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Study Says California OMFS Rates Lower Than Other States

A WCRI study summarized by Property Casualty 360 says that substantial workers-compensation rule changes in California are likely to affect the price and utilization of medical care to injured workers by most types of providers. The study by the Workers Compensation Research Institute is meant to provide a baseline for monitoring the impact of California reforms in S.B. 863, passed last August on the last day of the California legislative session.

In general, the new legislation seeks to increase benefits to workers, especially those on long-term disability, by 30 percent– paying for it by imposing certain reforms. According to WCRI, the potential impact from the measure could include, among other things, an increase in prices paid for primary care and a decrease in prices paid for specialty services. Other possibilities include a decrease in payments for ambulatory surgical care services, changes in utilization of different types of services, lower medical legal expenses, faster dispute resolution, and more timely medical treatment.

The WCRI report examines the state medical reimbursement and treatment prior to its reform legislation and compares the state to 16 other states. Prices paid for most types of professional services – which cover office visits, physical medicine, major and minor radiology, and major surgeries – were less than the others studied, anywhere from 54 to 14 percent lower. This was primarily due to lower fee schedule rates in California.

However, utilization of non hospital services, such as chiropractors and physical therapists, was higher in California. Non hospital office visits for a claim of more than seven days of lost time and 36 months of experience in 2008 averaged 13 per claim in California compared to 8 in the median state.

“Some system participants suggest that some providers might have billed more complex office visits in order to compensate for substantially lower fee schedule rates,” says the report.

The costs of medical care for injured workers in California grew rapidly from 2005 to 2010, WCRI reports. This growth followed a decrease of more than 30 percent from 2002 to 2004 due to the previous round of regulatory changes in the California workers’ compensation system. The report says the growth in utilization of non hospital care and hospital outpatient and/or ambulatory surgical center costs may reflect the combined impact of changes in regulation and participant behaviors.

Drugmaker Novartis Sued (Again) For Illegal Kickbacks

Reuters Health reports that the U.S. government filed a civil fraud lawsuit against Novartis AG on Tuesday, accusing a unit of the Swiss drug maker of causing the Medicare and Medicaid programs to pay tens of millions of dollars in reimbursements based on fraudulent, kickback-tainted claims. U.S. Attorney Preet Bharara in Manhattan said Novartis Pharmaceuticals Corp had since 2005 induced at least 20 pharmacies to switch thousands of kidney transplant patients to its immunosuppressant drug Myfortic from competitors’ drugs, in exchange for kickbacks disguised as rebates and discounts. He said Novartis tried to conceal the scheme by omitting the agreements from rebate and discount contracts with pharmacies.

In one alleged case, Novartis offered a Los Angeles pharmacist a “bonus” rebate of 5 percent of that pharmacist’s annual Myfortic sales, or several hundred thousand dollars, to switch as many as 1,000 patients to Myfortic. “Novartis co-opted the independence of certain pharmacists and turned them into salespeople,” Bharara said in a statement.

The lawsuit was filed in U.S. District Court in Manhattan, and seeks civil penalties and triple damages from Novartis for violating the federal False Claims Act.

Novartis disputes the claims and will defend itself, spokeswoman Julie Masow said in an email. Novartis is “committed to high standards of ethical business conduct and regulatory compliance in the sale and marketing of our products,” Masow said.

Myfortic net sales totaled $579 million in 2012, up 12 percent from a year earlier, according to Novartis’ annual report. The Novartis Pharmaceuticals unit has offices in East Hanover, New Jersey.

In his announcement, Bharara called Novartis a “repeat offender,” referring to a settlement of health care fraud charges based on kickbacks less than three years ago. Novartis in September of 2010 agreed to pay $422.5 million to resolve criminal and civil liability over its marketing of several drugs, including the epilepsy drug Trileptal.

The company violated a federal anti-kickback statute, “choosing instead to put sales growth and profits before its duty to comply with federal law,” according to the new complaint. The federal anti-kickback statute prohibits paying people to buy drugs or services that Medicare, Medicaid or other federal healthcare programs cover, according to the complaint.

