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Author: WorkCompAcademy

CIGA is Not Bound By Carrier Stipulation of Joint Liability

Roza Lopez sustained a cumulative injury while employed as a grocery clerk by Superior Center Concepts. Two insurers, Care West Pegasus Modesto (Care West) and Ullico Casualty Company (Ullico), were jointly and severally liable for claims arising from this injury. In a compromise and release agreement, they settled the employee’s claims and the insurers stipulated they would “pay, adjust, or litigate all liens of record,” and would “share equally for liability for med-legal charges,” and would allocate 52 percent of liability for the treatment charges to Care West and 48 percent to Ullico.

When Ullico became insolvent and was liquidated, responsibility for third party claims against it was assumed by the California Insurance Guarantee Association (CIGA), which the Legislature established in 1969 to protect against loss to insureds “arising from the failure of an insolvent insurer to discharge its obligations under its insurance policies.” CIGA moved to be dismissed from the instant workers’ compensation cases on the ground that it was authorized to pay only “covered claims,” from which the Legislature expressly excluded any “claim to the extent it is covered by any other insurance.” CIGA argued Care West’s policy constituted “other insurance” that covered third party claims. The Workers’ Compensation Appeals Board denied CIGA’s motion on the ground that the Care West/Ullico agreement limited Care West’s liability to roughly half of any third party claims, thereby rendering Care West’s insurance unavailable as to the remaining half.

The Court of Appeal summarily denied the petition for review filed by CIGA, but the Supreme Court granted review and remanded the case with directions to hear the matter on the merits. After review of the record, the Court of Appeal ruled that the order denying CIGA’s petition for reconsideration be annulled and the matter is remanded to the Appeals Board with directions to enter an order dismissing CIGA from these proceedings in the published case of CIGA v Workers’ Compensation Appeals Board.

The Appeals Board argued that the approved compromise and release was a final judgment that may not be relitigated, and after entry of that judgment Care West’s and Ullico’s liability was no longer joint and several. The Court of Appeal disagreed. “The argument reflects a basic misunderstanding of the nature of “several” liability, which is not, strictly speaking, a rule of liability at all – it is a rule of joinder.” Several liability has nothing to do with, and cannot be changed by, apportionment of an obligation between promissors.”

The Court concluded that the Care West/Ullico compromise and release agreement did not relieve Care West of its several liability for third party claims.The judgment merely apportioned liability; it did not change the joint and several nature of the now-apportioned liability.

Owner and Manager of Auto Repair Shop Face Fraud Charges

The owner of a uninsured San Jose auto repair shop and her manager have been charged with felony fraud after they denied that an employee who had lost three fingers in a workplace accident even worked for them. The cover-up by Sarb Collision Center owner, Sarbjeet Takhar, and her manager, Narindelpal Singh, both 43, delayed the injured employee from receiving any workers compensation benefits for months.

The two defendants have been charged with making a false statement to prevent a worker from receiving workers’ compensation benefits, making a false statement for reducing the insurance premium of a workers’ compensation insurance policy, and failure to obtain workers’ compensation insurance.

If convicted of all charges, Singh faces a maximum of seven years incarceration. Takhar faces a maximum of eight years incarceration. Both defendants would be ordered to pay full restitution.

The crimes came to light earlier this year after the injured worker tried to obtain benefits from the Uninsured Employers Benefit Trust Fund (UEBTF). Takhar, whose business was uninsured at the time of the injury, repeatedly denied at administrative hearings that the injured worker was her employee. The UEBTF is a special fund used to pay the claims of employees who are injured while working for an uninsured employer. UEBTF pays the injured worker and attempts to recover all benefits disbursed from the uninsured employer.

Subsequent to the accident, both Takhar and Singh obtained workers’ compensation insurance, but lied in the application by denying that the company had any work-related injuries within three years.

