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Workers’ Compensation Daily News for December 6th, 2019

  • Hospital Groups Sue to Stop Price Transparency Rule
    on December 5, 2019 at 7:43 AM

    Hospital groups on Wednesday filed a lawsuit to stop the Trump administration’s price transparency rule that requires hospitals to disclose negotiated rates with insurers.

    The suit, filed by the American Hospital Association (AHA), among other hospital groups, argues that the Centers for Medicare and Medicaid Services (CMS) rule violates the First Amendment by provoking compelled speech and reaches beyond the intended meaning of "standard charges" transparency in the Affordable Care Act.

    The groups filed the suit in the U.S. District Court in Washington and are asking for an expedited decision to prevent hospitals from needing to prepare for the rule if it is ultimately ruled unconstitutional.

    The hospitals argue that the efforts and cost required to follow the rule are overreaching as they would be required to release massive spreadsheets with data on negotiated drugs, supplies, facility and physician care prices. The estimated cost to hospitals to follow the rule is between $38.7 million to $39.4 million.

    "The burden of compliance with the rule is enormous, and way out of line with any projected benefits associated with the rule," according to the suit.

    The suit also alleges the Department of Health and Human Services (HHS) does not have the authority to enforce the rule, according to a release from the AHA.

    "Instead of giving patients relevant information about costs, this rule will lead to widespread confusion and even more consolidation in the commercial health insurance industry," Rick Pollack, president and CEO of AHA, said in the release. "We stand ready to work with CMS and other stakeholders to advance real solutions for patients."

    The rule, which was finished last month, is part of the Trump administration’s efforts to increase price transparency and to develop more competition within the health care industry, moves which they say would help lower medical costs.

    White House officials have said that a lack of cooperation from hospitals on the regulation indicates they are prioritizing themselves over consumers.

    "Hospitals should be ashamed that they aren’t willing to provide American patients the cost of a service before they purchase it," HHS spokeswoman Caitlin Oakley said. "President Trump and Secretary Azar are committed to providing patients the information they need to make their own informed health care decisions and will continue to fight for transparency in America’s health care system."

    The hospitals say the rule will have the opposite of the intended effect and cause competitors to increase prices to match their rivals to a point where consumers will decide against receiving care.

    The Association of American Medical Colleges, the Children’s Hospital Association and the Federation of American Hospitals also signed onto the suit.

  • Jury Verdict May Bankrupt Strongest Longshore Union
    on December 5, 2019 at 7:43 AM

    A recent $93.6 million verdict from an Oregon jury has the potential to bankrupt a union that some describe as one of the strongest and most militant in the United States - the International Longshore and Warehouse Union (ILWU).

    The November 4 federal jury award in favor of ICTSI Oregon Inc., the former operator of a Port of Portland terminal, was handed down after allegations of unlawful boycotts carried out by the ILWU-backed dock workers, which caused significant damages to ICTSI’s business.

    The employment firm of Fisher Phillips reports that the lawsuit was the last remaining active case out of six separate actions filed in 2012 arising from a labor dispute at Terminal T6 in Portland, Oregon.

    The dispute concerned which union was entitled to perform the job of plugging, unplugging, and monitoring refrigerated shipping containers (referred to as the "reefer" jobs) at T6. The ILWU and its local chapter, Local 8, alleged that their collective bargaining agreement required ICTSI to assign the reefer jobs to ILWU members. Conversely, the International Brotherhood of Electrical Workers (IBEW) argued that other contracts required the reefer jobs to be assigned to IBEW members.

    In August 2012, the National Labor Relations Board (NLRB) issued a decision awarding the reefer work to IBEW-represented employees. That did not sit well with the Longshore union.

    According to ICTSI, the ILWU and Local 8 responded by engaging in unlawful secondary boycott activity, including inciting or encouraging unlawful slowdowns. By "inducing and encouraging" longshoremen "to unnecessarily operate cranes and drive trucks in a slow and nonproductive manner, refuse to hoist cranes in bypass mode, and refuse to move two 20-foot containers at a time on older carts, in order to force or require ICTSI and carriers who call at terminal 6 to cease doing business with the Port,"

    ICTSI alleged that the union’s campaign led to the loss of its service contracts with two major shipping companies - which was approximately 98% of its business. The company further alleged that the union’s actions caused it to suffer in excess of $101 million in damages. The former operator filed a civil claim and took the Longshoremen's union to federal court in Oregon to recover these damages.

