)(2). A carrier that initiates a challenge within 30 days

need not pay provider invoices pending the “determination.” Id. at §1797(b)(3).

      In this regard, fee-shifting simply is not the overarching thrust of the enactment.

Rather, this dynamic is a discrete facet, and, throughout the statute, the concept of

“determination” plainly retains meaning independent of the fee-shifting inquiry.

Respectfully, it is the Superior Court’s cryptic pronouncement of “absurdity” that lacks

foundation.

      As to the Levine decision, the dispositive analysis turned on the fact that the

independent medical examination in issue concerned the causal association between

an injury and an accident, not the reasonableness or necessity of later treatment. See

Levine, 69 A.3d at 679. The case does not fairly stand for the broader proposition that

the reasonableness and necessity of treatment is not “challenged before a PRO,” for




                                    [J-74-2015] - 12
Section 1797(a)(4) purposes, even though a carrier in fact did advance a timely

challenge.5

       Finally, none of the statutes referenced by Provider or its amicus as examples of

similar applications of the word “challenge” utilizes the term to mean a contest that is

resolved properly by the body charged with making a determination. See supra note 3.

Ultimately, the disposition of this appeal turns on a straightforward understanding of a

“challenge” and the appreciation that “[t]here is . . . simply no express statutory

authorization for fee shifting on provider challenges to peer-review determinations.”

Herd, 619 Pa. at 451, 64 A.3d at 1066.

       This Court remains cognizant of the shortcomings of the peer-review regime. We

have no reasonable means, however, of assessing the degree to which these may be

offset by the benefits of cost containment and potentially lower insurance premiums

available to the public at large.6 Rather, the Legislature is invested with the implements

to conduct investigations, hearings, and open deliberations to address such salient

policy matters. Accord Seebold v. Prison Health Servs., Inc., 618 Pa. 632, 653, 57 A.3d

1232, 1245 (2012).      In such landscape, we decline to deviate from conventional

statutory interpretation to advance directed policy aims.



5
  In any event, the intermediate-court decision in Levine is not binding upon this Court.
See, e.g., Commonwealth v. Sneed, 587 Pa. 318, 330 n.12, 899 A.2d 1067, 1075 n.12
(2006).

6
  While the portrait depicted by Provider and its amicus spotlights the legitimate concern
about unscrupulous insurers, it downplays the phenomena of unnecessary medical
services and overbilling which, unfortunately, are also salient considerations in any
balanced public-policy debate. The adjudicatory system, operating as it does on
conventions such as decision-making by a mere preponderance of the evidence to
facilitate the resolution of discrete civil controversies, is ill equipped to render broader
legislative-type judgments with large-scale consequences.


                                     [J-74-2015] - 13
       The order of the Superior Court is reversed, and the matter is remanded for

reinstatement of the modified verdict.



       Messrs. Justice Eakin and Baer, Madame Justice Todd and Mr. Justice Stevens

join this opinion.




                                     [J-74-2015] - 14
