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Court of Appeal Affirms Employer Fraud Conviction

Michael Vincent Petronella owned several businesses, including The Reroofing Specialists, Inc., doing business as Petronella Roofing, Western Cleanoff, Inc., and Petronella Corporation. In September 2006, an SCIF claims adjuster received a telephone call from Petronella Roofing’s secretary, reporting an employee named Morales was still receiving workers’ compensation benefits although he had returned to work. The adjuster asked the secretary to provide documentation. She received a copy of Morales’s pay stub, reflecting he worked for Western. Noticing that Western had been reported to be dormant and removed from coverage under the policy, but was still listed as an active entity on the Secretary of State’s Web site, the adjuster reported the discrepancy to SCIF’s special investigations unit.

An SCIF claims manager compiled a list of 42 persons who filed workers’ compensation claims under Petronella Roofing’s policy whose payroll had not been reported to SCIF. A certified public accountant compared the payroll reports and audit documents defendant provided SCIF with the quarterly employee wage reports actually received by EDD. The accountant prepared a report reflecting the difference between the quarterly payroll defendant reported to EDD and the payroll reports he submitted to SCIF from the fourth quarter of 2000 to the fourth quarter of 2008. Over that 8-year span, the difference in payroll reported to EDD and that reported to SCIF exceeded $29 million.

The prosecution charged defendant with one count of grand theft, 36 counts of violating Insurance Code section 11880, subdivision (a), plus numerous tax evasion crimes. The information also alleged an enhancement under Penal Code section 186.11, subdivision (a). During trial, the court dismissed the grand theft charge at the prosecution’s request and granted defendant’s motion for acquittal on the bulk of the tax evasion charges. The jury found defendant guilty of 33 counts of violating Insurance Code section 11880, subdivision (a), but acquitted him on three other similar counts and the remaining tax evasion charges. As to counts 2 through 20, the jury returned true findings the prosecution of these charges began within four years of when the crime reasonably should have been discovered. Finally, the jury also found defendant engaged in a pattern of related fraudulent felony conduct resulting in over $500,000 in losses.

The superior court sentenced defendant to 10 years in state prison. It also and ordered him to pay $500,000 in restitution under Penal Code section 1202.4. Defendant appeals from the judgment raising numerous evidentiary, instructional, and sentencing issues. Both defendant and the People appeal from the trial court’s restitution award. The Court of Appeal reversed the trial court’s restitution order, but otherwise affirmed the judgment in the published case of The People v Michael Vincent Petronella.

The Court concluded that “a review of the trial court’s reasons for awarding SCIF $500,000 in restitution clearly indicates it abused its discretion in reaching this decision.” By ” failing to consider all of the evidence presented to it concerning restitution and relying on irrelevant factors to pick a figure out of thin air that was less than what the jury found to have been SCIF’s loss…” The matter was remanded to the Superior Court for further proceedings on the restitution award.

WCIRB Recommends 3.4% Increase In Pure Premium Rates

The insurer and public members of the WCIRB Governing Committee voted unanimously to authorize the WCIRB to submit two filings to the California Department of Insurance. The first filing will contain proposed changes to the Insurance Commissioner’s January 1, 2014 and January 1, 2015 workers’ compensation regulations and will be submitted to the CDI on August 9, 2013. The second filing, which will be submitted to the CDI on or around August 19, 2013, will contain proposed January 1, 2014 advisory pure premium rates.

Traditionally, the WCIRB submitted a single filing containing proposed changes to both the regulations and advisory pure premium rates. This year, the CDI and the WCIRB developed a bifurcated filing process in order to allow insurers more time to modify their operational systems to reflect any approved regulatory changes.

The proposed January 1, 2014 advisory pure premium rates that will be included in the WCIRB filing average approximately $2.62 per $100 of payroll, which is 3.4% above the industry average filed pure premium rate of $2.53 per $100 of payroll as of July 1, 2013.

These proposed advisory pure premium rates reflect the WCIRB’s most current evaluation of Senate Bill No. 863 (published October 12, 2012); however, these proposed advisory pure premium rates do not reflect any provision for the impact of the new physician medical fee schedule which is based on the Resource Based Relative Value Scale (RBRVS) and is under consideration by the Division of Workers’ Compensation (DWC). If the DWC adopts the new schedule, the WCIRB anticipates modifying its proposed advisory pure premium rates based on its evaluation of the cost impact of the new schedule on policy year 2014 medical costs.

