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CWCI Study Shows Decline in Medical Treatment Counts

A new CWCI study details changes in the utilization and reimbursement of California workers’ comp physician and non-physician medical services from 2013 through 2018 – a 6-year span during which the state transitioned to a Resource-Based Relative Value Scale (RBRVS) fee schedule mandated by 2012 legislative reforms (SB 863).

The study, authored by Stacy Jones, Senior Research Analyst at the California Workers’ Compensation Institute (CWCI) examines data on 35.9 million medical services provided to injured workers in California to measure changes in the mix of services and payments across nine medical service categories from 2013, the last year under the old fee schedule, across 2014 through 2017, the 4-year period during which the state transitioned into the RBRVS schedule, and into 2018, the first year after the new schedule took full effect.

Overall claim volume fell 5.2% from 2013 to 2018, but that only partially explains the 28.4% decline in total service counts (identified by billing codes) and the 20.4% decline in aggregate payments during that period.

Examining the service counts by medical service category reveals wide variation, with reductions ranging from a 17.2% decline in physical medicine services to a 71.8% drop in pathology and laboratory services.

In addition, the study found that the declines in the number of unique claims associated with each service category also varied widely, ranging from a 4.4% decline in claims with physical medicine services to a 42.9% drop in claims with pathology and laboratory services. The varying reductions in the volume of services among the different categories, as well as updates to the service codes and service descriptions included in the new fee schedule, resulted in a reallocation of the fee schedule dollars, with an increased share paying for primary care, and a smaller share paying for specialty services, which was a key goal behind the adoption of the RBRVS fee schedule.

Between 2013 and 2018, the study found total payments for evaluation and management (E&M) and physical medicine services, which together comprised 68.3 percent of primary care delivered to injured workers in 2018, increased by 9.3% and 30.6% respectively, while total payments for the 7 other service categories all declined, dropping between 16.5% and 76.1%.

Some of the disparities between the utilization and total payment trends in the 9 service categories reflected the change in the average payment per service code. Calculating average payments for services in the 9 categories from 2013 through 2018, the study found that despite the reductions in the volume of services, average amounts paid to providers increased in 5 categories, with increases of 2.1% for surgery services; 28.5% for medicine services; 35.9% for durable medical equipment, prosthetics, orthotics and supplies; 39.4% for evaluation and management; and 57.6% for physical medicine.

On the flip side, average payments fell for pathology and lab services (-15.3%); radiology (-17.2%); and special services (-35.6%), where the decline was primarily due to lower report costs which reflect the RBRVS schedule’s elimination of separate fees for consultation services and associated reports.

The full study takes a detailed look at the professional medical service utilization and reimbursement trends, including shifts in the mix of specific services and payments within each of the 9 service categories, and the underlying changes to the fee schedule that prompted those moves.

CWCI has published the study in a Research Update Report, “Trends in the Utilization and Reimbursement of California Workers’ Compensation Professional Medical Services, 2013-2018” which is available to Institute members and subscribers in the Research section of its website.

San Diego Musicians Play Blues Tunes Over AB-5

Ari Herstand is a Southern California musician. Herstand told NBC 7 he relies on booking gigs in local venues to make ends meet but says, that has all changed. Herstand and other musicians said a new labor law is disrupting California’s music industry.

We’re actually thinking of leaving the state of California and going elsewhere because we can’t survive here,” said Herstand.

Herstand said Assembly Bill 5 is forcing him to act as an employee and an employer, just to earn money by playing his music.

“The bassists I’d normally cut him a check for $200, well now I have to put this bassist on payroll and pay payroll taxes. I have to incorporate myself, I have to get workers comp insurance, I have to get unemployment insurance, etc,” Herstand said.

Herstand said the process will cost him and prevent him from doing what he loves.

“My accountant estimated it will cost me an additional $6,000 a year just to comply with this law and the additional costs,” he explained.

AB 5 was co-authored by assemblymember Lorena Gonzalez and supporters said the bill provides benefits to those in the gig economy.

Assemblymember Gonzalez told NBC 7 for more than a year they’ve been engaging with artists about how this would impact their work.

It’s completely unrealistic for us to change our entire way of operating for this that wasn’t intended to help or hurt us,” said Herstand. “I know assemblywoman Gonzalez did not have ill intention for the music industry when she wrote this bill.”

