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CVS, Walgreens and Rite Aid Are Closing Thousands of Stores

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In the wake of California’s statutory mandate for a higher minimum wage for healthcare workers, multiple financial problems are on the horizon for the industry as a whole, and retail pharmacies are the latest example.

Rite Aid filed for Chapter 11 bankruptcy protection on October 16, 2023. The company had been struggling with falling sales and opioid-related lawsuits. It is the third-largest pharmacy chain in the United States, with over 2,100 stores in 17 states. The company has been losing money for several years, and its stock price has plummeted. It is unclear how long Rite Aid will be in bankruptcy. The company said that it expects to emerge from bankruptcy within the next six to nine months.

In addition to its financial problems, Rite Aid is also facing a number of lawsuits from states and municipalities alleging that the company contributed to the opioid epidemic by overprescribing prescription painkillers.

The Wall Street Journal reports that Rite Aid will will reportedly close roughly 400 to 500 of its approximately 2,200 stores by the end of its bankruptcy.

At the same time CNN reports on walkouts by Walgreens pharmacists and technicians around the country and at CVS stores in Kansas City over low pay and understaffed stores.

The majority of drugstores’ sales comes from filling prescriptions. But their profits from that segment have declined in recent years because of lower reimbursement rates for prescription drugs. The front end of drugstores, where they sell snacks and household staples, also face pressure.

CNN also reports that CVS, Walgreens and Rite Aid are eliminating some locations as they face rising competition for these items from Amazon, big-box stores with pharmacies like Walmart, and Dollar General in rural areas.

Theft has become a problem for drugstores in some locations, and some stores have resorted to locking up products to prevent theft. But this has made the customer experience worse.

Drugstores are trying to pivot into the more lucrative health care industry in recent years and become primary care providers. CVS acquired health insurer Aetna, and Walgreens took a majority stake in primary care network VillageMD. But this strategy requires fewer brick-and-mortar retail stores.

Retail pharmacy chains overexpanded in the past, often pushing out local pharmacies in the process.The number of independent pharmacies decreased by nearly 50% from 1980 to 2022, according to McKinsey.

Rite Aid, CVS and Walgreens have also been shuttering stores for years. CVS, the largest US chain, closed 244 stores between 2018 and 2020. In 2021, it announced plans to close 900 stores by 2024. Walgreens said in 2019 it would close 200 stores and in June announced an additional 150 store closures.

A study published in the Journal of the American Medical Association found that pharmacies at greatest risk for closures are those with a large customer base on public insurance, which have lower reimbursement rates than private plans, as well as independent pharmacies.

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New Law Signed Friday Increases Healthcare Minimum Wage

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California’s current minimum wage is $15.50 per hour. Some cities in California have established minimum wages that are higher than the current statewide minimum wage. Since the start of 2022, spearheaded by SEIU-United Health Workers, several California cities have passed or introduced ordinances for a $25 per hour minimum wage for healthcare workers. Some of these ordinances have been challenged and put on hold after petitions for referendum were submitted to put the matter before city voters.

This is now all about to change after Governor Newsom signed Senate Bill 525 into law late Friday. This bill incorporates a limited moratorium on such future initiatives, but preserves the recent health care worker $25 minimum wage initiative passed by voters in Inglewood.

Amendments to the new law on September 11 struck the flat minimum wage increase provisions initially proposed when the bill was introduced, and instead implemented a tiered schedule of increases for differing employers based on specified factors. Generally speaking the new law provides:

– – Dialysis clinics and large health systems with more than 10,000 workers would pay a minimum wage of $23 an hour in 2024, $24 in 2025, and $25 in 2026.
– – Community clinics would start the pay increase at $21 per hour in 2024, rising to $22 in 2026 and $25 in 2027.
– – Other health care employers would increase their minimum wage to $21 per hour in 2024, $23 in 2026 and $25 by 2028.
– – Hospitals with a high mix of Medi-Cal and Medicare patients, as well as rural independent hospitals would have to pay workers $18 an hour in 2024. That rate would increase 3.5% annually until it reaches $25 in 2033.

