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Tag: 2016 News

CWCI Study Shows Rising Medical-Legal Costs

The average amount paid for an individual medical-legal service in the California workers’ compensation system rose 66 percent in the 8 years that followed the 2006 revisions to the medical-legal fee schedule, as the mix of medical-legal services shifted away from those reimbursed at a flat fee toward time-based services such as follow-ups within 9 months of a prior evaluation, comprehensive evaluations involving extraordinary circumstances and supplemental reports.

The findings are part of a new California Workers’ Compensation Institute (CWCI) study that reviews the legislative reforms, regulatory changes and judicial decisions that have reshaped the medical-legal process for resolving workers’ comp claim disputes over the past quarter century; provides an update on the quantity, mix and average payments for medical-legal services in the wake of the 2002-2004 reforms; and generates benchmark data for use in future studies on the impact of the 2012 reforms, which introduced independent medical review as a new means for resolving treatment disputes.

Among the key findings of the study determined:

1) The percent of indemnity claims with medical-legal services dropped from 24 percent in AY 2004 to 17 percent in AY 2005, after implementation of the 2002-2004 reforms, and has remained near that level.
2) In 2007, the first full year under the revised fee schedule that introduced new time-based billing codes for medical-legal testimony and supplemental evaluations, the average payment for an individual medical-legal service was $979. By 2014, the average had increased 66 percent to $1,628.
3) The increase in the overall average medical-legal payment from 2007 to 2014 reflects a continuing shift from services with flat fees to the following time-based services that are billed in 15-minute increments:
4) Follow-up evaluations within nine months of a prior evaluation (billing code ML 101), where the average payment increased 136.4 percent;
5) Comprehensive evaluations involving extraordinary circumstances (billing code ML 104), where the average payment increased 66.2 percent; and
6) Supplemental evaluations (ML 106) where the average payment rose 86.1 percent.
7) Invalid charges for supplemental reports have increased. The proportion of supplemental (ML 106) medical reports billed within 24 months of the injury absent an initial medical-legal evaluation increased from one in seven in AY 2007 to one in five in AY 2013.

CWCI has published its study, including additional details, tables and analyses in a Research Note, “The Changing Nature and Cost of the Medical-Legal Process in California Workers’ Compensation.” CWCI members and members of the public who are CWCI research subscribers can access the full 20-page report as well as a 2-page summary Bulletin by logging in to the Institute’s website.

Drugmakers Fight Over Rights to Generic OxyContin

A federal appeals court ruled Monday that four patents related to Purdue Pharma’s painkiller OxyContin are invalid, potentially bringing Teva Pharmaceutical Industries Ltd and others a step closer to introducing generic versions of the drug.

Reuters Health reports that privately owned, Connecticut-based Purdue had sued Teva, Amneal Pharmaceuticals, Epic Pharma and a U.S. arm of Mylan NV after they sought approval from the U.S. Food and Drug Administration to make generic OxyContin.

Monday’s ruling by the Federal U.S. Circuit Court of Appeals upheld earlier orders from a lower court judge in favor of the generic drugmakers.Purdue said in a statement that it was reviewing the decision and considering what to do next. ;”Despite the court’s ruling, Purdue has several other patents protecting OxyContin, and we do not anticipate generic manufacturers selling the product in the near future,” it said.

Representatives of the generic drugmakers could not immediately be reached for comment.

Currently, the only generic versions of OxyContin on the market are so-called “authorized generics,” which are exact copies of the brand-name version authorized by Purdue.

Three of the patents Purdue sought to enforce in its lawsuits are related to an improved formulation of oxycodone, the active ingredient in OxyContin.

The other patent describes technology designed to prevent abuse of the drug by making it difficult to crush and causing it to form a gel when dissolved in water so that it cannot be injected. Purdue licensed that technology from German pharmaceutical firm Grunenthal GmbH, which is also a plaintiff in the lawsuit.

Purdue’s lawsuit against Teva went to a non-jury trial before U.S. District Judge Sidney Stein in Manhattan in 2013. In January 2014, Stein said that the patents were invalid because they did not add enough to what was already known. Stein subsequently dismissed the lawsuits against Mylan, Amneal and Epic as well, since they were based on the same patents. Purdue appealed all four cases to the Federal Circuit.

The case is Grunenthal GmbH et al v Teva Pharmaceuticals USA Inc, U.S. Court of Appeals, Federal Circuit, No. 2014-1311.

