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SB 863 Forces Large Self Insured Staffing Company to Secure Insurance

Legislators were concerned about unmanageable workers’ compensation losses by staffing companies who were “self insured” in California, and as part of SB 863 required them to become insured as of the end of this year. Perhaps this legislative premonition was well founded. Shares of Vancouver based staffing company Barrett Business Services Inc. were down more than 50 percent after the company announced a big quarterly loss late last month.The Company attributed the loss to an $80 million pretax increase in self insured workers’ compensation reserves, which effectively wiped out Barrett Business Services’ pretax earnings for the past five years. As a result of this news, the Company’s stock declined more than 58%, or $26.18 per share, to close at $18.28 per share on October 29, 2014, on unusually heavy volume.

The Vancouver, Wash. company, provides a variety of business management solutions for small and medium-sized companies with fifty locations in ten states and dozens of offices in Northern and Southern California. BBSI provides human resource outsourcing and professional management consulting, BBSI said the loss resulted from setting aside $80 million for old workers’ compensation claims. “We have every reason to believe that the workers’ compensation data we have presented in the third quarter will normalize over time, proving that the strengthening process and change in practice have had the intended effect,” said CEO Michael Elich, in a news release. “Until then, we believe taking a conservative approach right now allows us to look forward and removes the obstacles of the unknowns within the model.”

A number of attorneys are investigating the company, and at least one, Glancy Binkow and Goldberg LLP, representing investors of BBSI has filed a class action lawsuit in the United States District Court for the Western District of Washington on behalf of a class comprising purchasers of BBSI securities. The Complaint alleges that defendants made false and/or misleading statements and failed to disclose material adverse facts about the Company’s operations and financial performance and prospects. Specifically, the Complaint alleges that defendants made false and/or misleading statements and/or failed to disclose that: (1) the Company under accrued its self-insured workers’ compensation reserves; (2) as a result, the Company overstated its earnings; (3) the Company lacked adequate internal and financial controls; and (4), as a result of the foregoing, defendants’ statements were materially false and misleading at all relevant times. A Los Angeles law firm says it’s investigating potential claims on behalf of shareholders of BBSI. The Wagner Firm says its investigation concerns “possible violations of federal securities laws” and focuses on statements the company made about its “financial results, operations and business prospects” as well as others across the nation. Several other law firms nationwide have issued similar press releases.

Established in 1965,BBSI offers both temporary and long-term staffing to some 1,750 small and midsized businesses. Its staffing services focus on light industrial, clerical, and technical businesses. Barrett also does business as a professional employment organization (PEO), providing outsourced human resource services, such as payroll management, benefits administration, risk management, recruiting, and placement for more than 1,500 clients. Each year about 90% of its PEO revenue comes from customers residing in the states of California and Oregon. Barrett depends mostly on the light-industrial sector for the majority of its staffing services revenue (the sector represented 86% of its total revenue in 20010). Its light-industrial workers operate machinery and perform manufacturing, loading and unloading, and construction-site cleanup tasks.

The Company is a self-insured employer with respect to workers’ compensation coverage for all of its employees (including employees co-employed through client service agreements) working in California, Oregon, Maryland, Delaware and Colorado, with some exceptions. The Company maintains excess workers’ compensation insurance through its wholly owned captive insurance company, Associated Insurance Company for Excess (“AICE”), with a per occurrence retention of $5.0 million, except in Maryland and Colorado.

In February, 2014, BBSI entered into a workers’ compensation insurance arrangement with ACE to provide coverage to BBSI employees in California beginning in the first quarter of 2014. The agreement will be effective through January 2015 with the potential for annual renewals thereafter.The arrangement, typically known as a fronted program, provides BBSI a licensed, admitted insurance carrier in California to issue policies on behalf of BBSI without the intention of transferring any of the worker’s compensation risk for the first $5.0 million per claim. The risk of loss up to the first $5.0 million per claim is retained by BBSI through an indemnity agreement. While this portion of the risk of loss remains with BBSI, ACE assumes credit risk should BBSI be unable to satisfy its indemnification obligations to ACE. ACE also bears the economic burden for all costs in excess of $5.0 million per claim. The arrangement with ACE addresses the requirements of legislation enacted in California in 2012 (Senate Bill 863) under which the Company cannot continue its self-insurance program in California beyond January 1, 2015.

