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Clinical Laboratories Under Scrutiny for Kickbacks to Doctors

Some clinical laboratories have collected hundreds of millions of dollars from Medicare while using a strategy that is now under regulatory scrutiny: They paid doctors who sent patients’ blood for testing a fee for drawing the blood to be tested. According to a report in the Wall Street Journal, for some physician practices, payments totaled several thousand dollars a week. The practice is now under regulatory scrutiny as a potential “kickback” which would be unlawful under federal law.

At the heart of the current controversy is Health Diagnostic Laboratory Inc, a compnay that transformed itself from a startupin late 2008 into a major lab with $383 million in 2013 revenues, 41% of that from Medicare. Until late June, HDL paid $20 per blood sample to most doctors ordering its tests – more than other such labs paid. Other labs under investigation include Quest’s Berkeley HeartLab, Singulex Inc., Boston Heart Diagnostics Corp. and Atherotech Diagnostics Lab. Quest says Berkeley ended payments of $7.50 to $11.50 in 2011 when Quest bought Berkeley. HDL, Singulex, Boston and Atherotech say they stopped payments after a Special Fraud Alert on June 25 from the Department of Health and Human Services, which warned that such remittances presented “a substantial risk of fraud and abuse under the anti-kickback statute.” The fraud alert is part of an investigation the health agency’s Office of Inspector General is conducting with the Justice Department into doctor payments by HDL and several other labs specializing in cardiac-biomarker testing, people familiar with the investigation say.

According to the alert “This Special Fraud Alert addresses compensation paid by laboratories to referring physicians and physician group practices (collectively, physicians) for blood specimen collection, processing, and packaging, and for submitting patient data to a registry or database. OIG has issued a number of guidance documents and advisory opinions addressing the general subject of remuneration offered and paid by laboratories to referring physicians, including the 1994 Special Fraud Alert on Arrangements for the Provision of Clinical Laboratory Services, the OIG Compliance Program Guidance for Clinical Laboratories, and Advisory Opinion 05-08. In these and other documents, we have repeatedly emphasized that providing free or below-market goods or services to a physician who is a source of referrals, or paying such a physician more than fair market value for his or her services, could constitute illegal remuneration under the anti-kickback statute. This Special Fraud Alert supplements these prior guidance documents and advisory opinions and describes two specific trends OIG has identified involving transfers of value from laboratories to physicians that we believe present a substantial risk of fraud and abuse under the anti-kickback statute.”

The Special Fraud Alert describes two specific trends that present a substantial risk of fraud and abuse: Specimen Processing Arrangements and Registry Arrangements. According to the OIG, suspect Processing Arrangements typically involve payments from laboratories to physicians for certain specified duties, which may include collecting the blood specimens, centrifuging the specimens, maintaining the specimens at a particular temperature, and packaging the specimens so that they are not damaged in transport. The OIG also raised concerns with arrangements under which clinical laboratories pay physicians to collect and package patients’ swabs or urine specimens or provide free or below-market point of care urine testing cups to health care providers who use the cups to perform billable in-office testing.

The Special Fraud Alert also addresses suspect Registry Arrangements, whether they are referred to as “registries” or “observational outcomes databases” or by other terminology. Payments are made for establishing, coordinating, or maintaining databases, either directly or through an agent, purportedly to collect data on the demographics, presentation, diagnosis, treatment, outcomes, or other attributes of patients who had tests performed by the offering laboratories. Although Registry Arrangements take various forms, they typically involve payments from laboratories to physicians for certain specified duties, including submitting patient data to be incorporated into the Registry, answering patient questions about the Registry, and reviewing Registry reports. Under this scheme yhe laboratory requires, encourages, or recommends that physicians who enter into Registry Arrangements perform the tests with a stated frequency (e.g., four times per year). Compensation paid to physicians is on a per-patient or other basis that takes into account the value or volume of referrals.