    After a 10-day trial, the jury unanimously found that both the ILWU and Local 8 engaged in unlawful labor practices for a several-year period. The jury further found that the unlawful labor practices were a substantial factor in causing damages to ICTSI and that at no time during the period on question did either the ILWU or Local 8 engage in lawful, primary labor practices. On November 4, the jury awarded ICTSI $93,635,000 due to the ILWU’s and Local 8’s actions.

    The jury’s verdict has the potential to bankrupt the ILWU. Each year, unions like the ILWU file must file a form with the Department of Labor called an LM-2 which lists various financial information about the union. The 2018 LM-2 filed by the ILWU national headquarters lists the total assets of the union as just over $8 million - $85 million less than necessary to satisfy the judgment against them.

    The union has already said that it intends to oppose the judgment and take legal steps to set aside the judgment. It is also likely that the ILWU will appeal the final ruling. Thus, any bankruptcy filing could be years from now, but it is certainly a realistic possibility.

  • LA Basin Home to Half of Indicted Medical Providers
    on December 4, 2019 at 9:10 AM

    For most of this decade, the average medical cost per indemnity claim in California has declined. Anti-fraud measures by the Department of Industrial Relations (DIR), the California Department of Insurance (CDI), local district attorneys and insurer special investigative units also contributed to the significant reduction in medical costs. As part of this effort, the DIR has, as of August 2019, indicted and/or suspended more than 500 medical providers from participating in the California workers’ compensation system.

    In 2018, the WCIRB published a study evaluating the potential impact of medical fraud enforcement.

    The 2018 study showed that over 7% of total medical payments were made to Indicted Providers, who rendered more than 4% of the medical services in the second half of 2012. By the second half of 2017, the shares of both medical payments and transactions to these Indicted Providers had fallen by over two thirds.

    The WCIRB has now released Treatment Patterns of Medical Providers Indicted for Fraud in California Workers’ Compensation, a follow-up analysis to its 2018 study that evaluated the potential impact of medical provider fraud enforcement.

    The new research brief compares the treatment patterns and types of services rendered by indicted/suspended providers (indicted providers) to non-indicted/suspended providers (other providers) as well as the regional variations and differences in treatment levels on cumulative trauma (CT) claims. The WCIRB’s findings include:

    The average total medical paid per indicted provider was 10 times higher than other providers between 2013 and 2018, largely because indicted providers treated significantly more injured workers and rendered more services per injured worker.

    The shares of medical payments for medical-legal (ML) and medical liens of indicted providers were two to three times higher than other providers. Indicted providers were also paid a significantly higher share for complex office visits and ML evaluations.

    Indicted providers in the Los Angeles Basin accounted for about half of indicted providers linked to WCIRB data, but they received more than 90 percent of the medical payments made to these indicted providers. The share of indemnity claims involving CT within the LA Basin was consistently higher for indicted providers between 2013 and 2015, yet the pattern did not hold in 2016.

  • Actuary Finds Self-Insurance Saves 21%
    on December 4, 2019 at 9:10 AM

    The California Self-Insurer's Security Fund (SISF) released findings of a study conducted by Bickmore Actuarial. The study compares the overall cost of workers' compensation self-insurance with the cost of traditional workers' compensation insurance. The study examined workers' compensation costs for 14 California self-insured employers across a variety of industries and with different self-insured retentions.

    Based on a sample of 14 self-insurers, Bickmore estimated self-insurance savings of 14% to 28% versus full insurance. The average savings are 21%.

    The 14 self-insurers that we evaluated are in a variety of industries and retain over $150,000,000 in annual workers’ compensation loss and allocated loss adjustment expense (ALAE), as projected by their independent actuaries. The self-insured retentions (SIRs) of those included in our evaluation range from $250,000 to $2,500,000.

    In order to estimate self-insurance savings Bickmore started with projected ultimate loss & ALAE detailed in each self-insurers’ actuarial study, and then we added industry-wide loads for both insurance and self-insurance. The self insurance savings are largely driven by the reduction in commissions, insurance company other acquisition costs, and insurance other/general expenses (including premium tax). For 2017 the California Workers’ Compensation Insurance Rating Bureau (WCIRB) has estimated these costs to total 18% of premium.

