Category: Daily News

After hearing oral arguments on Monday, and again on Thursday, federal judge George H. Wu indicated he will sign an order next week implementing his tentative ruling that the retroactive lien activation fee violates the equal protection clause of the U.S. Constitution. The scope of the preliminary injunction has yet to be decided. It may apply to just the named plaintiffs, or to all lien claimants subject to the mandatory lien activation fee. Judge Wu will further consider the scope of the injunction in the next few days, and then the actual order will issue.

Angelotti Chiropractic, Mooney and Shamsbod Chiropractic, Christina-Arana and Associates, Joyce Altman Interpreters, Scandoc Imaging and Buena Vista Medical Services filed a lawsuit last July in the United States District Court contesting the constitutionality of certain provisions of SB 863, and seeking to avoid payment of millions of dollars in lien activation fees before the end of 2013. They may be the only beneficiaries of the injunction, or the injunction may apply to lien claimants who are not a party.

The tentative ruling seemed to agree with the arguments that the retroactive lien filing fee violated the equal protection clause of the US Constitution since it discriminated against one class of smaller lien claimants and in favor of large lien claimants who are exempt from the fee. To state a claim under 42 U.S.C. § 1983 for a violation of the Equal Protection Clause of the Fourteenth Amendment a plaintiff must show that the defendants acted with an intent or purpose to discriminate ’against the plaintiff based upon membership in a protected class. Where the group excluded or discriminated against does not constitute a suspect class a plaintiff may still state a claim, but for equal protection purposes, a governmental policy that purposefully treats groups differently need only be ’rationally related to legitimate legislative goals’ to pass constitutional muster. As with suspect classes, differential treatment impinging on a fundamental right will “draw strict scrutiny” attention under the Equal Protection Clause.

The retroactive $100 lien activation fee at issue in this case specifically does not apply to any lien filed by a health care service plan licensed pursuant to [Cal. Health and Safety Code § 1349], a group disability insurer under a policy issued in this state pursuant to the provisions of [Cal. Ins. Code § 10270.5], a self-insured employee welfare benefit plan, as defined in [Cal. Ins. Code § 10121], that is issued in this state, a Taft-Hartley health and welfare fund, or a publicly funded program providing medical benefits on a nonindustrial basis.

Under the “rational basis” review of the lien activation fee, the Equal Protection Clause is satisfied if: (1) ’there is a plausible policy reason for the classification,’ (2) ’the legislative facts on which the classification is apparently based rationally may have been considered to be true by the governmental decisionmaker,’ and (3) ’the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational.

On this issue, the tentative ruling said there “is no question that the legislature has a legitimate legislative goal in its implementation of fees to the extent those fees have a purpose of funding the workers’ compensation adjudicative system and/or deterring lien filings so as to not clog the system. The question is whether a retroactive fee like the activation fee herein involved, that is designed to clear the backlog currently in the system (as well as provide funding for the system) can, while accomplishing those purposes, also discriminate amongst lienholders. If it cannot, then the case for a rational relationship to that (or those) legitimate governmental interest(s) is severely weakened.”

Defendants contended that the exempted entities are not major contributors to the backlog. However the ruling noted that “if they are not major contributors to the backlog, and if one of the purposes behind the imposition of fees is to fund the system, why any lienholder whose liens are tied up in the ‘backlog’ would be exempted is somewhat curious, especially ones who would not be greatly impacted because they are not major contributors to the backlog. The backlog is the backlog, and if clearing it is your purpose, then you attempt to clear it. It. makes little sense to clear only part of it.”

The ruling concluded that the court would “grant Plaintiffs’ motion for preliminary injunction, and discuss with the parties the appropriate scope of preliminary injunctive relief.” The scope of the injunction will be decided in the next few weeks.

