Author: WorkCompAcademy

NCCI just published the first of four installments in NCCI’s series on inflation and workers compensation medical costs. It explores price and utilization trends in medical services, and how each contributes to workers compensation costs in the four US geographical regions. This article also provides state-specific results.

As the first installment in NCCI’s Inflation and WC Medical Costs series, this article provides insight into the drivers of overall WC medical costs and trend differences by US region. Future installments will expand on each of the different types of medical services discussed here – physicians, facilities, and prescription drugs. Subsequent articles in the series will include more in-depth regional differences in cost changes, and details about the make-up of the underlying services.

Key Observations:

– – Medical inflation in WC has been moderate for the past decade. But with the recent dramatic rise in consumer prices, concerns have emerged about medical inflation rising at similar levels.
– – Two factors drive changes in medical claims costs: the price of medical services and utilization, which measures the mix and number of services provided to an injured worker.
– – NCCI’s most recent medical data shows that drug costs are declining, physician costs are up slightly, and facility costs are rising in the WC system.
– – In recent years, facility services are the dominant contributor to changes in WC medical costs across regions – most prominently in the Southeastern region.

In August 2022, the US Bureau of Labor Statistics (BLS) published an updated Consumer Price Index (CPI) for All Urban Consumers, which increased by 8.3 percent over the previous 12 months. That number was down from the largest year-over-year change in four decades reported back in June (9.1%).

The CPI has a Medical Care component (CPI-M) that measures price inflation for medical care services, medical care commodities, and health insurance. An alternative measure of price change is the Producer Price Index (PPI), which has a healthcare component. In simple terms, the PPI measures what is paid to service providers.

NCCI’s review of price indexes indicates that the price index that most closely reflects medical cost distributions in WC is the Personal Health Care (PHC) index, which is a mix of the two and calculated by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS).

Between 2012 and 2019, WC paid costs increased at a relatively stable rate of 1.5% annually. The year 2020 experience reflects the exceptional drop in new WC claims due to the pandemic.

Subsequent experience in 2021 shows that paid medical costs per claim rose at 2%, slightly above the eight-year average preceding 2020. The CMS Actuary projects the PHC to run higher at 3.7% in 2022. In fact, the CMS Actuary projects Personal Health Care (PHC) to revert to something in the 2.5% to 3% range beyond 2022.

However the WC paid medical trends have been increasing at a slower pace than the corresponding regional CPI-M indexes. This is particularly the case in the Northeastern and Western regions.

WC medical costs in the Southeastern region have increased at a slightly faster rate than the countrywide average.

Trending below countrywide, the Northeastern and Western regions have experienced a more modest increase. However, in 2021 WC medical costs in the Northeastern and the Southeastern regions each increased by an estimated 3%, while the Western and Midwestern regions increased by 2% and 1%, respectively.

Every region except the Midwestern region had a slightly larger increase in 2021 WC medical costs relative to those observed between 2012 and 2019.

Centene Corporation, is a Fortune 50 company (ranked 26th), and is a diversified, multi-national health care enterprise that provides a portfolio of services to government-sponsored health care programs. Centene is the parent company of Health Net. It is a big player in state Medicaid drug programs – but one with a questionable record.

In recent years, the company was accused by six states of overbilling their Medicaid programs for prescription drugs and pharmacy services and settled to the tune of $264.4 million. Three other states made similar allegations and have settled with the company, but the amounts have not been disclosed. Centene, in resolving the civil actions, denied any wrongdoing.

And they now have resolved their pending case in California. This month the California Attorney General announced a settlement of more than $215 million against the Centene Corporation over allegations that the national healthcare company overcharged California’s Medi-Cal program by falsely reporting higher prescription drug costs incurred by two of its managed care plans.

In doing so, Centene is alleged to have violated the California False Claims Act. California Health & Wellness and Health Net, the two managed care plans, provide healthcare services to Medi-Cal beneficiaries in over 20 California counties.

California Department of Justice investigators found that between January 2017 and December 2018, California Health & Wellness and Health Net reported inflated figures for the costs they incurred in providing prescription drugs to patients.

Centene allegedly leveraged advantages in its pharmacy benefit manager (PBM) contracts to save its managed care plans $2.70 per prescription drug claim over the two-year period. DOJ alleges that Centene and its PBM failed to disclose or pass on these discounted fees to Medi-Cal, which inflated fees and drug costs reported to California.

The settlement amounts to a total of $215,392,758, recovers twice the value of Centene’s inflated price reporting, and ensures full restitution to the Medi-Cal program.

Nonetheless in January 2023 the California Department of Health Care Services selected Centene’s California subsidiary – Health Net of California – for direct contracts in Los Angeles and Sacramento counties, increasing the number of direct county contracts by DHCS to 10.

