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WCAB Suspends Professional Lien Services Hearing Rep

On August 14, 2013, the WCJ in the case of Trinh v Tzeng Long USA Inc. issued an Order For Costs And Sanctions against Professional Lien Services, Inc., (PLS), ordering it to pay defendant’s costs and attorney’s fees in the amount of $2,355 along with a separate court sanction of $1,000. The sanctions were imposed for PLS’s bad faith and frivolous conduct in pursuing a trial on the issues of penalty and interest when it did not offer evidence at the trial adequate to meet its initial burden of proof.

Neither PLS nor its representative, Mike Traw petitioned for reconsideration or otherwise appealed the August 14, 2013 Sanction Order and it is now final and binding for all purposes.

Deputy Commissioner Rick Dietrich, Secretary of the Appeals Board, notified PLS in October 2013 that payment of the $1,000 court sanction was expected within ten days and further advised that failure to pay the sanction was grounds for suspending the privilege of appearing before the WCAB pursuant to section 4907. PLS replied that it was petitioning for reconsideration, but that was not the case.

Defendant also made unsuccessful efforts to recover the costs and attorney’s fees that PLS is obligated to pay as part of the Sanction Order. Thus the En Banc panel concluded “None of the efforts by the Appeals Board and the defendant have resulted in voluntary compliance with the August 14, 2013 Sanction Order by PLS and Mr. Traw, and it appears they are willfully disobeying the August 14, 2013 Sanction Order.”

Section 4907(a)(2) provides for suspension of the privilege of appearing before the WCAB for, “failure to pay final order of sanctions, attorney’s fees, or costs, issued under Section 5813.” The failure to comply with an order or regulation of the WCAB, including an order to pay a sanction, is an interference with the judicial process that provides good cause for suspending or removing the privilege of appearing before the WCAB.

For this reason it was ordered last August that “that the Appeals Board intends to suspend the privilege of Professional Lien Services, Inc., and Mike Traw of appearing before the Workers’ Compensation Appeals Board for ninety (90) days unless good cause is shown why the suspensions should not be imposed.”

Since then, no response to the Notice Of Intention was received from Mike Traw. The Appeals Board received a letter from Mark Blakely on the letterhead of PLS that stated that he acquired PLS from the prior owners and he requested a 60 day extension of the time which was granted. He requested a second 60 day extension which was also granted. No further response has been received from Mr. Blakely or PLS, and the two allowed extensions of time to respond have expired.

Thus, the WCAB sitting en banc issued its Decision After Removal, suspending the privilege of Mike Traw of appearing before the WCAB but did not suspend the privilege of Mark Blakely or PLS. However, the earlier ordered sanctions against PLS remain in full force and effect, and PLS continues to be liable sfor payment of those ordered sanctions.

The DWC Proposes a New MTUS Guideline for Mental Illness Treatment

The medical treatment utilization schedule (MTUS) provides medical treatment guidelines for utilization review and an analytical framework for the evaluation and treatment of injured workers. It helps medical providers understand which evidenced-based treatments have been effective in providing improved medical outcomes to those workers, and guides the physicians involved in the UR and IMR process. In 2004 the Legislature charged the DWC administrative director (AD) with adopting an MTUS that would be presumed correct on the issue of extent and scope of medical treatment, and made the American College of Occupational and Environmental Medicine Practice Guidelines, 2nd Edition, (ACOEM) the standard until the adoption of an MTUS by the AD.  Thus the ACOEM Guideline was a temporary solution.

After initial adoption, the MTUS is to be updated improving upon the original ACOEM edition. For example, the current version of the MTUS added new guidelines for chronic pain and postsurgical physical medicine treatment., topics not covered in the ACOEM Guideline. The MTUS was also reorganized to restructure the MTUS into a clinical topics format, which will allow for easier updates of the guidelines.

An continuing the effort to improve the Guideline, the Division of Workers’ Compensation has now posted the proposed Mental Illness and Stress Guideline to update the current Stress Related Conditions Guideline of the Medical Treatment Utilization Schedule set forth in section 9792.23.8 to its online forum.

