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CCWC Provides Forecast of Current Legislative Session

Jason Schmelzer CCWC Legislative Advocate has prepared and circulated an excellent forecast of the workers’ compensation isssues likely to be raised this year by the California legislature.

The California State Legislature returned to Sacramento on January 4 to complete the remainder of the 2015-2016 legislative session. California’s workers’ compensation system hasn’t been a major focus for the legislature for the last few years. The Division of Workers’ Compensation, however, has been busy promulgating regulations to implement SB 863, and the legislature and governor have stayed focused on other issues like climate change, transportation infrastructure, the drought, and affordable housing.

The first order of business for the legislature was to deal with the bills remaining from 2015, which are still eligible for consideration in the early weeks of 2016. One bill, in particular, that CCWC opposed aggressively in 2015 was SB 563 by Senator Richard Pan (D-Sacramento). Previous versions of the bill sought to place significant roadblocks in front of employers seeking to perform legitimate utilization review. However, recent amendments narrow the scope of the bill to simply prohibit UR contracts with a payment structure that specifically incentivizes delays, denials, and/or modifications of treatment requests. While there are some small details to be worked out, it appears that most of the concerns with this bill have now been resolved.

This is likely to be a year in which the stakeholders once again engage with seriousness. The reforms contained in SB 863 have finally been implemented and, as a result, workers’ compensation costs for employers have essentially stabilized. Benefits for injured workers are once again considered “adequate” after SB 863 increased permanent disability benefits by approximately $1 billion per year. The data, although preliminary, indicates that SB 863 has done what it was intended to do – augment benefits and slow or stop the growth in employer costs.

SB 863 is over three years old, and stakeholders are realizing that maintenance needs to occur if the system is to stay in balance. With three years of experience under SB 863 and plenty of data to drive discussions it seems likely that policymakers will attempt to smooth out whatever rough edges remain with recent reforms; and maybe even tackle some of the big issues that still remain. Additionally, stakeholders are getting itchy. Governor Brown has taken a cautious approach to workers’ compensation legislation since signing SB 863 in 2012. The result has been a lack of progress on priority legislation for many stakeholders that are pursuing changes as a direct result of SB 863, or weren’t involved in the negotiations and have priorities that predate SB 863.

It is unclear whether the conditions exist to tackle the big issues in 2016 – cumulative trauma reform, utilization review frequency, and myriad other issues from every corner of the stakeholder world. CCWC continues to watch the situation and work with the legislature, administration, and stakeholders to develop a strategy to move beyond the accomplishments of SB 863 and lower employer costs in what is still, at last evaluation, the most expensive venue for workers’ compensation in the nation.

The legislature, however, may have other ideas. The first new workers’ compensation bill of the year, SB 897 by Senator Richard Roth (D-Riverside), would unquestionably increase costs considerably for cities, counties, and the state. Labor Code Section 4850 provides for one year of full salary replacement, in lieu of temporary disability, for certain law enforcement personnel and firefighters. This provision is a source of great expense for local governments and the state, and SB 897 would double the duration to two years.

DWC Schedules Public Forum on Drug Formulary Regulations

The Division of Workers’ Compensation invites interested members of the public to discuss the adoption and implementation of a drug formulary. The meeting is scheduled from 10 a.m. until noon on Wednesday, February 17, in the auditorium of the Elihu Harris State Office Building, 1515 Clay Street, Oakland, CA 94612.

At its most basic level, a formulary is a list of medicines. Traditionally, a formulary contained a collection of formulas for the compounding and testing of medication (a resource closer to what would be referred to as a pharmacopoeia today). Today, the main function of a prescription formulary is to specify particular medications that are approved to be prescribed at a particular hospital, in a particular health system, or under a particular health insurance policy. The development of prescription formularies is based on evaluations of efficacy, safety, and cost-effectiveness of drugs. Depending on the individual formulary, it may also contain additional clinical information, such as side effects, contraindications, and doses.

Assembly Bill 1124, which became effective January 1, 2016, requires the adoption of a workers’ compensation formulary by July 1, 2017. The overarching goal of the formulary and related rules is to expeditiously provide high quality evidence-based care to injured workers while minimizing administrative burden and cost. DWC will facilitate public discussion on how best to achieve the goal, including the following:

1) Design of the formulary (how to maximize evidence-based drug selection and transparency)
2) Integration of the formulary with existing Medical Treatment Utilization Schedule
3) Adoption of rules to improve the efficiency of utilization review, including ways to reduce the need for elevated utilization review and independent medical review

A Newsline will be issued in the near future to announce the posting of an agenda and background material on the DWC Forum.

