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Fosun International Limited and Meadowbrook Insurance Group, Inc. announced that they have entered into a definitive agreement under which Fosun will acquire Meadowbrook for US$8.65 per share in cash, representing an aggregate transaction value of approximately US$433 million. The transaction follows a thorough review of strategic alternatives by the Meadowbrook board of directors and represents a 24% premium over Meadowbrook's closing price on December 29, 2014 and a premium of 39% to Meadowbrook's three-month average closing price for the period ending December 29, 2014. The transaction also represents a multiple of approximately 1.04x Meadowbrook's tangible book value per share as of September 30, 2014.

Meadowbrook Insurance Group, Inc., based in Southfield, Michigan, is a leader in the specialty program management market. Meadowbrook includes several agencies, claims and loss prevention facilities, self-insured management organizations and six property and casualty insurance underwriting companies. Meadowbrook has twenty-eight locations in the United States including California. It is a risk management organization, specializing in specialty risk management solutions for agents, professional and trade associations, and small to medium-sized insureds.

Fosun is a leading investment group headquartered in Shanghai, China with over $50 billion in total assets and operations around the world. The acquisition of Meadowbrook will enable Fosun to establish a significant presence in the U.S. property and casualty market. Currently, Fosun has more than one third of its total assets invested in insurance businesses around the world, including investments in Yong'an P & C Insurance, Pramerica Fosun Life Insurance and Peak Reinsurance, as well as Fidelidade Group, Portugal's largest insurance company.Fosun's most recent investment in the insurance sector was an acquisition of a 20% equity interest in Ironshore Inc. in August 2014.

Guo Guangchang, Chairman of Fosun, said, "This transaction allows Fosun to establish a presence in the important U.S. P & C market, consistent with our strategy of expanding our core insurance business. Meadowbrook has a talented employee base, comprehensive offering of high-quality specialty insurance products, robust distribution network and a strong commitment to meeting the evolving needs of its policyholders.The transaction represents another milestone for Fosun and will enable Fosun to further strengthen its insurance-oriented comprehensive financial capabilities."

Robert S. Cubbin, President and Chief Executive Officer of Meadowbrook, said, "Combining with Fosun further strengthens our capital base as we continue to focus on supporting the needs of our customers, partners and policyholders, improving our underwriting performance and driving profitability." Mr. Cubbin continued, "This transaction is the culmination of a thorough strategic review process to maximize shareholder value. We believe this is a positive outcome for our shareholders, who will receive significant value; our employees, who will benefit from enhanced opportunities as part of a larger, global organization; and our customers, partners and policyholders, who will benefit from an even stronger specialty risk, insurance and service provider."

The transaction has been unanimously approved by all of the directors of the Meadowbrook board of directors present at the meeting and has been unanimously approved by the Fosun board of directors. Following the closing of the transaction, which is expected in the second half of 2015, Meadowbrook will continue to maintain its headquarters in Southfield, Michigan and will operate under the Meadowbrook brand name. The transaction is subject to the approval of Meadowbrook's shareholders as well as regulatory approvals and the satisfaction of other specified closing conditions ...
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/ 2014 News, Daily News
A Child Support Officer for the San Bernardino County Department of Child Support Services was arraigned late December on three felony counts related to a workers’ compensation claim she filed with the County on July 20, 2009, alleging stress-related impairment.

Esther Marinelarena, 45, of Fontana, was arraigned at the San Bernardino Justice Center and pleaded not guilty to one count of Workers’ Compensation Fraud, one count of Insurance Fraud, and one count of Concealment of, or Failure to, Disclose Material Fact Regarding Insurance Benefits (see attached copy of complaint).

On Oct. 23, 2014, following an investigation by investigators with the San Bernardino County District Attorney’s Workers’ Compensation Insurance Fraud Unit, Marinelarena was charged for allegedly making false statements regarding the degree of her impairment and lying to her treating physician about her medical and psychiatric history.

Marinelarena was arrested by District Attorney Investigators Oct. 28 and transported to West Valley Detention Center in Rancho Cucamonga.

Deputy District Attorney Scott Byrd will prosecute this case. A Disposition/Reset Hearing is scheduled Jan. 21, 2015 in Dept. S12 of the San Bernardino Justice Center ...
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/ 2014 News, Daily News
The Department of Industrial Relations released its 2014 Legislative Digest, which provides an overview of new laws and vetoed bills related to the work of DIR and its divisions, which include the Labor Commissioner’s Office, Cal/OSHA, the Division of Workers’ Compensation and the Division of Apprenticeship Standards. These bills were all reviewed during the second half of the 2013/2014 legislative session. Among the chaptered bills signed by the Governor in the digest are:

AB 1035 extends the time period to file a dependency case with the WCAB from 240 weeks to no later than 420 weeks from the date of injury for certain safety workers if the death was due to cancer, tuberculosis, a blood-borne infectious disease or methicillin-resistant Staphylococcus aureus skin infection; Governor Brown vetoed a similar bill last year.
AB 1746 requires that cases in which an unrepresented employee who is or was employed by an illegally uninsured employer be placed on the priority conference calendar at the WCAB. It must be held within 30 days after a DOR is filed in the case..
AB 2230 allows CIGA to levy an assessment of up to two percent of direct written premiums for the payment of covered claims and expenses.
AB 2732 makes technical, non-substantive, and clarifying changes to several Labor Code provisions amended or enacted by SB 863.

It is of interest that the Governor vetoed the following bills that pertain to Workers' Compensation.