Singulex says it paid $10, saying such fees were “a long-standing industry wide practice,” before the “government clarified their view.” Boston says it paid $15 and thought the practice lawful before the alert. Boston and Singulex didn’t include a $3 draw fee. Berkeley did include the $3, as did Atherotech, which says it paid $10, declining further comment.

It seems clear that the workers’ compensation community should also scrutinize the financial relationships between treating or evaluating physicians and the clinical laboratories they use. Financial payment seems to be a wide spread practice.

Medical Industry Surpasses All Industries in Data Security Breaches

In 2013, the health care industry experienced more data breaches than it ever had before, accounting for 44% of all breaches, according to the Identity Theft Resource Center. It was the first time that the medical industry surpassed all others, and stood in stark contrast to the financial services industry, which represented just 3.7% of the total.

Identity theft is so pervasive in health care that, according to a 2013 ID Experts data security survey of 91 healthcare organizations, 90% of respondents had experienced a data breach in the previous two years and 38% had had more than five incidents. The leading causes of a breach are typical for any business: a lost or stolen computing device, an employee error, a third-party snafu. There’s also “Robin Hood fraud,” in which someone knowingly gives a friend or family member information to fraudulently receive health care. But one cause has grown in importance: Criminal attacks have doubled in the last four years, according to the survey. (A good example: the theft of 4.5 million records this month at hospital operator Community Health Services.)

Rick Kam, president and cofounder of ID Experts, a company that helps health organizations prevent and respond to breaches, says his team has been tracking crime rings that have been prosecuted in the last year for medical fraud. “Essentially, criminals have come to understand that using your medical credentials – your name, Social Security Number and health insurance numbers – to order goods and services that are never delivered and to bill organizations like Medicare and Medicaid, those activities are more profitable than drugs, prostitution, and other crimes they may pursue.” For this reason, medical identities are 20 to 50 times more valuable to criminals than financial identities. What could exacerbate the problem is the digitization of health information found in electronic records, mobile devices, and health exchanges.

Estimates of annual United States medical fraud range from $80 billion to $230 billion. Health care organizations who suffer breaches are subject to costs that average to $2 million over two years, according to estimates. This is why the health care industry and related players are starting come together to tackle prevention. It is a formidable task: With so many potential avenues for information to be lost, so many different institutions from which to steal data, and so many ways of perpetrating fraud at other organizations – not to mention the lack of a central database for reporting such fraud – the industry is a long way from being as impenetrable as the financial services industry.

Steven Toporoff, an attorney in the division of privacy and identity protection at the Federal Trade Commission, says that people who suspect financial fraud can get free copies of credit reports and can put on a fraud alert under federal law or a credit freeze in most states to halt fraudulent activity. “There are ways to block erroneous items from their credit report,” he says. “There are also remedies if you have a bank account and monies were withdrawn. There are protections for credit cards. In the financial world, we’ve been dealing with these problems for years. Unfortunately, in the medical world, it has not caught up yet.”

This year, a few dozen businesses (including health care providers such as hospitals, integrated care payer-providers such as Kaiser Permanente, insurers, credit companies, and digital security companies) formed the Medical Identity Fraud Alliance. The industry group is focusing on three key tasks: develop best practices to prevent medical identity theft and fraud for providers, payers, information management companies, and regulators; educate consumers, providers, and third-party vendors; and influence relevant legislation and regulations.The group aims “to take an enterprise-wide approach,” says Ann Patterson, MIFA’s senior vice president and program director. A company can’t just relegate the task of theft prevention to one executive or department like the chief information officer, fraud investigator, or HIPAA privacy office, she says. “It’s everybody together, down to someone in the mail room.”

