           IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Mary Ann Protz,                     :
                       Petitioner :
                                    :
            v.                      :
                                    :
Workers’ Compensation Appeal        :
Board (Derry Area School District), : No. 402 C.D. 2015
                       Respondent : Argued: December 10, 2015


BEFORE:       HONORABLE DAN PELLEGRINI, President Judge1
              HONORABLE MARY HANNAH LEAVITT, Judge2
              HONORABLE P. KEVIN BROBSON, Judge


OPINION BY
PRESIDENT JUDGE PELLEGRINI                                FILED: January 6, 2016


              Mary Ann Protz (Claimant) petitions for review of the order of the
Workers’ Compensation Appeal Board (Board) affirming the decision of the
Workers’ Compensation Judge (WCJ) which awarded Derry Area School District
(Employer) and PSBA/Old Republic Insurance Company (Insurer) subrogation of
a third party medical malpractice award Claimant received with respect to medical
treatment she underwent following her accepted workplace injury. For the reasons
that follow, we affirm the Board’s order.


       1
         This matter was assigned to this panel before January 1, 2016, when President Judge
Pellegrini assumed the status of senior judge.

       2
          This case was assigned to the opinion writer before January 4, 2016, when Judge
Leavitt became President Judge.
                                               I.
               The following facts are not in dispute. Claimant sustained a work-
related injury to her right knee in the form of right knee pain with underlying
vascular impairment from a total knee arthroplasty with chronic regional pain
syndrome type I (reflex sympathetic dystrophy) while working for Employer on
April 23, 2007. Employer accepted the work injury and was paying Claimant
partial-disability benefits as of January 2012 pursuant to an impairment rating
evaluation.3


               Subsequently, Claimant’s work injury necessitated a total knee
replacement resulting in an inadvertent transected popliteal artery. As a result,
Claimant filed medical malpractice actions against the hospital where the operation
was performed and the operating doctor and his practice in the Court of Common
Pleas of Westmoreland County, alleging that Defendants negligently performed the
procedure and failed to obtain Claimant’s informed consent.


               In the course of the medical malpractice lawsuits, Claimant submitted
a medical report from her expert, Raymond M. Vance, M.D. (Dr. Vance), stating
that as a result of Claimant’s work injury, she underwent a total knee replacement


       3
         In Protz v. Workers’ Compensation Appeal Board (Derry Area School District), (Pa.
Cmwlth., No. 1024 C.D. 2014, filed September 18, 2015) (en banc) (Protz I), we vacated the
Board’s affirmance of the WCJ’s grant of Employer’s petition to modify Claimant’s benefits
from total to partial disability under Section 306(a.2) of the Workers’ Compensation Act, Act of
June 2, 1915, P.L. 736, as amended, 77 P.S. §511.2, added by the Act of June 24, 1996, P.L 350,
finding Section 306(a.2) of the Act unconstitutional pursuant to Article II, Section 1 of the
Pennsylvania Constitution.




                                               2
performed by Dr. Hershock, and that due to the negligent manner in which it was
performed, Claimant suffered “a laceration completely dividing her popliteal
artery” which in turn necessitated subsequent popliteal artery repair, embolectomy
and bypass procedure. (Reproduced Record [R.R.] at 11a.)


             Specifically, Dr. Vance’s report stated:

                    While her vascular insufficiency has been
             reversed, the patient is left with continuing symptoms
             consistent with a chronic regional pain syndrome
             complicating her artery laceration.          I make the
             observation that this condition, that is complex regional
             pain syndrome, is known to commonly occur when
             significant neurovascular injury of the sort she sustained
             happens. With reasonable medical probability, the
             entirety of her symptom complex at the present time is
             the direct result of the complication she suffered. All
             treatment she has required since the complication can
             specifically be directly related to the complication itself.
             Apart from the patient’s specific need to undergo
             revision total knee replacement surgery, all vascular
             procedures in particular and any procedure directed at
             pain management considerations with medical
             probability derives entirely from the patient’s
             complication and its need for ongoing care.

                   Her disability results in my view solely at the
             present time from her complications of chronic regional
             pain syndrome that are directly attributable to the
             vascular injury.

                   Were it only for her knee itself, she would be back
             to work at her usual and customary employment.


(Id.) This action eventually settled.



