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Tag: 2014 News

Psychologist Investigated for Comp Fraud

A Grass Valley psychologist is suspected of fraudulently billing insurance companies for services that were never performed, according to the Department of Consumer Affairs (DCA).

Psychologist Pamlyn Kelly is now under investigation by a litany of departments, including the State Department of Insurance, the U.S. Department of Labor and the Nevada County District Attorney’s Office.

“The agency was alerted when a patient discovered services that were billed to her insurance company but were never performed,” DCA Deputy Director of Communications Russ Heimerich said.

What Kelly is accused of amounts to workers’ compensation fraud, which is a felony in California.

Heimerich said investigators served a search warrant at Kelly’s Grass Valley home; what they found gave them enough confidence to make the allegations public.

There are two simultaneous investigations into Kelly: the criminal investigation and an administrative investigation, which will determine whether disciplinary action should be taken against Kelly’s license.

“It’s either revocation, probation, sometimes there’s a stipulated settlement to surrender a license, it really depends case to case,” Heimerich said.

As of now, Kelly is still able to practice; however, the DCA is considering suspending her license during the investigation, depending on what is found.

Although this began with one patient, investigators suspect other instances of fraud.

Current or former patients are encouraged to check their bills or talk to their insurance company for services that were not provided — especially the dates of services.

If you suspect fraud, contact Supervising Investigator Mark Loomis at (916) 263-2585.

Study Shows California Has Highest Comp Rate in Nation

A list of state rankings for workers’ compensation premiums shows a slight drop in premiums in the last two years, and that a number of states are close in terms of how much employers are paying.The list put out by the Oregon Department of Consumer and Business Services once every two years, and analyzed in an Insurance Journal article, shows the 2014 median value of workers’ comp premiums paid was $1.85 per $100 of payroll, a drop of 2 percent from the $1.88 median in the 2012 study.

National premium rates range from a low of 88 cents in North Dakota to a high of $3.48 in California, the report shows.

The list also shows 21 states within 10 percent of the median and the range from highest and lowest rankings has been shrinking, according to Jay Dotter, who put the report together. The effect is that it makes the list more “volatile,” Dotter said, adding that it’s important to note that volatility because some states use the list to measure the performance of their workers’ comp system. “A small change in the index rate can give you a larger change in ranking,” he said.

As an example of a state that relied on the list to make changes Dotter pointed to Hawaii’s workers’ comp administrators, who noted their top 15 ranking in the 2006 report and put notice of the poor performance on a state’s website and publicized it to help champion reforms that were eventually passed. The state was ranked 27th on the latest report.

Oregon’s workers’ comp system was in sad shape when the state began to compile the list in the 1980s in order to evaluate itself and push for reforms that were eventually passed. The state went from 6th place on the list and was 43rd on this year’s list, its best performance to date, according to Dotter.

The study puts states’ workers’ comp rates on a comparable basis using a constant set of risk classifications for each state. This study used classification codes from the National Council on Compensation Insurance. Following California’s $3.48 per $100 in payroll was not even close to Connecticut ($2.87) at No. 2 on the list, coming in it at 155 percent above the national median workers’ comp premium. New Jersey ($2.82), New York ($2.75), and Alaska $2.68) rounded out the top five.

North Dakota (88 cents) was at the bottom of the list, which makes is the cheapest state for employers. It has traditionally ranked lowest, and the state retained it’s ranking from the 2012 list and also saw a drop in premiums from $1.01. Other states where workers’ comp is far below the national median for workers’ comp premiums are Indiana (at 50 percent of the national median), Virginia (61 percent), Arkansas (64 percent) and Massachusetts (68 percent).

Despite major workers’ comp reforms signed into law in 2012 California easily tops the 2014 Oregon Workers’ Compensation Premium Rate Ranking Summary.

