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Another Opioid Drugmaker Files for Bankruptcy Protection

Mallinckrodt filed for bankruptcy protection on Monday, saddled with lawsuits alleging it helped fuel the U.S. opioid epidemic. They are the third major durgmaker to seek bankruptcy protection.

The company had said in February it planned to have its generic drug business file for bankruptcy as part of a tentative $1.6 billion opioid settlement to resolve claims by state attorneys general and U.S. cities and counties.

Last March, the company also lost a court battle to avoid paying higher rebates to state Medicaid programs for its top-selling drug.

In September, Mallinckrodt hired restructuring advisers to help limit its liabilities regarding the opioid settlement and a potential restructuring. The opioid litigation had caused some concern at the company, including a suspension of its plans to spin off its generics business into a standalone entity due to the opioid litigation, as well as “market conditions.”

Mallinckrodt said on Monday it had agreed to pay $1.6 billion over several years to settle opioid-related litigation. About $450 million would be paid as part of its settlement once the company emerged from chapter 11 bankruptcy.

The company would then pay $200 million in the first and second year after its emergence from the bankruptcy, and $150 million subsequently through the seventh year.

Mallinckrodt had agreed to pay $260 million over seven years to resolve disputes related to its multiple-sclerosis drug H.P. Acthar gel and pay out rebates to state Medicaid programs.

Mallinckrodt also plans to dismiss its appeal to a March ruling related to Acthar gel, whose price per-vial has risen from about $50 in 2001 to $38,892 in 2019.

During the bankruptcy protection, the company said it aims to resolve opioid-related claims and reduce its debt by about $1.3 billion, while surviving on cash on hand and cash generated from operations.

The company listed both assets and liabilities in the range of $1 billion to $10 billion in a filing with the U.S. Bankruptcy Court for the District Of Delaware.

Under terms of the settlement announced this morning, the court-supervised process will lead to the creation of a trust, which, as the company said, will “establish an abatement fund to offset the expense of helping to combat opioid addiction and providing support to communities impacted by opioid abuse.” The court-supervised process is also expected to resolve all opioid-related claims against Mallinckrodt and its subsidiaries, the company said.

Mark Trudeau, president and chief executive officer of Mallinckrodt, said reaching the agreement and undergoing debt refinancing are important steps moving the company forward.

“Importantly, when finalized, we believe the proposed settlement and capital restructuring activities will provide us with a clear path forward to achieving our long term strategy, preserving value for our financial stakeholders and providing us with the flexibility to operate effectively,” Trudeau said in a statement.

Trudeau continued but adding that, while the company has had some uncertainties, it has delivered strong earnings and has a strong pipeline that continues to “build momentum.” Trudeau said the company anticipates seeking regulatory approval of terlipressin and StratGraft in the coming months, as well as the completion of key clinical study results and data readouts across the portfolio.

Mitchell Launches Data Explorer to Combat Fraud

Mitchell, announced the new Mitchell Provider Data Explorer solution, which provides a holistic view of medical provider behavior in the P&C industry. Using data visualization, Provider Data Explorer enables both auto casualty and workers’ compensation claims organizations to analyze medical provider treatment and billing behaviors to identify irregular activities that may signal fraud, waste and abuse.

Fraud accounts for 5% to 10% of claims costs for U.S. and Canadian insurers, costing about $80 billion per year for all lines of insurance, according to the Coalition Against Insurance Fraud.

By providing visual depictions of claims data, the visualization tool compares medical provider behavior to that of their peers. Users can see provider peer-to-peer comparisons that can be used in a variety of ways, including easily pinpointing outliers in order to help identify potential fraudulent or abusive medical provider treatment or billing behaviors for investigation.

The new data visualization tool tracks a variety of metrics related to provider behavior, including but not limited to treatment duration, treatment frequency, billing and adjustment behaviors, and procedure codes that, if incorrect, may disproportionately drive up the charged amount.

In addition to helping to detect potential fraud, waste and abuse, Mitchell’s customers have already reported success using Provider Data Explorer for a variety of purposes.