Dismissal of Injured Cafeteria Worker Discrimination Case Affirmed

In March 2009 Sally Wycoff was working for Paradise Unified school District as a cafeteria worker for approximately four hours per day, and as a food services manager for 3 hours 15 minutes per day. The job required the ability to “stand, stoop, reach and bend,” the ability to “grasp and manipulate small objects,” and to “lift, push and/or pull objects which may approximate 50 pounds and may occasionally weigh up to 100 pounds. She reported to her employer that she had sustained a right shoulder injury caused by repetitive use associated with her job and completed a workers’ compensation claim form.

The employer admitted the injury. Wycoff had shoulder surgery on July 21, 2009. The District hired a substitute to fill Wycoff’s position as a cafeteria worker. A series of letters followed discussing her sick leave benefits, and other rights to illness and accident leave for employees who are part of classified employment. Wycoff met with several District employees to discuss her options in late October 2009. She was offered part-time work as a food services manager, which would not require pulling, pushing, or lifting. However, she would not receive health insurance for part-time work. She was also told she could ask the school board to extend her leave. During these discussions, Wycoff brought up the possibility of taking early retirement, which was something one of her friends had suggested. She ultimately applied for early retirement after her other efforts to return to work were unsuccessful.

Wycoff then filed a complaint against District alleging the following causes of action: (1) physical disability discrimination in violation of the Fair Employment and Housing Act (FEHA); (2) Retaliation because of a physical disability and because a workers’ compensation claim was filed; (3) intentional infliction of emotional distress; (4) negligent infliction of emotional distress; (5) negligent supervision; and (6) failure to accommodate a physical disability. Following District’s successful demurrer to the third, fourth, and fifth causes of action, the trial court dismissed those causes of action. Wycoff pleaded three causes of action that survived demurrer: (1) disability discrimination, (2) retaliation, and (3) failure to accommodate a physical condition. With regard to those three, the District’s summary judgment motion was granted by the trial court and her case was dismissed. The dismissal was affirmed by the Court of Appeal in the unpublished case of Wycoff v. Paradise Unified School Dist. CA3.

The trial court found that District offered and provided reasonable accommodation. The court also found that Wycoff’s immediate supervisor averred Wycoff was unable to do the basic and essential job duties of a cafeteria worker, and that there was no vacant position and no accommodation that would have allowed Wycoff to return to her position as a cafeteria worker without making other people do Wycoff’s job or hiring another employee to assist Wycoff in doing her job.

Wycoff’s release for work from her physician, dated October 22, 2009, placed the following restrictions on her ability to work: “no overhead work with right arm and no lifting over 20 lbs.” Wycoff’s immediate supervisor stated that with those restrictions, Wycoff was not able to do the basic and essential job duties of a cafeteria worker, and that she was aware of no accommodation that would have made it possible for Wycoff to perform that job. Wycoff admitted in her deposition that “most if not all of [her] essential job functions were problematic for [her] right shoulder . . . .” She admitted there was no way she could have returned to work in her prior capacity in October 2009. She stated that at the time of the deposition (June 9, 2011) she still could not do the work that she did five years prior, and that it was still painful when she engaged in repetitive lifting, pushing, and pulling. At that time (June 9, 2011) she was still not allowed to do overhead work with her right arm or lift more than 20 pounds. Given this undisputed evidence, there was no requirement that District do more to ascertain Wycoff’s ability to perform her job. Under such circumstances there was no evidence that the District failed to participate in the interactive process as required by law.

Californians Weigh In on Insurance Related Ballot Propositions

California voters soundly rejected two hotly contested propositions Tuesday night — one that claims it would have halted excessive health care insurance rates and another that would have raised the state’s 39-year-old cap on medical malpractice damage awards.