The WCIRB’s August 9, 2013 regulatory filing will include proposed amendments to the California Workers’ Compensation Uniform Statistical Reporting Plan – 1995 (USRP), the Miscellaneous Regulations for the Recording and Reporting of Data – 1995 (Miscellaneous Regs) and the California Workers’ Compensation Experience Rating Plan – 1995 (ERP) effective January 1, 2014. The amendments to the USRP include (1) changes to the Standard Classification System, (2) changes to data reporting requirements to conform to national data reporting specifications, and (3) an amendment to provide for the use of collective bargaining agreements to validate an employee’s hourly wage rate for purposes of assignment to a high wage dual classification for audits on policies with an expiration date on or after January 1, 2014. Additionally, a number of amendments will be proposed to the USRP, Miscellaneous Regs and the ERP to facilitate a bifurcated filing process and for clarity and consistency.

The WCIRB will also propose a number of regulatory changes to be effective on January 1, 2015 including amendments to the USRP pertaining to policy reporting requirements and significant amendments to the ERP intended to constrain the impact of a single claim incurred during the experience period to 25 percentage points.

Fibromyalgia Study Finds SFPN – Nerve Fiber Damage

About half of a small group of patients with fibromyalgia — a common syndrome that causes chronic pain and other symptoms — was found to have damage to nerve fibers in their skin and other evidence of a disease called small-fiber polyneuropathy (SFPN). Unlike fibromyalgia, which has had no known causes and few effective treatments, SFPN has a clear pathology and is known to be caused by specific medical conditions, some of which can be treated and sometimes cured. The study from Massachusetts General Hospital (MGH) researchers will appear in the journal PAIN and has been released online.

“This provides some of the first objective evidence of a mechanism behind some cases of fibromyalgia, and identifying an underlying cause is the first step towards finding better treatments,” says Anne Louise Oaklander, MD, PhD, director of the Nerve Injury Unit in the MGH Department of Neurology and corresponding author of the Pain paper.

The term fibromyalgia describes a set of symptoms — including chronic widespread pain, increased sensitivity to pressure, and fatigue — that is believed to affect 1 to 5 percent of individuals in Western countries, more frequently women. While a diagnosis of fibromyalgia has been recognized by the National Institutes of Health and the American College of Rheumatology, its biologic basis has remained unknown. Fibromyalgia shares many symptoms with SFPN, a recognized cause of chronic widespread pain for which there are accepted, objective tests.

Designed to investigate possible connections between the two conditions, the current study enrolled 27 adult patients with fibromyalgia diagnoses and 30 healthy volunteers. Participants went through a battery of tests used to diagnose SFPN, including assessments of neuropathy based on a physical examination and responses to a questionnaire, skin biopsies to evaluate the number of nerve fibers in their lower legs, and tests of autonomic functions such as heart rate, blood pressure and sweating.

The questionnaires, exam assessments, and skin biopsies all found significant levels of neuropathy in the fibromyalgia patients but not in the control group. Of the 27 fibromyalgia patients, 13 had a marked reduction in nerve fiber density, abnormal autonomic function tests or both, indicating the presence of SFPN. Participants who met criteria for SFPN also underwent blood tests for known causes of the disorder, and while none of them had results suggestive of diabetes, a common cause of SFPN, two were found to have hepatitis C virus infection, which can be successfully treated, and more than half had evidence of some type of immune system dysfunction.

“Until now, there has been no good idea about what causes fibromyalgia, but now we have evidence for some but not all patients. Fibromyalgia is too complex for a ‘one size fits all’ explanation,” says Oaklander, an associate professor of Neurology at Harvard Medical School. “The next step of independent confirmation of our findings from other laboratories is already happening, and we also need to follow those patients who didn’t meet SFPN criteria to see if we can find other causes. Helping any of these people receive definitive diagnoses and better treatment would be a great accomplishment.”

DWC Posts Additional Modifications to OMFS

The Division of Workers’ Compensation (DWC) has issued a 15 day notice of modifications to proposed physician fee schedule regulations. Comments on the modifications will be accepted until Aug. 19. Modifications to the proposed physician fee schedule were made following stakeholder comments provided during a comment period that ended with a public hearing on July 17.

Under these proposed regulations

  • The maximum reasonable fee formulas are revised to apply average statewide geographic adjustment factors to the work, practice, and malpractice expense relative value units (RVUs) for procedures other than anesthesia.
  • A separate average statewide geographic adjustment factor will be applied to anesthesia services.
  • The transition conversion factors were revised in light of RAND’s refined modeling and application of the average statewide geographic adjustment factors.
  • The regulation was revised to clarify the applicability of the 1995 or 1997 evaluation and management documentation guidelines.
  • The proposed regulation was revised to clarify the hierarchy that should be used to determine payment for procedures with status indicator codes C, N, R, or I.
  • The proposed regulation was revised to clarify “AAs” are “certified anesthesiologist assistants” instead of the term used by Medicare, “anesthesia assistants.” Added clarifying language regarding applicability of the MEI to the workers’ compensation specific codes and updated the maximum reasonable fees to estimated 2014.

