THOMAS E. COLTON, Employee/Respondent, v. BLOOMINGTON PLATING and FEDERATED MUT. GROUP, Employer-Insurer/Cross-Appellants, and MINN. DEP’T OF CORR. (STATE OF MINN.) Self-Insured Employer/Respondent, and SPECIAL COMP. FUND, Appellant.

The Special Compensation Fund appeals from the compensation judge’s decision that it is responsible for reimbursing Federated Mutual Group for payments made to the Minnesota Department of Corrections for pharmacy expenses of the employee. We affirm.

Thomas Colton was employed by Bloomington Plating on June 21, 1985, and July 8, 1986, when he sustained work-related injuries to his lumbar spine. Bloomington Plating and its insurer, Federated Mutual Group, (collectively referred to hereinafter as “Federated”) accepted liability for the work injury. In 1987, the employee and Federated entered into a settlement which closed out all workers’ compensation claims past, present, and future with the exception of future medical expenses.

Mr. Colton was then employed by the State of Minnesota, Department of Corrections (hereinafter “DOC”) on September 19, 2006, when he claimed a work injury to his lumbar spine. Liability for this injury was accepted by DOC and wage loss, medical expenses, and rehabilitation benefits were paid.

In May 2012, the employee, Federated, DOC, and the Special Compensation Fund (the “Fund”) agreed to a settlement in a stipulation which was the subject of an award on May 2, 2012. (Ex. C.) A lump sum amount was paid to the employee for a full close-out of all workers’ compensation claims except for certain future medical expenses. The stipulation provided for DOC to be the paying agent for future medical expenses. DOC was to make an annual claim for reimbursement from Federated and Federated agreed to pay 44-percent of medical treatment expenses to DOC. The stipulation then provided for the Fund to reimburse Federated for the amount Federated had paid to DOC.^[1]

Workers’ compensation claims for DOC and other Minnesota state agencies are handled by the Department of Administration. DOC and Department of Administration are collectively referred to as the “State.” The State has a contract with CorVel, which provides that CorVel will provide managed care services and medical bill payment services, will maintain a “statewide network of participating providers” for medical services to injured employees, and will provide “pharmacy benefit management services.” (Ex. 2.)

In the present matter, the State paid medical expenses for the employee totaling $55,386.72 for the period of May 22, 2012, through July 2, 2014. The State subsequently submitted a request to Federated for 44-percent of that amount or $22,456.67. Federated paid the State that amount and requested reimbursement from the Fund. In a response to Federated dated May 23, 2015, the Fund refused to pay the amount claimed for some prescriptions because the amount claimed exceeded the maximum allowable for those prescriptions.^[2] The Fund’s response to Federated referred to Minn. R. 5221.4070, which sets fees for medical services provided by a pharmacy. Specifically, the Fund relied on Minn. R. 5221.4070, subp. 4.A(2), which sets the maximum fee for electronic transactions involving drug prescriptions as being the maximum allowable cost for that drug as established by the Department of Human Services and published in the State Register and, in addition, a professional dispensing fee of $3.65 per prescription filled.

Federated maintained its claim for reimbursement, which came on for hearing on March 22, 2017, before a compensation judge. Federated, the State, and the Fund were present and represented by attorneys. At the outset of the hearing, the parties set out their respective positions. Federated claimed that its role in the employee’s ongoing medical care was essentially that of a conduit. It had paid the amount requested by the State and, in turn, had requested reimbursement from the Fund. Federated contended that either it should be reimbursed by the Fund or, if the Fund was correct in its position, Federated should not have paid the disputed amount to the State and should be reimbursed by the State. Federated also asserted a claim for attorney fees under Minn. Stat. § 176.191 and a claim for penalties under Minn. Stat. § 176.225.

The Fund’s position was that it was not responsible for the entire cost of the prescriptions as submitted by Federated because the prescriptions exceeded the maximum allowed by Minn. R. 5221.4070, subp. 4.A(2). The Fund also claimed at the hearing that the requested reimbursement included management fees for CorVel and were, as a result, not “medical treatment expenses” for which it had some responsibility pursuant to the stipulation.

The State’s position was that Minn. R. 5221.4070, subp. 4.A(2), did not apply in the present case. The State has a contract with CorVel, a certified managed care provider, which has a contract with Caremark. Caremark is a network of pharmacies which has an agreement with CorVel to provide medications at a specified amount. Under Minn. R. 5221.4070, subp. 1a.H(3), CorVel is defined as a workers’ compensation payer because it has been designated by the State to act on its behalf in paying drug charges. As a result, the State argues that in this matter, Minn. R. 5221.4070, subp. 5, applies. That subpart states that subparts 3 and 4 do not apply “where a contract between a pharmacy, practitioner, or network of pharmacies or practitioners, and a workers’ compensation payer provides for a different reimbursement amount.” The State argued that because this provision applies, the maximum fee allowed provision under subpart 4 does not apply, and that the disputed amount of the claimed prescription expenses should be paid by the Fund.

The compensation judge issued his Findings and Order on June 22, 2017. In findings relevant to the present appeal, the compensation judge determined that:

The Fund appeals. Federated filed a cross-appeal.