Herstand is hoping to add an exemption to the law. If that doesn’t work, he said he’s teamed up with Senator Brian Jones for senate bill 881 to tackle this issue.

“I never thought when I got into music that one of the most effective, impactful things that I would’ve ever written would be a law for the state of California,” he said while laughing.

Assemblymember Gonzalez’s office told NBC 7 addressing the music industry this year is a top priority.

Disability Discrimination 2nd Highest EEOC Claim

Employers paid out a record $68.2 million to those alleging sexual harassment violations through the EEOC in 2019, shattering the all-time record by over $10 million. The #MeToo movement continues to be a major influence on workplaces across the country.

This is just one of many interesting findings released by the Equal Employment Opportunity Commission (EEOC) in its annual data summary covering fiscal year 2019).

The January 24 release is full of eye-opening statistics that could help set compliance priorities for 2020 and beyond. Here are some thought-provoking takeaways from the EEOC’s annual summary.

The most compelling piece of information from the release is the amount of money recovered from employers in 2019 for claims of sexual harassment. The $68.2 million represents a 20% increase from the previous all-time high set of $56.6 million in 2018, and is nearly double the total from just five years previous ($35 million in 2014).

Claims of sexual harassment remained high in 2019. Although the number of claims dipped slightly from 7,609 in 2018 to 7,514 in 2019, this figure still represents the second-highest mark for claims in the past seven years.

By a very wide margin, the most common EEOC claim employers faced in 2019 involved allegations of retaliation. Once again, these claims proved to be the most popular filed by workers. In 2019, over 39,000 retaliation claims were filed, representing nearly 54% of all claims filed with the EEOC.

The next-highest type of claim filed with the EEOC in 2019 were disability discrimination allegations. Following the passage of the ADA Amendments Act in 2008, there has been a steady increase in the number of such claims. Pre-ADAAA, only 14,893 disability claims were filed, representing under 20% of all EEOC claims. By 2019, that number had jumped to 24,238, accounting for a third of all claims filed.

The EEOC has placed a recent emphasis on efficiency, and the numbers bear out the success that the agency is having in this area. Just two years prior, the EEOC only resolved 125 pieces of litigation, including 109 merits suits (those involving substantive claims, excluding subpoena enforcement or pure requests for preliminary injunctions). By 2019, those numbers increased dramatically. The agency resolved 180 pieces of litigation, including 173 merits cases.

Lawsuits Claim AARP Cheats Policyholders

The AARP is fighting case by case to defeat claims that it is cheats consumers who purchase AARP-branded Medicare supplemental health insurance (“Medigap”) products by charging illegal commissions.

A non-profit organization that claims to advocate for Americans age 50+, the AARP is facing several lawsuits around the country, including a Washington, DC, lawsuit that is moving forward as a class action lawsuit and two proposed California class action lawsuits that are (for now, at least) not.

Since at least 1997, the AARP has held, in its name, group Medigap policies underwritten by UnitedHealth Group and UnitedHealthcare Insurance Company. For each policy purchased and renewed, the AARP charges an undisclosed 4.95% fee that it maintains is a royalty to compensate AARP for UnitedHealth’s use of its intellectual property.

The plaintiffs in lawsuits against the AARP say it is actually charging a “commission” but disguising it as a “royalty” to avoid oversight by insurance regulators and to avoid paying taxes on the income generated through insurance sales.

The rulings below reflect the dramatically different analysis of the facts by two federal judges in Washington and California.

U.S.District Judge Beryl Howell of Washington, D.C., last fall ruled the case of Krukas v. AARP, Inc, et. al, can proceed as a class action against the AARP, which is headquartered in Washington.

She rejected AARP’s argument the lawsuit should be dismissed because it would force the court to second-guess insurance rates approved by state regulators. Judge Howell said the plaintiffs are not challenging state-approved rates but allege the AARP used unfair business practices and deceptive conduct that prevented consumers from making informed decisions about the cost of AARP-branded insurance.

Judge Howell said the AARP does far more than simply endorse UnitedHealth Medigap policies. She ruled the plaintiffs “provided ample detail concerning AARP’s extensive responsibilities – to allow the reasonable inference that the defendants are merchants.”