Committee in Oversight and Government Reform Probes Drug Pricing

A decision by Turing Pharmaceuticals to increase profits by raising the price of a lifesaving drug by 5,000 percent drove some patient co-pays up to $16,000, according to excerpts of documents that congressional committee members made public on Tuesday.

The excerpts, highlighted in memos released by Democrats on the powerful U.S. House of Representatives Committee in Oversight and Government Reform, and summarized in an article by Reuters Health, give a rare behind-the-scenes glimpse into the business decisions behind drastic price increases at Turing and Canada-based Valeant Pharmaceuticals International Inc. The increases sparked a major public outcry. Both companies now face federal investigations over drug pricing.

The document excerpts show how Valeant bought two heart medicines for their “material pricing potential.” The company increased the price of Isuprel by 525 percent and Nitropress, by 212 percent. The documents also suggest Valeant hiked the prices of another 20 drugs by more than 200 percent between 2014 and 2015.

In a statement, Valeant said it had responded to complaints about pricing by offering volume-based discounts of up to 30 percent.

Turing said in a statement it cut the price of Daraprim by up to 50 percent for hospitals. It said it used the funds from the price increase for research and development and patient access programs.

A lawyer for Martin Shkreli, Turing’s former chief executive officer, did not respond to a request for comment. Shkreli, who also faces securities fraud charges, is slated to appear on Thursday before the House Oversight Committee with Valeant interim CEO Howard Schiller. Elijah Cummings, the panel’s top Democrat, called for the probe.

Tuesday’s excerpts show how Shkreli and Turing tried to maximize profits from Daraprim, while warding off potential public relations backlash from HIV patients who rely on the drug. The drug treats toxoplasmosis, a parasitic infection. “Very good. Nice work as usual. $1bn here we come,” Shkreli wrote in a May email to the board.

Not long after Turing acquired the drug, reports began to pour in about patients with skyrocketing co-pays. In one August email, a Walgreens Boots Alliance executive wrote to ask if the company would grant exceptions for “those patients with a co-pay over the approved amount of $10,000.” In another case, the company received a plea from Walgreens to reduce the price for a dog, who was “obviously not covered by insurance.”

A Turing executive turned down the request and directed the pharmacy to a “vet meds website.”

WCAB Panel Decision Continues Erosion of UR/IMR Jurisdiction

Rodolfo Arroyo sustained industrial injury in 2000 to his back, knees and right big toe while working for Inland Concrete Enterprises as a concrete worker. The parties’ Agreed Medical Evaluator (AME) Stuart Green, M.D., testified at his deposition in 2008 that it was medically reasonable for applicant to use a motorized scooter to relieve the effects of his industrial injury. Dr. Green reiterated that opinion in his comprehensive March 12, 2009 report of examination. Defendant accepted the opinion of the AME and provided applicant with a motorized scooter.

After approximately five years of use, the scooter began to break down. On February to, 2015, applicant’s primary treating physician Jalil Rashti, M.D., reported to defendant that applicant’s scooter was broken and he requested authorization to replace it with a new scooter in light of the costs of repair.

Defendant submitted the request for authorization to UR. However, the UR reviewer did not evaluate whether the scooter should be replaced or repaired.  Instead, the timely UR decision addressed whether Arroyo should use a motorized scooter as a matter of medical necessity, and denied authorization to purchase one on the grounds that it was “not essential to care.”

Applicant requested a hearing to challenge defendant’s action, and the issues of “(n]eed for further medical treatment in the form of a motorized scooter” and “[s]ubject matter jurisdiction over the medical treatment dispute” were tried before the WCJ who issued his decision finding that the WCAB lacked subject matter jurisdiction over the treatment dispute because defendant issued a timely UR decision. The WCAB granted a petition for reconsideration and reversed this finding in the panel decision of Arroyo v Inland Concrete Enterprises.

The panel concluded that the WCJ correctly noted in his Report that the UR decision issued within the time allowed by Labor Code section 4610(g)(I), but he then incorrectly concludes from that fact that the WCAB has no jurisdiction over the treatment dispute. Contrary to the WCJ’s conclusion, the WCAB does have jurisdiction over this dispute. Dr. Rashti requested authorization to replace the broken scooter that defendant previously provided, but the UR conducted by defendant did not address whether the broken scooter should be repaired or replaced. Instead, the UR considered whether provision of a scooter is medically supported, but that is not the issue raised by the request for authorization.

