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DWC Posts Updated Fact Sheets for Injured Workers

The Division of Workers’ Compensation (DWC) has posted updated fact sheets for injured workers on its website. The updated fact sheets provide injured workers with answers to frequently asked questions about issues affecting their benefits, and include changes mandated by Senate Bill 863.

“The fact sheets help injured workers and other parties understand the sometimes complicated process of workers’ compensation,” said DWC acting Administrative Director Destie Overpeck. “We have updated the fact sheets to reflect the changes made by SB 863.”

The fact sheets cover such topics as temporary disability benefits, permanent disability benefits, supplemental job displacement benefits, and medical care. They are available to employers and insurers who are required to comply with benefit notice regulations.

The updated fact sheets are available for immediate use in English and Spanish.

Feds Fraud Warning Targets Physician Owned Distributorships (PODs)

A federal government watchdog has issued a warning about the risk for fraud when doctors buy an ownership interest in a medical device distributor and then share in its profits from sales to hospitals.

In its March 20 report, the Department of Health and Human Services, Office of Inspector General issued a “Special Fraud Alert” that addresses physician-owned entities that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use in procedures the physician-owners perform on their own patients at hospitals or ambulatory surgical centers (ASCs).

These entities frequently are referred to as physician-owned distributorships, or “PODs.” A “POD” is any physician-owned entity that derives revenue from selling, or arranging for the sale of, implantable medical devices and includes physician-owned entities that purport to design or manufacture, typically under contractual arrangements, their own medical devices or instrumentation. Although this Special Fraud Alert focuses on PODs that derive revenue from selling, or arranging for the sale of, implantable medical devices, the same principles would apply when evaluating arrangements involving other types of physician-owned entities.

PODs are most commonly used in orthopedics.

Longstanding OIG guidance makes clear that the opportunity for a referring physician to earn a profit, including through an investment in an entity for which he or she generates business, could constitute illegal remuneration under the anti-kickback statute. The anti-kickback statute is violated if even one purpose of the remuneration is to induce such referrals.

OIG has repeatedly expressed concerns about arrangements that exhibit questionable features with regard to the selection and retention of investors, the solicitation of capital contributions, and the distribution of profits. Such questionable features may include, but are not limited to: (1) selecting investors because they are in a position to generate substantial business for the entity, (2) requiring investors who cease practicing in the service area to divest their ownership interests, and (3) distributing extraordinary returns on investment compared to the level of risk involved. PODs that exhibit any of these or other questionable features potentially raise four major concerns typically associated with kickbacks – corruption of medical judgment, overutilization, increased costs to the Federal health care programs and beneficiaries, and unfair competition. The OIG does not believe that disclosure to a patient of the physician’s financial interest in a POD is sufficient to address these concerns.

OIG is concerned about the proliferation of PODs. This Special Fraud Alert reiterates our longstanding position that the opportunity for a referring physician to earn a profit, including through an investment in an entity for which he or she generates business, could constitute illegal remuneration under the anti-kickback statute. OIG views PODs as inherently suspect under the anti-kickback statute.

Public Sector Claims Costs Near 10 Year High

Even with the volume of job injury claims reported by California public self-insured entities hovering near a 10-year low last year, total paid and incurred workers’ compensation claim costs for cities, counties and other public agencies in the state remained near their 10-year highs according to a California Workers’ Compensation Institute (CWCI) analysis of data from the Office of Self-Insurance Plans (OSIP).

The OSIP summary of public self-insured data for fiscal year 2011/2012, dated March 5, provides the first snapshot of public self-insured claims experience – including the number of claims, total loss payments and total incurred (paid losses plus reserves) — for the 12 months ending June 30, 2012. The agency compiles the data annually from reports submitted by hundreds of public self-insured entities other than the state itself, including cities and counties, local fire, school, transit, utility and special districts and joint powers authorities. The new summary shows that in FY 2011/2012, these employers provided workers’ compensation coverage to 1.9 million California public workers whose wages and salaries totaled $96 billion for the year.

CWCI compared the latest results to those included in the initial report from the prior year and found almost no change (-0.3%) in the number of employees covered by public self-insured employers. Likewise, overall public self-insured claim frequency held steady at 6.2 claims per 100 employees, with no change in the incidence of either medical-only or indemnity claims. Though claim frequency was unchanged, and last year’s first report claim count was the second lowest tally of the last decade, public self-insured employers’ paid losses for FY 2011/2012 still amounted to nearly $340 million. That total was within 1 percent of the 10-year high recorded in FY 2010/2011 first reports and was nearly $80 million (or about 30%) more than the post-reform low recorded in the FY 2005/2006 first reports.