It’s an unacceptable position to be in considering all the reforms that were made two years ago, said Workers’ Compensation Action Network spokesman Jerry Azevedo. “Try as we might to reform California’s workers’ compensation system, employers here continue to bear the heaviest cost burden in the nation – by a wide margin,” Azevedo said. Azevedo noted that the same study has consistently ranked California among the most expensive states for more than a decade. In the 2012 report California was third on the list with $2.92 per $100 of payroll, so in the two years since Gov. Jerry Brown signed into law the reforms of SB 863 premiums have jumped 56 cents.

Operators of Three L.A. Medical Clinics Indicted

An indictment was unsealed this week charging two managers and operators of three Los Angeles medical clinics with Medicare fraud and conspiracy to pay illegal kickbacks for medical procedures that were never actually provided.

Hovik Simitian, 47, of Los Angeles, and Anahit Shatvoryan, 49, of Glendale, California, were each charged in the Central District of California with one count of conspiracy to commit health care fraud, six counts of health care fraud and one count of conspiracy to pay health care kickbacks. According to allegations in the indictment, Simitian and and Shatvoryan managed and operated three medical clinics – Columbia Medical Group Inc., Life Care Medical Clinic and Safe Health Medical Clinic – out of two suites in the same Los Angeles office building. From approximately February 2010 through June 2014, Simitian and Shatvoryan paid marketers illegal kickbacks to recruit Medicare beneficiaries to the clinics. They then submitted false claims to Medicare for services – including procedures such as anorectal manometry and nerve conduction tests – that were not medically necessary and never actually provided.

From approximately February 2010 through June 2014, the clinics allegedly submitted a total of $4,526,791 in false and fraudulent claims to Medicare, and Medicare paid $1,668,559 on those claims.

This case is being investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California. This case is being prosecuted by Trial Attorneys Blanca Quintero and Alexander F. Porter of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division; Acting U.S. Attorney Stephanie Yonekura of the Central District of California; Special Agent in Charge Glenn R. Ferry of the Los Angeles Region of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) and Assistant Director in Charge Bill Lewis of the FBI’s Los Angeles Field Office made the announcement.

Prescription Drug Formulary Saves Claim Costs

A new California Workers’ Compensation Institute study shows that adopting a state-mandated workers’ comp prescription drug formulary such as those used in Texas and Washington State could reduce California workers’ compensation pharmacy payments by an estimated $124 million to $420 million a year while simultaneously raising the quality of care and reducing frictional costs in the system.

Drug formularies, which are widely used in group health, Medicare, and other federal health care programs are lists of approved drugs that define the scope, and in some cases, limit the variability in prices for certain types of drugs. Unlike California, states such as Texas, Washington and Ohio have mandatory formularies that apply uniform standards and drug lists for all injured workers in those jurisdictions.

To measure the potential effect of using a state-mandated formulary in California, the authors created a dataset of 1.6 million California workers’ compensation prescriptions filled between January 1, 2012 and June 30, 2013 and applied the Texas and Washington State formularies to these prescriptions. The results showed that applying the Texas formulary in the California workers’ compensation system would exclude 17 percent of the prescriptions and 29 percent of the payments, while Washington State’s more exclusive formulary would exclude 39 percent of the prescriptions and 70 percent of the payments. The study also estimated that using the Texas and Washington formularies in California would reduce brand-name drug payments between 42 and 95 percent, and reduce the use of controversial Schedule II opioid painkillers by 36 to 45 percent, reducing the associated payments for these drugs by 65 to 78 percent.

The study notes applying either formulary in California would sharply reduce workers’ comp prescription drug payments from current levels. When compared to current prescription drug utilization patterns and costs, the study estimated that the additional controls provided by a formulary could reduce total pharmaceutical payments in the system by 12 percent to 42 percent, which translates to a potential savings of $124 million to $420 million a year. The use of a state mandated formulary also would clarify the rules for drug selection, reduce the volume of ancillary services such as drug testing, and reduce administrative expenses for utilization review and independent medical review.

