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Sedgwick Acquires Software Company

Sedgwick Claims Management Services, Inc. has acquired Absentys, LLC., a Chattanooga-based software application developer and service provider. Absentys’ LeaveLink and ADALink software platforms will benefit Sedgwick’s claims services within the framework of the Family and Medical Leave Act, state-specific leave laws, the Americans with Disabilities Act and the ADA Amendment Act of 2008.

Absentys builds technology platforms designed to help employers ensure compliance with federal and state leave and accommodation regulations. Its proprietary, web-based LeaveLink® and ADALink® software solutions help companies navigate the framework of the Family and Medical Leave Act (FMLA), state-specific leave laws, the Americans with Disabilities Act (ADA) and the ADA Amendments Act of 2008 (ADAAA). The press release notes that Absentys’s state-of-the-art software solutions are easily configured to meet each employer’s unique needs and allow for self-administration or co-sourcing of leaves of absences and accommodation requests. The company’s software platforms currently administer leaves of absence and accommodation requests for more than 500 organizations and 3 million workers.

“Combining Absentys’ powerful software solutions with Sedgwick’s current capabilities allows us to not only bring our industry-leading expertise to organizations seeking to self-administer their employee absence and accommodation programs but also to augment our technology-enabled claims and productivity service offerings for large employers,” said David North, Sedgwick president and CEO.

In October, Sedgwick Claims Management Services, Inc. made another significant acquisition, of T and H Global Holdings. According to a release, this acquisition includes membership in the global vrs Adjusters’ organization, which is one of the top organizations in corporate and complex loss adjustment and claims management worldwide. Sedgwick’s move will expand the company’s international footprint beyond North America. T and H subsidiaries have a presence in all 50 states and the U.K. It includes VeriClaim Inc.; VRS VeriClaim U.K Ltd; Unified Investigations and Sciences, Inc.; Cramer, Johnson, Wiggins and Associates, Inc.; and Ellis May Chartered Loss Adjusters.

In 2010, Sedgwick was acquired by Affiliates of Stone Point Capital LLC and Hellman and Friedman LLC.

Hospitals Achieve “Historic Improvement” in Medical Errors

About 50,000 people are alive today because U.S. hospitals committed 17 percent fewer medical errors in 2013 than in 2010, according to a report in Reuters Health. The lower rate of fatalities from poor care and mistakes was one of several “historic improvements” in hospital quality and safety measured by the Centers for Medicare and Medicaid Services. They included a 9 percent decline in the rate of hospital-acquired conditions such as infections, bedsores and pneumonia from 2012 to 2013.

Secretary of Health and Human Services Sylvia Burwell is scheduled to announced the data at the CMS Healthcare Quality Conference in Baltimore. It is based on a detailed analysis of tens of thousands of medical records, but because data was collected differently before 2010, it is not possible to compare pre-2010 figures to later ones. CMS is a unit of Burwell’s department.

The deadly problem of hospital error burst into the national spotlight in 1999, when the Institute of Medicine estimated that as many as 98,000 people die every year because of hospital mistakes that allow patients to contract infections, fall, develop pneumonia from being on a ventilator, or suffer other serious but preventable harm.

In 2010, the HHS inspector general estimated that poor care in hospitals contributed to the deaths of 180,000 patients covered by Medicare, which insures the disabled and those 65 or older, every year. Officials offered several possible explanations for the steep decline in sometimes-fatal hospital-acquired injuries, infections and other conditions. Hospitals have made a concerted effort to improve safety, spurred in large part by changes in how Medicare pays them. President Barack Obama’s healthcare reform law requires CMS to reduce the reimbursement rate for hospitals that re-admit too many patients within 30 days, an indication of poor care the first time. As a result of the improvements in hospital safety, 1.3 million fewer patients suffered a hospital-acquired condition in 2013 than if the 2010 rate had remained steady, CMS Deputy Administrator Dr. Patrick Conway told reporters. That produced savings of some $12 billion from avoidable costs, such as for treating a single bloodstream infection due to a catheter, at a $17,000.

Compounding Pharmacies Sue Express Scripts

This past summer, Express Scripts began blocking coverage for approximately 1,000 active ingredients used to make a variety of compounded medicines, mostly ointments, creams and powders that are found in topical treatments. The move by the nation’s largest pharmacy benefit manager was made in response to the growing cost of some of these medicines. At the time, Express Scripts official said the average cost for each prescription had risen to about $1,100 from $90. Express Scripts officials maintained that less expensive prescription medicines are readily available.