Larry Ponemon, chairman and founder of the Ponemon Institute, a cyber security research firm, says health care companies aren’t prioritizing information security enough. For instance, he says, if you call and report a lost health insurance card, most companies will reissue you a card with the same number, whereas a credit card company would issue you a card with a new one. “The insurance industry could do a better job to make sure the credential is state of the art, that it isn’t just a piece of plastic but has information about you or could even in fact be a biometric or even a retina or facial scan,” Ponemon says. He adds that health companies could also adopt the behavioral analysis used by financial companies to determine whether charges or activities fall into an unusual pattern. The health care industry could take one more page from the financial services identity theft prevention playbook: adopt the U.S. Federal Trade Commission’s Red Flags Rule, which requires businesses and organizations to develop and implement procedures to detect suspicious activities or patterns of behavior that suggest identity theft. Some measures are as simple as asking for photo identification.

DWC Revises WCIS Regulations and Requests Public Comment

Following a public hearing on July 14 and review of written comments, the Division of Workers’ Compensation (DWC) has made revisions to its Workers’ Compensation Information System (WCIS) regulations and is revising the proposed regulations for an additional public comment period of 15 days. Members of the public are invited to present written comments regarding the proposed modifications to until 5 p.m. on Friday, September 19.

DWC incorporated the primarily technical changes to the WCIS regulations proposed by members of the workers’ compensation community, including:

1) Adding reference to the pre-2014 Official Medical Fee Schedule, to make sure that no data is lost during the transition period to the revised regulations
2) Broadening ICD diagnosis data collected to include both ICD-9 and ICD-10 data
3) Clarifying procedures for reporting lump-sum lien settlement payment data.

The DWC believes that these updates will allow WCIS to collect more robust and useful data that will assist with research regarding workers’ compensation issues. The notice and text of the regulations can be found on the proposed regulations page.

SCIF Claims it was Defrauded by Own Collection Company

State Fund hired F.D. De Leon and Associates, Inc. to collect past due debts on behalf of State Fund. The Master Service Agreement (MSA) required F.D. De Leon and Associates, Inc. to deposit payments that it collected into a trust account, and, once a payment “cleared the banking system,” to remit the payment to State Fund on the first week of the following month. The MSA required each remittance to include a statement identifying the policy account upon which payment had been collected, the commission due to F.D. De Leon and Associates, Inc. (calculated pursuant to a prescribed commission fee schedule) and the “amount due to State Fund.”

In July 2010, it was brought to the attention of State Fund’s program manager of credit and collections, Elizabeth Redican, that a former State Fund policyholder by the name of RDF Production Builders had delivered a $275,000 check “to DeLeon [sic]” in October 2007 as payment for outstanding premiums owed to State Fund. Redican then “made repeated attempts over an extended period of time to contact DeLeon [sic] for an explanation.” She “never received any explanation concerning this check from DeLeon. After Redican discovered there was no record of RDF’s payment being received by State Fund, she initiated an internal audit. Redican “determined that many former State Fund policyholders had sent money to DeLeon [sic] for past due premium[s] and that DeLeon [sic] had failed to remit the money collected to State Fund.” Redican claimed that “DeLeon [sic] received at least 34 additional checks from former State Fund policyholders where no money was ever remitted to State Fund.”

State Fund filed a civil complaint in August 2010 against F.D. De Leon and Associates, Inc., alleging causes of action for breach of written contract and fraud by affirmative misrepresentation and concealment of fact. State Fund’s complaint also named Francisco D. De Leon, individually, as an alleged “officer” of F.D. De Leon and Associates, Inc., in both causes of action. As to Francisco D. De Leon, individually, the complaint does not allege any specific misstatement of fact out of his mouth, or concealment of fact by him personally; the complaint broadly alleged “all defendants” defrauded State Fund. The complaint alleged “alter ego theory” as to Francisco D. De Leon.