So what does this mean to California employers? Essentially, they have lost a great deal of the employer’s “benefit” of SB 863, especially if the injunction will apply to all lien claimants. Lien claim resolution was a major component of the bargained for law. Additionally, a new WCIRB study noted once IMR became effective for all injuries regardless of the accident date starting on July 1, 2013, IMR requests have increased significantly. If the higher volume of August (15,731) and September (14,990) IMR requests are indicative of filing rates for subsequent months, the number of IMRs requested per year would be over three times greater than that projected in the WCIRB’s prospective cost estimate, potentially eliminating any savings in administrative costs due to IMR and also potentially negatively impacting medical treatment costs. Employers have yet to learn how litigation over the “catastrophic injury” exception to AMA Guides add-on ratings will be resolved. As a whole, the employer economics of S.B. 863 seems to be getting rapidly eroded.

This report was commissioned by the California Department of Industrial Relations to examine the different types of inspections that the California Department of Industrial Relations Division of Occupational Safety and Health (Cal-OSHA) carries out and the roles that they play. It focuses on the three major inspection types in California: programmed (planned) inspections, complaint inspections, and accident investigations.

As is well known, programmed inspections in general industry cite substantially more serious violations (and total violations) than other inspection types do. However, complaint inspections take inspectors to workplaces whose injury rates are higher.

The number of complaint inspections fell sharply after 1992, dropping from 8,000 per year to fewer than 3,000 in recent years. Cal- OSHA (and OSHA) adopted a policy for dealing with “informal” complaints (defined as cases in which the complainant was unwilling to give his or her name) that relied primarily on a letter or fax to the employer rather than on an inspection. The employer was required to respond and to explain what it had done to abate the alleged hazard. One out of five of these fax-letter cases is supposed to be followed up by an inspection. Unfortunately, neither Cal-OSHA nor OSHA maintains records on the number of these faxletter complaints or on the subject of the hazard in its computerized files. In addition, there is no way to identify the inspections that were conducted to verify the employer’s compliance statements. Thus, we have almost no information on either the magnitude of this procedure or on how it is working.

CHSWC noted that one idea behind the original fax-letter procedure was that the agency would check back with the complainant to see whether he or she was satisfied with what the employer had said and done. But Cal-OSHA cannot check back if it lacks contact information. The absence of that information makes it more important to maintain data on the complaints that are handled through the fax-letter procedure. Currently, there is no simple way to track the results of those one in five inspections that are carried out to validate employer compliance. In addition, for regular complaint inspections, Cal-OSHA should maintain information about the subject of the complaints; it could use that information to assess how good workers were at identifying different hazards.

California requires that acute injuries that involve hospitalization for more than 24 hours (except for observation) and amputations must, along with fatalities, be reported to Cal-OSHA within eight hours. Except for cases in which other law enforcement agencies have jurisdiction (assaults and highway crashes), Cal-OSHA is obligated to investigate these injuries. Although most believe that fatalities are well-reported, the quality of reporting of nonfatal cases is less clear. National data suggest that the number of hospitalizations is probably well above the roughly 2,000 cases reported in California. The implication is that there is a great deal of underreporting of hospitalizations, at least in construction.

The CHSWC report concludes that the Department of Industrial Relations needs to develop a system for identifying the hospitalizations (and amputations) that employers are supposed to immediately report to Cal-OSHA.

Earlier studies of federal OSHA inspections showed that the number of serious violations cited per inspections fell by about 50 percent after the first inspection and more slowly thereafter. In California, the fall-off is not as fast and varies by inspection type. However, the results do suggest that it may be useful to put a priority on workplaces that have not had frequent inspections.

The CHSWC report recommends that workplaces in high-injury-rate industries that have not been inspected at all or not for many years should be identified and deserve some priority in programmed inspections.

On March 8, 2011, Clifford Mulford fell from a ladder while working for El Toro RV Inc. as a service writer. He sustained a catastrophic brain injury as a result of his fall and spent several months in the hospital. At the time of his release from the hospital, he was experiencing residual left side weakness, decreased memory, fatigue, and seizures.

Applicant was evaluated by H. Richard Adams, M.D., a neurologist. The parties appeared for a second expedited hearing on January 15, 2013 on the issue of the provision of home health care. At the hearing, applicant presented the WCJ and defendant with a note from Dr. Adams, dated January 14, 2013, that reads, “Home health or or [sic.] case manager RN to eval for ongoing home health assistance.”