Text of the proposed amendments to the physician fee schedule and related documents listed above to be posted on the DWC rulemaking webpage. Members of the public are invited to present written comments regarding the proposed modifications by 5 p.m. on Monday, Aug. 19. DWC will consider only comments it has received by that time.

California Workers Comp Bonds Get AA Rating

Fitch Ratings affirmed the ‘AA’ rating on approximately $559.5 million in California Infrastructure and Economic Development Bank workers compensation relief bonds, series 2004A and 2004B. The bonds are limited obligations of the infrastructure bank, payable solely from pledged revenues consisting primarily of special bond assessments imposed by the California Insurance Guarantee Association (CIGA) upon all insurers providing workers compensation insurance policies in the state.The bonds are secured by a first lien on an unlimited, mandatory special assessment on all insurers writing workers compensation policies in the state. The special assessment is established annually at a level projected to provide 1.1x coverage, and supplemental assessments may be levied as necessary.

The bonds are secured by a first lien on a mandatory and unlimited special benefit assessment (SBA) charged to all insurers writing workers’ compensation policies in California. CIGA sets the SBA rate annually at a level projected to cover expected debt service by 1.1x; if insufficient, supplemental SBAs may be levied as necessary to ensure coverage. The minimum levy is 1% of net direct premium. CIGA’s calculation of the SBA includes a variance factor for series 2004B, which were issued as auction rate bonds and are held by the bank.

CIGA’s regular assessment on workers compensation insurers, levied at 1% of net direct premium, and the SBA are deposited first to the trustee to meet debt service requirements; regular assessments are available to CIGA thereafter. By statute, CIGA may use other resources including its regular assessment to pay bonds, but these funds are not pledged. Moreover, if an insurer’s payment is insufficient, amounts received are statutorily applied first to cover the SBA levy. Residual SBA revenues are held by the trustee and available for early bond repayment. A debt service reserve is also funded at maximum annual debt service.

Fitch noted that the California workers compensation system has undergone considerable reform over the last decade. Prior to reforms in 2003 and 2004, the market faced a high level of payouts, fierce price competition, and subsequent insurer insolvencies and voluntary departures from the market. Reforms included significant changes to medical delivery and treatment for injured workers, higher statutory deposit requirements for insurers, higher regular assessments on insurers, and authorization for up to $1.5 billion in bonds supported by the SBA.

The outstanding bonds were issued in 2004, with proceeds used by CIGA to pay claims on insolvent insurers. A second issuance, planned for 2006, was never undertaken. The remaining bond authorization, which was intended to expire in 2006, has been extended by the state’s legislature. Interest on the auction rate bonds is calculated on a weekly basis, linked to one of two short-term reference rates. The authorization provides flexibility to CIGA to refund the 2004B auction rate bonds, if necessary, should interest rates rise significantly. Any additional issuance also requires levying a sufficient SBA as well as consent of the state insurance commissioner.

Orthopedic Surgeon Faces Sexual Misconduct Charges

The Medical Board of California, Department of Consumer Affairs has filed an accusation against Ronald Glousman, M.D., of the Kerlan Jobe Orthopedic Clinic in Los Angeles alleging sexual misconduct while performing an evaluation of a workers’ compensation claimant. The Accusation is a public record and contains the following information.

The alleged victim was identified as “patient R.A., a Spanish-speaking male, who sustained injuries at work when a rack toppled over and struck him on the right shoulder and right side of his head. As a result, patient R.A. filed a worker’s compensation claim.” He then suffered two additional injuries including to his spine while at work.

The patient was then allegedly seen by Philip A. Sobol, M.D., at the Sobol Orthopedic Medical Group, Inc. in 2008 for a worker’s compensation evaluation. Dr. Sobol diagnosed R.A. with right shoulder sprain/strain/contusion/tendinitis, cervical sprain/strain with right upper extremity radiculitis, spondyolosis of the cervical spine at C4-C5, and a lumbar sprain/strain.

Because of the patient’s continued complaints about his right shoulder Dr. Sobol requested a worker’s compensation authorization for a surgical consultation with Ronald Glousman, M.D. (Respondent). Respondent is an orthopedic surgeon specializing in sports medicine, and shoulder, elbow, and knee injuries at Kerlan-Jobe Orthopaedic Clinic.

