National Linen Service, etc. v. Reginald H. Parker

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COURT OF APPEALS OF VIRGINIA

Present: Judges Koontz, Elder and Senior Judge Duff

NATIONAL LINEN SERVICE/
NATIONAL SERVICE INDUSTRIES, INC.

Vv. Record No. 1523-94-1 OPINION BY
JUDGE LAWRENCE L. KOONTZ, UR.
REGINALD HERMAN PARKER SEPTEMBER 5, 1995

FROM THE VIRGINIA WORKERS' COMPENSATION COMMTISSTON
Mary G. Commander (Goldblatt, Lipkin & Cohen,
P.C., on briefs), for appellant.

Laura L. Geller (Geoffrey R. McDonald; McDonald &
Snesil, on brief), for appellee.

National Linen Service/National Service Industries, Inc.
(employer), a self-insured employer, appeals a decision of the
Virginia Workers' Compensation Commission (commission) awarding
medical fees on behalf of Reginald Parker (claimant) following a
referral to a Regional Medical Costs Peer Review Committee
(committee). Employer contends that the commission erred in
finding that the committee had properly responded to the
commission's referral and in making an award of fees in the
amount recommended by the committee. Employer further contends

that the commission erred in ruling that res judicata barred

employer's challenge to the authorized status of the doctor whose
fees were at issue before the committee. Finding no error, we

affirm.

“Justice Koontz prepared and the Court adopted the opinion
in this case prior to his investiture as a Justice of the Supreme
Court of Virginia.

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I.
FACTUAL AND PROCEDURAL BACKGROUND
Proceedings before the commission established that claimant
sustained a compensable injury to his back on August 2, 1990. 	He
received disability and medical benefits thereafter. 	On January
24, 1992, the commission authorized treatment rendered by Drs.
Morales and Floyd through June 18, 1991. 	In April 1992, employer
sought a peer review of medical costs for treatment rendered by
Dr. Raymond Iglecia on referral from Dr. Morales. 	On August 31,
1992, the commission found that treatment rendered by Dr. Iglecia
after June 18, 1991 was not authorized. 	On December 15, 1992,
the committee found that all treatment rendered by Dr. Iglecia
and his business entities was medically inappropriate for
claimant's injury. 	On the same day, the committee also found
that treatment rendered by Dr. Morales, other than his initial
consultation and evaluation, was medically inappropriate for
claimant's injury.
Dr. Iglecia appealed the decision of the committee to the
commission. 	The commission reversed the committee's decision on
the ground that one member of the committee was not disinterested
with respect to Dr. Iglecia. 	The commission, in an opinion dated
June 18, 1993, remanded the matter to the committee using the
following language:
Dr. Morales, authorized treating physician prior
to June 20, 1991, prescribed three to four weeks of
pain clinic treatment and work hardening under medical
supervision. . . .

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• 	Was the medical supervision appropriate to
the need of the injured employee?
• 	Were the support functions appropriate?
• 	Were the charges appropriate for the services
rendered; that is, were they limited to charges for medical
and support services which prevail in the same community for
similar treatment when such treatment is paid for by the
injured person? (Code of Virginia, § 65.2-605)
This matter is remanded to the Regional Peer
Review Committee for consideration and for opinion
specifying whether all or any treatment by Dr. Iglecia
and at his direction was appropriate and whether the
charges for services rendered were appropriate. 	Any
deletion or change with regard to charges should be
specified in the committee report.
In responding to the remand, the committee stated that the
parties "presented their views" and "there was extensive review
of medical records regarding the claimant . . . for his treatment
April 1, 1991 to May 30, 1992." 	The committee allowed $9,247 for
claimant's treatment by Dr. Iglecia. 	The committee further noted
deficiencies in billings in October 1991 in order to "be helpful
to the providers in avoiding further difficulties with insurance
carriers . . . ."
Employer sought the commission's review of the committee's
report, asserting that the committee had exceeded the mandate of
the remand by examining medical records beyond the date of
authorized treatment and that the committee had failed to respond
with specificity to the interrogatories of the remand. 	Employer
contended that the amount of the award suggested that the
committee improperly awarded fees for services rendered after the
date of authorized treatment. 	Employer further contended that,

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because the committee previously had found that Dr. Morales'
treatments were medically unnecessary, the commission should find
that Dr. Iglecia was not an authorized physician.
In entering an award in the amount recommended by the
committee, the commission noted that the total medical cost prior
to June 18, 1991 was $11,360 and that the $9,247 award
recommended by the committee was less than this amount. 	The
commission found that while the committee reviewed medical cost
data after June 18, 1991, the record "does not show that they
relied on that data in making its (sic) determination." 	The
commission further found that the committee's one-page report
adequately responded to the issues presented by the remand.
Finally, the commission held that the employer's challenge to the
determination of Dr. Iglecia's authority as a treating physician
was barred by res judicata. 	This appeal followed.
II.
STATUTORY SCHEME FOR PEER REVIEW OF MEDICAL TREATMENT AND COSTS
The commission has the power to make adjustments to the fees
charged by providers of medical treatment under an award made
pursuant to its authority. 	Code § 65.2-714. 	In 1980, following
the trend of the majority of state jurisdictions, the General
Assembly instituted a Peer Review of Medical Costs program to
assist the commission in making determinations of reasonableness
of fees based upon prevailing local conditions of a given region.
See former Code § 65.1-153 et seq.
This appeal presents an opportunity of first impression to