AB 2052 would have established or expanded presumptions of injury for safety officers In the veto message Brown said "This measure seeks to expand coverage to dozens of additional categories of officers without real evidence that these officers confront the hazards that gave rise to the presumptions codified in existing law. Presumptions should be used rarely and only when justified by clear and convincing scientific evidence."
AB 2378 would have overturned the June 2013 decision by the California Court of Appeals in County of Alameda v. WCAB (Knittel) (2013) 213 Cal.App.4th 278, 78 Cal. Comp. Cases 81, which ruled that the period of salary continuation must be counted as part of the 104-week limit on TD benefits.
AB 2616 would have established a statutory presumption that a MRSA infection that develops in a hospital employee who provides direct patient care in an acute care hospital is work related. Brown's veto message said "The determination that an illness is work-related should be decided by the rules of that system and on the specific facts of each employee’s situation. While I am aware that statutory presumptions have steadily expanded for certain public employees, I am not inclined to further this trend or to introduce it into the private sector."

Other bills of interest that were signed into law include

AB 326 modernizes reporting requirements for employers reporting serious injury, illness or death. This law provides that employers may also report such incidents via email and removes the option to report via telegraph.
AB 1522 creates the Healthy Workplaces, Healthy Families Act of 2014, which provides that as of July 1, 2015, employees shall accrue compensated sick leave to care for themselves or for family members as defined in the bill. Under this bill, employers shall provide up to 24 hours (i.e., three days) of paid sick leave each year.

The Governor vetoed the following bill that pertains to Employment Law.

AB 2271 would have restricted employers, employment agencies, and persons who operate an Internet website from posting job advertisements that indicate an individual’s current employment is a requirement for a job. The veto message said "While I support the intent of this bill, it could impede the state’s efforts to connect unemployed workers to prospective employers as currently drafted. The problems facing our state’s long term unemployed are great. There is no doubt that those Californians want to get back to work and I want to help them get there - unfortunately this bill does not provide the proper path to address this problem."

The 26 page DIR 2014 Legislative Report, or the website of the Legislative Counsel of California should be consulted for further more detailed information about these and other laws that take effect in January ...
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/ 2014 News, Daily News
The Division of Workers’ Compensation (DWC) has posted a third 15-day notice of modification to the proposed Medical Treatment Utilization Schedule (MTUS) regulations to the DWC website. Members of the public are invited to present written comments regarding the proposed modification to dwcrules@dir.ca.gov until 5 p.m. on Tuesday, January 13, 2015. The proposed modifications include:

1) Specification that treating physicians provide a clear and concise statement in the Request for Authorization or in an attachment to the Request for Authorization when they are attempting to rebut the MTUS’ presumption of correctness.
2) Requirement that treating physicians provide a copy of the entire study or relevant sections of the guideline containing the recommendation that the physician believes guides the reasonableness and necessity of the requested treatment when they are attempting to rebut the MTUS’ presumption of correctness.
3) Clarification that the MTUS Methodology for Evaluating Medical Evidence shall be applied by Utilization Review physicians and Independent Medical Review physicians when competing recommendations are cited to guide medical care. The MTUS Methodology for Evaluating Medical Evidence is the process used to evaluate the quality and strength of evidence used to support a recommendation.

The notice and text of the regulations can be found on the proposed regulations page ...
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/ 2014 News, Daily News
Governor Brown has announced some year end appointments, four to the Workers' Compensation Fraud Assessment Commission and one to the Occupational Safety and Health Appeals Board.

Lilia García-Brower, 41, of Los Angeles, has been appointed to the California Fraud Assessment Commission, where she has served since 2007. García-Brower has been executive director at the Maintenance Cooperation Trust Fund since 2000. She was a teaching assistant at California State University, Northridge from 1999 to 2000 and a college counselor at Volunteers of America, Los Angeles from 1996 to 1999. This position does not require Senate confirmation and the compensation is $100 per diem. García-Brower is registered without party preference.

Donald Marshall, 60, of Fremont, has been appointed to the California Fraud Assessment Commission, where he has served since 2009. Marshall has been vice president at the Zenith Insurance Company since 2003, where he was manager of investigations from 1993 to 1996. He was director of special investigations at Gates McDonald from 1999 to 2003, vice president of CalFarm Insurance from 1996 to 1999 and special investigations coordinator at the California Casualty Insurance Company from 1991 to 1993. This position does not require Senate confirmation and the compensation is $100 per diem. Marshall is a Democrat.

John Riggs, 61, of Mission Viejo, has been appointed to the California Fraud Assessment Commission, where he has served since 2009. Riggs has been manager of worker's compensation at Disneyland Resort in California since 2003. He was director of workers' compensation at 99 Cents Only Stores from 2002 to 2003, a regional claims manager and vice president at the California Casualty Management Company from 1993 to 2001, claims manager at the Zenith Insurance Company Workers' Compensation Branch from 1987 to 1993 and an independent claims consultant from 1986 to 1987. This position does not require Senate confirmation and the compensation is $100 per diem. Riggs is a Republican.

Douglas Williams, 65, of Lancaster, has been appointed to the California Fraud Assessment Commission, where he has served since 2011. Williams has been an application processor for the Labor Management Cooperative Trust, Market Retention Committee since 2012. He was a manager at Ironworkers Local Union 433 from 2006 to 2012, where he was a business agent from 2000 to 2006. Williams was a superintendent at Benson Wall Systems from 1997 to1999, a rigging foreman at Randall's Erectors in 1997 and a lay-out foreman at South Coast Structural from 1996 to 1997. He was a journeyman at Junior Steel in 1996, a rigging foreman at Sheedy Drayage Company in 1995 and a journeyman at Plastal Manufacturing Company from 1994 to 1995 and at Atlas Industrial Contractors in 1994. This position does not require Senate confirmation and the compensation is $100 per diem. Williams is a Democrat.