CWCI President Alex Swedlow said he is “aware of discussions” among officials within California’s workers’ compensation system over whether to adopt a mandated formulary.

According to the Insurance Journal, establishing such a formulary in California would not require action from the state Legislature. Instead, it could be done through regulatory changes by the state Division of Workers’ Compensation. Mark Walls, vice president of communications and strategic analysis at Safety National, said insurers are interested in adopting a formulary as a way to drive down costs and stem opioid misuse. However, the system could face opposition from prescription drug manufacturers.

Complex Issues Raised at IAIABC Annual Conference

The 2014 International Association of Industrial Accident Boards and Commissioners (IAIABC) Annual Conference in Austin offered a forum for regulators from around the country to discuss common issues and potential solutions. The IAIABC is an association of government agencies that administer and regulate their jurisdictions’ workers’ compensation acts. At this year’s conference, held Sept. 29-Oct. 2, regulators highlighted a variety of complex issues that they are currently facing. According to the report published by Property Casualty 360 some of the issue were:

1. Hospital Fee Schedules. In states that do not have hospital fee schedules, the standard for payment is usually “reasonable and customary” charges. The question becomes, how do you determine what is reasonable? Providers push for billed charges to be the standard; however, payers feel that this is an unfair standard because it is significantly higher than what providers ultimately accept as payment. On the other hand, payers are pushing for paid charges to be the standard, but the providers argue that PPO contracts dictate much of this and those contracts are based on volume. If someone doesn’t have a contract, they do not believe that they should get the benefit of that discount.

2. Benefits for Illegal Aliens. Nearly all states extend benefits in some form to illegal alien workers. In some states this is limited to medical benefits, while other states limit this to medical and total disability. In most states, there are no limitations to what benefits these workers can receive.

The overall concern is that some states are awarding these injured workers permanent total disability benefits because they cannot be put through vocational rehabilitation and returned to work. Thus, their status as an illegal alien is factoring into the permanent disability award. Attorneys are also arguing that total disability benefits should continue when a light-duty release is obtained because that person cannot legally return to work. States are trying to strike a balance between protecting illegal-alien workers but at the same time not rewarding them additional benefits simply because of their inability to legally work in the U.S.

3. Ride-sharing Services. The explosion of ride-sharing services such as UBER is causing concern with regulators around the nation. The big concern from a workers’ compensation standpoint is whether these drivers should be classified as employees of UBER or whether they are independent contractors. Owners of taxi companies argue that allowing these drivers to be classified as independent contractors creates an unfair competitive advantage. States are challenged with whether they can classify these drivers by statute or whether this should be done by the courts interpreting the current statutes.

4. Treatment Guidelines. Several states, including Washington, Texas and Colorado, have pushed out treatment guidelines for issues such as opioids and lower back injuries. These guidelines have resulted in significantly lower medical costs on claims. The medical community tends to resist implementation of such guidelines, as they feel this impedes their ability to render appropriate medical care based on the specifics of the patient. Those that argue for treatment guidelines point to significant research on the effectiveness of certain treatment modalities and the dangers associated with opioids above certain dosage levels.

5. Large Deductible Policies. Regulators feel that there is confusion on the differences between large deductible policies and self-insurance, with many employers assuming that the two are interchangeable. In some states, the courts have ruled that employers under a large deductible policy cannot have influence over the claims-handling process so they cannot access items like adjuster files. It was stressed that, under deductible policies, the carrier is ultimately responsible for payment of the claims and compliance with the statutes. If the carrier is unable to collect the deductible from the employer, the regulators do not have jurisdiction over the issue. The deductible agreement is outside the parameters of the insurance policy.

