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DWC Proposes New UR/IMR Regulations

The Division of Workers’ Compensation (DWC) has posted a 15-day notice of modification to the proposed utilization review (UR) and independent medical review (IMR) regulations to the DWC website. Members of the public are invited to present written comments regarding the proposed modifications to until 5 p.m. on October 11. The number of proposed changes are extensive. The following are some examples.

The new proposed rules set forth a revised Request for Authorization form (DWC Form RFA), emphasizing that it must be signed by the employee’s treating physician. There is a statement on the DWC Form RFA that it is not a separately reimbursable report under the Official Medical Fee Schedule.

One of the proposed changes that may be of concern to claim administrators is Section 9792.9.1(c)(2), Under this proposed language, a non-conforming request for authorization (i.e., an incomplete Form RFA or request that does not use the form) must be returned to the requesting physician within three business days or else be considered as complete and subject to all applicable timeframes and requirements. This provisions would seem to place a substantial burden on claim administrators. It would seem that a Request for Authorization buried in any document forwarded by a treating physician would have to be identified (by reading carefully every single word in the document) and then this obscure language would rise to the level of an official Request for Authorization unless the administrator objected in three days. It is difficult to see how a claim department could meet this burden.

Section 9792.10.4 of the proposed changes allow the independent review organization delegated the responsibility by the Administrative Director to conduct independent medical review pursuant to Labor Code section 139.5 (IMRO) may consolidate two or more eligible applications for independent medical review by a single employee for resolution in a single determination if the applications involve the same requesting physician and the same date of injury.

The new proposed regulations implement new procedures to impose sanctions. Section 9792.10.6(j) provides that upon receipt of credible information that the claims administrator has failed to has failed to comply with its obligations under the independent medical review requirements the Administrative Director shall, concurrent or subsequent to the issuance of the final determination issued by the independent review organization, issue an order to show cause for the assessment of administrative penalties against the claims administrator under new section 9792.12(c). Section Section 9792.10.7 provides that upon receipt of credible information that the claims administrator has failed to implement the final determination, the Administrative Director shall issue an order to show cause for the assessment of administrative penalties against the claims administrator under new section 9792.12(c).

Section 9792.12(c) is a new subdivision to provide for Independent Medical Review Administrative Penalties. The subdivision lists specific violations and the amount to be assessed as an administrative penalty for each.

The notice, text of the regulations, and forms can be found on the proposed regulations page.

Researchers Find Little “Rhyme or Reason” Behind Physician Reimbursement

Private insurance companies across the U.S. pay doctors dramatically different amounts for the same routine office visits and services, according to a new study reported by Reuters Health. Physicians at the high end of the reimbursement spectrum get more than twice as much as those at the low end for the same service, with little apparent reason for the difference, researchers say.

“We figured that if we looked at fairly similar office services across clinics, the amount received by doctors might not vary much,” said Laurence Baker, co-author of the study and chief of health services research at Stanford University in California. “But that was not true.”

In the push to contain healthcare costs, focusing on how much care patients use won’t solve the problem unless the market forces determining what doctors charge and what insurers pay are better understood, Baker and his colleagues write in the journal Health Affairs. Unlike other health care cost studies, theirs looks at actual reimbursement amounts to physicians, and not the amount billed.

The researchers analyzed more than 40 million claims filed in 2007 for nearly a dozen types of service ranging from five-minute check-ups to comprehensive exams. The most common claim filed was for a “problem-focused” exam lasting about 15 minutes with a patient the physician already knew. The lowest-paid 5 percent of doctors received $47 or less for the visit while the highest-paid 5 percent received $86 or more. The average reimbursement amount was $63. For more complex, yet identical, office visits lasting longer and involving a new patient, the reimbursements ranged from $103 or less to $257 or more.

The price differences couldn’t be explained by the patients’ age or sex, the physicians’ specialty, the patients’ insurance plan type – preferred provider organizations (PPO) or point of service (POS) – or whether the physician was in the plan’s network. Geographic location accounted for some of the price variation, but only about one-third of it. Even with location taken into account, researchers could not pinpoint differences among specific cities because Truven Health Analytics, the company that provided the data, did not allow precise location information to be published in the study. “The point is that (there is) very little that can explain these price differences, no matter what information you put into the model,” Dr. Renee Hsia, professor of emergency medicine at the University of California at San Francisco, told Reuters Health. “There is not much rhyme or reason as to why the prices are what they are,” Hsia, who was not involved in the research, said.