“The Santa Clara County District Attorney’s Office is committed to proactively pursue workers’ compensation insurance fraud to protect workers and promote fair businesses competition,” Deputy District Attorney Christopher Kwok said. “The Office conducts regular enforcement actions to ensure every employer who has employees carries workers’ compensation insurance.”

Coachella Valley Doctor Pleads Guilty to Insurance Fraud Scheme

A Rancho Mirage cosmetic surgeon pleaded guilty to a scheme to defraud health insurance companies by submitting bills for more than $3.4 million for procedures that he claimed were “medically necessary” but in fact were cosmetic procedures such as “tummy tucks”, “nose jobs” and breast augmentations.

In a plea agreement filed in United States District Court, Dr. David M. Morrow, 71, of Rancho Mirage, a cosmetic surgeon and dermatologist who was the owner of the Morrow Institute (TMI) in Rancho Mirage, admitted that he participated in a scheme to obtain money from insurance companies by false or fraudulent pretences, which included submitting altered documents to the insurance companies. Morrow admitted that cosmetic surgeries were billed to insurance companies under the pretence that the procedures were “medically necessary” so that insurers would pay for them.

Morrow also pleaded guilty to one count of filing a false tax return for 2008. Morrow admitted that he failed to report to more than $100,000 of income on his 2008 tax return and more than $1.5 million on his 2009 tax return.

Morrow, his wife, and TMI were charged in this case last fall when a federal grand jury returned a 27-count indictment that outlined a scheme in which patients were lured to the Coachella Valley surgery center with promises that cosmetic procedures would be paid for by their union or PPO health insurance plans. The victim health insurance companies included Anthem Blue Cross, Blue Cross/Blue Shield of California, Blue Cross/Blue Shield of Massachusetts, Regional Employer/Employee Partnership for Benefits, formerly known as Riverside Employer/Employee Partnership (REEP), and Cigna.

To trick insurance companies into paying for the cosmetic procedures, Morrow and others at TMI completely fabricated diagnoses such as a “hernia” in the patients’ official medical records. According to the indictment, they also fabricated test results and symptoms on medical records to cover up the actual medical procedures being performed – tummy tucks were fraudulently billed as hernia repair or abdominal reconstruction surgeries, rhinoplasties (“nose jobs”) were fraudulently billed as deviated septum repair surgeries, and breast lifts and augmentations were fraudulently billed as “tuberous breast deformity.” A document filed as part of Morrow’s plea agreement shows that TMI billed insurance as much as $150,750 for a single cosmetic procedure.

Morrow faces a statutory maximum sentence of 20 years of in federal prison for the conspiracy count and three years of imprisonment for filing the false tax return. Morrow is scheduled to be sentenced by United States District Judge Josephine L. Staton on September 23. Morrow has also agreed to pay full restitution to the victims. Charges against Morrow’s wife, Linda Morrow, 63, are currently pending.

Clovis Pharmacy Owner Agrees to Pay $200,000 in Civil Penalties

Khoa Tan Huynh, owner of the Script Life Pharmacy in Clovis has agreed to pay the United States $200,000 to settle civil claims for statutory violations occurring at the pharmacy,

According to the settlement agreement, in June 2013, an audit revealed multiple violations of the Controlled Substances Act (CSA). The government contends that between June 6, 2011, and December 31, 2012, Script Life Pharmacy accepted and filled prescriptions that lacked required information, including the prescribers’ DEA registration numbers and signatures. In addition, the audit demonstrated shortages of several controlled substances, along with overages of several others.

“Abuse of prescription drugs is a significant societal problem. Pharmacies must take great care to ensure that controlled substances do not end up in the wrong hands. This settlement underscores the federal commitment to holding accountable dispensaries of controlled substances,” said U.S. Attorney Wagner.

