Category: Daily News

This year the California legislature passed SB 788, and sent the bill to Governor Newsom for signature. The bill would have added the following language to Labor Code 4663, one of the permanent disability apportionment statutes.

“The approximate percentage of the permanent disability caused by other factors shall not include consideration of race, religious creed, color, national origin, gender, marital status, sex, sexual identity, or sexual orientation.” The source of this bill was the California Applicants’ Attorneys Association. Assembly amendments in the legislative process removed genetic characteristics and age as factors that would be prohibited.

Most of the legislative effort to limit apportionment over the last few years has been in response to case law. In April 2017, the Court of Appeal published its decision in the case of City of Jackson v WCAB (Rice) which confirmed apportionment to genetic factors. Christopher Rice was a police officer who suffered a spine injury. A PQME found that genetic factors were significant factors in his permanent impairment. The Court of Appeal reversed the WCAB which refused to allow apportionment to genetics.

The letter response by Governor  Newsom reads as follows:

“I am returning Senate Bill 788 without my signature. This bill would preclude a physician from using certain characteristics as the basis for apportionment of permanent disability.”

“Current law states that physicians shall not apportion the percentage of permanent disability awarded based on the gender,race, or other personal characteristic of the employee and provides protection from the inappropriate application of apportionment law.”

“Instead, physicians are required to apportion the disability award based solely upon the employee’s own medical history and medical evidence.”

“While I support efforts to combat bias within the medical profession, this bill creates confusion with well-settled law, which is likely to result in increased litigation and subsequent delays to much-needed benefits to workers.”

“Ongoing efforts by the Division of Workers’ Compensation to implement mandatory continuing education of medical-legal evaluators related to current anti-bias is better suited to achieve the intent of this bill.”

On this recurrent legislative issue, Newsom followed vetoes by Governor Brown on several apportionment bills passed by the legislature in years past.

In 2018, Governor Brown vetoed AB 479. This proposed law would have set limits to apportionment of permanent disability in cases involving breast cancer. Brown’s veto message noted that it was similar to three previous measures that he has vetoed, Assembly Bill 570 in 2017, Assembly Bill 1643 in 2016 and Assembly 305 in 2015.

Brown said that AB 479, and its predecessors, have repeatedly singled out specific conditions and proposed a special set of rules that apply to them. This would result in an even more complex workers’ compensation system that would essentially be “disease by statute,” which would ultimately burden injured workers seeking quick resolution to their claims.

Vince Moreci was employed by Hydra Ventures, Inc. as a plumber, when he fell and injured himself at a construction project site, when he descended a scaffolding staircase with uneven stair risers. Scaffold Solutions constructed the temporary scaffolding stairs for the project where the injury occurred.

Moreci received $236,945.97 in workers’ compensation benefits that were paid by Starstone National Insurance Company.

Moreci, while represented by Boxer and Gerson, LLP, also filed a personal injury action against third party defendants, including Scaffold. Moreci eventually settled the tort case. As part of the settlement, Moreci agreed to assume the defense of Scaffold for claims by any parties, agencies, insurers (including but not limited to medical insurers and workers’ compensation insurers such as Starstone) arising from Moreci’s accident and pay any resulting judgment.

Prior to the dismissal of Moreci’s action, Starstone intervened, seeking reimbursement from the defendants for the amount of benefits it had paid to Moreci. Boxer Gerson became associated co-counsel for Scaffold, who then filed an answer to Starstone’s complaint in intervention.

Starstone moved to disqualify Scaffold’s attorneys on the ground they created a conflict of interest by representing Moreci in the underlying action against Scaffold, obtaining a settlement of that action, and then assuming the defense of Scaffold to Starstone’s claims in intervention.

The trial court held Starstone had no standing to seek the disqualification of counsel and denied the motion. Starstone appealed, asserting essentially the same arguments in support of standing it had raised below. The California Court of Appeal rejected its claims of error, and affirmed the motion denial in the unpublished case of Moreci v Scaffold Solutions Inc.

Starstone argued Moreci and Boxer Gerson “switch[ed] sides” in the same lawsuit by “alleg[ing] fault and liability against [Scaffold] to obtain settlement,” and then, once Starstone filed its complaint-in-intervention, aligned themselves with Scaffold to use “intimate . . . case knowledge and possibly privileged information” gained by counsel in an “attempt to defeat [Starstone’s] recovery claim (and thus keep settlement funds and achieve a double recovery specifically denounced by the Legislature) . . . .” Starstone asserted counsel’s “switching sides attempt has infected . . the litigation,” which Starstone claimed was sufficient to give it standing as a non-client, pursuant to a Federal District Court case, Colyer v. Smith (1999) 50 F.Supp.2d 966 (Colyer).