In total, Health Net will provide Medi-Cal managed care services in Los Angeles, Sacramento, Amador, Calaveras, Inyo, Mono, San Joaquin, Stanislaus, Tulare and Tuolumne counties. Health Net continues to serve members in Fresno, Imperial, Kings, and Madera counties via other contractual arrangements. Health Net did not receive an award ini San Diego.

More troubling is a report a few months ago by NPR Saint Luis that claims “Centene showers politicians with millions as it courts contracts and settles overbilling allegations.” One example in a sister state, involves Nevada Gov. Steve Sisolak, who they say “has accepted at least $197,000 from Centene, its subsidiaries, top executives, and their spouses since August 2018.”

They report that less than two months after Centene’s subsidiary contributions in November 2021 for his re-election were made, Nevada settled with the company over allegations the insurer overbilled the state’s Medicaid pharmacy program. The state attorney general’s office did not publicly announce the $11.3 million settlement but disclosed it in response to a public records request from KHN.

The contract went before the Nevada Board of Examiners for final approval. Sisolak is one of three voting members.

Since 2015, Centene, its subsidiaries, its top executives, and their spouses have given more than $26.9 million to state politicians in 33 states, to their political parties, and to nonprofit fundraising groups, according to a KHN analysis of IRS tax filings and data from the nonpartisan, nonprofit group OpenSecrets.

Last year, according to IRS filings that go through Sept. 30, Centene has given $2.2 million, combined, to the Republican and Democratic governors’ associations, which help elect candidates from their respective parties. And Centene gave $250,000, combined, to the Republican Attorneys General Association and its Democratic counterpart.

State attorneys general, whose campaigns are benefiting from the associations’ money, have negotiated massive settlements with Centene over accusations the company’s prescription drug programs overbilled Medicaid.

More than 20 states are investigating or have investigated Centene’s Medicaid pharmacy billing. The company has agreed to pay settlements to 13 of those states, with the total reaching about $596 million.

And Centene told KHN in October that it is working to settle with Georgia and eight more states that it didn’t identify. It has denied wrongdoing in all the investigations.

Abraham Degala was attacked and seriously injured by unknown assailants while he was working at a construction site at the Hunters Point East-West housing complex in San Francisco.

The Hunters Point East-West construction project involved the rehabilitation of 27 buildings containing residential units. John Stewart Company (JSC) was the general partner of the limited partnership that owned the property, and as such signed the contract hiring Cahill Contractors, Inc. as the general contractor on the project. Cahill in turn hired Janus Corporation as a subcontractor to perform demolition work at the site. Abraham Degala was an employee of Janus, and one of its foremen. The project site was located in an area known to have a high rate of crime.

JSC and Cahill jointly made decisions as to the appropriate amount of site security. JSC and Cahill had weekly discussions about site security because of ongoing concerns about the safety of property and people at the site.

In the months and weeks leading up to the January 2017 attack on Degala, Cahill changed security measures from time to time, including closing the project site, in part as an apparent response to incidents in the neighborhood. In August 2016, Cahill stopped weekday overtime work at part of the project because of concerns about worker safety arising from neighborhood tensions. In mid-November 2016, after a shooting in the neighborhood, Cahill instructed workers to stop work before sundown. Later that month, after another shooting, Cahill instructed workers to stay indoors as much as possible while working and to eat lunch and take breaks inside.

The physical attack on Degala took place on the walkway between the two buildings, which was outside the fence line of the construction site. As an employee of Janus, Degala was covered by workers compensation insurance for his injuries.

Degala sued JSC and Cahill, seeking damages on the basis of negligence and premises liability. JSC and Cahill filed separate motions for summary judgment. The trial court granted the motions and judgments were entered for defendants.

Degala appealed, and the court of appeal concluded there are triable issues of fact as to whether the site owner and general contractor are liable to Degala under a retained control theory. Thus it reversed and remanded in the published case of Degala v. John Stewart Company  -A163130 (February 2023).

Because Degala, as an injured employee of a contractor (Janus), sued the hirer of the contractor (Cahill) and the landowner (JSC) in tort to recover for his injuries, this case implicates the Privette doctrine, a long-standing common law principle that a hirer or landowner is ordinarily not liable for injuries to contract workers, as set forth in Privette v. Superior Court (1993) 5 Cal.4th 689 and subsequent cases.

The trial court rejected Degala’s argument that defendants could be liable to him under the Hooker exception to the Privette doctrine announced in Hooker v. Department of Transportation (2002) 27 Cal.4th 198, 201-202 (Hooker) which applies when the hirer retains control over any part of the contractor’s work and exercises that control in a way that affirmatively contributes to the plaintiff’s injury.

