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Paso Robles Contractor Arrested

A Paso Robles man was arrested for allegedly failing to correctly report his employee payroll to the State Compensation Insurance Fund. Jay Scott Silva, 53, owner of Drywall Dynamics, was arrested last month by the San Luis Obispo County District Attorney’s Office and booked into the county jail on two felony counts of workers’ compensation insurance fraud.

The California Department of Insurance began its investigation after the Carpenters/Contractors Cooperation Committee notified the department’s Fraud Division of Silva’s improper conduct regarding employee wages. Department investigators determined Silva was incorrectly reporting employee payroll, which reduced his rate of paid premium by $67,000.

“Workers’ compensation premium fraud hurts hard working men and women trying to make a living and feed their families,” said David Kersh, Executive Director of the Carpenters/Contractors Cooperation Committee. “It hurts honest employers that play by the rules and want to create good paying employment opportunities in our communities. In addition to the issue of premium fraud, Drywall Dynamics had also cheated its workers out of hundreds of thousands of dollars in wages. We applaud the work done by the Department of Insurance in cracking down on construction contractors that break the law.”

If convicted Silva faces a maximum of five years in jail, possible fines and full restitution. Bail was set at $30,000.

Governor Brown Signs Time Extension for Death Benefits

Governor Brown has now signed AB 1035 into law. The new law provides an extension for dependents of deceased firefighters and peace officers to file for workers’ compensation death benefits who died from cancer; tuberculosis; Methicillin-resistant staphylococcus aureus (MRSA) skin infections; or bloodborne infectious disease. This extension is for up to 420 weeks from the date of injury, or slightly more than 8 years, but in no case more than one year from the date of death. This extension will sunset on January 1, 2019. This bill further declares the need for the Administrative Director of the Division of Workers’ Compensation (DWC) to study mortality rates prior to extending or allowing the extension to sunset.

Governor Brown issued the following statement as he signed the new law. “Last year, in vetoing AB 1373, I expressed concern in enacting legislation prior to the availability of more research and fiscal data on the risks of death from cancer and other job related diseases on firefighters. The results of the National Institute for Occupational Safety and Health study on mortality and cancer incidence on US firefighters are now available for review and provide better data on the fiscal impacts of this bill. Importantly, a review of this data anticipates that fewer than 20 cases a year throughout the state would be affected if the provisions only apply to diseases diagnosed during active service.”

“Therefore, I am signing AB 1035 to extend the time period to file a claim for workers’ compensation benefits from 240 weeks to 420 weeks after date of injury, and to require a claim to be filed within one year after the date of death. The bill has been drafted to apply only if the date of injury is during active service, as defined in Section 5412 of the Labor Code, and also contains a sunset date to allow us to examine additional data collected by the Division of Workers’ Compensation before reauthorizing the statute.”

CWCI Update Study Shows Limited Reduction in Opioid Abuse

Over the past decade, the widespread use of Schedule II and Schedule III opioid analgesics to manage both acute and chronic pain has become a hotly debated issue as the volume of prescriptions for these drugs has grown despite a growing body of evidence linking their long-term use to adverse outcomes, including delayed recoveries, functional impairment, increased sensitivity to pain, addiction, overdoses, and death. This new CWCI study updates earlier analyses that examined utilization and reimbursement trends for Schedule II and Schedule III opioids in California workers’ compensation by reviewing data on prescription drugs dispensed to injured workers through June 2013.

The findings show that in the first half of 2013, Schedule II opioids, which include powerful narcotics such as oxycontin, fentanyl and morphine, have grown to 7.3 percent of California workers’ compensation prescriptions – nearly 6 times the proportion noted in 2002. Over the same period, payments for these drugs have increased from 4.7 percent to 19.6 percent of California workers’ compensation prescription dollars. The data also suggest that the use of Schedule II drugs in workers’ compensation may have stabilized near this record level, as over the most recent 3-1/2 years these drugs have accounted for between 6.5 and 7.3 percent of all prescriptions dispensed to injured workers, while over the most recent 4-1/2 years Schedule II drug payments have represented about 1 out of every 5 dollars paid for workers’ compensation prescriptions in California.

