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May 7 Meeting Set with MAXIMUS to Discuss IMR and IBR Communication

The Division of Workers’ Compensation has invited interested members of the public to a meeting May 7 to discuss the most efficient means of communication with Maximus Federal Services, the current independent medical and bill review organization. The meeting will be from 10 a.m. to noon in the auditorium of the Elihu Harris Building, 1515 Clay Street in Oakland

Principals from Maximus Federal Services will present an overview of how the requests for independent medical reviews (IMRs) and independent bill reviews (IBRs) are processed.

Workers’ compensation carriers and third party administrators are encouraged to join in this discussion regarding secure methods of transmitting documents and the best ways to handle billing and other communications issues.

Maximus Inc., trademarked as MAXIMUS, is an American for-profit privatizing company that provides business process services to government health and human services agencies in the United States, Australia, Canada, Saudi Arabia, and the United Kingdom. MAXIMUS focuses on administering government-sponsored programs, such as Medicaid, the Children’’s Health Insurance Program, health care reform, welfare-to-work, Medicare, child support enforcement, and other government programs. The company is based in Reston, Virginia, has 8,657 employees, and reported annual revenue of $1.05 billion in fiscal year 2012.

Over its nearly 40 year history it has not been without criticism. In October 2010, The Los Angeles Times reported that 146 medical workers, including doctors, nurses and pharmacists were allowed to keep working despite failing drug tests. MAXIMUS was awarded a $2.5 Million a year contract to run California’s confidential “diversion programs”. MAXIMUS contracted the work out to a subcontractor who in turn subcontracted the work to another company. The drug testing company was using the wrong standard of drug test from December 2009 to August 2010, resulting in medical workers who tested positive for drugs to continue working.

In October 2000 six state lawmakers in Wisconsin called for the termination of MAXIMUS’ W-2 contract, saying the firm has “broken faith with the state and poor people the agency serves in Milwaukee County.”

In November 1997, The Hartford Courant reported that MAXIMUS “gets minimal results” when it was hired by the State of Connecticut to manage a child care program for recipients of welfare. According to the Record-Journal, MAXIMUS “hired too few people, installed an inadequate phone system and fell weeks or months behind in making payments to day care providers.

WCIRB Report Shows 12% Increase In Average Rates

The Workers’ Compensation Insurance Rating Bureau of California has completed its report on insurer loss and premium experience valued as of December 31, 2012. This report is based on data reported to the WCIRB by insurers who wrote almost 100% of the statewide market.

California written premium (gross of deductible credits) for calendar year 2012 is approximately $12.5 billion. This is approximately 16% above the written premium reported for 2011 and 42% above the written premium reported for 2009.

The projected industry average charged rate (rates charged by insurers that reflect all rating plan adjustments except deductible credits, retrospective rating plan adjustments, terrorism charges, and policyholder dividends) per $100 of payroll for policies written between July 1, 2012 and December 31, 2012 is $2.60. This is approximately 12% above the average rate charged for 2011 and 24% above the average rate charged for 2009. However, the average rate charged in the second six months of 2012 remains approximately 59% less than the average rate charged in the second six months of 2003.

The WCIRB projects an ultimate accident year combined loss and expense ratio of 136% for accident year 2011, which is comparable to the 2009 and 2010 projections. The WCIRB preliminarily projects an ultimate accident year combined loss and expense ratio of 127% for accident year 2012. The combined ratios for the last four years are the highest since 2001.

The WCIRB projects indemnity claim frequency for accident year 2012 to be 2.7% above the frequency for 2011 and 12.8% above the frequency for 2009 (Exhibit 7). While projected indemnity claim frequency shows increases over the last three accident years, the 2012 frequency remains approximately 30% below the indemnity claim frequency experienced prior to the 2002 through 2004 reforms.

Court of Appeal Rules Against Nurse With Latex Allergy

Catholic Healthcare West owns and operates medical facilities in California and other states, including Mercy Medical Center Redding, a hospital and related facilities located in Redding, California. Janet Anderson started working at Mercy as a registered nurse in 1979.