By contrast, Senior U.S. District Court Judge Dean D. Pregerson of Los Angeles summarily dismissed two proposed class action lawsuits filed against the AARP in California.

Judge Pregerson in 2018 dismissed the case of Levay v. AARP, without allowing the plaintiffs to engaged in discovery, and did so with “prejudice” so the case cannot be refiled. The plaintiffs have filed a notice of appeal with the U.S. Court of Appeals for the Ninth Circuit in San Francisco.

Regarding the AARP’s undisclosed 4.95% fee, Judge Pregerson said, “It would be foolish indeed for an enterprise, regardless of its status as a non or for-profit entity to be blind, all other factors being substantially equal, to revenue generating opportunities.” Appeals Court Circuit Decision?

It’s not clear how Judge Pregerson’s ruling in the Levay case squares with a 2017 decision by a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit in response to Judge Pregerson’s dismissal of Friedman v. AARP, Incl, et. al, which also challenged the AARP’s Medigap insurance program.

The panel sent the Friedman case back to Pregerson for reconsideration. He dismissed the case again on November 1, 2019, with instructions that it cannot be refiled. Judge Pregerson criticized the lack of specificity of the third amended complaint and ruled the plaintiff failed to show they suffered any economic harm. Alan I. Schimmel of Sherman Oaks, CA, lead attorney for the plaintiffs, could not be reached for comment about whether the plaintiffs will appeal.

AG Suit Claims OptumRX Illegally Gouged Comp Claims

Over the years, there has been a consolidation of most of the U.S. pharmacy benefits business under OptumRx, CVS and Express Scripts. This has not occurred without controversy in workers’ compensation claims.

The pharmacy benefit manager administering prescription drugs for workers injured on the job overcharged the Ohio Bureau of Workers’ Compensation on more than 1.3 million claims for generic medications, according to a new court filing by Attorney General Dave Yost’s office.

The report in the Columbus Dispatch says that attorneys for the state asked the court to rule OptumRx breached its contract and is liable for unspecified damages. According to the court filing, OptumRx overcharged the state on 57% of 2.3 million claims between January 2014 and September 2018.

“By failing to follow the pricing rules it agreed to and promised to obey, OptumRx violated its duties to the State of Ohio and BWC and wrongfully pocketed millions of dollars in unearned profits,” the court filing says.

The state sued Texas-based OptumRx last March, leading to several months of mediation that failed to resolve the dispute. Late Friday, attorneys for the state filed a motion for partial summary judgment, arguing “there can be no dispute” that OptumRx violated terms of its contract.” Attorneys asked the court  to determine damages at a later hearing.

In an earlier filing, the state asked for a fine of up to $5,000 for each day that the improper prices were charged, pushing the potential damages into the millions.

OptumRx spokesman Drew Krejci said in response to the latest allegations, “We are honored to have delivered access to more affordable prescription medications for the Ohio Bureau of Workers’ Compensation and Ohio taxpayers. We believe these allegations are without merit and will vigorously defend ourselves.”

OptumRx, owned by UnitedHealth Group, was hired by the Bureau of Workers’ Compensation to manage claims, set pharmacy reimbursements and handle other billing matters. The bureau is funded by assessments on employers and spends about $86 million a year on prescription drugs.

The pharmacy benefit manager’s contract with the bureau expired in 2018 and was not renewed.

According to the latest filing by the state, OptumRx agreed to charge the bureau the lesser of four possible prices for generic drugs with the “federal upper limit,” a maximum price set by the Centers for Medicare and Medicaid Services for federally funded programs, the most that could be paid.

“The federal upper limit acted as a price ceiling,” the filing said. “If the other three prices, (which were set by OptumRx, drug companies and pharmacies, respectively), were higher than the federal upper limit, then the federal upper limit applied.”

The filing included an analysis of OptumRx claims data showing the company charged the bureau more than the federal upper limit price on 1.3 million of 2.3 million generic claims. In one example cited, OptumRx charged the bureau $101 for Lamotrigine, used to treat seizures, when the federal upper limit was $55.51, making for a $45.59 overcharge.

In its work for Ohio Medicaid, OptumRx was found to have billed the state $26 million more than it paid pharmacists to fill prescriptions in a one-year period.