— Validation: Provider Data Explorer allowed one large insurance carrier to validate the charges of a provider compared to its peers across multiple counties. “We were able to visually see just how much that provider was an outlier,” the carrier said. “The ability to then see the actual claim-level detail and the specifics of the codes allowed us to hone in further and get some more detail around the provider’s billing habits.”
— Identification: Another large insurance carrier used Provider Data Explorer to help a claimant find a local physician who was accepting auto insurance medical benefits. “One of our adjusters had a claimant that was injured in an accident but couldn’t find a doctor that would accept auto insurance,” the carrier said. “With just a few clicks, we were able to use Provider Data Explorer to identify multiple providers that had billed us for auto claims in the claimant’s zip code and surrounding areas. The adjuster was then able to provide a list to the claimant of providers in his area willing to accept auto insurance.”

Medical provider data quality is a chronic issue, with the healthcare industry spending $2.1 billion annually to maintain provider databases. Provider Data Explorer utilizes Mitchell’s foundational provider data management capabilities, which work to resolve provider data quality issues, including duplicate records and inaccurate information.

Mitchell Provider Data Explorer is currently available to Mitchell DecisionPoint® bill review customers and will be rolled out to Mitchell SmartAdvisor® bill review customers in phases through the end of 2020.

Headquartered in San Diego, California, Mitchell International, Inc. delivers smart technology solutions that simplify and accelerate claims handling and repair processes, driving more accurate, consistent and cost-effective resolutions.

October 5, 2020 – News Podcast

Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: WCJ Dismisses Michael Barri Liens Worth $18M. TD Required if Modified Work Limited by COVID Restrictions. Hospital Self-Referral Law Violation Settlements Continue Nationwide. Nursery Worker Arraigned for Insurance Fraud. New Law Allows Workers’ Compensation Remote Depositions. Cal/OSHA Cites So. Cal. Groceries for COVID-19 Violations. Cal/OSHA Cites So. Cal. Groceries for COVID-19 Violations. New Law Launches Cal Rx – The State Generic Drug Label. DWC Proposes Changes to Copy Service Fee Schedule. Updated Formulary Indicates New Exempt Anti-Depressants. Gallagher Bassett “Restarting” Systems After Ransomware Attack.

LC 5500.5 Contribution Can Be Timely Initiated by DOR

Charles Lewis filed a claim for an injury against Horizon Christian Fellowship that occurred on May 11, 2015 and also filed a cumulative trauma, a lower back injury, that he alleged occurred from April 11, 2016 to April 11, 2017.

Horizon was insured by GuideOne Mutual Insurance From March 1, 2015 to June 1, 2017, and was insured by Brotherhood Mutual Insurance Company from February 28, 2013 to February 28, 2015. On August 30, 2018 GuideOne filed a Petition for Joinder of Brotherhood as an additional party under Labor Code section 5500.5.

GuideOne and Lewis entered a Joint Compromise and Release which the WCJ approved on September 17, 2018. Brotherhood was joined as a party on October 16, 2018.

On January 18, 2019, GuideOne filed a Declaration of Readiness to Proceed on the issues of “Joinder Order issued 10/16/2018,” and that the complete file had been served on Brotherhood on 11/19/2018.

On January 31, 2019, Brotherhood filed an objection to the Declaration of Readiness to Proceed, stating it had not received the complete file and that it had subpoenaed additional records, which were needed before a hearing takes place on contribution issues.

on October 21, 2019, GuideOne filed another Declaration of Readiness for a Mandatory Settlement Conference (MSC) on the issue of Contribution/Arbitration and the conference was set for December 18, 2019. During the conference, Brotherhood “reserved its defense of untimely filing of the Petition for Contribution” as an issue for the arbitrator.

Brotherhood argued that GuideOne’s claim for contribution was barred because it had not timely submitted a pleading titled “Petition for Contribution” by September 17, 2019, one year after the Compromise and Release was approved. GuideOne argued that its January 18, 2019 Declaration of Readiness was sufficient to initiate contribution proceedings.