The findings also show that since 2002, less powerful Schedule III opioids – primarily Vicodin or other forms of hydrocodone compounded with a non-steroidal drugs such as acetaminophen -have accounted for a much more consistent share of workers’ compensation prescription drugs, generally representing around 20 percent of all prescriptions dispensed to injured workers and 10 to 11 percent of the overall drug spend. The only exception was a brief dip in both Schedule II and Schedule III prescriptions following the implementation of the 2002-2004 reforms and the adoption of the pharmacy fee schedule, which took effect in January 2004.

The analysis of the prescribing patterns for Schedule II opioid prescriptions reveals that a relatively small percentage of providers continue to account for the vast majority of these prescriptions in California workers’ compensation. In 2010, the top 10 percent of doctors who prescribed Schedule II opioids to California injured workers accounted for 79 percent of all workers’ compensation prescriptions for these drugs and 88 percent of the associated payments. The more recent data from 2012/13 show similar results, as the top 10 percent of the doctors who wrote these prescriptions accounted for 82 percent of the prescriptions and 86 percent of the payments. The prescribing patterns data also found that more than 8 out of 10 physicians who ranked among the top 3 percent of Schedule II opioid prescribers in 2012/13 were also in the top 3 percent in 2010. In addition, as in the earlier study, almost half of all Schedule II prescriptions dispensed to injured workers in the 2012/13 sample were for relatively minor injuries for which the use of these drugs is not supported by evidence-based medicine.

These findings suggest that the widespread publicity about the dangers associated with opioid medications, the public policy efforts to curb the utilization and cost of these drugs through the adoption of chronic pain medical treatment guidelines and the pharmacy fee schedule, and the attempts to tighten controls over the use of Schedule II and III drugs through utilization review have thus far had limited success in reducing system-wide use.

Nationwide Fraud Bust – Eight Caught in LA

The Medicare Fraud Strike Force in six cities charged 90 individuals — 27 doctors, nurses and other medical professionals — for their alleged participation in Medicare fraud schemes involving hundreds of millions. According to the story in Southern California Public Radio, eight of the people charged in Tuesday’s nationwide Medicare fraud crackdown operated in the Los Angeles area, and were responsible for $32 million in fraudulent billing. All told, the government’s Medicare Fraud Strike Force charged 90 health care workers, including doctors and suppliers, for allegedly bilking Medicare out of $260 million. he Medicare Fraud Strike Force charged people in six cities, including Los Angeles. The Strike Force is part of the Health Care Fraud Prevention and Enforcement Action Team, a joint initiative of the Justice Department and the Health and Human Services Department. Among the eight in the Los Angeles area, two are doctors, several run medical supply companies and the rest are marketers, whose job it is to bring Medicare beneficiaries to the doctors. The group is responsible for $32 million in fraudulent payments for equipment that was not necessary and for treatments that were never provided, according to the government.

Below are the individuals charged in California on Tuesday:

1) Robert A. Glazer, doctor at Glazer Medical Clinic in Los Angeles. Glazer allegedly billed for services that were never provided. He also allegedly received kickbacks for signing home health certificates that were not necessary and for prescribing equipment like power wheelchairs that were not needed. Between 2006 and 2014 Glazer was paid $735,000 by Medicare. Medical equipment companies were paid $2.6 million based on Glazer’s false prescriptions and Home Health Agencies received $16.4 million based on Glazer’s prescriptions. Glazer’s office did not return a call seeking comment.
2) Sylvia Ogbenyeanu Walter-Eze, Judith Bongcayoa Estrella and Wilmer David Guzman. Walter-Eze is owner of Ezcore 900, a durable medical equipment company in Valencia. Estrella and Guzman were marketers that brought Medicare patients to Ezcore. Walter-Eze is accused of filing false and fraudulent claims for power wheelchairs and accessories to Medicare. The company received nearly $2 million in payments from Medicare. The phone number for Ezcore 900 was disconnected, and the link to the company’s website is no longer functional.
3) Zoila O’Brien, patient recruiter/marketer for a medical equipment company. According to the court documents, she found Medicare beneficiaries and took them to a doctor for prescriptions they didn’t need and worked with the medical supplier to submit fraudulent claims. The indictment says she received $600 to $700 per beneficiary she found. In total, the court file alleges, the company she worked with was paid 356,000.
4) Eucharia Okeke, owner of Eastern Medical Supply in Inglewood. The indictment alleges she worked with a doctor who wrote fraudulent prescriptions for power wheelchairs. The lawsuit says she would pay marketers and doctors kickbacks for referring Medicare beneficiaries. Okeke’s company received $311,000 in payment. The phone number for Eastern Medical Supply was disconnected.
5) Jason Ling, medical doctor in Spring Valley, near San Diego. He wrote unnecessary prescriptions for Medicare recipients. He was working with Eucharia Okeke (above). His alleged activities resulted in payment of about $311,000 from Medicare. Ling did not return a call seeking comment.
6) Hakop Gambaryan, owner of Colonial Medical Supply in Van Nuys. According to the court documents Gambaryan was paid $1.7 million by Medicare for false and fraudulent claims. Gambaryan did not return calls seeking comment.