Calculating the first report average paid losses by benefit type, CWCI found that the $80 million increase in public self-insured loss payments over the past six years is associated with increased claim severity (average loss per claim) as average paid indemnity at the first report rose nearly 30% from a post-reform low $1,112 in FY 2005/2006 to $1,441 on last year’s claims, while over the same period the average paid for medical climbed 32.5% from the post-reform low of $1,073 to $1,422 last year.

The incurred data show a similar pattern, with incurred losses for California public self-insured employers totaling $1.1 billion in the FY 2011/2012 first reports, $244 million (28.6%) more than the post-reform low of $853 million noted in the FY 2005/2006 first reports, even though the number of claims is down. As with the paid loss data, the incurred results indicated that the increase in first report total incurred losses over the past 6 years are associated with rising claim severity, as the average incurred indemnity at first report jumped 19.5% from $3,106 in FY 2005/2006 to $3,713 last year, while average incurred medical at first report on public S-I claims rose more than 36% from $4,065 to $5,539.

CWCI ‘s analysis of the OSIP public self-insured data tracks changes in the volume and frequency of California public self-insured claims, and examines the 10-year trends in the total and average paid and incurred amounts for these claims.

Federal Judge Consolidates NFL Comp Claims

Three lawsuits from former National Football League players who are seeking California workers compensation benefits have been consolidated in U.S. District Court in San Francisco after a request from the NFL and several teams.

According to the story on the Business Insurance website, the cases involve 67 former NFL players who want to vacate a December 2012 arbitration award that requires them to withdraw workers comp claims in California, according to court records. The players played for the Buffalo Bills, Denver Broncos, New York Giants and Philadelphia Eagles.

California law allows NFL players to make a claim in California if they have played at least one game in the state. The plaintiffs argue that the arbitration award violates California and federal law and public policy by waiving their ability to seek workers comp in California, records show.

U.S. District Court Judge William H. Alsup ordered the three cases to be consolidated on March 13. The NFL Management Council and the four NFL teams filed a countersuit on March 8 asking the court to require the players to file any workers comp claims in the state specified by their respective player contracts.

The California comp lawsuits are part of several claims being made against the NFL by former players seeking compensation for injuries suffered on the field. At least 2,400 former players have sued the league over neurological and cognitive problems that they allege were caused by football-related head injuries. Most of the concussion-related cases have been consolidated into multidistrict litigation in the U.S. District Court in Philadelphia. The NFL is expected to use an exclusive remedy defense in those lawsuits.

DWC Implements Lien Filing Fee Process

The Division of Workers’ Compensation’s lien filing fee payment system has been updated as of March 2, 2013 so that JET Filers can pay the required filing fee and file their liens in one integrated process.

JET Filers who filed liens requiring payment of the filing fee between Jan. 1 and March 2, 2013 but did not pay the fee are reminded that Labor Code Section 4903.05(c)(2) provides that liens that are filed or lodged prior to payment of the required fee are deemed invalid.

DWC had previously advised JET Filers to file their liens and then use the public search tool to pay the filing fees. JET Filers who have filed liens between Jan. 1 and March 2, 2013 but failed to pay the fee are advised that the public search payment option for those liens will not be available after April 5, 2013 at 5 p.m. All lien claimants using JET File are now able to use the new integrated process.

JET Filers who have questions about the payment of lien filing fees should consult the DWC website.

Oxnard Cop Pleads Guilty in Fraud Case

A former Oxnard police officer pleaded guilty Monday to two counts of workers’ compensation fraud and was ordered to pay $70,000 in restitution to the state. According to the report in the Ventura County Star, 28 year old Edward Idukas handed over a check during the court proceedings to cover the full amount, prosecutor Ernesto Acosta said.

Ventura County Superior Court Judge Kevin McGee set sentencing for June 13. Idukas faces up to four years behind bars but will not likely get a harsh sentence, Acosta said. “Other than committing workers’ compensation fraud, he doesn’t have anything else on his record,” Acosta said. “The guy is a former cop.”

