Menu Close

Author: WorkCompAcademy

Civil Lawsuits Claim Comp Doctors Used Fake Spine Surgery Hardware

A story in the Desert Sun claims that doctors in Southern California have implanted counterfeit screws and rods, ginned up in a small machine shop, into the backs of thousands of injured workers, according to lawsuits filed throughout the state. Some doctors who used the bogus hardware allegedly took kickbacks including cash and private plane rides, while middlemen and hospitals profited by wildly inflating the cost of the screws, according to one suit filed in Sacramento. The allegations deepen the scandal surrounding a Corona del Mar hospital executive who pleaded guilty in April to paying doctors to bring in patients as part of a $500 million insurance scam. The executive, Michael Drobot, also admitted to bribing former state Sen. Ronald Calderon to keep huge insurance payments flowing.

The cases revolve around spinal fusion surgeries, in which rods and screws are implanted in the back to relieve pain. The state’s workers’ compensation system long paid a premium for hardware used in the surgeries until a loophole was closed by recent legislation. The latest lawsuit, filed in mid-June in Los Angeles, alleges that the knockoff spinal implants could harm patients because they could get an infection or react to metal that is not surgical grade. The screws also might loosen or fail. Some of the bogus screws cost $300 to make but were billed at as much as $12,500 each, records say.

“It’s probably the worst example where fraud has progressed from being a financial crime to hurting people for profit,” said Thomas Fraysse, an Oakland attorney on the case. “It’s beyond unethical.” Law firms in the Bay Area and Los Angeles plan to continue to file cases on behalf of people with counterfeit implants studding their backs. A contractor for Spinal Solutions, the firm accused of distributing the implants, and an attorney for the machine shop’s owner deny the allegations, saying it is impossible that the elderly machinist mass-produced the hardware.

The latest lawsuit accuses defendants of fraud and battery, saying the hardware has put the life of the patient, Arthur Golia of Riverside, at risk. Golia had seven counterfeit devices implanted in his spine, according to the suit. It follows a similar January case, which alleges that a Los Angeles man had medical implants from the mom-and-pop machine shop in Temecula put in his back in 2011. One of the screws broke, requiring David Solomon to undergo a second surgery in 2013. He has ongoing pain and loss of movement, the lawsuit says. Golia trusted his doctor to use medical implants approved by the Food and Drug Administration, his lawsuit states. Instead, the case alleges, Dr. Jack Akmakjian used counterfeit implants in Golia’s back because he was being paid a kickback to do so. Separately, the Medical Board of California accused Akmakjian in April of injecting unsafe amounts of steroids in patients and overprescribing drugs.

A separate whistleblower lawsuit alleges that many of the patients with fake implants may not have needed the surgery at all. According to that May 2012 suit, they were the collateral damage of a massive scheme to defraud insurers, involving Drobot, former owner of Pacific Hospital of Long Beach. Drobot admitted to paying doctors kickbacks of up to $15,000 to operate in his hospital. He also admitted to paying bribes to Calderon to protect a law allowing hospitals to bill insurance providers for the full cost of spinal implants. Calderon, a Montebello Democrat, has pleaded not guilty to corruption charges. Drobot’s sentencing is scheduled for December, according to news reports.

Spinal Solutions LLC, a now-shuttered Murrieta company, is accused of distributing and inflating the cost of the hardware in the Golia lawsuit and the whistleblower claim. The firm’s owner, Roger K. Williams, is accused of passing off the counterfeit rods and screws as FDA-approved even though they were made at the local tool shop. The case says Williams, his wife at the time and a key staffer hid or destroyed records that revealed the true origin of the hardware. According to the lawsuits, Spinal Solutions asked William Crowder, owner of Crowder Machine and Tool of Temecula, to make the rods and screws.

Thomas Mansor, an independent contractor who worked for Spinal Solutions and attended surgeries with their products, said the allegations sound “bogus.” Mansor said he went to Crowder’s machine shop for repairs on tools like screwdrivers. But he said Crowder didn’t have the equipment or capacity to churn out the spinal implants. Crowder sued Spinal Solutions last July, saying the firm owed him $29,900 “to machine, repair and prototype” tools for doctors. Crowder attached a one-year, $50,000 contract with the implant firm to his suit. Crowder won a judgment against Spinal Solutions because it did not respond to the suit.

