Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: Court Rules Truckers are Exempt from AB-5 ABC Test, Employer’s Delay in Interactive Process Supports FEHA Claim, Rehab-Recovery Mogul Pleads Guilty in $175M Fraud Case, Palmdale Internist Sentenced to Two Years in Kickback Case, Gov. Newsom Announces Plans to Enter Drug Business, New York Considers Passing AB-5 Gig Employment Law, SCIF Salaries – Including $732k Annual CEO Pay – Under Scrutiny, O.C. Register Calls for Privatizing the SCIF, Santa Monica Reports 23% Increase in Comp Claim Costs, Study Claims 1/3 of Healthcare Costs are Insurance Co. Overhead.
ResMed Corp., a manufacturer of durable medical equipment (DME) based in San Diego, California, has agreed to pay more than $37.5 million to resolve alleged False Claims Act violations for paying kickbacks to DME suppliers, sleep labs and other health care providers.
The federal Anti-Kickback Statute prohibits the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal healthcare program, such as Medicare, Medicaid or TRICARE. Claims submitted to these programs in violation of the Anti-Kickback Statute give rise to liability under the False Claims Act.
The settlement resolves allegations that ResMed (a) provided DME companies with free telephone call center services and other free patient outreach services that enabled these companies to order resupplies for their patients with sleep apnea, (b) provided sleep labs with free and below-cost positive airway pressure masks and diagnostic machines, as well as free installation of these machines, (c) arranged for, and fully guaranteed the payments due on, interest-free loans that DME supplies acquired from third-party financial institutions for the purchase of ResMed equipment, and (d) provided non-sleep specialist physicians free home sleep testing devices referred to as “ApneaLink.”
Contemporaneous with the civil settlement, ResMed entered into a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General. The CIA requires, among other things, that ResMed implement additional controls around its product pricing and sales and that ResMed conduct internal and external monitoring of its arrangements with referral sources.
The agreement resolves five lawsuits originally brought by whistleblowers under the qui tam, or whistleblower, provisions of the False Claims. The False Claims Act permits private citizens with knowledge of fraud against the government to bring a lawsuit on behalf of the United States and to share in the recovery. The whistleblowers will collectively receive a roughly $6.2 million share of the settlement.
This settlement was the result of a coordinated effort by the Civil Division of the United States Department of Justice; the U.S. Attorney’s Offices for the District of South Carolina, the Southern District of California, the Northern District of Iowa, and the Eastern District of New York; the Department of Health and Human Services, Office of Counsel to the Inspector General and Office of Investigations; the Defense Criminal Investigative Service; the Defense Health Agency Office of General Counsel; the Federal Bureau of Investigation; and the National Association of Medicaid Fraud Control Units.
The lawsuits resolved by this settlement are captioned United States, et al., ex rel. Ameer v. ResMed, Inc., et al., Case No. 2:15-CV-04842-MBS (D.S.C.); United States, et al., ex rel. Baker v. ResMed, Inc., et al., Case No. 3:16-CV-00987-MBS (D.S.C.); United States, et al., ex rel. Ross v. ResMed, Inc., Case No. 16-CV-1988-W (JLB) (S.D. Cal.); United States ex rel. Meyer v. ResMed, Inc., et al., Case No. 17-CV-12-MWB (N.D. Iowa); and United States, et al., ex rel. Ottavio, et al. v. ResMed, Inc., Case No. CV 17-5734 (E.D.N.Y.).
A federal judge has extended a temporary restraining order keeping officials from enforcing the onerous terms of its AB5 independent contractor law against motor carriers.
A Jan. 13 hearing on the California Trucking Association’s motion for a preliminary injunction in its legal case against the state’s controversial Assembly Bill 5 was “spirited,” according to one attendee.
U.S. District Judge Roger Benitez heard arguments under advisement but did not issue a decision. He has extended the temporary restraining order that was put in place Dec. 31, and it will be in effect until his ruling on the preliminary injunction. This could take days or a couple of weeks, according to a California Trucking Associations spokesperson.
According to Joe Rajkovacz, director of governmental affairs and communications for the Western States Trucking Association, the hearing was “a surprising two hours of spirited questioning from the bench of plaintiffs, Teamsters counsel and the California attorney general. [The judge’s] questioning of all parties was very indicative that he has serious constitutional issues with how AB 5 impacts goods movement nationally in violation of the commerce clause and F4A.”