Members of the public may review and comment on the proposals until February 16, 2016. The proposed amendment to the regulations incorporate by reference the March 25, 2015 version of the Official Disability Guideline’s “Mental Illness and Stress Guideline” which the DWC has adopted with permission from the publisher. The new guideline is 582 pages long! Previously the MTUS relied on the language of the Stress Related Conditions Chapter of the ACOEM Practice Guidelines, 2nd Edition (2004), Chapter 15. By contrast, the ACOEM guideline on mental heath issues was extremely vague and terse. The new effort addresses both of those criticisms.

As previously announced, the DWC will be updating all of the clinical topic medical treatment guidelines of the Medical Treatment Utilization Schedule. This online forum follows the October 2015 online forum which posted two new additional guidelines, the proposed Occupational Interstitial Lung Disease Guideline and the Occupational/Work Related Asthma Guideline. Once the online forums have been completed for each specific clinical topic, the DWC will combine all of the proposed regulatory updates and additions to section 9792.23 et seq. into one rulemaking package.

MAXIMUS Reports 19% Revenue Growth and More to Come From Government Programs

MAXIMUS, is an American, for-profit, 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 (CHIP), health care reform, welfare-to-work, Medicare, child support enforcement, and other government programs. It was selected by the DWC to provide IMR services for the California workers’ compensation community. The company is based in Reston, Virginia, and has more than 13,000 employees.

And MAXIMUS is financially prospering. This week it reported the financial results for the three months that ended December 31, 2015. It claimed a revenue growth of 19% to $556.7 million compared to the same period last year. It had year-to-date signed contract awards of $665 million and new contracts pending (awarded but unsigned) of $285 million at December 31, 2015. The increase in revenue was primarily driven by the acquisitions of Acentia and Remploy and organic growth in the Health Services Segment.

The company focuses primarily on “operating government-sponsored programs for vulnerable populations” according to one of its earlier annual reports. The outsourcing of health and human services function to private for-profit firms raises significant concerns, at least according to non-profit research group In the Public Interest, a comprehensive resource center on privatization and responsible contracting,

Maximus has been a Private Sector member of the American Legislative Exchange Council (ALEC) at least from 1994 to 1995. The American Legislative Exchange Council (ALEC) describes itself as the largest “membership association of state legislators,” but over 98% of its revenue comes from sources other than legislative dues, primarily from corporations and corporate foundations.

In March 2014, Maximus CEO Richard Montoni told Investors Business Daily that Maximus had booked $347 million in contracts related to the Affordable Care Act (Obamacare) in 2013 and that Maximus was expected to generate $200 million in annual revenue from work related to the ACA. In its 2013 annual statement, Maximus reported that 65 percent of its total revenue for that year came from its Health Services Segment and state that it expects health-sector-related revenue to continue to increase:

“We expect that demand for our core health and human services offerings will continue to increase over the next few years, driven by new legislation, austerity measures and increasing caseloads, as governments strive to deliver more services with fewer resources. Legislation, such as the Affordable Care Act in the United States as well as other health and welfare reform initiatives abroad, has created increased demand for our services, a trend we expect to continue over the next several years.”

Owner and Operator of DME Company Sent to Federal Prison

The former owner and the former operator of a durable medical equipment supply company based in Long Beach, California, were sentenced today for their roles in a $1.5 million Medicare fraud scheme.

Amalya Cherniavsky, 41, and her husband, Vladislav Tcherniavsky, 46, both of Long Beach, were ordered to pay $614,418 in restitution. U.S. District Judge Terry J. Hatter Jr. of the Central District of California ordered Tcherniavsky to serve 51 months in prison. On Oct. 15, 2015, a federal jury convicted both defendants of one count of conspiracy to commit health care fraud and five counts of health care fraud.

The evidence at trial demonstrated that Cherniavsky owned JC Medical Supply, a purported durable medical equipment supply company that she co-operated with Tcherniavsky. Evidence further showed that the defendants paid illegal kickbacks to patient recruiters in exchange for patient referrals and paid kickbacks to physicians for fraudulent prescriptions – primarily for expensive, medically unnecessary power wheelchairs – which the defendants then used to support fraudulent bills to Medicare.