Baker suggested that some variables, such as the quality of service provided by physicians, or the market power of insurance companies, could influence payments, but these were not analyzed in the study. “The take-away message is to get a quote before you go to the doctor’s office and consider shopping around,” said Chapin White, a senior health researcher at Center for Studying Health System Change in Washington, D.C.

Comparison shopping on cost isn’t easy for consumers, however, because the information is not readily available. Companies trying to bring price information to the public include the San Francisco-based startup Castlight and FAIR Health in New York City. “We think it is important to push future analyses further to include information we were not able to look at here,” Baker told Reuters Health. For example, the team did not know the size of the physicians’ practices. Larger practices may be able to command higher reimbursements, he said.

Medical Identity Theft Increased by 19%

A new study reported in SC Magazine says that as the number of individuals impacted by medical identity theft continues to climb, so does the number of victims fooled by spurious emails and websites designed to purloin their sensitive information.

According to the “2013 Survey on Medical Identity Theft,” the number of people who’ve fallen victim to this type of fraud has increased by 19 percent since last year, accounting for more than 1.8 million victims in 2013. More than 300,000 new medical identity theft cases cropped up during the one-year period, the study found. The survey was conducted by the Ponemon Institute and sponsored by the Medical Identity Fraud Alliance (MIFA) and data breach prevention firm ID Experts.

The study, in its fourth year, surveyed nearly 800 adults in the U.S. who self-reported that they, or their close family members, were victims of medical identity theft.  Along with the rise in medical identity fraud, experts also saw a significant uptick in dubious websites being erected by saboteurs and spam emails being sent – all with the intent of tricking individuals into giving up their medical information.

Between 2012 and 2013, the percentage of medical identity theft victims reporting spoofed websites and phishing emails as the likely cause of their troubles doubled. This year, eight percent of respondents cited the cyber schemes as the cause of their issues, while only four percent of victims reported the same in 2012.

In the report, medical identity theft was defined as a person using an individual’s name or personal identity “to fraudulently receive medical service, prescription drugs and goods, including attempts to commit fraudulent billing.”

Larry Ponemon, chairman and founder of the Ponemon Institute, told earlier this week that in this study, and in other Ponemon studies, the frequency of spear phishing targeting medical identity theft victims has gone up. Furthermore, spear phishing, attempts to infiltrate an individual’s network or steal their data by crafting a targeted ruse they are likely to open via email, is likely under-reported among medical identity theft victims, Ponemon added.

“A lot of people aren’t even aware that they have fallen for a phishing scam because they were so sophisticated,” he said. “The ability to record it is difficult because people aren’t even aware that it’s happened to them.”

In the study, the groups also found that seven percent of medical identity theft victims believed a data breach suffered by their health care provider, insurer or related organizations, was the cause of fraud. Last year, six percent of respondents cited those reasons as the cause.

Fed Panels Agree on Drug Compounding Bill

House of Representatives and Senate committees have agreed on legislation that would give the Food and Drug Administration greater authority to regulate companies that compound sterile drugs and ship them across state lines. The legislation would also create a national set of standards to track pharmaceuticals through the distribution chain to help thwart the introduction of fake medication into the drug supply.

Reuters Health reports that the bill, called the Drug Quality and Security Act, comes in response to a deadly outbreak last year of fungal meningitis that killed more than 50 people and was traced to a tainted steroid sold by the New England Compounding Center in Framingham, Massachusetts.

The legislation is expect to pass smoothly and quickly through the full House and Senate.

Traditionally, pharmacists who compound medication mix tailored doses for individual patients in response to specific prescriptions. Over the last decade the practice has mushroomed, with some pharmacies selling thousands of doses of regularly used mixtures without prescriptions for physicians to keep for future use. The legislation would draw a distinction between traditional compounding pharmacies and those such as NECC which ship sterile products across state lines. These larger organizations, to be known as “outsourcing facilities,” would be regulated by the FDA but be exempt from the full spectrum of regulations that apply to traditional pharmaceutical companies. Traditional compounding pharmacies would continue to be regulated by state boards of pharmacy.

Previous attempts to create national standards to track and trace drugs have foundered amid complaints from companies that they would be too costly to implement. But concerns over counterfeit drugs have been growing. Last year, fake vials of Roche Holding AG’s cancer drug Avastin appeared in the United States from Britain where it was purchased from a Turkish wholesaler.

The World Health Organization estimates that less than 1 percent of medicines available in the developed world are likely to be counterfeit. Globally, that number is around 10 percent.

