Category: Daily News

Last year, the city of Chicago accused the makers of high-powered painkillers of deceptive marketing, saying they overstated the benefits of their opioid meds and downplayed the risks of addiction and overdose. Five companies were initially named as plaintiffs in the suit. including Purdue Pharma, Teva, Johnson and Johnson, Actavis and Endo International. The city claimed the drugmakers misled physicians about the benefits and risks of prescription opioid painkillers, leading to a wave of addiction issues.

The deceptive marketing practices have caused health problems in Chicago, the city alleged in a news release, stating that opioid misuse resulted in 1,080 emergency room visits in Chicago in 2009. The city seeks to end deceptive marketing practices and seeks punitive damages. The city claims that the City’s Health Insurance plan “has reimbursed claims for approximately $9.5 million on these drugs since 2008.”

In the 122-page complaint filed in Cook County Circuit Court, the city of Chicago argues that the shift in medical use of opioid painkillers was the direct result of deliberately misleading marketing from pharmaceutical companies. According to the complaint, “in 2010, 254 million prescriptions for opioids were filled in the U.S.” It also reports that “20 percent of doctors visits resulted in the prescription of an opioid.” According to the press release, this accounted for a quadrupling of sales for these drugs from 1999 to 2010.

The complaint argues that the five companies named in the suit created a huge market ($8 billion in revenues in 2010) for these drugs by telling doctors (incorrectly) that they were effective for chronic pain management, which now accounts for roughly 87% of the opioid prescriptions given out in this country.

Chicago’s lawsuit has implications far beyond the city limits. If the allegations are true, they get at one root cause of the growing rates of addiction and death from opioid painkillers and heroin in the United States. Drug overdose deaths, the majority of which are caused by prescription painkillers, have more tripled since 1990, according to the CDC, and in 2010, prescription opioid painkillers caused 16,651 overdose deaths in the U.S. The implications would no doubt have an effect on workers’ compensation claim costs.

But, all of the defendants, with the exception of Purdue, were dismissed from the lawsuit this month. However, Chicago has the opportunity to file an amended suit in the next 30 days. Purdue Pharma–which makes perhaps the most notorious of the opioid pills, OxyContin–will have to fight some of the city’s accusations, under the ruling.

The claims point broadly to an alleged lack of honesty around opioid-related risks, with some specific claims related to paying key opinion leaders as speakers to support opioid use, funding advocacy groups who support the drugmakers and using persuasive tactics with physicians.

The movement against opioid use and against drugmakers has continued to grow, with advocacy groups, such as Physicians for Responsible Opioid Prescribing, calling for tighter restrictions on opioid use.

In 2007, Purdue and several top-level company executives pleaded guilty to a federal charge of misbranding Oxycontin, resulting in a fine of $634.5 million. Purdue is once again on the stand for its activities—but it stands by its commitment to provide pain relief for the hundreds of thousands of people who face chronic pain every day of their lives.

The United States has joined a whistleblower action pending in the Northern District of California against the owners and operators of Bay Sleep Clinic and their related businesses, Qualium Corporation and Amerimed Corporation, announced United States Attorney Melinda Haag and U.S. Department of Health and Human Services Special Agent in Charge, Ivan Negroni. The civil case was unsealed on May 11, 2015. Bay City Sleep has locations in Los Gatos, Gilroy, Menlo Park, Monterey, Mountain View, Oakland, Pleasanton, Salinas, Santa Cruz / Soquel, San Francisco, San Jose, Walnut Creek and Vacaville with facilities announced for Pasadena, Sacramento, Marin, San Luis Obispo and Santa Barbara

The action alleges that Saratoga, Calif., residents Anooshiravan Mostowfipour, 57, and Tara Nader, 56, fraudulently billed the Medicare program for diagnostic sleep tests. Defendants Mostowfipour and Nader own Qualium Corporation, which operates sixteen sleep clinics doing business as Bay Sleep Clinic. The defendants also own Amerimed Corporation, which distributes durable medical equipment under the name Amerimed Sleep Diagnostics. The defendants are alleged to have billed Medicare for tests that were conducted at unapproved locations and performed by technicians lacking the licenses or certifications required by Medicare payment rules and regulations. The government also alleges that the defendants fraudulently billed Medicare for medical devices in violation of Medicare rules and regulations that prohibit providers of diagnostic sleep tests from supplying medical devices and from sharing a sleep laboratory location with a durable medical equipment supplier.