This new law was highly controversial, and there is a long list of organizations who were in favor, or who opposed the law. SEIU California was the sponsor of this law arguing, among other things that “Care work has historically been undervalued by society. A recent report on the California nursing home workforce characteristics found that 1 out of every 2 Skilled Nursing Facility workers earns less than $20 per hour.”

Opponents argued that, “In the aftermath of the COVID-19 pandemic, health care providers in California are in dire financial straits. One major hospital has already closed, others are on the brink, and more than half are losing money every day to care for patients.” They also argue that, “SB 525’s added costs will force health providers to cut hours, positions and services. With fewer positions and potentially fewer providers, health care professionals will have fewer opportunities, be at heightened risk of job loss, and have less flexibility in the positions that are available.”

The California Nurses Association/National Nurses United is opposed unless amended to exempt RNs from the scope of the bill. They argue that, “the inclusion of RNs in this bill will ultimately lower the wage floor for RNs, encouraging employers to propose takeaways on wages during bargaining. California RNs are currently among the highest paid in the nation well above the proposed $25 minimum hourly wage for health care workers in SB 525. According to the U.S. Bureau of Labor Statistics, the median hourly wage for California RNs is $60.26, while RNs in the lower 10th percentile make $37.53. In other words, one would be extremely hard pressed to identify anyone working as an RN in California who makes below $25/hour.”

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Temecula Man Sentenced For Health Care Kickback Conspiracy

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49 year old Steven Donofrio, who lives in Temecula, California, man has been sentenced to federal prison for conspiring to commit health care kickbacks. Donofrio was found guilty by a jury on May 5, 2023, following a two-week-long trial and was sentenced to 42 months in federal prison by U.S. District Judge Robert W. Schroeder, III on October 11, 2023.

According to information presented in court, Donofrio conspired with others to pay and receive kickbacks in exchange for the referral of, and arranging for, health care business, specifically pharmacogenetic (PGx) tests.  

Pharmacogenetic testing, also known as pharmacogenomic testing, is a type of genetic testing that identifies genetic variations that affect how an individual patient metabolizes certain drugs.  The illegal arrangement concerned the referral of PGx tests to clinical laboratories in Fountain Valley, California; Irvine, California; and San Diego, California.  More than $28 million in illegal kickback payments were exchanged by those involved in the conspiracy.

In December 2019, twelve individuals from three states were charged for their roles in the kickback conspiracy.  A federal grand jury in the Eastern District of Texas returned an indictment against Philip Lamb, of Eagle, Colorado; Nicolas Arroyo, of Tempe, Arizona; Vincent Marchetti, Jr., of Coronado, California; William Flowers, of Houston, Texas; Steven Donofrio; James J. Walker, Jr. a/k/a Jimmy Walker, of Frisco, Texas; Timothy Armstrong, deceased, formerly of Frisco, Texas; Virginia Blake Herrin, of Frisco, Texas; Patrick Ridgeway, of Jackson, Mississippi; Chismere Mallard, of McAllen, Texas; Dr. Ray W. Ng, of Dallas, Texas; and Ashley Kretzschmar, of Aledo, Texas; for conspiring to commit illegal remunerations in violation of the Anti-Kickback Statute.

Philip Lamb, Nicolas Arroyo, Jimmy Walker, Timothy Armstrong, Virginia Blake Herrin, Patrick Ridgeway, Chismere Mallard, and Ashley Kretzschmar pleaded guilty prior to trial.  Kimberly Willette, of Friendswood, Texas, and Edwin Chad Isbell, of Atascocita, Texas also pleaded guilty to related charges.

Vincent Marchetti, Jr., was found guilty by a jury on December 16, 2021, following a month-long trial.  He was sentenced to 48 months in federal prison on August 30, 2022.

On April 25, 2022, Nicolas Arroyo was sentenced to 21 months in federal prison.  On August 23, 2022, Kimberly Willette was sentenced to one year and one day in federal prison, and Patrick Ridgeway was sentenced to a three-year term of probation and ordered to pay a $100,000 fine.  On September 11, 2023, Jimmy Walker was sentenced to five months in federal prison and ordered to pay a $50,100 fine.