In the United States, dozens of states have some type of regulation designed to track a drug’s pedigree, but the rules are inconsistent. The bill is designed to resolve the current patchwork of federal regulation by applying a uniform standard nationwide.

Sexual Conviction Restricts L.A. Orthopedic AME/QME Medical License

Fred F. Hafezi, M.D. is currently listed on the DWC QME database as a spine specialist with offices in Azusa and Ontario California. The Medical Board of California reflects that he holds Physicians and Surgeons certificate G19337 originally issued in October 1970. The Board records reflect that he is certified in Orthopedic Surgery.

Medical Board records also reflect that on June 25, 2013 the office of the Attorney General of California filed an Accusation against Dr. Hafezi asking that the Board revoke or suspend his Physician and Surgeon’s Certificate,

In support of this request, the Accusation alleged that “on April 25, 2013, in the case of The People of the State of California v. Farhad Fred Hafezi, Los Angeles County Superior Court case number KA090841, Respondent (Hafezi) was ordered, as part of his sentence, to register as a sex offender pursuant to the provisions of Penal Code section 290. As a result of his being ordered to register as a sex offender, Respondent’s Physician’s and Surgeons’ Certificate No. 019337 is subject to mandatory revocation pursuant to the provisions of Business and Professions Code Section 2232.”

The Accusation continues to allege the circumstances of the criminal prosecution. “Respondent was charged with several counts of oral copulation, contact with a minor with intent to commit a sexual offense, unlawful sexual intercourse with a person under the age of 18, all violations of the Penal Code. On April 1, 2011, Respondent did an “open plea” and pled nolo contendere to all 4 counts. Then on May 26, 2011, Respondent withdrew his plea of guilty. On April 5, 2013, the court denied Respondent’s motion to withdraw his guilty plea. As a result of his plea, he now stands convicted of several counts of oral copulation and a count of unlawful sexual intercourse with a person under 18. Respondent was sentenced on May 23, 2013. Imposition of sentence was suspended, and Respondent was placed on formal probation for 36 months, ordered to serve 180 days in the Los Angeles County Jail and required to register as a sex offender pursuant to Penal Code section 290. Respondent is currently out of jail as he was given credit for time served for his county jail sentence.”

On August 6, 2013, while being represented in the Matter of the Accusation by the Law Offices of Richard A. Moss, Hafezi and his attorney signed a Stipulation for Restricted Practice. The purpose of the Stipulation was to restrict his Physicians and Surgeons certificate pursuant to Government Code section 11529.

Pursuant to the Stipulation, on August 16, Hafezi was ordered to “cease performing any activity for which a license as a physician is required in the State o! California with the sole and singular exception he may complete reports on patients seen as workers compensation referrals who were referred to him prior to the date of endorsement of this Stipulation by the administrative law judge.”

It is further stipulated and agreed that the Stipulation would be posted on the Boards website as a public document. The Stipulation is to remain in effect until completion of the administrative proceedings against him, and the issuance of a final decision of the Medical Board thereon.

A Medical Board “Action Report” dated July 1997 reflects prior discipline for Dr. Hafezi based upon Business and Professions Code §2234(b)(c)(d) “Negligent and incompetent treatment of a patient with a back injury.”

FSK Employment Law Conference Set for November 7

Floyd, Skeren and Kelly LLP is pleased to announce its Northern California Annual Employment Law Conference, which will feature keynote speakers Christine Baker, Director of the Department of Industrial Relations and Phyllis W. Cheng, Director of the California Department of Fair Employment and Housing (DFEH).

The conference will be held on November 7, at the South San Francisco Conference Center.

This is an all-day event, designed for employers, managers, claims adjusters, risk managers, attorneys, and any other professionals associated with human resources and employment law. The conference will provide helpful guidance related to numerous workplace topics, including: the new California disability regulations (which impact an employer’s policies on reasonable accommodation, the interactive process and leaves of absence); the new comprehensive pregnancy disability regulations; a workers’ compensation update, focusing in on the latest developments related to SB 863; an overview of important OSHA workplace requirements and procedures; a review of 6 critical steps an employer can take to avoid costly employment related lawsuits; and, an update on the evolving role of social media in the workplace.

Ms. Cheng will discuss the important new disability and pregnancy regulations in effect as of January 2013. The new disability regulations significantly expand the protections for disabled workers and set forth new employer obligations and requirements related to disability discrimination, reasonable accommodation, the interactive process, job descriptions, and medical certifications. The new pregnancy disability regulations greatly expand the protections afforded to employees disabled by pregnancy including new notice requirements and an expanded list of conditions that constitute a pregnancy disability. Ms. Cheng will review key provisions of the new regulations, what is new for employers, the DFEH’s enforcement perspective, and employer best practices for ensuring compliance.