The lawsuit alleges that Defendant Mostowfipour represented that he was acting as supervisor and “clocked in” for working as a sleep technologist at approved facilities including Los Gatos when he in fact was never present. Other non-certified and non-registered sleep technicians and technologists were directed to not “clock in” for work in order to conceal who was working. Allegations also claim that Mostowfipour created a “medusa” software program and used the program to assist in controlling data including client, facility, billing and insurance data to control what information was submitted to defendant Access Medical Consultants, Inc. Defendants Nader and Mostowfipour directed Access Medical Consultants, Inc. to submit billings to Medicare that altered location services in the Medicare form from “satellite offices” where the services were actually performed and products were dispensed to the Medicare approved facility.These violations of federal regulations allegedly extended to the provision of services to Medicare patients referred by third persons including Kaiser Permanente Medical Group.
The suit also alleges that defendants Qualium, Nader and Mostowfipour delivered and caused to be delivered checks to physicians identified as “consultation services” which were simply a flat fee payment per sleep study regardless of whether there was any actual consultation and regardless of whether the physician had expertise in reading sleep studies.

The whistleblower action, captioned United States ex rel. Dresser v. Qualium Corp., et al., Civil Action No. 12-1745 (N.D. Cal.), was filed under the qui tam provisions of the False Claims Act. The False Claims Act allows for private persons, such as Elma F. Dresser in this case, to file actions to provide the government information about wrongdoing. Under the statute, if it is established that a person has submitted or caused others to submit false or fraudulent claims to the United States, the government can recover treble damages and $5,500 to $11,000 for each false or fraudulent claim filed. If the government is successful in resolving or litigating its claims, the whistleblower who initiated the action can receive a share of between 15 percent to 25 percent of the amount recovered.

The whistleblower action in this case contained additional allegations. However, the United States is intervening only with regard to allegations that Qualium Corporation (doing business as Bay Sleep Clinic), Amerimed Corporation (doing business as Amerimed Sleep Diagnostics), Tara Nader, and Anooshiravan Mostowfipour submitted false claims to Medicare for durable medical equipment and for sleep tests performed at unapproved locations or by unqualified technicians. The United States is not pursuing the whistleblower’s additional claims against the third-party company used by the defendants to submit claims to Medicare nor claims regarding alleged improper payments made by the defendants to medical providers.

Assistant U.S. Attorney Kimberly Friday is handling the case, with assistance from Financial Fraud Investigator Michael Zehr. The investigation was conducted by the U.S. Attorney’s Office for the Northern District of California and the Office of Inspector General of the Department of Health and Human Services.

Barrett Business Services, the Vancouver, Wash.-based supplier of staffing and outsourced human resources services, is under investigation by federal authorities in a case involving the company’s workers’ compensation reserves. In a filing with the U.S. Securities and Exchange Commission, Barrett said the SEC has launched an investigation of the company’s “accounting practices with regard to its workers’ compensation reserves.” The news pushed the company’s stock down $14.54, or 29 percent, to $35.01 Tuesday.

The public filing by the company stated “BBSI has been informed by staff at the San Francisco office of the Division of Enforcement of the Securities and Exchange Commission (“SEC”) that it has obtained a Formal Order of Investigation in connection with its review of the Company’s accounting practices with regard to its workers’ compensation reserves. The Company is cooperating fully with the SEC staff in providing the requested information.”

During the company’s first-quarter earnings conference call in April, Michael Elich, president and CEO of Barrett, said the company continued to maintain a “proactive, positive position” related to workers’ compensation expense The context of the company’s discussion of workers’ compensation costs was its announcement in the third quarter of last year of an $80 million increase in reserves for payments of drawn-out workers’ compensation claims.