Between 2006 and 2013, the defendants submitted $1,520,727 in claims to Medicare and received $783,756 in reimbursement for those claims, according to evidence presented at trial.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Central District of California. HHS-OIG’s Los Angeles Regional Office, the FBI and the California Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse investigated the case. Attorneys Blanca Quintero and Kevin R. Gingras of the Criminal Division’s Fraud Section prosecuted the case.

Healthcare Organizations Ask U.S. Supreme Court to Limit Fraud Cases

More than a dozen major healthcare organizations and associations have jumped into a Supreme Court case over the validity of a legal theory now used to bring many fraud lawsuits against them. The case has the potential to reduce – or increase – the number of False Claims Act suits brought against healthcare providers and other companies, depending on which way the high court rules.

The US Supreme Court has agreed to hear Universal Health Services v. United States ex rel Escobar. The case focuses on situations in which whistle-blowers allege providers have submitted false claims to government programs by failing to follow certain regulations. That legal theory is known as “implied certification” and has been accepted by some federal appeals courts and rejected by others.

Organizations found liable under the False Claims Act, also called Qui Tam litigation, face penalties and triple damages. In 2015, two-thirds of federal whistle-blower lawsuits targeted healthcare entities. That’s prompted a number of healthcare organizations to file briefs siding with the Universal Health Services, which argues against the theory. Organizations that have filed briefs include the Pharmaceutical Research and Manufacturers of America, the Generic Pharmaceutical Association, the American Hospital Association and the Chamber of Commerce of the United States.

The American Medical Association argues in its brief that imperfect compliance is not the same as fraud. “The healthcare regulatory environment is especially complex, making it particularly inappropriate to use the hammer of (False Claims Act) liability to punish noncompliance,” according to the brief.

In their brief, the American Hospital Association, Federation of American Hospitals and Association of American Medical Colleges say the healthcare field is already targeted by whistle-blowers seeking massive payouts. In False Claims Act cases, whistle-blowers are entitled to a percentage of whatever money the government recovers. They argue in the brief that the implied-certification theory has exacerbated the filing of meritless suits against healthcare organizations. The suits “try to tap into the extreme complexity of Medicare and Medicaid and use that as a basis for asserting all sorts of hospitals, healthcare providers and others – have committed fraud for what might be fairly minor regulatory missteps,” said Jessica Ellsworth, a partner at Hogan Lovells who filed the brief on behalf of the hospital associations and medical college association.

The United States Chamber of Commerce claims that the theory “profoundly increases risk and uncertainty for government contractors, grantees, and program participants” and should be rejected.

But Patrick Burns, co-executive director of the Taxpayers Against Fraud Education Fund, a not-for-profit group that supports whistle-blower incentive programs, said implied certification is important for holding healthcare and other organizations accountable for doing the right thing – even if that right thing isn’t explicitly stated in a contract with the government.

He said the facts of this case before the Supreme Court are a prime illustration. The Universal Health Services case was brought by the parents of a patient who died at a Massachusetts mental health clinic. Her parents alleged that the clinic’s caregivers were not properly supervised and that the clinic did not employ a board-certified or board-eligible psychiatrist and a licensed psychologist, in violation of state Medicaid program regulations. The 1st U.S. Circuit Court of Appeals sided with the plaintiffs in that case.

It is difficult to understand how the facts of this case can be construed to be about “fairly minor regulatory missteps.” The teen who died, Yarushka Rivera began seeing Universal Health Services counselor Maria Pereyra in 2007 after experiencing behavioral problems at school. Pereyra, though on staff at its Arbour satellite clinic, had no professional license to provide mental-health therapy. After hearing parent complaints about the quality of her care, Yarushka was transferred to another staff member, Diana Casado. Like Pereyra, Casado was unlicensed. In February 2009, Yarushka was once again assigned to a new therapist, Anna Fuchu. Fuchu held herself out as a psychologist with a Ph.D., though the parents later learned that she had trained at an unaccredited online school and that her application for a professional license had been rejected. Notwithstanding Fuchu’s lack of essential credentials, she treated Yarushka and eventually diagnosed her with bipolar disorder.