The FDA cited Spinal Solutions in 2012 for a variety of quality control violations. Last year, the agency announced that the company was recalling spinal implants because problems with the products “could cause patient harm due to implant breakage, movement, or inadequate sterilization.”

Veterans Administration Botches 60% Of Its Own Work Comp Claims

This week, Veterans Affairs released a report about its Workers Compensation program, which documented mismanagement of the Workers’ Compensation program similar to other programs administered by the VA. The VA’s Workers’ Compensation Program (WCP) provides compensation and medical rehabilitation for injured VA employees.

The Department of Labor (DOL) Office of Workers’ Compensation Programs (OWCP) administers the WCP for all Federal agencies. After claims adjudication, OWCP uses its Employees’ Compensation Fund to pay the claimants’ medical expenses and compensation benefits. Then it bills each agency annually through a chargeback report. Employing agencies manage all cases listed on the chargeback report.

Within VA, the Assistant Secretary for Human Resources and Administration has broad responsibility for WCP policy development and oversight. VHA workers’ compensation specialists execute the policy by initiating claims and managing cases from the time of employee injury up to the point of claims adjudication by OWCP. Upon claims adjudication, the specialists maintain WCP case files, assess medical evidence, and make job offers to return employees to work when possible.

Oversight summarized in this most current report revealed that over 60% of all claims evaluated were not monitored properly. VA lacked a fraud detection process, which is surprising in light of VA’s perpetual focus on veterans potentially defrauding the disability compensation program. Apparently its own workers get a pass for fraud. OIG concluded VA could save over $92 million if it improves management of the program.

The report goes on to say that “In five prior audits, we reported enhanced case management could reduce VA’s WCP costs and risks for fraud and abuse. In our two most recent reports, Follow-Up Audit of Department of Veterans Affairs Workers’ Compensation Program Costs (Report No. 02-03056-182, August 13, 2004) and Audit of Workers’ Compensation Case Management (Report No. 10-03850-298, September 30, 2011), VA inaccurately initiated claims and missed opportunities to make job offers. VA lacked the medical evidence necessary to support continuation of benefits to employees. We also identified instances of potential fraud. We recommended VA increase its oversight processes, dedicate resources, and take actions to reduce fraud risk.”

In this report “We determined whether VHA improved Workers’ Compensation Program (WCP) case management to better control costs in chargeback year 2012, which represented the most current audit data available at the time we began work. We identified issues with claims initiation and monitoring similar to those disclosed in our 2004 and 2011 audit reports. Specifically, WCP case files lacked initial or sufficient medical evidence to support connections between claimed injuries and medical diagnoses. We estimated VHA inaccurately initiated about 56 (7 percent) of 793 WCP claims. WCP claims also were not consistently monitored to timely return employees to work. VHA WCP specialists did not make job offers or take actions to detect fraud. We projected 489 (61.7 percent) of 793 active claims were inadequately monitored.”

“These issues occurred because VHA still lacked standard guidance and a clear chain of command to ensure compliance with WCP statutory requirements and VA policy. VHA also lacked a fraud detection process. Overall, we estimated VHA can reduce WCP costs over the next 5 chargeback years by $11.9 million through improved claims initiation and $83.3 million by increasing efforts to return medically able staff to work. In total, opportunities exist for VHA to reduce WCP costs by about $95.2 million with improved claims management. We also identified $2.3 million in unrecoverable payments due to VHA’s lack of oversight to return medically able employees to work”

Former Visalia Physician Pleads Guilty, Faces 20 Years in Drug Case

In June 2013, a federal grand jury returned a 27-count indictment against Terrill Eugene Brown, 61, of Visalia, charging him with conspiracy to dispense oxycodone, dispensing of oxycodone and hydrocodone, and structuring currency transactions to avoid bank reporting requirements, According to the indictment, Brown, a medical doctor formerly licensed in California, sold prescriptions for large quantities of highly addictive, frequently diverted prescription drugs, including oxycodone and hydrocodone, without medical necessity. Brown sold prescriptions to customers that did not have a legitimate medical purpose and were not in the usual course of his professional practice. Brown deposited the cash earned from this into different personal bank accounts in a manner designed to avoid currency transaction reporting requirements.