In 2005, Anderson experienced medical symptoms – itching all over her arms and torso – that were consistent with an allergic reaction. Anderson went to the employee health department to undergo a “RAST” test for sensitivity to latex.

Before the results of the RAST test were known, Anderson was called to a meeting with the director of perioperative services, Jeanette Smith, and the OR manager, Kirk Williams. Smith had been hired by Mercy five months earlier to make the OR department financially more efficient and attract more physicians to perform surgeries at Mercy. As part of that effort, Smith evaluated Anderson’s position and duties and found them to be nonessential. Smith informed Anderson the position of OR data coordinator was being eliminated as part of a reorganization of the OR.At no time during the meeting was Anderson’s allergic reaction or the possibility the reaction was caused by latex exposure discussed. Anderson applied for and obtained a position as a circulating nurse in the outpatient surgery center.

Later it was determined that Anderson’s symptoms were related to latex sensitivity.

Anderson experienced another allergic reaction at work on March 11, 2005, and went to the emergency room. Anderson discussed the latex allergy with her supervisor at the outpatient surgery center who then designated one of the rooms as a latex-free area for Anderson to perform many of her duties. She continued to be reactive at work. Anderson stopped working and filed a workers’ compensation claim relating to the allergic reactions in March.

Anderson’s medical records described subsequent allergic reactions to latex in non-hospital settings and to such products as automobile tires, furniture, food products and food packaging. She was found to be sensitive to foods handled by food workers wearing latex gloves, and to latex on chairs and seats in movie theaters and restaurants. Her physician wrote on March 19, 2007, that Anderson “remains unemployable outside of her own home, which she has purposefully made latex free.” Later he released her to transitional (modified) work, full-time depending on location, with no exposure to latex products. Efforts were made by the employer to locate work but she could not be returned to outpatient surgery, or to any other clinical locations within or outside of the hospital proper due to possible latex exposure.

Anderson filed a civil action which alleged five causes of action under the California Fair Employment and Housing Act. After a court trial, judgment was entered in Mercy’s favor and Anderson appealed. The Court of Appeal in the unpublished decision of Janet Anderson v Catholic Healthcare West affirmed the judgment in favor of the employer. Anderson failed to demonstrate on appeal the trial court’s decision with respect to disability discrimination and wrongful termination based on disability was unsupported by substantial evidence.

Retired Athletes Plan Sacramento Protest

A battle between professional athletes and owners of football, baseball, basketball, hockey and soccer teams starts Monday. The Los Angeles Times reports that dozens of retired athletes plan a news conference on the steps of the state Capitol to denounce a bill that would make it harder for them to file workers’ compensation claims in California.

The measure, AB 1309 by Assemblyman Henry Perea (D-Fresno), seeks to close what he sees as a legal loophole that allows out-of-state players to file claims for compensation for sports injuries developed from years of pounding in the arena. An Assembly Insurance Committee hearing is set for April 24.

Opposing the bill are the players and their unions. The legislation interferes with collective bargaining agreements, said NFL Players Assn. Executive Director DeMaurice Smith. Among those players expected Monday are J.J. Stokes of the National Football League’s San Francisco 49ers, Jacksonville Jaguars and New England Patriots; Ickey Woods of the NFL’s Cincinnati Bengals; and Marty McSorley, who played hockey for half a dozen teams, including the Los Angles Kings and San Jose Sharks.

Perea counters that out-of-state players are taking advantage of an overly generous California law. “The question as I see it for the Legislature,” he said, “is whether it is fair to burden California’s system with these claims from out-of-state employees.”

More Details Emerge in Pacific Hospital of Long Beach Investigation

According to a new story in the Wall Street Journal, federal agents are looking into fraud allegations at companies owned by Michael D. Drobot, a hospital executive who built a Southern California business empire centered on treating spine injuries suffered by workers’ compensation patients. Last week, FBI and IRS agents conducted searches at the companies as part of a fraud investigation by the U.S. attorney for the Central District of California, said Laura Eimiller, a spokeswoman for the FBI’s Los Angeles field office. She added that the grand jury affidavit supporting the searches was sealed, and declined to provide specifics about the investigation.