                                          3
                In December 2012, Employer and Insurer filed a petition to review
compensation benefits (petition) indicating that Claimant received a third party
recovery in the medical malpractice action and seeking to subrogate that recovery
under Section 319 of the Workers’ Compensation Act (Act).4 Claimant filed an

       4
         Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §671, added by the Act of June 24,
1996, P.L 350. Section 319 of the Act provides:

                        Where the compensable injury is caused in whole or in part
                by the act or omission of a third party, the employer shall be
                subrogated to the right of the employe, his personal representative,
                his estate or his dependents, against such third party to the extent
                of the compensation payable under this article by the employer;
                reasonable attorney’s fees and other proper disbursements incurred
                in obtaining a recovery or in effecting a compromise settlement
                shall be prorated between the employer and employe, his personal
                representative, his estate or his dependents. The employer shall
                pay that proportion of the attorney’s fees and other proper
                disbursements that the amount of compensation paid or payable at
                the time of recovery or settlement bears to the total recovery or
                settlement. Any recovery against such third person in excess of the
                compensation theretofore paid by the employer shall be paid
                forthwith to the employe, his personal representative, his estate or
                his dependents, and shall be treated as an advance payment by the
                employer on account of any future installments of compensation.

                         Where an employe has received payments for the disability
                or medical expense resulting from an injury in the course of his
                employment paid by the employer or an insurance company on the
                basis that the injury and disability were not compensable under this
                act in the event of an agreement or award for that injury the
                employer or insurance company who made the payments shall be
                subrogated out of the agreement or award to the amount so paid, if
                the right to subrogation is agreed to by the parties or is established
                at the time of hearing before the referee or the board.


77 P.S. §671.




                                                  4
answer denying that the injuries resulting from the medical malpractice increased
Employer and Insurer’s liability under the Act and asserting that they were not
entitled to any recovery under the Medicare Care Availability and Reduction of
Error (MCARE) Act.5 A consolidated hearing was held before the WCJ on this
issue and on Claimant’s utilization review petition which was filed simultaneously.


                At the hearing, Employer submitted Claimant’s medical malpractice
complaints, a praecipe dated November 2012 to settle and discontinue the
consolidated medical malpractice actions, and the settlement and distribution sheet
prepared by Claimant’s counsel in the malpractice action, showing that all monies
awarded were with regard to future medical expenses and lost wages, with none of
the funds being set aside for the payment of past medical bills or past lost wages.
The WCJ also admitted, over Claimant’s counsel’s hearsay objection, Dr. Vance’s
report.6

       5
           Act of March 20, 2002, P.L. 154, as amended, 40 P.S. §§1303.1011303.1115.

       6
          Following the admission of these documents, the WCJ inquired, “Where do we stand on
the Utilization Review?” (R.R. at 26a.) Later in the proceeding, Employer’s counsel circled
back to its petition, stating:

                        But with respect to the Review Petition, Your Honor, if I
                could just have a couple minutes to address that. With respect to
                the opinions of Dr. Vance, I think that they make out—and we
                haven’t read the report yet. But I think they make out the medical
                substantive cause of action, so to speak, with respect to a
                subrogation lien issued in the Review Petition context because he
                indicates the entirety of this Claimant’s symptom complex after the
                alleged malpractice event when the popliteal artery was
                inadvertently transected when he was performing the total knee
                replacement on the Claimant that after that occurred, her
                symptomatology was a direct result of that Malpractice Act….
(Footnote continued on next page…)

                                                5
                Following the hearing, the WCJ issued a decision awarding Employer
and Insurer subrogation benefits from the time of the settlement forward because
Employer and Insurer “established that [Claimant]’s third party settlement was for
the malpractice injury…sustained during surgery performed to treat the April 23,
2007, work injury and the complications that sprang from that injury,” for which
Employer and Insurer were paying Claimant’s medical and indemnity benefits.
(R.R. at 68a.)


                Based upon Section 508 of the MCARE Act,7 the WCJ determined
that Section 508(a) and (c) preclude Employer and Insurer from obtaining

(continued…)

(R.R. at 26a–27a.)

       7
           Section 508 of the MCARE Act provides:

                (a) General rule.--Except as set forth in subsection (d), a claimant
                in a medical professional liability action is precluded from
                recovering damages for past medical expenses or past lost earnings
                incurred to the time of trial to the extent that the loss is covered by
                a private or public benefit or gratuity that the claimant has received
                prior to trial.

                (b) Option.--The claimant has the option to introduce into evidence
                at trial the amount of medical expenses actually incurred, but the
                claimant shall not be permitted to recover for such expenses as part
                of any verdict except to the extent that the claimant remains legally
                responsible for such payment.

                (c) No subrogation.--Except as set forth in subsection (d), there
                shall be no right of subrogation or reimbursement from a
                claimant’s tort recovery with respect to a public or private benefit
                covered in subsection (a).

