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Author: WorkCompAcademy

October 19, 2020 – News Podcast

Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: WCAB Rules Tree Trimmer Amputation “Sudden and Extraordinary”. California Joins in Antitrust Litigation Against AbbVie. Another Opioid Drugmaker Files for Bankruptcy Protection. Santa Monica Woman Guilty of Price Gouging 20,000 N95 Masks. Mitchell Launches Data Explorer to Combat Fraud. NCCI Reports Most COVID Claims are “Small Dollar”. QME Emergency Regs 36.7 and 46.2 Extended to 2021. DWC Adjusts OMFS Pathology Lab Fees, Hospital and ASC Fees. Digital Health Startups are Disrupting Healthcare System.

Marsh Reports COVID-19 Claim Costs Less Than Expected

Marsh has published an Insight Report on the effects of COVID-19 on the Workers’ Compensation industry so far. Here are some of the highlights of its report.

Some six months after the World Health Organization declared a pandemic, many of the most dire predictions about COVID-19’s impact on workers’ compensation systems have not been realized. Claims of COVID-19 exposure in the workplace have been outpaced by a decline in other types of reported occupational injuries, and the workers’ compensation insurance market remains competitive.

Industry observers have forecast that workers’ compensation premium volume will drop by as much as 10% to 20% in 2020 and will likely not continue to grow in 2021 as the labor market remains challenging. Despite this negative premium growth and a number of changes to state regulations or directives regarding the compensability of COVID-19 claims, Marsh anticipates the impact to insurer profitability to be less drastic and for the line to normalize fairly quickly.

The National Council on Compensation Insurance (NCCI), Workers’ Compensation Insurance Rating Bureau of California (WCIRB), and other industry observers have published sizable initial ranges of estimated claims losses from COVID-19. But a large influx of COVID-19 claims have not yet materialized, with limited exceptions in health care. And initial analysis shows that the average severity of COVID-19 claims is lower than expected.

Telemedicine will play an increasingly important role in workers’ compensation, potentially even after the pandemic subsides and workplaces largely transition to a new normal. Amid the pandemic, employers are reporting a variety of benefits and practical applications for telemedicine, including to facilitate triage and claim intake, initial injury assessments follow-up visits, and injury rehabilitation.

Prior to the pandemic, employers had expressed interest in telemedicine but had not widely adopted its use in workers’ compensation, in part because laws in some states limited its use. Since COVID-19 emerged as a threat, however, many states have eased restrictions and encouraged employers and claims administrators to use telemedicine, which can offer many benefits to employers and workers, including the ability to avoid crowded waiting rooms and lengthy commutes.

The explosion of telemedicine in workers’ compensation during the pandemic also mirrors its greater use by primary care physicians and others in group health settings. As employees become more familiar with telemedicine’s benefits during the pandemic, they may expect it to remain a readily available option post-COVID-19 — including as a means for receiving care following workplace injuries.

LA Clinic Prescribes and Buys Back Opiates for Black Market

A woman was sentenced to 60 months in prison for her leading role in an opioid buy-back scheme in which a doctor at a Los Angeles clinic prescribed opioids to “patients” who sold the narcotics back to the clinic, which later sold drugs on the black market in California and Texas.

Angela Gillespie-Shelton, a.k.a. “Boss Lady,” and “Angotti,” 54, of Houston, was sentenced and also ordered to pay a $10,000 fine. She pleaded guilty on May 21 to one count of conspiracy to distribute controlled substances and one count of conspiracy to engage in money laundering.

From October 2012 to January 2015, Gillespie-Shelton and her co-conspirators ran Southfork Medical Clinic, located in the Harvard Heights neighborhood of Los Angeles. At the time, Gillespie-Shelton primarily was based in Texas, but she frequently traveled to California.

The conspiracy’s purpose was to sell prescriptions for narcotics in exchange for cash, and to later acquire those same drugs from the clinic’s “patients,” ship the narcotics to Texas and then sell them on the black market. The prescriptions were for drugs including oxycodone and hydrocodone (commonly sold under the brand names Vicodin, Norco and Lortab), alprazolam (best known by the brand name Xanax), carisoprodol (a muscle relaxant sold under the brand name Soma) and promethazine with codeine (a cough syrup sold on the street as “purple drank” and “sizzurp”).

At the clinic, Gillespie-Shelton’s co-conspirator – Dr. Madhu Garg, 69, of Glendora – saw “patients” and regularly prescribed them the narcotics, when both Gillespie-Shelton and Garg knew that the customers did not have any actual or legitimate medical need for them.