The scheme has been highly lucrative for Novartis, according to the complaint, resulting in “rapid, sometimes exponential growth in Myfortic sales.” A pharmacy in Arkansas, for example, increased its annual sales of the drug to more than $1 million from $100,000 over four years, according to the complaint.

The lawsuit also claims a Novartis account manager admitted the kickback scheme generates “an ongoing stream of revenue” for Novartis “as long as the patient is still living and using (Myfortic).” These types of cases “are one of the highest priorities of the FBI’s health care fraud program,” FBI Assistant Director Ronald Hosko said in a statement. The case is U.S. v. Novartis Pharmaceuticals Corp, U.S. District Court, Southern District of New York, No. 11-08196.

OSIP Proposes Final SB 863 Self Insured Regulations

The DIR Office of Self Insured Plans proposes to amend sections 15201, 15210, 15210.1, 15475, 15477, 15481, 15484, 15496 and 15497 and to adopt new section 15209 of Subchapter 2, Chapter 8, Division 1, Title 8, California Code of Regulations to implement amendments to the California Labor Code regarding the administration of Self Insurance Plans pursuant to SB 863 These regulations were amended and adopted on an emergency basis effective January 1, 2013, and are currently in effect in a substantially similar form to these final proposed regulations.

Labor Code section 3700 requires every employer in California, except the State, to secure the payment of workers’ compensation either by being insured against liability to pay compensation by one or more insurers duly authorized to write workers’ compensation insurance in this state, or by securing from the Department of Industrial Relations a certificate of consent to self-insure.

Among other things, SB 863, which took effect on January 1, 2013, amended Labor Code section 3701 to change the manner in which security deposits are calculated. Section 3701, subdivision (c), as amended, requires that the calculation of a self-insurer’s projected losses and expenses upon which the security deposit is based “be reflected in a written actuarial report that projects ultimate liabilities of the private self-insured employer at the expected actuarial confidence level, to ensure that all claims and associated costs are recognized. The written actuarial report shall be prepared by an actuary meeting the qualifications prescribed by the Director in regulation.”

The regulations proposed in this rulemaking action would permanently: define the content of the annual actuarial reports required by Labor Code section 3701, subdivision (c); prescribe the qualifications for the actuaries who may prepare those required annual actuarial reports; and bring the requirements for self-insurers’ security deposits into conformity with Labor Code section 3701, subdivision (c) as amended by SB 863.

Any interested person may submit written comments relevant to the proposed regulatory action to the Department. Submit comments to Jon Wroten, Chief
Office of Self Insurance Plans, 2265 Watt Avenue, Suite 1, Sacramento, CA 95825. The written comment period closes at 5:00 p.m. on Monday, June 10, 2013.

Court of Appeal Overturns WCAB in Psyche Injury Case

Michael Brooks started working as a supervising probation officer at the County of Sacramento’s juvenile hall in 2007, and was apprised of a pending lawsuit alleging use of excessive force by the officers there. He observed problems he believed bordered on violation of protocols and felt that the Security Emergency Response Team (SERT), which he supervised, resisted and undermined his authority and supervision.

In November 2007, Brooks counseled two of the SERT officers as a result of an incident with a ward. Brooks informed his supervisor that the SERT officers resisted his instructions concerning restraining and movement of wards. Later Assistant Chief Deputy John O’Brien met with Brooks and gave him a memo entitled “Admonition and Notice of Internal Affairs Investigation.” The memo advised Brooks of the allegations by Ron Parker, a SERT member, which formed the basis of the internal affairs investigation. The memo directed Brooks to refrain from any supervisory duties which involve Ron Parker, refrain from abusive and or indiscreet language toward Ron Parker, and refrain from any other actions that could reasonably be construed as an attempt to intimidate or threaten Ron Parker. Brooks believed that these directives were unreasonable when it was his job to supervise Ron Parker. Brooks believed that with these directives he would not be able to intervene in an emergency.