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consider the statutory rights of parties under the Peer Review of
Medical Costs program. 	As constituted under the Workers'
Compensation Act (the Act), the regional peer review committees
are independent bodies administered under the direction of a
statewide coordinating committee. 	See Code §§ 65.2-1301 and
-1303. 	The function of the regional committees is to review
medical treatment rendered under a claim authorized by the Act
for propriety of utilization and reasonableness of cost.1 See
Code §§ 65.2-1303 and -1304. 	A referral for review may be made
by the commission, by a treating physician or by an "insurance
company providing coverage for the cost of any services paid for
in whole or in part pursuant to" the Act. 	Code § 65.2-1305.
Thus, the Act does not provide for referrals to a peer review
committee initiated by an employer.2 However, under the facts of
this case, we hold that a self-insured employer is an "insurance
company" for the purposes of seeking a review of medical
utilization and costs under Code § 65.2-1305.
When such review is requested, the committee is empowered to
take corrective action only if it determines that inappropriate
medical treatment or services were rendered or ordered or
1Peer review of appropriate utilization is limited to
treatment already rendered pursuant to the Act. 	The necessity of
treatment prior to its being rendered is subject to the exclusive
determination of the attending physician or the commission. 	Code
§ 65.2-603.
2We express no opinion as to whether a non-self-insuring
employer could obtain a referral for peer review by requesting
that the commission exercise its statutory power to make such
referral.

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excessive fees were charged for appropriate care. 	Code
§ 65.2-1306(A). 	Accordingly, whenever a committee takes
corrective action, it does so in favor of the insurer and against
the interests of the physician or medical facility which rendered
treatment to the claimant. 	Obviously, if the committee takes no
corrective action, the positions of the parties remain unchanged.
"Any such [corrective] determination by any regional peer
review committee shall be reviewable by the Commission, which
shall have exclusive jurisdiction to effect any such review."
Code § 65.2-1306(B). 	The Act expressly provides that the
physician may seek such review. 	Id. 	Moreover, it is manifest
within the framework of the claims process that the insurance
company or the self-insured employer may also seek a review by
the commission.
The issue presented by this appeal is what form of review
the commission should apply to a committee determination, and
what standard of review is applicable in this Court to the action
taken by the commission. 	We hold that these issues are
controlled by the general provisions found in Code § 65.2-714(A):
Fees of . . . physicians and charges of hospitals for
services, whether employed by employer, employee or
insurance carrier under this title, shall be subject to
the approval and award of the Commission. 	In addition
to the provisions of Chapter 13 (§ 65.2-1300 et seq.)
of this title, the Commission shall have exclusive
jurisdiction over all disputes concerning such fees or
charges . . .; appeals from any Commission
determinations thereon shall be taken as provided in
§ 65.2-706.
The exclusive jurisdiction granted to the commission by this

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statute overrides the authority of the committees to make such
determinations on referral from the commission. 	This superior
jurisdiction is reconfirmed by the language of Code
§ 65.2-1306(B).
The nature of the review given by the commission can best be
understood by considering the process that would occur if no
review of the committee determination is sought. 	Where a
committee determines that a treatment, service or fee was
appropriate, that cost is payable by the insurance carrier under
a prior award of the commission. 	Absent a request for review, no
further action by the commission is required. 	Similarly, where
the committee determines that a service or treatment was
unnecessary or a fee excessive, the physician is bound by that
determination, Code § 65.2-1306(C), and absent a review by the
commission, must accept the reduced fee and return any excess
fees improvidently paid in advance of the determination. 	Code
§ 65.2-1306(A).
When a review of a committee determination is sought,
however, the commission is not exercising an appellate function
over the proceedings of the committee. 	Rather, it is assuming
its jurisdiction pursuant to Code § 65.2-714 to make a final
determination of the fees to be awarded for claims payable under
the Act. 	That determination must be based on the record as a
whole. 	While the determination of the committee should be given
significant weight as informed opinion, it is neither binding on
the commission nor the exclusive portion of the record to be