After the “patients” filled the prescriptions, Gillespie-Shelton and her co-conspirators bought the drugs from them and shipped the drugs to Texas.

In Texas, Gillespie-Shelton used two pharmacies that she controlled as a front to sell on the black market the drugs shipped from the Los Angeles clinic. Under Gillespie-Shelton’s control, the pharmacies in Texas also filled false or fraudulent prescriptions and received kickbacks from the fake prescriptions. Gillespie-Shelton’s co-conspirators also stole a physician’s identity to issue falsified prescriptions to obtain additional narcotics.

In addition, Gillespie-Shelton laundered more than $1 million from the diversion schemes through numerous accounts. She used some of the money to further the narcotics trafficking conspiracy, which included paying rent for the Southfork Clinic and a stash house in Los Angeles, as well as paying Garg more than $200,000 for writing the illegal prescriptions.

In February 2016, Garg pleaded guilty to illegally distributing oxycodone and money laundering, and she later served an 18-month prison sentence.

“[Gillespie-Shelton and her co-conspirators] made hundreds of thousands of dollars profiting off the Opioid Crisis,” prosecutors wrote in their sentencing memorandum. “The sheer amount of money [they] made over the course of this conspiracy shows that this was a crime borne of greed where the criminals trafficked lethal drugs despite the undeniable havoc they wreaked on their community.”

Purdue Pharma Agrees to $5.5B Criminal Fines and Penalties

The Department of Justice announced a global resolution of its criminal and civil investigations into the opioid manufacturer Purdue Pharma LP, and a civil resolution of its civil investigation into individual shareholders from the Sackler family. The resolutions with Purdue are subject to the approval of the bankruptcy court.

Purdue Pharma has agreed to plead guilty in federal court in New Jersey to a three-count felony information charging it with one count of dual-object conspiracy to defraud the United States and to violate the Food, Drug, and Cosmetic Act, and two counts of conspiracy to violate the Federal Anti-Kickback Statute.

The criminal resolution includes the largest penalties ever levied against a pharmaceutical manufacturer, including a criminal fine of $3.544 billion and an additional $2 billion in criminal forfeiture.

For the $2 billion forfeiture, the company will pay $225 million on the effective date of the bankruptcy, and, as further explained below, the department is willing to credit the value conferred by the company to State and local governments under the department’s anti-piling on and coordination policy.

Purdue has also agreed to a civil settlement in the amount of $2.8 billion to resolve its civil liability under the False Claims Act. Separately, the Sackler family has agreed to pay $225 million in damages to resolve its civil False Claims Act liability.

The resolutions do not include the criminal release of any individuals, including members of the Sackler family, nor are any of the company’s executives or employees receiving civil releases.

While the global resolution with the company is subject to approval by the bankruptcy court in the Southern District of New York, one important condition in the resolution is that the company would cease to operate in its current form and would instead emerge from bankruptcy as a public benefit company (PBC) owned by a trust or similar entity designed for the benefit of the American public, to function entirely in the public interest.

As part of the plea, Purdue will admit that it conspired to defraud the United States by impeding the lawful function of the DEA by representing to the DEA that Purdue maintained an effective anti-diversion program when, in fact, Purdue continued to market its opioid products to more than 100 health care providers whom the company had good reason to believe were diverting opioids and by reporting misleading information to the DEA to boost Purdue’s manufacturing quotas.

In addition, Purdue will admit to conspiring to violate the Federal Anti-Kickback Statute. Purdue made payments to two doctors through Purdue’s doctor speaker program to induce those doctors to write more prescriptions of Purdue’s opioid products. Similarly, from approximately April 2016 through December 2016, Purdue made payments to Practice Fusion Inc., an electronic health records company, in exchange for referring, recommending, and arranging for the ordering of Purdue’s extended release opioid products – OxyContin, Butrans, and Hysingla.

The DOJ resolution does not resolve claims that states may have against Purdue or members of the Sackler family, nor does it impede the debtors’ ability to recover any fraudulent transfers.

CMS Releases New WCMSA Reference Guide (Version 3.2)

The Centers for Medicare and Medicaid Services (CMS) has just released its latest version of the WCMSA Reference Guide (Version 3.2, October 5, 2020). This new guide replaces the WCMSA Reference guide version 3.1 (May 11, 2020).

