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WCAB Rejects Psychologist’s Psyche Claim Against Dept. of Corrections

Dennis Lindsey was employed as a staff psychologist by the California Department of Corrections and Rehabilitation. He filed an Application for Adjudication alleging injury arising out of and in the course of employment to his psyche, hypertension, and aortic root dilation.

Dr. Anne Welty, the Agreed Medical Examiner in psychology. issued a report diagnosing the applicant with adjustment disorder with mixed disturbance of emotions and conduct. As to causation, Dr. Welty stated that with a reasonable degree of medical probability, over 51% of the applicant’s acute and presenting psychiatric symptoms developed as a result of the events that transpired during the course of his employment with the Chino Institute for Men. Based on the opinions of Dr. Welty, the WCJ found that the events of employment were the predominant cause of the applicant’s psychiatric injury.

Having determined that the applicant’s psychiatric injury involves actual events of employment and that some of those events of employment were lawful, nondiscriminatory, and made in good faith personnel actions, the WCJ was required to determine if those personnel actions were a substantial cause of the applicant’s psychiatric injury. Substantial cause is defined by the Labor Code to mean at least 35 to 40 percent of the causation from all sources combined.

Based on the medical opinion of Dr. Welty, the WCJ found that 15% of the cause of the applicant’s psychological injury was the result of the disciplinary action for the paperwork submission and timeliness of patient team meetings and scheduled appointments, 10% attributed to the disciplinary action for going outside the chain of command and for using profane language, and 10% attributed to the disciplinary action for going outside the chain of command when he submitted a complaint regarding a particular staff psychiatrist who was going to come work on the team.

When combined, these three events of employment total 35% of the causation from all sources combined and were a substantial cause of the applicant’s psychological injury, and the WCJ found that the defendant had no liability for the applicant’s psychological injury.

Applicant’s Petitioned for Reconsideration was dismissed in the panel decision of Lindsey v  California Department of Corrections and Rehabilitation -ADJ9111192 (January 2024).

The petition in this matter was filed on November 13, 2023. This was more than 25 days after the service of the WCJ’s September 16, 2022 decision and beyond whatever extension of time, if any, the petitioner might have been entitled to under WCAB Rule 10600. This time limit is jurisdictional and, therefore, the Appeals Board has no authority to consider or act upon an untimely petition for reconsideration.

Additionally the Petition for Reconsideration was not verified and notice of this defect was specifically given in both the WCJ’s Report and by the respondent’s answer. Moreover, a reasonable period of time has elapsed, but petitioner has neither cured the defect by filing a verification nor offered an explanation of why a verification cannot be filed.

However, the WCAB panel went on to say “If the petition had been timely, we would have denied it on the merits for the reasons stated in the WCJ’s report.” And added “In addition to the WCJ’s Report, we offer the following as further clarification regarding ‘events of employment’ and ‘personnel actions.’ “

When a psychiatric injury is alleged and the “good faith personnel action” defense has been raised, the WCJ must evaluate the defense according to a multilevel analysis. This is often referred to as a Rolda analysis, base on Rdolda v. Pitney Bowes, Inc. (2001) 66 Cal.Comp.Cases 241.

It is often helpful to break this analysis into discreet elements: (1) whether the alleged psychiatric injury involves actual events of employment, a factual/legal determination; (2) if so, whether such actual events were the predominant cause of the psychiatric injury, a determination which requires competent medical evidence; (3) if actual events of employment were the predominant cause of the psychiatric injury, whether any of the events of employment were personnel actions; (4) if so, were those personnel actions lawful, nondiscriminatory and in good faith; and (5) if so, whether the lawful, nondiscriminatory, good faith personnel actions were a “substantial cause” of the psychiatric injury.

In Larch v. Contra Costa County, the Appeals Board defined personnel action as conduct either by or attributable to management, which includes actions taken by someone who has the authority to review, criticize, demote, or discipline an employee. (Larch (Fleming) v. Contra Costa County (1998) 63 Cal.Comp.Cases 831, 833 [“conduct attributable to management in managing its business including such things as done by one in authority to review, criticize, demote, transfer or discipline an employee in good faith.”].)

