Category: Daily News

The Division of Workers’ Compensation has adopted amendments to the Official Medical Fee Schedule (OMFS) for Physician and Non-Physician Practitioner Services (California Code of Regulations, title 8, section 9789.12.1 through 9789.19.1) to replace the average statewide geographic adjustment factor with local geographic adjustment factors as of January 1.

The locality-specific geographic adjustment factors, known as the Geographic Practice Cost Index (GPCI), was implemented by Medicare in January 2017 as part of its Metropolitan Statistical Area (MSA) program. Geographic Practice Cost Index is used along with Relative Value Units by Medicare to determine allowable payment amounts for medical procedures.

Fee-for-service Medicare payments to physicians and certain other licensed clinical practitioners (including nurse practitioners, physician assistants, clinical nurse specialists, and occupational and physical therapists) are adjusted for geographic differences in market conditions and business costs. These geographic adjustments are intended to ensure that payment to providers reflects the local costs of providing care, so that the Medicare program does not overpay in certain areas and underpay in others.

Each of the three components of the Medicare Physician Fee Schedule (PFS) – physician work, practice expense (PE), and malpractice (MP) insurance – is adjusted for differences across geographic areas in the input prices related to each component. When they are combined, these three components are known as the geographic adjustment factor (GAF).1

The GPCI payment adjustments are made for 89 different geographic areas in the United States, also known as payment areas (or localities). Some are defined according to metropolitan areas, but there are 34 statewide payment areas that include both metropolitan and nonmetropolitan areas.

By federal statute, any changes to the GPCIs that do not explicitly receive additional funding must be budget neutral. In practice, budget neutrality requires that the total amount of payment be unaffected by new adjustments, so that any adjustment upward for one payment area must be paid for by a downward adjustment for other areas. This requirement creates significant tensions among providers in high-versus low-cost areas.

Another major source of disagreement is whether the geographic adjusters should be used as policy levers to help influence provider supply, particularly in nonmetropolitan areas. Some rural health policy experts and practitioners argue that because earning potential influences physicians’ decisions on where to practice, and because many private payers use Medicare prices as a basis for setting their own rates, the geographic adjustments should be used as policy tools to encourage physicians to practice in nonmetropolitan areas.

The DWC says that adoption of the Medicare MSA-based locality GPCIs will improve payment allowance accuracy by reflecting the resources required to provide a service according to specific regions.

The amendments also make minor clarifying revisions to the regulations.

DWC submitted a request to the California Office of Administrative Law to file the amended regulations with the Secretary of State and have them published in the California Code of Regulations. The regulations can be found on the DWC website.

Insurance Commissioner Dave Jones has approved a Universal Claims Certification (UCC) program from Claims and Litigation Management Alliance (CLM) designed to streamline the licensing process for independent insurance adjusters.

The UCC makes the process of licensing independent insurance adjusters who wish to acquire and manage their independent insurance adjuster licenses in multiple states more efficient. The UCC does not replace an independent insurance adjuster license, but makes the process of securing a license more efficient. Both licensed and unlicensed individuals can acquire a UCC. However, unlicensed individuals must first go through an intensive training by completing a 40-hour online pre-certification education program and successfully pass an examination to earn the UCC.

Insurance Commissioner Dave Jones said “The Universal Claims Certification process is designed to streamline the independent insurance adjuster licensing process and reduce costs. Also, the UCC program sets requirements for licensees that exceed the requirements under current California law, meaning it requires licensees to complete more continuing education, which greatly benefits the independent insurance adjusters and consumers.”

Currently, independent insurance adjuster applicants are not required to complete any prelicensing education. California’s applicants are only required to take and pass the independent insurance adjuster license examination and meet the license requirements to receive an independent insurance adjuster license.

For a licensee to maintain the UCC, the independent insurance adjusters must complete 24 hours of continuing education every two years including five hours of insurance law and ethics. The UCC program’s insurance law and ethics requirement exceeds California’s required three hours of law and ethics that is a part of and not in addition to the 24-hour continuing education requirement.

Once independent insurance adjusters acquire the UCC, they will be able to more quickly obtain a license in the states where the UCC is currently approved, including Alabama, Florida, Georgia, Mississippi, Texas, and now California. This will allow out-of-state adjusters to be more readily available when a natural disaster occurs.

