Author: WorkCompAcademy

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.”

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.”

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.

The Boccardo Law Firm and one of its partners, John C. Stein, filed an action in San Joaquin Superior Court on behalf of Albert Carabello, alleging that he had been injured when his pickup collided with a vehicle operated by Beverly Casby. Casby was insured with a policy limit of $100,000. At the time of the collision, Carabello was acting in the course and scope of his employment. Old Republic was the workers’ compensation insurer for Carabello’s employer. It provided benefits which it claims exceeded $100,000. It filed a complaint in intervention in the San Joaquin action, asserting a right to reimbursement of these expenditures. Casby raised the affirmative defense of Witt v. Jackson (1961) 57 Cal.2d 57, which limits the ability of an employer, or its insurer, to obtain reimbursement out of an injured worker’s recovery against a third party where the employer’s own negligence contributed to the worker’s injuries.

Carabello and Casby agreed to settle the case for her $100,000 policy limits. Old Republic’s claim to reimbursement, however, remained unresolved. Accordingly, Casby’s insurer made the settlement check payable to Carabello, Boccardo, and Old Republic. Stein and counsel for Old Republic therefore signed a written stipulation stating “that the $100,000.00 settlement money . . . will be deposited into an interest bearing account” and that “[s]ignatures of both parties will be required to withdraw any money.” It was apparently understood that the funds would be placed in Boccardo’s client trust account. The settlement check was duly endorsed and deposited.

The Court set a settlement conference and trial on the motion of Old Republic for “apportionment of settlement proceeds” and the Witt v. Jackson defense to their lien. Before this was heard, counsel for Old Republic filed a notice of lien seeking to recover $111,026.33 “against any settlement of [sic] judgment in this action.” At the same time, counsel filed a request to dismiss Old Republic’s complaint in intervention with prejudice. Stein also dismissed the Carabello complaint with prejudice. The request recited that it was made “[a]s to defendants Beverly Casby and Gerald Casby only” and that “Plaintiff and Intervenor have Trial August 9, 2010 to resolve liens.” However, the dismissal of the complaint meant that there was no longer any pleading before the court seeking affirmative relief.

Boccardo then filed a motion authorizing release of the settlement funds to Carabello. He argued that by dismissing its pleading, Old Republic had forfeited any right to litigate the issue of employer negligence, and thus to recover on its lien. The trial court, however, concluded that the dismissal of all affirmative pleadings had deprived it of any power to grant the requested relief. In a formal order the court wrote, “This case has been dismissed in its entirety. This Court has no further jurisdiction.” It does not appear that either party sought relief from this order.

Stein wrote to counsel for Old Republic indicating that he intended to distribute the deposited funds. He again asserted that by dismissing its complaint Old Republic had given up the right to seek reimbursement. He took issue with a prior assertion by opposing counsel “that the matter can be litigated before the WCAB” He offered to forbear from withdrawal for one week to “give you time to go to the WCAB and get a Restraining Order prohibiting me from disbursing my settlement.” Old Republic apparently did nothing. On July 28, Stein wrote that having just received the court’s formal order disclaiming the power to grant relief, he was disbursing the funds to his client forthwith.

Old Republic petitioned the WCAB to order disbursement of the settlement proceeds. A workers’ compensation judge denied Old Republic’s petition for disbursement. He found that the settlement funds had already been “disbursed by applicant’s counsel.” He also concluded that the WCAB lacked jurisdiction to grant the relief sought by Old Republic. The WCAB granted reconsideration and issued a decision finding that it had jurisdiction over the issues presented, and remanding them for trial.

Old Republic also filed a civil complaint alleging that the stipulation was a binding contract between Carrabello [sic], and The Boccardo Law Firm. The first cause of action alleges that Boccardo and Stein “breached this contract” by disbursing the settlement proceeds without the signature and/or consent of Old Republic. After a successful demurrer to some of the causes of action, Boccardo filed a motion to dismiss the remaining causes of action under the anti-SLAPP law (§ 425.16) which the court denied in part and denied the motion to stay proceedings. Boccardo appealed. The Court of Appeal in the published case of Old Republic Construction Program Group v The Boccardo Law Firm ruled that the trial court correctly concluded that the first, fifth, and sixth causes of action, sounding respectively in breach of contract, negligence, and declaratory relief. did not arise from the parties’ stipulation for purposes of the SLAPP act. The conduct at the center of all three causes of action is defendants’ withdrawal and disbursement of the settlement funds that were the subject of the stipulation between defendants and counsel for Old Republic. There is no suggestion that this noncommunicative conduct had any connection to any issue of public concern or interest. It therefore falls outside the protection of the SLAPP act statute.

Medical marketers are often used inside and outside of workers’ compensation to induce physicians to prescribe a variety of products such as compounded medications, DME and other items as “profit enhancement” schemes for a medical practice. Little attention has been given when responding to lien claims in these cases to the application of the Insurance Fraud Prevention Act provisions contained in Insurance Code section 1871 as a possible tool to defend those claims when a capper (ie. marketer) has been used to seduce to the doctor. The Court of Appeal in the published opinion in The State of California ex rel. Michael Wilson et al. et al. v. Superior Court of Los Angeles County, Bristol-Meyers Squibb Co may have opened the door to the use of this tool where a “person” was “employed” to recruit the doctor into a scheme, even without a prescription by prescription quid pro quo.