(Footnote continued on next page…)

                                                  6
subrogation of the medical malpractice proceeds with regard to payments for past
medical expenses and past lost earnings paid before the time of trial in which
Claimant sought benefits for the malpractice. However, noting that the bar against
subrogation in subsection (c) applied only to a “benefit covered in subsection (a)”
and that subsection (a) pertained only to past medical expenses and past lost
earnings, the WCJ held that Section 508 of the MCARE Act did not preclude
Employer and Insurer from seeking subrogation with respect to future payments.


              As such, the WCJ ordered that Employer and Insurer reimburse
Claimant for the attorneys’ fees and costs she incurred in obtaining the medical
malpractice settlement. Determining that the cost of recovery for the third party
settlement consumed 47% of the settlement, the WCJ also held that Employer and


(continued…)
              (d) Exceptions.--The collateral source provisions set forth in
              subsection (a) shall not apply to the following:

                     (1) Life insurance, pension or profit-sharing plans or other
              deferred compensation plans, including agreements pertaining to
              the purchase or sale of a business.

                     (2) Social Security benefits.

                    (3) Cash or medical assistance benefits which are subject to
              repayment to the Department of Public Welfare.

                       (4) Public benefits paid or payable under a program which
              under Federal statute provides for right of reimbursement which
              supersedes State law for the amount of benefits paid from a verdict
              or settlement.

40 P.S. §1303.508(a)(d).




                                               7
Insurer were entitled to a reduction of Claimant’s “medical bills and disability
benefits at the rate of 47% of the repriced amount for future medical bills and 47%
of her weekly disability rate.” (Id.)


             Claimant appealed to the Board, contending that: (1) the WCJ erred
in relying upon Dr. Vance’s report which was offered only for purposes of
adjudicating Claimant’s utilization review petition and not for purposes of
Employer’s petition; and (2) Section 508 of the MCARE Act precluded a workers’
compensation carrier from subrogating the proceeds of a claimant’s third party
medical malpractice action. First, the Board noted that although there was no
evidence before it regarding Claimant’s utilization review petition, “[Employer]
indicate[d] that Claimant has filed a UR Petition concerning the propriety of
physical therapy she had been receiving, which was initially consolidated with the
Review Petition.” (R.R. at 79a n. 2.) Because Claimant’s utilization review
petition “[p]urportedly…involved the question of the reasonableness and necessity
of physical therapy treatment,” and because the expert report “specifically spoke to
issues surrounding the event during surgery performed for the work injury that led
to complications and disability,” the Board reasoned that the report was germane to
the subrogation issue and that Claimant never argued that the report should be
admitted only for utilization review purposes.


             Regarding subrogation, the Board explained that under Section 319 of
the Act, the right of subrogation is automatic and absolute. 77 P.S. §671. Because
the plain language of Section 508 of the MCARE Act expressly eliminated
subrogation rights with respect to past medical bills and past lost earnings but was



                                         8
silent on the issue of future payments of expenses and lost earnings, the Board
concluded that it did not preclude the subrogation sought in this case and affirmed
the WCJ’s order. 40 P.S. §1303.508. Claimant filed the instant appeal raising the
same arguments as below.8


                                            II.
                                            A.
              With respect to Claimant’s argument that the WCJ erred in relying
upon Dr. Vance’s expert report because it was offered only regarding Claimant’s
utilization review petition and not for purposes of Employer and Insurer’s petition,
we disagree. First, Employer’s counsel made clear that Dr. Vance’s report was
offered “with respect to a subrogation lien issue in the Review Petition context.”
(R.R. at 26a27a.) Indeed, counsel indicated that the report supports the position
that all of the symptoms Claimant sustained following the transection of her
popliteal artery were related to the malpractice incident and not her work injury.
Claimant’s counsel did not object to the admission of the report on the grounds that
it was irrelevant to Employer’s review petition; he objected only on the basis of
hearsay—an objection which Claimant did not pursue before the Board and which,
therefore, has been waived. Thissen v. Workers’ Compensation Appeal Board
(Tri-Boro Concrete, Inc., Gates McDonald, and Inservco Insurance Services), 842
A.2d 536, 539 (Pa. Cmwlth. 2004).


       8
          We review Board decisions to determine whether errors of law were made, whether
constitutional rights were violated, and whether necessary findings of fact are supported by
substantial evidence. Ward v. Workers’ Compensation Appeal Board (City of Philadelphia), 966
A.2d 1159, 1162 n.4 (Pa. Cmwlth.), appeal denied, 982 A.2d 1229 (Pa. 2009).




                                             9
                                        B.
            Claimant does not disagree that Section 508 of the MCARE Act is
silent regarding subrogation of future medical expenses and wage loss awards in
medical malpractice actions, but contends that such silence must be construed as
prohibiting subrogation in accordance with the plain language of Section 508(c) of
the MCARE Act. 40 P.S. §1303.508(c). Conversely, Employer and Insurer argue
that the statute’s plain meaning mandates allowance of subrogation in this respect.