The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remunerations in exchange for the referral of or arranging for or recommending the ordering of items or services payable under federal health care programs.  Under federal statutes, violations of the Anti-Kickback statute are punishable by up to five years in federal prison.

“Today’s sentence brings a conclusion to an illegal kickback scheme that defrauded our health care system for millions of dollars. The defendant and his co-conspirators enriched themselves and in turn affected the quality of care of innocent taxpayers,” said FBI Dallas Special Agent in Charge Chad Yarbrough. “The FBI is committed to working with our law enforcement, public, and private sector partners to combat health care fraud and seek justice for the patients that are harmed because of these schemes.”

This case was investigated by the U.S. Department of Health and Human Services, Office of Inspector General, and the FBI Dallas – Frisco Resident Agency.  It was prosecuted by Assistant U.S. Attorneys Nathaniel C. Kummerfeld, Lucas Machicek, and Adrian Garcia, with assistance from Assistant U.S. Attorneys Stephan E. Oestreicher, Jr., Brent Andrus, and L. Frank Coan, Jr., and Special Assistant U.S. Attorney Laurel E.P. Simmons.

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Claim Examiner Tips on Selecting Hip and Knee Replacements

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It is interesting how so many people carefully shop for an investigate their next appliance or television purchase, but how so few can tell you even the brand of hip or knee replacement that a surgeon placed inside their body. It is as though the brand of implantable device does not matter, and their seems to be an assumption that they are all the same.

A bad choice certainly has consequences, to the person who must undergo another painful surgery, and for the third party payor – such as a workers’ compensation claim administrator – who must pay tens of thousands of dollars in medical costs to remedy the situation.

The current litigation against Exactech is an excellent illustrative example. Exactech’s fortunes started to take off in 1994, when it inked a major deal to license and market the Optetrak knee implant based on designs by surgeons and engineers at the prestigious Hospital for Special Surgery in New York City. That alliance won Exactech instant credibility in the fiercely competitive device industry.

Exactech was first introduced in 2006. It is made of titanium and a plastic called polyethylene. The Optetrak implant was designed to be more durable and longer-lasting than other total knee replacement (TKR) implants. Building on that goodwill, Exactech’s sales shot past $124 million in 2007, about half generated by the Optetrak knee system.

The US Food and Drug Administration issued a number of safety warnings about the Optetrak implant. In 2012, the FDA issued a Class I recall of the Optetrak implant, which is the most serious type of recall. The recall was issued due to concerns about early failure of the implant.

In 2015, the FDA issued a Class II recall of the Optetrak implant due to concerns about loosening and osteolysis. The recall was issued after the FDA received reports of a number of patients who had experienced loosening and osteolysis of their Optetrak implants.

There are a number of class action lawsuits pending against the manufacturers of the Optetrak knee implant. These lawsuits allege that the implant is defective and has caused serious injuries to patients.The first class action lawsuit against the manufacturers of the Optetrak knee implant was filed in 2012. This lawsuit was filed on behalf of patients who had experienced early failure of their implants. Since then, a number of other class action lawsuits have been filed against the manufacturers of the Optetrak knee implant.

KFF Health News just featured a report on this problem, and what went wrong. It reports that there were ” years of warnings and doubts about the durability of the Optetrak, according to whistleblowers – one whistleblower called it an “open secret” inside the company. Notably, there were concerns about the fragility of a finned tibial tray, one of the four pieces of the knee replacement that fits into the shin bone, according to the whistleblower lawsuit.

Whistleblower Manuel Fuentes, a former Exactech senior product manager, testified in a deposition that pulling the product off the market around 2008 “would have been the ethical and moral thing to do.”

Exactech discussed the loosening problem in an internal memo that said between 2006 and 2009 the company “began to get some negative feedback” about the Optetrak “that was at times confounding and difficult to process,” court records show.The discouraging reports ranged from complaints of early revisions from at least 10 U.S. surgeons and surgery practices in several of the more than 30 countries where Exactech sold the implant, court records show.