Brown pleaded guilty on July 7, 2014. He will remain out of custody until his sentencing date. He is scheduled to be sentenced by Judge Lawrence J. O’Neill on September 22, 2014. Brown faces a maximum statutory penalty of 20 years in prison and a $1 million fine for illegally causing the dispensing of a controlled substance, and a maximum sentence of 10 years and a $500,000 fine for structuring currency transactions to avoid a reporting requirement. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. Brown agreed to forfeit more than $182,000 and three BMW sedans that were involved in or obtained as a result of his criminal activity.

This case is being brought as part of Operation Footprint, a nationwide law enforcement initiative led by the U.S. Attorney’s Offices, the IRS-Criminal Investigation, the DEA, and the U.S. Postal Inspection Service. Operation Footprint targets large drug trafficking organizations by identifying the transfer of drug proceeds through financial institutions, bulk cash smuggling and other forms of money transfers. Operation Footprint is focused on bringing criminal charges based on Bank Secrecy Act violations in addition to violations of the Controlled Substances Act and the Money Laundering Control Act.

This case is also the product of the Organized Crime Drug Enforcement Task Force (OCDETF), a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state and local law enforcement agencies.

Prior to the 2013 indictment, Brown was the subject of Board of Medicine investigations that ultimately led to the surrender of his medical license. On September 22, 2011, the Medical Board of California conducted an undercover operation at his office located at 5756 N. Marks Ave. #161 in Fresno California. The undercover operative was a female Medical Board Investigator, who utilized an undercover identity of a patient. During this undercover operation, Brown personally collected $200 cash and issued a medical marijuana recommendation, together with a prescription for 180 10-325 Norco tablets. Brown did not review any medical records and did not conduct any physical examination whatsoever.

California Has Mixed Scorecard in WCRI Medical Price Index Report

The Workers Compensation Research Institute (WCRI) released the sixth edition of its annual Medical Price Index for Workers’ Compensation (MPI-WC). The MPI-WC, like the Consumer Price Index for medical care (CPI-M), measures price inflation. It tracks the actual medical prices paid for each of the major services delivered to injured workers in 25 states over the past 12 years.

“This will help public policymakers and system stakeholders understand how prices paid for medical professional services for injured workers in their state compare with other states and know if prices in their state are rising rapidly or relatively slowly,” said Dr. Richard Victor, WCRI’s executive director.
“They can also learn,” said Victor, “if the reason for price growth in their state is part of a national phenomenon or whether the causes are unique to their state and, hence, subject to local management or reform.”

The method used to construct the MPI-WC is similar to the CPI-M, which is published by the U.S. Department of Labor’s Bureau of Labor Statistics. However, the MPI-WC is a more focused measure of workers’ compensation price growth than the CPI-M. In particular, the CPI-M includes the prices of all medical services provided to the U.S. population; the majority of these services have little or no relevance for tracking medical prices for the care provided to injured workers. The MPI-WC focuses only on those medical services that are commonly provided to injured workers – largely related to diagnosis and treatment of trauma and orthopedic conditions.

Additionally, changes in prices paid under workers’ compensation systems are likely to be related to regulation choices made by the states. The CPI-M for professional services did not track the workers’ compensation price trends well for the study states with fee schedules. For study states without fee schedules, growth in the CPI-M for professional services was fairly similar to workers’ compensation price trends over the study period.

The MPI-WC tracked medical prices paid in 25 large states from calendar year 2002 through June 2013 for nonhospital, nonfacility services billed by physicians, physical therapists, and chiropractors. The medical services fall into eight major groups: evaluation and management, physical medicine, surgery, major radiology, minor radiology, neurological and neuromuscular testing, pain management injections, and emergency care. The 25 states included in the MPI-WC, which represent nearly 80 percent of the workers’ compensation benefits paid in the United States, are Arizona, Arkansas, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin.

