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Tag: 2016 News

County of Los Angeles Claim Costs Skyrocket

The total of all costs related to County of Los Angeles liability and workers’ compensation claims increased by $45.0 million to $577.5 million, which represents an 8.4 percent increase over FY 2013-14. Hilda Solis, chair of the Los Angeles County Board of Supervisors, said in a statement that the increase is “an urgent call for introspection and action.” She added that she was “particularly concerned” with the costs of defending the Sheriff’s Department in excessive-force and officer-involved shooting cases.

The County’s Self-insured Workers’ Compensation Claim Administration Program is the largest local governmental program in the State of California. It is responsible for administering over 27,500 open workers’ compensation claims with approximately 11,000 new workers’ compensation claims reported annually. The Risk Manager’s Message stated “as the largest risk cost driver for the County, the Workers’ Compensation system continues to be the main focus for this fiscal year.

The cost of county workers’ compensation claims rose from $342.2 million in 2014 to $359.3 million last year despite the decrease in claims by 395 to 10,550, which represents a 3.6 percent decrease over FY 2013-14. The increased cost of claims is attributed to the statutory increase in weekly permanent disability rates since medical expenses and temporary disability benefits showed modest decreases.

The Sheriff’s Department made up the largest share of those payouts, with $123.7 million in 2015, up from $110.6 million the year before. If that were not bad enough, the cost of lawsuits against the Los Angeles County Sheriff’s Department jumped 50% from 2014 to 2015 – an increase driven largely by multimillion-dollar payouts in excessive-force and jail death cases.

Medical expenses are the largest single component of the workers’ compensation program cost. During FY 2014-15, the Program received over 409,000 bills from medical service providers. Back in FY 2011-12, a PBM was established to improve the evaluation of drug therapies prescribed to County injured workers. Evaluating the final quarter of FY 2014-15 against program inception baseline data demonstrates the increased utilization of generic drugs to 78.7% (an increase of 18.4% over the baseline). Increased home delivery to 14.2% (an increase of 75.3% over the baseline). And increased PBM Network penetration to 92.5% (an increase of 35.2% over the baseline).

In FY 2012-13, pharmacists from the PBM identified significant use of costly compound medications on the workers’ compensation program. CEO staff utilized data mining capabilities provided by the PBM to identify questionable compound medication prescription patterns. In FY 2014-15, efforts continued to reduce the use and costs of unwarranted compound medication by focused utilization review protocols.

Employment Practices Liability (non-Workers’ Compensation) claims increased by 35 to 193, which represents a 22.1 percent increase over FY 2013-14. The cost of claims and lawsuits increased by $7.1 million to $21.1 million, which represents a 50.5 percent increase over FY 2013-14. Six claims had expenses greater than $500,000 and represented 35 percent of this total ($7.5 million). These allegations include wrongful termination, whistleblower, sexual harassment, and failure to promote.

List Price of Pharmaceuticals Continue Relentless Increases

With a backlash brewing over the price of medicines in the United States, drugmakers are pushing back with a new message: Most people don’t pay retail. Top executives from Eli Lilly, Merck and Biogen said in interviews with Reuters this week that the media focus on retail, or “list prices,” for branded medications is misplaced. They stressed that the actual prices paid by prescription benefit managers, insurers and other large purchasers are reduced through negotiated discounts.

A couple of dramatic price hikes in 2015 exposed the whole industry to ongoing scrutiny in Congress and on Wall Street. Turing Pharmaceuticals raised the price of a generic anti-infective drug called Daraprim by 5,000 percent, and the larger Valeant Pharmaceuticals International raised the price on a heart drug Isuprel by more than 200 percent.

The largest drugmakers quickly portrayed those cases as outliers. But the industry practice of raising prices each year for treatments used by millions of people is attracting new attention.

Adam Schechter, Merck’s president of Global Human Health, said the industry needs to better explain the value of drugs and how they can prevent healthcare costs down the line. “We have to explain the difference between the list price and the net price,” he said in an interview.Toward that end, two drugmakers at the JP Morgan Healthcare Conference in San Francisco this week shared with Reuters some limited information on actual pricing.