Restaurant Owner Gets 6 Years 8 Months Sentence

El Dorado County District Attorney Vern Pierson announced the sentencing of Michael Adams and Brenda Adams, the owners of Poor Reds in Diamond Springs, who failed to report $1,320,400 in taxes and committed insurance fraud.Poor Red’s opened in 1948 and is best known for its signature drink, the Golden Cadillac, a frothy blend of Galliano, half-and-half, white cream de cacao and ice.

Defendant Michael Adams was sentenced to 6 years 8 months in state prison, and ordered to pay $629,818 as restitution for the unpaid taxes and investigation costs. Defendant Brenda Adams was sentenced to a year in county jail, and also ordered to pay $629,818 as restitution for the unpaid taxes and investigation costs. The length of time from plea to sentencing was much longer than had been anticipated, but necessary in order to attempt to obtain transfer of ownership of Poor Reds. The sentence was the result of guilty pleas to 8 felony counts, including insurance fraud, tax evasion and an admission of an aggravated white collar crime enhancement.

This case was textbook example of multi-agency collaboration and joint investigation by the California Board of Equalizations (BOE), Employment Development Department (EDD) Franchise Tax Board (FTB), Department of Insurance (DOI), and investigators from the El Dorado County District Attorney’s Office. County of El Dorado

WCAB , DWC Issue New Forms

The Workers’ Compensation Appeals Board and the Division of Workers’ Compensation have created a new form and made modifications to two existing forms for use in the Electronic Adjudication Management System (EAMS). The new and modified forms will be posted on DWC’s website today. The changes were necessitated by SB 863. The forms are:

1) DWC-CA 10214 a-1 [Stipulations with Request for Award (Rev. 4/2014)]
2) DWC-CA 10208.3 [Declaration of Readiness to Proceed (Expedited Trial) (Rev. 4/2014)]
3)DWC-CA 10232.2 [Document Separator Sheet]

The DWC-CA 10214 a-1 [Stipulations with Request for Award DOI post 1-1-2013 (Rev. 4/2014)] is a new form to be used for injuries on or after January 1, 2013. Pursuant to SB 863, the 15 percent increase or decrease in permanent disability under Labor Code 4658(d) has been eliminated. This form is used by e-form filers and it is now available for use by OCR filers. The old form will be accepted for OCR filing for injuries on or after January 1, 2013 until October 1, 2014. At a later date, the revised form will be placed in use for JET filers.

The current form DWC-CA 10214(a) [Stipulations with Request for Award (Rev 11/2008)] remains in use for e-form and OCR filers for injuries before January 1, 2013. JET filers will continue to use this form for all dates of injury.

The DWC-CA 10208.3 [Declaration of Readiness to Proceed (Expedited Trial) (Rev. 4/2014)], which is used for expedited trials, was also modified. Medical treatment issues are limited to those not arising out of utilization review. Medical Provider Network (MPN) issues for medical treatment purposes have been added. Vocational rehabilitation appeal has been removed. This form is in use for e-form filers and it is now available for use by OCR filers. The older version of this form will be accepted for OCR filing until October 1, 2014. At a later date, the new form will be placed in use for JET filers.

DWC-CA 10232.2 [Document Separator Sheet] (Rev. 4/2014) for OCR filing also updates the document types and titles used for OCR filers and the Unstructured E-form. At a later date it will be placed in use for JET filers.

The modifications to existing document types or document titles are posted in the DWC website. These changes to document types and titles are in use for OCR and e-form filers currently. The older version of this form will be accepted for OCR filing until October 1, 2014.