“For years, the CLM membership has complained of the tedious state-by-state adjuster licensing process. We first worked to tackle the process of managing multiple licenses with our Tracker product, then we started to work with various states to actually change the licensing process,” says CLM Founder and former CEO Adam Potter. “It’s exciting to see this work come to life as we launch the UCC.”

CLM is an insurance industry association with more than 45,000 members that focuses on education and resources. CLM offers over 300 live courses, events and conferences annually.

A WCJ found Dean Fitzpatrick “100 percent permanently totally disabled” as a result of injury to his heart and psyche sustained during the course of his employment as a correctional officer. The award was based on the reports of two doctors regarding Fitzpatrick’s injury — Peter Chang-Sing for his heart and Richard Lieberman for his psyche.

Chang-Sing rated Fitzpatrick’s WPI for his heart at 75 percent and his resulting permanent disability at 97 percent. Lieberman rated Fitzpatrick’s GAF score at 45, resulting in 40 percent WPI, and permanent disability of 71 percent for his psyche. It is undisputed that, combining the 97 percent and 71 percent ratings under the Combined Values Chart Fitzpatrick’s permanent disability scheduled rating is 99 percent — permanent partial disability.

Thus Fitzpatrick’s permanent disability scheduled rating is 99 percent — permanent partial disability.

In the July 16, 2015 report, Dr. Lieberman felt that applicant was”on strict psychiatric grounds totally and permanently disabled” . . . Dr. Lieberman elaborated further: “I am dubious that this patient will return to work in any capacity.”

The ALJ concluded: “Based upon [Fitzpatrick’s] credible testimony, the medical reports of Dr. Chang-Sing and Dr. Lieberman, and in accordance with the facts (see Labor Code §4662(b)), it is found that applicant is permanently totally disabled.” The administrative law judge did not mention or discuss the combined rating under the 2005 Schedule. No vocational expert presented evidence in the case.

The Board affirmed the Decision in its opinion and order denying the petition for reconsideration. However, the Court of Appeal reversed in the published case of Department of Corrections v WCAB (Dean Fitzpatrick).

The question presented on appeal is whether the Board correctly interpreted and applied sections 4660 and 4662, subdivision (b).

“We easily harmonize sections 4660 and 4662, subdivision (b). Section 4662, subdivision (b), provides that, in nonconclusively presumed permanent total disability cases (i.e., those cases not enumerated in section 4662, subdivision (a)), permanent total disability may be found ‘in accordance with the fact.’ This section does not, however, address how such a determination shall be made; read plainly, it merely provides that a determination of permanent total disability shall be made on the facts of the case.”

Section 4660 addresses how the determination on the facts shall be made in each case for injuries occurring before January 1, 2013. Indeed, section 4660 expressly applies to the determination of “the percentages of permanent disability.” A “final permanent disability rating” is obtained by going through the steps outlined in the 2005 Schedule.

“Our interpretation of sections 4660 and 4662, subdivision (b), is squarely at odds with the Board panel’s interpretation of those statutes in Jaramillo (on which the administrative law judge and the Board relied in this case).” [Coca-Cola Enterprises, Inc. v. Workers’ Comp. Appeals Bd. (Jaramillo) (2012) 77 Cal.Comp.Cases 445 [writ. den.].

“We thus disapprove of Jaramillo with respect to its analysis on this issue, and annul the Board’s Opinion for the same reason.”

Governor Brown has signed new provisions that apply to California Workers’ Compensation Benefits. Here are highlights of new law that will take effect next January.

AB 1749 Workers’ compensation: off-duty peace officers.  This new law was created as a result of the October 1, 2017, mass shooting in Las Vegas, Nevada.  The new law provides that an employer, at its discretion or in accordance with specified policies, is not precluded from accepting liability for compensation for an injury sustained by a peace officer by reason of engaging in the apprehension or attempted apprehension of law violators or suspected law violators, or protection or preservation of life or property, or the preservation of the peace, outside the state of California.

AB 2046 Workers’ compensation insurance fraud reporting. Requires data sharing between governmental agencies involved in combating workers’ compensation fraud, and grants the Fraud Assessment Commission (FAC) discretion to augment an assessment with unused funds from a prior year’s assessment.

SB 880 Workers’ compensation prepaid cards. This bill would authorize an employer, with the written consent of the employee, to deposit disability indemnity payments for the employee in a prepaid card account. The bill would require the Commission on Health and Safety and Workers’ Compensation to issue a report  to the Legislature regarding payments made to those prepaid card accounts.