Proposition 45 would have given the state insurance commissioner the power to reject health insurance rate hikes for about six million Californians who buy their own policies or who work for small businesses. The measure would have required health insurance companies to publicly disclose rate changes and allowed California’s insurance commissioner to control rates. Supporters said the initiative would stem skyrocketing healthcare costs. It failed to pass by a wide margin. Insurance Commissioner Dave Jones won reelection Tuesday, but he’s left with no real power over health insurance rates. Jones had invested significant political capital in campaigning for Proposition 45 and drew the ire of fellow Democrats at times for his criticism of Covered California. The commissioner called Tuesday’s vote a major setback. “Health insurers flooded Californians with $57 million worth of false television commercials, radio ads and slick mailers,” Jones said. “Our consumer coalition simply could not compete with that.” Jones’ backers see the fight returning to Sacramento. “We expect the rate regulation debate to return to the Legislature, possibly with more momentum,” said Anthony Wright, executive director of Health Access. “We will continue to advocate the simple point that patients shouldn’t have to pay premiums deemed unreasonable by regulators.”

“Prop. 45 was an ill-conceived measure that would have been a step backwards against the progress made by the Affordable Care Act and our state’s health exchange, by giving a politician power over health care decisions that should have involved doctors and their patients,” Dr. John Maa of the San Francisco Medical Society, said in a statement. “California voters saw through this deceptive measure motivated by self-interest, and opposed it wholesale.”

The Los Angeles Times laments the loss as a “boon for health insurers.” The Times went to to say that “California’s biggest health plans, led by Anthem Blue Cross and Kaiser Permanente, spent millions of dollars on ads portraying Proposition 45’s rate regulation as a threat to implementation of the health law. In a lopsided result, 60% of voters joined the industry in opposition.” Despite the stinging loss, supporters of rate regulation vowed to keep fighting on behalf of consumers in the courts, state Legislature and possibly again at the ballot box.

“It’s incredible that an industry that’s so unpopular could do so well in this election,” said Robert Laszewski, a healthcare consultant who has closely tracked California’s implementation of the health law. “Pro-Obamacare forces and anti-regulation folks formed a 60% coalition. It was a strange set of bedfellows.”

Proposition 46, which would have raised the state’s 39-year-old cap on medical malpractice damage awards, would have also required doctors to take random drug tests and mandate use of a database designed to reduce prescription drug abuse. It was a wide-ranging initiative that included raising the limit on pain and suffering damages in medical malpractice lawsuits. This proposition was also defeated Tuesday by a wide margin. Supporters had said the proposition would have detected and deterred medical negligence, over-prescribing of prescription drugs and drug and alcohol abuse by doctors and promoted justice for people who don’t have an income — including retirees, children and stay-at-home parents — who are victims of medical malpractice.

“This was a battle worth fighting. But the battle doesn’t stop here,” Bob Pack, author of Proposition 46, said in a statement released late Tuesday night. He and his wife, Carmen, lost their two children Troy and Alana as a result of medical negligence. “Our coalition will continue to press for changes to end that cycle of preventable death, to put a dent in prescription drug abuse, ensure our doctors aren’t operating under the influence and give malpractice victims a better shot at justice,” Pack said.

The defeat of Proposition 46 came after a cascade of negative advertising financed by insurance and physician groups. They warned the change would send medical costs soaring and drive doctors from the state. “In this health care environment, undermining California’s long-standing malpractice cap is a political poison pill,” Dustin Corcoran, chief executive of the California Medical Association and chairman of the No on 46 campaign, said in a statement. “Increasing payouts in medical lawsuits would have increased health care costs.” Insurance companies, hospitals and physician groups depicted the proposal as a sugar-coated pill that’s really about fattening attorneys’ wallets.

Medicare Pays for Prescriptions for the Deceased

An investigation by the U.S. Department of Health and Human Services found that the federal insurance program paid nearly $300,000 to cover HIV drugs for about 160 people who were dead when their prescriptions were filled in 2012. The report, released last week, was a reminder that Medicare’s struggles with fraud, waste and abuse remain a drain on the more than $580-billion insurance program.

Under the Medicare Part D program, the Centers for Medicare and Medicaid Services (CMS) contracts with private insurance companies, known as sponsors, to provide prescription drug coverage to beneficiaries who choose to enroll. The Office of Inspector General (OIG) says in the report that it “has had ongoing concerns about Medicare paying for drugs and services after a beneficiary has died. Drugs that treat the human immunodeficiency virus (HIV) can be a target for fraud, waste, and abuse, primarily because they can be very expensive. Although this report focuses on HIV drugs, the issues raised are relevant to all Part D drugs.”