13 New San Diego Comp Fraud Indictments in “Operation Backlash”

The San Diego County District Attorney announced 13 new indictments against defendants in one of the largest workers’ compensation health care insurance bribery schemes ever uncovered in San Diego County. The defendants include a radiologist, a pain management physician, two chiropractors, a medical equipment provider, a medical clinic administrator and a medical marketer. Eight defendants, including doctors and their associates were indicted in connection with the same bribery scheme in November by the U.S. Attorney’s Office.

The charges in this case are the result of Operation Backlash, an extensive FBI led undercover investigation that revealed a widespread kickback scheme, including attorneys, doctors and medical providers who referred patients for health services in exchange for money. The defendants paid kickback payments to the owners and operators of chiropractic clinics in San Diego, Escondido and Calexico, in exchange for the patient referrals. A grand jury returned indictments on charges involving approximately $450,000 in kickback payments, resulting in millions of dollars in fraudulent workers’ compensation insurance claims.

The sheer scale of this fraud makes it one of the largest insurance bribery schemes in workers’ compensation ever uncovered in San Diego County. “When law enforcement became aware of the scam, we began following the trail of dirty money and it took us in many different directions,” DA Bonnie Dumanis said. “The circle of criminal conduct continues to widen with today’s charges, and we expect additional indictments and arrests in the future.”

Yesterday, law enforcement fanned out across three counties in a sweeping, early morning take down of more players. Dozens of District Attorney Investigators joined law enforcement in making arrests and serving search warrants at seven locations. At the end of the day, nine defendants were arrested.

Operation Backlash was first announced in November when the initial round of federal indictments was handed down. San Diego chiropractor Steven J. Rigler and San Diego workers’ compensation attorney Sean O’Keefe previously pleaded guilty to federal charges. In addition to today’s state charges, the U.S. Attorney’s Office announced federal indictments against three additional defendants. They include patient recruiters, Fermin Iglesias, Carlos Arguello, Miguel Morales and four corporations. The corporations are Providence Scheduling, Inc., Medex Solutions, Inc., Prime Holdings International, Inc. and Meridian Medical Resources, Inc., doing business as Meridian Rehab Care. The three federal defendants are accused of recruiting individuals to file workers’ compensation claims resulting from an on-the-job injury. The defendants then directed these patients to specific chiropractors who, in exchange for dozens of new workers’ compensation patients each month, agreed to meet a quota set by the defendants for referrals of the new patients for ancillary goods and services such as MRIs and durable medical equipment from specific providers.

The defendants either operated the companies that provided the durable medical equipment the chiropractors were required to use or were paid by the ancillary-procedure providers for the referrals for MRIs and other tests. If the chiropractors failed to average a certain quota of referrals per applicant, the pipeline of new applicants was cut off, according to court records.

“This wave of indictments reinforces the FBI’s commitment to working as a team with our state and local partners in rooting out corruption in our healthcare system,” said FBI Special Agent in Charge Eric S. Birnbaum. “The FBI will continue to use our investigative expertise and intelligence capabilities to detect, deter and disrupt sophisticated fraudulent criminal conspiracies that undermine our health care system and jeopardize patient care.”

Claimant Faces Felony Fraud Charges in San Bernardino

A Hemet man was arraigned on insurance fraud charges Thursday following an investigation conducted by the San Bernardino County District Attorney’s Workers’ Compensation Insurance Fraud Unit.

Raymond Chastain, 23, is charged with one felony count of Insurance Fraud and has plead not guilty. His preliminary hearing is set for Feb. 3 in San Bernardino County Superior Court. He is accused of failing to report income while receiving disability benefits, according to a San Bernardino County District Attorney’s Office news release.

On Oct. 26, 2012, Chastain filed a workers’ compensation claim alleging that he sustained injuries while performing his job duties as a worker for TPG Staffing.

“Our investigation revealed that Mr. Chastain failed to report additional earned income while receiving total temporary disability benefits,” said Senior District Attorney Investigator Rodney Tamparong, who is assigned to the case.

After obtaining an arrest warrant, investigators arrested Chastain at his place of residence in Nov. 2015. He was booked into the West Valley Detention Center on $50,000 bail.

This case is being prosecuted by Deputy District Attorney Scott Byrd.

DWC Appoints Presiding WCJ Paige S. Levy to Position of Chief Judge

The Division of Workers’ Compensation announced that Administrative Director Destie Overpeck has selected Paige S. Levy as chief judge, beginning February 1, 2016.