During the course of Glousman’s treatment of the claimants shoulder, he allegedly conducted an examination of patient’s hip and groin area on several occasions after asking the patient to remove his pants and underwear.

The accusation alleges that because “of what occurred in the last two follow up visits, the patient decided to record this examination. The patient positioned his cell phone’s video camera to capture a majority of the examination room and table.” Allegedly the patient obtained a video recording of sexual misconduct at the time of this visit, according to the allegations of the Accusation. Allegedly Dr. Glousman provided information to the Board about this event and “admitted that by the time he walked back into the examination room Respondent intended to engage in a sexual act with R.A.”

According to the Board, the conduct constitutes “sexual exploitation of a patient” in violation of law, for which the Board seeks to revoke his Physicians and Surgeons Certificate in addition to other relief.

The Accusation is in the preliminary stages of litigation, and Dr. Glousman of course can have evidentiary hearings to disprove any or all of these allegations, and his license status will be determined at the end of any litigation process he may follow.

Controversial WCAB MSC Goes Off Calendar

Attorneys representing John Pike and the University of California will try to reach a deal over the former UC Davis police lieutenant’s worker’s compensation claim, out of court and away from the media spotlight. The sides had been scheduled to take part in a mandatory settlement conference on Aug. 13 in Sacramento to discuss Pike’s claim of psychiatric injury. That hearing has been scratched from the calendar, according to State Department of Industrial Relations spokesman Peter Melton. The case will not go before a judge unless the sides fail to reach an agreement.

Pike, a former U.S. Marine with 17 years of law enforcement experience, gained worldwide notoriety after he pepper-sprayed seated, unarmed Occupy UC Davis protesters who blocked police on a Quad sidewalk on Nov. 18, 2011. Hackers posted his personal information online, and Pike received threatening calls and emails.

After the Davis Enterprise first reported Pike’s injury claim on its website July 25, the pepper-spraying regained regional and national attention. That may have pushed the sides back to the table.

Protesters with ties to Occupy UCD had planned to hold a tongue-in-cheek “support” rally for Pike outside the scheduled hearing, mocking an injury claim that would see the former cop “rewarded” for his actions, in the words of Davis attorney Bernie Goldsmith. Because the hearing was removed from the court calendar, another event, the Officer Pike Fiesta of Emotional Support has also been canceled. The fiesta was meant as an opportunity for a demonstration for those opposed to Pike receiving workers’ compensation.

Pike ceased to be a university employee in July 2012. He was fired, according to a Sacramento Bee account, despite a confidential internal affairs investigation finding his actions “reasonable” and recommending discipline, not termination. He remains entitled to retirement credit for his years of service, but he was to receive no other payout. He collected eight months of his $121,680 annual salary while being investigated by a separate task force that found both the police and UCD administration at fault.

Protesters pepper-sprayed or arrested that day split a $1 million settlement. Criminal charges were not filed against police or protesters.

Legislators Propose Fed Work Comp Benefits Reduction

A provision in bipartisan Senate postal reform legislation would overhaul workers’ compensation policies for all federal employees.

Titled the 2013 Workers’ Compensation Reform Act, the provision — introduced by Sens. Tom Carper, D-Del., and Tom Coburn, R-Okla. — would cut benefits for federal workers injured on the job once they reach retirement age. Currently, federal employees receive 66 2/3 percent of their basic salary tax-free, designed to approximately replicate their entire post-tax salary. That figure is bumped to 75 percent if the employee has dependents. Related medical expenses are also covered.

The new plan would trim the benefit to 50 percent of an employee’s salary, once that employee is eligible for retirement. Additional compensation for dependents would no longer be provided.

The changes would not affect individuals eligible for retirement on the date of the bill’s enactment, those with an exempted disability condition or those who “face financial hardship” — such as workers eligible for food stamps. The proposal also contains a provision that would boost efforts to help employees on workers’ compensation return to work.

A similar proposal was included in the postal reform bill Carper sponsored last Congress, which cleared the Senate but died in the House. Some Democrats and federal employee unions opposed that measure.

Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, has expressed support for previous Senate proposals to overhaul the federal workers’ compensation system. Issa’s own postal reform bill included changes for only postal workers’ compensation, but he said during the bill’s markup he only put them in so the final bill would adopt the Senate’s broader plan after going through conference negotiations.

