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Tag: 2014 News

TRIA Expiration Seen as Non Event for Comp Industry

The Terrorism Risk Insurance Act (TRIA) is a United States federal law signed by President George W. Bush on November 26, 2002. The Act created a federal “backstop” for insurance claims related to acts of terrorism. The Act “provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism.” The Act was originally set to expire December 31, 2005, was extended for two years in December 2005, and was extended again on December 26, 2007. The current law, under the Terrorism Risk Insurance Program Reauthorization Act, is set to expire on December 31, 2014.

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

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

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

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

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

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

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

Jury Convicts Former CHP Officer

A former California Highway Patrol officer has been convicted in a case involving workers’ compensation insurance fraud.

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

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

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

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

Yao is to be sentenced Jan. 28 before Sacramento Superior Court Judge Russell Hom.

Alleged Malpractice and WCAB “Fraud” Does Not Toll Statute of Limitations

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

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

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

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

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

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

Mendez did not file her complaint until November 2013, so the court properly found it was time-barred. Even if Mendez had sufficiently alleged a claim for fraud or professional negligence, her complaint was also filed beyond the three-year limitations period that applies to such claims. Mendez’s workers’ compensation claim against Cottage was only pending from August 28, 2012, until November 5, 2012. Tolling the statute of limitations for this 69-day period would not have aided Mendez, who filed her complaint over three years after she discovered her claim.

Rating Agencies Say Healthcare Sector Has “Grim” 2015 Outlook

The outlook for non-profit healthcare remains dour for 2015, as hospital operating margins continue to face pressure from rising costs and weaker reimbursement.

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

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

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

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

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

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

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

“The hospital sector has navigated many challenging environments in the recent past, but the upcoming years represent a true transition as the core model of healthcare delivery and reimbursement is undergoing redesign,” said James LeBuhn, Fitch senior director.

Court of Appeal Says IBR Applies Prospectively

Elite Surgical Centers, Escondido, L.P., Elite Surgical Centers, Del Mar, L.P., and Point Loma Surgical Center, L.P. (collectively Elite), had claims pending before the WCAB concerning billing disputes related to the facility fees for arthroscopic knee procedures, arthroscopic shoulder procedures, and epidural injection procedures provided by Elite to injured workers prior to January 1, 2004.

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

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

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

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

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

“We conclude that although the text of the relevant legislation and resulting statutes is ambiguous, the most reasonable interpretation of the legislation is that it does not divest the Board of jurisdiction to decide the dispute at issue in this case. We further conclude that the WCJ’s findings, which the Board adopted in its decision on petitioners’ motion for reconsideration, are supported by substantial evidence. We therefore affirm the decision of the Board.”

Mileage Rate Increases to 57.5 Cents Per Mile in January

The Division of Workers’ Compensation announced the increase of the mileage rate for medical and medical-legal travel expenses by one and one-half cent to 57.5 cents per mile effective January 1, 2015.

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

IRS Bulletin Number IR-2014-114 dated December 10, 2014 announced the rate increase. The updated mileage reimbursement form is posted on the DWC website.

CSHWC Unanimously Elects Sean McNally as Chair

The California Commission on Health and Safety and Workers’ Compensation (CHSWC) has announced the unanimous election of Commissioner Sean McNally as the Chair of the Commission for 2015.

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

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

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

The DIR has posted a CHSWC Historical Timeline on its website to celebrate the 20th anniversary of the Commission on Health and Safety and Workers’ Compensation. The CHSWC timeline is part of the concurrent celebration of the 100th anniversary of the Division of Workers’ Compensation (DWC), and the 40th anniversary of Cal/OSHA

Kitchen Worker Arrested for Working on TTD

Fernando Gallegos, 43, of Los Angeles, was arrested for allegedly collecting workers’ compensation benefits for one job while still working another. Gallegos faces five felony counts of workers’ compensation fraud and one felony count of perjury.

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

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

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

This case is being prosecuted by the Los Angeles County District Attorney’s Office. Bail for Gallegos is set at $30,000.

DWC Posts IMR Progress Report

The Department of Industrial Relations and its Division of Workers’ Compensation posted a progress report on the department’s implementation of Independent Medical Review, one of the most important provisions of Senate Bill 863. Independent Medical Review (IMR) is the medical dispute resolution process that uses medical expertise to obtain consistent, evidence-based decisions.

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

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

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

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

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

The progress report is posted on the DIR website.

Robert Shlens M.D. Dies at 79

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

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

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

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

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

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

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

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