    The key difference between the low and high savings estimates is the assumed insurance company profit. Historically, California insurance company workers’ compensation profit has been highly variable by year. The low savings estimates assume no insurance underwriting profit. The high savings estimates assume insurance company profit is roughly 10% of premium, which the WCIRB has estimated insurance company profit to be for the 2017 year.

    In addition to the costs previously discussed, the study adjusts for the estimated cost of excess insurance purchased by the self-insurer, self insurance assessments from the California Department of Industrial relations (DIR), and charges by the California Self-Insurers’ Security Fund (SISF).

  • WCIRB Finds LA Basin Claims Highest in State
    on December 3, 2019 at 8:22 AM

    The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) released the 2019 WCIRB Geo Study, which underscores regional differences in claim characteristics across California. The web-based interactive map allows you to quickly view key measures across regions.

    The study’s key findings include the following:

    -- Even after controlling for regional differences in wages and industrial mix, indemnity claim frequency is significantly higher in the Los Angeles Basin and significantly lower in the San Francisco Bay Area.

    -- Regional differences in indemnity claim frequency have been fairly consistent over time and across industries. The LA/Long Beach region has had the highest frequency, and the Peninsula/Silicon Valley region has had the lowest frequency during all available years. The difference between these regions has grown in each of the last two years. Since 2013, the largest improvement in relative indemnity claim frequency is in the Fresno/Madera region, and the greatest deterioration has been in Orange County and the Imperial/Riverside region.

    -- Regional differences in severity are more muted than in frequency. Even after controlling for regional differences in industrial mix, limited average incurred on indemnity claims is highest in the San Luis Obispo, Santa Barbara and Ventura regions and lowest in the San Bernardino/West Riverside region.

    -- Pharmaceutical costs throughout the state have dropped dramatically over the last several years, and the prevalence of opioid prescriptions for claims with pharmaceutical payments has also dropped dramatically. The largest decreases in pharmaceutical costs have occurred in Southern California regions, which had the highest pharmaceutical spending at the beginning of the study period. This has decreased the differences in pharmaceutical costs across regions over time.

    -- The share of cumulative trauma claims as a percent of all claims is much higher in the Los Angeles Basin than in other parts of the state, and that gap has generally widened over time.

    -- Both medical-legal costs and paid allocated loss adjustment expenses (ALAE) are significantly higher in the Bakersfield and Los Angeles Basin regions than in the remainder of the state.

    -- The share of open indemnity claims has decreased substantially in all regions since 2013. The largest decreases have been experienced in the Los Angeles Basin regions that had the highest initial open indemnity claim shares. These changes have narrowed regional differences over time.

    -- Incurred loss development regional differences observed were relatively modest. In general, development appeared higher than average in more urban areas, with the highest in the Los Angeles/Long Beach region and the lowest in the Fresno/Madera region.

  • CMS Reporting Threshold Unchanged for 2020
    on December 3, 2019 at 8:22 AM

    As required by Section 202 of the SMART Act, CMS is required to annually review its costs relating to recovering conditional payments as compared to recovery amounts.

    Since 2017, CMS has maintained its threshold of $750.00 across all Non-Group Health Plan (NGHP) lines of business to include workers’ compensation, general liability, and no-fault insurance.

    The threshold means that in scenarios where the Total Payment Obligation to Claimant (TPOC)/settlement amount is $750.00 or less, the claim does not need to be reported and CMS will not require reimbursement of conditional payments.

    CMS has again reviewed the costs related to collecting Medicare’s conditional payments and compared this to recovery amounts.

    Beginning January 1, 2020, the threshold for physical trauma-based liability insurance settlements will remain at $750. CMS will maintain the $750 threshold for no-fault insurance and workers’ compensation settlements, where the no-fault insurer or workers’ compensation entity does not otherwise have ongoing responsibly for medicals.

    This means that entities are not required to report, and CMS will not seek recovery on settlements, as outlined above.

