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New Study Questions Hip Replacement Costs

Many hospitals are hard-pressed to tell people needing a hip replacement how much their procedure is likely to cost, according to a new study. Even when they can cite prices, going rates for the procedure may vary from hospital to hospital by a factor of 10, researchers found.

“It was very frustrating,” said Jaime Rosenthal, a student at Washington University in St. Louis, Missouri, who led the new research. “You got transferred to all these different people. You had to leave messages, call back.”

According to the U.S. Centers for Disease Control and Prevention, about 327,000 Americans had a hip replaced in 2009. The surgery is especially common among the elderly, who are covered by Medicare. Still, about half of all hip replacements in the U.S. are done on people younger than 65 – some of whom may not have private insurance.

For the new study, Rosenthal called 122 hospitals: two per state and two in Washington, D.C., plus the top 20 orthopedic hospitals listed in the US News and World Report rankings. During each call, she pretended to have a 62-year-old grandmother who needed a hip replaced but didn’t have insurance, and asked for the total price of the procedure. Just 45 percent of the top 20 hospitals and 10 percent of other hospitals could provide a complete cost for the hospital and doctor fees for a hip replacement, after up to five phone calls. When Rosenthal called both the hospital and affiliated doctors separately, she did a little better. In those cases, her team was able to put together the prices of procedures at 60 percent of top hospitals and 63 percent of others.

Those totals ranged anywhere from $11,100 to $125,798, Rosenthal and her colleagues from the University of Iowa reported Monday in JAMA Internal Medicine. She said some hospitals gave her reasons for a higher price – such as assigning her grandmother to a private room – but for others, it wasn’t clear what went into the cost of care. “It just points to the fact that most of us in the health system don’t have any idea what the costs really are,” said medical ethicist Dr. Ezekiel Emanuel from the Perelman School of Medicine at the University of Pennsylvania in Philadelphia, who co-wrote a commentary published with the new study.

Often, only the hospital’s billing office knows how much a patient is actually charged for a procedure such as a hip replacement, researchers noted. Some of the variation in costs has to do with how hospitals factor in overhead to each patient’s bill, Emanuel told Reuters Health. And the cost of an actual hip prosthesis can vary four- or five-fold across the country, he added.

Jeanne Pinder, founder of the transparency group ClearHealthCosts, said a ten-fold difference in price for any given test or procedure isn’t unusual, even within a single geographic area. “Nobody has any idea what they will pay in healthcare because the marketplace is completely opaque,” Pinder, who wasn’t involved in the new study, told Reuters Health. “When you go into the system, you’re usually not there because you want to be. You’re usually anxious, upset, and there’s a question of when you come out on the back end, whether you’ll be bankrupt or not.” That’s not only a concern for uninsured people, she noted, given how high co-pays or deductibles may be for those who are covered.

For a patient looking for cost information, there aren’t a lot of options right now – other than waiting for more transparency to come through legislation or other means, researchers said. “I don’t know that the information is readily available right now,” Emanuel said. “You can try to call around, especially if it’s elective.” Rosenthal told Reuters Health the findings do show that people willing to make lots of calls might have success shopping around for the best deal. But hospitals don’t make it easy. “Patients can take responsibility and put pressure on hospitals to make this information available,” she said. Pinder agreed. “I always recommend that people ask,” she said. “If you put this information into people’s hands… you can start to think like a consumer.”

WCAB Panel Warns Applicant Attorneys About Inflating Attorney Fee Requests

In the case of Felix Nino Mota v Allgreen Landscape and National Insurance Company ADJ2567272 (ADM 0105012), the Court of Appeal issued an order denying defendant’s petition for writ of review and found under section 5801 that “there is no reasonable basis for the petition.” Therefore the Court remanded this case to the Appeals Board to make a supplemental award of “reasonable attorney’s fees [to applicant’s attorneys] based upon services rendered in connection with the petition for writ of review.”

Applicant’s attorneys then submitted three unitemized declarations claiming a section 580 I attorney’s fee in the total amount of $51,900, i.e., 62 hours at $500 per hour for Susan E. Kaplan, Esq.,16 hours at $550 per hour for R. Jeffrey Evans, Esq., and 22 hours at $550 per hour for Gary R. Kaplan, Esq.