In January 2013, State Fund filed a motion for summary judgment but did not identify toward which of the three named defendants, i.e., F.D. De Leon and Associates, Inc., FDDA Incorporated, and Francisco D. De Leon, the motion was actually directed. State Fund’s arguments were somewhat vague in referring only to “DeLeon.” State Fund’s separate statement includes facts continued the agency’s vague use of “De Leon” without differentiating among the named corporate defendants and Francisco D. De Leon the individual. No defendant filed opposition to State Fund’s motion, but Francisco De Leon, in his capacity as an individual defendant, filed objections to certain evidence presented in State Fund’s motion. Despite these deficiencies, the trial court granted the motion in the sum of $1.5 million against all defendants. Francisco D. De Leon, in his capacity as an individual defendant appealed, and the Court of Appeal reversed as to him in the unpublished case of State Compensation Ins. Fund v. De Leon.

State Fund’s evidence did not show who, specifically, made any representation or did any act constituting fraud against State Fund. State Fund’s evidence failed to show that Francisco D. De Leon, individually and personally, collected payments, or that he personally was responsible for the non-remittances or that he personally submitted reports which fraudulently understated the amount of payments recovered on behalf of State Fund.

Tower Group Anticipates Merger With ACPre Ltd.

Tower Group International, Ltd. (Tower) is a Bermuda-based global diversified insurance and reinsurance holding company. Tower’s insurance subsidiaries are focused on providing commercial, personal and specialty insurance and reinsurance products. Tower is listed on the NASDAQ Global Select Market under the symbol TWGP. Tower provides personal insurance products to individuals and commercial insurance products to small to medium-sized businesses through a dedicated team of retail and wholesale agents. It is operating as Tower Select Insurance Company in California with offices in Irvine.

On August 7, 2013, the Company announced that it was delaying the release of its financial results for the second quarter of 2013 due to issues, “relating to the estimate of its loss reserves.” By October 7, 2013, TWGP announced that it would increase its loss reserves by approximately $365 million, primarily for accident years 2009 through 2011 in its commercial insurance lines of business, including workers’ compensation, commercial multi-peril, commercial auto and other liability lines. TWGP’s most recent Securities and Exchange Commission 10Q filing included a net loss of $106 million and GAAP shareholders’ equity (excluding noncontrolling interests) of negative $11 million.

Tower Group has seen multi-notch rating downgrades from rating agencies Fitch and A.M. Best for a number of times in recent months. On August 28, 2014, A.M. Best Co. downgraded the issuer credit ratings from “cc” to “c” of Tower and its wholly-owned subsidiary, Tower Group, Inc. , as well as the debt rating on the convertible senior notes due September 2014 of TGI. Additionally, the financial strength ratings of Tower’s insurance company subsidiaries have been downgraded from “C++” (Marginal) to “C” (Weak). The ratings remain under review with developing implications pending the planned merger with ACP Re Ltd. The company has a planned merger with ACP Re, which is anticipated to close in September 2014, but may be delayed to as late as Nov. 15, 2014, which is the merger termination date. Recently, the terms of the deal were amended to reduce the cash payment per share to $2.50 from $3.00 agreed to earlier. At least one analyst (Zacks) says that “there remains a high degree of uncertainty about the deal. As a backup to rescue itself from the debt holders, in May 2014, Tower Group hired Greenhill and Co. to seek advice on repaying debt (due in Sep 2014), if the merger fails to materialize.”

To add to these worries, the Insurance Journal reports that the company received a letter, dated Aug. 28, 2014, from the Securities and Exchange Commission (SEC) stating that the SEC is conducting an investigation and attaching a subpoena for various documents. “The investigation and the subpoena do not mean that we have concluded that you or anyone else has broken the law. Also, the investigation does not mean that we have a negative opinion of any person, entity or security,” the SEC’s letter states at one point. Tower said it intends to cooperate fully with the SEC’s investigation.

AAA Copy LLC Convicted in Fraud Case

AAA Copy, LLC, a Rancho Cucamonga-based document copy and management company, entered a plea of No Contest to one felony count of Insurance Fraud. AAA Copy is a litigation support company for the legal community and the insurance industry. They specialize in document production and procurement, handling all aspects of discovery in workers’ compensation and other insurance cases.