Brooks asked to be reassigned or placed on administrative leave pending completion of the investigation. His requests were denied. Brooks did not feel that the Chiefs listened to his concerns or provided a reasonable alternative. However, the employer allowed Brooks to change his shifts to reduce contact with Ron Parker. Brooks went to work on January 2, 2008 and saw that Ron Parker was scheduled to work. Brooks was too upset to work and filed a workers’ compensation psychiatric injury claim which the employer denied. The defense of the claim involved the “good faith personnel action” defense.

Psychiatrist Ann E. Allen, M.D., acted as the agreed medical evaluator. Dr. Allen reported that his disorder was caused by (1) Parker’s complaint, (2) the internal affairs investigation, and (3) Brooks’s feelings that his supervisors were not supporting him. Based upon her report, the WJC found an industrial injury. Ultimately the WCAB affirmed the WCJ’s decision, with one dissenting commissioner, The employer appealed, and the Court of Appeal reversed the finding of injury in the published decision of County of Sacramento v WCAB, Michael Brooks.

The Court of Appeal agreed that Dr. Allen’s reports and testimony did not constitute substantial evidence. Labor Code section 3208.3 was enacted as part of the Margolin-Greene Workers’ Compensation Reform Act of 1989. It is part of the Legislature’s response to increased public concern about the high cost of workers’ compensation coverage, limited benefits for injured workers, suspected fraud and widespread abuses in the system, and particularly the proliferation of workers’ compensation cases with claims for psychiatric injuries. The Legislature’s expressed intent in enacting Labor Code section 3208.3 was to establish a new and higher threshold for compensability for psychiatric injury. To further this more restrictive policy, subdivision (h) provides: “No compensation under this division shall be paid by an employer for a psychiatric injury if the injury was substantially caused by a lawful, nondiscriminatory, good faith personnel action.”

A personnel action has been defined as conduct attributable to management in managing its business, including such things as reviewing, criticizing, demoting, transferring, or disciplining an employee. An employer’s disciplinary actions short of termination may be considered personnel actions even if they are harsh and if the actions were not so clearly out of proportion to the employee’s deficiencies so that no reasonable manager could have imposed such discipline.

The reports of Dr. Allen, when “taken as a whole, were so confusing and changing that Dr. Allen’s opinion cannot be deemed support for the Board’s conclusion that personnel actions were not a substantial cause of Brooks’s injury. Therefore, the Board’s award must be annulled.”

San Garbriel DME Owner Pleads Guilty to Federal Fraud Charges

Federal officials announced that a former owner of a Los Angeles-area medical equipment supply company pleaded guilty Monday to conspiring with others to defraud Medicare.

Tigran Aklyan, 37, of Van Nuys, California, pleaded guilty before U.S. District Judge Michael W. Fitzgerald in the Central District of California to one count of conspiracy to commit health care fraud.

According to court documents, Aklyan was the owner and president of Las Tunas Medical Equipment Inc., a durable medical equipment (DME) supply company located in San Gabriel, California. Aklyan admitted that from approximately October 2007 through May 2009, he conspired with others to commit health care fraud through the operation of Las Tunas by providing medically unnecessary power wheelchairs and other DME to Medicare beneficiaries and submitting false and fraudulent claims to Medicare. Aklyan admitted that he paid the owners and operators of fraudulent medical clinics to provide him with prescriptions and supporting medical documentation for the power wheelchairs and DME that he billed to Medicare. Aklyan admitted knowing that the prescriptions and medical documents that the clinics produced were fraudulent, yet he certified to Medicare with the submission of each claim that the DME was medically necessary. Aklyan also admitted that he knew it was illegal for him to pay for prescriptions, but he did so anyway.

From approximately December 17, 2007 through February 20, 2009, Aklyan, through Las Tunas, submitted approximately $910,377 in fraudulent claims to Medicare for power wheelchairs and related services, and Medicare paid Las Tunas approximately $653,461 on those claims.

At sentencing, scheduled for August 5, 2013, Aklyan faces a maximum penalty of 10 years in prison and a $250,000 fine.

The case was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers. To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.

DWC Audit Unit to Investigate Electronic Billing Regulation Compliance

The Division of Workers’ Compensation April 19 Newsline issued the following warning to claims administrators.