The workers’ compensation administrative law judge found that applicant sustained industrial injury to his head and brain. The WCJ found that defendant was not liable for home health care from October 23, 2012 to the present,. In the accompanying Opinion on Decision, the WCJ explained that labor code section 4600(h) applied retroactively to applicant’s injury, and that applicant had not met his burden of showing that his doctor had prescribed home health care.

Applicant timely sought reconsideration, contending that the WCJ erred in finding that defendant was not liable for home health care from October 23, 2012 to the present. Applicant argues that section 4600(h) does not apply to his case. Alternatively, applicant argues that if section 4600(h) does apply to his case, he has met his burden of proof under section 4600(h). Reconsideration was denied in the panel decision of Mulford v El Toro RV inc.

The WCAB agreed with the WCJ that the language in SB 863 “clearly indicates that [section 4600(h)) applies to all pending cases prospectively from the date the statute became effective regardless of the date of injury[.)” (Report, p. 4.) Accordingly, it was applicant’s burden to prove that home health care services were “reasonably required to cure or relieve” applicant’s injury, and “prescribed by a physician and surgeon.” (Lab. Code, § 4600(h).)

Applicant has not done so. Dr. Adams’s December 5, 2012 Report does not include a prescription for home health care services. To the contrary, it makes no mention of home health care. Similarly, Dr. Adams’s January 14, 2013 note does not prescribe home health care services. Instead, it prescribes an evaluation to determine whether home health care services should be provided. Reconsideration was therefore denied.

Commissioner Sweeney in a dissenting opinion concurred with the majority that the recently-enacted Labor Code section 4600(h) applies to this case. However, “I would rescind the WCJ’s finding and return the matter to the WCJ to develop the record and obtain a supplemental report from applicant’s primary treating physician.”

Sutter Health, which operates one of the largest hospital chains in California, agreed to pay $46 million and implement historic changes in its billing and disclosure of anesthesia charges and services to its patients, insurers and other payers.

Sutter has over 20 hospitals in northern California, including California Pacific Medical Center in San Francisco, Sutter General Hospital in Sacramento, and Memorial Medical Center in Modesto. The settlement brings to a close a 2011 whistleblower lawsuit brought against Sutter by billing auditor, Rockville Recovery Associates. The California Insurance Commissioner joined the whistleblower in that lawsuit.

“This settlement represents a ground breaking step in opening up hospital billing to public scrutiny,” said Commissioner Jones. “The settlement requires Sutter to disclose on its Website every component of its anesthesia billing and what those services cost Sutter. ;Patients, insurers and the public will now be able to compare Sutter’s costs to what it charges for anesthesia. They will see any mark-ups. I commend Sutter for agreeing to these reforms and this settlement. This new transparency should lead to lower prices and point the way to similar billing reforms for all types of hospital services.”

The whistleblower lawsuit alleged that Sutter included a false and misleading charge in its surgery bills. Sutter patients or their insurers received three separate charges relating to anesthesia, including a charge by an outside anesthesiologist, a charge for the operating room and a charge under an obscure Code 37x Anesthesia. Sutter often charged thousands of dollars for Code 37x Anesthesia for each operation. Yet the services covered by that code were allegedly already captured in the operating room charge, itself a charge in the thousands of dollars. Sutter charged for anesthesia on a time-based or chronometric basis even when no Sutter employee, only the outside anesthesiologist, was present and overseeing anesthesia. Some hospitals also charged separately for anesthesia gasses using code 25x. Sutter’s contracts with insurers also included a clause alleged to unduly restrict insurers from contesting the bills.

In March of this year, Time Magazine devoted a special issue to the problem of lack of transparency in hospital billing practices. “Bitter Pill: Why Medical Bills Are Killing Us” exposed hospital bills that sometimes include markups as high as 10,000%.