The Controlled Substances Act (CSA) authorizes the Drug Enforcement Administration (DEA) to regulate controlled substances to create a “closed” system of distribution that provides the legitimate drug industry with a unified approach to narcotic and dangerous drug control. The CSA establishes a classification system for all controlled substances, including prescription medications, based upon the potential for abuse, dependence profile, and medicinal value of the drugs. The CSA and its implementing regulations mandate that prescriptions for controlled substances include certain critical information and require pharmacies to maintain certain records and inventories of these controlled substances; these controls allow the DEA to protect the distribution system and prevent drug diversion and abuse.

This case was prosecuted by Assistant United States Attorney Catherine Swann and results from an investigatory audit by the DEA Fresno Diversion Group.

Jury Awards $500 Million for Defective Hip Implants

Joint replacements and surgical implants are an integral part of medical care for injured workers. Many devices cost tens of thousands of dollars. While consumers spend hours agonizing over product features and benefits for home appliances or automobiles, often little or no time is spent deciding what surgical product will be selected by a physician to be placed in the patient, and more importantly why was that product selected over any other. Indeed, looking back at the data in a claim file for these cases, can we even identify the manufacturer of a product that was used in a surgery after the fact? Perhaps this jury verdict last week will illustrate why shopping for medical implants might be worth the time and effort.

Reuters Health reports that Johnson & Johnson and its DePuy unit were ordered by a Texas federal jury on Thursday to pay about $500 million to five plaintiffs who said they were injured by Pinnacle metal-on-metal hip implants. Following a two-month trial, jurors deliberated for a week before finding that the Pinnacle hips were defectively designed, and that the companies failed to warn the public about their risks. Jurors awarded about $140 million in total compensatory damages and about $360 million in punitive damages.

A J&J spokeswoman said the company will appeal. John Beisner, a lawyer for the company, said he expected the verdict to be a “pyrrhic victory for plaintiffs’ counsel” that could be slashed significantly. Appeals courts often reduce massive personal-injury verdicts, and Texas law limits the amount of punitive damages that can be awarded to plaintiffs. Beisner estimated that punitive damages could be reduced to as little as $10 million. Lanier said plaintiffs would address the issue in post-trial proceedings.

The verdict came in the second federal trial involving the Pinnacle device. J&J was cleared of liability in the first trial, which ended in 2014.Verdicts in these early trials are not binding on the rest of the litigation, but are used to help gauge the value of the remaining claims. More than 8,000 Pinnacle lawsuits have been consolidated in Texas federal court.

All five plaintiffs are Texas residents who were implanted with metal-on-metal Pinnacle hip devices. They said design flaws caused the devices to fail more frequently and quickly than expected, leading to injuries including tissue death, bone erosion and high levels of metal in their blood. Plaintiffs said J&J and DePuy described the metal-on-metal hips as long-lasting, durable and safe despite being aware of the risks, and aggressively promoted them for use in younger, more active patients. J&J has said that it researched and marketed the devices responsibly.

DePuy stopped selling the metal-on-metal version of the Pinnacle devices in 2013. That year, it paid $2.5 billion to settle more than 7,000 lawsuits over a separate metal-on-metal hip device, the ASR, which was recalled in 2010.

CHSWC Publishes 2015 Annual Report

The Commission on Health and Safety and Workers’ Compensation (CHSWC) has released its twenty-first Annual Report of its activities to improve vital programs affecting nearly all Californians. The 313 page 2015 Annual Report presents information about the health and safety and workers’ compensation systems in California and makes recommendations to improve their operations. CHSWC, created by the workers’ compensation reform legislation of 1993, is charged with examining the health and safety and workers’ compensation systems in California and recommending administrative or legislative modifications to improve its operations.

Senate Bill (SB) 863, the workers’ compensation reform legislation passed in 2012, incorporated many of CHSWC’s previous recommendations for statutory improvements in the workers’ compensation system, and the Division of Workers’ Compensation (DWC) is carrying out many of the commission’s recommendations for administrative improvements.