            The right of subrogation has been described as “an absolute [right]”
that “applies whenever a debt or obligation is paid by one party though another is
primarily liable” and which “has assumed even greater stature” in the workers’
compensation context. Brubacher Excavating, Inc. v. Workers’ Compensation
Appeal Board (Bridges), 835 A.2d 1273, 1275 (Pa. 2003).           In examining an
employer’s right to subrogation under Section 319 of the Act, 77 P.S. §671, our
Supreme Court has emphasized the threefold rationale supporting subrogation
rights: “[T]o prevent double recovery for the same injury by the claimant, to
ensure that the employer is not compelled to make compensation payments made
necessary by the negligence of a third party, and to prevent a third party from
escaping liability for his negligence.” Poole v. Workers’ Compensation Appeal
Board (Warehouse Club, Inc.), 810 A.2d 1182, 1184 (Pa. 2002) (internal citation
omitted). It is against this backdrop that we analyze the MCARE Act.


            Certainly, Section 508(c) of the MCARE Act precludes subrogation of
plaintiffs’ medical malpractice proceeds to the extent that those proceeds are
“covered in subsection (a).” 40 P.S. §1303.508(c). Subsection (a), in turn, bars



                                        10
recovery of “past medical expenses or past lost earnings incurred to the time of
trial,” including those paid by an employer or workers’ compensation insurance
carrier. 40 P.S. §1303.508(a). Subsection (a), however, does not address future
medical expenses or future wage loss. Therefore, because future expenses and
wage loss are not “covered in subsection (a),” subsection (c)’s prohibition against
subrogation with regard to those awards does not apply. 40 P.S. §1303.508(c).


              This plain-meaning interpretation is consistent with the purpose of
subrogation insofar as it prevents Claimant from enjoying a double recovery for
the same injury, namely, workers’ compensation benefits and medical malpractice
proceeds which both compensate her for her complex regional pain syndrome, a
complication she would not have experienced but for the alleged medical
malpractice.9 Moreover, it furthers the goal of ensuring that Employer and Insurer
are not compelled to compensate Claimant for injuries caused by the negligence of
a third party—that is, the medical malpractice Defendants.


              Our interpretation of Section 508 of the MCARE Act also aligns with
the presumption that “the legislature did not intend to change existing law by
omission or implication” but only “by an express provision.”                     Fletcher v.
Pennsylvania Property and Casualty Insurance Guaranty Association, 914 A.2d
477, 483 (Pa. Cmwlth. 2007), aff’d, 985 A.2d 678 (Pa. 2009). Indeed, prior to the
enactment of the MCARE Act, employers and workers’ compensation carriers


       9
         It is of no moment that Claimant’s medical malpractice claims were settled and did not
reach verdict. See Helms Express v. Workmen’s Compensation Appeal Board (Lemonds), 525
A.2d 1269, 1272 (Pa. Cmwlth. 1987), appeal dismissed, 548 A.2d 252 (Pa. 1988).



                                              11
were entitled to subrogation with respect to both past and future benefits. See
Helms Express v. Workmen’s Compensation Appeal Board (Lemonds), 525 A.2d
1269, 1272 (Pa. Cmwlth. 1987), appeal dismissed, 548 A.2d 252 (Pa. 1988).
Although Section 508(c) of the MCARE Act disallows subrogation with respect to
benefits paid up until the time of trial, it does nothing to alter the pre-existing law
with regard to future benefits. This is of particular importance since the General
Assembly has demonstrated in other contexts its ability to impose an absolute bar
against workers’ compensation carriers’ right of subrogation. See 75 Pa. C.S.
§1720 (“In actions arising out of the maintenance or use of a motor vehicle, there
shall be no right of subrogation or reimbursement from a claimant’s tort recovery
with respect to workers’ compensation benefits….”).


             Accordingly, we affirm the Board’s order awarding Employer and
Insurer subrogation of Claimant’s third party medical malpractice recovery with
respect to the award for her future medical expenses and wage loss.




                                          DAN PELLEGRINI, President Judge




                                          12
         IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Mary Ann Protz,                     :
                      Petitioner :
                                    :
           v.                       :
                                    :
Workers’ Compensation Appeal        :
Board (Derry Area School District), :
                      Respondent : No. 402 C.D. 2015




                                  ORDER


            AND NOW, this 6th day of January, 2016, the order of the Workers’
Compensation Appeal Board in the above-captioned case is affirmed.




                                       DAN PELLEGRINI, President Judge