When a defendant authorizes a particular kind medical treatment it does not become obligated to provide that treatment forever. For example, the conduct of URs at reasonable intervals to address the ongoing use of a medication may be appropriate to determine if the medication continues to be effective and medically necessary. Similarly, the ongoing provision of physical therapy and chiropractic treatment may properly be evaluated through UR to determine if it is reasonable to continue to authorize those treatments. UR of other forms of medical treatment may also be supported when there is a change in the employee’s circumstances or condition that raises a question about the necessity for continued provision of the treatment. But in all of these situations, the UR that is conducted must address the treatment for which authorization is requested or the medical treatment issue in dispute. That did not occur in this case.

Here, defendant did not conduct a timely UR of the treating physician’s request for authorization to replace or repair the broken motor scooter. Thus, there is no valid UR concerning the request for authorization submitted by Dr. Rashti, and as held in Dubon II, the determination of whether the treatment should be authorized may be made by the WCAB based on substantial medical evidence consistent with Labor Code section 4604.5. Accordingly, the WCJ’s October 28, 2015 decision is rescinded and the case is returned to the trial level for consideration of the reasonableness and necessity of repairing or replacing the broken scooter.

DWC Administrative Director Destie Overpeck Moves to State Bar

Division of Workers’ Compensation Administrative Director Destie Overpeck is leaving the Department of Industrial Relations to join the State Bar of California at its Office of the General Counsel. Ms. Overpeck’s last day with the DWC will be February 12, 2016. DWC Chief Counsel George Parisotto will assume the acting administrative director responsibilities.

As administrative director, Ms. Overpeck managed the DWC and oversaw the implementation of several reforms to the workers’ compensation system, including California’s 2012 reform law, SB 863, which increased payments to injured workers while simultaneously reducing costs for employers.

“As a valued member of my executive team, Destie Overpeck guided the Division of Workers’ Compensation through the sweeping reforms of SB 863, and leaves behind a strong organizational structure and dedicated team at the division,” said DIR Director Christine Baker.

Ms. Overpeck has been with DWC for 16 years. After five years as an attorney with the legal unit, Ms. Overpeck was appointed chief counsel in 2005. She became acting administrative director for two interim periods in 2009 and 2011, and again served as acting administrative director in 2012 and was appointed administrative director by Governor Brown in 2015.

Please join DIR in thanking and congratulating Administrative Director Destie Overpeck.

CCWC Provides Forecast of Current Legislative Session

Jason Schmelzer CCWC Legislative Advocate has prepared and circulated an excellent forecast of the workers’ compensation isssues likely to be raised this year by the California legislature.

The California State Legislature returned to Sacramento on January 4 to complete the remainder of the 2015-2016 legislative session. California’s workers’ compensation system hasn’t been a major focus for the legislature for the last few years. The Division of Workers’ Compensation, however, has been busy promulgating regulations to implement SB 863, and the legislature and governor have stayed focused on other issues like climate change, transportation infrastructure, the drought, and affordable housing.

The first order of business for the legislature was to deal with the bills remaining from 2015, which are still eligible for consideration in the early weeks of 2016. One bill, in particular, that CCWC opposed aggressively in 2015 was SB 563 by Senator Richard Pan (D-Sacramento). Previous versions of the bill sought to place significant roadblocks in front of employers seeking to perform legitimate utilization review. However, recent amendments narrow the scope of the bill to simply prohibit UR contracts with a payment structure that specifically incentivizes delays, denials, and/or modifications of treatment requests. While there are some small details to be worked out, it appears that most of the concerns with this bill have now been resolved.

This is likely to be a year in which the stakeholders once again engage with seriousness. The reforms contained in SB 863 have finally been implemented and, as a result, workers’ compensation costs for employers have essentially stabilized. Benefits for injured workers are once again considered “adequate” after SB 863 increased permanent disability benefits by approximately $1 billion per year. The data, although preliminary, indicates that SB 863 has done what it was intended to do – augment benefits and slow or stop the growth in employer costs.

SB 863 is over three years old, and stakeholders are realizing that maintenance needs to occur if the system is to stay in balance. With three years of experience under SB 863 and plenty of data to drive discussions it seems likely that policymakers will attempt to smooth out whatever rough edges remain with recent reforms; and maybe even tackle some of the big issues that still remain. Additionally, stakeholders are getting itchy. Governor Brown has taken a cautious approach to workers’ compensation legislation since signing SB 863 in 2012. The result has been a lack of progress on priority legislation for many stakeholders that are pursuing changes as a direct result of SB 863, or weren’t involved in the negotiations and have priorities that predate SB 863.