The attorneys at transportation legal firm Scopelitis, Garvin, Light, Hanson & Feary agreed that the judge “seemed to be leaning in favor of granting a preliminary injunction that would enjoin the state from enforcing AB 5 as to any motor carrier operating in California pending resolution of the case by the District Court.”
The California Trucking Association in November had filed a lawsuit challenging Assembly Bill 5. The new law, which went into effect Jan. 1, put into place a stringent “ABC test” for determining the validity of independent contractor relationships. Because one of the requirements, the “B prong,” prohibited companies from using independent contractors unless the worker was performing work “outside the usual course of the hiring entity’s business.”
CTA contends in its lawsuit that AB 5 is preempted by the supremacy and commerce clauses in the U.S. Constitution and is in direct conflict with the Federal Motor Carrier Safety Act and the Federal Aviation Administration Authorization Act of 1994. (Part of the FAAAA, also called F4A, bans states from enacting laws that affected a motor carrier’s prices, routes and services.)
California Gov. Gavin’s proposed 2020 budget calls for $20 million in additional funding to enforce Assembly Bill 5, the governor announced Friday. But trucking isn’t the only industry battling the new law.
In December, the Western States Trucking Association filed a complementary suit targeting how AB5 treats motor carriers that provide “construction trucking services.” Freelance writers and photographers also filed suit in December, alleging that AB5 unconstitutionally restricts free speech and the media. Uber and Postmates filed suit alleging that AB5’s targeting of app-based workers and platforms violates the Equal Protection Clauses of the United States and California Constitutions.
And there are indications that it will be addressed in the next session of the legislature. Kevin Kiley, a California Legislator representing the 6th Assembly District, has said he will introduce legislation in 2020 to “restore the right to earn a living.” He is promoting a rally to repeal AB5. Jan. 28 at 10 a.m. Pacific Time on the north steps of the California state capitol.
Ushering in a new decade means new conversations, new complexities, new and exciting trends to weave into the existing ways of doing things. Sedgwick just published “Conversation threads for 2020,” which lists major global industry trends that employers, risk management and human resource professionals, and carriers should watch for in the coming year.
Sedgwick’s numerous experts and thought leaders believe the topics and trends outlined below will significantly impact our industry in 2020 and will continue to monitor them throughout the year.
Evolving experience: Pairing digital-first technology with human-centered solutions will continue to help improve the claims experience and simplify the process for consumers.
Caring culture: Across the claims spectrum, adjusters are evolving into partners and advocates for the consumer, offering claims expertise and assistance with a focus on empathy and compassion.
Breaking barriers: From the point of need, throughout a claim and through to resolution, our industry continues to shine a light on ways to reduce and break down barriers to care for injured individuals, as well as removing inefficiencies that can slow down resolution of property claims.
Compliance complexities: Business owners around the world may face different compliance challenges, but they all are concerned with how to stay on top of regulatory changes, streamline their processes, create stronger work environments, maintain safety and keep compliance simple.
Major mitigation: Major and complex losses are becoming an increasing concern for all lines of business. When facing extreme weather events, crisis management situations, the impact of “nuclear” verdicts and other precedent-changing forces, the question is, “How can we prepare for the unexpected?”
Digital development: Digital evolution forces us to rethink the claims process as we know it. With the next wave of technology, we will see big changes in the way adjusters work, reducing cost and delivering faster and smarter response.
Ready resilience: No matter the reason for a claim, whether property, casualty, benefits, marine or any other type, or where it happens around the world, developing the ability to recover quickly is a common theme.
Workforce watch: We’ve talked about changing workforce demographics and ways to attract and retain talent for years – but that doesn’t change the fact that these are still key issues – for the insurance industry and beyond. What strategies are gaining viability in addressing ongoing productivity challenges?
Trending themes: During 2020, we expect several topics to increase in relevance, from geopolitical concerns – particularly with major elections taking place in the U.S. and elsewhere – to the impact of climate change and connected regulations in different parts of the world. Cyber threats will continue to intensify and the hardening insurance market may cause organizations to take a new look at their strategies.