But not all of past CHSWC recommendations have had success. Suggestions have been made to integrate workers’ compensation medical care with the general medical care provided to patients by group health insurers in order to improve the quality and coordination of care, reduce overall medical expenditure and administrative costs, and derive other efficiencies in care. Research also supports the contention that an integrated 24-hour care system has the potential to create medical cost savings as well as shorten the duration of disability for workers. So far this ongoing annual suggestion has been a non-starter.

CHSWC continues to report unrelenting systemic fraud. By misreporting payroll costs, some employers avoid the higher premiums they would incur with accurate reporting of their payroll. Employers can also misreport total payroll or the number of workers in specific high-risk, high-premium occupation classifications by reporting them in lower-risk, lower-premium occupations. An earlier study by CHSWC found that between $15 billion and $68 billion of payroll is underreported annually.

Although most California businesses comply with laws regarding health, safety, and workers’ compensation, some businesses do not and thus operate in the “underground economy.” Such businesses may not have all their employees on the official company payroll or may not report wages paid to employees that reflect their real job duties. The underground economy costs the state economy an estimated $8.5 billion to $10 billion in tax revenues every year.

CHSWC identified an ongoing problem with the definition of first aid. Injuries that do not require treatment beyond first aid do not necessitate an employer report of injury for worker’s compensation or a Cal/OSHA log. The definitions of first aid for those two purposes are different, however, leading to some uncertainty about when a minor injury is reportable. Even criminal evasion of workers’ compensation obligations can hide behind that uncertainty. Employers have identified the conflicting definitions as a barrier to compliance, and prosecutors have identified the conflicting definitions as a barrier to prosecution of willful violations. The definition of first aid is pertinent only to reporting requirements, so a change in the definition would not change an injured workers’ right to receive treatment.

Information about CHSWC and the 2015 Annual Report is available on the CHSWC website.

DOJ “Yates Memo” Increases Individual Risk in Corporate Healthcare Crime

“Americans should never believe, even incorrectly, that one’s criminal activity will go unpunished simply because it was committed on behalf of a corporation.” This was the pronouncement made by Deputy Attorney General Sally Yates a day after she issued new guidance to Department of Justice attorneys outlining the importance of individual accountability in DOJ prosecutions. The Department of Justice has thus increased the risk in medical fraud cases. The Yates Memo announced an official DOJ initiative to hold individuals responsible for corporate misdeeds, both criminal and civil. By having the Justice Department’s number two official instruct prosecutors to target individual business people for criminal prosecution and civil sanctions, DOJ is upping the ante in white collar enforcement.

The Yates Memo is the latest in a line of similar pronouncements that began in 1999 when then-Deputy Attorney General Eric Holder penned a similar memo titled “Bringing Criminal Charges Against Corporations.” The principles stated in the Holder Memo continued to evolve through several subsequent memos from later Deputy Attorneys General (Thompson Memo (2003), McNulty Memo (2006), Filip Memo (2008)), and were eventually “codified” in the U.S. Attorney’s Manual (“USAM”) as the Principles of Federal Prosecution of Business Organizations (USAM § 9-28.000).

The “Principles” are a detailed framework that federal prosecutors are supposed to rely on in assessing whether and what charges to bring against a corporation in a criminal case. They also provide corporations and their counsel tools for considering important issues such as cooperation and remediation. The “Principles” and other sections of the USAM are being revised to incorporate the Yates Memo’s dictates on individual accountability for corporate wrongdoing.

The notion of targeting individuals for prosecution has been a stated goal expressed by numerous DOJ officials in recent years. It should not be news to anyone inside or outside a corporation that federal prosecutors are being asked to identify and prosecute individual executives and managers for their roles in corporate misconduct. However, the Yates Memo provides a telling insight into DOJ’s current policy objective: reach the highest-level business leaders through cooperation deals with lower-ranking executives.

While this shift in policy appears to be a response to repeated criticism that too many individuals evaded punishment for wrongdoing related to the financial crisis and a related push to improve integrity within the banking sector, it will have significant implications for healthcare providers and their employees. Recognizing the challenges required to go back and pursue individuals after the conclusion of a case originally aimed at corporate liability, DOJ attorneys have now been instructed to focus on individuals from the start of an investigation. Once a case is underway, the inquiry into individual misconduct will proceed in tandem with the broader corporate investigation.