The eleven year graph for “Professional Services” from 2002 to 2013 shows that California is well below the median of states without fee schedules, and consistently below the median of states with fee schedules. It was not as frugal with Evaluation and Management Services that slightly exceeded the median of states with fee schedules for a few years in the middle of the study. However, for Professional Surgery services, California exceeded the median of states with fee schedules for all years after 2003.  California appears to have an expensive community of surgeons.

WCAB Panel Rejects Jurisdiction Over Hospital Lien Claim

Rudy Gallardo’s claim of industrial injury to his low back and right shoulder while employed by Southern California Edison was settled by compromise and release. Before the settlement he received two back surgeries performed at Huntington Hospital. What remained to be adjudicated was a dispute concerning the lien claim of Huntington Hospital in the amount of $43,870 pursuant to the Official Medical Fee Schedule (OMFS) in addition to the $18,050 already paid by Edison. Huntington initially billed $130,610.59 for the services it provided, but was paid $18,050.00 by Blue Cross of California on behalf of Edison. Huntington filed a workers’ compensation lien for the $112,560.59 balance it claimed was due, but it was subsequently stipulated that the total fee allowed by the OMFS is $61,920.00, and Huntington amended its claim to $43,870.00, which is the difference between the $18,050.00 paid by BCC and the $61,920.00 allowed by the OMFS.

The fee dispute was presented at a lien trial. Two contracts were received into the record. The first was a 23 page January 1, 2002 “Comprehensive Contracting Hospital Agreement” (CCHA) made between Blue Cross of California and Huntington. The second was a seven page August 1, 2006 “Workers’ Compensation Network Access Agreement” made between Edison and “BC Life and Health Insurance Company,” which is a Blue Cross of California subsidiary.

The WCJ issued her December 23, 2013 decision finding that defendant was obligated to pay the additional $43,870.00 to Huntington pursuant to the OMFS. Edison Petitioned for Reconsideration which was granted in the panel decision of Rudy Gallardo v Southern California Edison and Huntington Hospital.

Defendant contended that the WCAB lacks jurisdiction over the fee dispute and that it is not liable to Huntington for the additional amount because it earlier paid $18,050 to Huntington in accordance with the express agreement between Huntington and Blue Cross of California (BCC), which established the amount to be paid consistent with Labor Code sections 4906 and 5304.1.The WCAB panel agreed and reversed.

Labor Code Section 5304 provides as follows: “The appeals board has jurisdiction over any controversy relating to or arising out of Sections 4600 to 4605 inclusive, unless an express agreement fixing the amounts to be paid for medical, surgical or hospital treatment as such treatment is described in those sections has been made between the persons or institutions rendering such treatment and the employer or insurer.”

In prior decisions the WCAB held that the language in the Blue Cross ‘Comprehensive Contracting Hospital Agreement,’ expressly provides for Blue Cross to contract with ‘Other Payors’ to provide access to a hospital’s medical services. Such ‘Other Payors’ are noted to consist of other insurers, including workers’ compensation insurers. (See e.g., Recovery Resources, Inc. v. Workers’ Comp. Appeals. Bd (Gordon) (2009) 74 Cal. Comp. Cases 881 [writ denied]; See Ferguson v. Handee Market (2005 Cal. Wrk. Comp. P.D. Lexis 22[)]; Waters v. Los Angeles Clippers (2005 Cal. Wrk. Comp. P.D. Lexis 15.)

“The $18,050 fee paid by defendant to Huntington by way of the chain of contracts was pursuant to an “express agreement fixing the amounts to be paid” as described in section 5304, and under that section the WCAB does not have jurisdiction over the fee dispute. Huntington’s contention that BCC did not follow the terms of their contract in accordance with section 4906 does not change the fact that the WCAB is without jurisdiction because there is an express agreement fixing the amounts to be paid. A different forum must be used by Huntington to adjudicate its breach of contract claims.”