The Los Angeles Times recently published a scathing article about claims of excessive executive salaries and nepotism at the State Fund. The Orange County Register response to this report was “Maybe it’s time give the State Fund its wish and privatize it.”
In a response to this suggestion, Jonathon Tudor, senior vice president of communications at State Compensation Insurance Fund, sent the Orange County Register the following reply:
The editorial board recently stated their belief that the State Compensation Insurance Fund (State Fund) “really wants to be private.” This is not the case.
Our current structure as a quasi-governmental entity, while unusual, fits perfectly with our role – to provide workers’ compensation insurance to any California employer who needs it at no cost to California taxpayers.
Many employers, including many start-ups and those in high-risk industries, are unable to get the coverage they need – and are required to have by law – in the private market.
State Fund ensures these businesses can operate and by doing so supports job growth, entrepreneurship and economic expansion.
We recently announced a $160 million dividend for the 2019 policy year and we have the financial strength to fulfill our role during any economic environment.
We are also continuing to improve the value we deliver to policyholders by providing more advanced technology and a better customer experience. In our current form we have been protecting California businesses and injured workers for over 100 years and we have no plans to change course.
Anthony Dennis sustained an injury in 2013 to his right wrist while working as an inmate for the California Department of Corrections and Rehabilitation. The parties stipulated to an award in 2017. This did not include his claim for a SJDB voucher.
Prior to the stipulation, defendant sent Dennis a Notice of Offer of Regular, Modified, or Alternative Work. The Notice also stated “SUBJECT TO APPLICANT VERIFYING THEY ARE LAWFULLYQUALIFIED TO ACCEPT EMPLOYMENT AS AN INMATE LABORER, YOU HAVEVOLUNTARILY TERMINATED YOUR EMPLOYMENT DUE TO YOUR RELEASE FROM PRISON AND ARE NO LONGER AVAILABLE FOR EMPLOYMENT [sic].”
Dennis filed a Request for Dispute Resolution Before Administrative Director, to resolve the issue of entitlement to a SJDB voucher. the AD did not issue a determination, and pursuant to the Rules, the request was therefore deemed denied.
Dennis then filed a DOR with the Sacramento District Office asking it to adjudicate his claim to this benefit. The WCAB rescinded the Award, and substituted a new Finding that applicant is entitled to a SJDB voucher.
It concluded that the WCAB maintains exclusive jurisdiction to adjudicate SJDB disputes irrespective of AD Rule 10133.54, which provides that the parties may request a dispute resolution with the Administrative Director before appealing the Administrative Director’s decision to the WCAB.
The Defendant, newly aggrieved, sought reconsideration of the new decision, which the WCAB granted. In the new En Banc decision of Dennis v Department of Corrections, it concluded that AD Rule 10133.54 exceeds the authority granted in sections 4658.5(c) and 4658.7(h), which authorizes the Administrative Director to adopt regulations for the administration of the supplemental job displacement benefits program. Neither statute authorizes the Administrative Director to adjudicate SJDB disputes.
It went on to note that it was “cognizant that employment in a prison setting is unique in that inmate workers cannot return to an inmate job once they are released from prison, making it impossible for a prison employer to make a bona fide job offer. Our review of statutes and case law, however, leads us to conclude that an employer’s inability to offer regular, modified, or alternative work does not release an employer from the statutory obligation to provide a SJDB voucher.”
In concluding, the WCAB issued its notice of intent to issue a decision holding that:
— (1) AD Rule 10133.54 is invalid because it exceeds the statutory authority granted to the Administrative Director under sections 4658.5, subdivision (c), and 4658.7, subdivision (h)5, and restricts the exclusive adjudicatory power of the WCAB to adjudicate compensation claims, including disputes over supplemental job displacement benefits; and
— (2) an employer must show that it made a bona fide offer of regular, modified, or alternative work in order to avoid liability for a supplemental job displacement benefit voucher.
The Administrative Director may file a response to this Notice of Intention within thirty (30) days.
Physicians often complain that they spend too much time on paperwork, and cite this as one of the reasons they are unhappy with their profession. A new study published in the Annals of Internal Medicine and summarized by Reuters illustrates the problem. For each patient they see, doctors spend about 16 minutes using electronic health records.