This case was initially reported by the State Compensation Insurance Fund (SCIF) to the San Bernardino County District Attorney’s Office Workers’ Compensation Insurance Fraud Unit in late 2013. According to Deputy District Attorney Dave Simon who prosecuted the case, in the summer of 2013, claims managers at SCIF noticed that for a period of time from 2011 through 2013, AAA Copy was including charges of sales tax on their billings for copy and document services related to Workers’ Compensation litigation. “This was something that no other copying service did for such services,” said Simon.

An investigation by the District Attorney’s Workers’ Compensation Fraud Unit determined that while sales tax was being charged by AAA Copy for these services, the money received was not being submitted to the Board of Equalization, or to any other state agency where such tax monies are supposed to be deposited; rather, it appeared that after charging sales tax to this customer, AAA Copy was keeping those funds in violation of the law.

The owner and operator of AAA Copy during the time period in which this crime was being committed was Inger Stewart Soto of Rancho Cucamonga. “However, it was learned prior to any case being filed by our office that Mr. Soto passed away in early 2014,” said Simon. “Therefore, only the company itself was considered for criminal charges.” On July 1, 2014, a felony criminal complaint was filed by the DA’s Workers’ Compensation Insurance Fraud Unit, charging AAA Copy with one felony count of Insurance Fraud, in violation of PC 550(b)(1).

On Aug. 15, 2014, a representative of the defendant company entered a plea of No Contest to that count as a felony, and was sentenced immediately. The Court placed the company on probation and ordered it to pay $2,469.74 in actual victim restitution to the State Compensation Insurance Fund, additional mandatory court fines and fees, and imposed a number of terms of probation on the company. According to Simon, AAA Copy was ordered by the court not to charge sales tax in cases not authorized by, or submitted to, a state agency tasked with collecting sales taxes. This case was investigated by District Attorney Investigator Rodney Tamparong.

CWCI Says PTP Reports Fail Requirements

A new CWCI study finds that the average number of first-year medical reports per claim provided by California workers’ comp treating physicians to claims administrators rose by 123% in the 12 years leading up to the adoption of the new physician fee schedule, fueled in part by increases in evaluation and management (E/M) services used to treat injured workers and in the number of physician reports per E/M service, but claims organizations note that reports still do not always meet regulatory requirements or include all of the medical information needed for effective claims management.

California’s new workers’ comp physician fee schedule, which took effect in January, includes 2 changes that will affect physician reporting. First, it incorporates fees for consulting physician reports into the underlying evaluation service fee, so these reports are no longer separately reimbursable unless requested by the DWC Administrative Director, the Appeals Board or a Qualified Medical Evaluator in the context of a med-legal evaluation. Second, it no longer provides for separate reimbursement for a primary treating physician’s review of medical records outside the context of a face-to-face E/M service. The extent to which these changes will impact reporting is unknown, so CWCI Senior Research Analyst Stacy Jones conducted the study to compile benchmark data that can be used to measure future changes, using data from nearly 10 million medical report bills from accident year (AY) 2000 to 2013 claims. The analysis tracks growth trends for medical reports, measuring both the average number of reports per indemnity claim, and the proportion of workers’ comp medical services and medical payments accounted for by medical reports. The findings show that the average number of reports per claim rose steadily for more than a decade (e.g., the average number of first-year reports jumped by 123%, from 4.3 in AY 2000 to 9.6 in AY 2011 while the average number of reports at 36 months increased by 154% from 5.9 to 15.0 between AY 2000 to 2010), which helped push reports up from 7.2% to 12.2% of all workers’ comp medical services in the 10 years leading up to the adoption of the new fee schedule, though report payments fell from 3.7% of workers’ comp medical reimbursements in 2004 to 3.0% in 2008 before leveling off and holding at about 3% through mid-2013.