Inspector General Warns About Electronic Health Records Potential for Fraud

The federal government is rewarding doctors and hospitals for moving to electronic health records – and will soon punish them if they don’t – even though these records currently make it easier for health care providers to defraud government-paid health programs, fraud experts say. The Department of Health and Human Services’ inspector general charged in December that the basic auditing safeguards that also help to prevent fraud for electronic health records (EHRs) weren’t in place in many hospitals, or they were being used, but vulnerable to corruption.

Yet, according to the story in USA Today, the Centers for Medicare and Medicaid Services still doesn’t require health care providers to keep their audit systems on. Reed Gelzer, a former primary care doctor who is now an EHR consultant to the federal government and private groups, says that means the health records that are maintained electronically can be easily falsified, altered or otherwise misrepresented. “There have been billions spent on these systems and incentives paid to providers, but there is no private or government agency that provides oversight,” said Dan Bowerman, a Philadelphia chiropractor who has assisted in many state and federal fraud investigations.

Preventing EHR fraud is a “top priority” for CMS, spokesman Aaron Albright said in an e-mail response. “We are working to create strong standards for validating electronic health records to ensure that we allow beneficiaries to receive the care they need and at the same time protect taxpayers from fraud, waste and abuse,” he said.

A 2009 federal law requires that certified EHRs have to be used in a “meaningful manner.” This includes e-prescribing, sharing health information and allowing providers to submit clinical quality measures, such as patient care outcomes. Electronic records can be enormously beneficial in medicine because they improve patient care and cut costs – key goals of the Affordable Care Act – by allowing doctors and pharmacists to coordinate treatment. That reduces medical errors and avoids duplication of procedures. HHS has spent more than $22.5 billion in financial incentives for doctors and hospitals to use EHRs, and those that don’t will soon have their Medicare payments reduced.

The problems occur when the records aren’t audited for reliability or checked for cloned records, said Bowerman, a former medical director at a major insurer. Questionable electronic documentation systems allow providers to add notes to existing records or create new records where none existed before. Some health care providers who are the subject of insurance company audits or criminal investigations have created such records, Bowerman said.

The push for EHRs comes as funding for fraud prevention has been on a downward trend, federal data show, though some funding is set to increase in 2015. Even though the Health Care Fraud and Abuse Control program and Medicare Integrity Program recover more than $8 for every $1 spent, the two programs only make up about 0.22% of total federal health care expenditures, Gelzer estimates using federal and congressional data. CMS is working on new standards and ways to identify when records are copied and used inappropriately in future notes, wrongly modified or altered by date or author. The agency said it is also trying to identify best practices for detecting fraud and abuse associated with EHRs with the help of contractors.

New Study Says Steroid Injections Ineffective for Back Pain

Steroid injections widely used to treat back pain offer little or no real benefit, according to a new study of 400 patients published in the New England Journal of Medicine and summarized by an article by Reuters Health.

Those who received the drug mixed with the painkiller lidocaine scored no better on measures of disability and leg pain after six weeks than patients in a control group who received lidocaine injection alone. “These (injections) are so commonly used and the steroids do pose an added risk to patients without much benefit,” the study’s lead author Dr. Janna Friedly of the University of Washington in Seattle told Reuters Health. “I do hope patients and their doctors will be more cautious about using them” for spinal stenosis, she said.

Lumbar spinal stenosis is a narrowing of the passageway surrounding spinal nerves in the lower back. The resulting nerve compression is painful and the number one reason older adults have spinal surgery. The combination of glucocorticoid steroids and an anesthetic is supposed to reduce nerve inflammation and swelling in the surrounding tissue. Roughly 550,000 procedures – at a cost ranging from $500 to $2,000 per injection – are done each year just among Medicare recipients.

“Certainly, this study raises serious questions about the benefits of epidural glucocorticoid injections for spinal stenosis,” Dr. Gunnar Andersson of Rush University Medical Center in Chicago writes in an accompanying editorial in the New England Journal of Medicine. “It’s looking like it may be a little harder to justify doing those injections for spinal stenosis in patients. But it doesn’t show it’s not effective at all,” said Dr. D. Scott Kreiner, co-chairman of the guidelines committee of the North American Spine Society, who was not involved in the research.