This study was based on an analysis of Prescription Drug Event (PDE) records for HIV drugs in 2012.  Part D sponsors submit these records to CMS for each drug dispensed to beneficiaries enrolled in their plans. Each record contains information about the drug, beneficiary, pharmacy, and prescriber. Investigators used the Beneficiary Enrollment Database, the Social Security Administration’s Death Master File, and Accurint’s Death Records to identify beneficiaries’ dates of death.

Investigators discovered that Medicare paid for HIV drugs for over 150 deceased beneficiaries. CMS’s current practices allowed most of these payments to occur. Specifically, CMS has edits (i.e., systems processes) in place that reject PDE records for drugs with dates of service more than 32 days after death. CMS’s practices allow payment for drugs that do not meet Medicare Part D coverage requirements. Most of these drugs were dispensed by retail pharmacies. “This review looked only at HIV drugs, which account for one-quarter of one percent of all Part D drugs in 2012. However, our findings have implications for all drugs because Medicare processes PDE records for all drugs the same way. Considering the enormous number of Part D drugs, a change in practice would affect all Part D drugs and could result in significant cost savings for the program and for taxpayers.”

Another recent OIG report found that nearly 1,600 Part D beneficiaries had questionable utilization patterns for HIV drugs in 2012. In total, Medicare paid $32 million for HIV drugs for these beneficiaries. These beneficiaries had no indication of HIV in their Medicare histories, received an excessive dose or supply of HIV drugs, received HIV drugs from a high number of pharmacies or prescribers, or received contraindicated drugs. These questionable patterns indicate that beneficiaries may be receiving inappropriate or unnecessary drugs. It may also indicate that a pharmacy is billing for drugs that a beneficiary never received, or that a beneficiary’s identification number has been stolen.

Another earlier OIG report looked at the extent to which CMS made monthly prospective payments in 2011 to Part C and D sponsors for deceased beneficiaries. According to CMS policy, Medicare pays the sponsor the full payment for the month in which a beneficiary dies. OIG found that in 2011, CMS made monthly payments to Part C and D sponsors totaling $21 million for deceased beneficiaries in the months after death.

Lastly, another OIG report found that in 2006 and 2007 CMS paid $3.6 million in monthly prospective payments to certain Part D sponsors for deceased beneficiaries. It found that although CMS had correctly stopped payments for the vast majority of deceased beneficiaries in 2006 and 2007, its systems did not always identify and prevent improper payments. In addition, CMS did not always recover on a timely basis the payments it had made on behalf of deceased beneficiaries.

So these problems appear again, in plain sight. Willie Sutton Jr. was a prolific American bank robber. Sutton is known, albeit apocryphally, for the urban legend that he said that he robbed banks “because that’s where the money is.” He died in 1980. He would probably be looking at Medicare today for his next heist were he still around.

Researchers Find Smoking and Back Pain Link

A new Northwestern Medicine® study has found that smokers are three times more likely than nonsmokers to develop chronic back pain, and dropping the habit may cut chances of developing this often debilitating condition. Since apportionment of permanent disability can be based upon causation, this study may be of interest to the workers’ compensation community.

“Smoking affects the brain,” said Bogdan Petre, lead author of the study and a technical scientist at Northwestern University Feinberg School of Medicine. “We found that it affects the way the brain responds to back pain and seems to make individuals less resilient to an episode of pain.” This is the first evidence to link smoking and chronic pain with the part of the brain associated with addiction and reward. The study was published online in the journal Human Brain Mapping.

The results come from a longitudinal observational study of 160 adults with new cases of back pain. At five different times throughout the course of a year they were given MRI brain scans and were asked to rate the intensity of their back pain and fill out a questionnaire which asked about smoking status and other health issues. Thirty-five healthy control participants and 32 participants with chronic back pain were similarly monitored.

Scientists analyzed MRI activity between two brain areas (nucleus accumbens and medial prefrontal cortex, NAc-mPFC), which are involved in addictive behavior, and motivated learning. This circuitry is critical in development of chronic pain, the scientists found. These two regions of the brain “talk” to one another and scientists discovered that the strength of that connection helps determine who will become a chronic pain patient. By showing how a part of the brain involved in motivated learning allows tobacco addiction to interface with pain chronification, the findings hint at a potentially more general link between addiction and pain. “That circuit was very strong and active in the brain’s of smokers,” Petre said. “But we saw a dramatic drop in this circuit’s activity in smokers who — of their own will — quit smoking during the study, so when they stopped smoking, their vulnerably to chronic pain also decreased.”