The WCAB indicated the request for fees was “inadequate.” First,”the declarations do not cite to itemized billings or, indeed, anything that might indicate the time expended on (and the dates of) each specific task” and, therefore, “the declarations of time expended are essentially completely unsupported.” Second, “although the declarations claim a total of 100 hours of attorney time rendered in connection with defendant’s petition for writ of review, the declarations give no indication of why so many hours were reasonably required.” Third, “the declarations include statements that the attorneys’ ‘usual and customary’ rates are $500 to $550 per hour, but the statements are not supported by such potential factors as the attorneys’ status as certified workers’ compensation specialists, if any, or the degree of care exercised and the effort required because of the legal or factual issues involved. Furthermore, a mere declaration that the stated rates of $500 and $550 per hour actually represent applicant’s attorneys’ ‘usual and customary’ rates for appellate work does not establish that those rates are reasonable.” Fourth, “Ms. Kaplan’s declaration also claimed $500 per hour for time she spent performing clerical tasks. However, section 5801 provides for ‘a reasonable attorney’s fee for services rendered in connection with the petition for writ of review.’ We interpret ‘services’ in this context to mean legal services rendered by the attorney, not clerical services the attorney may have performed..

The WCAB went on to say “we ordinarily determine a reasonable fee based on our independent review of the record. Moreover, in the absence of the $51,900 fee claimed, we would have determined that a fee award in the range of $14,000 to $16.000 would have been “reasonable” based on our independent review.”

“However, based on an extensive discussion of California and corresponding federal case law, we emphasized that “where the original request for a “reasonable” attorney’s fee is unreasonably inflated, we may award less than what would otherwise be a “reasonable” fee or even allow no fee at all.”

“Therefore, for the limited purpose of assisting us in determining what fee, between $0 and $16,000, should be awarded, our NIT allowed applicant’s attorneys to file properly itemized declarations. We were not allowing applicant’s attorneys a “second bite of the apple” at justifying the original $51,900 inadequate and defective fee request.”

“On November 2, 2012. applicant’s attorneys filed a response and three supplemental declarations consequent to our October 15, 2012 NIT. Based on our review of the three latest fee declarations, together with our review of the prior declarations and the appellate record. we conclude that the latest fee declarations are not credible and, instead, represent an inaccurate and inadequate after-the-fact attempt to justify the original un-itemized fee request.”

“In concluding that the three supplemental declarations represent a non·credible. inaccurate, and inadequate after-the-fact attempt to justify the original un-itemized fee request, we observe that all three declarations claim that legal services were rendered in connection with the petition for writ of review before (according to its proof of service) it was even mailed and before the petition presumably would have been received by the attorneys in the course of ordinary mail.”

“Because we conclude that the declarations are not credible, and possibly even perjurious, and we will entirely disregard them.”

“Therefore, even though their original fee request was unreasonably inflated, and even though their response to our NIT is inadequate for the reasons specified above ( among others), we will allow a section 5801 fee of $2500.”

“We emphasize that our decision on fees is expressly intended to deter applicants attorneys from making future unreasonably inflated fee requests that are not supported by adequate and accurate time itemizations (or. worse, that are based on non-credible and possibly even perjurious declarations). We specifically observe that our intent is to deter them not only from making unreasonably inflated fee section 5801 requests, but also any other type of “reasonable” attorney’s fee request, including but not limited to deposition attorney’s fees (Lab. Code, § 5710(b)(4)), fees for compensation unreasonably delayed subsequent to the issuance of an award (Lab. Code. § 5814.5), and even fees claimed as a lien against ordinary benefits (Lab. Code, § 4906 (esp., subd. (d)], Cal. Code Regs., tit. 8, § 10775). Moreover) we caution applicant’s attorneys that if they do make such improper fee requests in the future, not only do they risk being allowed a $0 attorney’s fee. but they also risk sanctions under section 5813 and WCAB Rule 10561. (Cal. Code Regs.) tit. 8, § 10561.)”

Feds Recover Record $4.2 Billion in 2012 Health Care Fraud Efforts

Health and Human Services and the Department of Justice say that a record-breaking $4.2 billion were recovered as a result of joint efforts to address health care fraud in 2012.

