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Author: WorkCompAcademy

Bulk-Buy Program Lowers Drug Costs by 90%

WorkCompAcademy

China has embarked on a program in which major cities bulk-buy certain drugs together, forcing companies to bid for contracts and driving down prices by an average of 52 per cent, one by as much as 90 per cent.

Beijing introduced the bulk-buy program last year, allowing some cities to band together to negotiate lower prices for medicines for use at public hospitals.

The program, when it was rolled out, saw 11 Chinese cities work together on a process to bulk-buy 25 types of drugs. This caused the price of some medicines to decrease over 90 percent.

Early this year, Chinese Vice-Premier Sun Chunlan said China would be expanding the program to cover more cities and drugs, as medicine prices must fall for health care to be affordable for the people.

China has now expanded a pilot drug bulk-buying program to almost the entire country in an attempt to negotiate lower prices from drug manufacturers, Reuters has reported. This is adding pressure on multinational pharmaceutical companies and their domestic rivals.

Medicines where generic versions are significantly cheaper than branded drugs will be prioritized for inclusion in a centralized procurement program, a State Council meeting chaired by Premier Li Keqiang said.

Drugs on the list so far include off-patent cancer treatment drug Pemetrexed, sold by Eli Lilly under the brand name Alimta, and leukemia therapy Imatinib, which is sold by Novartis as Gleevec. Local companies produce generic versions of both drugs.

The move caused the price of some medicines to plunge more than 90%, state news agency Xinhua said.

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State Auditor Critical of QME Process

WorkCompAcademy

The California State Auditor conducted an audit of the Department of Industrial Relations’ Division of Workers’ Compensation and its oversight and regulation of QMEs, as directed by the Joint Legislative Audit Committee. The full 52 page report has been made available online.

The review found that from fiscal years 2013-14 through 2017-18, the total number of QMEs decreased by 12 percent while requests for QMEs increased by 37 percent. Consequently, the availability of QMEs has decreased during those years, indicating that the current number of QMEs is not meeting the demand for their services.

During this time period, the number of panels that were requested to be replaced because QMEs were unavailable more than quadrupled – from about 4,600 replacement panels in fiscal year 2013-14 to nearly 19,000 in fiscal year 2017-18.

Nevertheless, DWC has not taken sufficient action to address the QME shortage, such as establishing a process to recruit new QMEs and updating the 13-year-old rates on the fee schedule that QMEs use to charge for their services, which could help DWC attract and retain QMEs.

Furthermore, DWC inappropriately used its reappointment process to discipline certain QMEs alleged to have committed overbilling violations. This practice raises concerns about due process. Specifically, instead of having used its regulatory process to discipline QMEs at the time it identified alleged violations, DWC denied their reappointments because of the alleged violations.

Finally, DWC has not continuously reviewed medical-legal reports, prepared by QMEs and containing the findings of the examinations, for quality and has not tracked when workers’ compensation judges have rejected medical-legal reports because those reports failed to meet minimum standards. Because it did not perform these reviews or track when workers’ compensation judges rejected reports, DWC lacks the data to identify whether report quality is a systemic problem or whether individual QMEs are producing low-quality reports.

The auditor suggested that the Legislature should amend state law to specify that DWC review and, if necessary, update the fee schedule for compensating QMEs at least every two years based on inflation. And the Legislature should revise state law to increase the number of QMEs on the panels DWC provides.

The DWC should develop and implement a plan to increase the number of QMEs, prioritizing specialties with the greatest shortage relative to demand. It should also develop and implement separate written policies and procedures that define and specify its internal processes for disciplining and reappointing QMEs. As well as create and implement a plan to continuously review QME reports for quality and report its findings to its administrative director annually.

In response, the Division acknowledged and accepted the draft report’s recommendations, which it will work to implement by April 2020. It did however disagree with some of the conclusions

The DWC pointed out that the supply of primary care physicians in California is not sufficient to meet the population’s needs. Therefore, while attempts to increase the number of QMEs in our system can be made through outreach at medical and workers’ compensation conferences and in continued discussions with medical groups, the DWC faces headwinds in ending the persistent and ongoing decline.

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IMR Applications Increase for Sixth Consecutive Year

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In September 2012, Governor Brown signed into legislation Senate Bill (SB) 863. This reform of the workers’ compensation system in California included Independent Medical Review (IMR), which went into effect January 1, 2013. The program is now in its seventh year.

The Department of Industrial Relations (DIR) and its Division of Workers’ Compensation (DWC) have posted a progress report on the Department’s Independent Medical Review (IMR) program.

In 2018, the Independent Medical Review Organization (IMRO) processed 252,565 applications, a slight increase from 2017. Of those, 74% (185,783) were determined to be eligible for review.