Medication, such as anti-inflammatory drugs, did help study participants manage pain, but it didn’t change the activity of the brain circuitry. In the future, behavioral interventions, such as smoking cessation programs, could be used to manipulate brain mechanisms as an effective strategy for chronic pain prevention and relief.

Scientists Pursue Anti-Ageing Treatments

In September life-science company Calico, which was set up by Google last year to investigate the aging process, joined with U.S. drugmaker AbbVie in committing an initial $250 million apiece to developing cures for age-related diseases. Away from the limelight, however, Switzerland’s Novartis and Denmark’s Novo Nordisk are already testing new roles for existing drugs, which could keep people alive for longer, as they look to cater to the ever larger numbers living into their 80s and beyond. “Everybody now is talking about the aging population and how to have a healthy old age,” said Mads Krogsgaard Thomsen, Chief Science Officer at Novo Nordisk.

The goal is not to create some “elixir of life” pill to help people live ever longer, but rather to maximize healthy lifespan and reduce the period of end-of-life sickness and dependency.Alex Zhavoronkov, chief executive of Baltimore-based biotech company Insilico Medicine, believes shifting healthcare spending from treatment to prevention will be central to this.

Research into anti-ageing drugs has historically received little attention from Big Pharma, given the difficulties of running clinical trials to prove such an effect. Moreover, companies have been deterred by regulators in the United States and Europe who will only approve medicines for specific illnesses and not for something as broad as aging, which is not in itself defined as a treatable disease. Despite these obstacles, Novartis has completed a successful pilot trial examining its cancer drug everolimus as a potential treatment to reverse immunosenescence, or the gradual deterioration of the immune system that occurs with age and is a major cause of disease and death.

Encouraged by studies showing that the closely related drug rapamycin extended the lifespan of worms, flies and mice, Novartis looked for ways to assess whether everolimus could have a similar effect in humans. The hurdles were high. Aging is a gradual, decades-long process making it impractical to assess directly in clinical trials. “For aging you have to pick a target system that can be investigated in months or years, not decades,” said Novartis’s head of research Mark Fishman. The company’s work-around is to focus on immunosenescence. It gave 218 people aged over 65 a six-week course of everolimus followed by a regular flu vaccine after two weeks.

Results showed that taking the drug improved the immune system response by more than 20 percent compared to placebo, potentially opening the door to use it as a treatment to increase the efficacy of vaccines and help stave off the infections associated with old age. While Fishman stresses the research is still early-stage, Novartis’s work highlights the growing interest in aging as a biological process that can be manipulated, treated and delayed.

Given the regulatory barriers, experts believe re-purposing existing treatments in new indications will likely be the fastest way to get drugs with an anti-ageing benefit to market, since these medicines have already been proven safe. A study published in the journal Neuropharmacology this week found lixisenatide, a drug sold as Lyxumia by Sanofi to treat type 2 diabetes, could slow nerve cell damage in mice with some of the hallmarks of Alzheimer’s disease. Other diabetes drugs may have a similar effect. Imperial College London is currently recruiting around 200 patients with mild Alzheimer’s for a study with Novo Nordisk’s diabetes drug liraglutide, or Victoza. “It would be fantastic if we were able to take a safe and simple type 2 diabetes medicine and use that in Alzheimer’s,” said Novo’s Thomsen.

The Danish company, which is the world’s biggest maker of insulin, is also working with academics at the University of Oxford, the Karolinska Institute and the University of Copenhagen on a new project looking at healthy aging. Its interest in the field has a scientific logic, since some of the genes that researchers are now exploring as factors in healthy aging have links to the body’s insulin pathways.

Once again, scientific developments have to be considered when calculating long term claim reserves in life pension cases, and life time medical awards. The future is sure to be full of surprises.