In the editorial, Andersson said if patients decide to have injections anyway, a second one should be avoided if there is no effect from the first. Because many insurance companies require the injections before surgery is approved, the new finding, combined with the U.S. Food and Drug Administration’s warning that they can cause paralysis, nerve damage or death, “suggest that this requirement should be reconsidered,” he said.

Friedly predicted that the findings will meet with some resistance among doctors because “these are injections that are commonly performed and people believe that they work,” which is why the results were surprising. “There are not a lot of effective treatments for pain and symptoms associated with spinal stenosis,” she said. “We still have a lot of unanswered questions about what alternative treatments are effective.”

Major Drugmakers Lack Interest in New Antibiotic Development

An article in Reuters paints a glum picture of the future of antibiotics as a tool for modern medicine. “The drugs don’t work – and neither does the market, when it comes to antibiotics.” Take gonorrhea, a sexually transmitted disease contracted by more than 100 million people a year: it used to be easily treatable but has now developed superbug strains that are drug-resistant and are spreading around the planet. Tuberculosis is a similar tale. Totally resistant forms of the lung infection emerged in India just a few years ago and have now been detected worldwide. Hospital patients in Africa with untreatable TB are often simply sent home to die. It’s a glimpse of what Britain’s chief medical officer Sally Davies calls the “apocalyptic scenario” of a post-antibiotic era, which the World Health Organization says will be upon us this century unless something drastic is done.

Waking up to the threat, governments and health officials are getting serious about trying to neutralize it. It may seem like a question of science, microbes and drugs – but in truth it is a global issue of economics and national security. The debate moved to center stage last week when British Prime Minister David Cameron launched a global review of the crisis, securing specific support from U.S. President Barack Obama and German Chancellor Angela Merkel. That builds on a resolution passed at the World Health Assembly in Geneva in May recognizing the pressing need for the world to act in the fight to combat increasing resistance.

Britain’s chief medical officer Sally Davies said in an interview with Reuters “This is…not a science issue. This is an issue of markets and economics.”

In recent decades, drugmakers have slashed investment in antibiotics because of poor returns from a class of low-priced medicines that are only used for short periods, even as overuse of existing drugs has spurred the spread of resistance. As a result, the world’s biggest investor in the field today is a little-known U.S. firm, Cubist Pharmaceuticals, with an annual research budget for antibiotics of $400 million. The industry complains its bug-killing medicines are severely undervalued – and they have a point.

Just over a year ago, Johnson and Johnson won approval for the first drug in 40 years that provides a new way to treat TB, yet sales of Sirturo are forecast by analysts to total just $75 million this year. Compare that to Gilead Sciences’ new hepatitis C drug Sovaldi – carrying an eye-watering U.S. price tag of $1,000 per pill – which is tipped to sell more than $8 billion in 2014.

For companies like Cubist the current situation is not all doom and gloom. The exit of bigger players has reduced competition, while recent steps to ease the regulatory path to market have helped and the U.S. Generating Antibiotics Incentives Now (GAIN) Act now ensures some extra patent life. Indeed, the U.S. Food and Drug Administration has approved two new drugs from Cubist and Durata Therapeutics for acute bacterial skin infections in the last two months. That’s encouraging but a more fundamental fix is still needed.

Workers’ Compensation – Where Did All The Money Go?

Pursuant to Section 11759.1 of the California Insurance Code, the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) has prepared this report containing estimated California workers’ compensation costs for 2013 based on insured employer experience including payments made by the California Insurance Guarantee Association (CIGA).

Calendar year 2013 earned premium totaled $14.4 billion (as compared to the $12.1 billion of premium earned in 2012). Total insurer paid losses (i.e., excluding payments made by CIGA) in 2013 were $8.4 billion, or 58% of calendar year earned premium. Combining insurer paid losses with a $1.9 billion increase in total insurer loss reserves resulted in total insurer incurred losses, excluding payments made by CIGA, of $10.3 billion, or 72% of the premium earned in 2013.In 2013, $5.2 billion, or 61% of total loss payments, were for medical services. $3.4 billion, or 39% of total loss payments, were for indemnity benefits (including vocational rehabilitation benefits).