Concurrently, the IMRO issued 184,733 IMR determinations, a 7% rise from the prior year. At the end of 2017, the average length of time the IMRO took to issue a determination, after the receipt of all necessary medical records, was fourteen days. By the end of 2018, this decreased to a monthly average of nine days.

Overall, the IMRO overturned 10.3% of the utilization review decisions that denied treatment requests made by physicians treating injured workers. Analysis of several variables, including the geographic region of the injured worker, the time elapsed since the worker’s occupational injury occurred, and representation by an attorney or other entity acting on behalf of the worker, shows similar rates of overturned case decisions.

The highest number of requests was for pharmaceuticals, which comprise 42% of the issues in dispute, with opioids the most common drug class (33% of drug requests). As in previous years, the second- and third-highest number of requests were for diagnostic tests (e.g. imaging, radiology) (16% of requests) and rehabilitation services (e.g., physical therapy, chiropractic) (15%).

The treatment request denials that were overturned most often were for behavioral and mental health services (22% overturned) and evaluation and management, which include specialist consultations and dental services (18% overturned).

Changes in the Medical Treatment Utilization Schedule (MTUS) that took effect in 2018 include the new drug formulary and the update of several evidence-based guidelines. Expert reviewers for IMR apply these guidelines to their evaluations of medical necessity, citing the Chronic Pain, Low Back Disorders, and Opioid Guidelines most often.

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Contractor Sentenced to 10 Years in Premium Fraud Case

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56-year-old Earl “EJ” Thompson was sentenced to 10 years state prison for Workers’ Compensation Insurance Fraud, Conspiracy, Wage Theft, Perjury, and Grand Theft.

After Thompson’s California Contractor’s License was revoked for fraud, he convinced his wife and friend to put their names on a new business, Russell/Thompson, which he would secretly run using the fraudulent contractor’s license they obtained. Thompson used that business to obtain a contract with UC Davis to build some of the Tercero South student housing.

During the construction, Thompson stole $633,199 in wages from his employees, defrauded his workers’ compensation insurance carrier, California State Compensation Insurance Fund, for $359,011, committed multiple acts of perjury to conceal his fraud, and caused a total loss of over $2 million.

Deputy District Attorney Jennifer McHugh prosecuted the case which included over 35,000 pages of discovery, over 60 defrauded employees, and involved 26 felony counts.

Over the course of the six years it took to prosecute the case, the defense filed multiple motions to dismiss counts or enhancements and the case was further delayed when Thompson claimed to be incompetent to stand trial. Ultimately the Court deemed Thompson competent to stand trial and criminal proceedings were reinstated.

On July 10, 2019, Thompson plead no contest to all charges pending against him and the Court heard evidence on the enhancements.

On November 13, 2019, the Court found Thompson ineligible for probation and sentenced him to 10 years in state prison. The Court considered Thompson’s extensive history of committing similar offenses, his prior felony convictions for insurance fraud and tax evasion, the sophisticated nature of Thompson’s fraud and the position of leadership that Thompson took in committing the crime. After getting out of prison for insurance fraud and tax evasion in 1995, he continued defrauding unsuspecting victims in California.

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CDI Adopts Advisory Rate Below WCIRB Recommendation

WorkCompAcademy

Insurance Commissioner Ricardo Lara has adopted and issued a revised average advisory pure premium rate, lowering the benchmark to $1.52 per $100 of payroll for workers’ compensation insurance, effective January 1, 2020.

This marks the ninth consecutive reduction to the average advisory pure premium rate benchmark since January 2015.

“Reduced costs should translate to real savings for California’s businesses while preserving protections for workers,” said Commissioner Lara. “I encourage insurers to continue to reduce their prices to reflect the lower costs.”

With an average filed pure premium rate of $1.99 per $100 of payroll as of July 1, 2019, insurers were applying pure premium rates that were approximately 19.2 percent more than the corresponding average advisory pure premium rate of $1.67 approved by the Commissioner as of January 1, 2019.

The indicated average advisory pure premium rate level of $1.52 approved by the Commissioner is about 23.6 percent lower than the industry filed average pure premium rate of $1.99 as of July 1, 2019.

Lara’s decision results in an advisory pure premium rate that is below the $1.58 average rate recommended by the Workers’ Compensation Insurance Rating Bureau (WCIRB) in its filing. Lara issued the advisory rate after a public hearing on October 14, 2019, and careful review of the testimony and evidence submitted by stakeholders. The pure premium rate is only advisory, as the Legislature has not given the Commissioner rate authority over workers’ compensation rates.

The WCIRB’s pure premium rate filing demonstrated continued decreases in costs in California’s workers’ compensation insurance market. The pure premium advisory rate reduction is based on insurers’ cost data through June 30 of this year. Insurers’ net costs in the workers’ compensation system continue to decline as a result of SB 863, SB 1160, AB 1244, and AB 1124 enacted by the Legislature and Governor Jerry Brown.