The DWC has received complaints regarding claims administrators who do not accept electronic bills from medical providers. The DWC Audit Unit has begun investigating claims administrators to determine if they accept electronic transmissions of medical bills.

Provisions relating to electronic medical bills became effective Oct. 18, 2012. By statute, claims administrators are required to accept electronic bills and may develop their own capacity to accept e-bills or may contract with a vendor to perform the function. Participation in e-billing is optional for medical providers.

Claims administrators who do not comply with the e-billing regulations will be subject to assessment, including civil penalties. The electronic billing rules are available on the DWC website. Claims administrators seeking assistance in implementing electronic medical bill processing may wish to consult one or more of the service providers who have elected to be listed on the DWC website. Other companies not listed may be equally capable of providing electronic bill processing services or products.

Imprisoned Former Orange County Sheriff Resolves Comp Case

Former Orange County Sheriff Mike Carona, who is serving a 66-month term in federal prison for public corruption, has settled two workers’ compensation cases against Orange County for more than $37,000 over injuries he suffered on duty, according to state records reviewed by the Orange County Register.

The Orange County Register says that Carona, 57, agreed through his attorney to accept $22,165 as compensation for lower back, hip and leg injuries he suffered in a car crash Dec. 5, 2005

The claim stems from a car accident on Dec. 5, 2006. Carona was a passenger in an unmarked department vehicle that rear-ended another car causing an injury to his lower back.The driver of the car was an investigator from what was formerly known as the dignitary protection unit, which regularly provided security and transportation for Carona. The investigator picked up Carona at his home because Carona had a full schedule that day, and when they were traveling near Chapman Avenue and Earlham Street in Orange about 8 a.m.,traffic suddenly stopped and they rear-ended the car in front of them.

Carona’s driver and the driver of the other car were not injured. But Carona filed a workers’ compensation claim for his back pain at the time, and it was accepted. Since then, Carona has received medical treatment through the claim.Then Carona filed an application for adjudication of claim.

Carona resigned from office after nine years in January 2008 to focus on his federal public corruption trial. He was convicted in 2009 of federal witness tampering and sentenced to 66 months in prison. He was acquitted on five other charges, including conspiracy, three charges of mail fraud and one additional count of witness tampering. He was ultimately convicted and sentenced to 5 1/2 years in prison and a fine of $125,000.

A doctor examined Carona before he reported to a Colorado prison in January 2011 and determined he suffered permanent injuries on the job.

Last year, the U.S. Supreme Court declined to review Carona’s appeal. Carona had argued prosecutors breached an ethical rule when they had an assistant sheriff secretly record him in 2007, and that he was charged under the wrong federal statute.

Controller Critiques Los Angeles Comp Program

City Controller Wendy Greuel issued her latest audit, raising serious concerns about the City’s Worker’s Compensation Salary Continuation Program for employees injured on the job. Her audit finds potential savings of up to $5.2 million annually by bringing the City’s non-sworn employee payment program in line with other jurisdictions in the State of California.

Greuel called on the responsible departments and City leaders to act immediately to protect taxpayer resources and reduce t he benefits to a level comparable with others throughout the State. The State Rate for temporary disability is two thirds of an employee’s take-home pay not to exceed $1 ,067 per week, while Los Angeles pays an employee’s full salary for the first 52 weeks. As all disability pay is tax-exempt by law, the City’s policy creates the potential for earning more than 100% of salary and, in some instances, employees earn more while on disability leave than while working.

“I am deeply concerned by the findings of this audit. While it is critical to support our injured employees, Los Angeles absolutely cannot afford to leave $5 million a year on the table that could go towards keeping our children safe and our roads paved,” said Greuel.

Greuel’s audit found that Injury on Duty (IOD) payments have increased dramatically each of the last four years, from $12.6 million in 2009 to over $19 million in 2012. According to the audit, this increase is most likely a result of employees receiving payments for a longer period of time, rather than an increase in the number of employees receiving payments.

The audit also evaluated system controls to prevent overpayments. A test sampling of payment data identified $127,000 in overpayments due primarily to departments’ failure to terminate salary continuation payments following the 52 week period and a failure to communicate between two independent systems.