In total, California insurers have incurred about $5.3 billion in expenses in 2013, or 37% of 2013 earned premium. In total, incurred losses and expenses in calendar year 2013 were $15.6 billion, or 108% of earned premium. Based on insurer statutory Annual Statement information, the WCIRB estimates policyholder dividends incurred in 2013 to be 0.4% of 2013 earned premium, resulting in an underwriting loss of $1.3 billion, or 8.8% of premium.

Although generally part of incurred indemnity losses rather than expenses, the amount paid in 2013 to applicant attorneys was derived from the WCIRB’s Annual Expense Call. In 2013, applicant attorneys were paid $457 million. (In 2012, applicant attorneys were paid $450 million.)

At the bottom end of paid medical expenses, 4% was paid for medical cost containment programs, 3% for medical legal evaluations, 2% for medicare-set-asides, Physicians on the other hand were paid 36% of the dollars allocated to this category. The top five recipients by percentage were general and family practice physicians, followed by physical therapists, clinics, orthopedists and then radiology services. Chiropractors were ninth with 1.3% of total medical paid. Psychiatrists were 11th and psychologists 13th on the list.

By medical legal specialty, orthopedists had 66% of the number of reports, followed by psychiatry at 14% and internal medicine and cardiology at 6%. Thus the ortho/psyche combination continues to be a popular combination punch.

In terms of money flowing to injured workers, temporary disability was 48% and permanent partial disability payments followed at 42%. Life pensions took 3% of the dollars while total permanent disability was 4%. Death benefits were 2% of paid indemnity benefits.

DIR Approves New Alternative Security Program for Self Insureds

Department of Industrial Relations Director Christine Baker approved the implementation of the 2014/15 Alternative Security Program (ASP), which frees $7.54 billion in working capital and provides self-insured California businesses greater financial flexibility.

The ASP is a first-in-the-nation, innovative program operated by the non-profit California Self Insurers’ Security Fund with the California Department of Industrial Relations (DIR). The program provides financial guarantees to replace security deposits required to collateralize self-insured workers’ compensation liabilities.  The participation fee for the guarantee program was also reduced 10% versus last year.  These added savings make the program and costs even more competitive for California businesses.

“Self-insurance and the ASP are two innovative ways that California supports businesses and helps them reinvest their capital,” said DIR Director Christine Baker. “With workers’ compensation representing a significant expense to businesses, this program benefits both the businesses and the larger California economy.”

All employers in California are required to have workers’ compensation insurance to protect themselves and workers, and to minimize the impact of work-related injuries and illnesses. Meeting this requirement can be accomplished either by buying an insurance policy, or through obtaining authority from DIR’s Office of Self Insurance Plans (OSIP) to self-insure the businesses’ workers’ compensation liabilities. “Self-Insurance offers tremendous advantages and substantial cost savings to California employers,” said OSIP Chief Jon Wroten. “With program improvements and streamlining efforts, it is now possible for a company wanting to enter self-insurance to move from initial application to fully insured in less than 2 weeks.”

Self-insured employers are required to maintain a deposit to collateralize their risk in an amount equal to estimated liabilities as determined by an actuary. This deposit, which can be posted in cash, letters of credit, surety bonds or securities, limits the employer’s ability to use the cash or credit line to expand their business. In contrast, ASP member’s cash or line of credit is freed up allowing them to invest this capital back into their businesses while the ASP assumes responsibility of their security deposit posting requirement.

California currently has more than 9,850 employers protecting more than 4 million workers representing a total payroll of $177 billion through self-insurance workers’ compensation plans. One of every four California workers is protected by a self-insurance plan. Self-insured employers in California represent large and midsized private companies, industry groups, and public entities such as city, county, state and school districts.

More information of California’s workers’ compensation self-insurance program is available at OSIP’s website .