Eli Lilly said the actual average price increase on Humalog, its injectable insulin used to treat diabetes, has been a modest 1 to 2 percent annually over the last five years. The company declined to provide a list price. Horizon Pharma plc, a small drugmaker, raised list prices across its business about 7 percent for this year, Chief Executive Tim Walbert said in an interview. But he said he expects the company’s actual price increases to be 4 percent or less.

More recently, Pfizer, one of the world’s largest drugmakers, raised U.S. list prices on more than 100 drugs as of Jan. 1, according to data from information services company Wolters Kluwer that was published last week by UBS Securities. The list included a 9.4 percent rise for pain drug Lyrica and a nearly 13 percent increase for erectile dysfunction drug Viagra. Pfizer said in an email the prices don’t reflect “considerable discounts” to many payers, but did not provide examples of net prices.

Drugmakers keep actual pricing details close to guard their position in negotiations with commercial insurers and government health plans like Medicaid. There is no centralized catalog of U.S. list prices or rebates for medicines. That drug executives at the San Francisco conference allowed even a glimpse into their actual pricing strategies reflects the intensity of the new attention being paid to their practices.

The candor of some individual pharmaceutical executives follows earlier messaging by industry advocates. In a November blog post, the industry’s main lobbying group PhRMA, reported that list prices grew 13 percent in 2014, but actual prices increased only 5 percent.

U.S. health insurers say that, even accounting for discounts, drug prices are rising at an unsustainable rate, and they are pressuring drugmakers for cuts. “Whether it’s a gross number, or a net number, it is still astronomical,” said Daniel Hilferty, chief executive of Independence Blue Cross, which operates in Pennsylvania and New Jersey.

9th Circuit Affirms Allstate’s $8.6 Million Fraud Judgement

The U.S. Court of Appeals for the 9th Circuit affirmed an $8.6 million judgment in favor of Allstate Insurance Company against former Las Vegas chiropractor Obteen N. Nassiri.

Nassiri began defrauding Allstate in 2003 by exaggerating clinical findings, submitting improbable diagnoses, billing for services not rendered, providing unnecessary and excessive treatment, misrepresenting billing, making inappropriate referrals and exhibiting a general pattern of illegal and fraudulent conduct, according to the Allstate lawsuit, originally filed in 2008 in the U.S. District Court of Nevada.

The Chiropractic Physicians’ Board of Nevada revoked Nassiri’s license in 2010.

“Medical fraud drives up costs for everyone — and in this case it was egregious fraud,” said Melinda Wilson, an Allstate spokesperson. “This is a notice to every fraudster out there: Allstate is going to battle fraud wherever we find it to protect our policyholders and all consumers. We’re gratified the courts in this case continue to help us fight that battle.”

In June 2013, following a 10-day trial, the jury awarded $1.1 million in damages against Obteen N. Nassiri, Advanced Accident Chiropractic Care, ONN Management, Digital Imaging, and Digital X-Ray Services, LLC. Following the trial, the District Court trebled the damages under Federal and Nevada State RICO laws, increasing the award of damages to $3.5 million, and added pre-judgment interest of $1 million. Punitive damages, attorney fees, costs and additional pre-judgment interest were added to the award, increasing the total amount of the judgment to $8.6 million.

Nassiri was the only defendant who appealed the 2013 decision, arguing the District Court erred in admitting the testimony of Allstate’s damages and in denying his motion for summary judgment. The appellate court rejected his contentions and upheld the jury’s decision. The court concluded “Where the tort itself is of such a nature as to preclude the ascertainment of the amount of damages with certainty . . . it will be enough if the evidence show the extent of the damages as a matter of just and reasonable inference, although the result be only approximate.”

Former PEO Operator Pleads Guilty

A former El Dorado Hills man has pleaded guilty in federal court to using business funds for personal expenses.

Gregory J. Chmielewski, 46, of West Bend, Wisc., operated a business in Roseville and later Sacramento called Management Resources Group California LLC, which also went by the name Independent Management Resources.

The company was supposed to sell and manage workers’ compensation insurance for companies, eventually paying money for valid claims. But Chmielewski spent funds that were supposed to be reserved for claims, and the company couldn’t cover claims. On Friday he pleaded guilty in Sacramento to two counts of mail fraud for transferring business funds to his own personal use.