It is unclear whether the conditions exist to tackle the big issues in 2016 – cumulative trauma reform, utilization review frequency, and myriad other issues from every corner of the stakeholder world. CCWC continues to watch the situation and work with the legislature, administration, and stakeholders to develop a strategy to move beyond the accomplishments of SB 863 and lower employer costs in what is still, at last evaluation, the most expensive venue for workers’ compensation in the nation.

The legislature, however, may have other ideas. The first new workers’ compensation bill of the year, SB 897 by Senator Richard Roth (D-Riverside), would unquestionably increase costs considerably for cities, counties, and the state. Labor Code Section 4850 provides for one year of full salary replacement, in lieu of temporary disability, for certain law enforcement personnel and firefighters. This provision is a source of great expense for local governments and the state, and SB 897 would double the duration to two years.

DWC Schedules Public Forum on Drug Formulary Regulations

The Division of Workers’ Compensation invites interested members of the public to discuss the adoption and implementation of a drug formulary. The meeting is scheduled from 10 a.m. until noon on Wednesday, February 17, in the auditorium of the Elihu Harris State Office Building, 1515 Clay Street, Oakland, CA 94612.

At its most basic level, a formulary is a list of medicines. Traditionally, a formulary contained a collection of formulas for the compounding and testing of medication (a resource closer to what would be referred to as a pharmacopoeia today). Today, the main function of a prescription formulary is to specify particular medications that are approved to be prescribed at a particular hospital, in a particular health system, or under a particular health insurance policy. The development of prescription formularies is based on evaluations of efficacy, safety, and cost-effectiveness of drugs. Depending on the individual formulary, it may also contain additional clinical information, such as side effects, contraindications, and doses.

Assembly Bill 1124, which became effective January 1, 2016, requires the adoption of a workers’ compensation formulary by July 1, 2017. The overarching goal of the formulary and related rules is to expeditiously provide high quality evidence-based care to injured workers while minimizing administrative burden and cost. DWC will facilitate public discussion on how best to achieve the goal, including the following:

1) Design of the formulary (how to maximize evidence-based drug selection and transparency)
2) Integration of the formulary with existing Medical Treatment Utilization Schedule
3) Adoption of rules to improve the efficiency of utilization review, including ways to reduce the need for elevated utilization review and independent medical review

A Newsline will be issued in the near future to announce the posting of an agenda and background material on the DWC Forum.

13 New San Diego Comp Fraud Indictments in “Operation Backlash”

The San Diego County District Attorney announced 13 new indictments against defendants in one of the largest workers’ compensation health care insurance bribery schemes ever uncovered in San Diego County. The defendants include a radiologist, a pain management physician, two chiropractors, a medical equipment provider, a medical clinic administrator and a medical marketer. Eight defendants, including doctors and their associates were indicted in connection with the same bribery scheme in November by the U.S. Attorney’s Office.

The charges in this case are the result of Operation Backlash, an extensive FBI led undercover investigation that revealed a widespread kickback scheme, including attorneys, doctors and medical providers who referred patients for health services in exchange for money. The defendants paid kickback payments to the owners and operators of chiropractic clinics in San Diego, Escondido and Calexico, in exchange for the patient referrals. A grand jury returned indictments on charges involving approximately $450,000 in kickback payments, resulting in millions of dollars in fraudulent workers’ compensation insurance claims.

The sheer scale of this fraud makes it one of the largest insurance bribery schemes in workers’ compensation ever uncovered in San Diego County. “When law enforcement became aware of the scam, we began following the trail of dirty money and it took us in many different directions,” DA Bonnie Dumanis said. “The circle of criminal conduct continues to widen with today’s charges, and we expect additional indictments and arrests in the future.”

Yesterday, law enforcement fanned out across three counties in a sweeping, early morning take down of more players. Dozens of District Attorney Investigators joined law enforcement in making arrests and serving search warrants at seven locations. At the end of the day, nine defendants were arrested.

