Author: WorkCompAcademy

In 2009, James Swoben, a former data manager for California-based SCAN Health Plan, filed a whistleblower complaint against his own employer, and then amended that compliant three times over the next two years to add claims against United Health, HealthCare Partners, Aetna, WellPoint and Health Net.

The Centers for Medicare & Medicaid Services (CMS), administrator of the federal Medicare program, pays Medicare Advantage organizations fixed monthly amounts for each enrollee. CMS calculates the payment for each enrollee based on various “risk adjustment data,” such as an enrollee’s demographic profile and the enrollee’s health status, as reflected in the medical diagnosis codes associated with healthcare the enrollee receives. These diagnosis codes are reported by Medicare Advantage organizations to CMS.

Because Medicare Advantage organizations have a financial incentive to exaggerate an enrollee’s health risks by reporting diagnosis codes that may not be supported by the enrollee’s medical records, Medicare regulations require a Medicare Advantage organization, as an express condition of receiving payment, to “certify (based on best knowledge, information, and belief) that the [risk adjustment] data it submits . . . are accurate, complete, and truthful.” 42 C.F.R. § 422.504(l), (l)(2).

The gist of Swoben’s complaint is that the defendants – Medicare Advantage organizations United Healthcare, Aetna, WellPoint and Health Net, and HealthCare Partners, a physician group providing health care services to the organizations’ enrollees in exchange for a percentage of the organizations’ capitated payments – performed biased retrospective medical record reviews.

According to Swoben, retrospective reviews by Medicare Advantage organizations typically should identify (and report to CMS) two types of errors in the risk adjustment data previously submitted: (1) diagnosis codes supported by an enrollee’s medical records but not previously submitted to CMS (underreporting errors); and (2) diagnosis codes previously submitted to CMS but not supported by the enrollee’s medical records (over-reporting errors). Identifying and reporting the first type of error is favorable to the Medicare Advantage organization; identifying and reporting the second type of error is unfavorable.

Swoben alleges the defendants conducted one-sided retrospective reviews designed to identify (and report to CMS) solely the first type of error. He alleges these reviews were designed to exaggerate enrollees’ health risks and cause CMS to make inflated capitated payments to the defendants. These actions, Swoben alleges, rendered the defendants’ periodic certifications under § 422.504(l) false, in violation of the False Claims Act, 31 U.S.C. § 3729(a)(1).

The district court dismissed the suit without leave to amend The 9th Circuit Court of Appeals reversed and reinstated the claim in the published case of James M. Swoben v United Healthcare Insurance Co, et. al.

CMS has long made clear that, under § 422.504(l), Medicare Advantage organizations have “an obligation to undertake ‘due diligence’ to ensure the accuracy, completeness, and truthfulness” of the risk adjustment data they submit to CMS and “will be held responsible for making good faith efforts to certify the accuracy, completeness, and truthfulness” of these data.

“When, as alleged here, Medicare Advantage organizations design retrospective reviews of enrollees’ medical records deliberately to avoid identifying erroneously submitted diagnosis codes that might otherwise have been identified with reasonable diligence, they can no longer certify, based on best knowledge, information and belief, the accuracy, completeness and truthfulness of the data submitted to CMS. This is especially true when, as alleged here, they were on notice – based on audits conducted by CMS – that their data likely included a significant number of erroneously reported diagnosis codes.”

The increasing cost of prescription drugs in the United States has become a source of concern for patients, prescribers, payers, and policy makers.

In order to determine the origins and effects of high drug prices in the US market and to consider policy options that could contain the cost of prescription drugs, researchers reviewed the peer-reviewed medical and health policy literature from January 2005 to July 2016 for articles addressing the sources of drug prices in the United States, the justifications and consequences of high prices, and possible solutions.

Their review published in the Journal of the American Medical Association concluded that per capita prescription drug spending in the United States exceeds that in all other countries, largely driven by brand-name drug prices that have been increasing in recent years at rates far beyond the consumer price index.

In 2013, per capita spending on prescription drugs was $858 compared with an average of $400 for 19 other industrialized nations. In the United States, prescription medications now comprise an estimated 17% of overall personal health care services.

The most important factor that allows manufacturers to set high drug prices is market exclusivity, protected by monopoly rights awarded upon Food and Drug Administration approval and by patents. The availability of generic drugs after this exclusivity period is the main means of reducing prices in the United States, but access to them may be delayed by numerous business and legal strategies.

The primary counterweight against excessive pricing during market exclusivity is the negotiating power of the payer, which is currently constrained by several factors, including the requirement that most government drug payment plans cover nearly all products. Another key contributor to drug spending is physician prescribing choices when comparable alternatives are available at different costs.