More AB-5 Unintended Consequences

The new law, Assembly Bill 5, has generated outrage from a wide range of Californians, from musicians to therapists to truckers and freelance journalists. It requires businesses to classify more workers as employees entitled to benefits like sick leave and overtime pay. But some workers affected by AB 5 say it’s caused them nothing but grief and anxiety.

The Sacramento Bee reports that the Sacramento Jazz Cooperative is a struggling nonprofit, operating on a shoestring budget during its three-year history as it presents Monday night concerts at the Dante Club. Now it has another problem on its hands – the controversial California labor law that requires it to hire musicians as employees.

Since Jan. 1, the jazz co-op has had to contribute to musicians’ Social Security and Medicare, while withholding payroll taxes from their checks. Founder Carolyne Swayze said the law is proving costly to the co-op and threatens its viability, potentially hurting musicians.

I’m not sure if we can hang in there,” she said. “It might be different if we were in Chicago or LA or New York.”

Many truckers have made a similar argument about the law, saying it inhibits their ability to do business. The California Trucking Association secured a court injunction blocking implementation of AB 5 in its industry, after it argued the law is preempted by the US Constitution because it interferes with interstate commerce.

Placerville resident Lacey Easton says she’s lost work as a professional sign-language interpreter because of AB 5. She’s down to about 15 to 20 hours of work “in a good week.”

“More importantly, deaf and hard-of-hearing people have lost access to communication,” said Easton, who does interpreting for schools, job-training agencies and medical appointments.

She said flexibility is extremely important in her profession; that’s why she’s resisted going to work for a company as an employee. Interpreters have to be “compatible” with the person they’re signing for, and if she’s an employee she’d lose the ability to turn down a job.

Critics of the law are fighting back. Some have gone to court. Uber has vowed to challenge the law at the ballot box – while also changing its ride-hailing platform in an effort to have its drivers remain classified as independent contractors instead of employees.

The company, along with Lyft, DoorDash, Instacart and Postmates, is pouring tens of millions of dollars into a proposed ballot initiative that would allow it to continue classifying drivers as independent contractors. Spokesman Davis White said Uber isn’t withholding any payroll deductions from its drivers’ compensation.

At the same time, Uber has changed its platform as a way of trying to work around AB 5.

Its 150,000 California drivers now have the freedom to choose which rides they accept; previously, they had to pick up a customer without knowing the destination. And in late January, Uber launched a pilot project at the Sacramento, Santa Barbara and Palm Springs airports that lets drivers set their prices. The Uber app matches passengers with the driver offering the lowest fare.

Another California “New-Law-Fail” in Federal Court

AB-5, the new California law that defines most freelance workers as employees has been under fire since it was passed.

A state court conclude that California’s controversial new misclassification law doesn’t apply to truck drivers, the second time in the last few weeks that a judge has come down hard on AB-5 for going too far in limiting the kinds of workers who can be classified as independent contractors.

Now, a coalition of business groups led by the U.S. Chamber of Commerce filed a lawsuit in December seeking to block AB 51 from ever taking effect.

That law, signed into effect in October, would make it unlawful for California employers to require applicants and employees to sign arbitration agreements beginning January 1, 2020.

The plaintiffs asked the court to grant a preliminary injunction blocking the enforcement of AB 51 pending proceedings in the lawsuit. They also filed a request for a Temporary Restraining Order (TRO), which would halt the law from being enforced while the litigation over the preliminary injunction request was taking place.

On December 30, the court granted the TRO, effectively preventing the state from enforcing AB 51 until the request for a preliminary injunction is decided.

A federal judge just extended the reprieve that permitted California employers to escape the grasp of a newly enacted law that aimed to prevent them from utilizing mandatory arbitration agreements with their employees.

After granting a temporary restraining order that pressed pause on the new law before it could take effect on January 1, the court granted a full preliminary injunction that will block the law during the court proceedings that will examine the legality of the new statute.

This is good news for California employers, but because things could evolve rapidly over the coming weeks and months, they should pay particular attention to upcoming developments to ensure compliance.

Mike Hessling New Gallagher Basset CEO

Gallagher Basset announced the promotion of Mike Hessling to the newly created position of CEO, North America.

The position is effective immediately and reports directly to Gallagher Bassett Global CEO, Scott Hudson.