The California Supreme Court in Sandoval v. Qualcomm Inc. (2021) 12 Cal.5th 256, 269-270 recognized exceptions to the Privette doctrine, which “apply where delegation is either ineffective or incomplete.”

At issue in this case is the exception for incomplete delegation, recognized in Hooker. “[W]hen the hirer does not fully delegate the task of providing a safe working environment, but in some manner actively participates in how the job is done, and that participation affirmatively contributes to the [contractor’s] employee’s injury, the hirer may be liable in tort to the [contractor’s] employee.” (Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659, 671 (Kinsman) [discussing Hooker, supra].)

Accordingly, “[i]f a hirer entrusts work to an independent contractor, but retains control over safety conditions at a jobsite and then negligently exercises that control in a manner that affirmatively contributes to an employee’s injuries, the hirer is liable for those injuries, based on its own negligent exercise of that retained control.” (Tverberg v. Fillner Construction, Inc. (2012) 202 Cal.App.4th 1439, 1446 (Tverberg).)

Degala argues that the evidence shows that the site security measures in place at the time he was attacked were not reasonable in the circumstances; that JSC and Cahill were negligent in configuring the fences, removing security guards, and failing to monitor the on-site cameras during the day; and that their negligence contributed to his injuries.

“Whether the measures taken by JSC and Cahill were reasonable, and whether or to what extent the alleged unreasonableness of those measures contributed to Degala’s injuries are all questions of fact for a jury to resolve. On the record here, these issues cannot be resolved as a matter of law, and therefore it was error to grant summary judgment. ”

The U.S. Supreme Court gave two doctors found guilty of misusing their licenses in the midst of the U.S. opioid epidemic to write thousands of prescriptions for addictive pain medications another chance to challenge their convictions.

Xiulu Ruan and Shakeel Kahn are medical doctors licensed to prescribe controlled substances. Each was tried for violating 21 U. S. C. §841, which makes it a federal crime, “[e]xcept as authorized[,] . . . for any person knowingly or intentionally . . . to manufacture, distribute, or dispense . . . a controlled substance.”

A federal regulation authorizes registered doctors to dispense controlled substances via prescription, but only if the prescription is “issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.” 21 CFR §1306.04(a).

At issue in Ruan’s and Kahn’s trials was the mens rea – or state of mind – required to convict under §841 for distributing controlled substances not “as authorized.”

Ruan and Kahn each contested the jury instructions pertaining to mens rea given at their trials, and each was ultimately convicted under §841 for prescribing in an unauthorized manner. Ruan, who practiced in Alabama, and Kahn, who practiced in Arizona and then Wyoming, were sentenced to 21 and 25 years in prison, respectively, in separate criminal cases.

Their convictions were separately affirmed by the Courts of Appeals for the 10th and 11th circuits.

Both doctors appealed their convictions to the U.S. Supreme Court which overturned their convictions in the combined case of Xiulu RUAN, Petitioner v. United States and Shakeel Kahn, Petitioner v. United States. Nos. 20-1410 and 21-5261. (June 2022)

The question before the Supreme Court concerned the state of mind that the Government must prove to convict these doctors of violating the statute. The cases concerned the good faith defense available to defendants charged under the U.S. Controlled Substances Act.

The Government argued that requiring it to prove that a doctor knowingly or intentionally acted not “as authorized” will allow bad-apple doctors to escape liability by claiming idiosyncratic views about their prescribing authority.

Ultimately SCOTUS held that the statute’s “knowingly or intentionally” mens rea applies to authorization. After a defendant produces evidence that he or she was authorized to dispense controlled substances, the Government must prove beyond a reasonable doubt that the defendant knew that he or she was acting in an unauthorized manner, or intended to do so.

Additionally, the court rejected the “bad-apple” argument, that the additional burden on the government to prove would allow doctors to escape criminal liability much more easily, by stating that such an argument could be applied to almost all cases.

The court vacated the decisions and remanded the cases for further proceedings in its 9-0 ruling. On remand, the 10 Circuit has now issued its published opinion in the case of United States v Shakeel Kahn – 19-8054 (February 2023).

During his testimony at trial, Dr. Kahn did not contest the fact that he wrote the relevant prescriptions, nor did he contest that the testifying patients were abusing or selling their medications. The central issue put to the jury in Dr. Kahn’s trial was his intent in issuing the charged prescriptions.

It concluded that the jury instructions issued in Dr. Kahn’s case are inconsistent with the mens rea standard set by the Supreme Court. Each of Dr. Kahn’s convictions was impacted by erroneous instructions in a way that prejudiced him, and, therefore, it remand with directions to vacate his convictions on all counts, and remand for a new trial.