According to the plea agreement, California workers’ compensation insurance rates rose quickly in early 2003. Some entrepreneurs negotiated agreements with California Indian tribes to collaborate on business ventures to sell alternative insurance plans not subject to the state’s insurance regulations because the ventures operated under the sovereign domestic nation status of the tribe. That’s what Chmielewski did.

Prosecutors say Chmielewski in 2003 set up Management Resources Group California LLC to sell workers’ compensation insurance. Chmielewski then worked with Fort Independence Community of Paiute Indians near Death Valley to create a professional employer organization called Independent Staffing Solutions, managed by his Management Resources Group.

From 2004 through 2007, more than $225 million passed through Independent Staffing Solutions accounts. As part of managing Independent Staffing Solutions, Chmielewski promised to maintain a financial reserve to pay valid claims. But Chmielewski used $7.3 million of the money in reserve accounts for his own personal real estate investments.

Independent Management Resources went out of business in 2010 through a Chapter 7 bankruptcy liquidation, leaving about 117 injured workers with approximately $1.8 million in unpaid claims.

Chmielewski is scheduled to be sentenced on April 1, by U.S. District Judge Garland E. Burrell Jr. Chmielewski faces a maximum statutory penalty of 20 years in prison and a $250,000 fine or up to twice the gain or loss from the offense.

This case was investigated by the U.S. Postal Inspection Service, the IRS and the California Department of Insurance. Assistant U.S. Attorneys Heiko Coppola and Andre Espinosa were prosecutors.

Advance-Fee Scam Moves Into Comp Fraud Arena

An advance-fee scam is a type of fraud and one of the most common types of confidence trick. The scam typically involves promising the victim a significant share of a large sum of money, which the fraudster requires a small up-front payment to obtain. If a victim makes the payment, the fraudster either invents a series of further fees for the victim, or simply disappears.

There are many variations on this type of scam, including 419 scam, Fifo’s fraud, Spanish Prisoner scam, the black money scam and the Detroit-Buffalo scam. The scam has been used with fax and traditional mail, and is now prevalent in online communications like emails.

Online versions of the scam originate primarily in the United States, the United Kingdom and Nigeria, with Ivory Coast, Togo, South Africa, the Netherlands, and Spain also having high incidences of such fraud. The scam messages often claim to originate in Nigeria, but usually this is not true. The number “419” refers to the section of the Nigerian Criminal Code dealing with fraud, the charges and penalties for offenders. Generally a victim will receive an email from someone in a foreign country who claims to have a stash of cash and needs your help to get the money out of the country into your bank account. In exchange for your help, you are to keep part of the money, which never arrives.

Now the advance-fee scam has a Workers’ Compensation variant. A Chico woman has been arrested on suspicion of grand theft and elder abuse after accepting nearly $29,000 from an Illinois woman in a workers’ compensation scam. The woman, Sandra Freeman, 53, was arrested after Chico police detectives served a search warrant at her residence in the 2500 block of The Esplanade, according to a press release published in the Chicoer.

Detectives were said to have found evidence that Freeman had been accepting money orders, Western Union transactions and cash deliveries for more than year, according to the release. She would then allegedly wire the money to multiple locations in Nigeria.

The arrest stemmed from a report Chico police received Jan. 5 from the Danville Police Department in Illinois. The report outlined how a 72-year-old Danville woman had been the victim of an Internet scam. The woman, whose name was not given, received a private Facebook message from a person who was disguised as one of the woman’s friends. The message relayed that the woman was eligible to receive a $150,000 workers’ compensation settlement.

The woman was given a phone number spoke with an “attorney” who explained that to receive the settlement she would need to make payments to cover things like an “application, delivery fee, taxes, insurance and attorney’s fees,” according to the release.

The woman, who felt comfortable talking to the unknown “attorney” because the information was provided by a person she thought was her Facebook friend, then sent five cash transactions to an address in Chico over the course of a month. The transactions totaled $28,700. The woman was told by the unknown person over the phone to mail the money to a Sandra Freeman. Chico police detectives then confirmed with the U.S. Postal Service that five envelopes were delivered to Freeman’s address on The Esplanade.

Following a search of Freeman’s home, she was booked at the Chico Police Department and taken to Butte County Jail.