The arbitrator issued an order rejecting Brotherhood’s arguments, and noted in his decision that although a better practice is the filing of an actual petition for contribution that clears any confusion, he concluded that the Declaration of Readiness was sufficient to initiate the contribution proceeding.

The WCAB denied reconsideration. The fourth district Court of Appeal affirmed the arbitrator in its minute order of a Summary Denial in the case of Brotherhood Mutual Insurance Company v. WCAB, Guideone Mutual Insurance Company et al. Case Number D 077799.

In general the WCAB has inherent power to control its practice and procedure to prevent frustration, abuse, or disregard of its processes.” (Crawford v. Workers’ Comp. Appeals Bd. (1989) 213 Cal.App.3d 156, 164.) A review of a decision of the WCAB is limited to whether the WCAB acted without or in excess of its powers and whether the order, decision or award was unreasonable, not supported by substantial evidence or procured by fraud. (Lab. Code § 5952.)

Rule 10510 states, “After jurisdiction of the Workers’ Compensation Appeals Board is invoked pursuant to rule 10450, a request for action by the Workers’ Compensation Appeals Board, other than a rule 10500 form pleading, shall be made by petition.”

The WCAB has previously concluded a Declaration of Readiness is sufficient under that statutory provision and rule 10510 to initiate proceedings. (See Old Republic Ins. Co. v. Workers’ Comp. Appeals Bd. (Bennett) (2010) 75 Cal.Comp.Cases 168, 169 (Bennett).) As the WCAB found in Bennett, neither section 5500.5, subdivision (e) or rule 10510 specify that a petition is required in this circumstance. Section 5500.5, subdivision (e) does not specify what document must be used to initiate a contribution proceeding and rule 10510 contains an explicit exception for the use of a Declaration of Readiness.

Successor Corporation Not Insured by Existing Comp Policy

Liberty Mutual Fire Insurance issued workers’ compensation and general liability insurance policies to Shea Homes (Shea) since 2010.

Shea, a residential real estate developer, maintains an owner-controlled insurance program called the Shea Homes Partnership Insurance Program (SHPIP). Under the SHPIP, Shea purchases workers’ compensation insurance coverage for contractors enrolled in the program. Enrollment in the SHPIP is mandatory for all contractors working at Shea projects.

Falcon Framing Company, Inc. was an approved Shea trade partner and had been continuously enrolled in the SHPIP since at least 2009. On March 1, 2012, Falcon and Shea entered into a construction contract for the Shea Seaside project in Encinitas, California.

On April 5, 2012, Falcon formed a new corporate entity named FFC, Inc. (FFC). It conducted the same business, at the same office, with the same customers, suppliers, and equipment as Falcon. FFC acquired Falcon’s assets for no consideration and Falcon was dissolved on August 13, 2012.

Falcon did not notify Shea, Orion, or Liberty that they had dissolved Falcon and were continuing their business operations through FFC until August 20, 2012, when Marc Corbitt, an FFC employee suffered catastrophic injuries while working at the Shea Seaside project. At the time of the accident, Falcon had been paid in full for the Seaside project and had paid all of the premiums for the Liberty policy issued to Falcon.

FFC tendered the claim to Liberty and to Zenith, who had issued a worker’s compensation policy to Falcon for work on projects other than Shea jobsites. Liberty denied coverage for the claim. Zenith paid $3,239,003.86, subject to a reservation of rights, to resolve the claim. It then filed an action against Liberty and was awarded the full amount from Liberty. In a prior appeal, the judgment was reversed and remanded.

After remand, the trial court ruled that the Liberty policy did not provide coverage to FFC for Corbett’s injuries and that Liberty had no obligation to indemnify or reimburse Zenith for sums paid on FFC’s worker’s compensation claim. The Court of Appeal affirmed in the unpublished case of Zenith v. Liberty Mutual Fire Insurance.

FFC is not an insured under the Liberty policy terms. Zenith provides no legal support for its contention that the successor corporation of a named insured employer in a worker’s compensation policy acquires the named insured’s rights under the policy.