Art Carter, 73, of San Francisco, has been reappointed member and chair of the Occupational Safety and Health Appeals Board, where he has served since 2009. Carter was legislative advocate for Art Carter and Associates from 1984 to 2004 and served as deputy chief administrative officer for the city of San Francisco in 1983. He served as chief of the California Department of Industrial Relations, Division of Occupational Safety and Health Administration from 1976 to 1983 and was secretary-treasurer for the Contra Costa County Central Labor Council from 1967 to 1976. This position requires Senate confirmation and the compensation is $121,778. Carter is a Democrat ...
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/ 2014 News, Daily News
The Division of Workers’ Compensation has posted an example of a streamlined End of Medical Provider Network (MPN) Coverage Notice to the DWC website.

This streamlined notice is only used when an employer-based or insurer-based MPN ends its coverage and consolidates medical care into an MPN established by an entity that provides physician network services and the medical treatment of injured workers is not affected. Medical treatment will not be affected if the underlying network of providers is used by all of the MPNs involved.

Since an injured worker’s medical treatment will remain with the same physician and continue with the MPN that is taking over medical care, a Transfer of Care Notice pursuant to California Code of Regulations, title 8, section 9767.9 is not required. However, a complete employee notification must be provided pursuant to California Code of Regulations, title 8, section 9767.12(a), along with the streamlined End of Medical Provider Network (MPN) Coverage Notice. This sample gives three options to choose from to provide the complete employee notification ...
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/ 2014 News, Daily News
A federal judge dismissed a class action accusing the NFL of giving football players dangerous painkillers to mask their injuries.

According to the report in Courthouse News, U.S. District Judge William Alsup found the lawsuit brought by more than 500 former players must be settled under the collective bargaining agreements between the NFL and the players' union, as the crux of the claim is that players' teams mistreated them, and that the league did nothing to stop it in his 22 page ruling. The lead plaintiff was Richard Dent, a former Chicago Bear.

"One problem is this: no decision in any state (including California) has ever held that a professional sports league owed such a duty to intervene and stop mistreatment by the league's independent clubs," Alsup wrote. Alsup ruled that while the agreement's medical care provisions may not be perfect, and its protections may not specifically discuss prescribing drugs and painkillers, "this is not a situation in which the NFL has stood by and done nothing."

"The main point of this order is that the league has addressed these serious concerns in a serious way - by imposing duties on the clubs via collective bargaining and placing a long line of health-and-safety duties on the team owners themselves," Alsup wrote in his 22-page ruling. "These benefits may not have been perfect but they have been uniform across all clubs and not left to the vagaries of state common law. They are backed up by the enforcement power of the union itself and the players' right to enforce these benefits." He continued: "Given the regime in place after decades of collective bargaining over the scope of these duties, it would be impossible to fashion and to apply new and supplemental state common law duties on the league without taking into account the adequacy and scope of the CBA duties already set in place."

At a hearing in October that signaled Alsup's decision, he said: "The union is supposed to be looking out for the plaintiffs. The labor union is the one that is supposed to be doing this." Alsup ordered that the players' union weigh in on whether the retired players could still arbitrate their grievances.

The union complied with that order, and Alsup, who found that the players' retiree status should not bar them from arbitration, quoted the union's letter in his ruling. "On this issue, the union's letter has explained that 'the current CBA and former CBAs have included various provisions negotiated on behalf of current and future players that continue to benefit those players after they retire from the NFL,' such as provisions on retirement plans or termination pay," Alsup wrote. "In fact, former players in other cases have been able to arbitrate their grievances against the NFL or individual clubs, notwithstanding their prior retirement from the league."

Though Alsup found the issue should not be decided in federal court, he said: "This order does not minimize the underlying societal issue. In such a rough-and-tumble sport as professional football, player injuries loom as a serious and inevitable evil. Proper care of these injuries is likewise a paramount need."

The players may file an appeal, or may file a motion to file an amended pleading. Thus this may not be the final word on this claim filed in San Francisco, or the Workers' Compensation claims that may also follow ...
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/ 2014 News, Daily News
SB 863 made certain changes to the California Government Code at section 11435 to require certification of interpreters who are used in WCAB hearings, depositions and medical appointments. One of the certification methods for Court Interpreters is specified in Government Code sections 68560-68566

Effective January 1, section 68561 of the Government Code will be amended by the provisions of AB 2370 which was approved by the Governor on September 18, 2014 and filed with the Secretary of State on September 18, 2014. The amendment would require certified or registered interpreters to state information for the record in depositions where a judge is not present, that documents the qualifications of the interpreter that us used. Specifically the new language of section 68561 requires the following at a deposition.

GC 68561 (h) In a deposition where a judge is not present to fulfill the requirements specified in subdivision (g), a certified or registered interpreter shall state all of the following for the record:
(1) His or her qualifications, including his or her name and certification or registration number.
(2) A statement that the interpreter’s oath was administered to him or her or that he or she has an oath on file with the court.
(3) A statement that he or she has presented to both parties the interpreter certification or registration badge issued to him or her by the Judicial Council or other documentation that verifies his or her certification or registration accompanied by photo identification.

The author of the bill explained the rationale. "There is no statutory requirement for a judge to verify the qualifications of an interpreter who claims to be certified, or claims to have an "oath on file." Instead, non-certified interpreters often say they have an oath on file, thus giving a false impression that they are certified. This results in judges struggling to recognize when an interpreter is actually certified and when there is a need to follow court procedures for qualifying a non-certified interpreter. Ensuring that a certified interpreter has a certification number, certification status, and badge or photo identification would increase the accuracy of determining whether the court proceeding has received services from a certified interpreter or a non-certified interpreter. AB 2370 would increase accountability for the use of certified court interpreters and prevents any misrepresentation of certification by requiring a judge to direct the certified interpreter to state, for the record, their name and certification status, show photo identification, identify the language that will be interpreted and verify the filing of their oath with the court."