Although prices are often justified by the high cost of drug development, there is no evidence of an association between research and development costs and prices; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear.

Drug prices are higher in the United States than in the rest of the industrialized world because, unlike that in nearly every other advanced nation, the US health care system allows manufacturers to set their own price for a given product. In contrast, in countries with national health insurance systems, a delegated body negotiates drug prices or rejects coverage of products if the price demanded by the manufacturer is excessive in light of the benefit provided. Manufacturers may then decide to offer the drug at a lower price. In England and Wales, for example, the National Institute for Health and Care Excellence considers whether a new drug passes a cost-utility threshold before recommending it for coverage by the National Health Service.

In workers’ compensation claims, and in other systems, one factor that undermines competition among treatment alternatives is the separate roles of patients, prescribers, and payers: physicians write prescriptions, pharmacists sell medications, and patients or their insurers pay for them. This separation has traditionally insulated physicians from knowing about drug prices or considering those prices in their clinical decision making and can similarly remove many patients with good drug coverage from considering the price of the medications they “purchase.”

The most realistic short-term strategies to address high prices include enforcing more stringent requirements for the award and extension of exclusivity rights; enhancing competition by ensuring timely generic drug availability; providing greater opportunities for meaningful price negotiation by governmental payers; generating more evidence about comparative cost-effectiveness of therapeutic alternatives; and more effectively educating patients, prescribers, payers, and policy makers about these choices.

Aluma Systems Concrete Construction of California entered into an agreement with Nibbi Bros. Inc. to design and supply the materials for wall formwork and deck shoring at Nibbi Bros. Inc. construction project.

The terms of the Contract included an indemnification provision that required Nibbi to defend, indemnify and hold harmless Aluma against any and all claims, actions, expenses, damages, losses and liabilities, including attorneys fees and expenses, for personal injuries rising from or in connection with this contract “except to the extent such claims, actions, expenses, damages, losses and liabilities are caused by the acts or omissions of [Contractor]…”

Subsequently, two lawsuits were filed by Nibbi employees against Aluma alleging that in August 2011, the employees were injured after a shoring system designed by Aluma collapsed. The Employee Lawsuits alleged the collapse was due to Aluma’s negligence. Aluma tendered the Employee Lawsuits to Nibbi for defense and indemnification, but received no response.

Subsequently, Aluma sued Nibbi for indemnification based on a specific provision in the parties’ contract. The trial court sustained Nibbi’s demurrer to Contractor’s complaint without leave to amend, relying on the allegations in the underlying lawsuit that set forth claims only against Aluma and not against Nibbi the employer. Thus they argued that the exception applied since the allegations claim only “acts or omissions” of Aluma.

The Court of Appeal reversed and remanded in the published case of Aluma Systems Concrete Construction v Nibbi Bros. Inc.

The parties agreed that pursuant to Labor Code section 3864, an employer is only liable to indemnify a contractor pursuant to the terms of the contract. They dispute whether the indemnity provision – which applies to claims and damages in connection with the Contract “except to the extent” they are “caused by the acts or omissions of Aluma – applies to the Employee Lawsuits.

Nibbi argues the Employee Lawsuits allege solely Aluma’s negligence and the indemnification provision therefore does not apply. Aluma argues that the provision may apply because Aluma is jointly and severally liable for all economic damages in the Employee Lawsuits, including any attributable to the negligence of Nibbi or others, as long as Aluma’s negligence is partially responsible.

Because the employees were working for Employer at the time of their injuries, they cannot sue Employer for damages but must pursue benefits through the workers’ compensation system. This limitation on Employer’s liability does not extend to third parties, however, and the employees may sue Contractor for damages caused by its negligence.

Here the indemnification provision applies to “claims: and the Employer argues this indicates the allegations of the Employee Lawsuits control the provision’s application. But the provision also requires indemnification for Contractor’s “damages” and “losses.”

The court of appeal concluded that there is “no basis to restrict the damages and losses so indemnified to the allegations of the Employee Lawsuits, rather than to the damages Contractor is ultimately found liable for.”

The Department of Industrial Relations and its Division of Workers’ Compensation reported that $600 million in liens against injured employees’ claims for workers’ compensation benefits have been filed by convicted or criminally indicted parties from 2011 through 2015.

“While California has made great strides in increasing benefits to injured workers, improving appropriate care and reducing employers’ costs, we are pursuing legislation to prohibit criminal and indicted providers from lining their pockets through liens and to address the assignment of liens,” said Christine Baker, DIR Director.