Doctors and Hospitals Receive $10 Billion Annually From Vendors

Pulling the curtain back on long-hidden industry relationships, the federal government revealed that U.S. doctors and teaching hospitals had $3.5 billion worth of financial ties with drug and medical-device makers in the last five months of 2013. The details published in a new government database have been sought for years by consumer advocates and lawmakers concerned that conflicts of interest in the medical profession are jeopardizing patient care and costing taxpayer-funded health programs. This first batch of payment data covers just five months of 2013, but it shows the extensive ties medical companies have forged with doctors and academic medical centers across the country. About 546,000 U.S. physicians and 1,360 teaching hospitals received some form of compensation.

According to the story and analysis by the Los Angeles Times, California doctors and hospitals received 18% of the U.S. total, or $638 million, for the five-month period. In all, the data show nearly $2.5 billion in direct payments to medical providers – with 60% of that related to research. There was an additional $1 billion reported for medical providers’ ownership stakes in companies. That includes grants from companies and money that doctors invested themselves.

Advocates have long been concerned that this corporate largess – from speaking and consulting fees to luxury trips and meals – can lead to patients getting the wrong drugs or medical procedures. Those decisions can harm patients and drive up the nation’s $3-trillion medical tab, experts warn. Consumer advocates hailed the release of the information after years of debate in Congress and steadfast opposition from industry groups. “This exposure will require everybody to talk about something that’s been underground,” said Lisa McGiffert, director of Consumers Union’s Safe Patient Project in San Francisco. “It’s a widespread practice that does influence the kind of care patients get.”

The Physician Payments Sunshine Act, originally authored by Sen. Charles E. Grassley (R-Iowa), was included in the Affordable Care Act that President Obama signed in 2010 amid growing demands for more openness in the U.S. healthcare system. In the last several years, the Obama administration has lifted some of the secrecy by publishing data on how much hospitals charge for medical procedures and how much the massive federal Medicare program pays individual physicians. However, federal officials urged people not to rush to conclusions because financial ties between medical providers and manufacturers don’t necessarily signal wrongdoing. The database “does not identify which financial relationships are beneficial and which could cause conflicts of interest. It simply makes the data available to the public,” said Dr. Shantanu Agrawal, a deputy administrator at the Centers for Medicare and Medicaid Services.

Indeed, physicians and academic medical centers defend industry collaboration as essential to advance research into life-saving treatments. For example, drugs and devices that companies donate to doctors to use in their research are included in the database as company contributions. Critics also questioned the accuracy of the government data and the potential for doctors’ reputations to be tarnished unfairly. Similar complaints arose this year when Medicare published its physician payment data. “If the information made available to the public involves dollar amounts without full context, it can lead to gotcha-style news stories and healthcare providers facing the presumption of ethical wrongdoing even when they have done nothing wrong and their work is benefiting patients,” said Mary Grealy, president of the Healthcare Leadership Council, an association of medical industry leaders. Medical groups complained that physicians had not been given adequate opportunity to review the information before it was published.

Free IMR Webinar Set for October 22

Submitting medical records to IMR can be an arduous process. However, as the IMR system improves the flow of information, the process becomes less of a problem. Now, claims examiners may be able to submit records electronically, over the internet. To discuss how this might be done, the Division of Workers’ Compensation (DWC) and MAXIMUS Federal Services (MFS) invite claims administrators to attend a two-hour webinar on Wednesday, October 22 from 10 a.m. until noon PDT.

The webinar will discuss electronic submission of medical records related to the Independent Medical Review (IMR) process, with the primary focus on the MFS Secure File Transfer Protocol (SFTP) solution. Secure File Transfer Protocol, or SFTP) is a network protocol that provides file access, file transfer, and file management functionalities over any reliable data stream such as the internet. SFTP is a secure way to transfer files between local and remote servers.