It would be prudent for attorneys to insure compliance with this new law at any deposition taken after January when an interpreter is used. It is not known if failure to comply would jeopardize use of the deposition transcript at a later time. Compliance with this new law would avoid this risk ...
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/ 2014 News, Daily News
A federal lawsuit alleging price gouging by the maker of hepatitis C drug Sovaldi mirrors a growing struggle to contain hepatitis C-related workers compensation prescription costs that can reach up to $150,000 per claimant. While Sovaldi, which entered the market a year ago, is a highly effective treatment that can cure patients of hepatitis C - unlike other treatments for the chronic liver infection - employers should carefully monitor its use to determine whether cheaper treatments are available or appropriate, experts say.

In the class action suit filed Dec. 9 in U.S. District Court in Philadelphia, the Southeastern Pennsylvania Transportation Authority in Philadelphia says it has paid more than $2.4 million for Sovaldi prescriptions for its employees in 2014. According to the story in Business Insurance, the agency accuses Sovaldi's maker, Foster City, California-based pharmaceutical company Gilead Sciences Inc., of "selectively charging exorbitant prices" for Sovaldi, and is seeking unspecified restitution and monetary damages against Gilead for alleged unjust enrichment, violations of the Patient Protection and Affordable Care Act and other claims.

While the SEPTA suit relates to group health payments for Sovaldi, workers comp payers also are seeing rising costs related to the drug. Pharmacy benefit manager Express Scripts Inc. said spending for hepatitis C medications in workers comp increased 135% in the first six months of 2014 compared with the same period in 2013. About 66% of that increase is attributed to Sovaldi prescriptions, the company said in a statement. The cost increase occurred despite a reduction in the number of pharmacy prescriptions for hepatitis C medications at Express Scripts, where workers comp claims for the disease fell to 79 in the first half of 2014, down from 92 in the first half of 2013, according to the PBM's data. Health care workers, emergency first responders and other workers who are regularly exposed to bodily fluids are most likely to file for workers comp benefits related to hepatitis C.

"Sovaldi is priced at an orphan drug price for a population that is not an orphan drug population. So it's priced really at a premium that we can't sustain," said Brigette Nelson, senior vice president of workers compensation clinical management for Express Scripts in Cave Creek, Arizona. So-called orphan drugs are medications used for illnesses that affect only a small subset of the population.

Hepatitis C treatment costs can soar higher when Sovaldi, which costs $84,000 for a 12-week course of treatment, is paired with another new hepatitis C drug called Olysio, which is made by Titusville, New Jersey-based pharmaceutical company Janssen Therapeutics and costs $66,360 for a 12-week course of treatment. The U.S. Food and Drug Administration approved both drugs in late 2013. The medications often are used together to help increase the chances of curing a patient's hepatitis C infection, said Phil Walls, chief clinical and compliance officer at Tampa, Florida-based PBM Matrix Healthcare Services Inc., which does business as myMatrixx.

Trying to limit drug costs for hepatitis C under a workers comp claim can be tricky. Experts agree that Sovaldi and other newer treatments are more effective than older, cheaper hepatitis C medications that include longer courses of treatment, have more side effects, require patients to take multiple doses a day and less likely to cure patients of the disease. "We're not disputing that Sovaldi is a much better drug, because it is better tolerated than the previous therapies. It's just the cost that we're concerned about," Ms. Nelson said.

Employers should work with their TPA or PBM to create prescription drug formularies that would automatically flag a claim for Sovaldi and initiate a review of whether the drug is appropriate for certain patients, Ms. Harer said. For example, patients recently exposed to bloodborne pathogens may be effectively treated with prophylactic antiviral medications that can prevent infection and are much less costly than Sovaldi and other hepatitis C treatments, she said. Mr. Walls said claim payers should consider using specialty drug pharmacies to fill prescriptions for Sovaldi or other hepatitis C drugs, since such pharmacies specialize in helping patients to adhere to drug treatments.

Proper adherence can make sure that a Sovaldi drug course works the first time, preventing a patient from needing to do another expensive round of the treatment in the future, he said. "You really need to be compliant with your therapy in order for the drug to be as effective as possible," Mr. Walls said.

Ms. Nelson of Express Scripts said the company - the nation's largest PBM - is pushing Gilead and other hepatitis C drug makers for more competitive prescription prices. "That's the next step that needs to happen so that people have access to drugs at a cost that can be sustained," she said ...
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/ 2014 News, Daily News
The Division of Workers’ Compensation (DWC) has received inquiries regarding an update to the Official Medical Fee Schedule (OMFS).

The Physician and Non-Physician Practitioner Fee Schedule based on the federal Resource Based Relative Value Scale (RBRVS) was adopted pursuant to the requirements of Senate Bill 863 and became effective for services rendered on or after January 1, 2014.

The Medicare final physician fee schedule RBRVS rule for 2015 was published in the Federal Register on November 13 with an effective date of January 1, 2015. The Labor Code requires that the fee schedule be updated within 60 days after the effective date of the Medicare revision by issuance of an Administrative Director update order. DWC has been working diligently to complete review of the rule and Relative Value File and to determine the updates that are needed.

As a result of review of the published final rule, and based on prior Medicare practice, DWC anticipates that the Centers for Medicare and Medicaid Services (CMS) will be posting a Physician Fee Schedule Final Rule Correction Notice. DWC has determined that it would be most efficient to wait for the Medicare Final Rule Correction Notice before adopting an update. After publication of the Medicare Final Rule Correction Notice, DWC will review the revisions, and will issue an Administrative Director update order making appropriate adjustments to the workers’ compensation fee schedule.

The Administrative Director update order will specify the effective date of the changes. If the Medicare correction notice is issued prior to the end of December, DWC anticipates that the 2015 update to the Physician and Non-Physician Practitioner Fee Schedule will be effective for services rendered in early February 2015. The estimated date is subject to change depending on the date of issuance of the Medicare Final Rule Correction Notice, the extent of the changes, and the need to allow time for implementation by providers and payers.