The agents served search warrants on Pacific Hospital of Long Beach, a 184-bed facility owned and run by Mr. Drobot, and on Industrial Pharmacy Management LLC, a Drobot company based in Newport Beach that dispenses medications to patients in doctors’ offices.

“We look forward to working with the authorities to resolve the misunderstandings that led to” the searches, said Laura Salas Reyes, a spokeswoman at the hospital. A person at the drug-dispensing firm said no one was available to comment. Mr. Drobot and his attorney didn’t respond to requests for comment.

Mr. Drobot, 68 years old, acquired Pacific Hospital of Long Beach in 1997 and shifted its focus to spine surgeries for workers’ compensation patients. In a front-page article last year, the Wall Street Journal identified the hospital as one of the most prolific spine-surgery facilities in California. From 2001 to 2010, according to state data, it performed 5,138 spinal fusions on workers’ compensation patients and billed $533 million for them – three times as much as any other hospital in the state.

For a time, Mr. Drobot was in business with Paul Randall, a hospital marketer who served time in federal prison in the 1990s for racketeering. Mr. Randall said he recruited spine surgeons to operate at Mr. Drobot’s hospital, and the two said they operated a magnetic-resonance-imaging business together. Documents reviewed by the Journal last year showed that Mr. Randall was under investigation by the U.S. attorney’s office for allegedly inflating the cost of spinal implants and paying kickbacks to chiropractors and spine surgeons. Mr. Randall hasn’t been charged and has denied engaging in any illegal activities. On Monday, he and his attorney both declined to comment.

In January, the Wall Street Journal reported that Randall was a consultant paid millions of dollars by Tri-City Regional Medical Center, that It built up this business rapidly. Tri-City is a 107-bed facility just south of Los Angeles near Long Beach. The small hospital billed workers’ compensation insurers $65 million in 2010 for spinal fusions, up from less than $3 million three years earlier. Randall’s role for Tri-City was twofold: bringing surgery cases to the hospital by recruiting surgeons to operate there, and supplying metal implants for the surgeries through distributorships he owned. An official of Tri-City said the hospital ended its relationship with Mr. Randall in the middle of last year, a few months after it ousted the executive who had hired him.

Mr. Randall, 52 years old, an entrepreneur with a collection of sports memorabilia and a yen for gambling, began his career as a hospital marketer in the mid-1990s after serving a stint in federal prison for racketeering. He was convicted of the felony in 1993 for deals that involved buying wooden shipping pallets on credit and reselling them without paying the original vendors, and was sentenced to a 21-month term. After serving time in the Terminal Island federal correctional facility in Long Beach harbor, Mr. Randall went into business with Michael D. Drobot, the owner of Pacific Hospital of Long Beach.

A Naval officer in the Vietnam era, Mr. Drobot bought Pacific in 1997 and shifted its focus to spine care for workers’ compensation patients. For a decade, Messrs. Randall and Drobot operated a business that arranged for magnetic resonance imaging, or MRI, services. Randall was reportedly paid $25,000 a month to run the MRI business plus a share of profits. Mr. Drobot created several businesses focused on workers’ compensation patients: a van service to shuttle patients, a provider of Spanish interpretation and a distributorship of metal implants used in back surgery. His hospital became one of the most prolific spine-surgery facilities in California.

After a business dispute between the two men, Mr. Randall in 2008 moved to Tri-City, a hospital eight miles away that then focused on bariatric surgery. Tri-City, which is a nonprofit institution, paid Mr. Randall more than $3.2 million between 2008 and July 2011 as a business-development consultant. Mr. Randall recruited some of the same spine surgeons to Tri-City that he earlier introduced to Mr. Drobot at Pacific. By August 2011, Mr. Randall said, he was back to doing spine-surgery marketing work for Mr. Drobot at Pacific Hospital of Long Beach. . Mr. Randall said he signed a $100,000-a-month marketing agreement with Mr. Drobot – technically between Mr. Drobot’s spinal-implant distributorship and a Randall marketing firm – under which Mr. Randall is to provide services such as “recruiting surgeons to the medical staff of hospitals that use” implants Mr. Drobot distributes. Mr. Drobot said through a spokesman that he didn’t recall entering into any such contract and that he didn’t believe the signature on the document was his.