But according to the story in the Wall Street Journal, three compounding pharmacies are fighting back. Last week, three compounders filed a lawsuit charging Express Scripts is illegally blocking legitimate prescriptions and unfairly forcing patients to seek more expensive treatments or forgo medical care.

An Express Scripts spokesman declined to comment on the lawsuit and referred us to a page on the company web site in which an explanation for the policy change was made.

The compounders maintain that Express Scripts is violating federal law, because the pharmacy benefits manager allegedly lacks the authority to alter the terms of the affected health plans, according to the lawsuit. As an example, the lawsuit cites a health plan served by Express Scripts in which compounded medicines and ingredients have not been listed as excluded. “In order to cover up its financially driven scheme, Express Scripts….. is issuing intentionally deceptive and misleading letters to patients informing them that there is an unspecified change in their compound medication benefits and that there is a purported lack of FDA approval for compound medications, which is untrue,” the lawsuit states. The lawsuit goes on to argue that, until now, Express Scripts “routinely paid” for compounded drugs as “medically necessary, efficacious and properly prescribed by patients. The letters are a misleading scare tactic and pretext invented to cover up its true financial goal behind the scheme.” The lawsuit cites a document indicating the move is designed to cut compound spending by 95%.

The safety of some compounded medications became a hot topic two years ago after an outbreak of fungal meningitis was traced to a compound pharmacy in Massachusetts and led to dozens of deaths. This prompting Congress to pass a law called the Drug Quality & Security Act to boost oversight. The FDA, meanwhile, has responded by increasing inspections and issuing warning letters.

Compound pharmacies, however, have been chafing over the law, which creates two classes of compounders – one that voluntarily chooses to register with the FDA and another that may decline to do so. The first group is subject to certain conditions, such as meeting good manufacturing practices, but the FDA hopes the requirements will give hospitals and physicians the confidence needed to purchase needed compounded medicines.

Recently, the International Academy of Compounding Pharmacists, a trade group, began lobbying Congress to alter the law and make “technical corrections.” In response, a group of trade groups for drug makers, along with the Pew Trust, wrote to the FDA to express support for the law in its existing form.

Scientists Discover Pain “Off Switch”

In research published in the medical journal Brain, Saint Louis University researcher Daniela Salvemini, Ph.D. and colleagues within SLU, the National Institutes of Health (NIH) and other academic institutions have discovered a way to block a pain pathway in animal models of chronic neuropathic pain including pain caused by chemotherapeutic agents and bone cancer pain suggesting a promising new approach to pain relief.

The scientific efforts led by Salvemini, who is professor of pharmacological and physiological sciences at SLU, demonstrated that turning on a receptor in the brain and spinal cord counteracts chronic nerve pain in male and female rodents. Activating the A3 receptor — either by its native chemical stimulator, the small molecule adenosine, or by powerful synthetic small molecule drugs invented at the NIH — prevents or reverses pain that develops slowly from nerve damage without causing analgesic tolerance or intrinsic reward (unlike opioids).

Pain is an enormous problem. As an unmet medical need, pain causes suffering and comes with a multi-billion dollar societal cost. Current treatments are problematic because they cause intolerable side effects, diminish quality of life and do not sufficiently quell pain. The most successful pharmacological approaches for the treatment of chronic pain rely on certain “pathways”: circuits involving opioid, adrenergic, and calcium channels.

For the past decade, scientists have tried to take advantage of these known pathways — the series of interactions between molecular-level components that lead to pain. While adenosine had shown potential for pain-killing in humans, researchers had not yet successfully leveraged this particular pain pathway because the targeted receptors engaged many side effects.

In this research, Salvemini and colleagues have demonstrated that activation of the A3 adenosine receptor subtype is key in mediating the pain relieving effects of adenosine. “It has long been appreciated that harnessing the potent pain-killing effects of adenosine could provide a breakthrough step towards an effective treatment for chronic pain,” Salvemini said. “Our findings suggest that this goal may be achieved by focusing future work on the A3AR pathway, in particular, as its activation provides robust pain reduction across several types of pain.”

Researchers are excited to note that A3AR agonists are already in advanced clinical trials as anti-inflammatory and anticancer agents and show good safety profiles. “These studies suggest that A3AR activation by highly selective small molecular weight A3AR agonists such as MRS5698 activates a pain-reducing pathway supporting the idea that we could develop A3AR agonists as possible new therapeutics to treat chronic pain,” Salvemini said.