Michael Wilson, a former Bristol-Meyers Squibb Co. sales representative filed the underlying qui tam action against the drug maker. The California Insurance Commissioner later intervened and participated in the litigation.

The lawsuit alleges that in marketing its drugs, Bristol-Meyers Squibb Co., (BMS) engaged in a course of illegal and fraudulent conduct aimed at doctors, health care providers, pharmacists, and insurance companies. It alleges BMS targeted high-prescribing physicians, members of formulary committees, and sometimes their families, to be recipients of lavish gifts and other benefits (such as tickets to sporting events and concerts, free rounds of golf, resort vacations, meals, gifts, and other such incentives – characterized in the complaint as “kickbacks”), in order to induce physicians to prescribe BMS’s drugs and to reward them for doing so.  And it alleges the targeted physicians “wrote prescriptions and submitted them to the private insurance companies . . . as a result of kickbacks BMS provided to them.” The suit alleges that in carrying out this program, BMS effectively employed physicians and others to act as runners and cappers, paying them for the purpose of procuring patients whose prescriptions will be covered by insurance. This conduct, the suit alleges, violated the Insurance Fraud Prevention Act, Insurance Code section 1871.7, subdivisions (a) and (b), as well as a number of provisions of the Penal Code.

At issue in the case is the proof required to establish a violation of subdivision (a) of Insurance Code section 1871.7, a portion of the IFPA that relates to health insurance and workers’ compensation insurance fraud, informally entitled, “Employment of persons to procure clients or patients.” Subdivision (a) makes it unlawful to knowingly employ runners or cappers to procure clients or patients to obtain insurance benefits. The trial court ruled in favor of BMS on a summary judgment hearing, and the Court of Appeal granted writ review in part due to the dearth of appellate review of matters involving interpretation of section 1871.7,

The court of appeal reversed the dismissal of the claim, and remanded the case for further proceedings. In doing so, it clarified the requirements for proof of a case of violation of IFPA contained in section 1871.7.  Some of the language of the published opinion is as follows.

The conduct made unlawful by subdivision (a) is identified by a single verb: To employ. Subdivision (a)’s single verb makes a single act unlawful: “Employment”. What kind of employment is unlawful? Employment of a person or persons (“runners, cappers, steerers or other persons”), for a specified purpose: “. . . to procure clients or patients to perform or obtain services or benefits . . . that will be the basis for” an insurance claim. Subdivision (a) is violated by the employment of others with that objective; it does not make proof of that result a prerequisite to its violation. Based upon this language the Court of Appeal ruled “there can be a violation of subdivision (a) without proof that the item or service of value provided or promised to the physician caused a particular prescription to be written.”

Subdivision (a) identifies certain running and capping activities as unlawful without regard to whether the resulting services are competently rendered. Running and capping activities are disfavored and unlawful not just because they may often result in services that are excessive or unnecessary, but also because their purpose is to unfairly (and perhaps deceptively) obtain the benefits (clients, patients, prescriptions, claims, etc.) that otherwise might have gone to others who did not use the prohibited methods. In enacting section 1871.7, the Legislature could have concluded that using runners and cappers for the prohibited purpose tends to result in additional insurance claims and payments, that have substantial social costs despite their inability to be identified on an individual basis. Subdivision (b) identifies remedies for conduct that the Legislature has concluded leads to undesirable results that are rarely subject to available proof.

Section 1871.7 contains no specification that proof of unlawful conduct, or of causation, must necessarily be on a prescription-by-prescription or claim-by-claim basis, and such a requirement would be contrary to the statute’s clear purpose. While subdivision (b)’s final sentence requires proof of deceit and causation, section 1871.7’s primary focus is on the unlawful conduct identified in subdivision (a); the proof of resulting claims is required in order to measure the penalties to be assessed, not to define the targeted wrong – the employment of runners and cappers for the unlawful purpose. Yet the requirement that each prescription and claim to an insurer must be attributed to a quid pro quo arrangement involving the drug company and the physician shifts the focus from the conduct identified in subdivision (a) – which is unlawful without regard to its success in producing prescriptions and claims – to conduct that would constitute bribery and kickbacks, for which success is an essential element.

“Subdivision (a) remains a viable identification of running or capping activity as conduct that the Legislature has found to be unlawful, and to be “almost always” a harbinger of fraud.  (Analysis of Sen. Comm. on Crim. Proc., Sen. Bill 465 (1995-1996 Reg. Sess.) p. 5.)”

“Under the clear language of subdivision (b), the equitable and other remedies that do not constitute the “penalty prescribed in this paragraph” may be imposed without proof that a prescription or claim resulted from the unlawful conduct, or that any resulting claim was fraudulent or deceitful.”

“A substantial purpose for subdivisions (a) and (b)’s enactment is to enable the assessment of civil penalties for unlawful running and capping activities, without the practically impossible showing that a particular claim resulted from a particular violation.”

This opinion may provide new tools for the defense of certain medical lien claims.  The opinion specifies a broad and liberal interpretation of what is unlawful under 1871.7(a).  Thus for example, when a medical supplier hires a “person” to market a group of PTP’s to recommend or prescribe its products to industrially injured workers, is that in effect illegal “employment’ of a capper, runner, steerer or “other person?”  If so, there is no need to show quid pro quo, or any kickback, or a direct relationship with the prescriptions that were written. According to this decision, the use of a marketer alone is “almost always” a harbinger of fraud and thus conduct declared unlawful.  It remains to be seen if this can be a viable defense to liens in such cases.