Outside the courtroom, Idukas’ lawyer, David S. Kestenbaum, said his client was remorseful. “He’s lost his whole career and had to move his family out of state and picked up a new career. This is all he wanted to be: a police officer,” Kestenbaum said. “I hope in the interest of justice the judge reduces it to a misdemeanor and doesn’t impose jail. He’s suffered a lot as a result of his mistake. But before that he had done a lot of good for the community and received a lot of commendations … from the Oxnard PD.”

Idukas was placed on temporary total disabled status after he told a supervisor on Dec. 29, 2009, that he hurt his back while bending over at his locker and had pain and limited mobility, according to court records. He received disability pay for several months.

Investigators discovered Idukas was playing baseball weekly in a local adult league while receiving disability benefits from the city of Oxnard, according to court records. While these activities were taking place, Idukas told doctors and physical therapists that he was too disabled to return to his duties as a police officer, prosecutors said.

Kestenbaum said he thinks Idukas, who was arrested in June 2011, is innocent. But he was offered a good plea bargain, so he took it, Kestenbaum said. “He was not hiding what he was doing and felt he had received bad advice – that he could resume playing baseball to strengthen his back,” Kestenbaum said. “From our standpoint, there is a big difference in playing baseball, where you can say timeout if your back hurts, than being in a squad car in El Rio and there is no timeout in the field. Psychologically, he didn’t feel he could be a police officer (with a back injury). That was one of the problems.”

Liberty Mutual Nations Largest Comp Carrier

Liberty Mutual Holding Co. Inc. was the largest workers compensation insurer nationwide in 2012 with about $4.2 billion in direct written premiums, according to the latest market share report by the National Association of Insurance Commissioners.

Boston-based Liberty Mutual held 8.73% of the workers comp market for 2012, according to data published Monday by Washington-based NAIC.

Travelers Cos. Inc. was the second-largest comp insurer with 7.94% of the market, or $3.8 billion in direct written premiums, while The Hartford Financial Services Group Inc. held the third-largest share with 6.86% of the market, or nearly $3.3 billion in written premiums.

American International Group Inc. held 6.16% of last year’s comp market with nearly $3 billion in written premiums, and Zurich Insurance Co. Ltd. captured 5.79% of the market with $2.8 billion in premiums.

The list of top 25 workers comp insurers, as well as other property/casualty insurance lines is available on the NAIC’s website. The tentative data is scheduled to be finalized by the end of this month.

2013 Annual Report of Inventory Due on April 1

Claims administrators are reminded that the 2013 annual report of inventory (ARI) for claims reported in calendar year 2012 is due to be submitted to the Division of Workers’ Compensation (DWC) Audit Unit no later than April 1, 2013.

The California Code of Regulations,title 8, section 10104 requires claims administrators to file an annual report of inventory (ARI) with the number of claims reported at each adjusting location for the preceding calendar year. Even if there were no claims reported in 2013, the report must be completed and submitted to the DWC Audit Unit. Each adjusting location is required to submit an ARI, whether or not they receive a form for reporting claims from the Audit Unit, unless their ARI requirement has been waived by the AD.

In 2011, the Audit Unit began requesting the federal employer identification number (FEIN) for each adjusting location and for all underwriting companies and/or clients for which claims are administered at the given location. A claims administrator’s obligation to submit an ARI can be waived if the AD determines that they are in compliance with electronic data reporting requirements of the Workers’ Compensation Information System (WCIS). FEIN information will be used by the DWC Research Unit to match claims information submitted electronically to the WCIS with that reported to the Audit Unit on the ARI. This will allow the AD to waive ARI requirements for claims administrators, as appropriate.

When ARI requirements are waived, claims administrators must file an annual report of adjusting locations. This report is to be filed annually on April 1 of each calendar year for the adjusting location operations as of Dec. 31 of the prior year. DWC has provided a form which can be used for this purpose.

Claims administrators are also required to report any change in the information reported in the ARI or annual report of adjusting location within 45 days of the effective date of the change.

The forms for the required 2013 ARI and annual report of adjusting locations, along with advice for claims administrators, are posted on the website.

Questions about submission of the ARI or the annual report of adjusting locations may be directed to the DWC Audit Unit by email, phone or U.S. mail: to the State of California Department of Industrial Relations, Division of Workers’ Compensation – Audit Unit, 160 Promenade Circle, Suite #340, Sacramento, CA 95834-2962. E-mail: DWCAuditUnit@dir.ca.gov., Facsimile: 916.928.3183. Telephone inquiry: 916.928.3180.