DWC to Impose $500/Day Penalty for Late IMR Records

The Division of Workers’ Compensation announced it will initiate the procedure to assess administrative penalties for claims administrator failure to timely submit relevant medical records in cases currently pending Independent Medical Review (IMR).

Under Labor Code section 4610.5(i), DWC is authorized to assess penalties against claim administrators whose conduct has the effect of delaying the IMR process. Under current regulations, Maximus Federal Services, Inc., the organization designated by DWC to conduct IMR reviews, sends the claims administrator a Notice of Assignment and Request for Information (NOARFI) in an IMR case. The notice advises of the relevant medical records to be submitted, which must be provided to Maximus within 15 days of the date on the NOARFI. The regulatory requirements for submitting records can be found at California Code of Regulations, title 8, section 9792.10.5.

Under California Code of Regulations, title 8, section 9792.12(c)(6), failure to submit the records within those 15 days will subject a claims administrator to an administrative penalty of $500 for each day the records are untimely, up to a maximum of $5,000. DWC will send an Order to Show Cause to claims administrators who may be liable for a penalty, with the facts upon which the penalty is based, the penalty amount, and the administrative process for contesting a penalty.

The procedure to assess administrative penalties will commence in cases where there is a failure to timely submit medical records dated on and after December 1, 2014. For IMR cases currently pending at Maximus as of December 1, 2014, the penalty procedure will commence if the relevant medical records are not received on or before December 15, 2014.

DWC will continue to post updates and notifications regarding the IMR system on the IMR page.

SubRosa Nails San Diego Nurse After Two-Week Jury Trial

A workers’ compensation fraud defendant was sentenced to six years of local custody after being convicted by a jury of 12 felony counts including perjury and insurance fraud for her role in defrauding her employer out of more than $300,000 over a seven-year period. Golnaz Gholipour, 35, was sentenced to three years in local prison and three years of mandatory supervision. A restitution hearing will be held at a future date to determine how much she will pay in restitution to Sharp Healthcare for costs they incurred in handling her fraudulent claim.

Gholipour was a nurse at Sharp Hospital who initially told her doctors in January 2007 that she injured her back while waking up from a nightmare. She first filed for state disability benefits, but after learning that the most she could receive from state disability was $4,515 based on the fact that she’d only been employed in California a few months, she filed for workers’ compensation benefits.

All of the defendant’s medical expenses were covered and she received more than $88,000 for the two years she claimed she could not work after her injury. In May 2010, after all conservative care was exhausted, Gholipour had back surgery. By April 2013, when Ghoilpour continued to claim she was worse off than before the surgery, the insurance company hired a private investigator.

The defendant was filmed on several occasions in a normal state with no apparent injuries. Only when she was going to doctor’s visits or attending legal meetings did Gholipour appear hurt and in need of a walker. At her deposition, Gholipour testified that she lived with her parents and that her mother had to bathe her and help her get dressed. She claimed to need to use the walker at all times, that she was depressed, had not gone out on any dates and was not involved in any relationships. She also said she had significant gastro-intestinal problems and generally stayed at home groggy from her medications.

After her deposition, Gholipour was filmed over an eight-hour period as she went shopping, dined at restaurants, and moved about in a normal fashion without any sign of pain or discomfort and without a walker. On another occasion, she was filmed during a 12-hour period during which she moved potted plants on her balcony, went shopping, walked several hundred yards to go to a picnic and back and went to a movie. In the videos, she was observed with the same man who is now her husband and they appeared to be living together.

After a two-week jury trial, the defendant was convicted on eight counts of perjury and four counts of insurance fraud.

Monterey County Contractor Sentenced for 2nd Offense

Jose Valdez, 41 of Seaside, has been sentenced on one felony count of fraudulent use of a contractor’s license and one misdemeanor count of failing to secure workers’ compensation insurance, according to Monterey County District Attorney Dean D. Flippo.

Valdez was doing business as Angel Valdez Landscaping. The defendant was also sentenced on a misdemeanor violation of probation case involving the same and similar charges.

Judge Larry E. Hayes sentenced Valdez to five years probation on the new case and reinstated his probation in the earlier case on the same terms as previously ordered. He was then sentenced to 180 days in jail on the new case with that term suspended and 180 days on the violation of probation to run consecutive. His terms and conditions of probation include, but are not limited to, obey all laws including Labor Code and Business & Professions Code laws, regulations and other ordinances and pay over $20,000 in fines.