As chief judge, Levy will work closely with the administrative director, the associate chief judges and presiding judges to oversee more than 160 workers’ compensation administrative law judges at the Division’s 24 district offices and satellites. The chief judge also establishes and monitors procedures for effective maintenance of case calendars, and assists in the coordination of the judicial, legal, medical and related operational activities of the Division.

“I’m confident that Judge Levy will successfully accomplish the goal of improving benefit delivery to injured workers,” said Christine Baker, director of the Department of Industrial Relations.

Judge Levy has served as the presiding judge in Marina del Rey since 2012 and as a workers’ compensation administrative law judge since 2005. She was chair of the Workers’ Compensation State Bar Executive Committee for the 2013-2014 term and served on the committee for five years. She has been a board member for the California Conference of Workers’ Compensation Judges. Judge Levy was the project manager for the 2013 revisions to the DWC Policy and Procedural Manual, and is currently a member of the DWC Ethics Advisory Committee.

Over the last 10 years she has spoken on numerous topics including the application of the AMA Guides, Case Law update, Utilization Review, WCAB policy and procedure, ethics, specialization exam prep, liens, and litigation tips for attorneys. Judge Levy was the 2013 California Applicants’ Attorneys Association (CAAA) Judge of the Year, the 2012 WorkCompCentral Magna Comp Laude Award Winner, and a 2014 DWC Employee of the Year Recipient. She became a certified workers’ compensation specialist in 2000.

“Judge Levy will make an excellent chief judge. Her experience as a workers’ compensation judge and presiding judge, as well as her many years participating in judge training, will serve as a firm foundation for her new position. Please join me in congratulating Judge Levy and wishing her well in her new assignment,” said Destie Overpeck, DWC administrative director.

The DWC also took the opportunity to thank Associate Chief Judge Tom Clarke for his work as acting chief judge for the past several months.

DWC Distributes Audit and Enforcement Unit Annual Report

The Division of Workers’ Compensation has posted the 2015 DWC Audit and Enforcement Unit annual report on its website. The annual report provides information on how claims administrators audited by the DWC performed and includes the Administrative Director’s ranking report for audits conducted in calendar year 2014.

The 2015 Audit and Enforcement Unit annual report details the results of audits conducted in 2014 and provides the name and location of each insurer, self-insured employer and third-party administrator audited during that time. This report to the Legislature summarizes audits conducted in accordance with Labor Code §§129 & 129.5 to assure that injured workers, and their dependents in the event of their death, are provided with all benefits due them in an expeditious manner. The audit findings, by law, must detail the number of files audited, the number and type of violations cited and the amount of an undisputed compensation found due and unpaid to the injured worker.

Performance of insurers, self-insured employers, and third party administrators subject to profile audit review and full compliance audit is rated in accordance with the performance standards set annually by the Administrative Director. The DWC Administrative Director’s 2015 Audit Ranking Report lists, in ascending order by performance rating, the administrators audited in calendar year 2014.

The DWC Audit Unit completed a total of 47 profile audit reviews (PAR audits). Of the PAR audits, 46 were routinely selected, and 1 was a target audit, which was conducted based upon failure of a prior audit. Forty audit subjects (85%) met or exceeded the PAR 2014 performance standard and therefore had no penalty citations assessed. Seven audit subjects (15%) failed to meet or exceed the PAR standard, and their audits expanded into a full compliance audit of indemnity claims (FCA stage 1). Three of these audit subjects (43% of those failing to meet or exceed the PAR standard) met or exceeded the FCA 2014 performance standard. The remaining four of the seven audit subjects (57% of those failing to meet or exceed the PAR standard) failed to meet or exceed the FCA 2014 performance standard, and their audits expanded into a full compliance audit of indemnity claims (FCA stage 2) and added a sample of denied claims to be audited.

The DWC Administrative Director’s 2014 Audit Ranking Report (Statewide Exhibit 4) is part of this annual report. The Ranking Report provides the performance ratings for the 47 audit subjects listed in order, from the best to worst performer.

Memorial Service for Barry F. Evans on Friday – Hillside Memorial Park Cemetery

Barry Frank Evans of Hancock Park, CA, passed away peacefully on January 25, 2016 at the young age of 90 years. As a “giant” in the workers compensation legal community, he practiced as a defense attorney representing industry, employers and insurance companies in the defense of industrial injury claims before the Workers Compensation Appeals Board for over 60 years. During his many years of legal practice, he represented large self-insured employers [like Bethlehem Steel, Northrup Corporation and Bank of America], national insurance companies [such as Liberty Mutual , Home Insurance , Homeland Insurance, Fireman’s Fund, Industrial Indemnity; Republic Insurance Company , Tokio Marine and many more] in the California state workers compensation system; shipping and marine-based companies in the defense of Longshore & Harbor Workers’ claims; and esoteric claims under the Defense Base Act arising out of civil activities on military installations throughout the world, especially in the Middle East. For the last ten years of practice, Barry switched sides of the practice, with the urging of his partner, Mark Malter, and represented injured workers in California, for whom he had great compassion.