You may receive the announcement of the 2015 fee schedule update by subscribing to DWC’s Newsline mailing list. Upon adoption, the 2015 fee schedule will be posted to the DWC website ...
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/ 2014 News, Daily News
The Terrorism Risk Insurance Act (TRIA) is a United States federal law signed by President George W. Bush on November 26, 2002. The Act created a federal "backstop" for insurance claims related to acts of terrorism. The Act "provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism." The Act was originally set to expire December 31, 2005, was extended for two years in December 2005, and was extended again on December 26, 2007. The current law, under the Terrorism Risk Insurance Program Reauthorization Act, is set to expire on December 31, 2014.

The potential for the TRIA expiration was seen as a potential catastrophe in the insurance marketplace by some workers' compensation experts. They reasoned that the peculiar nature of workers' compensation policies precluded insurance carriers from excluding catastrophic losses from their policies, and as a result the increase risk of a massive claim loss should there be a repeat of an act of terrorism similar to the September 11 event could pose an unacceptable risk. As a result, the expectation was that carriers would simply exit the market rather than underwrite the risk leaving employers in an insurance marketplace with no or extremely expensive carriers.

According to a report in Property Casualty 360, It seems that this disruptive lack-of-insurance scenario will not occur on January 1.

Congress failed to act on TRIA before adjourning for the year, meaning TRIA will expire at the end of the year. This was a big surprise, as most felt the House would be the reason for TRIA not getting extended. Last week the House passed a TRIA extension bill, but it was the Senate that ultimately failed to take up a vote on the issue. Why did this happen? Unfortunately, Congress has a habit of tacking unrelated riders onto bills with the hope of getting these issues passed. In this case, the House added amendments to NARAB II legislation, which has to do with licensing of insurance agents and brokers. Some in the Senate were not comfortable with those issues, which kept the Senate from approving the House bill on TRIA.

So what happens now with TRIA? The new Congress will reconvene on January 6, 2015, and the expectation is they will take up TRIA. However, given what just happened, you cannot assume the new Congress will pass a TRIA bill. And even if they do, a new bill may look substantially different than what was on the table.

What does this mean to the workers’ compensation industry? Back in February, carriers started issuing policies that contemplated coverage without the TRIA backstops. Employers saw some carriers pull back from certain geographic locations -- most notably in New York City, particularly in Manhattan. They also saw some carriers change the terms of their policies and only bind coverage through the end of the year, giving themselves the flexibility to renegotiate terms or terminate coverage if TRIA did not renew. There were legitimate concerns that the workers’ comp marketplace in New York City would be in chaos by the fourth quarter of 2014 as brokers scrambled to place coverage beyond January 1, 2015. The New York State Insurance Fund was in the middle of these discussions, as they were faced with the prospect of having to provide coverage for employers if the private marketplace did not respond.

As the year progressed, something else happened. The marketplace responded. While some carriers pulled back in certain geographic locations, others stepped up to take their place. While some carriers tied their policy expiration to the expiration of TRIA, other carriers did not. Ultimately, employers were still able to obtain workers’ compensation coverage in the private marketplace.

What does this mean going forward? There may still be some policies out there that have endorsements allowing the carrier to cancel or renegotiate terms when TRIA expires, but this does not appear to be a widespread issue. Since workers’ compensation is statutory, and carriers cannot exclude for cause, there cannot be terrorism risk exclusions on a workers’ compensation policy. The carrier’s only choice is to provide coverage or decline the risk. While this may not hold true for other lines of coverage, the workers’ compensation marketplace has adapted to the absence of TRIA. Carriers are likely paying more attention to their geographic concentration of exposures, which means employers will have fewer choices, and may see higher pricing. But, at the end of the day, employers should be able to obtain workers’ compensation coverage without the TRIA backstop in place ...
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/ 2014 News, Daily News
A former California Highway Patrol officer has been convicted in a case involving workers’ compensation insurance fraud.

A Sacramento County jury on Thursday convicted Tony Yao on felony charges of failure to disclose a prior motor vehicle accident and resulting injury, making false statements in support of his workers’ compensation claim and filing a false claim. Yao was a CHP officer working in the Commissioner’s Support Unit when he alleged he had suffered a work injury to his back, according to a Sacramento County District Attorney’s Office news release. The claim was administered by the State Compensation Insurance Fund, and the CHP’s Internal Affairs Workers’ Compensation Fraud Unit investigated the claim.

Evidence showed that Yao failed to disclose and concealed a 2005 motor vehicle accident that caused injury to the same part of his back that he alleged he injured in the in workers’ compensation claim, authorities said.

Yao claimed he was unable to work because he could not bend, twist, walk without a cane and needed help with everyday activities, such as washing and dressing. But video surveillance showed Yao was able to walk normally without a cane, bend and twist with ease, and that he was able to pound stakes in his front yard to mount a flag.

Yao also claimed that he mistakenly gave the wrong date for when his injury occurred on his workers’ compensation claim form and filed an amended claim to change the date. Evidence showed Yao changed the date to conform to information contained in his medical records in an effort to conceal his pre-existing back injury from the State Compensation Insurance Fund, authorities said.

Yao is to be sentenced Jan. 28 before Sacramento Superior Court Judge Russell Hom ...
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/ 2014 News, Daily News
On November 19, 2013, Rosa Mendez filed an in pro per civil complaint in Superior Court against Cottage Health System, the parent organization of Santa Barbara Cottage Hospital. The factual allegations were contained in an undated letter addressed to the staff at Santa Barbara City College (SBCC), a copy of which was attached to the complaint. The letter stated that on October 28, 2010, Mendez was exposed to dangerous levels of radiation while assisting an x-ray technician at Cottage Hospital.