In the aftermath of that announcement, the company was hit with a shareholder class-action lawsuit alleging Barrett, Elich and Chief Financial Officer Jim Miller violated federal securities laws. The suit arose after the company’s stock price plummeted on the heels of its announcement of increased workers’ compensation reserves. In a filing with the SEC, the company said it will defend itself against the litigation and that it believes “the claims are covered under our directors and officers’ liability insurance, and we have notified our insurance carriers of the claims.”

Barrett has clients with employees in 22 states and the District of Columbia through a network of 54 branch locations in California, Oregon, Washington, Idaho, Arizona, Nevada, Utah, Colorado, Maryland, Delaware and North Carolina.

Pursuant to SB 863 and Labor Code section 3701.9, effective January 1, 2015, the Company no longer maintains a certificate to self-insure in the state of California and now maintains individual policies with ACE Group (“ACE”) for all California-based clients. The arrangement, typically known as a fronted program, provides BBSI a licensed, admitted insurance carrier in California to issue policies on behalf of BBSI without the intention of transferring any of the workers’ compensation risk for the first $5.0 million per claim. The risk of loss up to the first $5.0 million per claim is retained by BBSI through an indemnity agreement. While this portion of the risk of loss remains with BBSI, ACE assumes credit risk should BBSI be unable to satisfy its indemnification obligations to ACE. ACE also bears the economic burden for all costs in excess of $5.0 million per claim. The agreement is effective through January 2016 with the potential for continued annual renewals. The Company makes monthly payments into a trust account established between the Company and ACE related to the new ACE fronted insurance program to be set aside for the payment of future claims. The balance in the trust account was $78.0 million and $50.1 million at March 31, 2015 and December 31, 2014, respectively. The trust account balance is included as a component of the current and long-term restricted marketable securities and workers’ compensation deposits in the accompanying consolidated balance sheet.

The company offers “professional employer organization” services. Under that system, Barrett becomes a co-employer of a client’s workforce, handling payroll, payroll taxes, workers’ compensation coverage and other administrative functions. Its staffing services include on-demand or short-term staffing, contract staffing, long-term on-site management, and direct placement. Barrett’s clients include electronics manufacturers, light-manufacturing industries, transportation enterprises, food processors and telecommunications firms.

Three years ago, the Legislature enacted and Gov. Jerry Brown signed SB 863, a significant overhaul of California’s multibillion-dollar system of compensating workers for job-related injuries and illnesses. It followed a well-established pattern in workers’ compensation politics. An article in the Sacramento Bee points out that about once a decade, the complex system undergoes revision, usually when several of the five major stakeholder groups make a private deal that takes something away from the others.

In 2012, employers and labor unions, with the friendly neutrality of insurers, ganged up on lawyers who specialize in disability cases and on providers of medical care and rehabilitation. The bill’s major provisions tightened up standards for medical and rehabilitation services to save money and increased cash benefits for disabled workers. By all accounts, it worked, at least from the standpoint of supporters. The Workers Compensation Research Institute reported recently that the average medical payment per claim declined by 5 percent in 2013, after several years of increases.

Meanwhile, the California Workers Compensation Insurance Rating Bureau recommended, and Insurance Commissioner Dave Jones approved, a 5 percent reduction in base premiums paid by employers for coverage – although their costs would remain the nation’s highest, averaging $3.48 per $100 of payroll in the latest survey.

Not surprisingly, those on the losing side three years ago want changes without waiting the traditional decade for another workers’ comp revision.

That attitude is expressed in Senate Bill 563, carried by Sen. Richard Pan, a Sacramento Democrat who is also a physician. It would partially undo the 2012 legislation by softening “utilization review” of medical treatments, aimed at approving only those deemed to be medically necessary. The bill would exempt a request for medical treatment by a physician from these requirements if the request meets specified conditions, including that a final award of permanent disability made by the appeals board specifies the provision of future medical treatment and that the request for medical treatment is for medical treatment that is specified by the award.