New California Law Follows WHO Naloxone Guideline to Reduce Opioid Deaths

Opioids are potent respiratory depressants, and overdose is a leading cause of death among people who use them. Worldwide, an estimated 69 000 people die from opioid overdose each year. Among people who inject drugs, opioid overdose is the second most common cause of mortality after HIV/AIDS. A recent rise in opioid-overdose deaths in a number of countries is associated with an increase in the prescribing of opioids for chronic pain. In 2010, an estimated 16 651 people died from an overdose of prescription opioids in the United States of America alone.

New World Health Organization (WHO) guidelines, released this month aim to reduce the number of deaths from opioid overdose globally by providing evidence-based recommendations on the availability of naloxone for people likely to witness an opioid overdose along with advice on the resuscitation and post-resuscitation care of opioid overdose in the community. The guidelines recommend countries expand naloxone access to people likely to witness an overdose in their community, such as friends, family members, partners of people who use drugs, and social workers. In most countries, naloxone is currently accessible only through hospitals and ambulance crews who may not manage to get help to the people who need it fast enough

According to the Guideline, people dependent on opioids are the group most likely to experience an overdose. The incidence of fatal opioid overdose among opioid-dependent individuals is estimated at 0.65 per 100 person years. Non-fatal opioid overdoses are several times more common than fatal ones.Although people taking prescribed opioids are at lower risk of overdose than people using unprescribed opioids. The high number of people receiving prescribed opioids in many countries mean that they constitute a significant proportion of opioid overdose deaths, if not the majority. Risk factors for overdose in people taking prescribed opioids include higher prescribed dosage, male gender, older age, multiple prescriptions (including benzodiazepines), mental health disorders and lower socioeconomic status. The risk of overdose is significantly higher where the prescribed dose is 100 mg morphine equivalents daily or greater.

Opioids depress the respiratory drive and overdose is characterized by apnoea, myosis and stupor. A severely reduced respiration rate results in hypoxaemia, leading to cerebral hypoxia and impaired consciousness. Cardiac arrest is a late complication of opioid overdose and secondary to respiratory arrest and hypoventilation. Prolonged cerebral hypoxia is the mechanism for brain injury and death in opioid overdose, resulting from apnoea or cardiac dysrhythmias and cardiac arrest.

The Guideline concluded that death in opioid-overdose can be averted by emergency basic life support resuscitation and/or the timely administration of an opioid antagonist such as naloxone. Most opioid overdoses occur in private homes, and most of these are witnessed. Close friends, a partner or family members are most likely to witness an opioid overdose. The other key group of individuals likely to witness overdoses are people working with people who use drugs. They include trained health professionals and first responders, such as ambulance, police, fire and drug-treatment workers as well as outreach workers. Naloxone has been used in the management of opioid overdose for more than 40 years. It is a safe drug with a low risk of serious side effects. Any adult capable of learning basic life support can also learn to recognize an opioid overdose, and administer naloxone in time to save lives.

Naloxone is a prescription medicine in almost all countries. In recent years, several countries in different regions have started distributing naloxone to people likely to witness an opioid overdose, initially in pilot programs, but now also in some cases state or national policy, demonstrating the feasibility of this approach and prompting calls for widespread adoption of this approach.

The California legislature passed Assembly Bill No. 1535 this year and it was signed by the Governor on September 15, 2014. The new law adds Section 4052.01 to the Business and Professions Code, relating to pharmacists. Existing law, generally, authorizes a California pharmacist to dispense or furnish drugs only pursuant to a valid prescription except for nicotine replacement products and emergency contraceptives and hormonal contraceptives. The new law would now also authorize a pharmacist to furnish naloxone hydrochloride in accordance with standardized procedures or protocols developed and approved by both the Pharmacy Board and the Medical Board of California, in consultation with specified entities. The new law would authorize the California State Board of Pharmacy to adopt emergency regulations to establish the standardized procedures or protocols that would remain in effect until the earlier of 180 days following their effective date or the effective date of regulations adopted as described above. California therefore will provide non prescription access to naloxone and will be on the forefront of these new WHO Guidelines. Claim examiners may wish to take advantage of this new law in cases where risk factors are high for overdose.

Lake Tahoe Skier Gets One Year Sentence

A former U.S. Postal Service employee from South Lake Tahoe has received a one-year prison sentence for making a false statement to obtain workers’ compensation.