The results did little to dim Exactech’s prospects. From 1994 through April 2022, Exactech sold 58,763 Optetrak devices with finned trays for use by 514 surgeons nationwide, according to an affidavit by a company official.

While 95% of artificial knees should last at least a decade, surgeons had to pull out and replace many Optetrak components – a complex operation known as revision surgery – much sooner, according to allegations in patient lawsuits.

The Food and Drug Administration runs a massive, public, searchable databank called MAUDE “Manufacturer and User Facility Device Experience” to warn the public of dangers linked to medical devices and drugs. This tool might be a good start for a due diligence investigation by a Claims Administrator to ascertain the track record of orthopedic devices.

Manufacturers must advise the FDA when they learn their device may have caused or contributed to a death or serious injury, or malfunctioned in a way that might recur and cause harm.Those reports must be submitted within 30 days unless a special exemption is granted.

But court and government records show that reports of adverse reactions tied to Exactech’s implant sometimes took years to show up in the government database — if they were reported at all.

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Charges Filed Against Business Owner Under New Wage Theft Law

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The Labor Commissioner’s Office (LCO) Criminal Investigation Unit partnered with the Los Angeles District Attorney’s Office in the first criminal prosecution of a garment manufacturing business owner under California Penal Code Section 487m (Grand Theft of Wages), which became effective on January 1, 2022.

Lawrence Lee, co-owner of garment manufacturer business Parbe Inc., dba Fabiola, and Soon Ae Park, a garment contractor who had a history of wage theft, have been arraigned on felony charges of grand theft of wages and perjury by declaration.

“This is the first time a garment manufacturer and garment contractor have ever been arrested for wage theft,” said Labor Commissioner Lilia García-Brower. “These employers not only abused their workers by paying them as little as $6.00 per hour but they also defrauded the system. My office will continue to work with the Los Angeles District Attorney’s office to prosecute bad-actor employers who commit wage theft and gain an unfair advantage over law-abiding employers.”

The LCO’s Bureau of Field Enforcement (BOFE) began its investigation of Park, a sewing contractor, in January 2021, and the case was referred to the LCO’s Criminal Investigative Unit in December 2021. Investigators determined there was probable cause to believe Soon Ae Park and Lawrence Lee committed grand theft of labor and perjury. Lawrence Lee and Soon Ae Park were arrested on September 6, 2023 and arraigned thereafter.

The investigation found that Park failed to pay her workers minimum wage or overtime, paid her workers in cash an average of $350 for more than 50 hours of work per week, and failed to provide workers with paystubs. Park also failed to provide workers with workers’ compensation insurance coverage or information about paid sick leave.

Parbe Inc., identified as a wage guarantor for Park, contracted with Park even after the Labor Commissioner’s Office notified it of alleged wage violations by Park. Both Parbe Inc. and Park were operating without required garment manufacturing registrations. Lawrence Lee also allegedly failed to provide material information on his garment manufacturing registration application under penalty of perjury.

In addition to these criminal charges, BOFE issued Notices of Joint Liability to Park and Parbe Inc. for over $81,000 for their failure to provide workers’ compensation coverage for their employees. Park was cited more than $70,000 for violation of the paid sick leave requirements, violating record-keeping requirements, and violating the garment registration provision. Parbe Inc. CEO Lawrence Lee was cited $4,000 for failure to provide workers with written notice of their paid sick leave, $4,000 for violation of record-keeping provisions, and $200 for violation of the garment registration provision. The citations totaled $161,738.

Under the Garment Worker Protection Act, contractors, manufacturers, and brand guarantors are jo­­intly and severally liable for the full amount of unpaid minimum, regular, overtime and other premium wages, reimbursement for expenses, and any other compensation, including interest, due to all employees who perform manufacturing operations under this law.