Content for this webinar will be largely technical in nature. Therefore, interested parties are encouraged to have IT staff attend.   Interested parties can register for the webinar online for the general meeting for the CA community regarding the transfer of medical records using a file transfer solution (MoveIT)

WCAB Reverses Itself in Dubon En Banc IMR Case

The WCAB changed course in its second en banc opinion on the landmark case of Jose Dubon v World Restoration, SCIF now known as Dubon II. The new decision comes as some relief to the defense industry that has seen major aspects of SB 863 evaporate in a flurry of judicial opinions attacking some of its major provisions. The applicant community no doubt will have consternation over this newest development.

Last February, the WCAB in Dubon I ruled that the WCAB rather than the IMR process must decide appropriate medical treatment in situations were UR was defective. It reasoned that if a UR decision is invalid because its integrity was undermined due to the defendant’s failure to provide the UR physician with adequate medical records or because the UR physician failed to consider them, there is no valid UR determination and no basis for the employee to invoke IMR. Although both the defendant and employee may submit medical records and reports to the IMR organization a defendant may not use this as a vehicle to cure defects in its UR process if the UR decision has been found invalid. Where there is no valid UR decision subject to IMR, the issue of medical necessity must be determined by the WCAB.

In a surprising reversal, the WCAB has now ruled:

1. A utilization review (UR) decision is invalid and not subject to independent medical review (IMR) only if it is untimely.
2. Legal issues regarding the timeliness of a UR decision must be resolved by the Workers’ Compensation Appeals Board (WCAB), not IMR.
3. All other disputes regarding a UR decision must be resolved by IMR.
4. If a UR decision is untimely, the determination of medical necessity may be made by the WCAB based on substantial medical evidence consistent with Labor Code section 4604.5.3

The new case reversed the prior ruling stating “Therefore, we will rescind our February 27, 2014 en banc decision in Dubon I and affirm the decision of the workers’ compensation administrative law judge (WCJ), which held that the medical necessity of applicant’s requested back surgery must be determined by IMR, notwithstanding any procedural defects in defendant’s timely UR decision.”

“In our February 27, 2014 en banc decision, we held that ‘[a] UR determination is invalid if it is untimely or suffers from material procedural defects that undermine the integrity of the UR determination’ and that ‘[m]inor technical or immaterial defects are insufficient to invalidate a defendant’s UR determination.’ (Dubon I, 79 Cal.Comp.Cases at pp. 315, 320.) We now modify our holding to conclude that a UR decision is invalid only if it is untimely.”

However, the WCAB went on to say that “Legal disputes over UR timeliness must be resolved by the WCAB.” With the exception of timeliness, “all other requirements go to the validity of the medical decision or decision-making process. The sufficiency of the medical records provided, expertise of the reviewing physician and compliance with the MTUS are all questions for the medical professional.” “With the exception of timeliness, all defects in the UR process can be remedied when appealed to IMR. The legislature has made it abundantly clear that medical decisions are to be made by medical professionals. To allow a WCJ to invalidate a UR decision based on any factor other than timeliness and substitute his or her own decision on a treatment request violates the intent of SB 863.”

“All requirements of section 4610 should be complied with, however, failure to do so will not invalidate a UR decision. A defective UR can be corrected by either exercising an internal UR appeal process, if available, or through IMR where both parties may submit records, and for which an appeal process has been established. Timeliness, however, cannot be fixed. Whether a UR decision is timely is a legal determination and must be decided by a WCJ.”

Commissioner Marguerite Sweeney concurred and dissented from the en banc decision. She would affirm Dubon I.

Big Bear Lake Contractor Arrested

A Big Bear Lake man has been arrested on suspicion of running his construction business without paying workers compensation insurance. Brandon Scott Beede, 38, faces misdemeanor charges of doing business as an uninsured employer, San Bernardino County district attorney’s office said in a news release.

The district attorney’s Workers Compensation Insurance Fraud Unit began investigating Beede’s business, Beede Construction, on Aug. 12 when the Contractors State License Board filed a claim against him. After an investigation, prosecutors filed criminal charges and issued a $10,000 warrant for Beede, the release said. He was arrested Sept. 16 at a construction site in Big Bear Lake.