DWC Posts More Proposed Changes to MTUS Regs

The Division of Workers’ Compensation has posted a second 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, December 9. The proposed modifications include:

1) Re-organization of section 9792.21 to clarify the MTUS shall be the primary source of guidance for treating physicians and physician reviewers for the evaluation and treatment of injured workers.
2) Addition of a new section, 9792.21.1 – The Medical Evidence Search Sequence. The Medical Evidence Search Sequence was separated from section 9792.21 to clarify the steps required to find medical evidence. Any search for medical evidence begins, and likely ends, with the MTUS. Searching for medical evidence outside the MTUS is limited to situations where a medical condition or injury is not addressed by the MTUS or if the MTUS’ presumption of correctness is being challenged. (Note: A flow chart is included in the Notice of Modification to Text of the Proposed Regulations to provide a visual aid for the Medical Evidence Search Sequence.)
3) Specification that a treating physician who seeks treatment outside of the MTUS bears the burden of rebutting the MTUS’ presumption of correctness by a preponderance of scientific medical evidence.
4) Requirements that shall be included in a Request for Authority, Utilization Review Decision and Independent Medical Review Decision. Any citation provided by a treating physician or medical reviewer shall be the primary source relied upon which contains the recommendation that guides the reasonableness and necessity of the requested treatment that is applicable to the injured worker’s medical condition or injury. If more than one citation is provided, then a narrative shall be included in the three aforementioned documents explaining how each guideline or study cited provides additional information that guides the reasonableness and necessity of the requested treatment applicable to the injured worker’s medical condition or injury but is not addressed by the primary source.
5) Details of the citation format requirements.
6) Revision of The MTUS Methodology for Evaluating Medical Evidence to clarify when it must be applied by a reviewing physician and how to evaluate the quality and strength of medical evidence used to support a recommendation.
7) Amendments to citations in sections 9792.23, 9792.24.1 and 9792.24.3 referencing the sections currently being revised in rulemaking to sections 9792.20 – 9792.26.

The DWC has also prepared a graphical flowchart that depicts the decision making process of a medical treatment review.

The notice and text of the regulations can be found on the proposed regulations page.

Appeals Court Affirms “Dual Occupation Rule” for Rating Formula

Pope Powell sustained an industrial injury to his shoulders and elbows while employed by respondent City and County of San Francisco. The injury caused permanent partial disability. The parties disputed the occupational group to be used in the rating formula for his injury.

Powell’s job title was Director of Fleet Management and Operations. He supervised five employees; dealt with budgets and requests for proposals; and wrote contracts, policies, and procedures. According to Powell’s undisputed testimony, to perform his job duties he spent 80 to 85 percent of his time on a computer performing tasks such as emailing, creating spreadsheets and budgets, and drafting various documents. The parties disputed the appropriate occupational group for Powell. Powell contended occupational group 112 applied; the City contended occupational group 212 applied. The WCJ agreed with the City, and a majority of the Board affirmed the WCJ. The dissenting Board member contended that a third group, 211, was the most appropriate.

The WCJ and the WCAB awarded benefits based upon group 212, which is undisputedly appropriate for Powell’s “managerial” duties: “Mostly Professional and Medical Occupations [¶] Work predominantly performed indoors, but may require driving to locations of business; less use of hands than 211; slightly higher demands on spine than 210 and 211. [¶] Typical occupations: Chemist, Dialysis Technician, Secondary School Teacher.” (Schedule, supra, at p. 3-30.)

Group 112, which Powell argues is the most appropriate: “Mostly Clerical Occupations [¶] Highest demand for use of keyboard; prolonged sitting. [¶] Typical occupations: Billing Clerk, Computer Keyboard Operator, Secretary.” (Schedule, supra, at p. 3-29.)

Group 211, which the dissenting Board member found the most appropriate: “Mostly Clerical Occupations [¶] Emphasis on frequent fingering, handling, and possibly some keyboard work; spine and leg demands similar to 210. [¶] Typical occupations: Bank clerk, Inventory clerk, License clerk.” (Schedule, supra, at p. 3-30.)

The Board majority affirmed the WCJ’s classification of Powell in group 212, quoting with approval from the WCJ’s opinion. The dissenting Board member disagreed. While agreeing that Powell’s job was “managerial in nature,” the dissenting member found “[h]is computer use . . . was necessary and integral to the successful performance of the duties and responsibilities inherent in his position.” Applying the dual occupation rule, the dissenting member found occupational group 211 “the most appropriate.” The Court of Appeal reversed in the unpublished case of Powell v WCAB.