Enforcement investigations typically include a payroll audit of the previous three years to determine minimum wage, overtime, and other labor law violations, and to calculate payments owed and penalties due. When workers are paid less than minimum wage, they are entitled to liquidated damages that equal the amount of underpaid minimum wages plus interest.

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

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Senators Announce False Claims Amendments Act of 2023

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As National Whistleblower Day approaches, a bipartisan group of senators, led by Sen. Chuck Grassley (R-Iowa), introduced the False Claims Amendments Act of 2023 to beef up the government’s most potent tool to fight fraud. The bill ensures those who knowingly defraud the government cannot escape liability in cases where the government has made recurring payments on a fraudulent claim. The bill is cosponsored by Sens. Dick Durbin (D-Ill.), John Kennedy (R-La.) and Roger Wicker (R-Miss.).

“The False Claims Act continues to be the single greatest tool in the fight against fraud, returning $72 billion to the taxpayer since my update to the statute in 1986. Unfortunately, flawed court interpretations have created loopholes for fraudsters to avoid accountability even when their fraud is obvious and undisputed. Taxpayers deserve better than this sort of legal gymnastics. Our bipartisan bill clarifies our original intent to hold those accountable when they bilk the taxpayer,” Grassley said.

‘We must ensure that our government uses taxpayer dollars wisely and efficiently. This bill would do just that by strengthening the False Claims Act – a tool used by the federal government to fight fraud and recoup lost taxpayer dollars. I’m thankful for this bipartisan cooperation to help fight fraud, waste, and abuse, and I’ll work to help this bill move swiftly through the Senate,’ Durbin said.

The False Claims Act empowers the government – often with the help of whistleblowers – to recover taxpayer dollars lost to fraud from entities that defraud the government. The U.S. Supreme Court flawed ruling in United Health Services v. United States ex rel. Escobar has resulted in entities claiming that their obvious fraud was not material simply because the government continued payment.

The False Claims Amendments Act of 2023 makes clear that the government’s continued payment on a fraudulent claim is not dispositive evidence that the fraud was not material if the government shows other reasons exist for the payment. It also clarifies that the False Claims Act’s whistleblower anti-retaliation provision applies to post-employment retaliation, and requires a GAO study on the benefits and challenges of enforcement efforts and amounts recovered under the False Claims Act.

“Taxpayers Against Fraud applauds Senator Grassley’s continued strong support of the False Claims Act,” said Taxpayers Against Fraud President & CEO Jeb White. “The Senator is a consistent champion of Lincoln’s Law, which saves taxpayers billions of dollars every year. Regularly updating and modernizing the law ensures our federal anti-fraud statutes can meet the challenges created by today’s fraudsters who seek to steal and misuse taxpayer funds. We appreciate Senator Grassley’s tenacious leadership and look forward to full congressional passage of this bipartisan legislation.”

In 1986, Grassley led the successful effort to update the False Claims Act, which allows the government to recover taxpayer dollars from entities that defrauded federal agencies. A key provision in that update, known as qui tam, allows whistleblowers to bring suits against alleged fraudsters on behalf of the government and share in any recoveries. That provision is credited with more than two-thirds of all False Claims Act recoveries since 1987.

In February, the Justice Department announced the successful recovery of over $2.2 billion through False Claims Act cases that would have otherwise been lost to fraud in FY2022. More $1.9 billion of those claims were recovered through Grassley’s qui tam provision. A total of more than $72 billion in taxpayer money has been recovered since the 1986 update to the law.

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Walgreens to Launch On-Demand Virtual Care This Month

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Tracey D. Brown, EVP, president of Walgreens retail & chief customer officer, underscored Walgreens transformation into a helathcare company that solves challenges that face the industry. She emphasized the power of the fourth network and community-based solutions that make quality healthcare more accessible while improving outcomes and lowering costs – an approach with the potential to transform the way we engage with our health.

“We’re launching Virtual Healthcare at Walgreens this month because our goal is to be the most convenient health and wellness destination, whether you’re physically in stores or visit Walgreens virtually in stores.”