The new Reference Guide provides a list of major medical centers used by the Workers’ Compensation Review Contractor (WCRC). This list of centers is used to establish pricing associated with medical services such as a surgery, hospital stay, long-term in-patient care, etc. The list of the zip codes is found in Appendix 7 of the Guide and should follow the same process as outlined for selecting the proper jurisdiction for determining pricing.

CMS also added a new screen to the WCMSA Portal (WCMSAP) on October 5, which requires the submitter to answer the question, “Does the proposed WCMSA for this settlement include any costs associated with a major medical center, Yes or No?” If the answer is yes, then the appropriate zip code for the major medical center that was used in the calculation of the WCMSA needs to be entered into the space provided.

This enhancement should improve the WCMSA process. In the past, it has not been clear which major medical center the WCRC used to price WCMSAs.

The new process should reduce the number of counter higher determinations received on WCMSAs. The industry has been asking CMS/WCRC to clarify this issue for some time and Optum is pleased to see that this has been addressed in the WCMSA Reference Guide.

Applied Risk – CDI Conservatorship Battle Goes to Federal Court

Applied Underwriters, Inc. and Applied Risk Services, Inc. filed a lawsuit against the Insurance Commissioner of the State of California and others in U.S. District Court for the Eastern District of California, asserting five claims under the U.S. Constitution.

Applied and its affiliates primarily write workers’ compensation insurance through multiple insurance companies in all fifty states in the United States,and have done so since 2002. California Insurance Company (“CIC”) is the largest of those companies and was formed in 2004. Since that time, CIC has grown into a company with over a billion dollars in assets and over $600 million in capital and surplus.

Applied Underwriters and Applied Risk Services allege that the California Department of Insurance acted in bad faith and abused its authority under state law in ways that have caused substantial harm to the companies.

Disputes between the CDI and Applied Underwriters has a longstanding history. The current dispute arose in January 2019, after a $920 million sale to company founder Steve Menzies, who was an indirect owner of 11.5% of CIC’s shares was announced.

The California Department of Insurance says it must sign off on the deal because one of Applied’s subsidiaries, California Insurance Co., is domiciled in the state. It subsequently denied approval of the sale.

The California Department of Insurance placed California Insurance Company into a conservatorship, allegedly under false pretenses and has abused its authority by trying to force Applied Underwriters to relinquish its rights in connection with the Department’s unlawful actions.

In the year long period that CIC has been in conservation, Applied Underwriters claims the CDI has “refused to resolve matters in good faith,” and has instead demanded that Applied “subject itself to jurisdiction, give up its right to bring this and other lawsuits, and bind itself to other onerous terms.”

The complaint says that up until this week, Insurance Commissioner Lara and his representatives continued to “propose unfair and preposterous terms under the constant threat that if Applied and others did not agree, they would seek court approval for a rehabilitation plan that would be ‘even worse.’

That rehabilitation plan, originally due in August, was filed October 19.

According to Applied Underwriters, the rehabilitation plan “effectively eliminates CIC’s business in California, and other states, requires CIC to transfer its business to a new insurer of the Commissioner’s choosing, and leaves just a shell CIC with all of its obligations to other reinsurers and affiliates under its contracts and no source of revenue to meet its obligations.”

Daly City Injured Worker – Triple Dipper – Sent to Jail

Michael Ray Williams, 37, of Daly City, was sentenced to 60 days in county jail and three years formal probation after pleading no contest to two felony counts of insurance fraud, after illegally working for multiple employers while simultaneously collecting over $85,000 in workers’ compensation benefits from two different insurers.

Williams repaid the State Compensation Insurance Fund $40,000 in restitution and was ordered to pay additional restitution to Travelers Insurance and his former employer.

In November 2014, Williams was working as an electrician when he sustained a work-related injury. He filed a workers’ compensation claim with SCIF and began collecting temporary workers’ compensation benefits.

In March 2015, Williams began working for a different employer, yet allegedly continued to collect payments from SCIF.

In May 2015, Williams sustained another work-related injury and filed another workers’ compensation claim, this time with Travelers Insurance.

Between March 2015 and November 2016, Williams allegedly worked for and was paid by three different employers. At one point, Williams was collecting payments from SCIF and Travelers for two different work-related injuries, while continuing to work.

To fraudulently collect benefits, William allegedly misrepresented his level of injury, abilities, earnings and employment status to SCIF and medical providers, including providing false statements to his Qualified Medical Examiner to collect permanent disability benefits after the temporary benefits were exhausted.

Williams was also charged with grand theft for allegedly using his former employer’s credit card for personal expenses, including the purchase of an engagement ring.

This case was being prosecuted by the San Mateo County District Attorney’s Office.