Falcon’s failure to notify Liberty of its dissolution and the formation of FFC after the date of the policy’s inception did not extend coverage to FFC. The plain language of the Liberty policy does not provide coverage to FFC.

Historic Fed Takedown of 345 Healthcare Providers for $6B Fraud

Federal officials announced a historic nationwide enforcement action involving 345 charged defendants across 51 federal districts, including more than 100 doctors, nurses and other licensed medical professionals.

These defendants have been charged with submitting more than $6 billion in false and fraudulent claims to federal health care programs and private insurers, including more than $4.5 billion connected to telemedicine, more than $845 million connected to substance abuse treatment facilities, or “sober homes,” and more than $806 million connected to other health care fraud and illegal opioid distribution schemes across the country.

This nationwide enforcement operation is historic in both its size and scope, alleging billions of dollars in healthcare fraud across the country,” said Acting Assistant Attorney General Brian C. Rabbitt.

The largest amount of alleged fraud loss charged in connection with the cases – $4.5 billion in allegedly false and fraudulent claims submitted by more than 86 criminal defendants in 19 judicial districts – relates to schemes involving telemedicine: the use of telecommunications technology to provide health care services remotely.

According to court documents, certain defendant telemedicine executives allegedly paid doctors and nurse practitioners to order unnecessary durable medical equipment, genetic and other diagnostic testing, and pain medications, either without any patient interaction or with only a brief telephonic conversation with patients they had never met or seen.

Durable medical equipment companies, genetic testing laboratories, and pharmacies then purchased those orders in exchange for illegal kickbacks and bribes and submitted false and fraudulent claims to Medicare and other government insurers.

The continued focus on prosecuting health care fraud schemes involving telemedicine builds on the efforts and impact of the 2019 “Operation Brace Yourself” Telemedicine and Durable Medical Equipment Takedown, which resulted in an estimated cost avoidance of more than $1.5 billion in the amount paid by Medicare for orthotic braces in the 17 months following that takedown.

The “sober homes” cases include charges against more than a dozen criminal defendants in connection with more than $845 million of allegedly false and fraudulent claims for tests and treatments for vulnerable patients seeking treatment for drug and/or alcohol addiction. The subjects of the charges include physicians, owners and operators of substance abuse treatment facilities, as well as patient recruiters (referred to in the industry as “body brokers”).

The cases involving the illegal prescription and/or distribution of opioids or that fall into more traditional categories of health care fraud include charges and guilty pleas involving more than 240 defendants who allegedly participated in schemes to submit more than $800 million in false and fraudulent claims to Medicare, Medicaid, TRICARE, and private insurance companies for treatments that were medically unnecessary and often never provided.

According to court documents, in many cases, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare. Also included are charges against medical professionals and others involved in the distribution of more than 30 million doses of opioids and other prescription narcotics.

The Department of Justice also announced the creation of the National Rapid Response Strike Force of the Health Care Fraud Unit of the Criminal Division’s Fraud Section. The National Rapid Response Strike Force’s mission is to investigate and prosecute fraud cases involving major health care providers that operate in multiple jurisdictions, including major regional health care providers operating in the Criminal-Division-led Health Care Fraud Strike Forces throughout the United States.

Prior to the charges announced as part of this historical nationwide enforcement action and since its inception in March 2007, the Health Care Fraud Strike Force program had charged more than 4,200 defendants who have collectively billed the Medicare program for approximately $19 billion.

Further information:
Graphics, Images and Resources.
Case Descriptions.  
Court Documents.

Sedgwick Launches COVID-19 Reporting Portal

Sedgwick, has added a solution to its technology suite of services that streamlines the submission process for California employers who are required under new legislation to report and determine COVID-19 workplace outbreaks.