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considered.
To give the commission traditional appellate oversight of
the committees would abrogate the committees' role as independent
bodies. 	Similarly, to extend deferential treatment to the
determination of a committee would impermissibly delegate the
jurisdiction of the commission. 	In short, when a review of a
committee determination is sought, the party seeking the review
merely asks the commission to assume its role as final arbiter of
the propriety of treatment, services and fees.
In that role, the commission may take any action that the
statute permits. 	It may, as it did in this case, accept the
recommendation of the committee as appropriate when viewed in the
context of the whole record. 	Similarly, if the record supports
some further downward modification of the award or some
remittitur of the adjustment recommended by the committee, the
commission may make such adjustment as is appropriate. 	The
commission may also, as it did in an earlier proceeding of this
case, refer the claim back to the committee for further
consideration.
Employer contends that the commission erred in not pursuing
this latter course. 	We recognize that decisions of the
commission concerning referral to a peer review committee are
subject to review once a final determination has been entered by
the commission. 	See Jewell Ridge Coal Corp. v. Henderson, 229
Va. 266, 269, 329 S.E.2d 48, 50 (1985). 	Thus, the decision of
the commission to enter a final award rather than refer the

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matter back to the committee is reviewable by this Court upon an
appeal of the commission's final award.
Although no prior case law construes the standard of review
applicable to decisions concerning a peer review referral, we
have previously held that the standard of review applicable to
decisions of the commission concerning attorney's costs and fees
made pursuant to Code § 65.2-714 will not be disturbed in the
absence of an abuse of discretion. 	Volvo White Truck Corp. v.
Hedge, 1 Va. App. 195, 200-01, 336 S.E.2d 903, 907 (1985).
Because the exclusive jurisdiction of the commission to effect a
review of a committee determination in Code § 65.2-1306(B) is
concordant with and derives from the exclusive jurisdiction to
adjust fees for medical treatment and services pursuant to Code
§ 65.2-714, we hold that the abuse of discretion standard applies
to actions of the commission taken pursuant to Code § 65.2-1306.
The record before us shows that the commission considered
the record in whole, determined that the committee had adequately
responded to its referral and that the determination of the
committee was supported by the record. 	In entering an award in
accord with that recommendation, the commission properly
exercised its discretionary authority under Code §§ 65.2-714 and
-1306(B). 	A reviewing court, in considering the propriety of a
discretionary action of a lower body, must not supplant its
discretion for that rendered below. 	The discretionary act should
only be reversed where there is clear evidence that the act was
not judicially sound. 	The action of the commission here was well

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reasoned and grounded in facts evident on the record.
Accordingly, we find no abuse of discretion.
III.
AUTHORIZATION OF TREATMENT BY DR. IGLECIA
Finally, we consider employer's assertion that the
commission erred in determining that the issue of whether Dr.
Iglecia was an authorized physician was barred by res judicata.
Employer contends that because the peer review committee
determined, in a separate proceeding, that Dr. Morales had
rendered unnecessary treatment at the time he referred claimant
to Dr. Iglecia, that referral was not authorized and the prior
determination by the commission to the contrary was not binding
for purposes of res judicata. 	We disagree.
The question of whether a physician is "authorized" to give
treatment by virtue of a referral is a different question from
whether the treatment rendered by an authorized physician is
"necessary." 	The former relates to the process of selecting a
primary physician and then establishing a chain of referral to
the treating physician; the latter relates to the therapeutic or
ameliorative relationship between the treatment rendered and the
compensable injury or occupational disease.
The mere fact that unnecessary treatment is rendered does
not, of itself, divest a treating physician of authorized status,
nor does it preclude the possibility that a physician further
down the chain of referral can properly treat the claimant by
providing necessary treatment. 	When a physician is within an

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authorized chain of referral, the necessity of the treatment
rendered by that physician must be judged on its own merits and
without regard to the propriety of actions taken by other
physicians in the referral chain.
The commission had previously determined that Dr. Morales
was an authorized physician until June 18, 1991 and that the
referral to Dr. Iglecia by Dr. Morales was made properly during
that time.3 Any subsequent determination of the necessity of
treatment rendered by Dr. Morales was not relevant to the issue
of whether his referral to Dr. Iglecia was authorized or whether
the treatment rendered by Dr. Iglecia was necessary.4
Accordingly, the commission's prior determination of Dr.
Iglecia's authority as a treating physician was not abrogated by
the subsequent denial of fees charged by Dr. Morales for
unnecessary treatment. 	That determination was memorialized in an
opinion of the commission which was not appealed to this Court.
Accordingly, for the parties subject to that opinion, the matter
was res judicata in subsequent proceedings before the commission
and this Court.
3We note further that the commission properly determined
that when Dr. Morales ceased to be an authorized physician, the
chain of referral was broken and Dr. Iglecia was also divested of
his authority to treat claimant under the Act.
4Evidence showing that treatment rendered by one physician
was unnecessary may be relevant in establishing that treatment
rendered by another physician for the same or related condition
was also unnecessary. 	We merely hold that the necessity, or lack
thereof, of a treatment rendered by a physician must be
established independently from determinations made for treatments
rendered by other physicians in the same referral chain.

For these reasons, we affirm the decision of the commission.

Affirmed.

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