The study also examined the relationship between the volume of E/M services and progress reports, noting that growth in the average number of E/M services per indemnity claim from 2000-2011 (ranging from a 49% increase at 12 months post injury to an 83% increase at 48 months) are associated with more physician reporting. That, however, was not the only factor as the average number of reports per E/M service was also up, with increases ranging from 31% at 48 months post injury to 47% at both the 12- and 24-month valuation points.

To assess qualitative aspects of reporting, the study included results of a survey of claims administrators to evaluate both the content and the timeliness of the reports they receive. Even though state law requires a primary treating physician (PTP) to incorporate findings of secondary physicians into their reports, 1 in 4 survey respondents said such findings are rarely included in a PTP’s report, while half said they are “sometimes” included. On the issue of timeliness, two-thirds of the respondents said that reports are usually or always on time (within 20 days of a triggering event) which tracks with the finding that first-year services were billed an average of every 24 days. Similarly, half the respondents said that more than 50% of reports are submitted to meet the mandate that a PTP report every 45-days (barring another triggering event), which tracks with the finding that reports for services beyond the first year were billed every 44 days.

CWCI plans to continue to research the issue of physician reporting in workers’ comp, using data from the current study as a baseline to gauge changing patterns. In the meantime, the Institute has published additional details and graphics from the study in a Research Note, “The Price of Progress: Progress Reports in the California Workers’ Compensation System,” which is available to CWCI members and subscribers in the Research section at

New MPN Regulations Now in Effect

The Office of Administrative Law (OAL) has approved the Division of Workers’ Compensation’s final version of Medical Provider Networks (MPN) regulations, one of the sections that implemented major reform provisions of Senate Bill 863. The MPN regulations went into effect August 27, 2014.

“We’re pleased to announce that the MPN regulations have been approved and are immediately effective,” said Christine Baker, Director of the Department of Industrial Relations (DIR). DWC is a division of DIR. “These regulations will help improve patient access to physicians within MPNs.”

The MPN regulations include:
1) A streamlined application process that allows electronic submission of MPN applications, modifications and reapprovals
2) Unique MPN Identification numbers to be assigned to each MPN in order to identify a specific MPN
3)The requirements for an MPN applicant to qualify as an entity that provides physician network services. Allowing these entities to qualify as an MPN applicant better aligns legal responsibility with operational responsibility
4) Improved access to medical care with the introduction of MPN Medical Access Assistants and the regulatory standards that they must meet to properly assist injured workers to find and schedule medical appointment with MPN physicians
5) Clarified access standards that require an MPN to have at least 3 available physicians from which an injured worker can choose from, and if the time and location access standards are not met, MPNs shall have a written policy permitting out-of-network treatment
6) Sets forth the physician acknowledgment requirements to ensure that physicians in the MPN have affirmatively elected to be a member of the network and a streamlined process for obtaining acknowledgments from medical groups
7) Greater accountability with the requirement that MPNs are approved for a period of four years and the procedural timelines for MPN re-approval
8) Oversight of MPNs is strengthened with the formal complaint process
9) DWC’s ability to enforce MPN statutory and regulatory compliance is improved with the regulations that set forth the petition for suspension or revocation of MPN process. In addition, the regulations establish additional grounds for the probation, suspension, or revocation of an MPN and the procedures by which MPNs are reviewed by DWC and assessed administrative penalties.

The final regulations are posted on the DWC website.The fillable MPN forms will be posted next week.

Reclassification of Opioid Painkillers May Increase Comp Costs

Tighter controls on opioid prescription painkillers issued by the U.S. Drug Enforcement Administration last month may increase workers compensation costs in the short term, but over the long term they could help reduce overuse of opioids according to an article in Business Insurance. The new regulations may drive up the price of some drugs and will force some workers comp claimants to visit their doctors more frequently to obtain prescription painkillers, increasing employer costs, but closer monitoring by medical professionals may lead to alternative therapies that don’t rely on potentially addictive drugs, experts say. Despite the tighter controls, opioid use by workers remains a critical workplace safety concern, they say.