Operation Backlash was first announced in November when the initial round of federal indictments was handed down. San Diego chiropractor Steven J. Rigler and San Diego workers’ compensation attorney Sean O’Keefe previously pleaded guilty to federal charges. In addition to today’s state charges, the U.S. Attorney’s Office announced federal indictments against three additional defendants. They include patient recruiters, Fermin Iglesias, Carlos Arguello, Miguel Morales and four corporations. The corporations are Providence Scheduling, Inc., Medex Solutions, Inc., Prime Holdings International, Inc. and Meridian Medical Resources, Inc., doing business as Meridian Rehab Care. The three federal defendants are accused of recruiting individuals to file workers’ compensation claims resulting from an on-the-job injury. The defendants then directed these patients to specific chiropractors who, in exchange for dozens of new workers’ compensation patients each month, agreed to meet a quota set by the defendants for referrals of the new patients for ancillary goods and services such as MRIs and durable medical equipment from specific providers.

The defendants either operated the companies that provided the durable medical equipment the chiropractors were required to use or were paid by the ancillary-procedure providers for the referrals for MRIs and other tests. If the chiropractors failed to average a certain quota of referrals per applicant, the pipeline of new applicants was cut off, according to court records.

“This wave of indictments reinforces the FBI’s commitment to working as a team with our state and local partners in rooting out corruption in our healthcare system,” said FBI Special Agent in Charge Eric S. Birnbaum. “The FBI will continue to use our investigative expertise and intelligence capabilities to detect, deter and disrupt sophisticated fraudulent criminal conspiracies that undermine our health care system and jeopardize patient care.”

Claimant Faces Felony Fraud Charges in San Bernardino

A Hemet man was arraigned on insurance fraud charges Thursday following an investigation conducted by the San Bernardino County District Attorney’s Workers’ Compensation Insurance Fraud Unit.

Raymond Chastain, 23, is charged with one felony count of Insurance Fraud and has plead not guilty. His preliminary hearing is set for Feb. 3 in San Bernardino County Superior Court. He is accused of failing to report income while receiving disability benefits, according to a San Bernardino County District Attorney’s Office news release.

On Oct. 26, 2012, Chastain filed a workers’ compensation claim alleging that he sustained injuries while performing his job duties as a worker for TPG Staffing.

“Our investigation revealed that Mr. Chastain failed to report additional earned income while receiving total temporary disability benefits,” said Senior District Attorney Investigator Rodney Tamparong, who is assigned to the case.

After obtaining an arrest warrant, investigators arrested Chastain at his place of residence in Nov. 2015. He was booked into the West Valley Detention Center on $50,000 bail.

This case is being prosecuted by Deputy District Attorney Scott Byrd.

DWC Appoints Presiding WCJ Paige S. Levy to Position of Chief Judge

The Division of Workers’ Compensation announced that Administrative Director Destie Overpeck has selected Paige S. Levy as chief judge, beginning February 1, 2016.

As chief judge, Levy will work closely with the administrative director, the associate chief judges and presiding judges to oversee more than 160 workers’ compensation administrative law judges at the Division’s 24 district offices and satellites. The chief judge also establishes and monitors procedures for effective maintenance of case calendars, and assists in the coordination of the judicial, legal, medical and related operational activities of the Division.

“I’m confident that Judge Levy will successfully accomplish the goal of improving benefit delivery to injured workers,” said Christine Baker, director of the Department of Industrial Relations.

Judge Levy has served as the presiding judge in Marina del Rey since 2012 and as a workers’ compensation administrative law judge since 2005. She was chair of the Workers’ Compensation State Bar Executive Committee for the 2013-2014 term and served on the committee for five years. She has been a board member for the California Conference of Workers’ Compensation Judges. Judge Levy was the project manager for the 2013 revisions to the DWC Policy and Procedural Manual, and is currently a member of the DWC Ethics Advisory Committee.

Over the last 10 years she has spoken on numerous topics including the application of the AMA Guides, Case Law update, Utilization Review, WCAB policy and procedure, ethics, specialization exam prep, liens, and litigation tips for attorneys. Judge Levy was the 2013 California Applicants’ Attorneys Association (CAAA) Judge of the Year, the 2012 WorkCompCentral Magna Comp Laude Award Winner, and a 2014 DWC Employee of the Year Recipient. She became a certified workers’ compensation specialist in 2000.

“Judge Levy will make an excellent chief judge. Her experience as a workers’ compensation judge and presiding judge, as well as her many years participating in judge training, will serve as a firm foundation for her new position. Please join me in congratulating Judge Levy and wishing her well in her new assignment,” said Destie Overpeck, DWC administrative director.

The DWC also took the opportunity to thank Associate Chief Judge Tom Clarke for his work as acting chief judge for the past several months.