Emergency Rooms Face Increasing Medication Shortages

A new study summarized in Reuters Health says that U.S. emergency rooms are increasingly running short on medications, including many that are needed for life-threatening conditions. Since 2008, the number of shortages has risen by more than 400 percent, researchers found. Half of all emergency room shortages were for life-saving drugs, and for one in 10 there were no available substitutes, they report in Academic Emergency Medicine. And a bad result in an emergency room can easily result in a higher workers’ compensation claim cost in the long run.

Half of the individual shortage incidents had no explanation, the authors found. The rest had a variety of systemic causes that add up to a U.S. drug supply too low to meet public demand.

“Drug shortages are of particular concern in emergency care settings where providers must rapidly treat ill and injured patients,” said lead author Kristy Hawley of the George Washington University School of Medicine and Health Sciences in Washington, D.C. “For most medications, substitutes exist but may not be as effective and may have more side effects, or providers may not have as much experience with them,” she told Reuters Health by email.

The researchers looked at U.S. data on drug shortages between 2001 and 2014. The information came from hospital doctors’ reports, and it’s possible there were additional unreported shortages, the authors note. The number of shortages declined steadily between 2001 and 2007 but began a sharp, continual rise in 2008. Of the 1,798 shortages reported over the 13-year period, 610, or about one third, were for drugs used in emergency medicine. Over half of these were shortages of drugs used as lifesaving interventions or for high-risk conditions. The average shortage duration for emergency drugs was nine months.

Drugs for treating infections were the most common ones to run low, with 148 shortages. Painkillers and drugs for treating overdoses and poisonings were also among the most common shortages. Hawley noted that a particularly problematic shortage was for nalaxone, the only injectable treatment for opiate overdose.

In nearly half of shortage incidents, the manufacturer did not give a reason for the shortage when contacted. For shortages with a known reason, about a quarter were due to manufacturing problems or delays, around 15 percent were caused by market supply and demand issues and about 4 percent were from problems with raw materials.

In 2013, the U.S. Food and Drug Administration released a plan to combat drug shortages. Last spring, the agency also released a mobile app for doctors and pharmacists to search for information about drug shortages.

Drugmaker “Pay for Delay” Deals Decline After Top Court Ruling

Reuters Health reports that branded drug companies hammered out far fewer deals with generic drug makers to delay sales of cheaper medicines in the year after the Supreme Court ruled the Federal Trade Commission could legally pursue such agreements as potentially illegal.The FTC, which has fought the practice for years, said that pharmaceutical companies reached 21 of the “pay-for-delay” deals in fiscal 2014, compared with 29 in 2013 and a record 40 in 2012.

The Supreme Court ruling (Federal Trade Commission v. Actavis, 12-416) said in June 2013 that the deals could potentially be a violation of antitrust law but refused the FTC’s request to declare them to be presumed to be illegal.

An FTC study concluded in 2010 that pay-to-delay costs consumers $3.5 billion a year in higher drug prices. Over the last decade, generic drugs have saved consumers more than $1 trillion. That figure could be a lot higher if pay-to-delay were banned. The FTC says 40 such deals were struck in fiscal 2012 alone.

In a typical pay-for-delay deal, a branded drug company will give a generic firm money or some other consideration in exchange for the generic firm’s agreement to delay bringing out a cheaper version of the medicine.

The FTC said it was pleased with the drop in the number of the deals. “Although it is too soon to know if these are lasting trends, it is encouraging to see a significant decline in the number of reverse payment settlements,” said Debbie Feinstein, director of the FTC’s Bureau of Competition, in a statement.

The FTC did not say which drug makers were involved in the 21 deals but did say that the 2014 agreements involved 20 different branded drugs with combined U.S. sales of about $6.2 billion.

Ten involved a cash payment, six involved compensation via a related business arrangement and five involved an agreement by the branded manufacturer to refrain from marketing a competing “authorized” generic for a certain period of time, the FTC said.

An FTC table said that there were three potential pay-for-delay deals in fiscal 2005, 14 the following two years and then a steady increase until 2012, when the number of deals hit 40 in fiscal 2012.

The agency noted that while the number of pay-for-delay deals declined in 2014, the absolute number of settlements actually settlements between branded and generic companies actually increased to a record 160.