    Please note that the liability insurance (including self-insurance) threshold does not apply to settlements for alleged ingestion, implantation or exposure cases. Information on the methodology used to determine the threshold is provided at

  • Hey - Not So Fast! Treatment Guidelines are Often Wrong
    on December 2, 2019 at 9:27 AM

    When Vinay Prasad, MD, was a resident, strict control of blood glucose for patients in the intensive care unit was considered an important goal. "We really chased tight glycemic control in the medical ICU, but of course, just a few years later, a randomized control trial - NICE-SUGAR - came out showing that that actually led to net harm without benefit," he said.

    That's just one example of a medical reversal, which occurs when new and superior research contradicts and supersedes existing clinical practice. It's a phenomenon in which Dr. Prasad, an associate professor of medicine at Oregon Health & Science University and the author of Ending Medical Reversal: Improving Outcomes, Saving Lives, is an expert.

    He and a team of colleagues from OHSU published a comprehensive review of randomized clinical trials in the Journal of the American Medical Association, The Lancet, and the New England Journal of Medicine identifying 396 medical reversals.

    At least a dozen of these reversals related specifically to emergency medicine, while many others had at least some relationship to emergency care, trauma, and critical care. A few examples:

    Mechanical chest compressions with the LUCAS device, in use since 2003 for treating patients in cardiac arrest, was found in the LINC randomized, controlled trial to have no significant effect on survival compared with manual CPR in patients with out-of-hospital cardiac arrest. The ability to achieve ROSC with the mechanical device was inferior to manual chest compression during resuscitation. (JAMA. 2014;311[1]:53)

    Early and aggressive intervention with the early goal-directed therapy (EGDT) protocol for ED patients in whom sepsis is suspected was widely adopted after one positive study in 2001. It was later found to confer no added survival benefit compared with usual care and to contribute to increased ICU resource utilization. (JAMA. 2017;318[13]:1233)

    The REACT-2 trial found that routine use of an immediate total-body CT scan as part of trauma workup did not reduce in-hospital mortality compared with conventional imaging and selective CT scanning in patients with severe trauma. (Lancet. 2016;388[10045]:673)

    Platelet transfusion after acute hemorrhagic stroke associated with antiplatelet therapy was a common practice in the ED (as well as in neurosurgery and stroke units), but the 2015 PATCH study found worsened survival in the platelet transfusion group (68%) compared with the standard care group (77%). (Lancet. 2016;387[10038]:2605)

  • Drugmakers to Invest $2B in Gene Therapies
    on December 2, 2019 at 9:27 AM

    Eleven drugmakers led by Pfizer and Novartis have set aside a combined $2 billion to invest in gene therapy manufacturing since 2018, according to a Reuters analysis, in a drive to better control production of the world's priciest medicines.

    The full scope of Novartis' $500 million plan, revealed to Reuters in an interview with the company's gene therapy chief, has not been previously disclosed. It is second only to Pfizer, which has allocated $600 million to build its own gene therapy manufacturing plants, according to filings and interviews with industry executives.

    Gene therapies aim to correct certain diseases by replacing the missing or mutated version of a gene found in a patient's cells with healthy copies. With the potential to cure devastating illnesses in a single dose, drugmakers say they justify prices well above $1 million per patient.

    The senior vice president of Pfizer's global gene therapy business, acknowledged drugmakers take a "leap of faith" when they make big capital investment outlays for treatments before they have been approved or, in some cases, even produced data demonstrating a benefit. The rewards are potentially great, however.

    Gene therapy is one of the hottest areas of drug research and, given the life-changing possibilities, the FDA is helping to speed treatments to market. It has approved two so far, including Novartis's Zolgensma treatment for a rare muscular disorder priced at $2 million, and expects 40 new gene therapies to reach the U.S. market by 2022.

    There are currently several hundred under development by around 30 drugmakers for conditions from hemophilia to Duchenne muscular dystrophy and sickle cell anemia.

    The proliferation of these treatments is pushing the limits of the industry's existing manufacturing capacity. Developers of gene therapies that need to outsource manufacturing face wait times of about 18 months to get a production slot, company executives told Reuters. They are also charged fees to reserve space that run into millions of dollars, more than double the cost of a few years ago, according to gene therapy developer RegenxBio.