A trial court’s authority to disqualify an attorney derives from the power inherent in every court. However, a standing’ requirement is implicit in disqualification motions. A party moving to disqualify counsel must have a legally cognizable interest that would be harmed by the attorney’s conflict of interest. And courts have found an attorney-client relationship between the complaining party and the attorney sought to be disqualified is a prerequisite to seeking disqualification.

Other courts, however, have slightly broadened the scope of that general rule, holding that a non-client may bring a disqualification motion based on an attorney’s breach of a duty of confidentiality owed to the non-client. .) However, this minority view does not alter well-established standing requirements because “the non-client must meet stringent standing requirements, that is, harm arising from a legally cognizable interest which is concrete and particularized, not hypothetical.”

Starstone appears to propose another rule: “[S]tanding requires only that the moving party establish harm to the moving party by the continued participation of counsel . . . .”

A review of 1971 amendments to the labor code provisions regarding subrogation actions demonstrates that it does not necessarily follow from these principles that the legal interests of the employee and employer must be aligned, such that the employee is charged with a duty to safeguard the employer’s right to sue a third party.

Courts have refuted the notion that in the workers’ compensation context, an employee, relative to his or her employer, is akin to trustee, fiduciary, or legal representative or in privity – that is, “a person is so identified in interest with another that he represents the same legal right.”

The decision concluded that in touting “the sanctity of the employer-employee relationship,” Starstone overstates the nature of that relationship.

The number of independent medical reviews (IMRs) used to resolve California workers’ comp medical disputes hit a record low in the first half of 2021, as statewide unemployment remained stubbornly high, non-COVID job injury claims stayed below pre-pandemic levels, millions of Californians continued to work from home, and efforts to reduce prescription drug disputes appear to be paying off, according to a new analysis by the California Workers’ Compensation Institute (CWCI).

California law requires every workers’ comp claims administrator to have a Utilization Review (UR) program to assure that the care provided to injured workers meets the evidence-based treatment guidelines adopted by the state.

Most treatment requests are approved by UR, but in 2012 state lawmakers adopted IMR to allow injured workers to get an independent medical opinion on requests that UR physicians deny or modify. IMR took effect for all claims in July 2013.

CWCI began monitoring IMR activity in 2014. In its latest review, CWCI found that 68,044 IMR decision letters were issued in the first half of 2021 in response to applications submitted to the state, down 3.3% from 70,368 letters issued in the first half of 2020, while the latest full-year tally shows 136,738 letters were issued in 2020, down 16.6% from 163,899 letters in 2019 and down 26% from the record 184,735 letters in 2018.

A review of IMR outcomes found that after reviewing medical records and other information provided to support a disputed treatment request, IMR doctors upheld the UR physician’s modification or denial of the service in 91.2% of the IMRs in the first half of 2021, which was up slightly from the 88.4% uphold rate in 2019.

Disputes over prescription drug requests continued to account for the largest share of the January through June IMR decisions (35.5%), but that percentage has declined from nearly half of all IMR disputes prior to the state’s adoption of opioid and chronic pain treatment guidelines at the end of 2017 and the implementation of the Medical Treatment Utilization Schedule Prescription Drug Formulary in January 2018.

Even with those guidelines and the formulary, opioids still accounted for 25.8% of the 2020 prescription drug IMRs – more than any other category of drug – though that percentage is down from 32.2% in 2018. While pharmaceutical requests have represented a dwindling share of the IMRs, since 2018 requests for physical therapy; injections; and durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) have accounted for an increased share, and together accounted for 35% of all IMRs in the first half of 2021, while all other medical service categories combined accounted for 29.5%.

The overall uphold rate for the first six months of this year was 91.2%, but uphold rates for specific service categories varied, ranging from 84.2% for psych services to 94.4% for injections. The high uphold rates show a high degree of agreement in assessing high-quality care while challenging inappropriate or excessive treatment requests.

As in the past, a small number of physicians accounted for a disproportionate share of the disputed medical service requests that went through IMR this year. The top 10% of physicians identified in the IMR decision letters issued in the 12 months ending in June 2021 accounted for 82.2% of the disputed service requests during that period, while the top 1% (83 providers) accounted for 39.3%.

CWCI has published additional data and analyses on the IMR data through June 2021 in a Bulletin which Institute members and subscribers will find under the Communications tab at www.cwci.org.