It is not necessary that the action have a direct or immediate effect on the employment status. Not every action taken by someone who has the authority to review, criticize, demote, or discipline is necessarily a personnel action. The issue of whether the employee’s psychiatric injury occurred as a result of a personnel action is a factual and legal issue for the WCJ, as is the determination of whether a personnel action is lawful, nondiscriminatory, and made in good faith.

The WCAB dismissed the Petition as untimely and unverified. However, “if the petition had been timely and verified, we would have denied it on the merits for the reasons stated in the WCJ’s report.”

Sedgwick Introduces it’s Connect 2024 Industry Trends Agenda

Sedgewick just introduced its Connect 2024 list, which highlights major industry trends and issues that employers, carriers, brokers and risk management and human resources professionals should watch throughout the coming year. In 2024, it expects connected conversations to center around key topics related to people, property, brands and performance and its analysis pinpoints opportunities for collaboration across a variety of industries.

Sedgewick noted that the workforce is not just changing; it has been transformed. Priorities have shifted; people expect elevated experiences in the workplace and in everyday interactions. Employers are thinking holistically about health and well-being options for their teams, focusing on culture and development, and finding ways to make the workplace more appealing as individuals adapt to new realities.

Throughout the year, Sedgewick will continue to explore the ways human connection can help people during times of need – and watch how technology automates tasks to free up individuals for more personal engagement.

In the face of evolving catastrophes, insurers and policyholders grapple with increasing claim volumes stemming from natural disasters, business interruptions and geopolitical developments. We expect conversation to pick up around structural risks and resilience, population density and migration, and the challenging economic landscape.

Amid recession, inflation and rising premiums, hard market conditions persist in certain regions and lines of coverage. This reality is prompting a rise in alternatives such as captives, as well as a heightened focus on risk engineering to optimize access to insurance markets.

The profound influence of AI and transformative technology like ChatGPT has reverberated across industries, setting the stage for continued expansion in 2024. Through technology advancements, the insurance sector will realize greater capabilities in predictive modeling, fine-tune quality initiatives for real-time action, resolve claims quickly and more efficiently, and positively impact experience, value and outcomes.

Sedgewick invites those who are interested in Connect 2024 are invited to bookmark the Connect 2024 list for easy access to frequent insights from Sedgwick’s thought leaders on the latest industry trends and share your thoughts with us on LinkedIn, Instagram or our other social channels. Sedgewick looks forward to continuing the conversation and sharing insights throughout the year.

CEO of Whittier Health Clinic Sentenced to 10 Years for Billing Fraud

The former president and CEO of a Whittier medical clinic was sentenced today to 124 months in federal prison for submitting fraudulent billings to a Medi-Cal health care program that provides family planning services to low-income Californians who lack health insurance.

Vincenzo Rubino, 59, of Valencia, was sentenced by United States District Judge Otis D. Wright II, who also ordered him to pay $3,815,478 in restitution and entered a money judgment of $2,308,028.

Rubino pleaded guilty in August 2023 to nine counts of health care fraud and two counts of aggravated identity theft. Rubino pleaded guilty mid-trial when the prosecution had nearly finished presenting its case to the jury.

Rubino founded, owned and operated Santa Maria’s Children and Family Center, a Whittier-based medical clinic based registered as a non-profit public benefit corporation and enrolled as a Family Planning, Access, Care and Treatment (Family PACT) provider run through Medi-Cal.

From November 2014 to August 2017, the center submitted fraudulent claims totaling nearly $5 million to the Family PACT program for family planning services that were never provided, often using the information of patients who were recruited at off-site locations with offers of free diabetes testing.

To submit many of these claims, Rubino used the names of two medical providers who were not employed at Santa Maria’s. The patients did not see these providers – a physician’s assistant and an elderly doctor who was himself a patient in a skilled nursing facility during much of the scheme.

The Medi-Cal program paid more than $2.3 million dollars on the fraudulent claims, as well as an additional approximately $1.5 million to a pharmacy and laboratory for claims stemming from referrals from Santa Maria based on the same services that were never delivered.

“This defendant took advantage of health-care services intended for people in need,” said United States Attorney Martin Estrada. “Instead of allowing that money to go where it was intended, Rubino stole millions of dollars through sham claims to Medi-Cal for family planning services that either were unnecessary or unprovided. Today’s sentence highlights my office’s resolve to protect the most vulnerable in our community.”