Ms. Baker will co-present with David W. O’Brien, Esq., Retired Workers’ Compensation Administrative Law Judge. They will provide a workers’ compensation update focusing in on the latest developments pertaining to SB 863 and new case law.

Visit for more information and online registration.

LexisNexis Data Compromised by Identity Theft Hackers

An identity theft service that sells Social Security numbers, birth records, credit and background reports on millions of Americans has infiltrated computers at some of America’s largest consumer and business data aggregators, according to a seven-month investigation by KrebsOnSecurity.

Two of the hacked servers were inside the networks of Atlanta, Ga.-based LexisNexis Inc., a company that maintains the world’s largest electronic database for legal and public-records related information. LexisNexis is also widely used by members of the workers’ compensation community for legal research.

Contacted about the findings, LexisNexis confirmed that the two systems listed in the botnet interface were public-facing LexisNexis Web servers that had been compromised.

A tiny unauthorized program called “nbc.exe” was placed on the servers as far back as April 10, 2013, suggesting the intruders have had access to the company’s internal networks for at least the past five months. The program was designed to open an encrypted channel of communications from within LexisNexis’s internal systems to the botnet controller on the public Internet.

An initial analysis of the malicious bot program installed on the hacked servers reveals that it was carefully engineered to avoid detection by antivirus tools. A review of the bot malware in early September using – which scrutinizes submitted files for signs of malicious behavior by scanning them with antivirus software from nearly four dozen security firms simultaneously – gave it a clean bill of health: none of the 46 top anti-malware tools on the market today detected it as malicious.

All three victim companies said they are working with federal authorities and third-party forensics firms in the early stages of determining how far the breaches extend, and whether indeed any sensitive information was accessed and exfiltrated from their networks.

For its part, LexisNexis confirmed that the compromises appear to have begun in April of this year, but said it found “no evidence that customer or consumer data were reached or retrieved,” via the hacked systems. The company indicated that it was still in the process of investigating whether other systems on its network may have been compromised by the intrusion.

“Immediately upon becoming aware of this matter, we contacted the FBI and initiated a comprehensive investigation working with a leading third party forensic investigation firm,” said Aurobindo Sundaram, vice president of information assurance and data protection at Reed Elsevier, the parent company of LexisNexis. “In that investigation, we have identified an intrusion targeting our data but to date have found no evidence that customer or consumer data were reached or retrieved. Because this matter is actively being investigated by law enforcement, I can’t provide further information at this time.”

NICB Reports That Reports of Questionable Comp Claims Are Increasing

The National Insurance Crime Bureau (NICB) just released an analysis of workers’ compensation questionable claims (QC) referrals submitted from Jan. 1, 2011, through June 30, 2013. The report finds that while the total number of WC claims has been decreasing, the percentage that is deemed “questionable” has been rising.

QCs are claims that NICB member insurance companies refer to NICB for closer review and investigation based on one or more indicators of possible fraud. A single claim may contain up to seven referral reasons.

California ranked first generating a total of 2,270 WC QCs. It was followed by Illinois with 689. New York was third with 688.

In 2011, 3,349,925 WC claims were found in the Insurance Services Office (ISO) ClaimSearch® database. That number decreased to 3,244,679 in 2012, and is on track to decrease again in 2013 based on the 1,498,725 claims received in the first half of 2013.

In 2011, 3,474 WC QCs were referred to NICB. That number increased to 4,460 in 2012 – a 28 percent rise. WC QCs accounted for 3.5 percent of the 100,201 QCs submitted in 2011, and increased to 3.8 percent of the 116,171 QCs in 2012.  Through the first half of 2013, 2,325 WC CQs have been referred to NICB (3.7 percent of 62,352 total QCs), compared with 1,681 through the first half of 2011 and 2,174 through the first half of 2013.

The distribution of WC QCs follows a standard Monday – Friday workweek with the QCs almost evenly divided during the week with steep drop-offs in the numbers for Saturday and Sunday.

There are several referral reasons from which NICB member companies can select to further describe a QC. The top three referral reasons were the same in each year. First was “claimant fraud” with 6,107. Second was “prior injury/not related to work” with 2,319, and third was “malingering” with 1,380.

An injury not related to work is typically a person who suffers an injury during a recreational or day off activity but fails to report it until at work, thus claiming the injury happened on the job. A malingerer is someone who has suffered a legitimate injury but continues to feign symptoms, thus collecting benefits long after he or she has fully recovered.