Health and Human Services (HHS) Secretary Kathleen Sebelius and Attorney General Eric Holder issued a report which showed that for every dollar the US government spent on health care-related fraud and abuse investigations over the last 36 months, it got $7.90 back. This is a record over a three-year period since the HCFAC (Health Care Fraud and Abuse) Program began sixteen years ago.

Is this huge haul a sign of better coordination among public authorities, or does it reflect an increase in criminality? The Justice Department and HHS believe it is a sign of the government’s health care fraud prevention and enforcement efforts. $4.2 billion (2012) is an increase from $4.1 billion in 2011.

The money was recovered from companies and individuals who had tried to defraud federal health programs aimed at seniors and taxpayers for payments they were not entitled to receive. $14.9 billion have been recovered over the last four years, compared to $6.7 billion during the previous four-year period. Over $23 billion have been returned to the Medicare Trust Funds since 1997 by the HCFAC Program.

HEAT (Health Care Fraud Prevention and Enforcement Action Team) was created in 2009 to fight fraud, abuse and waste in the Medicaid and Medicare programs, and to close in on people and entities which abuse the system and cost the American taxpayers billions of dollars. A takedown involving the highest number of false Medicare billings in history of the strike force program occurred in 2012. It involved 107 people, including nurses and doctors in seven cities. They were charged for taking part in Medicare fraud schemes totaling approximately $452 billion in fraudulent billings. During that takedown, HHS also suspended or took other action against 52 providers to suspend payments until the investigation was completed.

Last year, 251 guilty pleas and 13 jury trials were brought to court. Twenty-nine defendants had guilty verdicts against them in strike force cases. Those found guilty were given prison sentences averaging over 48 months.

Hearings Scheduled for Electronic Document Filing and Lien Filing Fee Rules

The Division of Workers’ Compensation has issued notices of public hearings for the electronic document filing and lien filing fee rules. The proposed rulemakings are to permanently adopt the emergency regulations which became effective Jan. 1, 2013. A public hearing on the proposed regulations has been scheduled at 10 a.m., March 26 in the auditorium of the Elihu Harris Building, 1515 Clay Street, Oakland, CA, 94612. Members of the public may also submit written comment on the regulations until 5 p.m. that day.

Senate Bill (SB) 863 has created substantial changes to how liens are filed within the workers’ compensation system. Specifically, any liens filed pursuant to Labor Code section 4903(b) or claims of costs must be filed electronically. Also, a fee of $150 is now required prior to filing for most liens filed after Jan. 1, 2013, and a $100 activation fee is required for most liens filed before then, but activated for a lien conference after Jan. 1, 2013. This activation fee is required to be paid at the time a lien claimant files a declaration of readiness or appears at a lien conference. This rulemaking implements these changes.

There are some proposed revisions to the emergency regulations. Specifically, the definitions of “cost,” “lien conference,” “mandatory settlement conference” and “party” have been amended for clarity. The definition of “section 4903(b) lien” is amended to delete reference to “interpreters’ fees incurred in connection with medical treatment (Labor Code section 4600)” because those fees are subject to a petition for costs under Labor Code section 5811. The EAMS E-Form Filing Reference Guide has been revised to reflect that lien claimants will now be given uniform assigned names to use when filing electronically.

DWC will consider all public comments, and may modify the proposed regulations for consideration during an additional 15-day public comment period. The notices of rulemaking, text of the regulations, and the initial statements of reasons can be found at on the DWC rulemaking page.

Ventura County Sheriff’s Office Employee Arrested For Comp Fraud

Ventura County District Attorney Gregory D. Totten announced the filing of a felony complaint against Keri Atwood (DOB 09/24/1984) and Michael Atwood (DOB 08/28/1976) of Santa Paula. Both defendants are charged with committing workers’ compensation fraud and conspiracy. Keri Atwood is also charged with grand theft and burglary. This case was investigated by the Valencia office of the California Department of Insurance.

Keri Atwood, a civilian employee of the Ventura County Sheriff’s Office, reported to her supervisors that she sustained an injury to her left ankle. According to Keri Atwood, the injury occurred when another employee accidentally hit the back of her foot with a mail cart. She was placed on Temporary Total Disability (TTD) status and received over $29,000 in disability pay.