President Proposes Changes to Federal Comp System

President Barack Obama’s 2014 budget proposal sent to Congress on Wednesday calls for reforms to two federal workers compensation programs: the Federal Employees’ Compensation Act and the Defense Base Act.

According to the story on the Business Insurance website, the White House is proposing to act on longstanding recommendations by the Government Accountability Office and other federal organizations by converting retirement-age FECA beneficiaries to a “retirement annuity-level benefit.” FECA currently creates an incentive for federal employees injured on the job to continue receiving its benefits beyond their retirement age, according to the budget proposal.

“In addition, while state workers compensation systems have waiting periods for benefits to discourage less serious claims, FECA has a three-day waiting period for non-postal employees that is imposed too late in the claims process to be effective,” the proposal states.

The proposed changes also would impose a new up-front waiting period for FECA benefits and give the U.S. Department of Labor “additional tools to reduce improper payments.” The budget proposal does not provide specifics, but the FECA changes would save more than $500 million over 10 years, it says.

The president’s proposal also would replace the current Defense Base Act program with a governmentwide benefit fund that would bill individual federal agencies for their workers comp insurance costs. The DBA provides benefits for contract overseas workers on U.S. military bases and for workers on overseas public works projects.Under the DBA’s current structure, federal agencies pay for their insurance through a “patchwork” of individual contracts, and its costs now exceed benefits paid “by a significant margin,” according to the budget proposal. The proposal points out that the DBA’s caseload increased by nearly 2,600% from 2002 to 2011, with more than 11,600 claims filed in 2011.

Cal Chamber of Commerce Adds Pending Bills to Job Killer List

Each year the California Chamber of Commerce releases a list of “job killer” bills to identify legislation that it claims will decimate economic and job growth in California. The CalChamber will track the bills throughout the rest of the legislative session and work to educate legislators about the serious consequences these bills will have on the state. The List for 2013 now shows several proposed legislative changes that pertain to workers’ compensation and other workplace issues.

SB 626 (Beall; D-San Jose) Massive Workers’ Compensation Cost Increase – Unravels many of the employer cost-saving provisions in last year’s workers’ compensation reform package and results in employers paying nearly $1 billion in benefit increases to injured workers without an expectation that the increases will be fully offset by system savings.

AB 1138 (Chau; D-Alhambra) Massive Exposure to Civil Penalties and Liability – Inappropriately increases civil cases and civil penalties on employers by permitting civil action against those employers who fail to conspicuously post a list of every employee covered under an employer’s workers’ compensation insurance policy and to retain this list for five years.

SB 761 (DeSaulnier; D-Concord) Paid Family Leave Protection – Creates a new burden on small businesses and additional opportunities for frivolous litigation by transforming the paid family leave program, which is used as a wage replacement for an employee who is taking a separate leave of absence, into an additional paid protected leave.

AB 5 (Ammiano; D-San Francisco) Increased Exposure to Frivolous Litigation – Imposes costly and unreasonable mandates on employers that could jeopardize the health and safety of others by creating a new protected classification of employees and customers who are or are perceived to be homeless, low income, suffering from a mental disability, or physical disability, and establishing a private right of action for such individuals that includes statutory damages, punitive damages, and attorney’s fees.

AB 10 (Alejo; D-Salinas) Automatic Minimum Wage Increase – Unfairly increases California employers’ cost of doing business by raising the minimum wage $1.25 over the next three years and thereafter indexing the minimum wage based on inflation, which fails to take into account the current economic status of the state or other fees and costs employers are required to pay.