Mendez said she was working at the hospital that day as part of her coursework in the x-ray technician program at SBCC. Mendez immediately complained to the technician and the chairperson of SBCC's Department of Radiologic and Imaging Sciences, both of whom deemed the complaints unfounded.

After the exposure, Mendez alleged she "began to experience severe chest pain and dizziness and blurred vision." Although the letter does not refer to the date when these symptoms purportedly began, another attachment indicates that Mendez sought treatment for blurred vision in March 2011. The letter also states that Mendez has "been suffering mentally and emotionally since [she] was exposed to unnecessary radiation." No amount of damages was specified.

Cottage demurred to the complaint, contending among other things, that the action was barred by the statute of limitations. Mendez did not oppose the demurrer. In sustaining the demurrer, the court noted that "[t]he complaint itself alleges that [Mendez] was aware of the incident when it occurred" on October 28, 2010, yet did not file her action until November 19, 2013. The court concluded that Mendez had thus filed her action beyond the two-year statute of limitations for personal injury claims. The court nevertheless granted Mendez leave to amend "because there may exist some set [of] facts which could potentially act to bring the action within some tolling provision[.]"

Mendez then filed a first amended complaint seeking $14 million in compensatory damages, unspecified punitive damages, and "life time medical insurance" for herself and her two children. Mendez once again stated she was immediately concerned about the radiation exposure and added that she began experiencing symptoms of the exposure the following month. Mendez also alleged that the chairperson of SBCC's Department of Radiologic and Imaging Sciences, the attorney who represented Mendez in proceedings before the Workers' Compensation Appeals Board (WCAB), and the judge who presided over those proceedings all fraudulently induced Mendez to refrain from filing suit until after the limitations period had expired.

Cottage demurred to the first amended complaint, again asserting that the action was time-barred. Mendez opposed the demurrer, claiming that the doctrine of equitable tolling applied. The trial court sustained the demurrer without leave to amend, reasoning that the first amended complaint only alleged a claim of negligence and was filed beyond the two-year statute of limitations that applies to such claims. In rejecting Mendez's claim of equitable tolling, the court noted that Mendez's allegations and supporting documentation "conclusively show that she was aware of her claim on the date of the incident." The court further noted that Mendez had not alleged that she was misled by Cottage or its employees to refrain from pursuing her claim. Judgment was entered in favor of Cottage, and Mendez appealed. The Court of Appeal affirmed the dismissal in the unpublished case of Mendez v Cottage Health Systems.

Mendez did not file her complaint until November 2013, so the court properly found it was time-barred. Even if Mendez had sufficiently alleged a claim for fraud or professional negligence, her complaint was also filed beyond the three-year limitations period that applies to such claims. Mendez's workers' compensation claim against Cottage was only pending from August 28, 2012, until November 5, 2012. Tolling the statute of limitations for this 69-day period would not have aided Mendez, who filed her complaint over three years after she discovered her claim ...
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/ 2014 News, Daily News
The outlook for non-profit healthcare remains dour for 2015, as hospital operating margins continue to face pressure from rising costs and weaker reimbursement.

According to the report in Reuters, the three major credit ratings agencies gave the healthcare and hospital sector a negative outlook next year, citing anticipated downgrades, declining operating cash flows, and on-going uncertainties surrounding the implementation of the Affordable Care Act.

"The negative pressures facing most providers are widespread," said Martin Arrick, services analyst with Standard and Poor's Ratings. "Many providers will not be able to adapt."

Standard and Poor's forecasted more downgrades than upgrades among not-for-profit healthcare providers for a third consecutive year, as operating margins are pinched by rising costs. "There would likely have been more downgrades in 2014 if not for the high level of merger and acquisition activity which often precluded downgrades and in many cases led directly to upgrades," the authors said in its 2015 outlook.

Moody's Investors Service anticipated another 12 to 18 months of weak performance, with large hospital systems faring better from economies of scale and the ability to drive revenue growth through expanded services. "The largest hospitals are getting stronger, while the smaller hospitals get weaker," Moody's senior analyst Daniel Steingart said.

Many hospitals have exhausted the low-hanging fruit for cost-cutting. At the same time, hospitals are expected to shift away from the traditional fee-for-service models, in which more patient services led to more revenue. The Affordable Care Act and purchasers of healthcare are now emphasizing preventative care and reduced hospital stays.

That trend might be good news for the 43 million Americans grappling with overdue medical debt, according to the U.S. Consumer Financial Protection Bureau, but not so for hospitals that historically counted on healthcare spending to balance operating budgets.

Fitch Ratings said more uncertainty is on the way, as Republicans with Congressional control vow to repeal or defund parts of the Affordable Care Act. That would "hamper the sector's ability to adapt and plan," Fitch said. The rating agency was closely following an upcoming U.S. Supreme Court decision in the King vs. Burwell case, in which the court could effectively invalidate insurance coverage purchased through federally operated state exchanges.

"The hospital sector has navigated many challenging environments in the recent past, but the upcoming years represent a true transition as the core model of healthcare delivery and reimbursement is undergoing redesign," said James LeBuhn, Fitch senior director ...
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Elite Surgical Centers, Escondido, L.P., Elite Surgical Centers, Del Mar, L.P., and Point Loma Surgical Center, L.P. (collectively Elite), had claims pending before the WCAB concerning billing disputes related to the facility fees for arthroscopic knee procedures, arthroscopic shoulder procedures, and epidural injection procedures provided by Elite to injured workers prior to January 1, 2004.