The Senate Bill Analysis proclaims that “Recently, UR has come under some scrutiny by stakeholders, many of whom argue that it is leading to a significant number of injured workers being denied care. This claim, however, is not currently supported by the data. As was discussed at the Committee’s March 25th oversight hearing, a recent study by the California Workers’ Compensation Institute (CWCI) found that only approximately 25% of medical treatment requests go through UR , with approximately 75% of the medical treatment requests approved. Once the approvals from UR and Independent Medical Review (IMR) are included, more than 94% of treatment is approved in California’s workers’ compensation system.”

Despite this Committee finding, sponsors of SB 563 contend that without changes, the current system denies injured workers badly needed treatment. The bill zipped through the Senate Labor Committee, with all four Democrats voting for it, three of whom had voted for the 2012 overhaul.

Their change of heart might have something to do with the bill’s supporters, who include, as one would expect, medical providers and lawyers, but also, oddly, the California Labor Federation, a sponsor of the 2012 legislation. Another supporter, the California Medical Association (CMA), citing a survey from its members, argues that California’s workers’ compensation system is facing significant challenges and CMA is concerned that IMR may incentivize and allow the denial of necessary patient care. CMA also cites a recent ProPublica article on workers’ compensation as possible evidence that necessary home healthcare is being denied to injured workers.

Whatever the reasons for labor’s flip, the California Chamber of Commerce has tagged SB 563 as a “job killer,” saying it “undermines the entire medical treatment review process.”

It will be interesting to see what Kevin de León does. He carried the 2012 bill – and trumpeted it loudly – but has since become the Senate’s president pro tem with, shall we say, broader priorities. And if the bill reaches Brown’s desk, would he be willing to undo, at least partially, something he’s already checked off his bucket list of accomplishments?

Insurance Commissioner Dave Jones adopted and issued a revised advisory pure premium rate, lowering the benchmark to $2.46 per $100 of payroll for workers’ compensation insurance, effective July 1, 2015. The commissioner adopted the recommendation of the Workers’ Compensation Insurance Rating Bureau (WCIRB), which filed a recommendation to lower the advisory pure premium rate mid-year. Mid-year pure premium rate adjustments are not the norm-new data reflecting a significant change in underlying workers’ compensation costs is required before the commissioner will issue a mid-year adjustment.

Jones issued the mid-year advisory pure premium rate one week after a public hearing and careful review of the testimony and evidence submitted. The commissioner reduced the advisory pure premium rate mid-year, based on insurers’ cost data indicating that in 2014 there was a reduction in workers’ compensation insurers’ medical costs. The reductions in medical costs appear to be the result of SB 863 (De León), signed in 2012. The WCIRB noted that not all of the cost reductions projected from SB 863 have materialized. Other costs continue to rise, but those increases were offset by the reduction in medical costs.

The WCIRB’s pure premium advisory rate filing demonstrated that workers’ compensation insurers continue to charge premiums that are close to the estimated cost of providing benefits and adjusting expenses. The rates actually charged to employers, however, are on average lower than the rates filed by insurers. Workers’ compensation insurance rates are not set by the Department of Insurance. Under California law, workers’ compensation insurers set their own rates.

The WCIRB will evaluate workers’ compensation insurance costs again in the fall of this year when it files its 2016 pure premium rate benchmark recommendation with the Department of Insurance. That filing will provide an opportunity to assess whether medical costs continue to be lower and what changes, if any, there are in other costs in the system.

The commissioner’s pure premium decision is advisory only. Under California law, the commissioner does not set or have authority to reject workers’ compensation insurance rates. The commissioner’s advisory pure premium rate is not predictive of what an individual insurance company may charge its policyholders because the review of pure premium rates is just one component of insurance pricing.

The purpose of the pure premium benchmark rate process is to review costs in the workers’ compensation insurance system and to confirm that rates filed by insurance companies are adequate to cover benefits for injured workers.

The mid-year pure premium rate benchmark of $2.46 per $100 of payroll is a 10.2 percent reduction in the current benchmark and 5 percent lower than the average industry-filed pure premium rate as of January 1, 2015, which was $2.59 per $100 of payroll.