The full report is available online..

WCAB Does Not Have Exclusive Jurisdiction Over Attorney Fee Distribution

The Law Offices of Mark R. Leeds entered into a contract with the Law Offices of Donald J. Reino, whereby Leeds agreed to refer workers’ compensation cases to Reino in consideration for payment of 25 percent of the attorney fees earned on those cases, 100 percent of all deposition fees (Lab. Code, § 5710) if “handled” by Leeds, and 25 percent of the vocational rehabilitation attorney fees.

Three years later, in 1997, Reino and Iida, a Professional Corporation, and Law Offices of Myles Iida were formed as successors of Reino. By this time, plaintiff had referred over 1,000 cases to Reino pursuant to the agreement. Leeds entered into a new agreement to the successor firm that is substantially similar to the original agreement with Reino

Reino and the successor firms paid plaintiff in accordance with the terms of the agreements for about 16 years.

On October 1, 2010, Leeds separated from the successor firms and formed his own firm in Long Beach California. at separation, many of the referred clients manifested their intent to substitute Leeds as counsel of record while others elected to remain with Reino; and some of the previously referred clients had substituted other firms to handle their claims. Reino then refused to pay any attorney fees to Leeds, and Leeds filed a civil action in Superior Court to collect the fees he claims to have earned.

Reino demurred to the complaint on three grounds: (1) the trial court lacked subject matter jurisdiction over the subject of the cause of action, because WCAB has exclusive jurisdiction over disputes regarding attorney fees in workers’ compensation matters; (2) another action is pending before the WCAB entitled Lovato v. The Kroger Co. dba Ralph’s Grocery, case No. ADJ7354967 (Lovato) between the same parties on the same issues, i.e., “the alleged failure of Defendants to pay Plaintiff[’s] referral fees allegedly earned under the alleged contract . . . including California Labor Code section 5710 deposition fees;” and (3) no cause of action for declaratory relief is stated. The trial court sustained the demurrer without leave to amend on all grounds asserted in the demurrer and entered its order (judgment) dismissing the complaint with prejudice.

Leeds appealed the dismissal, and the Court of Appeal reversed in the unpublished case of Leeds v. Reino and Iida.

The Court of Appeal concluded that the distribution of attorney fees in a final award pursuant to a fee splitting agreement is not subject to the exclusive jurisdiction of the WCAB. “Once the WCAB has resolved the ‘reasonable amount’ of the attorney fees and makes a final award in this amount, the WCAB has no further interest in, or obligation to determine, how the fees are to be disbursed or otherwise disposed of by the lien claimant. We therefore conclude that a dispute between the lien claimant and a third party regarding allocation or division of the attorney fees in a final award issued by the WCAB is outside the jurisdiction of the WCAB. ”

FDA Issues Rules on Mobile Medical Apps

The U.S. Food and Drug Administration has issued final rules governing the development of mobile medical apps, saying it will focus its oversight on those products that have the potential to harm consumers if they do not function properly.

The rules, announced on Monday, come more than two years after the FDA released draft guidance in which it proposed regulating any mobile app deemed to be a medical device.

The FDA said it will only regulate products that transform smartphones into devices the agency currently regulates, such as electrocardiography (ECG) machines that can determine whether a patient is having a heart attack.

The agency will also regulate apps that would be used as an accessory to a regulated device, such as one that displays images used by physicians to diagnose patients.

The agency said it will not regulate the sale or general consumer use of smartphones or tablets or mobile app distributors such as the iTunes store or Google Play store. Nor will it regulate personal wellness apps such as pedometers or heart-rate monitors.

Dr. Jeffrey Shuren, director of the FDA’s medical device division, said on a conference call with reporters that whether the agency regulates a product will depend on its function and its risk. If a heart device used in a hospital is currently regulated, chances are a mobile app will be too.

“It’s not about the platform. It’s about the functionality,” Shuren said. “An ECG is an ECG.”

Such products will need to be cleared by the FDA before being allowed on the market. The agency has cleared about 100 mobile medical apps over the past decade, of which 40 were cleared in the last two years. Shuren said the average review time was 67 days.

The agency said it is not going to enforce its powers on mobile apps it considers relatively safe such as those that help patients organize and track their health information, or promote strategies for maintaining a healthy weight or adhering to medication dosing schedules.

According to a report published in March by research2guidance, a research firm, the market for mobile health apps will reach $26 billion by 2017. Currently, there are about 97,000 mobile health applications in major app stores, the report said.