Court Finds “Probability” that El Centro Regional Medical Center Adversely Risks Patient Care

San Diego Hospital Based Physicians (SDHBP) and its two owners, Dr. Maria Ramirez and Dr. Dalia Strauser, sued El Centro Regional Medical Center alleging the Hospital retaliated against plaintiffs for complaining about patient care practices. The Hospital is a municipal agency owned by the City of El Centro and is governed by a seven-person Board of Trustees. SDHBP is an entity that provides hospitalist personnel and services. SDHBP is owned by Dr. Strauser and Dr. Ramirez, who both specialize in internal medicine and hospital medicine. Dr. Strauser has practiced medicine for more than 20 years and Dr. Ramirez has practiced medicine for more than 15 years. Hospitalists are generally internal medicine doctors who treat hospitalized patients to ensure they receive proper care, including diagnosis and appropriate specialty referrals.

According to allegations in the complaint, the Hospital hired Team Health, Inc. to manage and operate the Hospital’s emergency department. Shortly after, SDHBP became concerned about Team Health’s practices and the nature of the contract between the Hospital and Team Health, which SDHBP believed negatively affected patient care. SDHBP doctors found that Team Health physicians frequently admitted patients into the Hospital (or sought to compel SDHBP physicians to do so) despite the fact that these patients were not properly stabilized, diagnosed, or treated in the emergency room and/or that they should have been transferred to other hospitals with available surgeons and/or necessary medical equipment.

Dr. Ramirez and Dr. Strauser reported to Hospital administrators “at the highest levels” their concerns about patient care arising from Team Health practices and operations. The doctors identified approximately 35 specific cases of inadequate patient care. Later, SDHBP sent an email to Dr. George Hancock, the Hospital’s chief of medicine (who became medical chief of staff on January 1, 2011), detailing 19 separate cases in which Team Health and Hospital practices allegedly negatively affected patient care in a substantial manner. SDHBP also sent the email to several other Hospital officials, including the Board president, the Hospital’s chief of staff, and the Hospital’s quality committee chair.

On March 22, 2011, the Hospital’s Board held its monthly public meeting. During a closed (nonpublic) portion of this meeting, the Board voted to terminate the SDHBP Agreement “without cause.” When Dr. Strauser asked Hospital official Virgen why the Agreement was terminated, he allegedly said ” ‘you turned on the light and all the cockroaches ran away scared.’ ”

Several months later, plaintiffs filed their lawsuit against the Hospital and Team Health. Plaintiffs alleged five causes of action against the Hospital. In the first three, plaintiffs alleged the Hospital violated statutes prohibiting retaliation against physicians for complaining about, or advocating for, patient care. The Hospital moved to strike the complaint under the anti-SLAPP statute. (§ 425.16.) The Hospital argued that plaintiffs’ complaint arose from constitutionally protected activity because it was based on the Board’s contract termination decision, which it said was a “quasi-legislative” act made at an “official proceeding.” The trial court denied the motion, and the Hospital appealed. The Court of Appeal sustained the denial of the anti-SLAPP motion in the unpublished opinion of San Diego Hospital Based Physicians vs El Centro Regional Medical Center.

One of the elements required to reject an anti-SLAPP motion to dismiss is a determination that there is a “probability” that plaintiffs will prevail on its claims. In meeting this burden, the plaintiff cannot rely solely on the allegations in the complaint and must present evidence that would be admissible at trial. The Court of Appeal concluded that plaintiffs met this burden, and may proceed with their case.

American Claims Management Awarded El Camino Hospital TPA Contract

The Insurance Journal reports that American Claims Management Inc., a national third party administrator (TPA), has been selected as the workers’ compensation TPA for El Camino Hospital in Northern California. Under the terms of the contract, which was effective July 1, 2013, ACM will manage claims, bill review, managed care, subrogation, investigation and other ancillary services for new claims. ACM will also take over the administration of approximately 300 existing claims from the prior TPA.

“After conducting a very thorough search, we are excited to work with ACM,” said Sandra Speer, director of Employee and Labor Relations at El Camino Hospital. “ACM is well-suited to help us manage workers’ compensation claims while continuing to provide quality care for our employees.”

“El Camino Hospital and ACM are a great match because both companies embrace innovation,” says Deirdre Gonzalez, president of ACM’s Workers’ Compensation Division. “In fact, El Camino Hospital and its advanced robotics program were featured in a piece by 60 Minutes showcasing the economic impact of robots. So, it’s no surprise that the organization sought an equally forward-thinking TPA.”

Since 1988, American Claims Management has been a nationwide third party claims administrator specializing in both commercial and personal lines.