Walgreens Virtual Healthcare offering is set to launch in late October 2023. This digital solution will provide discreet, convenient and on-demand medical care for common health needs. It will make it easier for individuals to receive online diagnoses and prescriptions, making healthcare accessible and affordable at any time. Meeting patients where they’re at is core to Walgreens mission, and Walgreens Virtual Healthcare aims to improve access to fast, reliable, affordable care.

Some of the key benefits include:

– – An easier way to get care, when you need it: Patients will be able to connect easily with doctors and nurse practitioners through virtual or chat-based consultations. For certain conditions, video visits with healthcare providers will be available, all on the patient’s terms and from the convenience of their own devices.
– – Care and treatment for some of the most common health needs: Walgreens Virtual Healthcare will provide on-demand medical care and treatment for some of the most common health needs, including respiratory illness, allergies, urinary tract infections (UTIs) and acne.
– – Streamlined treatment access: After patients connect with a provider either via chat or video, Walgreens Virtual Healthcare enables them to get their prescriptions filled from their preferred pharmacy, including at Walgreens pharmacies or with Walgreens Same-Day Prescription Delivery.
– – Affordable pricing: Most Walgreens Virtual Healthcare chat visits will be priced at $33 out-of-pocket, with pricing for video visits varying from $36-75, making healthcare more affordable and accessible. At this time, insurance is not accepted for Walgreens Virtual Healthcare visits, but it can be used to cover the cost of prescriptions. In the future, Walgreens Virtual Healthcare plans to accept insurance, Flexible Spending Accounts and Healthcare Savings Accounts will be accepted.

Patients in select states will be able to access Walgreens Virtual Healthcare at Walgreens.com beginning in late October. These initial states cover nearly half of the U.S. population and half of Walgreens pharmacy customers. Walgreens plans to expand the service to cover additional conditions and markets in the near future.

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Accrued Vacation Pay Immediately Due Upon Temporary Layoff

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In March 2020, because of the reduction in business caused by the COVID-19 pandemic, Hyatt decided to furlough or temporarily lay off over 7,000 employees.

Plaintiffs, Karen Hartstein filed a class action complaint in Los Angeles County Superior Court on behalf of a putative class of California Hyatt employees, asserting claims under California law for failure to pay all wages upon discharge,waiting time penalties, failure to furnish accurate wage statements, unfair business practices, and enforcement under the Private Attorneys General Act (“PAGA”). Hyatt removed the action to federal court.

The district court granted Hyatt’s motion for summary judgment, denied Plaintiff’s motion for partial summary judgment, and dismissed the action with prejudice. The district court concluded that the March 2020 furlough of Hyatt’s employees was not a termination within the meaning of Labor Code § 227.3 because there was not a complete severance of the employer-employee relationship.

The court also rejected Plaintiff’s claim that the value of the complimentary hotel rooms class members were eligible to receive constituted wages they should have received upon discharge. And because it concluded that Hyatt was not required to pay the accrued vacation in March 2020, the district court declined to address whether Hyatt was liable for waiting time penalties under § 203 and whether Hyatt had a good faith dispute about the payments.

The 9th Circuit Court of Appeals reversed as to the vacation pay claim, and affirmed the dismissal of the value of the hotel room claims in the published case of Harstein v Hyatt Corporation -22-55276 (September 2023).

Hyatt did not contest that it was required to pay its employees their accrued vacation pay when the employees were discharged. The question is when the employees were discharged within the meaning of California’s prompt payment provisions. Plaintiff argues that the indefinite layoff in March 2020 was a “discharge” within the meaning of Labor Code § 201(a), triggering Hyatt’s obligation to pay accrued vacation pay. Hyatt contends that it was not required to pay accrued vacation pay until June 2020, when employees were formally terminated.

Section 201 does not define “discharge.” The question accordingly is whether a temporary layoff, with no specified return date, is a discharge for purposes of § 201. “We have not found, and the parties have not cited, any caselaw that addresses this question. However, the California Division of Labor Standards Enforcement (‘DLSE’) has answered the question explicitly.”