Medical Costs Moderated Before SB 863

A study issued by the Workers Compensation Research Institute shows medical costs for injured workers in California moderated before sweeping reforms were implemented.

CompScope Medical Benchmarks for California 14th Edition provides baseline data for monitoring the impact of the California’s reform legislation Senate Bill 863, which took effect on Jan. 1, 2013. For the study, WCRI examined the bill’s effect on the state workers’ compensation system and compared changes implemented through SB 863 with reforms in other states. The goal of the study is to set benchmarks for such systems in order to weigh their costs and benefits.

Researchers found that in 2010 and 2011, medical payments per claim in California grew by about 3%, down from 8% annual growth since 2005. According to the Insurance Journal, the drop can be attributed to stability of: prices paid for professional services; and use of non hospital services. However, hospital payments per inpatient visit increased significantly between 2006 and 2011, according to the report.

Based on experiences in other states, WCRI predicted that California’s shift to a “resource-based relative value scale fee schedule” likely will shift payments from specialty care to primary care providers

Physician Dispensed Narcotics Linked to Poor Outcomes

A new study in the Journal of Occupational and Environmental Medicine reveals a negative impact on medical costs, indemnity costs and lost time from work on workers’ compensation claims when physicians, rather than pharmacies, dispense narcotic-related drugs to injured workers within the first 90 days of injury. The study, titled “The Effect of Physician Dispensed Medication on Workers’ Compensation Claim Outcomes in the State of Illinois,” was authored by Jeffrey Austin White, director of Medical Management Practices & Strategy, and members of the Medical Center of Excellence team of Accident Fund Holdings, Inc., in partnership with researchers from the Johns Hopkins University School of Medicine.

The authors studied a sample of 6824 workers’ compensation indemnity claims that were opened and closed between January 1, 2007, and December 31, 2012, by Accident Fund Holdings in the State of Illinois.The number of prescriptions per claim and pharmaceutical, medical, and indemnity costs, as well as time out from work, were significantly higher in claims where a pharmaceutical was dispensed by the physician within 90 days of injury than in claims where physician dispensing did not occur. These differences persisted controlling for age, sex, attorney involvement, and injury complexity.The major findings of the study align with previous research from a February 2013 report on physician-dispensed repackaged drugs in the state of California by the California Workers’ Compensation Institute. “These studies leave little doubt that physician dispensing of medications, especially opioid medications, results in poor outcomes for injured workers,” said Dr. Dan Hunt, corporate medical director of Accident Fund Holdings. “Longer recoveries, more time away from work and increased medical costs are all unfortunate outcomes of this prescribing practice in workers’ compensation.”

In the last several years, there has been a surge in the cost and quantity of drugs dispensed from physician offices in workers’ compensation insurance. A 43% increase in drugs dispensed by physicians and a 63% percent increase in medication payments in the state of Illinois prompted researchers to perform an investigation on claims outcomes. The analysis demonstrated a 2.99 times higher number of prescriptions dispensed from the physician’s office in comparison to the pharmacy. When opioids were dispensed by the physician, the medical costs were 78% higher, the indemnity costs were 57% higher and the number of days off work were 85% higher than pharmacy dispensations after adjusting for differences in age, gender, attorney involvement and injury complexity.

“The ability of physicians to profit from dispensed narcotics in workers’ compensations puts a burden on the industry and jeopardizes the safety and well being of our injured workers,” said White. “State laws for managing and controlling physician dispensing in workers’ compensation are mostly non-existent and are, at the very least, in serious need of careful evaluation and reform.”

Comp Combined Ratio Significantly Improved

The fact that the workers compensation combined ratio was 101 in 2013, a seven-point decrease from 2012 and a 14-point decline since 2011, is a sign that the workers’ compensation market is returning to a state of “balance,” according to the industry’s statistical and rating organization, NCCI.

“We are finally starting to see an industry in balance with these results,” said NCCI President and CEO Steve Klingel, reporting on the state of the industry at NCCI’s annual symposium. “Today, industry costs are largely contained, claims frequency continues to decline, and the system in most states is operating efficiently. In short, the market is operating as it should on behalf of most stakeholders.”