The WCIRB notes continued favorable medical loss development including acceleration in claim settlement rates, and continued decline in pharmaceutical costs and lien filings.

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WCAB Decides Objections Not Waived by Failure to Raise in EOB

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Ashley Colominico claimed that she injured her spine and internal organs while working for Secure Transportation. She requested that the lien claimant, Med-Legal Photocopy obtain records from multiple locations. The photocopy service issued several subpoenas duces tecum for multiple locations and issued numerous invoices in 2014 and 2015 for its copy services.

In 2018, the defendant issued eight Explanations of Review (EOR) for lien claimant’s copy services that were performed in 2014 and 2015.

In 2019, the claim proceeded to a lien trial on issues regarding lien claimant’s lien which were necessity and value of the copy services as well as penalty and interest.

The WCJ issued Findings and Orders, which found, that: defendant waived all objections to the unpaid portion of Med-Legal Photocopy’s billings; and lien claimant was entitled to reimbursement as well as penalty and interest.. The WCAB in an En Banc decision reversed and remanded this Order in the case of Colominico v Secure Transportation.

The WCAB concluded that a medical-legal provider has the initial burden of proof that: 1) a contested claim existed at the time the expenses were incurred, and that the expenses were incurred for the purpose of proving or disproving a contested claim pursuant to section 4620; and 2) its medical-legal services were reasonably, actually, and necessarily incurred pursuant to section 4621(a).

It also concluded that the defendant does not waive an objection based on Section 4620 or 4621 by failing to raise those objections in an explanation of review pursuant to section 4622.

In 1993 the Legislature amended Labor Code section 4622, by adding subdivision (d), which provided: “Nothing contained in this section shall be construed to create a rebuttable presumption of entitlement to payment of an expense upon receipt by the employer of the required reports and documents. This section is not applicable unless there has been compliance with Sections 4620 and 4621.”

In its detailed analysis of the 1993 amendments, the Court in American Psychometric Consultants Inc. v. Workers’ Comp. Appeals Bd. (Hurtado) (1995) 36 Cal.App.4th 1626 [60 Cal.Comp.Cases 559] held that “section 4622, which provides that an employer/carrier must protest a medical-legal billing within 60 days of receipt, has no application in its entirety when the medical provider has not complied with the “contested claim” rule, because the Legislature so provided, in Labor Code, section 4622, subdivision (d), as amended in 1993.”

It also concluded that this holding in the holding in Otis v. City of Los Angeles (1980) 45 Cal.Comp.Cases 1132 [1980 Cal. Wrk. Comp. LEXIS 3527] (Appeals Board en banc) is inconsistent with section 4622, and it rejected the application of this holding in Otis with respect to the statutory framework of sections 4620, 4621, or 4622. Otis was decided in 1980, and the holding was based on the language of former section 4601.5. However, in 1984, subsequent to the issuance of Otis, section 4622(a) was enacted and former section 4601.5 was repealed. (Stats. 1984, ch. 596, § 4.)

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Reminder for Submission of Annual Report of Inventory

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Claims administrators are reminded that the annual report of inventory (ARI) must be submitted in early 2020 for claims reported in calendar year 2019.

The California Code of Regulations, title 8, Section 10104 requires claims administrators to file, by April 1 of each year, an annual report of inventory (ARI) with the DWC administrative director indicating the number of claims reported at each adjusting location for the preceding calendar year. Even if no claims were reported in the prior year, the report must be completed and submitted to the DWC Audit Unit. Each adjusting location is required to submit an ARI unless its requirement has been waived by the DWC administrative director.

When ARI requirements are waived, claims administrators must file an annual report of adjusting locations. This report is to be filed annually on April 1 of each calendar year for the adjusting location operations as of December 31 of the prior year.

Claims administrators are required to report any change in the information reported in the ARI or annual report of adjusting location within 45 days of the effective date of the change. Penalties of up to $500 per location for failure to timely file this Report of Inventory may be assessed under Title 8, California Code of Regulations, Section 10111.1(b)(11) or 10111.2(b)(26).

The form for 2020 can be found on the DWC website.

Questions about submission of the ARI or the annual report of adjusting locations may be directed to the Audit Unit:
State of California
Department of Industrial Relations

Division of Workers’ Compensation – Audit Unit
160 Promenade Circle, Suite #340
Sacramento, CA 95834-2962

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New Rule to Mandate Disclosure of Hospital Charges

WorkCompAcademy

The Trump administration plans to release a sweeping proposal that would require hospitals to publicly disclose the discounted prices they secretly negotiate with insurance companies – a change intended to increase price transparency for patients shopping for care.