The United States Department of Health and Human Services Office of Inspector General and the California Department of Justice investigated this matter.

Assistant United States Attorneys Kristen A. Williams of the Major Frauds Section and David H. Chao of the General Crimes Section prosecuted this case. Assistant United States Attorney Tara B. Vavere of the Asset Forfeiture and Recovery Section is handling the asset forfeiture portion of this case.

Cheesecake Factory Settles SoCal Wage Violations for $1M

The Labor Commissioner’s Office (LCO) reached a $1 million settlement against the Cheesecake Factory Restaurants Inc. dba The Cheesecake Factory and two janitorial contractors for underpaying 589 janitorial workers.
LCO’s investigation began in December 2016 after receiving complaints of possible wage and hour violations of janitors who cleaned Cheesecake Factory restaurants in San Diego County.

The workers were employed by Zully Villegas dba Magic Touch Commercial Cleaning, which in turn was engaged by Americlean Janitorial Services Corp., dba Allied National Services, for the client Cheesecake Factory Restaurants, Inc. These entities were cited in 2018 for unpaid minimum wages, unpaid overtime, liquidated damages and waiting time penalties, as well as meal and rest period premiums. All three entities were held liable under California Labor Code Section 2810.3.

All three entities appealed the citations, and the case settled before going to hearing.

Under the settlement’s terms, contractors must provide information on prior wage claims as part of the bidding process with Cheesecake Factory, as well as provide annual wage and hour trainings to janitors. Cheesecake Factory can audit their contractors and agreed to train their managers and those overseeing janitorial contracts to ensure the law is followed.

The case was originally referred by the Employee Rights Center, a non-profit organization in San Diego that offers legal services regarding employment and labor law issues.

Soon after the referral, the Maintenance Cooperation Trust Fund (MCTF), a statewide watchdog organization that works to eliminate illegal and unfair business practices in the janitorial industry in California, began connecting former employees of Zully Villegas dba Magic Touch Commercial Cleaning with the Labor Commissioner’s Office.

Janitors who worked at Cheesecake Factory restaurants in Brea, Huntington Beach, Irvine, Mission Viejo, Newport Beach, Escondido, San Diego-Fashion Valley and San Diego-Seaport District between August 31, 2014 and August 31, 2017 should contact LCO at (619) 767-2039 to determine if they are entitled to proceeds under the settlement agreement.

The Department of Industrial Relations’ Division of Labor Standards Enforcement (California Labor Commissioner’s Office) combats wage theft and unfair competition by investigating allegations of illegal and unfair business practices.

The Labor Commissioner’s Office in 2020 launched an interdisciplinary outreach campaign, “Reaching Every Californian.” The campaign amplifies basic protections and builds pathways to affected populations, so workers and employers understand legal protections and obligations, as well as the Labor Commissioner’s enforcement procedures. Californians can follow the Labor Commissioner on Facebook and Twitter.

“California strengthened its laws to remove loopholes that allowed businesses to subcontract services and avoid responsibility to ensure workers are paid what they are owed,” said Labor Commissioner Lilia García-Brower. “This settlement is a result of our effort to use enforcement tools which increase compliance, levels the playing field and recovers owed wages for workers.”

Study Shows VA Healthcare More Efficient, Less Costly & Better Results

Many studies have documented US health care’s high administrative costs, with several studies pointing to complex billing processes as drivers of those costs. Several analyses have compared US administrative costs or staffing with those in other nations,but none have examined Veterans Health Administration (VHA) facilities.

A new study published in the journal JAMA Network Open, by researchers at Hunter College of the City University of New York, Harvard Medical School, the Veterans Health Administration, and the University of Washington, points fingers at profit-driven private facilities and insurers, where a whopping 30% of staff are stuck in the tangled web of paperwork, while the VHA shines with a lean 22.5% administrative staff.

That means nearly 900,000 fewer paper pushers would be needed if private hospitals, clinics, and insurers took a page from the VHA’s playbook. And most of the bloat comes because profit-seeking insurers try to avoid paying for care by imposing complex rules and documentation requirements.