Prior to this appointment, Mr. Hessling was North American chief client officer and led the Rolling Meadows, Illinois-based TPA’s sales and account management teams.

In 2017, Mr. Hessling was named a Break Out Award winner by Business Insurance.

Mike Hessling’s work ethic and commitment to customer service began at a young age as a newspaper carrier for the Washington Post. These values have transcended his academic and professional career including qualifying as a CPA and gaining an MBA, then working as a consultant, first at Bridge Strategy Group and then at Bain & Co., where he served as a manager and later principal. In 2012, he joined Gallagher Bassett Services Inc. as chief client officer.

When asked about the newly created role to lead North America, Mr. Hudson stated, “Mike has been a leader with GB for over seven years and has a tremendous track record as North America Chief Client Officer, leading our sales and account management teams.

He has also been a driving force behind the building of our industry-leading analytics team. Mike’s knowledge of the North America market, proven ability to work across all functions, and passion for GB’s culture and team, makes him the perfect person to lead our North America business.”

On his promotion, Mr. Hessling said, “I’m excited and humbled to lead GB’s North America business. We have an incredible team of talented professionals, who are extremely passionate about making a positive impact for our clients, their businesses and the people they employ and serve.”

February 3, 2020 News Podcast


Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: WCAB Panel Specifies Requirements for 4903.8(d) Lien Declaration, WCAB Claim Tolls Statute of Limitations for FEHA Action, Arch Health Partners Resolves Kickback Allegations for $3M, Convicted Surgeon Extradited from Israel to Serve, Bay Area Medical Device CEO Convicted, Charges Filed in $20M Comp Treatment Kickback Scheme, Cal/OSHA Reminds Employers to Post Annual Summary, Looking Back at the Validity of NFL Concussion Claims, Non-Opioid “Stem Cell” Pain Treatment Provides Relief, Insurance Industry Reports Varying Results With Data Analytics.

New O.C. DA Drops “Manufactured” Charges Against Orthopedist

The newly elected Orange County District Attorney is dropping all charges against a doctor and his girlfriend, alleging that his predecessor “manufactured” allegations that the couple drugged and sexually assaulted up to 1,000 women.

The stunning turn of events comes a year and a half after the case against Grant Robicheaux, an orthopedic surgeon who appeared on the TV show The Online Dating Rituals of the American Male, and substitute teacher Cerissa Riley exploded into the headlines.

At the time, Orange County’s then-district attorney, Tony Rackauckas, claimed the pair lured women to their Newport Beach home, knocked them unconscious, and raped them.

At a press conference in September 2018, he said investigators had seized “hundreds” of incriminating videos from the couple’s phones. Asked whether the number could be as a high as a thousand, Rackauckas said, “I think so.”

A few months later, though, Rackauckas was out of office, replaced by current DA Todd Spitzer, who eventually ordered a review of the evidence. He says he was appalled by what he found.

The prior District Attorney and his chief of staff manufactured this case and repeatedly misstated the evidence to lead the public and vulnerable women to believe that these two individuals plied up to 1,000 women with drugs and alcohol in order to sexually assault them – and videotape the assaults,” Spitzer said in a blistering statement.

“As a result of the complete case review I ordered beginning in July, we now know that there was not a single video or photograph depicting an unconscious or incapacitated woman being sexually assaulted.”

Rackauckas has not responded to his former rival’s allegations. But Robicheaux’s attorney praised the reversal.

Robicheaux, 39, and Riley, 32, insisted from the start that all their liaisons were consensual. They were swingers, their attorneys argued, and the so-called victims were willing participants.

They claimed Rackauckas inflated the allegations, hoping that media attention would buoy his re-election effort. And last June, unsealed transcripts of a deposition showed the ex-prosecutor thought the publicity would help him.

Spitzer said that’s when he assembled a team to re-evaluate the case. “A team of prosecutors with a combined 175 years of experience determined there is no provable evidence that Robicheaux and Riley committed any sexual offense,” he said in a press release.

The charges that will be dropped include kidnapping and rape; Robicheaux and Riley would have faced up to life in prison if convicted.

At least some of the women who accused Robicheaux and Riley maintain they were assaulted.

Michael Fell, an attorney for one of them, told the Los Angeles Times the decision is a betrayal of his client.