October 12, 2020 – News Podcast

Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: LC 5500.5 Contribution Can Be Timely Initiated by DOR. Successor Corporation Not Insured by Existing Comp Policy. Historic Fed Takedown of 345 Healthcare Providers for $6B Fraud. San Diego Lab Pays $3M to Resolve Kickback Case. Sedgwick Launches COVID-19 Reporting Portal. WCIRB Reports 11% Reduction in Premium. Labor Unions Disappointed at Newsom Employment Law Vetoes. Uber and Lyft Face $392M Annual Payroll Taxes if Prop 22 Fails. FDA Approves New Cervical Disc Replacement Design. Next Insurance Expands to 24 Additional States.

CWCI Examines 2019 Geographic Adjustment Factors in the OMFS

A new California Workers’ Compensation Institute (CWCI) study examined the initial impact of replacing the statewide average GAF in the workers’ comp Official Medical Fee Schedule (OMFS) with a system that uses smaller Metropolitan Statistical Area (MSA) localities when applying regional cost adjustments as part of the fee schedule formula.

The state adopted the GAF change for services rendered to injured workers on or after 1/1/19 to improve payment accuracy and align OMFS allowable fees with those allowed by Medicare and other systems.

Under the new structure developed by Medicare in 2017, there are 32 payment localities in California.

The CWCI study found that switching from statewide to locality-specific geographic adjustment factors (GAFs) in the calculation of California workers’ comp physician and non-physician service fees has not resulted in a major shift in where the dollars go, and despite concerns, the switch does not appear to have generated inappropriate shifting of billing to higher reimbursed areas, or caused rural providers to leave the system.

The study found that both before and after the switch, medical providers in Los Angeles County accounted for a much larger share of the office visit services and payments than providers in any other locality, though their proportion of services and payments did decrease by about 5 percentage points in the first year after the locality specific GAFs were adopted.

Those decreases, however, were offset by 5 percentage point increases in the proportion of E&M visits and payments to providers in nearby San Bernardino/Riverside Counties, a shift that occurred after a large occupational medicine group expanded into the Inland Empire.

Other than that, the study found no significant changes in the proportion of E&M services or payments among the geographic localities, and no indication of a shift in services or payments to providers in either urban or rural areas of the state

The study also showed that the switch to the new GAF had little effect on the types of E&M services used, as follow-up visits by established patients remained the most prevalent type of office visits, accounting for 86.5% of the E&M services in 2018 and 80.5% in 2019.

A key factor influencing the average payments in each locality was the use of discount contracts, such as those paid to providers within an employer’s medical provider network, which allow payments below the fee schedule amounts.

The percentage of E&M services in the study sample that were paid at a discounted rate fell from 78.3% to 76.6%, but the average discount increased from 15.5% to 17.1%, so thus far the use of these contracts has helped mitigate the impact that the change to the fee schedule’s geographic adjustment factor has had on the average amounts paid for E&M services.

Trucking Company Owners Face Premium Fraud Charges

Trucking company owners Hardip Singh, 44, and Amandeep Kaur, 36, were charged with multiple counts of insurance fraud after allegedly misclassifying employees as independent contractors in a scheme to underreport payroll by more than $1.4 million.

The scheme resulted in a $234,000 loss to their insurer and a $220,000 loss to the Employment Development Department (EDD).

Singh and Kaur were doing business as Trust Transport, Inc., a long-haul trucking company based out of their residence in Sacramento and a separate trucking yard in West Sacramento.

From February 25, 2014 through October 20, 2016, Trust Transport maintained workers’ compensation insurance coverage with State Compensation Insurance Fund (SCIF) and reported $105,811 in payroll.

SCIF conducted audits to confirm the payroll and found that several workers were issued 1099s and had been misclassified as independent contractors. Department of Insurance detectives served a search warrant at Trust Transport’s bank for financial records and discovered approximately $1,436,387 in unreported payroll from the misclassified “independent contractors.”

The investigation revealed Singh and Kaur fraudulently misclassified these employees in order to avoid paying higher workers’ compensation insurance premiums. SCIF reported a $234,541 loss in underpaid insurance premiums and EDD reported a $220,000 loss due to this scheme.

Both Singh (October 13) and Kaur (October 16) self-surrendered to the Sacramento County Superior Court. The Sacramento County District Attorney’s Office is prosecuting the case.

The California Insurance Commissioner said that by “under reporting payroll and employees, not only are business owners breaking the law they are putting honest businesses at risk.”