The VHA’s leaner administrative staffing likely reflects the agency’s simpler financing scheme. High administrative costs in the private sector have been attributed to the complexity of collecting revenues. Health care institutions bill for individual patients and services and interact with insurers that have varying fee schedules, deductibles, prior-approval requirements, formularies, and referral networks.

Even capitation payment schemes generally entail risk-adjustment calculations requiring detailed tracking of each patient’s service use, diagnoses, and costs. In this context, investments in administration may make financial sense, for example, increasing revenue by documenting more diagnoses.

Financial success is key to private sector institution growth and even survival, and executive compensation is often linked to financial metrics. This could incentivize efforts to improve efficiency but could also encourage revenue-enhancing administrative activities that add little clinical value (eg, marketing and upcoding).

In contrast, VHA hospitals and clinics are funded mostly through lump-sum budgets. The VHA does not bill Medicare or Medicaid and collects only 2.7% of its revenues from private insurers and 0.3% from patients,minimizing the need to attribute costs and charges to individual patients. In the VHA, all facilities are in network, 1 formulary applies to all patients, and few services require prior authorization. While managers must adhere to budgetary constraints and provide a volume of clinical services commensurate with their budgets, incentives based on financial metrics are minimal for hospital leaders and their institutions.

“Our profit-oriented system rewards providers for devoting more resources to gaming the payment system,” said lead author Dr. Steffie Woolhandler.

“In the VHA, caring for our patients – not money – is at the center of our mission,” said Dr. Andrew Wilper, chief of staff at the Boise, Idaho, VHA and associate professor of medicine at the University of Washington. “We strive to care for those who have served in our nation’s military and for their families, caregivers, and survivors.”

A 2014 Congressional Budget Office review found suggestive but not conclusive evidence that VHA care was cheaper than private sector care. A 2022 quasi-experimental study of patients with myocardial infarction who had both Medicare and VHA coverage found 21% lower costs and lower mortality in the VHA. This finding was consonant with an analysis that found fewer complications among patients who underwent knee replacement in the VHA. A 2023 comprehensive review concluded that VHA care was generally of equal or better quality compared with the private sector.

Technology Industries Dominate 2024 J.P. Morgan Healthcare Conference

Every year, thousands of bankers, venture capitalists, private equity investors, and others flock to San Francisco’s Union Square to pursue deals and meet with executives from biotech and other health care companies. And according to the story by California HealthLine, after a few years of pandemic slack, the 2024 J.P. Morgan Healthcare Conference regained its full vigor, drawing 8,304 attendees in early January to talk science, medicine, and, especially, money.

Of the 624 companies that pitched at the four-day conference, the biggest overflow crowd may have belonged to Nvidia, which unlike the others isn’t a health care company. Nvidia makes the silicon chips whose computing power, when paired with ginormous catalogs of genes, proteins, chemical sequences, and other data, will “revolutionize” drug-making, according to Kimberly Powell, the company’s vice president of health care.

Soon, she said, computers will customize drugs as “health care becomes a technology industry.” One might think that such advances could save money, but Powell’s emphasis was on their potential for wealth creation. “The world’s first trillion-dollar drug company is out there somewhere,” she dreamily opined.

Some health care systems are also hyping AI. The Mayo Clinic, for example, highlighted AI’s capacity to improve the accuracy of patient diagnoses. The nonprofit hospital system presented an electrocardiogram algorithm that can predict atrial fibrillation three months before an official diagnosis; another Mayo AI model can detect pancreatic cancer on scans earlier than a provider could, said Matthew Callstrom, chair of radiology at the Mayo Clinic in Rochester, Minnesota.

No one really knows how far – or where – AI will take health care, but Nvidia’s recently announced $100 million deal with Amgen, which has access to 500 million human genomes, made some conference attendees uneasy. If Big Pharma can discover its own drugs, “biotech will disappear,” said Sherif Hanala of Seqens, a contract drug manufacturing company, during a lunch-table chat with California Healthline and others. Others shrugged off that notion.

The first AI algorithms beat clinicians at analyzing radiological scans in 2014. But since that year, “I haven’t seen a single AI company partner with pharma and complete a phase I human clinical trial,” said Alex Zhavoronkov, founder and CEO of Insilico Medicine – one of the companies using AI to do drug development. “Biology is hard.”