According to the story in the Insurance Journal, overall, the workers compensation line showed a number of positive results in 2013, said Kathy Antonello, NCCI chief actuary. Premiums grew for the third consecutive year, and at the same time, the combined ratio fell by seven points. The overall reserve position for private carriers improved in 2013, following five consecutive years of deterioration. NCCI estimates the year-end 2013 reserve position to be an $11 billion deficiency for private carriers. The workers compensation residual market experienced a second straight year of significant growth in 2013. Premiums grew by more than 30 percent, and the average market share in the residual market increased from 7 percent to 8 percent. NCCI’s latest data shows the pace of growth has slowed in the first quarter of 2014.

In other good news, lost-time claim frequency maintained a path of decline in 2013, down 2 percent, on average, in NCCI states. The 2 percent decline is within NCCI’s long-term annual estimate of a of 2-4 percent decline per year .

Corrections Officer Fraud Conviction Reversed Over Jury Instructions

David Brian Lewis was employed by the California Department of Corrections at Centinela State Prison starting in 1998, where he worked most recently as a plumber. During the course of his employment, Lewis filed several claims for workers’ compensation benefits. In the instant proceeding, Lewis was prosecuted for insurance fraud concerning claims arising from an injury to his left arm in 2006 and an injury to his heels that he reported in 2009.

On October 24, 2006, Lewis filled out a workers’ compensation claim form reporting an injury that occurred at work on September 16, 2006, when he hit his left hand while using pliers and developed soreness in his forearm. Unbeknownst to his treating doctors, Lewis had a previous diagnosis of epicondylitis. Despite general questions about Lewis’s previous injuries and medical conditions during the patient intake process, Lewis did not disclose that he had been previously diagnosed with epicondylitis. While Lewis was off work because of the arm injury, coworkers noticed and reported certain activity by Lewis that they suspected to be inconsistent with Lewis’s claimed arm injury. In late 2006 or early 2007, a coworker saw Lewis driving his truck on a bumpy dirt road using his left hand. A coworker also noticed a photo of Lewis displayed at a gas station, in which Lewis was using his left hand to hold up a large fish that he caught in September 2007. Another coworker drove past Lewis’s house in March 2007 and observed Lewis getting his trailer ready to transport his all terrain vehicles on a camping trip.

On August 25, 2009, after having been back to work for approximately a year and a half following recovery from his arm injury, Lewis submitted an injury report and a workers’ compensation claim form stating that he had a cumulative trauma injury to his left and right heels. Unbeknownst to his treating doctors in the workers’ compensation system, Lewis had a previous history with plantar fasciitis and heel spurs. In June 1999, he reported to his family doctor that he was having pain in his left foot, and he was referred for further evaluation and was diagnosed bilateral plantar fasciitis. Lewis told his doctors 1999 that he had been having heel pain for the past 15 years. Lewis was asked when he first visited his PTP’s office in August 2009 whether he had any significant past medical history and specifically any previous foot injury. He did not disclose the prior problems with his heels. At trial, the People introduced evidence of certain activities that Lewis engaged in while being treated for heel pain that may have been inconsistent with his condition. Among other things, the jury heard evidence that during the period 2008 to 2012, Lewis was participating in a bowling league.

Lewis was charged with insurance fraud based on his 2006 claim and his 2009 claim. After a month-long trial, a jury convicted Lewis of eight counts of insurance fraud in connection with workers’ compensation benefits that he received during two different time periods. Lewis appealed, and the court of appeal reversed in the unpublished opinion of People v Lewis.

Lewis challenged the judgment, arguing (among other things) that the trial court prejudicially erred in not giving a unanimity instruction to the jury; Defense counsel requested that the trial court instruct the jury on the requirement that the jury reach a unanimous decision as to which acts Lewis committed in violation of each count. The trial court declined to give the instruction, stating that the instruction was not needed “when there is a continuous course of conduct.” Lewis contends that the trial court prejudicially erred in declining to deliver a unanimity instruction. The Court of Appeal agreed and reversed.

The requirement that the jury be instructed on unanimity in certain cases is based on the principle that “[i]n a criminal case, a jury verdict must be unanimous.” Cases have long held that when the evidence suggests more than one discrete crime, either the prosecution must elect among the crimes or the court must require the jury to agree on the same criminal act. This requirement of unanimity as to the criminal act is intended to eliminate the danger that the defendant will be convicted even though there is no single offense which all the jurors agree the defendant committed.

The judgment is reversed and this matter is remanded for further proceedings.