According to The Wall Street Journal, which first reported the news, the final rule will force hospitals in 2021 to report the rates they strike with individual insurers for all services, including drugs, supplies, facility fees and care by doctors who work for the facility.

The administration will also extend the rule to the $670 billion health-care industry, meaning that insurance companies, including Anthem and Cigna, and group health plans that cover employees will have to disclose negotiate rates and previously paid rates for out-of-network treatment in computer-searchable file formats, the Journal reported.

The proposal will likely face a legal challenge from hospitals and insurers, which have previously warned that transparency could actually force prices to rise because they would know the price that competitors offer, and therefore be unwilling to settle.

“Right now there is too much arbitrage in the system,” a senior administration official told the Journal. “There are a ton of vested interests who will oppose this. We expect to get sued.”

A similar health care transparency law in Ohio remains tangled in the legal web.

Still, the Trump administration contends that requiring hospitals to release the negotiated price is intrinsic to lowering costs. For instance, hospitals would need to disclose payer-specific charges for at least 300 shoppable services, 70 of which — including vaginal birth, colonoscopy and joint-replacement surgery, are mandated in the rule. Hospitals can select the other 230 services they post online.

If the 6,000 hospitals that accept Medicare do not comply with the proposed requirement, they’ll be slapped with a $300 fine each day.

Prices charged for health care vary dramatically depending on several factors, including whether a patient is in or out of the patient’s insurance network and what price the hospital negotiated with the insurance company. For instance, the cost of a mammogram ranges from $50 at a hospital in New Orleans, to $86,000 at a hospital in Massachusetts, according to Clear Health Costs, which publishes information on health costs.

By making those prices available to consumers, the Trump administration argues that hospitals will be under more pressure to compete, eventually causing prices to fall.

According to a September study conducted by the Kaiser Family Foundation, employer health-plan deductibles are outpacing wage growth and have increased to an average of $1,655 for a single plan. On average, workers contribute $6,015 toward the cost of coverage.

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Chick-fil-A and Starbucks Distributor Moving HQ From Irvine to Texas

WorkCompAcademy

Quality Custom Distribution, a fast-food industry supplier for the likes of Starbucks, Chick-fil-A and Chipotle, is moving its corporate headquarters to Texas from Irvine.  

It joins a growing list of California firms moving headquarters operations to Texas, most notably Toyota USA’s relocation from Torrance three years ago. Other movers include Occidental Petroleum (from L.A.) and Jamba Juice (from San Francisco).

The company, a logistics unit of food-industry supply giant Golden State Foods, runs a nationwide chain of 19 distribution centers that warehouses and distributes food and supplies to individual chain restaurants. The new headquarters will initially be home to between 30 and 45 workers, both relocations and new hires. It is expected to be open by January.

A Quality Custom statement said the move “will maximize company efficiencies by placing multiple services, including finance, accounting, customer service and purchasing, into one location.”

Quality Custom is a food-delivery subsidiary of Golden State Foods, which started in 1947 as a meat supplier to Southern California restaurants and hotels. In the 1950s it won a curious new customer – the fledgling restaurant chain McDonald’s.

Things soon changed as that partnership helped Golden State Foods grow globally into an Irvine-based behemoth with $7 billion in revenues handling various industry functions from making food to warehousing and inventory management to stocking an estimated 120,000 restaurants.

The Quality Custom unit, as the name implies, handles some odd services for clients. Take a new warehouse in Fontana that opened last year with just one purpose: handling the needs of 300-plus Starbucks around Southern California.

In moving its corporate operations to Texas, Quality Custom felt a need to “better align our corporate resources with our business and provide enhanced support to our distribution centers and to our customers,” said Ryan Hammer, Quality Custom’s corporate vice president and president of Golden State Foods’ logistics operations, said in a statement. He came to the company from Texas-based PepsiCo Inc. two years ago.

Hammer added: “This centralization will enable us to continue to grow our distribution business and solidify our position as a dominant player in the food industry. We are looking forward to expanding within the Dallas area, which we chose due to its central location, large talent pool, and excellent business community overall.”

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November 11, 2019 News Podcast

WorkCompAcademy

Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: Judge Extends Litigation Stay for Purdue Pharma, California Insurance Company Placed in Conservatorship, 5 Year Sentence in Merced $6M Medical Fraud Case, China and US Announce Rare Fentanyl Crackdown, DEA Warns: “Mass Quantities” Counterfeit Pills, Air Ambulance Ride to UCLA Cost More than Lung Transplant, Response to AB-5: California Freelancers “Need Not Apply”, Courtroom Secrecy Hides Public Safety Information, 4 in 10 Deal With Weekly Burnout Caused Health Issues, NASI Report – Decreasing Comp Benefits are Inadequate.

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