Last month, the DEA said that effective Oct. 6, hydrocodone combination drugs – powerful opioids that have been prescribed increasingly over the past several years to treat injured workers – would be classified as Schedule II controlled substances under the federal Controlled Substances Act. Previously, they had been classified as Schedule III. Pure hydrocodone already was considered a Schedule II controlled substance, along with opioids such as oxycodone and morphine. In addition, the DEA classified tramadol, another opioid painkiller but one that is generally viewed as less powerful than some others, as a Schedule IV drug last month. Previously, tramadol, which is sold under the names Ultram and Ryzolt, was unregulated by the DEA.

Under DEA rules, Schedule II drugs cannot be refilled under the same prescription, whereas Schedule III and Schedule IV drugs can be refilled up to five times, with prescriptions expiring after six months. As an unregulated substance, patients had access to unlimited refills of tramadol over the course of one year in most states, said Paul Peak, pharmacist on the complex pharmacy management team at Sedgwick Claims Management Services Inc. in Memphis, Tennessee. However, at least 10 states treated products containing tramadol as controlled substances prior to the DEA’s classification, Mr. Peak said.

As a result of the changes for both classes of drugs, some injured workers may have to make more frequent physician visits to be monitored or to obtain new written prescriptions, said Dr. Robert Hall, medical director at pharmacy benefit manager Helios, which formed from the merger of PMSI Inc. and Progressive Medical Inc., in Tampa, Florida. “We are increasing costs to the system” by having injured workers visit physicians more often, but there’s also a chance that those visits could lead to better care, said Brian Carpenter, senior vice president of pharmacy product development and clinical management at Healthcare Solutions in Atlanta. “As long as the physician is … checking to see if optimal capacity is increasing with the use of the drug, making sure there isn’t aberrant behavior” and doing drug screenings, costs could actually decrease in the long run, Mr. Carpenter said. However, if more claimants begin taking tramadol as a result of hydrocodone combination products becoming more controlled, the average wholesale price of tramadol products could increase, Dr. Hall said.

The DEA is “adding a lot more control,” but the controls are not as restrictive as those imposed on hydrocodone combination products, such as Vicodin and Norco, that can no longer be refilled under Schedule II, Mr. Carpenter said. As tramadol is less tightly controlled than other popular opioids, its use may increase despite the tighter controls imposed on the drug because the alternatives are even more tightly controlled, experts say.

In October, claimants who were taking hydrocodone products may switch to tramadol or codeine, Mr. Carpenter said, although “a lot of users don’t like codeine because it has more side effects.” “It will be interesting now to see if codeine will be on the uptick because of the conditions that are being placed on the hydrocodone combo products,” Mr. Carpenter said.

Even though the DEA has tightened controls on tramadol and hydrocodone combination products, employers and third-party administrators “can’t, in most situations, prevent someone from taking it unless an outside peer reviewer comes along and says it’s not necessary,” Mr. Peak said.

WCAB Gives Applicants Second Chance at IMR Appeal

Christopher Torres suffered industrial injury to his left knee while working for Contra Costa Schools Insurance Group as a claims examiner in 1998, causing 27% permanent disability and need for future medical treatment. It in 2000, he also sustained industrial injury to his neck and spine causing a need for medical treatment.

For a period of time, defendant authorized the Duragesic patches and Norco prescribed by applicant’s primary treating physician, Douglas Grant, M.D., to relieve the pain caused by applicant’s industrial injuries. However, after Dr. Grant requested authorization to refill additional prescriptions for Duragesic patches and Norco in June 2013, defendant’s UR physician Claudio Palma, M.D., issued a UR determination certifying the request for Norco, but conditionally denying certification of the request for Duragesic patches.