Several months later, when Yarushka’s behavioral problems had not abated, officials at her school informed the parents that she would be permitted to attend classes only if she saw a psychiatrist. When the parents told this to Fuchu, she referred Yarushka to Maribel Ortiz, another staff member at Arbour. Believing Ortiz to be a psychiatrist, the parents referred to her as “Dr. Ortiz.” They eventually discovered, however, that she was not a psychiatrist, but rather a nurse, and that she was not under the supervision of the one Arbour staff psychiatrist, Maria Gaticales – herself not board-certified, or eligible for board certification, as contemplated by the regulations. Yarushka died after having a second seizure while under this care.

There is an old saying in the practice of appellate law “bad facts make bad law.” Cases with bad facts should not be appealed. It is very difficult to see how the U.S. Supreme Court can construe what happened in this case to be nothing more than quibbling over vague and ambiguous regulations dealing with being properly trained, licensed and supervised to provide health care.

CWCI Study Shows Rising Medical-Legal Costs

The average amount paid for an individual medical-legal service in the California workers’ compensation system rose 66 percent in the 8 years that followed the 2006 revisions to the medical-legal fee schedule, as the mix of medical-legal services shifted away from those reimbursed at a flat fee toward time-based services such as follow-ups within 9 months of a prior evaluation, comprehensive evaluations involving extraordinary circumstances and supplemental reports.

The findings are part of a new California Workers’ Compensation Institute (CWCI) study that reviews the legislative reforms, regulatory changes and judicial decisions that have reshaped the medical-legal process for resolving workers’ comp claim disputes over the past quarter century; provides an update on the quantity, mix and average payments for medical-legal services in the wake of the 2002-2004 reforms; and generates benchmark data for use in future studies on the impact of the 2012 reforms, which introduced independent medical review as a new means for resolving treatment disputes.

Among the key findings of the study determined:

1) The percent of indemnity claims with medical-legal services dropped from 24 percent in AY 2004 to 17 percent in AY 2005, after implementation of the 2002-2004 reforms, and has remained near that level.
2) In 2007, the first full year under the revised fee schedule that introduced new time-based billing codes for medical-legal testimony and supplemental evaluations, the average payment for an individual medical-legal service was $979. By 2014, the average had increased 66 percent to $1,628.
3) The increase in the overall average medical-legal payment from 2007 to 2014 reflects a continuing shift from services with flat fees to the following time-based services that are billed in 15-minute increments:
4) Follow-up evaluations within nine months of a prior evaluation (billing code ML 101), where the average payment increased 136.4 percent;
5) Comprehensive evaluations involving extraordinary circumstances (billing code ML 104), where the average payment increased 66.2 percent; and
6) Supplemental evaluations (ML 106) where the average payment rose 86.1 percent.
7) Invalid charges for supplemental reports have increased. The proportion of supplemental (ML 106) medical reports billed within 24 months of the injury absent an initial medical-legal evaluation increased from one in seven in AY 2007 to one in five in AY 2013.

CWCI has published its study, including additional details, tables and analyses in a Research Note, “The Changing Nature and Cost of the Medical-Legal Process in California Workers’ Compensation.” CWCI members and members of the public who are CWCI research subscribers can access the full 20-page report as well as a 2-page summary Bulletin by logging in to the Institute’s website.

Drugmakers Fight Over Rights to Generic OxyContin

A federal appeals court ruled Monday that four patents related to Purdue Pharma’s painkiller OxyContin are invalid, potentially bringing Teva Pharmaceutical Industries Ltd and others a step closer to introducing generic versions of the drug.

Reuters Health reports that privately owned, Connecticut-based Purdue had sued Teva, Amneal Pharmaceuticals, Epic Pharma and a U.S. arm of Mylan NV after they sought approval from the U.S. Food and Drug Administration to make generic OxyContin.