Keri Atwood used crutches or a wheel chair to get to her medical appointments. After her medical appointments, she was seen walking freely without the aid of crutches or a wheel chair. She was also observed engaging in a number of physical activities that she had told her treating physicians she could not perform. Michael Atwood drove Keri Atwood to her doctors’ visits and failed to disclose her true physical condition.

The defendants were arrested on February 7, 2013, by investigators from the California Department of Insurance. The defendants are scheduled to be arraigned on February 8, 2013, at 9:00 a.m. in courtroom 12. Keri Atwood faces a maximum sentence of nine years and eight months in county jail. Michael Atwood faces a maximum sentence of four years and four months in county jail.

CWCI Report Says Compound Drug Costs Still Out of Control Despite Recent Legislation

Recent public health concerns and legislative actions have raised the profile of compound drug utilization in the California workers’ compensation system. In 2011, California lawmakers enacted Assembly Bill 378, which took effect January 1, 2012. The legislative intent of this statute was to control the increase in prescriptions for and thee costs associated with compounded pharmaceutical products in the California workers’ compensation system through the implementation of unit price controls.

In 2002, California lawmakers passed Assembly Bill 749, the first of several workers’ compensation reforms that included provisions to modify the delivery of pharmacy benefits and contain the rapidly escalating cost of prescription drugs used to treat injured workers. In January 2004, the California Division of Workers’ Compensation adopted a pharmacy fee schedule that capped maximum reimbursements for pharmacy services and drugs at 100 percent of Medi-Cal rates, which at the time, were at least 10 percent below the average wholesale price (AWP) for prescription drugs, plus a dispensing fee. However, these legislative and regulatory adjustments, which focused on unit price controls, were only partially successful in containing the growth in workers’ compensation prescription drug costs. Following the full implementation of the 2002-2004 reforms, the average amount paid for pharmaceuticals on a California workers’ compensation indemnity claim within the first two years of injury more than doubled from $599 to $1,234 between accident years 2005 and 2009.

After the repackaged drug regulations took effect, some manufacturers began promoting compound drugs, medical foods and convenience packs (or “co-packs”) that included prescription medications and “medical foods” to California workers’ compensation medical providers.

Compounding pharmacies provide drugs to patients who may experience challenges obtaining specific prescription medications that are not available through conventional means. Such challenges include special formulation requirements to improve tolerance or products that lack a critical mass of potential patients to make their manufacturing economically viable. Although many compound drugs outside of workers’ compensation are related to hormone replacement, dermatology, children’s formulations for those who can’t swallow pills and anti-cancer treatment, most of the compounded drugs in the California workers’ compensation system are pain management medications delivered through topical creams.

Assembly Bill 378, signed into law in 2011 and implemented on January 1, 2012, was designed to curb the increased use of and the rapidly growing costs associated with compounded pharmaceutical products in the California workers’ compensation system. The measure sought to reduce the amounts paid for compounded drugs used to treat injured workers through the adoption of additional unit price controls and billing conventions. AB 378 strengthened the pharmacy fee schedule by requiring that any compounded drug used to treat an injured worker must be billed at the ingredient level by the compounding pharmacy or dispensing physician, with each ingredient identified using the applicable National Drug Code (NDC) of the ingredient and the corresponding quantity. The bill also prohibited separate reimbursement for ingredients with no NDC. Workers’ compensation reimbursements for compounded medications were set at the rates allowed by Medi-Cal for each ingredient, plus a dispensing fee equal to that allowed by Medi-Cal. The maximum reimbursement for a compound drug dispensed by a physician was set at 300 percent of the physician office’s Documented Paid Cost, but in no case could that amount exceed $20 above the Documented Paid Cost.

A new CWCI study examines changes in compound drug utilization and payments before and after the implementation of AB 378 by measuring the volume of compound drugs prescribed to California injured workers and the amounts reimbursed for those drugs in the first half of 2011 to the comparable data from the first half of 2012.