Researchers examined approximately 100 million patient encounters with about 155,000 physicians from 417 health systems. They collected data on every keystroke, mouse click and second of time spent on various tasks in electronic health records (EHR) throughout 2018.
Across all specialties, physicians spent the most time in EHR doing chart review, which accounted for about 33% of total time using the records and an average of about 5 minutes and 22 seconds per patient. They spent about 24% of EHR time on documentation, averaging 3 minutes and 51 seconds per patient, and 17% of EHR time ordering things like lab tests, for an average of 2 minutes and 42 seconds.
The study was not designed to prove whether EHR use improves patient care or whether physicians spend more or less time on computerized tasks than they did under older paper-based systems.
Still, the amount of time providers spend using EHRs to support the care delivery process is a concern for the U.S. healthcare system, not only for cost related to patient care but also because of physician burnout and job dissatisfaction.
“We don’t know how much of the time is spent in valuable ways – doing more comprehensive documentation to create a more complete patient record, responding to alerts that reminded the physician to do something they might have otherwise forgotten, etc.,” said Julia Adler-Milstein of the University of California San Francisco School of Medicine.
While it’s not clear whether EHRs are a waste of time, it is clear that computers are transforming how doctors work in ways that could impact patient interactions, Adler-Milstein, author of an editorial accompanying the study, said by email.
“Whether it’s EHRs or anything else that is taking a doctor’s attention away from the patient, patients should feel empowered to speak up if they feel that they have not been given the opportunity to share all pertinent information with their doctor or feel that their doctor might have missed something because their attention was directed elsewhere,” Adler-Milstein advised.
Kim Rushton was employed as a chemist for the City of Los Angeles at the Hyperion Treatment Plant for over twenty years. In 2015 he struck and killed pedestrian Ralph Bingener while commuting to work in his own car and on his usual morning route and was not performing work for the City while driving to work.
As a chemist at the Hyperion Treatment Plant, he was at the time a self-described “lab rat” and his job did not require him to be in the field or use his personal automobile for his employment.
Bingener’s surviving brothers filed a complaint alleging that the City was vicariously liable for Rushton’s negligence in the collision. The City moved for summary judgment based on the going and coming rule, asserting that Rushton was not in the course of employment at the time of the accident.
The trial court agreed that the going and coming rule applied to Rushton, who was engaged in his regular commute at the time of the accident and entered judgment against the Bingeners who then appealed. The Court of Appeal sustained the trial court in the published case of Bingener v City of Los Angeles.
Plaintiffs argued an exception to the going and coming rule – the “work – spawned risk” exception. This exception applies when an employee endangers other with a risk arising from or related to work. For example, where an employee gets into a car accident on the way home after drinking alcohol at work with his supervisor’s permission, courts have carved out an exception to the going and coming rule.
Plaintiffs argued that the City knew about Rushton’s health conditions and how it might impair his ability to drive because certain medical expenses were being paid for Rushton’s back injury through the City’s worker compensation program. According to plaintiffs, Rushton’s then-present injuries and medications rendered him unfit to drive. Despite this knowledge, the City allowed Rushton to return to work prematurely without placing any restrictions on his driving. Given that Rushton was impaired and unfit to drive, his driving to work was a foreseeable risk of the City’s activities. The City, should, therefore, be held liable for “a negligently created work-spawned risk endangering the public.”
The Court of Appeal rejected this argument. Nothing about the enterprise for which the City employed Rushton made his hitting a pedestrian while commuting a foreseeable risk of this enterprise. The “going and coming rule” was created for precisely the situation presented here and its application in this case precludes plaintiffs’ claim of vicarious liability against the City.
“Plaintiffs contend that nevertheless, the City was obligated to review Rushton’s worker’s compensation file and reach a decision that Rushton could not return to work because he could not safely drive a vehicle. That argument ignores the undisputed fact that it was a physician, and not the City, who approved Rushton to return to work and did so without limitation on his driving.”
BlueCrew and Wonolo both run on-demand marketplaces for blue-collar gigs. The startups use smartphone apps to connect people to temporary jobs such as warehouse packers, janitors, delivery drivers, forklift operators, line cooks and event staffers.