Monday’s ruling by the Federal U.S. Circuit Court of Appeals upheld earlier orders from a lower court judge in favor of the generic drugmakers.Purdue said in a statement that it was reviewing the decision and considering what to do next. ;”Despite the court’s ruling, Purdue has several other patents protecting OxyContin, and we do not anticipate generic manufacturers selling the product in the near future,” it said.

Representatives of the generic drugmakers could not immediately be reached for comment.

Currently, the only generic versions of OxyContin on the market are so-called “authorized generics,” which are exact copies of the brand-name version authorized by Purdue.

Three of the patents Purdue sought to enforce in its lawsuits are related to an improved formulation of oxycodone, the active ingredient in OxyContin.

The other patent describes technology designed to prevent abuse of the drug by making it difficult to crush and causing it to form a gel when dissolved in water so that it cannot be injected. Purdue licensed that technology from German pharmaceutical firm Grunenthal GmbH, which is also a plaintiff in the lawsuit.

Purdue’s lawsuit against Teva went to a non-jury trial before U.S. District Judge Sidney Stein in Manhattan in 2013. In January 2014, Stein said that the patents were invalid because they did not add enough to what was already known. Stein subsequently dismissed the lawsuits against Mylan, Amneal and Epic as well, since they were based on the same patents. Purdue appealed all four cases to the Federal Circuit.

The case is Grunenthal GmbH et al v Teva Pharmaceuticals USA Inc, U.S. Court of Appeals, Federal Circuit, No. 2014-1311.

Committee in Oversight and Government Reform Probes Drug Pricing

A decision by Turing Pharmaceuticals to increase profits by raising the price of a lifesaving drug by 5,000 percent drove some patient co-pays up to $16,000, according to excerpts of documents that congressional committee members made public on Tuesday.

The excerpts, highlighted in memos released by Democrats on the powerful U.S. House of Representatives Committee in Oversight and Government Reform, and summarized in an article by Reuters Health, give a rare behind-the-scenes glimpse into the business decisions behind drastic price increases at Turing and Canada-based Valeant Pharmaceuticals International Inc. The increases sparked a major public outcry. Both companies now face federal investigations over drug pricing.

The document excerpts show how Valeant bought two heart medicines for their “material pricing potential.” The company increased the price of Isuprel by 525 percent and Nitropress, by 212 percent. The documents also suggest Valeant hiked the prices of another 20 drugs by more than 200 percent between 2014 and 2015.

In a statement, Valeant said it had responded to complaints about pricing by offering volume-based discounts of up to 30 percent.

Turing said in a statement it cut the price of Daraprim by up to 50 percent for hospitals. It said it used the funds from the price increase for research and development and patient access programs.

A lawyer for Martin Shkreli, Turing’s former chief executive officer, did not respond to a request for comment. Shkreli, who also faces securities fraud charges, is slated to appear on Thursday before the House Oversight Committee with Valeant interim CEO Howard Schiller. Elijah Cummings, the panel’s top Democrat, called for the probe.

Tuesday’s excerpts show how Shkreli and Turing tried to maximize profits from Daraprim, while warding off potential public relations backlash from HIV patients who rely on the drug. The drug treats toxoplasmosis, a parasitic infection. “Very good. Nice work as usual. $1bn here we come,” Shkreli wrote in a May email to the board.

Not long after Turing acquired the drug, reports began to pour in about patients with skyrocketing co-pays. In one August email, a Walgreens Boots Alliance executive wrote to ask if the company would grant exceptions for “those patients with a co-pay over the approved amount of $10,000.” In another case, the company received a plea from Walgreens to reduce the price for a dog, who was “obviously not covered by insurance.”

A Turing executive turned down the request and directed the pharmacy to a “vet meds website.”

WCAB Panel Decision Continues Erosion of UR/IMR Jurisdiction

Rodolfo Arroyo sustained industrial injury in 2000 to his back, knees and right big toe while working for Inland Concrete Enterprises as a concrete worker. The parties’ Agreed Medical Evaluator (AME) Stuart Green, M.D., testified at his deposition in 2008 that it was medically reasonable for applicant to use a motorized scooter to relieve the effects of his industrial injury. Dr. Green reiterated that opinion in his comprehensive March 12, 2009 report of examination. Defendant accepted the opinion of the AME and provided applicant with a motorized scooter.