Compound drugs fell from 3.1 percent of California workers’ compensation prescriptions in the first half of 2011 to 2.0 percent of the prescriptions dispensed to injured workers in the first six months of 2012, a relative decline of 35 percent; yet at the same time, compound drug reimbursements increased from 11.6 percent to 12.6 percent of California workers’ compensation prescription payments, a relative increase of 9 percent. Over the same period, the average amount paid per compound drug prescription increased 68.2 percent from $460.42 to $774.21, while the average paid for a non-compound drug prescription decreased 4.6 percent from $112.78 to $107.61.

The average number of NDC ingredients used within compounded drugs dispensed to California injured workers increased from 3.4 in the first half of 2011 to 3.8 in the first half of 2012, a 13.1 percent increase; while the average paid per NDC ingredient increased 48.7 percent from $135.63 to $201.67. In addition, there was a 25.5 percent increase in the quantity per NDC ingredient but virtually no change in the average days’ supply per compound drug prescription, suggesting that more potent compound drugs are being dispensed.

There is little evidence from clinical trials to support the use of many of the compound drugs dispensed to injured workers. Ingredients such as Dextromethorephan are reimbursed at significantly higher levels than alternative therapeutic equivalents without adequate cost/benefit evaluation. The lack of rigorous independent evaluation and the lack of federal and state oversight limit the California workers’ compensation payers’ ability to control compound drug utilization and cost. Current Trends in Compound Drug Utilization and Cost in the California Workers’ Compensation System Alex Swedlow, MHSA Eileen Auen, MBA

Council Report Says Workers’ Compensation Market in “Distress”

Insurance brokers across the country reported price increases in the commercial lines market in the 4th quarter of 2012, according to The Council of Insurance Agents and Brokers’ quarterly Commercial P/C Market Index Survey. Pricing rose on average at a rate of 5.0 percent, compared with 3.9 percent in the 3rd quarter of 2012, across small, medium and large accounts.

The workers’ compensation market clearly was in distress last quarter. In one Northeast broker’s words, workers’ compensation was “crashing.” The broker said prices escalated 30 percent to 50 percent, mostly on large accounts. In the Midwest, a broker said some carriers weren’t particularly interested in writing workers’ compensation accounts. Others said monoline coverage was harder to find.

Property prone to catastrophes was also tough to write, according to survey results. A Southeast broker stated, “Sandy brought flood back under the microscope and carriers scrutinized coverage harder and cut flood limits.” In the Northeast where Sandy hit hardest, carriers decreased CAT limits such as flood and wind, while increasing deductibles in both areas. Brokers reported similar stories for vulnerable property across the country. Many carriers asked for percentage wind/hail deductibles and some cut back on property exposures altogether. “Carriers didn’t want an “account that was running a high loss ratio,” a Southwest broker commented.

The general feeling of the market last quarter can be summed up this way: underwriters looked carefully at their potential loss exposures and in some cases were willing to walk away rather than get caught short. The Council’s survey is the oldest, most authoritative source of existing market conditions, pricing practices and trends, dating back to 1999.

“I think you can characterize the fourth quarter as more of the same,” said The Council’s President/CEO, Ken A. Crerar. “Carriers were still cautious about the risks they were putting on their books and pushed for price increases where they could get them.”

CHSWC 2012 Annual Report Looks at Integrating Comp and Group Health Care

Group health costs have been rising much more quickly than inflation and wages. Costs have been rising even more quickly for treatment of occupational injuries in the California’s workers’ compensation system. This creates major financial challenges for employers, especially those in industries with already high workers’ compensation costs. Furthermore, group health care and workers’ compensation medical care are typically delivered through separate provider systems, resulting in unnecessary, duplicative and contraindicated treatment, and inefficient administration.

Integration of group health and workers’ compensation medical care is an alternative to two separate systems of medical care. Under integrated health care, the same individual physician or health provider group administers treatment for both occupational and non-occupational medical conditions and integrates payment for treatment under a single insurance policy. Integrating workers’ compensation medical treatment with group health treatment offers employers the potential for significant savings and could help improve the quality of care and workers’ overall access to health insurance. Research also supports the contention that an integrated 24-hour care system could potentially provide medical cost savings, as well as shorten the duration of disability for workers.