Nonprofit hospitals showed off their investment appeal at the conference. Fifteen health systems representing major players across the country touted their value and the audience was intrigued: When headliners like the Mayo Clinic and the Cleveland Clinic took the stage, chairs were filled, and late arrivals crowded in the back of the room.

These hospitals, which are supposed to provide community benefits in exchange for not paying taxes, were eager to demonstrate financial stability and showcase money-making mechanisms besides patient care – they call it “revenue diversification.” PowerPoints skimmed through recent operating losses and lingered on the hospital systems’ vast cash reserves, expansion plans, and for-profit partnerships to commercialize research discoveries.

At Mass General Brigham, such research has led to the development of 36 drugs currently in clinical trials, according to the hospital’s presentation. The Boston-based health system, which has $4 billion in committed research funding, said its findings have led to the formation of more than 300 companies in the past decade.

Other nonprofit hospitals talked up institutes to draw new patients and expand into lucrative territories. Sutter Health, based in California, said it plans to add 30 facilities in attractive markets across Northern California in the next three years. It expanded to the Central Coast in October after acquiring the Sansum Clinic.

CMS Announces Move to Innovation in Behavioral Health (IBH) Model

On January 18, 2024, the Centers for Medicare & Medicaid Services (CMS) announced the Innovation in Behavioral Health (IBH) Model.  This model is intended to prepare practices for more advanced alternative payment models and accountable care arrangements in the future.

IBH is focused on improving quality of care and behavioral and physical health outcomes for Medicaid and Medicare populations with moderate to severe mental health conditions and substance use disorder (SUD). Medicare and Medicaid populations experience disproportionately high rates of mental health conditions and/or substance use disorders (SUD), and as a result are more likely to experience poor health outcomes and experiences, like frequent visits to the emergency department and hospitalizations, or premature death.

The IBH Model seeks to bridge the gap between behavioral and physical health; practice participants under the IBH Model will screen and assess patients for select health conditions, as well as mental health conditions and/or SUD, in community-based behavioral health practices. IBH is a state-based model, led by state Medicaid Agencies, with a goal of aligning payment between Medicaid and Medicare for integrated services.

The model works to improve care through four key program pillars:

– – Care Integration: Behavioral health practice participants will screen, assess, refer, and treat patients, as needed, for the services they require.
– – Care Management: An inter-professional care team, led by the behavioral health practice participant, will identify, and as appropriate address, the multi-faceted needs of patients and provide ongoing care management.
– – Health Equity: Behavioral health practice participants will conduct screenings for HRSNs and refer patients to appropriate community-based services. Participating practices will be required to develop a health equity plan (HEP). The HEP should stipulate how the practice participant will address disparities that impact their service populations.
– – Health Information Technology: Expansion of health IT capacity through targeted investments in inter-operability and tools (including electronic health records) will allow participants to improve quality reporting and data sharing.

CMS will release a Notice of Funding Opportunity (NOFO) in Spring 2024, and up to eight states will be selected to participate. The model will launch in Fall 2024 and run for eight years.

The Innovation in Behavioral Health (IBH) Model is designed to deliver person-centered, integrated care to Medicaid and Medicare populations with moderate to severe mental health conditions and/or substance use disorder (SUD). The practice participants in the IBH Model will be community-based behavioral health organizations and providers, including Community Mental Health Centers, opioid treatment programs, safety net providers, and public or private practices, where individuals can receive outpatient mental health and/or SUD services. These practice participants may include safety net providers who ensure that vulnerable populations are able to access care.

Practice participants will lead an inter-professional care team and be responsible for coordinating with other members of the care team to comprehensively address a patient’s care to include behavioral and physical health, and health-related social needs (HRSN) such as housing, food, and transportation.

The practice participants will conduct an initial screening and assessment, offer treatment or referrals to other care specialists and community-based resources, and monitor ongoing behavioral and physical health conditions and HRSNs. In this value-based care approach, the practice participants will be compensated based on the quality of care provided and improved patient outcomes.