With respect to advanced educational training, Barry attended Harvard University from 1944 to 1947 as an undergraduate, receiving an Associate Bachelor’s degree. As an involved student, he was a member of Hasty Pudding [the theatrical group at Harvard], and participated in numerous productions. His class and peer group at Harvard included Jack Lemmon, Charlie Chaplin, and Robert Kennedy. At the same time, he enlisted in the U.S. Navy in 1944 as an officer [Lieutenant JG] and served during World War II, remaining in the US Naval Reserves from 1946 through 1959. He attended Boston University School of Law from 1947 to 1949, graduating with an LLB in an accelerated law program. He was admitted to the Massachusetts Bar Association in 1949 and the California Bar in 1953.

His first major employment was with Employers’ Group Insurance Company in 1951 handling insurance claims, and then he commenced the practice of law in January 1953 with the firm of Herlihy & Herlihy in Los Angeles practicing Workers’ Compensation Defense. He later joined Willian T. Hays and John F. McLaughlin establishing a Workers’ Compensation Defense Firm.

Barry was a leader amongst his peers, joining the ranks of historic law firms in the industry. From his original position as an associate with the old firm of Herlihy & Herlihy, he then created his own firms of Hays, Laughlin & Evans, which then morphed into Laughlin, Evans, Dalbey & Cumming and then Evans, Dalbey & Cumming. Barry Evans, Blair Dalbey and Ray Cumming were partners for over 25 years before they brought in some younger attorneys, at which point the law firm developed into Evans, Cumming & Malter, and eventually Evans & Malter. During the growth of Evans, Cumming & Malter, the firm had five offices statewide [from San Diego to San Jose], with 27 attorneys and 89 support staff. Barry Evans was president of the California Workers Compensation Defense Association, and was a frequent speaker for major industry groups, such as California Manufactures Association, California Self-Insureds Association, and the IAIABC [International Association of Industrials Accident Boards and Commissions]. From 1977 through 1986, he authored and recorded audio books for a lecture series on legal developments in workers compensation with Eugene Marias of Rose, Klein & Marias, Charles Lawrence Swezey, and Melvin Witt [founder of the California Worker’s Compensation Reporter (CWCR) for CEB [California’s Continuing Education of the Bar]. Throughout his career, he presented and argued numerous cases before the Workers Compensation Appeals Board, the California Court of Appeal, and the California Supreme Court. It was not uncommon for Barry to be invited by various industry leaders to author amicus [“friend of the court”] briefs on major issues presented to the Supreme Court including the cases of Wilkinson [which established the proper rating of disability for successive injuries]; Hegglin and the cases that challenged the constitutionality of Labor Code Section 5500.5.

However, the lasting impact that Barry Evans has left to this world and upon our memories is not the legal results of his litigation prowess, but rather the depth of human contact with such a loving and caring man. Barry was honored and revered by many, but he was deeply loved by a special few: his dedicated wife, his very special children and grandchildren that he adored; his partner to which he was like a father; his friends who will forever laugh at his jokes and remember his cherubic smile, and the many staff members for whom he cared and gave support. We know that Barry is in heaven looking down upon us all with a loving smile, and a chuckle under his breath.

He is survived by his loving wife of 67 years, Harriett Lillian Evans; children: Joan Mindy Fay and Neil C. Evans; his son David S. Evans predeceased him in 2001; and seven grandchildren: Elliott, Rachael, Andrew, Michael, Ashlyn, Brandon and Brooke. A memorial service will be held at 12:00 noon, Friday, January 29, 2016, at Hillside Memorial Park Cemetery located at 6001 West Centinela Avenue in Culver City, CA; and he shall be laid to rest next to his son, David Evans, and his daughter-in-law, Marsha Evans.

Big Pharma Jumps Into Cloud Based Drug Use Monitoring

Novartis wants every puff of its emphysema drug Onbrez to go into the cloud. The Swiss drugmaker has teamed up with U.S. technology firm Qualcomm to develop an internet-connected inhaler that can send information about how often it is used to remote computer servers known as the cloud.

According to the report in Reuters Health, this kind of new medical technology is designed to allow patients to keep track of their drug usage on their smartphones or tablets and for their doctors to instantly access the data over the web to monitor their condition.