The Commission on Health and Safety and Workers’ Compensation (CHSWC) has partnered with the California HealthCare Foundation (CHCF) and the University of California (UC), Berkeley, to examine the feasibility of integrated care in California. To conduct a pilot project, partnerships between CHSWC, CHCF, UC Berkeley, DMS Facility Services, and the Service Employees International Union (SEIU) Local 1877 were established. The pilot is part of a carve-out agreement and uses Kaiser Permanente for delivery of both workers’ compensation medical care and group health benefits. The goal of the pilot is to identify areas of administrative savings and ways to reduce litigation. Savings are expected in medical utilization, indemnity costs, and administration. Medical services are expected to be delivered with fewer delays and disputes, enabling injured employees to recover more fully and return to work sooner.

CHSWC has issued a working paper titled “Comparing the Costs of Delivering Medical Benefits Under Group Health and Workers’ Compensation – Could Integration Pay for Covering the Working Uninsured?” At its October 22, 2009 meeting, CHSWC voted to create an advisory group to discuss the findings of the issue paper on integrating workers’ compensation medical and group health care. Subsequently, on February 25, 2010, CHSWC held a roundtable to discuss the issue paper in detail, get feedback from the advisory group, and examine the feasibility of adopting integrated care in California. The roundtable was composed of over 40 participants representing employers, labor, government agencies, medical providers, insurance companies, and attorneys.

Study findings indicate that total national savings estimates over the first ten years would be between $490 billion, based on National Academy of Social Insurance (NASI) data, and $560 billion, based on California insurer data. Savings for California alone would be about $10 billion in the first year and $100 billion for the ten years 2011 to 2020 inclusive. Key reasons for the savings are that it is expensive to deliver medical care separately for a single condition. This is very expensive initially and even more expensive over a life-time of separate treatment. Additionally, life-time medical costs are very difficult to predict, and insurers have to charge a “risk premium” for taking on a highly speculative liability. Health insurers are only estimating medical treatment costs over the next 12 months, a much less risky proposition.

Based upon this information The CHSWC 2012 Annual Report made the following suggestions:

  • Evaluate the administrative and overhead cost of delivering occupational medical care under workers’ compensation insurance.
  • Disseminate the results of the evaluation and the opportunities and challenges of implementing an integrated occupational and non-occupational medical treatment and insurance product.
  • Develop and provide specific details and resources on integrated care for unions and employers interested in carve-out programs.
  • Evaluate the impact of Medicare’s implementation of its secondary payor rights with regard to settlements of workers’ compensation claims, and examine alternative ways to coordinate benefits between the two systems.

DWC Announces Recipients of the Carrie Nevans Community Service Award

The California Division of Workers’ Compensation announced the recipients of the 2013 Carrie Nevans Community Service Award. This year’s award in Northern California goes to Angie Wei, Legislative Director of the California Federation of Labor, AFL-CIO. Sean McNally, president of KBA Engineering in Bakersfield is the Southern California recipient. Both are commissioners with the Commission on Health and Safety and Workers’ Compensation. The awards will be presented at the upcoming 20th annual DWC educational conference luncheons.

“We received many outstanding nominations but Ms. Wei’s and Mr. McNally’s collaborative contributions to the workers’ compensation community with their work on Senate Bill 863 were stellar” said DIR Director Christine Baker.

“Their exceptional efforts were instrumental in negotiating and developing a reform package that drastically improves the system. They personally spent hundreds of hours to craft a bill that increased benefits to injured workers and produced cost-saving efficiencies that both labor and management could agree to,” continued Ms. Baker.

Ms. Wei has been with the California Labor Federation since 2000. She previously worked as an advocate for the California Immigrant Welfare Coalition and served as a public policy director for the Northern California Coalition for Immigrant Rights. She received her undergraduate degree from UC Berkeley and a master’s degree in public policy from the Kennedy School of Government at Harvard University.

As is noted above, Mr. McNally is the President of KBA Engineering in Bakersfield. He is a licensed general contractor and serves as a trustee for the Self Insurer’s Security Fund and is very active in the community in leadership capacities. Sean has been certified by the State Bar of California as a specialist in workers’ compensation and was a partner at Hanna, Brophy, MacLean, McAleer and Jensen. He received his B.A. degree from the University of San Francisco and J. D. from the University of Pacific, McGeorge School of Law.