SB 1086 Workers’ compensation: firefighters and peace officers. Section 5406.7 of the Labor Code currently sets extended time limits for death claims for firefighters and peace officers. By its terms, this provision was to expire on January 1, 2019.  The new law  deletes the January 1, 2019, date of repeal of Section 5406.7 so that the time limits will now apply to death cases after January 2019.

Governor Brown has vetoed several bills passed by the legislature that pertain to California Workers’ Compensation Benefits. Here are highlights of what he chose not to sign into law.

AB 479 Workers’ compensation: permanent disability apportionment. This proposed law would have set limits to apportionment of permanent disability in cases involving breast cancer. The veto message notes that is similar to three previous measures that he has vetoed, Assembly Bill 570 in 2017, Assembly Bill 1643 in 2016 and Assembly 305 in 2015. He said that this bill 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.

AB 553 Workers’ compensation: return-to-work program. This bill would have required the Department of Industrial Relations to completely disburse $120 million annually from the Workers’ Compensation Return to Work Fund to eligible injured workers. The veto message noted that the Return-to-Work Program began in 2015 and is relatively new. He was concerned this measure proposes sweeping revisions to the Return-to-Work program that are premature.

AB 1697 Workers’ compensation fraud unit. This would have required the DIR  to establish an anti-fraud unit within the DWC. The veto message notes that the work required by this measure is already underway.

AB 2496 Janitorial employees.The proposed law was a codification of the California Supreme Court new ABC test for an employment relationship in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903. The bill was vetoed because the Administration and the Legislature are still reviewing this decision and any statutory changes to such tests would be premature.

SB 899 Workers’ compensation permanent disability apportionment. This measure seeks to preclude a physician from using race, gender, or national origin as a basis for apportionment. The Governor vetoed this bill for many of the same reasons that he returned a similar measure in 2011 – Assembly Bill 1155. This bill is unnecessary as it would not change existing law and may disturb settled court decisions, which already provide protection from the inappropriate application of the apportionment statutes.

Barrett Business Services Inc. (BBSI) has agreed to pay a $1.5 million civil penalty to resolve accounting fraud allegations by the U.S. Securities and Exchange Commission.

BBSI, a publicly traded company, provides human resources and other business management services. It reported $920 million in revenue last year and profits of $25.2 million.Clients hire BBSI to process payroll and payroll taxes, to provide workers’ compensation coverage, and to perform other business administration and consulting services. It has over 50 offices in 12 states and lists 24 offices in Northern and Southern California.

According to the SEC settlement, BBSI’s former chief financial officer, James Douglas Miller hid negative trends in BBSI’s financials by concealing the company’s workers’ compensation expense and liabilities. The SEC said former controller Mark Cannon approved improper journal entries created by Miller to manipulate BBSI’s tax expenses.

Separately, Cannon agreed to pay a $20,000 penalty, the agency said.

Concurrently, federal prosecutors announced they have obtained a criminal indictment against Miller, who’s been accused of falsifying financial reports. Miller served as the CFO of BBSI from 2008 to 2016. He was fired in 2016 when he disclosed to the company that he had falsified entries in the company’s books to improperly report workers’ compensation expenses as payroll taxes and fees.

As a result of Miller’s accounting improprieties, BBSI under reported approximately $12 million in workman’s compensation expenses in 2013. At the same time as he falsified BBSI’s books and falsely certified the periodic reports filed with the U.S. Securities and Exchange Commission,

Miler allegedly profited on BBSI stock, by exercising stock options worth 35,300 shares for $467,261 and selling it for more than $2.4 million.

According to records filed in the case, on four different occasions in 2013 and 2014, Miller falsely certified periodic reports filed with the SEC. His certifications contained a number of false statements including statements that BBSI’s periodic reports fairly presented, in all material respects, the results of BBSI’s operations.

Contrary to his representations, Miller allegedly knew that during each calendar quarter of 2013, he had circumvented BBSI’s internal controls and created a number of accounting entries that improperly classified workers’ compensation expenses as payroll and payroll tax expenses in violation of generally accepted accounting procedures.

“Mr. Miller will be pleading not guilty to the charge and defending the matter vigorously,” said his lawyer, Portland attorney Janet Hoffman.  Willful certification of a false periodic report is punishable by up to 20 years in prison and a fine of up to $5,000,000.