    As a result, companies including bluebird bio, PTC Therapeutics and Krystal Biotech are also investing in gene therapy manufacturing, according to a Reuters analysis of public filings and executive interviews. They follow Biomarin Pharmaceutical Inc, developer of a gene therapy for hemophilia, which constructed one of the industry's largest manufacturing facilities in 2017.

    The FDA is keeping a close eye on standards. This comes amid the agency's disclosure in August that it is investigating alleged data manipulation by former executives at Novartis' AveXis unit.

  • Daniel Capen Sentenced to 30 Months in Prison
    on November 26, 2019 at 10:40 AM

    A spinal surgeon was sentenced to 30 months in federal prison for participating in a long-running health care fraud scheme in which he received at least $5 million in kickbacks for performing hundreds of spinal surgeries. The overall scheme resulted in more than $580 million in fraudulent bills being submitted, mostly to California’s worker compensation system.

    Dr. Daniel Capen, 70, of Manhattan Beach, was sentenced by United States District Judge Josephine L. Staton, who also ordered Capen to forfeit $5 million to the United States and pay a $500,000 fine.

    Capen, an orthopedic surgeon specializing in spinal surgeries, pleaded guilty in August 2018 to conspiracy to commit honest services fraud, and soliciting and receiving kickbacks for health care referrals.

    The kickback scheme centered on Pacific Hospital in Long Beach, which specialized in surgeries, especially spinal and orthopedic procedures. Pacific Hospital’s owner, Michael D. Drobot, conspired with doctors, chiropractors and marketers to pay kickbacks in return for the referral of thousands of patients to Pacific Hospital for spinal surgeries and other medical services paid for primarily through the California workers’ compensation system.

    Capen received kickbacks for referring surgeries to Pacific Hospital and also for using medical hardware from a Pacific Hospital-affiliated entity during the spinal surgeries he performed. He also received kickbacks for referring medical services such as urine and drug testing to Pacific Hospital-affiliated entities.

    In total, between 1998 and 2013, Capen accounted for approximately $142 million of Pacific Hospital’s claims to insurers, on which the hospital was paid approximately $56 million. Capen admitted to receiving at least $5 million in kickbacks during the course of his crimes.

    Drobot is serving a five-year prison sentence for conspiracy and paying illegal kickbacks, and has admitted that he orchestrated a wide-ranging fraudulent kickback scheme where paid more than $50 million in bribes to doctors to steer hundreds of millions of dollars in spinal surgeries to his hospital. Drobot ultimately profited millions of dollars from the scheme. Drobot currently faces additional federal criminal charges for allegedly violating a court forfeiture order by illegally selling his luxury cars.

    Seventeen defendants have been charged in connection with the scheme, and 10 of them have been convicted, including Drobot and his son. Another doctor – Timothy James Hunt, 55, of Palos Verdes Estates – was sentenced in late September to two years in federal prison after he admitted taking illegal kickbacks.

    The investigation into the spinal surgery kickback scheme was conducted by the FBI; IRS Criminal Investigation; the California Department of Insurance; and the United States Postal Service, Office of Inspector General.

    This case is being prosecuted by Assistant United States Attorneys Joseph T. McNally of the Violent and Organized Crime Section, Scott D. Tenley of the Santa Ana Branch Office, Ashwin Janakiram of the Major Frauds Section, and Victor A. Rodgers of the Asset Forfeiture Section.

  • Medical-Legal Fee Schedule Amendments Update
    on November 26, 2019 at 10:40 AM

    The Division of Workers’ Compensation provided an update on the development of amendments to the Medical-Legal Fee Schedule.

    The division is close to finalizing the fee schedule, and intends to begin the rulemaking process by the end of the year and will hold a public hearing in early 2020. The development of the draft amendments included comprehensive review by those who work in and utilize California’s workers’ compensation system.

    The division posted proposed amendments in May 2018 and after soliciting proposals and obtaining feedback from the industry, posted a revised proposal last August incorporating input from stakeholders including medical providers, public and private employers, attorneys, insurance carriers, advocates and policymakers.

    The division continues to meet with stakeholders as it refines its proposed amendments and fixed fee schedule to improve the quality of medical reports, eliminate complexity factors and increase fees for medical-legal testimony. Updates on the proposed regulation including information on the public hearing will be posted on DWC’s proposed regulations webpage.

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