IBH is a state-based model focused on community-based behavioral health practices that treat Medicaid and Medicare beneficiaries and includes both Medicaid and Medicare-aligned payment models. CMS will first issue awards to Medicaid agencies in up to eight states to implement the model. Practice participants within selected states may volunteer to participate in the Medicare payment model. The selected states will partner with their state’s agencies for mental health and/or SUD to ensure alignment in clinical policies, as well as work with at least one partnering Medicaid Managed Care Organization (MCO) or another intermediary partner, where applicable, to develop and implement the IBH Model in their state.

IBH supports behavioral health practices in delivering integrated care in outpatient settings. This person-centered approach to addressing whole-person health represents a “no wrong door” approach that prioritizes close collaboration with primary care and other physical health providers to support all aspects of a patient’s care.

The IBH Model is projected to run for eight years and includes a pre-implementation period (model years 1-3). During this period, states and practice participants will receive funding to develop and implement model activities and capacity building. During model year 1, states will conduct outreach and recruit behavioral health practice participants into the model. Practice participants will receive funding to support necessary upgrades to health IT and electronic health records, as well as practice transformation activities, and staffing to implement the model. Practice participants who elect to participate in the Medicare payment model may also be eligible for additional funding to support model activities.

Hospital and Health System Financial Pressures are Key 2024 Issue

In its 2022 year-end report, Kaufman and Hall noted that Merger and Acquisition (M&A) activity had regained momentum following a two-year slowdown in the wake of the Covid pandemic. This momentum continued through 2023 with 65 announced transactions, up from last year’s total of 53. Sixteen of the 65 transactions were announced in Q4.

Yesterday it published its 2023 review. One significant change was the increase in the percentage of financially distressed organizations that sought a partner in 2023.

Hospitals and health systems faced one of their most challenging years in 2022, with median operating margins staying in negative territory throughout almost the entire year. Those financial pressures emerged as a key driver of M&A activity in 2023, with financial distress cited as a factor or otherwise evident in 28% of announced transactions, compared with 15% in 2022. And there is an increasing number of larger systems citing financial distress, a change from the historical concentration of distress in smaller hospitals and health systems.

Many organizations continue to struggle, and the search for partners for these organizations is likely to continue. The struggle is quite evident here in California.

Palm Springs’ Desert Regional Medical Center is as the only Level 1 designated trauma center in the Coachella Valley. According to a report by the Desert Sun, the Desert Healthcare District Board must chart a course of immediate action for the hospital’s survival.

In 1997, the Desert Healthcare District Board voted to lease the hospital to Tenet Systems, the nationwide private hospital behemoth, for 30 years. This prepaid lease “positioned the district to meet outstanding debt obligations” and gave the hospital the chance to be part of a national health care company. Tenet currently runs the hospital while the district retains ownership of the lease as well other assets including Las Palmas Medical Plaza.

Tenet submitted a proposal to purchase Desert Regional Medical Center in 2019.

Last September Tenet proposed another 30-year lease. At the commencement of a new lease, Tenet’s terms included an initial payment of $75 million, followed by annual lease payments beginning in 2027. But a wrinkle that the district did not anticipate is the option for Tenet to purchase the hospital at the end of the lease, by making a final payment of $75 million.

With Tenet’s lease expiring in 2027, district leaders and Tenet leaders are stuck in a tug of war as two huge unknowns loom:

1) Will Tenet re-up their proposed 30-year lease? If not, who will take over the hospital?
2) Senate Bill 1953 mandates that by Jan. 1, 2030, all hospitals rebuild or retrofit and must be able to remain fully functional in the event of an earthquake. If a hospital does not make this deadline they will, under current law, be required to close their doors and cease operation – it’s estimated this will cost $222 million – so, who will foot the bill?

Structural seismic retrofits are needed at three buildings – the main hospital and additions, east tower and north wing – and nonstructural retrofits at 20 buildings at Desert Regional’s campus, according to a 2019 report from engineering firm Simpson Gumpertz & Heger Inc.

By comparison, Eisenhower Hospital, as a nonprofit, got big donations and has already completed their retrofits ahead of schedule.

Yet were Desert Regional Medical Center forced to close their doors, Eisenhower cannot absorb the valley’s medical needs and airlifting people in emergencies to Loma Linda is problematic.