The dispute over billing began when, in 2000 when Elite increased the charges that it billed for certain outpatient services, including the services at issue in this proceeding. The defendants in the WCAB cases disputed the reasonableness of Elite's increased charges. Rather than remitting the amounts billed, the petitioners paid only the amounts that they believed were appropriate for the services performed. For the period between April 13, 2001 and December 31, 2003, the administrative director adopted an OMFS with reasonable maximum fees for services performed by 21 San Diego area hospitals. (8 Cal. Code Regs., § 9792.1.) This OMFS did not cover facility fees charged by ASCs. As a result, there was no established "reasonable maximum fee" for procedures provided at ASCs during the relevant time period. Elite filed notices of liens which resulted in 300 consolidated claims pending before the San Diego office of the WCAB. In this case, a 17-day trial was held before the WCJ regarding the reasonable value for certain facility services provided by Elite in the consolidated cases. Both parties presented extensive documentary and testimonial evidence.

At the time the parties' dispute over Elite's bills arose, billing disputes were resolved through litigation before the Board. On January 1, 2013, after the case had been submitted to the WCJ but before the WCJ issued a decision SB 863 was enacted in 2012 and became effective in January 2013. One month later, on February 1, 2013, the WCJ issued his decision regarding the consolidated claims. The WCJ determined that the reasonable fee for arthroscopic knee procedures was "$5,207.85 or the amount billed, whichever is less." This amount is approximately 28 percent of the amount that Elite customarily billed for such procedures, and is $5,377 less than what Elite stated that it accepted, on average, per bill. The Board granted reconsideration but affirmed the the original decision. The defendant CIGA appealed.

The Court of Appeal in the published case of CIGA v WCAB and Elite Surgical Centers affirmed the decision of the Board after Reconsideration and resolved the following issues: (1) Does the Workers' Compensation Appeals Board retain jurisdiction over a medical billing dispute pertaining to more than 300 consolidated claims, after the Legislature passed SB 863 that created a new administrative independent review process for the resolution of billing disputes?; and (2) if the Board does retain jurisdiction over this dispute, is there substantial evidence to support the workers' compensation judge's (WCJ) findings of fact regarding his determination of the "reasonable fee" to be paid for arthroscopic knee procedures, arthroscopic shoulder procedures, and epidural injection procedures performed at three commonly managed ambulatory surgical center (ASC) facilities in San Diego County?

CIGA argued that in enacting SB 863 the Legislature intended to immediately divest the WCAB of jurisdiction over medical billing disputes. The Court of Appeal disagreed and noted that "After considering S.B. 863 as a whole, we conclude that this legislation is ambiguous with respect to whether the IBR process was intended to apply to pending billing disputes, or, rather, was intended to apply only prospectively, to new billing disputes that arise with respect to injuries that occur after the effective date of the legislation. Attempting to apply section 84 of S.B. 863 in this case would leave these parties without a process by which to have their dispute resolved by a third party, since the new IBR process may be utilized only if certain conditions precedent have been met, and the deadlines for meeting those conditions have passed. Leaving these parties without a viable process to decide their dispute cannot be what the Legislature intended. ... In the face of such ambiguity, we are led to interpret the statute as operating prospectively."

"All of the relevant deadlines that the parties to a billing dispute must meet in order to be eligible to invoke the IBR process have long since passed in this matter, years before S.B. 863 was passed by the Legislature. As a result, neither party has satisfied the requirements imposed on it by the new procedure. The Legislature made all of these events conditions precedent to the availability of the IBR process, and did not provide for an expedited or alternative procedure for disputed bills that were pending at the time S.B. 863 was enacted."

"We conclude that although the text of the relevant legislation and resulting statutes is ambiguous, the most reasonable interpretation of the legislation is that it does not divest the Board of jurisdiction to decide the dispute at issue in this case. We further conclude that the WCJ's findings, which the Board adopted in its decision on petitioners' motion for reconsideration, are supported by substantial evidence. We therefore affirm the decision of the Board." ...
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The Division of Workers’ Compensation announced the increase of the mileage rate for medical and medical-legal travel expenses by one and one-half cent to 57.5 cents per mile effective January 1, 2015.

This rate must be paid for travel on or after January 1, 2015 regardless of the date of injury. Labor Code section 4600, in conjunction with Government Code section 19820 and the Department of Personnel Administration regulations, establishes the rate payable for mileage reimbursement for medical and medical-legal expenses and ties it to the Internal Revenue Service (IRS).

IRS Bulletin Number IR-2014-114 dated December 10, 2014 announced the rate increase. The updated mileage reimbursement form is posted on the DWC website ...
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The California Commission on Health and Safety and Workers' Compensation (CHSWC) has announced the unanimous election of Commissioner Sean McNally as the Chair of the Commission for 2015.

Mr. McNally, appointed by the Governor to represent employers, is the President of KBA Engineering in Bakersfield, California. He has been certified by the State Bar of California as a specialist in workers' compensation law. He is a licensed general contractor and serves as a trustee for the Self Insurer's Security Fund. His community activities include serving on the Board of Directors of the Golden Empire Gleaners and the Board of Trustees for Garces Memorial High School. He is the past Vice President of Corporate and Government Affairs as well as past Vice President of Human Resources for Grimmway Farms.

He is a graduate of the University of the Pacific, McGeorge School of Law and was a partner at the law firm of Hanna, Brophy, MacLean, McAleer and Jensen. He graduated from the University of San Francisco with Bachelor of Arts degrees in English and Theology. Following that, he did graduate studies at Hebrew University in Jerusalem Israel.

CHSWC, created by the workers' compensation reform legislation of 1993, is charged with examining the health and safety and workers' compensation systems in California and recommending administrative or legislative modifications to improve their operation. CHSWC was established to conduct a continuing examination of the workers' compensation system and of the state's activities to prevent industrial injuries and occupational diseases and to examine those programs in other states.

The DIR has posted a CHSWC Historical Timeline on its website to celebrate the 20th anniversary of the Commission on Health and Safety and Workers' Compensation. The CHSWC timeline is part of the concurrent celebration of the 100th anniversary of the Division of Workers' Compensation (DWC), and the 40th anniversary of Cal/OSHA ...
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Fernando Gallegos, 43, of Los Angeles, was arrested for allegedly collecting workers' compensation benefits for one job while still working another. Gallegos faces five felony counts of workers' compensation fraud and one felony count of perjury.