“Unfortunately, this is the type of behavior that not only puts workers at risk should they be injured on the job, but it also chips away at the livelihood of those business owners who follow the law,” Deputy District Attorney Scott Byrd, who is prosecuting the case, said in a news release. “By cutting corners, dishonest business owners are able to often underbid the honest contractors.”

Two Appellate Cases Raise Medical Marijuana Concern

Not only are states approving the use of medical marijuana at an astounding pace, but at least two state supreme courts – in Colorado and in New Mexico – are taking up questions that center on marijuana and the workplace and workers’ compensation. According to the report in the Insurance Journal, such cases are of particular interest to those watching the workers’ comp space, and it has some wondering whether insurers will start being asked to pay for a substance that the federal government considers illegal.

And the National Council for Compensation Insurance (NCCI), says that insurers are starting to receive requests to pay for medical marijuana. However, there are those who believe that at this early stage questions arising around workers’ comp are all talk no action. “It’s got a lot more hype than what’s happening in the marketplace,” said John Leonard, president and CEO of Maine Employers’ Mutual Insurance Co. Leonard said he has surveyed his claims professionals and he’s so far found no instances where medical providers have requested marijuana to treat injured workers. “We have no knowledge of any prescriptions involving the use of medical marijuana,” he said, adding that he’s “perplexed” because that experience is contrary to what he’s so often hearing in the press.

NCCI has been concerned about the implications and been tracking the issue for quite some time, said Lori Lovgren, a state relations executive for the group. “We identified it as an emerging issue a couple of years ago,” Lovgren said, adding that medical marijuana has in many states “had a lot of success in the last few years in the legislature.” Like others in the workers’ comp space, NCCI is particularly interested in cases in Colorado and New Mexico.

In Colorado, in Coats v. Dish Network LLC, a man who was injured and using medical marijuana off-duty was terminated. A judge upheld the termination as lawful because use of marijuana, while it was legalized for both medicinal and non-medicinal uses in Colorado, violates federal law. The Colorado Court of Appeals affirmed the employer’s right to fire the employee, but the Colorado Supreme Court recently granted a review of the case.

Another case being closely watched is the New Mexico case of Vialpando v. Ben’s Automotive Services and Redwood Fire and Casualty. The case is believed to be the first in the nation in which a judge has ordered an insurance carrier to reimburse a workers’ comp claimant for the cost of medical marijuana to treat back pain. That case is being appealed to the New Mexico Supreme Court.

It’s not unreasonable to think that decisions from those high courts could lead the way in other states, said Mark Walls, vice president of communications and strategic analysis for Safety National. “Other states will look at those cases,” Walls said. And when it comes to medical marijuana, states have a history of playing follow the leader.

In 1996 California became the first state to legalize medical marijuana. Some 18 years later, it’s currently legal in 23 jurisdictions and the District of Columbia for medicinal use, and it’s legal without a prescription in Washington and Colorado. “There’s certainly a trend,” said Kambiz Akhavan, president and managing editor of, a nonprofit provider of data on a range of topics that include medical marijuana According to Akhavan, legalizing medical marijuana is now under consideration on a Florida ballot and in the Ohio and Pennsylvania legislatures.

Also trending upward is the list of illnesses that advocates believe marijuana can treat. Among those illnesses being tracked by are: appetite stimulation, Alzheimer’s, arthritis, asthma, Crohn’s, GI tract disorders, glaucoma, migraines, nausea from chemotherapy, general pain, and a host of psychological disorders including depression or schizophrenia, bipolar disorder and Tourette syndrome. “The list is quite long,” Akhavan said.

Other insurance challenges NCCI notes are: an absence of National Drug Code, which creates reimbursement issues; liability concerns for employers and insurance companies that pay for medical marijuana if additional injuries are caused by drug intoxication. And, given federal issues, many state courts will be reluctant to approve medical marijuana for the treatment of work-related injuries.