In response to “the challenges facing the Alameda County Medical Center arising from changes in the public and private health industries,” the Legislature in 1997 enacted Health and Safety Code section 101850, authorizing the Alameda County Board of Supervisors “to create a hospital authority.” (Health & Saf. Code, § 101850,4 subd. (a)(1).)

In turn, the Alameda County Board of Supervisors created respondent hospital authority to govern the various hospital facilities formerly known as the Alameda County Medical Center.  In so doing, the board deemed respondent “a public agency for purposes of eligibility with respect to grants and other funding and loan guarantee programs pursuant to” the enabling statute.

Tamelin Stone and Amanda Kunwar worked for Alameda Health System as a medical assistant and a licensed vocational nurse respectively.

In their first amended complaint against Alameda Health System, Stone and Kunwar alleged seven class action claims related to wages and hours, and six individual claims for race and sex discrimination. They alleged that Alameda “automatically deducted ½ hour from each workday” as if to account for a meal period, when in fact, employees “were not allowed or discouraged from clocking out for meal periods.” This alleged conduct formed the basis of seven class action claims.

Alameda demurred, arguing that the first six claims were “not authorized against public entities under any of the cited Labor Code sections.” As to the seventh claim, Alameda contended that it was not a “person” capable of being sued under PAGA, that the “PAGA claim [was] derivative of” the first six unauthorized claims, and that Government Code section 818 exempted Alameda from liability.

The trial court sustained the demurrer as to all seven class action claims. With respect to the first six, the trial court reasoned that Alameda was a “statutorily created public agency” beyond the reach of the Labor Code sections and Industrial Welfare Commission (IWC) Wage Order invoked in the complaint.

As to the seventh, a PAGA claim (PAGA, § 2698 et seq.), the trial court held that such an action would not lie because respondent is not a “person” within the meaning of section, there was no underlying statutory violation from which the PAGA claim could derive, and respondent’s “public agency” status exempted it from paying punitive damages.

The court of appeal affirmed in part and reversed in part in the published case of Stone v. Alameda Health System -A164021(February 2023).

The court of appeal reviewed following issues: (1) whether the “sovereign powers” doctrine renders respondent liable for certain Labor Code violations, notwithstanding the general rule of statutory construction exempting government agencies from such liability; (2) whether respondent is an exempt “municipal corporation” under section 220, subdivision (b); (3) whether respondent is an exempt “governmental entity” under section 226, subdivision (i); and (4) whether respondent can be sued under the Private Attorneys General Act (PAGA, § 2698 et seq.).

Subjecting Alameda to liability for the first, second, and third causes of action would not infringe upon any sovereign governmental powers. Thus, the trial court erred by finding that respondent was not included within the statutes underlying those causes of action and in sustaining the demurrer as to those claims.

With regard to their fifth and sixth causes of action, Section 220, subdivision (b), provides that section 204 does “not apply to the payment of wages of employees directly employed by any county, incorporated city, or town or other municipal corporation.” Because it is beyond dispute that respondent is not a county, incorporated city, or town, “the trial court erred in sustaining the demurrer as to the fifth and sixth causes of action.”

With regard to the fourth cause of action, Section 226, subdivision (a), requires employers to provide employees with “an accurate itemized statement in writing showing” the employee’s wages and hours worked, along with other information. Subdivision (i) exempts from this requirement the state, . . . any city, county, city and county, district, and “any other governmental entity.” The plain meaning of “other governmental entity” is expansive. The demurrer was properly sustained as to the fourth cause of action.

With regard to the PAGA claim in the seventh cause of action, under section 18, a “person” is “any person, association, organization, partnership, business trust, limited liability company, or corporation.” Alameda is a public entity of some sort and therefore is not a “person” when that term is used in PAGA. However, PAGA’s “person” requirement is limited to statutory violations subject to the default penalties set forth in section 2699, subdivision (f); it does not apply to those statutory violations “for which a civil penalty is specifically provided.”

A civil penalty is specifically provided for by at least two of the statutes underlying appellants’ class action claims. “For that reason, section 18 provides no ground for sustaining the demurrer as to the seventh cause of action.”

Finally, there is the trial court’s citation of Government Code section 818, which provides that “a public entity is not liable for . . . damages imposed primarily for the sake of example and by way of punishing the defendant.” However, PAGA penalties are not punitive damages. Consequently, because PAGA penalties are not punitive damages, section 818 presents no obstacle to appellants’ seventh class action claim.

Thus the court affirmed the order as to the fourth cause of action and reverse it as to the first, second, third, fifth, sixth, and seventh.