On Sept. 17, 2020, California Gov. Gavin Newsom signed into law CA SB 1159, which expands workers’ compensation injury claims to include illness or death from COVID-19 within specific dates of infection. The law also establishes a rebuttable presumption of injury within certain limitations, shortens the period to accept or deny claims to either 30 or 45 days from the filing, and requires exhaustion of COVID-related paid sick leave prior to compensation.  SB1159 requires employers to calculate outbreaks using specific criteria and report all positive tests to their administrator.

This action codified Newsom’s executive order from March 19, 2020, and expanded rebuttable presumptions to more professions and employees if and when an “outbreak” is determined for injuries from July 6, 2020, through Jan. 1, 2023. The law took effect immediately and includes added responsibility for employers and administrators.

Employers are now required to report to their claims administrator within 30 business days of the effective date of CA SB 1159 when and how many employees in California tested positive for COVID-19 between July 6 and Sept. 17, 2020. From Sept. 18 onward, employers must report positive tests within three business days, as well as the largest number of employees who have worked at the infected location in the 45 days preceding the last day the positive employee was in the place of employment.

To ease the process for California employers, Sedgwick has launched a COVID-19 intake portal for reporting positive test results. Sedgwick’s award-winning global intake platform provides an innovative, easy-to-use and secure cloud-based system to initiate the process of recording positive tests and exposure events tied to COVID-19 in the workplace.

“With any new legislation, Sedgwick’s objective is to provide an appropriate, effective and efficient means to help our clients meet their compliance requirements,” said Max Koonce, Sedgwick’s chief claims officer. “Our global intake platform simplifies the COVID-19 reporting process for California employers so they can follow the state’s guidelines, protect their employees and customers, and keep their workplaces operating safely during the pandemic.”

“Sedgwick’s quick response with this advanced intake and reporting solution will help clients easily report information under CA SB 1159, giving them more time to focus on their day-to-day operations,” said Leah Cooper, Sedgwick managing director of global consumer technology.

WCIRB Reports 11% Reduction in Premium

The Workers’ Compensation Insurance Rating Bureau of California has published its report on insurer loss and premium experience valued as of June 30, 2020. This Quarterly Experience Report contains charts illustrating current cost drivers in the system. Highlights of the findings include the following.

Written premium for the first two quarters of 2020 is 11% below that for the first two quarters of 2019. The impact of the COVID-19 crisis on the California economy is expected to significantly reduce employer payroll and insurer premium for the remainder of 2020. The large decrease in premium for the second quarter of 2020 is driven by the sudden and sharp slowdown in the economy.

The average charged rate for the first two quarters of 2020 is 8% below that for 2019 and 40% below the peak in 2014. The January 1, 2020 approved advisory pure premium rates are on average 47% below those for January 1, 2015. Absent COVID-19, the indicated average advisory pure premium rate for January 1, 2021 was slightly below the 2020 level. However, when including the COVID-19 claim impact, the WCIRB proposed a 2.6% increase in average advisory pure premium rates.

The projected combined ratio for 2019 is 8 points higher than 2018 and 16 points higher than the low point in 2016 as premium levels have lowered while claim costs increased moderately. Despite the recent increase, combined ratios for 2013 through 2019 are below 100% and are the lowest since the 2003 through 2007 period.

Claim activity in the second quarter of 2020 was significantly slower due to the pandemic and shelter-in-place period and may not be indicative of future claim activity.

Indemnity claims have settled quicker over the last several years, largely driven by SB 863 and SB 1160 reforms. Average claim closing rates declined sharply in the second quarter of 2020 as a result of the pandemic and shelter-in-place period.

Incremental reported claims have generally increased through 2019. Reported indemnity claims in the second quarter of 2020 were 10% lower than the second quarter of 2019, while medical-only claims were one-third lower. The recent lower claim counts are likely due to the slowdown of economic activity, less work being done outside the home, and delays in reporting of claims during the shelter-in-place period.

The number of liens filed in 2019 and 2020 are more than 60% below pre-SB 1160 and AB 1244 levels. Lien filings decreased in the first two quarters of 2020, though some of the decrease is likely due to the pandemic.