U.S. HealthWorks Expands Operations in Bay Area

U.S. HealthWorks, one of the largest operators of occupational health and urgent care centers in the United States, announced it has acquired Muir/Diablo Occupational Medicine, an affiliate of John Muir Health, effective January 9, 2016. Muir/Diablo Occupational Medicine operates three occupational care centers in the East Bay region of the San Francisco Bay Area.

U.S. HealthWorks currently has 11 centers throughout the San Francisco Bay Area, including two in the East Bay (Oakland and Berkeley). The acquisition of these three centers allows U.S. HealthWorks to better serve the large population in the region and brings the total number of U.S. HealthWorks medical and onsite clinics to 227 nationwide in 20 states.

The acquired centers are located at: 2231 Galaxy Court , Concord, CA 94520, 1981 N. Broadway, Suite 190, Walnut Creek, CA 94596 and 2400 Balfour Road, Suite 230, Brentwood, CA 94513. The facilities will continue to offer a wide range of occupational health services, including injury management, physical exams, corporate medical services and physical rehabilitation.

“The physicians at Muir/Diablo have proven expertise in managing workplace injuries and reducing workplace risk,” said Joseph Mallas, President and Chief Executive Officer of U.S. HealthWorks. “We are pleased to bring these centers into the U.S. HealthWorks family and look forward to the opportunity to expand our service to clients and patients in this key California region.”

“We appreciate the opportunity to become part of the U.S. HealthWorks team in this region,” said John Gunderson, MD, President of Muir/Diablo Occupational Medicine. “U.S. HealthWorks is a leader in the field of occupational care, and with greater resources and an expanded team of experts, we look forward to continuing to provide exceptional patient care.”

The terms of the transactions were not disclosed.

U.S. HealthWorks, a subsidiary of Dignity Health, is one of the country’s largest operators of occupational healthcare centers with 227 medical and worksite clinics in 20 states and more than 3,600 employees, including about 800 medical providers. Its centers collectively serve more than 13,000 patients each day.

Say Goodbye to Some Old Legacy Liens!

The Division of Workers’ Compensation ended its collection of lien activation fees at midnight on December 31, 2015. Any liens not activated by that time were dismissed by operation of law.

New liens are still required to pay a filing fee.

Lien fees are one of the components of Senate Bill 863’s workers’ compensation reforms. SB 863 requires a provider to pay a $150 filing fee for filing any new lien on or after January 1, 2013. For liens filed prior to January 1, 2013, prior to filing a Declaration of Readiness to Proceed (DOR) to request a lien conference or prior to appearing at a lien conference on or before January 1, 2014 were required to pay a lien activation fee. In addition any lien not activated by January 1, 2014 was to be dismissed by operation of law.

Litigation enjoined lien activation fees for two years until the U.S. Court of Appeals upheld the constitutionality of the fees. DWC resumed collection of the lien activation fees on November 9, 2015 before ending December 31, 2015.

One court provision stated that if between November 9, 2015 and December 31, 2015, the lien activation payment system became non-operational for six or more hours in a 24-hour period, the deadline would be extended by one calendar day for each day of non-operation. However, this was not necessary as the system remained operational. During this period more than 254,000 liens were activated. A total of 461,650 lien activation fees were filed between January 2013 and December 31, 2015. A total of 536,945 new liens were filed during the same time period.

Ambulance Fees Reduced in Revised OMFS

The Division of Workers’ Compensation administrative director has adopted an order incorporating the Centers for Medicare and Medicaid Services (CMS) revised ambulance fee schedule rates, ZIP code files and inflation factor for services rendered on or after January 15, 2016.

This order adjusting the ambulance services section of the Official Medical Fee Schedule (OMFS) conforms to changes in the Medicare payment system as required by Labor Code section 5307.1.

Effective for services rendered on or after January 15, 2016, the maximum reasonable fees for Ambulance Fee Schedule shall not exceed 120% of the applicable California fees set forth in the calendar year 2016 ambulance services, contained in the electronic Public Use file.

The Administrative Director incorporates by reference the following CMS files from the CMS website:

1) The CY 2016 Public Use File, as revised December 22, 2015
2) The CMS Zip Code Files as revised November 17, 2015

The adjustment incorporates the 2016 ambulance inflation factor which has been announced by CMS. The ambulance inflation factor for calendar year 2016 is negative 0.40 percent (-0.40%).

The Ambulance Fee Schedule may be accessed on the DWC website.