"Workers' compensation fraud is not a victimless crime. The cost of fraud losses are passed along to business and then to consumers through higher costs for goods and services," said Insurance Commissioner Dave Jones. "Anyone who lies to collect unearned benefits and takes advantage of the system is stealing from all Californians."

Gallegos was allegedly injured while working in a commercial kitchen and claimed the injury made it impossible for him to work. An investigation by the California Department of Insurance revealed that Gallegos was actually employed at two restaurants performing the very job duties he claimed he was unable to perform.

Gallegos received workers' compensation benefits of $8,890 over a nine-month period. During this time, he perjured himself at a deposition by failing to report his other jobs. He also lied to his doctors by claiming he was too injured to work. Gallegos continued to collect benefits while he worked for two different restaurants while double-dipping to receive workers' compensation benefits.

This case is being prosecuted by the Los Angeles County District Attorney's Office. Bail for Gallegos is set at $30,000 ...
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The Department of Industrial Relations and its Division of Workers’ Compensation posted a progress report on the department’s implementation of Independent Medical Review, one of the most important provisions of Senate Bill 863. Independent Medical Review (IMR) is the medical dispute resolution process that uses medical expertise to obtain consistent, evidence-based decisions.

The "2014 Report on Independent Medical Review" describes the successful implementation of IMR and provides an analysis of data gathered since the process took effect on July 1, 2013. "SB 863 sought to replace a broken medical review process with one where injured workers receive timely care based on the best medical evidence," said Labor Secretary David Lanier. "Fewer delays and vastly less litigation are better for injured workers and employers. This report shows we are on the right track."

"Making evidence-based treatment the foundation for decisions about care was a significant change," added DIR Director Christine Baker. "We are now seeing the tangible benefits of IMR and can expect further improvement to the process."

Highlights of the report include the following:
1) First year numbers: In 2013, 73,282 IMR applications were filed, of which 22 percent were found to be ineligible; 3,723 IMR determinations were issued and contained on average two treatment requests per decision. IMR upheld 84 percent of UR decisions in 2013.
2) A considerable increase in the number of applications starting in the latter half of 2013 posed challenges to issuing timely determinations. Process changes resulted in IMR decisions being issued in a timely manner by October 2014.
3) Costs: The costs of IMR were reduced by 25 percent in April 2014.
4) Claims data: More than half of workers’ compensation claims as well as IMR applications came from the top 10 claims administrators

Dr. Rupali Das, DWC Medical Director, said, "this report demonstrates the great progress made in resolving medical necessity disputes affecting injured workers." She added, "DWC will continue to collect information and monitor the results to make ongoing improvements to the program."

Other findings:
1) Nearly a third of IMR applications as well as workers’ compensation claims originated from the Los Angeles area.
2) Most physician reviewers who provided decisions in 2013 were licensed in California.
3) Physical Medicine and Rehabilitation and Occupational Medicine specialists issued the majority of IMR determinations.
4) IMR decisions were primarily evidence-based and relied on the Medical Treatment Utilization Schedule or other clinical guidelines.
5) Nearly half of IMR treatment requests were for pharmaceuticals, most commonly opioids.

The progress report is posted on the DIR website ...
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Those of us who have been in workers' compensation for many decades will recall the San Fernando Valley orthopedic surgeon, Robert Dale Shlens M.D. He passed away on December 5 from Pancreatic Cancer at age 79.

He contracted paralytic poliomyelitis at age 10, the year before the Salk Vaccine became available. He spent the next 9 months in an "Iron Lung" breathing machine. He was informed that he would not be able to walk again due to the severity of his permanent paralysis. With multiple surgeries to align his limbs and a severe scoliosis of his spine, he became ambulatory using braces and crutches.

He completed his high school education while hospitalized for his multiple surgeries and spinal fusion at Warm Springs Georgia, where President Franklin Roosevelt was treated. He attended Indiana University and after completing his undergraduate degree with honors, he applied to the medical school. He was declined admission initially because of his physical disabilities. He persisted until he was admitted to the Indiana University School of Medicine.

After internship he applied for residency training in Orthopedic Surgery. The programs that he applied to indicated this specialty was beyond his capacity because of his physical limitations. Orthopedic Hospital at Los Angeles hired a new staff surgeon from the Warm Springs Georgia Polio Center, Doctor Thomas Gucker. Doctor Gucker had been the lead physician who had operated on Dr. Shlens as a child, performing the multiple reconstructive surgeries. Dr. Gucker was instrumental in persuading Orthopedic Hospital to admit Dr. Shlens to the Orthopedic Surgery Residency Program.

Doctor Shlens completed his training and became Board Certified in Orthopedic Surgery. He practiced for 50 years in Los Angeles using Orthopedic Hospital, Good Samaritan Hospital and St. Vincent Medical Center for his patients.

Doctor Shlens started the first audio tape educational programs for orthopedic surgeons through the Orthopedic Audio Synopsis Foundation. He also started a certification board for Arthroscopic Surgery with the assistance of the Princeton Testing Service. His passion for optimal medical care led him to his reviewing hospitals for the California Medical Board. He was instrumental in helping to close substandard hospitals by testifying in front of the U. S. Congress.

He is survived by his daughter, Jennifer Fey; son, Jonathon Shlens and a grandson, Peter Alexander Fey. He also leaves behind his companion, Buffy Lyn Roney, and his brother, Michael Shlens MD.

He established a scholarship for medical students with physical disabilities at Indiana University. Contributions can be made in his honor to the Shlens Scholarship Program by contacting Indiana University School of Medicine, Office of Gift Development, 1110 West Michigan Street, Indianapolis, Indiana 46202-5100 ...
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