FDA Approves New Cervical Disc Replacement Design

Several cervical artificial disc technologies have been developed to replace degenerated intervertebral discs in the cervical spine. While no artificial disc can perfectly replace a natural disc’s ability to cushion and transfer loads in the neck, an artificial disc may maintain more of the cervical spine’s natural range of motion compared to fusion surgery.

Artificial discs are available in various sizes, shapes, and heights in order to achieve these goals and provide good surgical outcomes. Several types of discs have been fabricated using different materials, designs, and techniques.

And now a California company has just obtained FDA approval for another promising product.

Simplify® Disc is a motion-preserving cervical artificial disc designed to allow for advanced imaging capability of MRI, to better match patients’ anatomies, and for physiologic movement. The three-piece disc, with a semi-constrained mobile core, is designed to mimic/replicate the natural biomechanical motion of a healthy disc. Implantation of the Simplify Disc is accomplished in a straightforward, three-step procedure.

Simplify Medical, a privately-held company, headquartered in Sunnyvale California, focused on cervical spinal disc arthroplasty and developer of the Simplify® cervical artificial disc, announced U.S. Food and Drug Administration (FDA) Approval for the Simplify Disc Pre-Market Application (PMA) for 1-level indications. Simplify Disc achieved superiority to the fusion control on the composite primary endpoint.

The prospective trial enrolled 166 Simplify Disc patients at 16 clinical sites across the United States, and results were compared with a historical fusion control. Simplify Disc was used for 1-level cervical implantation between the C3 to C7 vertebrae.

The study results demonstrated that Simplify Disc achieved superiority in overall success compared to anterior cervical discectomy and fusion (ACDF). At 24 months:

The Simplify Disc overall success rate of 93.0% was statistically superior to the ACDF overall success rate of 73.6% (p<.001).
97.9% of Simplify Disc patients achieved a significantly higher rate of meaningful (15 point) improvement in Neck Disability Index (NDI) compared to ACDF at 88.0% (p=.009).
— Simplify Disc mean NDI improved from 63.3 at baseline to 13.6 at 24 months, and was superior to ACDF at all follow-up timepoints.
— Simplify Disc patients had a higher rate of improvement in neurological function at 79.9% compared to ACDF at 54.7%.
— Simplify Disc mean VAS (Neck/Arm Pain) of 15.6 was superior to ACDF at 23.3 (p<.001).
— Significantly fewer Simplify Disc patients, 10.8%, were taking narcotic pain medication compared to ACDF patients at 36.8% (p<.001).
Time to recovery (defined as 15 points of NDI improvement) was faster for Simplify Disc patients compared to ACDF patients. At 6 weeks, 87.0% of Simplify Disc patients and 76.8% of ACDF patients had achieved this threshold. At 3 months, 95.9% of Simplify Disc patients and 81.1% of ACDF patients had achieved recovery.
— Simplify Disc patients had less adjacent level degeneration compared to ACDF patients. At the disc level above the treatment level, 82% of Simplify Disc patients and 52% of ACDF patients had no progression in degeneration. At the disc level below the treatment level, 72% of Simplify Disc patients and 34% of ACDF patients had no progression in degeneration.

The Simplify Disc is also being evaluated in a separate IDE study in the U.S. for 2-level indications. The enrollment for the 2-level trial was completed in November 2018. Simplify Disc is limited to investigational use for this indication.

September 28, 2020 – News Podcast

Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: Suit by Restaurant Server Encouraged Drink Limited by Exclusive Remedy. Court Rules Exclusive Remedy Applies to COVID-19 Civil Action. Gilead Sciences Resolves Kickback Case for $97M. Fraudulent EDD Debit Cards Flood Beverly Hills Luxury Shops. Redding Forestry Technician Faces Comp Fraud Charges. Central Valley Farm Worker Faces Felony Comp Fraud Charges. Physicians Sentenced in $65M Compound Meds Fraud Case. Cal/OSHA Cites Police Department for COVID Safety Violations. CWCI Reports 2020 IMR Requests Fell Sharply. Travelers Launches Virtual Ergonomic Assessments.