The DWC’s 20th annual educational conference is the largest workers’ compensation training in the state and allows claims administrators, attorneys, medical providers, return to work specialists, employers, and others to learn about the most recent developments in the system as well as on-going DWC programs. This year’s conference has many sessions devoted to SB 863 and its successful implementation. The Los Angeles conference (Feb. 28-March 1, 2013) has been sold out for several weeks, however registration is still open for the Oakland training, which take place March 4-5, 2013 at the Oakland Marriott City Center Hotel.

County Jail Inmate is Not an Employee While Working in Kitchen

The WCAB found that Stewart Espinoza, while an inmate of the Los Angeles County Men’s Central Jail, was not an employee of the County of Los Angeles at the time that he was injured while working as a cook in the jail, and that he was therefore not eligible for workers’ compensation benefits. Espinoza filed a petition for review which the Court of Appeal denied on May 17, 2012. The Supreme Court granted Espinoza’s petition for review on and transferred the matter back to the Court of Appeal with directions to vacate the order denying the petition for a writ of review. The Court of Appeal issued a writ of review pursuant to the Supreme Court’s direction and affirmed the WCAB denial of benefits in the unpublished opinion of Stewart Espinoza v WCAB and Los Angeles County Jail.

Espinoza and the County stipulated that Espinoza was working as a cook in the county jail on November 1, 2005 when he sustained an injury to his left shoulder. The parties also stipulated that if Espinoza was found to be County’s employee, the injury arose in the course and scope of employment. Thus, the only issue in the case is whether Espinoza was County’s employee. Whether Espinoza was County’s employee depends in this case on whether he performed the work he was doing voluntarily or whether he was required to work as a condition of his incarceration.

The Los Angeles County Board of Supervisors issued an order in 1970 referred to as Order #91, which provides that persons confined in the county jail may be compelled to perform labor under the direction of a county official. Order #91 goes on to state that “[n]o prisoner engaged in labor pursuant to this order shall be considered as an employee of, or to be employed by the County or any department thereof, nor shall any such prisoner come within any of the provisions of the Workmen’s Compensation Insurance and Safety Act of 1917 . . . .” Order #91 was enacted by the Board of Supervisors in response to the decision in State Compensation Ins. Fund v. Workmen’s Comp. App. Bd. (1970) 8 Cal.App.3d 978 (Childs). Childs was a case in which David Childs, then an inmate in the Los Angeles County Jail, was working on a road project in Malibu in November 1966 when he was injured.

Espinoza did not testify. Instead, there was an offer of proof that the WCJ rendered as follows: “He [Espinoza] thought his work was voluntary, and was never told his work was mandated by the terms of his incarceration. He received preferential treatment in exchange for the work.”

The WCJ reasoned that Order #91 only provides that a jail inmate “may” be compelled to work, not that the inmates “shall” be compelled to work. The WCJ went on to conclude that there was no evidence that Espinoza was compelled to work. “He [Espinoza] did the work in order to receive some extra benefits while in jail. Nothing indicates the terms of his sentence required him to work in the kitchen.”

The WCAB disagreed. Noting that it was Childs that spawned Order #91, the WCAB pointed out that similar ordinances have been held to exclude county jail inmates from workers’ compensation coverage. The WCAB cited as an example the Tulare county ordinance in Parsons v. Workers’ Comp. Appeals Bd. (1981) 126 Cal.App.3d 629 (Parsons). The WCAB’s conclusion was that an inmate’s work “is not voluntary if it is performed subject to a County ordinance that requires an inmate to work while incarcerated.”

The Court of Appeal concluded that “Given that Order #91 precludes the establishment of an employment relationship, it is not necessary to address the question whether Espinoza volunteered to work. We note, however, the manifest difficulties that would be encountered if Order #91 did not exist. With an inmate population the size of the County’s jail system, the problems of proving whether the County entered into an employment relationship with a given inmate would be practically insurmountable. It would also lead to the highly undesirable result of leaving some inmates in the workers’ compensation system and some outside of it, leaving the public agency with a completely unpredictable financial exposure. ”