According to the Sacramento Bee, Mark E. Leung, 60, was sentenced Tuesday in Sacramento by U.S. District Judge John A. Mendez. In addition to the prison sentence, the judge ordered Leung to pay $160,000 in restitution, according to a U.S. Attorney’s Office news release.

Court documents indicate Leung worked for the U.S. Postal Service until 1987, when he claimed he suffered a work-related injury. He never returned to full-time employment with the Postal Service and began receiving workers’ compensation benefits in 1987.

From September 2007 through November 2012, Leung received approximately $160,000 in benefits from the Department of Labor, which administers the program for the U.S. Postal Service, authorities said. To obtain the benefits, Leung submitted an annual certification form and had his medical providers attest that he could not perform any work due to the pain that limited his mobility and range of movement.

But while claiming he was totally disabled for employment, Leung maintained a yearly ski pass for Heavenly Ski Resort, where he regularly skied at least 40 days per ski season, authorities said. In addition, they said, Leung was observed performing arduous physical labor on numerous days.

The case resulted from an investigation by the U.S. Postal Service, Office of Inspector General, and the Department of Labor, Office of Inspector General.

UC Davis Biomedical Engineers Improve Lab-Grown Tissues

Lab-grown tissues could one day provide new treatments for injuries and damage to the joints, including articular cartilage, tendons and ligaments. Cartilage, for example, is a hard material that caps the ends of bones and allows joints to work smoothly. UC Davis biomedical engineers, exploring ways to toughen up engineered cartilage and keep natural tissues strong outside the body, report new developments in the journal Proceedings of the National Academy of Sciences.

“The problem with engineered tissue is that the mechanical properties are far from those of native tissue,” said Eleftherios Makris, a postdoctoral researcher at the UC Davis Department of Biomedical Engineering and first author on the paper. Makris is working under the supervision of Professor Kyriacos A. Athanasiou, a distinguished professor of biomedical engineering and orthopedic surgery, and chair of the Department of Biomedical Engineering.

While engineered cartilage has yet to be tested or approved for use in humans, a current method for treating serious joint problems is with transplants of native cartilage. But it is well known that this method is not sufficient as a long-term clinical solution, Makris said.

The major component of cartilage is a protein called collagen, which also provides strength and flexibility to the majority of our tissues, including ligaments, tendons, skin and bones. Collagen is produced by the cells and made up of long fibers that can be cross-linked together.

Researchers in the Athanasiou group have been maintaining native cartilage in the lab and culturing cartilage cells, or chondrocytes, to produce engineered cartilage. “In engineered tissues the cells produce initially an immature matrix, and the maturation process makes it tougher,” Makris said.

Knee joints are normally low in oxygen, so the researchers looked at the effect of depriving native or engineered cartilage of oxygen. In both cases, low oxygen led to more cross-linking and stronger material. They also found that an enzyme called lysyl oxidase, which is triggered by low oxygen levels, promoted cross-linking and made the material stronger.

“The ramifications of the work presented in the PNAS paper are tremendous with respect to tissue grafts used in surgery, as well as new tissues fabricated using the principles of tissue engineering,” Athanasiou said. Grafts such as cadaveric cartilage, tendons or ligaments – notorious for losing their mechanical characteristics in storage – can now be treated with the processes developed at UC Davis to make them stronger and fully functional, he said. Athanasiou also envisions that many tissue engineering methods will now be altered to take advantage of this strengthening technique.

The plethora of medical developments on the horizon pose a mixed dilemma for workers’ compensation claims administrators when reserving long term medical costs and settlements.  On one hand, the cost of exotic medical care will no doubt drive higher reserve estimates for these procedures in the future.  On the other hand, if these treatments are successful, costs should at some point be reduced to the extent of less effective care that is no longer needed.  An accurate reserve estimate may be somewhat difficult to establish between these forces.

Injured Worker Loses Legal Malpractice Claim

Richard Hamp Sr. worked as a ready-mix concrete driver for Hanson Aggregates Pacific Southwest, Inc. The job includes driving and delivering concrete material. The delivery responsibilities require the driver to load and unload concrete material through heavy chutes that must be removed from the truck frame, attached to the rear of the truck, and then reloaded on the truck after the delivery is complete. In July 2004, Hamp injured his back at work. He filed a workers compensation claim and was on medical leave for the next several years.