The pace of California companies moving their headquarters out of state is quickening, according to a new report published by the Hoover Institute.

“The departures are accelerating as more relocation plans move to implementation,” according to the report by site selection consultant Joseph Vranich, president of Spectrum Location Solutions, and Lee Ohanian, a UCLA economics professor and senior fellow at the Hoover Institution.

The paper provides the most detailed and comprehensive data on relocations of California business headquarters between 2018 and 2021. It documents that these headquarter exits have more than doubled in 2021.

In the first half of 2021, 74 companies moved their headquarters out of California, for a monthly average of 12.3. In all of 2020, 62 companies took their headquarters out of the Golden State for a monthly average of 5.2, while 78, or a monthly average of 6.5, did so in 2019. In 2018, 58 companies moved their headquarters out of California, or a monthly average of 4.8, according to the report titled, “Why company headquarters are leaving California in unprecedented numbers.“

That means California lost a total of 272 headquarters between Jan. 1, 2018, and June 30, 2021, the report found. The figures may understate the actual departures since small businesses leaving the state often go unnoticed.

The report’s authors cite familiar reasons for the headquarters leaving California: taxes, regulations and high costs tied to labor, litigation, energy and utility costs. Other factors coming into play are so-called quality of life issues such as housing affordability and homelessness.

“With 395,000 pages of regulations, California is the most highly regulated state in the country. The challenges that businesses have in complying with these regulations are compounded when we consider that they must also deal with many state agencies, boards, and commissions and the state has 518 such entities.”

Page 22 of the 45 page report commences the review of employer costs for worker’s compensation benefits. “Businesses have long been concerned with California’s inordinately high workers’ compensation costs.” Table 12 shows California to be the third highest out of a 50 state analysis of 2020 workers’ compensation costs.

Anecdotal evidence also suggests the pace of departures is accelerating according to a review of this report by Bizjournal.

Last week, Brex said it has joined Coinbase in giving up its San Francisco headquarters. The two companies have embraced a no-headquarters model.

This week so far, HomeLight CEO Drew Uher said the proptech company had moved its San Francisco headquarters to Scottsdale, Arizona. On Aug. 24, Flexible Funding said it moved its headquarters from San Francisco to Fort Worth, Texas, where much of the company’s future hiring will occur.

“Our strategic move will foster an environment for team innovation, accommodate future business expansions, as well as attract and retain experienced talent,” Amelia Dipprey, chief revenue officer at the factoring and asset-based lender, said in unveiling the headquarters relocation. The company said it will maintain its San Francisco office, but the executive team will be based in Texas.

CompPharma offers retrospective and real-time pharmacy benefit management (PBM) audits along with a range of consulting services to workers’ compensation payers.

The company just published its 17th Annual Survey of Prescription Drug Management in Workers’ Compensation.

The survey results indicate that workers’ compensation prescription drug costs have decreased by approximately $1.8 billion or 38% over the last decade. Several drivers contributed to this decline:

– – Massive decrease in opioid utilization and impact on co-prescribing;
– – Significant reduction in California’s pharmacy fee schedule;
– – A very competitive PBM market; and
– – Consolidated PBM industry providing greater buying power.

The structural decline in drug costs we have seen for the last nine years continued in 2020 as workers’ compensation pharmacy costs decreased 12.3% across all 28 payers surveyed. This follows 2018’s 10.1% and 2017’s 9.8% decline.

While the double-digit drop is quite significant, it is important to note that there was wide variation among the respondents with changes ranging from a decrease of 27.9% to a 10% increase. There was more variation this year than in any recent survey, likely due to the broad range of respondents, e.g., public entities, state funds, and payers of last resort and their exposure to COVID-19. Four respondents reported declines greater than 20%.

Fully half of all respondents attributed the drop in spend to fewer claims and/or the impact of COVID. Another key contributor was the continuation of significant year-over-year reductions in opioid spend.

Here are the five top takeaways from this year’s survey:

1. Total workers’ comp drug spend was approximately $3 billion in 2020.
2. Opioid spend in 2020 dropped to 17% of total drug spend across all respondents.
3. There was a significant decrease in opioid utilization in 2020.
4. There is no consensus regarding the most problematic issues in workers’ comp, rather an abiding concern that the industry is still challenged by physician dispensing, mail-order pharmacies, and over-prescribing physicians.
5. Respondents expect a lot out of their PBMs, including a more proactive approach, more useful and actionable data, and more transparency on pricing. Some – but by no means all – respondents acknowledge their own staff must do a much better job to support their PBMs’ clinical management efforts.