The mandate to do seismic upgrades to California hospitals is not a new requirement. Senate Bill 1953 mandating the seismic upgrades of California hospitals was passed in 1994. Thirty years ago.

The district needs to provide Tenet with a proposal and give them something to work with. Tenet is the 10th largest hospital management company in the U.S., but if negotiations fail, here might be other potential service providers. It could be a hard sale at this late date and with the huge cost of the required upgrades.

Trial Courts Lack Power to Reject “Unmanageable” PAGA Litigation

Royalty Carpet Mills Inc., operated facilities located on Derian Avenue and the other on Dyer Road in Orange County. Jorge Luis Estrada worked at Derian.

Estrada filed a complaint against Royalty alleging various claims, including one asserting that Royalty violated Labor Code provisions requiring that it provide first and second meal periods, and one seeking PAGA penalties for various alleged Labor Code violations. Estrada and plaintiff Paulina Medina, a former Royalty employee who worked at Dyer, filed a second amended complaint that realleged Estrada’s individual claims as class claims and retained the PAGA claim from the original complaint.

Estrada, Medina, and 11 other plaintiffs then filed the operative third amended complaint. The third amended complaint alleged a total of seven class claims, one which was based on the failure to provide first and second meal periods, and one which sought PAGA penalties for various Labor Code violations, including those related to meal periods.

Several named plaintiffs moved for class certification in June 2017. The trial court certified a Dyer/Derian class composed of former nonexempt hourly workers who worked at the two facilities between December 13, 2009, and June 14, 2017. The court also certified three Dyer/Derian subclasses, including a meal period subclass to determine whether “class members were provided timely first meal periods and/or deprived of second meal periods.”

The trial court held a bench trial on plaintiffs’ claims. Plaintiffs presented “live testimony from 12 of the 13 named plaintiffs, deposition testimony from four different managers and officers of Royalty, live testimony from two of Royalty’s human resources employees, and live testimony from an expert witness.” In defense, Royalty presented testimony from two former employees and an expert witness.

After hearing this evidence, the trial court entered an order decertifying the two Dyer/Derian meal period subclasses alleging the first and second meal period violations, on the ground that there were too many individualized issues to support class treatment. In the same order, the trial court dismissed the PAGA claim seeking penalties for the alleged Dyer/Derian meal break-related violations with respect to persons other than the named plaintiffs as being unmanageable and subsequently entered judgment. Plaintiffs appealed from the decertification order and the judgment.

In the Court of Appeal, plaintiffs claimed that the trial court abused its discretion by decertifying the Dyer/Derian meal period subclasses and erred in dismissing the subclasses’ PAGA meal period claims on manageability grounds. The Court of Appeal agreed with plaintiffs on both issues.The Court of Appeal, in it’s published decision, directed the trial court to hold a new trial on both claims on remand, and added, “[a]s to both, we leave it in the court’s discretion to determine whether additional witnesses or other evidence will be allowed in light of the principles set forth in this opinion.” Estrada v. Royalty Carpet Mills, Inc. (2022) 76 Cal.App.5th 685).

The California Supreme Court granted Royalty’s petition for review to resolve the issue dividing the appellate courts: whether trial courts have inherent authority to strike a PAGA claim on manageability grounds. The Supreme Court affirmed the Court of Appeal and concluded that “trial courts lack inherent authority to strike PAGA claims on manageability grounds in the case of Estrada v. Royalty Carpet Mills, Inc. -S274340 (January 2024).

In 2003, the Legislature enacted PAGA to remedy “systemic underenforcement” of the Labor Code. Civil penalties recovered on a PAGA claim are split between the state and aggrieved employees. PAGA suits exhibit virtually none of the procedural characteristics of class actions.

The term “manageability” and its variants may be used more specifically to refer to a factor utilized in determining whether a class may be certified. This factor looks to whether issues pertaining to individual putative class members may be fairly and efficiently adjudicated.

Under federal law, manageability refers to the rule that a court consider “the likely difficulties in managing a class action” in determining whether the class action certification requirements of predominance and superiority are met.