After approximately five years of use, the scooter began to break down. On February to, 2015, applicant’s primary treating physician Jalil Rashti, M.D., reported to defendant that applicant’s scooter was broken and he requested authorization to replace it with a new scooter in light of the costs of repair.

Defendant submitted the request for authorization to UR. However, the UR reviewer did not evaluate whether the scooter should be replaced or repaired.  Instead, the timely UR decision addressed whether Arroyo should use a motorized scooter as a matter of medical necessity, and denied authorization to purchase one on the grounds that it was “not essential to care.”

Applicant requested a hearing to challenge defendant’s action, and the issues of “(n]eed for further medical treatment in the form of a motorized scooter” and “[s]ubject matter jurisdiction over the medical treatment dispute” were tried before the WCJ who issued his decision finding that the WCAB lacked subject matter jurisdiction over the treatment dispute because defendant issued a timely UR decision. The WCAB granted a petition for reconsideration and reversed this finding in the panel decision of Arroyo v Inland Concrete Enterprises.

The panel concluded that the WCJ correctly noted in his Report that the UR decision issued within the time allowed by Labor Code section 4610(g)(I), but he then incorrectly concludes from that fact that the WCAB has no jurisdiction over the treatment dispute. Contrary to the WCJ’s conclusion, the WCAB does have jurisdiction over this dispute. Dr. Rashti requested authorization to replace the broken scooter that defendant previously provided, but the UR conducted by defendant did not address whether the broken scooter should be repaired or replaced. Instead, the UR considered whether provision of a scooter is medically supported, but that is not the issue raised by the request for authorization.

When a defendant authorizes a particular kind medical treatment it does not become obligated to provide that treatment forever. For example, the conduct of URs at reasonable intervals to address the ongoing use of a medication may be appropriate to determine if the medication continues to be effective and medically necessary. Similarly, the ongoing provision of physical therapy and chiropractic treatment may properly be evaluated through UR to determine if it is reasonable to continue to authorize those treatments. UR of other forms of medical treatment may also be supported when there is a change in the employee’s circumstances or condition that raises a question about the necessity for continued provision of the treatment. But in all of these situations, the UR that is conducted must address the treatment for which authorization is requested or the medical treatment issue in dispute. That did not occur in this case.

Here, defendant did not conduct a timely UR of the treating physician’s request for authorization to replace or repair the broken motor scooter. Thus, there is no valid UR concerning the request for authorization submitted by Dr. Rashti, and as held in Dubon II, the determination of whether the treatment should be authorized may be made by the WCAB based on substantial medical evidence consistent with Labor Code section 4604.5. Accordingly, the WCJ’s October 28, 2015 decision is rescinded and the case is returned to the trial level for consideration of the reasonableness and necessity of repairing or replacing the broken scooter.

DWC Administrative Director Destie Overpeck Moves to State Bar

Division of Workers’ Compensation Administrative Director Destie Overpeck is leaving the Department of Industrial Relations to join the State Bar of California at its Office of the General Counsel. Ms. Overpeck’s last day with the DWC will be February 12, 2016. DWC Chief Counsel George Parisotto will assume the acting administrative director responsibilities.

As administrative director, Ms. Overpeck managed the DWC and oversaw the implementation of several reforms to the workers’ compensation system, including California’s 2012 reform law, SB 863, which increased payments to injured workers while simultaneously reducing costs for employers.

“As a valued member of my executive team, Destie Overpeck guided the Division of Workers’ Compensation through the sweeping reforms of SB 863, and leaves behind a strong organizational structure and dedicated team at the division,” said DIR Director Christine Baker.

Ms. Overpeck has been with DWC for 16 years. After five years as an attorney with the legal unit, Ms. Overpeck was appointed chief counsel in 2005. She became acting administrative director for two interim periods in 2009 and 2011, and again served as acting administrative director in 2012 and was appointed administrative director by Governor Brown in 2015.

Please join DIR in thanking and congratulating Administrative Director Destie Overpeck.