SB 404 (Jackson; D-Santa Barbara) Expansion of Discrimination Litigation – Makes it virtually impossible for employers to manage their employees and exposes them to a higher risk of litigation by expanding the Fair Employment and Housing Act to include a protected classification for any person who is, perceived, or associated with a family caregiver.

AB 1164 (Lowenthal; D-Long Beach) Inappropriate Wage Liens – Creates a dangerous and unfair precedent in the wage and hour arena by allowing employees to file liens on an employer’s personal property or real property where the work was performed, based on an alleged but unproven wage claim, that will take priority over other existing liens.

The CalChamber will continue to add legislation to the “job killer” list throughout the year as bills are amended or new language is introduced.

Facebook Video Leads to Conviction of Corrections Officer

Sacramento County District Attorney Jan Scully said on her Facebook page that Ryan Patrick Wenker, 35, was convicted of making a false statement to fraudulently obtain compensation.

After Wenker claimed that he was hurt, Facebook posts and video surfaced, along with his standings in a bike race that took place May 12, 2010 in Prairie City, according to documents that were part of an investigation done by the Department of Corrections. The bike race took place two days after he filed a claim alleging an injury to his back, according to the documents.The DA’s office says a video posted online shows that Wenker is shooting video of mountain biking, using a helmet camera while riding behind others.

Scully reported that “Ryan Wenker was convicted of misdemeanor making a false statement to fraudulently obtain compensation. He filed a workers’ comp claim while employed with the Dept. of Corrections as a corrections officer. He alleged he injured his back at work. Photos and bike race standings posted on Wenker’s Facebook page show that he participated in a mountain bike race while collecting disability – see video. Wenker is wearing a camera attached to his helmet.”

A spokeswoman for the DA’s office said that Wenker was ordered to serve 45 days in the Sacramento County Jail, and ordered to pay $5,000 in restitution to the Department of Corrections.

Exclusive Remedy Shields LAUSD Principal From Employee Battery Claim

Elvira Mendez worked for the Los Angeles Unified School District at Encino Elementary School until she was laid off in November 2010 as a result of budget reductions. She was an office technician assigned to special education services. In August 2010, Marcia Koff became the Encino Elementary School principal.

During a meeting in August or early September 2010, Koff told Mendez and other staff members that, to protect student privacy, parents should not be allowed to view staff computer screens. On September 15, 2010, Koff saw Mendez talking to a parent at her desk behind the counter dividing the walkway from the desk area. Koff told the parent to move to the counter. The parent attempted to explain the subject of her conversation with Mendez, but Koff insisted that she move away from Mendez’s desk. Koff then pulled Mendez out of her chair by her shoulders, grabbed her left arm, and dragged her to the counter. Mendez felt a sharp pain in her upper left arm. During the incident, Koff told Mendez: “I told you not to speak to parents so close to your workstation.” Ten minutes later, after Mendez had returned to her desk, Koff put her hands on Mendez’s shoulders and whispered into her ear: “I don’t want you to speak to parents next to your desk. That is one of the many complaints from the district.”

Based on this incident, Mendez filed a police report against Koff the next day. She contacted her union representative about it on September 20, and complained in writing to Local District Superintendent Linda del Cueto on September 28. In the first week of October 2010, Mendez refused to proceed with the workers compensation claim the LAUSD had filed on her behalf. Also in the first week of October, Koff was asked to respond to Mendez’s complaint against her during a meeting with LAUSD directors Lisa Gaboudian and Dea Tramble. Koff was interviewed by police about the incident at the end of October 2010. No criminal charges were filed against her.

By letter dated October 15, 2010, the Personnel Commission notified Mendez of her layoff effective November 30, 2010. An office technician displaced from another school took over Mendez’s position, and her duties in special education were assigned to another office technician who transferred from a different school. A total of 1161 office technicians were laid off as a result of the RIF process.

In March 2011, Mendez sued Koff for assault and battery and the LAUSD for wrongful termination under Labor Code section 1102.5, subdivision (b). The trial court entered summary judgment in favor of the employer and Koff, and Mendez appealed the dismissal of her case. The Court of Appeal affirmed the dismissal in the unpublished opinion in Elvira Mendez v Los Angeles Unified School District.