More than one occupational group may apply to an applicant’s job. In such cases, “[t]he employee is entitled to be rated for the occupation which carries the highest factor in the computation of disability. Labor Code section 3202 provides that the provisions of the Workmen’s Compensation Act ‘shall be liberally construed by the courts with the purpose of extending their benefits for the protection of persons injured in the course of their employment.’ It has been determined that where the duties of the employee embrace the duties of two forms of occupation, the rating should be for the occupation which carries the higher percentage.” (Dalen v. Workmen’s Comp. Appeals Bd. (1972) 26 Cal.App.3d 497, 505-506 (Dalen); accord, National Kinney v. Workers’ Comp. Appeals Bd. (1980) 113 Cal.App.3d 203, 215 (National Kinney).) “[N]o precise percentage of time for [performing the duties of the higher percentage occupation group] is required but rather the pertinent inquiry is whether [performance of those duties] is an ‘integral part of the worker’s occupation.’ ” (National Kinney, supra, at p. 216.)

The Court of Appeal agreed with the dissenting Board member that the proper focus is on the claimant’s physical work activities. The Board majority’s statements that Powell’s ” ‘integral job duties . . . were managerial in nature’ ” and his “job required the use of a computer to fulfill the managerial responsibilities inherent in [his] position . . . , not as his core task,” erroneously focus on a characterization of his job duties as “managerial.” Group 212, which contemplates some small amount of keyboard use, is only partially appropriate in classifying Powell, who spent a substantial amount of his work time on a computer or other keyboard.

CWCI Says Pharmaceutical and DME Costs Increased Sharply

Payments for pharmaceuticals and durable medical equipment (DME) in California workers’ compensation continue to increase sharply, adding pressure against the recent reforms to the system according to a new CWCI study that examines medical and indemnity payment trends from accident years (AY) 2002 to 2014.

The study, based on an analysis of 2.1 million claims involving $25.6 billion in benefit payments, breaks out results by accident year, noting average amounts paid for medical services at 3 through 60 months post injury. The latest data show that while average medical payments on lost-time claims in the first two years post injury grew a modest 2.3% between AY 2011 and AY 2012, average amounts paid for pharmaceuticals and DME increased 19.4% to $2,154 — and that came on the heels of a 26% increase in the prior year. Following legislative reforms in 2003 and 2004, pharmaceutical and DME payments declined briefly, falling in both AY 2004 and 2005, but since then they have been the fastest growing medical component in California workers’ comp, increasing more than threefold over the past 7 years. In contrast to the ongoing double-digit increases in pharmaceutical and DME payments, the 2-year data on AY 2011 and AY 2012 claims show medical treatment expenses (i.e., payments to medical providers, hospitals, outpatient facilities, and for ancillary services such as X-rays and MRIs), which accounted for two-thirds of all medical payments on those claims, and medical management/cost containment expenses (i.e., medical bill review, medical case management, utilization review and medical network fees), registered only modest increases, while payments for medical-legal reports declined.

With growth rates varying among the medical subcategories over the past decade, medical treatment declined from 81.7% of all workers’ comp medical payments at 24 months in AY 2002 to 66.6% in AY 2012, while pharmaceutical/DME payments grew from 7.8% to 13.2%. Medical management payments grew from 6.6% to 14.2% over the same period, as those expenses escalated rapidly after AY 2005 as various managed care elements of the 2002-2004 reforms led to increased outlays for medical bill review, medical case management, and medical network access fees, though the 2-year data from AY 2011 and AY 2012 claims indicate they may have leveled off, albeit near record levels.

The study also offers a first view of medical experience for 2014 injury claims, showing total medical payments at 3 months post injury averaged $3,809, up 12% from $3,400 in the prior year, but such outcomes should be treated as preliminary as early treatment patterns often change due to market and regulatory factors. In addition to identifying medical payment trends, the Institute study also provided new trend data on indemnity benefits and length of temporary disability. Among the key findings at 24 months, total indemnity costs per claim for injury year 2012 were up 5.9 percent to $12,923. At 24 months, average temporary disability payments increased by 5.5 percent and paid temporary disability days increased by 2.9%.

The CWCI Research Update report, “California Workers’ Compensation Medical and Indemnity Benefit Trends, AY 2002 – 2014,” is posted on the Institute’s website, and is available to CWCI members and Research subscribers who use their passwords to log in to the site.