“I am pleased that the Personnel Dept is working closely with my Office to enhance oversight and improve communications and controls for Workers Compensation” Greuel said.

Controller Greuel has conducted more than 80 audits and and claims she uncovered more than $160 million that the City has lost to wasteful spending, fraudulent activity, and abuse of city resources.

CEO and Accounting Director Accused of $1.45 Million Comp Fraud

The Palm Desert Patch reports that a father and son are accused of more than $1 million in workers’ compensation insurance fraud. Indio resident Jesse Garcia Contreras, 57, and his son, 32-year-old Carlos Contreras of Bermuda Dunes, have each pleaded not guilty to six felony counts of workers’ compensation insurance fraud. They both face up to 19 years and eight months in prison if convicted, according to John Hall of the Riverside County District Attorney’s Office.

Jesse Contreras is president and CEO of Thousand Palms-based Sunshine Landscape and Carlos Contreras is the company’s accounting director. Sunshine Landscaping contracts with many homeowner’s associations and businesses in the Coachella Valley, according to Hall and the company’s website.

An 18-month investigation showed that the Contrerases allegedly defrauded the State Compensation Insurance Fund and insurance companies out of about $1.45 million from January 2008 to March 2012, Hall said.

“The defendants intentionally misclassified dozens of employees as having jobs that were less dangerous than they actually were. They classified more than 40 tree trimmers as landscapers, therefore having to pay far less in workers’ compensation insurance premiums,” Hall alleged.

He said the case was investigated by the Inland Empire Premium Fraud task force because of a complaint of possible fraud filed by Zenith Insurance Company with both the California Department of Insurance and the Riverside County District Attorney’s Office.

“By cheating insurance companies out of their rightful premiums, this type of criminal conduct causes there to be an uneven playing field for those businesses which are doing things the right and legal way,” District Attorney Paul Zellerbach said. “Crimes like this also cause an increase in insurance premiums for those businesses which are following the law. It is this office’s responsibility to make sure that businesses operate under the same rules and guidelines to ensure that there is a fair marketplace.”

Another Drugmaker Settles Kickback Charges

Amgen Inc., a California-based biotechnology company, has agreed to pay the United States $24.9 million to settle allegations that it violated the False Claims Act. Amgen develops, manufactures, and sells pharmaceutical products, including products sold under the trade name Aranesp.

The settlement resolves allegations that Amgen paid kickbacks to long-term care pharmacy providers Omnicare Inc., PharMerica Corporation and Kindred Healthcare Inc. in return for implementing “therapeutic interchange” programs that were designed to switch Medicare and Medicaid beneficiaries from a competitor drug to Aranesp. The government alleged that the kickbacks took the form of performance-based rebates that were tied to market-share or volume thresholds. The government further alleged that, as part of the therapeutic interchange program, Amgen distributed materials to consultant pharmacists and nursing home staff encouraging the use of Aranesp for patients who did not have anemia associated with chronic renal failure.

“We will continue to pursue pharmaceutical companies that pay kickbacks to long-term care pharmacy providers to influence drug prescribing decisions,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division. “Patients in skilled nursing facilities deserve care that is free of improper financial influences.”

“By this agreement we are making important strides in holding drug manufacturers accountable for fraudulent and abusive practices not only in South Carolina but nationwide,” said William Nettles, U.S. Attorney for the District of South Carolina. “I am proud of the tireless work of this office to investigate this case across the country.”

This civil settlement resolves a lawsuit filed under the qui tam, or whistleblower, provision of the False Claims Act, which allows private citizens with knowledge of false claims to bring civil actions on behalf of the United States and share in any recovery. The False Claims Act suit was filed in the U.S. District Court for the District of South Carolina, and is captioned United States ex rel. Kurnik v. Amgen Inc., et al.

Acting Assistant Attorney General Delery noted that the settlement with Amgen, Inc. was the result of a coordinated effort among the Civil Division, the U.S. Attorney’s Office for the District of South Carolina, and the U.S. Department of Health and Human Services, Office of Inspector General.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $10.3 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14.2 billion.

The claims settled by this agreement are allegations only; there has been no determination of liability.