It also creates a host of “Big Data” opportunities for the companies involved – with huge amounts of information about a medical condition and the efficacy of a drug or device being wirelessly transmitted to a database from potentially thousands, even millions, of patients. The potential scale of the so-called “Medical Internet of Things” has not been lost on pharmaceutical and tech firms around the world, both big companies hunting growth and smaller ones looking to provide bespoke products and services.

It has created unlikely alliances. Novartis’ domestic rival Roche has also teamed up with Qualcomm and Danish diabetes drugmaker Novo Nordisk has partnered with IBM on cloud-linked device projects, for example, while healthcare device maker Medtronic is working with a U.S. data-analytics firm Glooko. GlaxoSmithKline, meanwhile, is in talks with Qualcomm about a medical technology joint venture potentially worth up to $1 billion, according to people familiar with the matter.

However, with the opportunity comes risk. Security experts warn that hacked medical information can be worth more than credit card details on the black market as fraudsters can use it to fake IDs to buy medical equipment or drugs that can be resold, or file bogus insurance claims. The U.S. Centers for Disease Control and Prevention estimates there are 35 million U.S. hospital discharges a year, a billion doctor and hospital visits and even more prescriptions, much of which is stored in cloud databases.

Now the “Medical Internet of Things” is introducing more and more web-connected devices into the equation and pushing even more confidential patient data on to the cloud. This is creating potential new opportunities for thieves seeking to penetrate medical companies’ security where they may target names, birth dates, policy numbers, billing data and the diagnosis codes needed to obtain drugs, say experts.

Novartis aims to have its inhaler for chronic lung disease, to be on the market by 2019. Other pharma-tech alliances include Aerocrine and Microsoft, which are working together on a cloud project to analyze data from allergy and asthma patients. Google is, meanwhile, working with French drugmaker Sanofi to collect and analyze information from diabetes sufferers. The U.S. tech giant also has a partnership with Novartis to develop a smart contact lens that can monitor diabetics’ glucose levels.

All the companies involved in such projects say they are going to extreme lengths to protect patients’ data from hackers.

DWC Publishes Reminder to Use New QME Form 105

The Division of Workers’ Compensation sent a reminder email message urging parties to use the revised version of the QME Form 105 that became effective October 1, 2015.

The QME Form 105 is used to request a panel Qualified Medical Evaluator (QME) examination for an unrepresented injured worker. Claims administrators are required to send the current form to injured workers when the claim is disputed or when there is a dispute to the Primary Treating Physician’s report.

The QME Form 105 and instructions for its completion are posted on the DWC website. A Spanish-language version of the form and instructions are also available. The old forms have been removed from the website.

The approved regulations simplified the QME Form 105 for unrepresented injured workers, which must still be mailed to the DWC Medical Unit for processing.

Long-Acting Surgical Opioid Implant May Become Long-Term Comp Cost

An article published in Business Insurance says that a U.S. Food and Drug Administration committee’s vote in favor of approving a long-acting, rod-shaped drug implant to combat opioid addiction could mean added costs for workers compensation payers.

In a 12-5 vote last week, the FDA’s Psychopharmacologic Drugs Advisory Committee approved Probuphine. The implant, by South San Francisco, California-based Titan Pharmaceuticals Inc. and Princeton, New Jersey-based Braeburn Pharmaceuticals, which is surgically inserted under the skin of the arm, can help reduce opioid dependence by delivering a daily dose of buprenorphine for up to six months.

Probuphine is a version of buprenorphine, which federal law classifies as a Schedule III controlled substance. Buprenorphine is a “widely accepted tool to help people taper from opioids” that already is available in tablet and film formulations, Mark Pew, senior vice president at Duluth, Georgia-based medical management company PRIUM, said in an email. “In a perfect world, the buprenorphine is added to discontinue the opioids, and then the buprenorphine is itself discontinued,” Mr. Pew said. “However, since we don’t live in a perfect world, often the buprenorphine stays long-term.”

Titan Pharmaceuticals submitted a new drug application for Probuphine to the FDA in 2012, but the agency decided against approving the treatment since the dose provided was too low to be effective for patients new to buprenorphine treatment. This time around, the advisory committee expressed concerns about whether physicians would be sufficiently trained on surgically inserting the rod, saying “provider qualification and training should be better defined.”

Mr. Pew said the implant could become a “long-term cost consideration” for workers comp payers. “If Probuphine becomes a long-term strategy for pain management, it could be a very expensive addition,” Mr. Pew added. “If all other drugs were tapered appropriately, then the payer may be swapping one cost for another, and that may or may not be a cost-efficient swap.”

The FDA, which is scheduled to make a decision by Feb. 27, isn’t obligated to follow the committee’s recommendation.