US Supreme Court Hears Drug Company “Pay for Delay” Arguments

The U.S. Supreme Court will hear arguments today over whether big drug companies can settle patent litigation with generic rivals by making deals to keep cheaper products off the market. U.S. and state regulators say the practice costs consumers, insurers and government billions of dollars annually.

The story in Reuters Health says that the Federal Trade Commission, which has dubbed the arrangements “pay for delay,” has fought them in court for more than a decade with mixed success, culminating in the case now before the U.S. Supreme Court. “The continuing stream of monopoly profits is large enough to pay the generic competitors more than they could hope to earn if they entered the market at competitive prices,” the FTC said in a brief. At the same time, the brand-name manufacturer receives greater profits than it could earn in the face of generic competition, the regulatory agency argued.

The Justice Department, the European Union and more than two dozen U.S. state attorneys general view the deals as illegal, but drug companies defend them as a way to avoid potentially lengthy patent litigation. “In every case that we’ve been involved in that resulted in a settlement, it has resulted in years being taken off the patent life,” said Paul Bisaro, chief executive of generic drug maker Actavis, Inc. Actavis was formerly Watson Pharmaceuticals. “It’s very unsophisticated to say ‘Oh, they get paid a bunch of money to stay off the market,'” said Bisaro.

In the case before the court, Solvay Pharmaceuticals Inc, now owned by AbbVie, sued generic drug makers Watson, Paddock Laboratories Inc and Par Pharmaceutical Cos in 2003 to stop them from making cheaper versions of AndroGel, which is used to treat men with low testosterone. The firms settled in 2006, reaching a deal that generic AndroGel would not be marketed until 2015. The patent expires in 2020. In exchange, the FTC alleges, the generic manufacturers were each paid as much as $30 million annually. AbbVie’s 2012 sales of AndroGel totaled $1.2 billion.

Solvay internal documents dating from April 2006 which were released at the Supreme Court on Friday, show that months before the companies struck their deal, Solvay concluded that it would make about $1.4 billion from AndroGel if it won the court fight and $359 million if it did not. The documents also show what appear to be a list of ideas of what to offer the generic firms to make it attractive to them to settle and delay entry. One was to allow Watson to promote the drug to urologists, while Solvay would not.

AbbVie spokeswoman Adelle Infante described the papers as “a single document among hundreds of thousands of pages of documents that were provided to the FTC.” “This internal analysis is insignificant because the negotiated patent settlement led to generic entry years in advance of the expiration of the patent, she said. The company also said that it expected to prevail. “The federal district and appellate courts have both previously ruled that the plaintiff’s allegations lacked merit. We are confident that these decisions will be upheld,” Adelle Infante, an AbbVie spokeswoman, said in a statement.

AbbVie’s arrangement with the generic manufacturers is similar to the 40 deals made in the 2012 fiscal year, which ended on September 30. That was up from 28 the previous year, despite FTC efforts to stop them. The FTC said the agreements involved 31 different brand-name drugs with total U.S. sales of more than $8.3 billion annually. The FTC sued to stop the AndroGel arrangement, arguing that it was illegal under antitrust law because the companies divided up the market. The FTC lost at the district court level and lost an appeal as well. But another appellate court has said the deals were illegal, prompting the Supreme Court to step in.

The Supreme Court is expected to issue a decision by the end of June.

S.B. 863 Triggers Sharp Rise in Lien Filings

The California Workers’ Compensation Insurance Rating Bureau says that California experienced a significant increase in lien filings from workers compensation service providers after the state adopted S.B. 863 in September.

BusinessInsurance.com reports that San Francisco-based WCIRB discussed the impact of S.B. 863 on California’s workers comp loss development during an actuarial committee meeting on Wednesday. The bill included several workers comp reform provisions, including a lien filing fee of $150 and a three-year statute of limitations for new lien filings – both of which took effect Jan. 1. Another statute of limitations of 1.5 years for new lien filings will go into effect July 1.

During the fourth quarter of 2012, there were 513,129 lien filings from copy services, interpreters, medical providers and other workers comp services, according to a presentation posted on WCIRB’s website. That’s compared with 323,294 liens filed in the third quarter of 2012 and 463,856 liens filed in all of 2011.

WCIRB expects that 640,000 liens will be filed in 2013, according to the rating bureau’s presentation. The lien filing fee is expected to reduce the projected number of workers comp liens by 30% and reduce California’s comp system costs by $480 million.