Royalty and some amici curiae claim that trial courts have broad inherent authority to strike any type of claim, irrespective of its nature, to foster judicial economy.Contrary to Royalty’s contention “case law has recognized that the inherent authority of trial courts to dismiss claims is limited and operates in circumstances that are not present here.” The California Supreme Court explained the limits of a court’s “inherent discretionary power to dismiss claims with prejudice” in Lyons v. Wickhorst (1986) 42 Cal.3d 911,

In reaching this conclusion, the Supreme Courts emphasized that trial courts do not generally possess a broad inherent authority to dismiss claims. Nor is it appropriate for trial courts to strike PAGA claims by employing class action manageability requirements. And, while trial courts may use a vast variety of tools to efficiently manage PAGA claims, given the structure and purpose of PAGA, striking such claims due to manageability concerns – even if those claims are complex or time-intensive – is not among the tools trial courts possess.”

New CMS Rules Targets Access to Health Records

The Centers for Medicare & Medicaid Services (CMS) finalized the CMS Interoperability and Prior Authorization Final Rule (CMS-0057-F) today. The rule sets requirements for Medicare Advantage (MA) organizations, Medicaid and the Children’s Health Insurance Program (CHIP) fee-for-service (FFS) programs, Medicaid managed care plans, CHIP managed care entities, and issuers of Qualified Health Plans (QHPs) offered on the Federally-Facilitated Exchanges (FFEs), (collectively “impacted payers”), to improve the electronic exchange of health information and prior authorization processes for medical items and services. A fact sheet for this final rule is available. .

Together, these policies will improve prior authorization processes and reduce burden on patients, providers, and payers, resulting in approximately $15 billion of estimated savings over ten years.

The announcement noted that while prior authorization can help ensure medical care is necessary and appropriate, it can sometimes be an obstacle to necessary patient care when providers must navigate complex and widely varying payer requirements or face long waits for prior authorization decisions.

This final rule establishes requirements for certain payers to streamline the prior authorization process and complements the Medicare Advantage requirements previously finalized.

Beginning primarily in 2026, impacted payers (not including QHP issuers on the FFEs) will be required to send prior authorization decisions within 72 hours for expedited (i.e., urgent) requests and seven calendar days for standard (i.e., non-urgent) requests for medical items and services.

For some payers, this new timeframe for standard requests cuts current decision timeframes in half. The rule also requires all impacted payers to include a specific reason for denying a prior authorization request, which will help facilitate resubmission of the request or an appeal when needed. Finally, impacted payers will be required to publicly report prior authorization metrics, similar to the metrics Medicare FFS already makes available.

The rule also requires impacted payers to implement a Health Level 7 (HL7®) Fast Healthcare Interoperability Resources (FHIR®) Prior Authorization application programming interface (API), which can be used to facilitate a more efficient electronic prior authorization process between providers and payers by automating the end-to-end prior authorization process.

Medicare FFS has already implemented an electronic prior authorization API, demonstrating the efficiencies other payers could realize by implementing such an API. Together, these new requirements for the prior authorization process will reduce administrative burden on the healthcare workforce, empower clinicians to spend more time providing direct care to their patients, and prevent avoidable delays in care for patients.

CMS is also finalizing API requirements to increase health data exchange and foster a more efficient health care system for all. CMS values public input and considered the comments submitted by the public, including patients, providers, and payers, in finalizing the rule. Informed by public comments, CMS is delaying the dates for compliance with the API policies from generally January 1, 2026, to January 1, 2027.

In addition to the Prior Authorization API, beginning January 2027, impacted payers will be required to expand their current Patient Access API to include information about prior authorizations and to implement a Provider Access API that providers can use to retrieve their patients’ claims, encounter, clinical, and prior authorization data. Also informed by public comments on previous payer-to-payer data exchange policies, we are requiring impacted payers to exchange, with a patient’s permission, most of those same data using a Payer-to-Payer FHIR API when a patient moves between payers or has multiple concurrent payers.

Finally, the rule also adds a new Electronic Prior Authorization measure for eligible clinicians under the Merit-based Incentive Payment System (MIPS) Promoting Interoperability performance category and eligible hospitals and critical access hospitals (CAHs) in the Medicare Promoting Interoperability Program to report their use of payers’ Prior Authorization APIs to submit an electronic prior authorization request. Together, these policies will help to create a more efficient prior authorization process and support better access to health information and timely, high-quality care.