Only in the rarest of circumstances will the DOJ now release individuals from civil or criminal liability when resolving a matter with a corporation. Any decision to conclude a corporate case, without simultaneously settling individual liability, will require the DOJ attorney to demonstrate, to his/her supervisor, a clear plan for resolving any related individual cases promptly and before the statute of limitations expires. Further, if the decision is made not to proceed against individuals, the justification for such a decision must be memorialized and approved by the relevant U.S. Attorney or Assistant Attorney General overseeing the investigation.

CSLB SWIFT Team Finds Unlicensed Contractors Thriving Online

For many consumers seeking construction or home repair services, online advertising services have become their go-to source to “hire the right pro,” as one popular website proclaims. However, they’ve also become a place where unlicensed contractors unqualified to perform construction services lurk, a recent Contractors State License Board (CSLB) sting operation in Napa showed. Of the 12 people cited on illegal contracting charges during the March 9-10 operation, eight were contacted through online advertising sites that exercise little to no control over unlicensed contractors.

Although California-licensed contractors do advertise on these online sites, CSLB Registrar Cindi Christenson said consumers need to be aware that unlicensed operators post their ads or list themselves on consumer services websites, often right next to legitimate contractors. Most of these sites operate on a buyer beware principle, with no warnings posted about California contractor law requirements.

“It’s vital that consumers check CSLB’s website and make sure they’re considering a reputable contractor in order to avoid serious risks,” Christenson said. “In all advertising, including websites, licensed contractors are required to list their license number, and unlicensed contractors, by law, must declare that they are not licensed.”

The Napa sting took place at a single-family home near Alston Park. Investigators with CSLB’s Statewide Investigative Fraud Team (SWIFT) posed as the homeowners seeking bids on improvement projects such as laminate flooring, concrete work, fencing, painting, and landscaping. Napa County District Attorney’s Office investigators lent assistance.

Six persons who came to the house and turned in bids were cited for contracting without a state license (Business and Professions Code (BPC) section (§) 7028) on the sting’s first day. Six received misdemeanor citations for that offense on the operation’s second day, March 10.

Most of the bids for the work were far in excess of what’s legally allowable before a state contractor license is required. The limit is $500 for construction-related materials and/or labor. Most of those cited submitted quotes that were in the $3,000-$5,000 range, the highest for interior painting and a stretch of fencing.

An additional misdemeanor charge of illegal advertising (BPC §7027.1) was lodged against 10 of the 12 suspects. State law requires unlicensed contractors to state in all advertising that they are not licensed.

CSLB regularly stages sting operations throughout the state to crack down on unlicensed contracting, which feeds a multi-billion-dollar underground economy in California, endangers the public, and creates unfair business competition for licensed, law-abiding contractors.

Those receiving citations were ordered to appear for arraignment May 26, 2016, in Napa County Superior Court, 1111 Third Street, Napa, CA 94559

Study Says Phone and Email Orthopedic Care Effective in Rural Areas

Orthopaedic care for patients living in remote areas may be managed through phone or email, allowing patients to receive treatment without traveling to a larger, urban hospital for care, according to a study presented at the 2016 Annual Meeting of the American Academy of Orthopaedic Surgeons (AAOS). The study also found that remote care may provide significant savings in time, missed work, and health care and transportation costs for residents living in rural areas.

Orthopaedic surgeons at a McGill University Health Centre in Montreal used commercial, encrypted email and phone calls to communicate with primary care physicians in six towns in the northern area of Quebec about their patients, who primarily suffered from bone fractures, injuries which typically require travel to a larger hospital for care. The towns are part of a geographic area surrounding the hospital which spans 375,291 square miles (972,000 square kilometers), including areas where medical services are extremely limited.