The Court of Appeal noted that workers’ compensation is the exclusive remedy for injuries caused by the tortious conduct of co-workers acting within the scope of their employment. (Lab. Code, § 3601, subd. (a); Torres v. Parkhouse Tire Service, Inc. (2001) 26 Cal.4th 995, 1002 (Torres).) An exception exists for injuries caused by a co-worker’s “willful and unprovoked physical act of aggression.” (Lab. Code, § 3601, subd. (a)(1).) This exception requires that the co-worker acted with a specific intent to injure. (Torres, supra, 26 Cal.4th at p. 1005.)

Mendez argues that whether Koff acted with an intent to injure her when she dragged her to the counter presents a triable issue of fact. The Court of Appeal disagreed. In Torres, supra, 26 Cal.4th 995, the California Supreme Court explained: “Flare-ups, frustrations, and disagreements among employees are commonplace in the workplace and may lead to ‘physical act[s] of aggression.’ [Citations.] ‘”In bringing [people] together, work brings [personal] qualities together, causes frictions between them, creates occasions for lapses into carelessness, and for fun-making and emotional flareup. . . . These expressions of human nature are incidents inseparable from working together. They involve risks of injury and these risks are inherent in the working environment.” [Citations.]’” (Id. at p. 1009.) Because “willful acts, including aggressive physical acts, may be considered within the scope of employment,” the intent to injure requires something more. (Ibid., citing Johns-Manville Products Corp. v. Superior Court (1980) 27 Cal.3d 465, 476 [trend toward allowing actions against employer who “‘acts deliberately for the purpose of injuring the employee’”].)

Viewed in the light most favorable to Mendez, the facts do not support a reasonable inference that Koff acted with the specific intent to physically injure Mendez.

Employer Wage Theft is First State Premium Fraud Case

A San Diego grand jury indictment has been returned charging two defendants with a total of 21 felony counts in an ongoing payroll scheme at a College Area restaurant that violated minimum wage laws and California theft laws. Over a two-year period, the defendants hired more than 20 servers and cooks, many of them college students, to work at State Street Grill but refused to pay them after a week of work or offered them a wage that amounted to less than $5 per hour.

This is believed to be the first case in California where wages stolen from employees that were then not reported to the insurance company as payroll is being used as the basis to charge premium fraud.

David Dadon, 61, and his son Barry Dadon, 27, have both been charged with workers’ compensation premium fraud, payroll tax evasion, sales tax evasion and grand theft of labor from 23 victims. David Dadon was also indicted on one count of the fraudulent removal of property under a lease and two counts of attempted extortion. If convicted of all the charges, David Dadon faces up to 21 years in prison and Barry Dadon faces up to 18 years and possible restitution to the victims.

The case was originally referred to the DA’s Insurance Fraud Division from the California Labor Commissioner, whose Criminal Investigation Unit launched an investigation of State Street Grill, located at 5131 College Avenue in San Diego. The investigation revealed wages earned but not received by at least 23 individuals. As many as 50 potential additional victims are being encouraged to come forward. The DA’s Office worked closely with the Labor Commission to investigate the case. The Labor Commissioner’s office, also known as the Division of Labor Standards Enforcement (DLSE), is the state agency charged with labor law enforcement in California.

The men advertised on Craigslist for immediate placement of server and cook positions. They would offer the applicant the position if they accepted to work without pay for the first seven days. This was considered to be the “training period.” If, after the first seven days of unpaid work, the Dadons were satisfied by the employees’ performance, they indicated the workers would be “put on the schedule” and paid wages. In desperate need of income, many accepted the offer. The trainees described working in excess of 40 hours per week (many 50 to 60) and were never paid. In addition, the Dadons took some of the tips the workers earned.

Employees who were hired after the training period continued to work 50 to 60 hours per week and were fired if they refused to accept a $400 semi-monthly salary. Based on the number of hours worked many employees were working for less than five dollars per hour.