Applicant disagreed with the UR determination and submitted an application for IMR on August 2, 2013. On August 15, 2013, applicant’s attorney sent the IMR organization an additional report by Dr. Grant concerning applicant’s history and use of Duragesic patches.

An IMR determination dated November 12, 2013 was sent to applicant’s attorney, stating without further explanation that Duragesic patches were “not medically necessary and appropriate.” On December 18, 2013, applicant’s attorney filed an appeal of the IMR determination regarding the Duragesic patches, writing that the “reviewer failed to review documents submitted by applicant and applicant’s representative before making the determination,” contrary to applicant’s right to due process. Although the IMR appeal was signed by the attorney, it was not verified. Following submission of the matter the WCJ issued his February 18, 2014 decision dismissing the IMR appeal for lack of verification.

The WCAB reversed the dismissal and remanded the case to allow applicant a second chance to file a verified appeal in the panel decision of Torres v Contra Costa Schools Insurance Group and SCIF.

Labor Code section 4610.6(h) provides that a determination of the administrative director pursuant to that section “may be reviewed only by a verified appeal from the medical review determination of the administrative director.” That statutory verification requirement is consistent with Workers’ Compensation Appeals Board Rules of Practice and Procedure, Rule 10450(a), which addresses the form of requests for action filed with the Workers’ Compensation Appeals Board (WCAB), and provides that all such requests “shall be made by petition.” (Cal. Code Regs., tit. 8, § 10450(a).) Rule 10450(e) in turn requires that all such petitions be verified under penalty of perjury. Applicant’s December 13, 2013 IMR appeal includes no affidavit by either the applicant or his attorney verifying the contents of the appeal under penalty of perjury as required by section 4610.6(h) and Rule 10450.7 Rule 10450(e) plainly provides that an unverified petition filed with the WCAB may be summarily dismissed.

However, it has long been recognized that lack of verification does not necessitate automatic dismissal of a nonconforming pleading. (United Farm Workers v. Agricultural Labor Relations Bd. (1985) 37 Cal.3d 912, 915; Mullane v. Industrial Acc. Com. (1931) 118 Cal.App. 283, 286 [17 I.A.C. 328, 330]; Wings West Airlines v. Workers’ Comp. Appeals Bd. (Nebelon) (1986) 187 Cal.App.3d 1047 [51 Cal.Comp.Cases 609]; Katzin v. Workers’ Comp. Appeals Bd. (1992) 5 Cal.App.4th 703, 712, fn.3 [57 Cal.Comp.Cases 230].). Failure to correct a lack of verification within a reasonable time after receiving notice of the defect allows dismissal of the nonconforming petition. (Lucena v. Diablo Auto Body (2000) 65 Cal.Comp.Cases 1425 [significant panel decision]; Smith v. Workers’ Comp. Appeals Bd. (2001) 66 Cal.Comp.Cases 788 (writ den.); see also Connor v. Workers’ Comp. Appeals Bd. (1980) 45 Cal.Comp.Cases 370 (writ den.).).

In this case, defendant raised the issue of lack of verification of the IMR appeal as an issue at the expedited hearing on January 9, 2014. However, applicant did not seek to cure the defect before the appeal was dismissed by the WCJ for lack of verification or at anytime thereafter. Applicant’s failure to timely cure the verification defect after receiving notice of it supports the WCJ’s dismissal of the IMR appeal. However, the WCAB also recognized that the verification requirement in section 4610.6(h) is relatively new, and that there is a strong public policy favoring the disposition of cases on their merits that is consistent with our mandate under Article XIV, section 4 of the California constitution to “accomplish substantial justice in all cases.” If applicant cures the procedural defect in the IMR appeal within 20 days after service of this decision by filing an appropriate verification or amended appeal with the necessary verification, the WCJ should address the substance of the IMR appeal.