But according to the report in the San Francisco Chronicle, the two rivals diverge significantly when it comes to employment. Their contrasting approaches crystallize ways AB5 is changing the work landscape.
BlueCrew has always hired its workers as employees. Now, as California makes it harder for companies to claim that workers are independent contractors, it’s seeing a surge of interest from clients trying to comply with the new law and with Dynamex, the 2018 California Supreme Court decision that AB5 codifies.
Wonolo has primarily hired its workers as independent contractors. AB5 has prompted it to drastically shrink its California operations, essentially ending gig jobs here after the first quarter, although it will keep its headquarters in San Francisco.
“Given the limitations of AB5, we anticipate that we may not be able to allow businesses to post jobs in California as of March 31,” Wonolo CEO Yong Kim said in a letter to its workers. “This means you will see significantly fewer jobs on Wonolo in California. We have not made this decision lightly but have done so in order to protect businesses from any unnecessary risks associated with the new legislation.”
In an interview, Kim said that the move, which he characterized as “de-emphasizing” rather than exiting California for good, was a matter of principle in creating a “workers-first company.” Wonolo wants the freedom to devise its own modern ways to meet workers’ needs and feels it would be hamstrung here, he said.
Echoing arguments made by Uber, Lyft and other gig companies, Kim said that what blue-collar gig workers want “is flexibility and autonomy of their schedule, working when and where and for whom they want.”
Walking away from California, its largest market by far, “will be a financial burden to us,” Kim said, but the business is growing elsewhere in the country. “It’s a drastic move, but we stand for what we think is the right thing for providing new kinds of benefits for Wonoloers and other gig workers.”
By contrast, BlueCrew, based in Chicago with offices in San Francisco, has received dozens of client inquiries and new customers since the Dynamex decision in April 2018, and that intensified leading up to AB5’s Jan. 1 implementation, said CEO Adam Roston.
“Over the past few months there was a steep change of interest in California in what we offer,” he said. “We are designed to access workers quickly on demand but are also a compliant solution because 100% of our workers are (employees). Customers are coming to us who were using gig labor because they’re no longer comfortable with that.”
In California’s tight labor market, most of BlueCrew’s jobs pay about 50% above minimum wage – or else it couldn’t attract workers, he said. The company covers mandated benefits such as workers’ compensation and disability insurance.
A Los Angeles judge ruled that California’s new “gig worker” law does not apply to independent truck drivers because they are subject to federal statute, handing a victory to one industry that is challenging a state effort to clamp down on labor abuses.
The law, known as AB5 and which took effect on Jan. 1, makes it tougher for companies to classify workers as contractors rather than employees, a classification that exempts them from paying for overtime, healthcare and workers’ compensation.
According to the report in Reuters, truckers have mounted the strongest defense against AB5, which is best known for striking at the heart of high-profile “gig economy” businesses like Uber Technologies and Postmates Inc, which depend on freelance workers to provide low-cost transportation and deliveries.
In a decision on Wednesday, Los Angeles Superior Court judge William Highberger said AB5 “prohibits motor carriers from using independent contractors to provide transportation services” and therefore is preempted by the Federal Aviation and Administration Authorization Act of 1994.
Highberger ruled in favor of NFI Industries’ Cal Cartage Transportation Express and other trucking companies that were sued by Los Angeles City Attorney Mike Feuer for allegedly misclassifying truck drivers as independent contractors rather than employees.
Feuer said his office would appeal.
“As the Court itself stated, ‘… there are substantial grounds for difference of opinion,’” Feuer said in a statement emailed to Reuters.
Highberger’s decision came eight days after the California Trucking Association won a temporary restraining order in a separate challenge to AB5. Another hearing in that federal case is scheduled for Jan. 13.
California is home to 450,000 contract workers. Roughly 70,000 of them are independent big-rig owner-operators who transport everything from ocean cargo containers to strawberries.
“California cannot simply eliminate that business model and force truck drivers to be employees,” said Gibson Dunn partner Joshua Lipshutz, who represented NFI.
Uber and Postmates on Wednesday asked a federal judge to issue a temporary injunction. They argue that AB5 is unconstitutional because it singles out their workers in violation of equal protection guaranteed under the constitutions of the United States and California.