California’s workers’ compensation law allows certain claims for payment of services or benefits provided to or on behalf of injured workers to be filed as a lien against an employer in an employee’s claim for workers’ compensation benefits.  The filing of a lien generates collateral litigation between the lien filer and defendant (insurer or employer) over the validity of the claim and the necessity, extent and value of any services provided.  The parties may then settle on an amount due or adjudicate the dispute in a lien trial before the Workers’ Compensation Appeals Board.

SB 863 (De León), which took effect on January 1, 2013, included a number of provisions to reduce costs by reducing the volume of lien claims and lien claim litigation in the workers’ compensation system, including the reestablishment of lien filing fees to preclude frivolous lien filings, creation of an Independent Bill Review system to remove most billing disputes from litigation, and restrictions on the ability of third parties to collect on assigned lien claims.

Despite these efforts, the 68 businesses comprising the top one percent of lien filers filed more than 273,000 liens totaling $2.5 billion in accounts receivable on adjudicated cases between 2013 and 2015.  Two of the business owners are indicted and three others have pled guilty.  Legislation is underway to stay liens of physicians or providers who are criminally charged with workers’ compensation fraud, medical billing fraud, insurance fraud, and Medicare or Medi-Cal fraud.

Assignments of Accounts Receivables are proving fertile ground for fraud

The assignment of liens by service providers to those who file and collect on liens are, in essence, the buying and selling of injured workers’ treatments and fertile ground for presenting fraudulent claims.  DIR’s review of filing dates indicates that lien claimants tend to wait until after the primary case is settled rather than seeking early resolution of medical necessity.  Even if lien claimants – especially those who bundle and buy or sell accounts receivables – only make pennies on the dollar, returns can still be high.  

DIR say it is leading an effort to identify and address strategies for improved anti-fraud efforts in the workers’ compensation system. DIR and the Department of Insurance convened working groups in June to gather stakeholder input and evidence of fraudulent activity in the system.  At the direction of the Secretary of the California Labor and Workforce Development Agency, DIR will be preparing a report on further recommendations to the Governor and the Legislature by no later than Fall of 2016.

A new study published in the British Medical Journal says that exercise therapy is as effective as surgery for middle aged patients with a common type of knee injury known as meniscal tear (damage to the rubbery discs that cushion the knee joint).

The researchers suggest that supervised exercise therapy should be considered as a treatment option for middle aged patients with this type of knee damage.

According to the story reported in Medical News Today, every year, an estimated two million people worldwide undergo knee arthroscopy (keyhole surgery to relieve pain and improve movement) at a cost of several billion US dollars. Yet current evidence suggests that arthroscopic knee surgery offers little benefit for most patients.

So researchers based in Denmark and Norway carried out a randomized controlled trial to compare exercise therapy alone with arthroscopic surgery alone in middle aged patients with degenerative meniscal tears.

A randomized controlled trial is one of the best ways for determining whether an intervention actually has the desired effect.

They identified 140 adults (average age 50 years) with degenerative meniscal tears, verified by MRI scan, at two public hospitals and two physiotherapy clinics in Norway. Almost all (96%) participants had no definitive x-ray evidence of osteoarthritis.

Half of the patients received a supervised exercise program over 12 weeks (2-3 sessions each week) and half received arthroscopic surgery followed by simple daily exercises to perform at home.

Thigh muscle strength was assessed at three months and patient reported knee function was recorded at two years.

No clinically relevant difference was found between the two groups for outcomes such as pain, function in sport and recreation, and knee related quality of life. At three months, muscle strength had improved in the exercise group. No serious adverse events occurred in either group during the two-year follow-up.

Thirteen (19%) of participants in the exercise group crossed over to surgery during the follow-up period, with no additional benefit.

“Supervised exercise therapy showed positive effects over surgery in improving thigh muscle strength, at least in the short term,” say the authors. “Our results should encourage clinicians and middle aged patients with degenerative meniscal tear and no radiographic evidence of osteoarthritis to consider supervised structured exercise therapy as a treatment option.”

How did this situation – widespread practice without supporting evidence of even moderate quality – come about, ask two experts in a linked editorial? “Essentially, good evidence has been widely ignored,” say Teppo Järvinen at the University of Helsinki and Gordon Guyatt at McMaster University in Canada.

“In a world of increasing awareness of constrained resources and epidemic medical waste, what we should not do is allow the orthopaedic community, hospital administrators, healthcare providers, and funders to ignore the results of rigorous trials and continue widespread use of procedures for which there has never been compelling evidence,” they conclude.

Medical care under the California workers’ compensation system is based upon evidence based medicine.  One would hope that the UR and IMR process has physicians who are aware of the findings of these studies when they make a decision to allow or turn down a request for treatment.