On appeal, the Workers’ Compensation Court of Appeals must determine whether “the findings of fact and order [are] clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted.” Minn. Stat. § 176.421, subd. 1(3). Substantial evidence supports the findings if, in the context of the entire record, “they are supported by evidence that a reasonable mind might accept as adequate.” Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984). Where evidence conflicts or more than one inference may reasonably be drawn from the evidence, the findings are to be affirmed. Id. at 60, 37 W.C.D. at 240. Similarly, findings of fact should not be disturbed, even though the reviewing court might disagree with them, “unless they are clearly erroneous in the sense that they are manifestly contrary to the weight of evidence or not reasonably supported by the evidence as a whole.” Northern States Power Co. v. Lyon Food Prods., Inc., 304 Minn. 196, 201, 229 N.W.2d 521, 524 (1975).

A decision which rests upon the application of a statute or rule to essentially undisputed facts generally involves a question of law which the Workers’ Compensation Court of Appeals may consider de novo. Krovchuk v. Koch Oil Refinery, 48 W.C.D. 607, 608 (W.C.C.A. 1993), summarily aff’d (Minn. June 3, 1993).

The Fund has appealed the compensation judge’s decision ordering it to pay the disputed amount of $1,441.72 to Federated. The Fund makes two arguments in support of its position.

The Fund’s first argument is that the compensation judge erred in applying Minn. R. 5221.4070, subp. 5. The Fund argues instead that subparts 3 and 4 are controlling. For pharmacy expenses, subpart 3 and 4 are what might be called the standard or default rule. Both subparts establish criteria for a maximum fee, either for non-electronic transactions (subpart 3) or electronic transactions (subpart 4). The parties in these transactions are identified as being on the one side a payer, defined in subpart 1a.H of the same rule, and on the other side as being the pharmacy or practitioner, also defined in subparts 1a.E and F.

The State argues that Minn. R. 5221.4070, subp. 5, applies. That subpart states that subparts 3 and 4 do not apply “where a contract between a pharmacy, practitioner, or network of pharmacies or practitioners, and a workers’ compensation payer provides for a different reimbursement amount.” Subpart 1a.H(3) of the same rule specifically provides that a payer includes “any other person or entity” that a workers’ compensation payer contracts with to act on the payer’s “behalf in paying drug charges.” We conclude the evidence supports a determination that CorVel meets this definition.

The Fund argues in its brief that this conclusion must be wrong because there is no evidence of a contract between the State and a pharmacy network. However, State exhibit 3, a Letter of Agreement between CorVel and Caremark, meets that requirement of subpart 5. We recognize that the result here is that CorVel, acting on behalf of the State, enters into an agreement with CorVel, acting on behalf of a network of pharmacies. However, we are given no authority that the rules which apply in these cases prohibit this type of agreement. In fact, the only witness at the hearing, Cody Marks, a vice president of CorVel, explained the role of a pharmacy benefits technician manager in those terms.

The Fund’s second argument is that the disputed amount of $1,441.72 is a management fee for CorVel and is not medical services for which the Fund is partly responsible. We disagree.

It is correct that pharmacy or medical bills include an administrative component. We note first that the subparts of Minn. R. 5221.4070 cited by the Fund allows for payment of a drug cost as well as a “dispensing fee.” We see no way that this dispensing fee could be categorized as anything other than an administrative cost of the provider. We also note that all medical bills include an administrative component, whether specified or not. The bills from any medical provider include the cost of a business office staff as well as staff to handle insurance issues. The finding by the compensation judge that administrative costs are “woven into the prescription drug costs” is supported by the evidence. (Finding 4.)

Perhaps most importantly, there is no evidence that any administrative cost of CorVel in dealing with the pharmacy bills between May 22, 2012, and July 2, 2014, equals $1,441.72. When the Fund denied that amount, it did so by applying subparts 3 and 4 of Minn. R. 5221.4070. The difference in the amount billed and the amount paid under those subparts does not automatically become an administrative cost in the absence of any evidence to support that assertion.

The compensation judge’s determination that the Fund is responsible for reimbursing Federated the amount of $1,441.72 is affirmed.

Federated filed a notice of cross-appeal in this matter on August 2, 2017. A respondent must serve and file a notice of cross-appeal within 30 days of the filing of the compensation judge's Findings and Order or within 15 days of service of the notice of appeal on that respondent. Minn. Stat. § 176.421, subd. 3a; Minn. R. 9800.1600, subp. 1. Filing is complete upon receipt of the necessary documents at the office or department. Minn. Stat. § 176.275, subd. 1. Time limits for perfecting an appeal are jurisdictional. Carpenter v. Woodvale, Inc., 400 N.W.2d 727, 39 W.C.D. 430 (Minn. 1987); Bjerga v. Maislin Transp., 400 N.W.2d 99, 39 W.C.D. 309 (Minn. 1987); Kearns v. Julette Originals Dress Co., 267 Minn. 278, 126 N.W.2d 266, 23 W.C.D. 127 (1964). Where subject matter jurisdiction is lacking, this court cannot determine the merits of the case. Hemmesch v. Molitor, 328 N.W.2d 445, 35 W.C.D. 541 (Minn. 1983). Since the compensation judge’s decision was served and filed June 22, 2017, and the Fund’s notice of appeal was served on July 17, 2017, the cross-appeal was filed one day late and this court lacks subject matter jurisdiction to determine the issues raised by the cross-appeal. Therefore, Federated’s cross-appeal is dismissed.