The DLSE is the state agency empowered to enforce California’s labor laws. In Opinion Letter 1996.05.30, the DLSE addressed an employer’s question “regarding the obligation of an employer to pay wages due at the time of a ‘temporary layoff.” The DLSE replied that, “if an employee is laid off without a specific return date within the normal pay period, the wages earned to and including the lay off date are due and payable in accordance with Section 201.”

The DLSE cited Campos v. Employment Development Department, 183 Cal. Rptr. 637 (Ct. App. 1982), which addressed “whether workers on indefinite layoff are disqualified from receiving unemployment benefits when they refuse to accept recall offers in the course of a trade dispute.” Campos concluded that, “where the employees have no contractual right to recall within any specified time period, the better approach is to treat such layoffs as indefinite, thereby terminating any employment relationship.”

Thus the Court of Appeals concluded that the prompt payment provisions of the California Labor Code required Hyatt to pay Plaintiffs their accrued vacation pay in March 2020. It therefore reversed the district court’s grant of summary judgment to Hyatt as to the vacation pay claim and remand for the district court to consider whether Hyatt acted willfully in failing to comply with the prompt payment provisions.

However, the complimentary hotel rooms Hyatt provided to employees were excludable from the calculation of employees’ regular rate of pay under the Fair Labor Standards Act (FLSA). It therefore affirmed the grant of summary judgment as to the complimentary hotel room claim.

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Gov. Newsom Vetoes CAAA Sponsored TD Extension – AB 1213

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Labor Code Section 4656 prohibits aggregate temporary disability payments for a single injury occurring on or after January 1, 2008, causing TD from extending for more than 104 compensable weeks within a period of 5 years from the date of injury, except if an employee suffers from certain injuries or conditions.

Assembly Bill 1213 introduced by Assembly member Liz Ortega (D-San Leandro) provides that if a utilization review (UR) denial of treatment recommended by a treating physician for an injured worker is overturned by IMR, any TD benefits paid or owing to the injured worker from the date of the UR denial until the date of the IMR decision shall not be used in calculating aggregate TD for which the injured worker is eligible.

The California Applicants’ Attorneys Association, the sponsor of this bill, writes in support arguing “It is wrong for TD benefits for so many injured workers to end when necessary treatment was erroneously or unreasonably denied, and the denial delayed the injured worker’s recovery and return to work.”

In opposition, California Coalition on Workers’ Comp and other employer organizations, argued the bill is not needed because “The actual delay in the system related to care comes from the overuse of IMR by a small number of attorneys and physicians trying to push care that is conflicting with the state-established guidelines for determining medical necessity.”

AB 1213 was passed by the California Legislature. However, on October 8, Governor Newsom vetoed the proposed law.

In his veto message he said “While I understand the goal of the author and sponsor, there is a lack of data to support such a change. Under the existing workers’ compensation system, employers are required to establish a UR process to evaluate the necessity and appropriateness of requested medical treatments. This process is in place to ensure that employees receive the appropriate evidence-based medical care.”

“Realigning incentives is an important policy tool to deliver on our shared goal of returning injured workers back to work. Such realignment should be done cautiously to avoid further friction in the system that frustrates the objective of providing timely treatment, prompt payment of benefits and returning injured workers back to work. Unfortunately, this bill does not strike the right balance.”

“For these reasons, I cannot sign this bill.”

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October 2, 2023 – News Podcast

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Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: 3M Resolves Defective Military Earplug Cases for $6 Billion. Court of Appeal Rules Against Cal/OSHA in Valley Fever Case. School District Struggles to Prove Exclusive Remedy for Volunteer. Five Wingstop Restaurants and Owners Cited $3M for Wage Theft. $12.7M in DOL Grants Awarded For Workplace Safety. WCIRB Releases COVID-19 2023 Claim Trends – Update. CWCI Study Shows SB 863 Cost Reductions Bottomed Out by 2015. Costly Healthcare Presumption of AOE/COE Law Failed – This Year. New Law Facilitates Physicians and Dentists from Mexico Program. Biomarkers Can Confirm Long COVID With 94% Accuracy.

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