The settlement requires that Sutter 1) pay $46 million, 2) stop billing for anesthesia in the operating room on a chronometric basis and instead charge on a fully disclosed flat-fee basis, 3) describe every component of its anesthesia billing, 4) post on its Website and provide to insurers and the commissioner the cost to each Sutter hospital of its anesthesia services, updated annually, 5) clarify the relationship between its master schedule of charges (known as chargemasters in the health care industry) and the bills that consumers and insurers receive. This change will lead to an increase of transparency and accountability in hospital billing, and 5) more readily permit insurers and other payers to contest Sutter’s bills.

Another defendant, Marin General Hospital, has agreed to implement the same changes to its procedures for billing anesthesia services. Marin General Hospital was a member of Sutter Health during the period of the misconduct alleged by the complaint. In 2010, Marin General Hospital became an independent hospital.

Today’s settlement also includes defendants MultiPlan, Inc. (“Multiplan”) and Private Healthcare Systems, Inc. (“PHCS”), whose provider contracts with Sutter included Sutter’s audit policy that allegedly unduly restricted payers’ ability to challenge Sutter’s charges. In addition to paying $925,000, MultiPlan and PHCS agreed to continue to provide notifications to payers about their audit rights.

As required by the state’s insurance whistleblower law, Sutter’s settlement payment will be divided between the whistleblower, Rockville Recovery Associates, and the State of California. The state will receive $20 million, to be used to enhance the investigation and prevention of insurance fraud.Sutter and MultiPlan/PHCS do not admit to wrongdoing in the settlement agreement.

The WCIRB has now submitted the 2013 SB 863 Cost Monitoring Report, which was prepared in conformance with the monitoring plan submitted to the California Department of Insurance earlier this year The WCIRB’s plan to retrospectively monitor the cost impact of SB 863 based on emerging post-reform costs was published on March 27, 2013. Pursuant to this plan, this report summarizes the WCIRB’s initial retrospective evaluation of the cost impact of a number of SB 863 provisions based on data emerging through the third quarter of 2013..

Indemnity claim frequency for the first six months of 2013 is 6.2% above the comparable 2012 frequency, which is significantly above the projected levels. It is not yet clear the extent to which the higher than expected claim frequency in 2013 is attributable to a greater than projected impact of SB 863 permanent disability benefit increases. Nevertheless, the sharp increase in claim frequency is concerning .

Early indications on lien filings based on Division of Workers’ Compensation (DWC) data through September 30, 2013 suggest that there may be a greater reduction than the 40% reduction projected by the WCIRB in 2012. Also, as projected, WCIRB lien survey data suggests that the greatest level of reduction is in liens for relatively small amounts.

In 2012, based on a California Workers’ Compensation Institute analysis, the WCIRB estimated an approximate $20,000 per claim reduction on claims involving spinal implant hardware due to the SB 863 provisions related to duplicate reimbursement for spinal implant hardware. Preliminary WCIRB data suggests savings of more than $15,000 per claim on affected spinal surgery claims in 2013.

SB 863’s reduction in maximum ambulatory surgical center faci lity fees was estimated to reduce those costs by 25%, which is consistent with the reductions observed based on preliminary WCIRB MDC estimates comparing 2013 reimbursements to pre-SB 863 levels.

A relatively small number of IMRs were filed during the first half of 2013. However, once IMR became effective for all injuries regardless of the accident date starting on July 1, 2013, IMR requests have increased significantly. If the higher volume of August (15,731) and September (14,990) IMR requests are indicative of filing rates for subsequent months, the number of IMRs requested per year would be over three times greater than that projected in the WCIRB’s prospective cost estimate, potentially eliminating any savings in administrative costs due to IMR and also potentially negatively impacting medical treatment costs. Based on DWC information on early IMR decisions, approximately 75% of decisions have upheld the initial utilization review determination.

Although relatively few independent bill review (IBR) requests have been filed when compared to IMR filings, early estimates of IBR decisions show 60% of decisions favoring the provider for amounts significantly less than the IBR filing fee.

Preliminary estimates of medical provider network usage in 2013 show that network utilization in the first six months of 2013 is fairly consistent with that for prior years.