The retrospective study, using data from January 2008 to June 2013, found that out of 921 email consults, 731 patients were able to receive treatment from their local doctor with the guidance of an orthopaedic surgeon at McGill.

“These results show that you don’t need an expensive, elaborate system to clinically manage patients with more common conditions,” said Adam Cota, MD, lead study author and now an orthopaedic trauma fellow at OrthoIndy at St. Vincent Indianapolis.

Researchers used a basic email system, requiring virtually no start-up costs or dedicated personnel. In contrast, sophisticated telehealth communication systems have higher operating costs. Dr. Cota noted that the email application meets Canada’s requirements for protecting patient information.

For patients, receiving proper orthopaedic treatment and care near their home eliminates the need to travel, take time off from work, or pay for child care and other related expenses. In addition, the study estimated a savings of nearly $3.7 million ($5.5 million in Canadian dollars) over the study timeframe in medical transportation, which in Canada, is provided free of charge from rural areas.

“We feel that these results will be important for planning and enhancing delivery of orthopaedic care in remote communities,” said Dr. Cota, “and a low-cost referral system like this can result in significant savings by the patient and/or insurance or government provider.”

Researchers Find Better Knee Replacement Outcomes at High Volume Hospitals

According to a study at Hospital for Special Surgery (HSS) in New York City, if all patients scheduled for knee replacement were directed to high-volume hospitals for the surgery, it could save the U.S. healthcare system between $2.5 and $4 billion annually by the year 2030. “Numerous studies have shown lower complication rates and better outcomes in hospitals that do a high number of knee replacements compared to low-volume hospitals. And this new study was designed to determine whether the lower rate of complications, hospital readmissions and revision surgeries translated into cost savings.

The researchers found that knee replacement surgery at higher-volume hospitals is less costly over a patient’s lifetime and provides better outcomes, and if all knee replacements were performed at these hospitals, it could save between $15 and $23 million annually in New York State alone. With the number of procedures growing at a rapid rate nationwide, this could potentially translate into annual cost savings to society of up to $4 billion by 2030.

The study, “Cost-Effectiveness of Total Knee Arthroplasty at High Volume Hospitals,” was presented at the annual meeting of the American Academy of Orthopaedic Surgeons (AAOS) on March 4, in Orlando, Florida.

“Regionalization of knee replacement surgery to high-volume hospitals has been proposed as a means for reducing escalating health care expenditures in the United States, especially given the large and growing demand for the procedure,” said Stephen Lyman, PhD, study author and director of the Healthcare Research Institute at HSS.

“This is the first study to include a younger patient population in addition to Medicare patients in a cost-effectiveness analysis of total knee replacement. This is important because patients under 65 now account for about 50 percent of those having the procedure,” said Douglas Padgett, MD, chief of the Adult Reconstruction and Joint Replacement Service at HSS. “The list of complications included in our study was also much more comprehensive than those in previous analyses.”

Researchers compared the cost-effectiveness of elective knee replacement over a patient’s lifetime in low-, medium-, high-, and very high-volume hospitals utilizing data from the New York Statewide Planning and Research Cooperative System (SPARCS) from 1997-2014.

Total knee replacement in the younger patients at very high-volume hospitals was associated with the lowest lifetime costs and the greatest benefits. Hospitals performing the most knee replacements showed significantly greater cost-effectiveness than all other hospital categories. In the Medicare group, results were similar; however, the cost savings of very high-volume centers relative to the other categories was more modest than in the younger patient group.

“Based on current trends, 2.8 million patients will be eligible to regionalize to very high-volume hospitals annually by the year 2030,” Dr. Burket noted. “While regionalization may not be feasible for all patients, many low-volume hospitals are located in or near a metropolitan area with a high-volume hospital. Policy initiatives aiding to guide patients to higher-volume hospitals when available will not only reduce their risk for complications and improve outcomes, but will also considerably reduce the large financial burden knee replacement surgery places on our healthcare system. ”