Hanson Pacific made a decision to terminate Hamp based on its asserted conclusion that Hamp’s disabilities (as described in its workers compensation carrier’s report) precluded him from performing the key functions of his job (including the heavy lifting and bending requirements). However, Hanson Pacific did not send a letter to Hamp notifying him of this decision. Hamp contacted Hanson Pacific and inquired about his employment status. At that time, he first learned that he had been terminated. The next month, in December 2007, Hanson Pacific wrote a letter to Hamp confirming his 2006 termination and stating that it had been willing to seek to accommodate his disabilities before it terminated him, but Hamp never responded to its inquires and letters. Hamp denied this version of events and maintained that he had asked for accommodations but Hanson Pacific never responded to his requests.

In January 2008, Hamp retained Harry Harrison Esq., to bring a lawsuit challenging his employment termination. During November 2008 and January 2009, Hanson Pacific’s attorneys took Hamp’s deposition over three different days. In his deposition testimony, Hamp acknowledged he still had back problems and never received medical clearance to return to his ready-mix driver job. When asked if he thinks he is “physically capable of returning to work as a ready mix driver . . . ,” Hamp responded: “I can’t answer that. I don’t know.” He said he is not sure whether the problem would “flare[ ] up” if he returns to his job. When Hanson Pacific’s attorney asked Hamp about his PTPs certification to the EDD in June 2007 that he was not capable of returning to work because he could not perform the physical duties of the ready-mix driver job, Hamp indicated he agreed with that statement.

During the lawsuit, Harrison defeated Hanson Pacific’s summary adjudication motion on Hamp’s wrongful termination claim based on evidence showing Hanson Pacific failed to make efforts to accommodate Hamp’s disability. About five or six months later, in February 2010, Harrison wrote an email to Hamp explaining the weaknesses in his case and urged Hamp to accept Hanson Pacific’s $8,000 settlement offer. After Hamp refused to accept this offer, the attorney-client relationship broke down. Several months later, in May 2010, Harrison obtained the court’s approval to withdraw from the representation.

Shortly after, Hamp obtained new counsel, but the court ultimately found in Hanson Pacific’s favor on the accommodation issue and entered judgment for Hanson Pacific. Hamp then sued Harrison, and his firm Harrison Patterson O’Connor and Kinkead alleging breach of fiduciary duty and attorney malpractice. The primary focus of the complaint was on the Third Job Description produced by Hanson Pacific in the underlying lawsuit. Hamp alleged this job description “was entirely fraudulent and was produced . . . to defraud the court and prejudice the proceedings against the interest of [Hamp].” On the malpractice cause of action, Hamp alleged Harrison failed to identify and seek exclusion of the “fraudulent” job description. After considering the papers and conducting a hearing, the court granted Harrison’s summary judgment motion, finding the undisputed facts showed Hamp could not prevail on any of his causes of action. The court also overruled the parties’ numerous evidentiary objections. The dismissal of his malpractice claim was affirmed in the unpublished case of Hamp v Harrison Patterson etc.

The record of the underlying action shows Harrison’s litigation strategy was to acknowledge that Hamp was disabled and could not perform the ready-mix job without accommodation, and to use these facts to support the theory that Harrison considered the strongest: Hanson Pacific breached legal duties by failing to engage in the legally-required interactive process to identify a position that would accommodate Hamp’s disability. Under this strategy, the difference between the First Job Description and the Third Job Description was not material. Even assuming Hamp could not return to the ready-mix driver job, there is California law supporting that an employer must engage in an interactive process to determine whether any reasonable accommodation is possible. (See Wysinger v. Automobile Club of Southern California (2007) 157 Cal.App.4th 413, 424-425.) Whether Harrison’s strategy was a competent one is not a matter of common knowledge. An expert witness was necessary to evaluate whether this litigation strategy was within the range of reasonable tactical decisions, particularly given Hamp’s concessions at his deposition and his prelitigation admissions that he could not engage in the heavy lifting or repeated stooping and bending required for the job. Hamp did not present any expert evidence to support his theory that Harrison breached his duty by failing to challenge the Third Job Description. Generally, expert witness testimony is required in a professional negligence case to establish the applicable standard of care, whether that standard was met or breached by the defendant, and whether the defendant’s negligence caused the plaintiff’s damages.