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Tag: 2019 News

U.C. Berkeley Claims Gig Economy Workers are “Exploited”

Many gig workers, whether in new occupations such as ride-hail driver, or traditional ones such as janitor or truck driver, could soon become employees in California after a ground breaking state Supreme Court ruling last year.

The Dynamex case implemented a simple criteria called the ABC test under which someone is an employee if a company controls what they do; if their work is linked to a company’s primary business; and if they do not have an independent business performing that work.

Assemblywoman Lorena Gonzalez, D-San Diego, is sponsoring a labor-backed bill that would codify that test. But numerous companies have lined up against it, saying it would undermine the flexibility that both they and gig workers value.

A separate case based on different criteria was decided in the U.S. Supreme Court this week. The high court declined to hear an appeal by the California Trucking Association, leaving intact a decision that could result in widespread reclassification of state truck drivers as employees.

Gig workers lack a whole list of protections afforded employees, including minimum wage, overtime, paid breaks, family and medical leave, paid sick leave, unemployment insurance and workers’ compensation. Those costs would add about 41 percent on top of the cost of wages, according to Bureau of Labor Statistics studies.

A new report from the UC Berkeley Labor Center examined demographics and wages, as well as employers’ classification practices, with an eye to the impact that changing workers’ status might have. Independent contractors – the status most gig workers have – don’t get benefits and must pay their own employment taxes, among other differences.

According to the summary prepared by the San Francisco ChronicleThese industries that are some of the worst offenders in California (for misclassification) have a disproportionate share of workers of color, immigrants and low-wage workers,” said Sarah Thomason, a research and policy associate at the Labor Center who co-authored the report. “These workers are in vulnerable positions and being exploited.

Contracted janitors, for instance, make a median hourly wage of $12.22, and are 80.9 percent Latino and 3.7 percent black. Almost half live in households defined as low income (below 200 percent of the federal poverty line).

The report estimated that 19 percent of California janitors are independent contractors, without suggesting how many are misclassified.

Among truck drivers, the median hourly wage was higher at $19.70 but drivers have high expenses, with many having to purchase a truck and pay for fuel, insurance, maintenance and repair. About 60 percent were Latino and 6 percent were black. About a fifth live in low-income households.

The report quoted a National Employment Law Project report that about four-fifths of drivers at ports are classified as independent contractors, with the majority misclassified.

For construction workers, median hourly pay is $14.98 with 73.2 percent being Latino and 2.3 percent black. About 40 percent live in low-income households.

If the ABC criteria becomes more widely applied, “definitely misclassification would not happen as frequently,” Thomason said.

Brown & Brown Acquires MEDVAL LLC

Brown & Brown, Inc. is a provider of insurance and reinsurance products and services to general business, corporate, governmental and quasi-governmental, institutional, professional, trade association and individual clients. Its headquarters are in Daytona Beach, Florida.

The company is currently ranked as the sixth largest independent insurance intermediary organization in the U.S. and eighth largest in the world based on the July 2018 ranking by Business Insurance magazine.

Brown & Brown is also one of the selected companies that comprise S&P 400 stock market index. In September 2007, Brown & Brown was ranked #10 on Forbes’s “The 100 Best Mid-Cap Stocks in America” list in 2007.

The company has reach from coast to coast, with several offices in California. And they are rapidly extending this reach with mergers and acquisitions this year.

J. Scott Penny, Chief Acquisitions Officer of Brown & Brown, Inc. announced that The Advocator Group, LLC, a wholly owned subsidiary of Brown & Brown, Inc., has acquired MEDVAL, LLC.

MEDVAL provides a suite of MSP-compliant services, which services incorporate front-line claims negotiation and comprehensive settlement solutions. MEDVAL has annual revenues of approximately $10,000,000.

The MEDVAL team will continue to operate from their offices in California, Pennsylvania and Maryland, as MEDVAL, LLC, under the leadership of Jon Gunter and the experienced MEDVAL team. MEDVAL leadership will report to Julie Turpin, Chief Executive Officer of The Advocator Group.

And it announced this month that Brown & Brown Insurance Services of California, Inc. has acquired substantially all of the assets of Austin & Austin Insurance Services, to serve the insurance needs of real estate professionals in the Bay Area of California. The firm specializes in providing errors and omissions insurance coverage to real estate brokers throughout California and has annual revenues of approximately $2 million.

Brown & Brown revenues for the fourth quarter of 2018 were $508.7 million, increasing $34.4 million, or 7.3%, compared to the fourth quarter of the prior year, with commissions and fees increasing by 7.2%.


Legislative and Judicial Developments vs Fighting Fraud

More than 100 insurance-fraud bills are pending state action. Major state supreme court cases also could have a dramatic impact on fighting fraud. Privacy of consumer data – and how it affects fraud investigations – should be also be closely watched this year.

The California legislature rushed through AB 375, the nation’s most sweeping data privacy law last June. The California Consumer Privacy Act of 2018 (CCPA) takes effect Jan. 1, 2020.

The CCPA applies to insurers and all other businesses in the state and has very severe restrictions on the use of private data. It is not clear what impact it might or might not have on an insurer’s ability to even report fraud.

California legislators rushed a bill through to avoid a ballot initiative proposed by Alastair Mactaggart. Mactaggart agreed to withdraw the initiative if a law was signed by the Governor. Legislators in other states will watch closely for how California’s more-sweeping law moves forward.

The NAIC approved its model data security law. The model already was adopted last year by South Carolina, Ohio, and Michigan. Many other states will likely debate adopting versions of the NAIC model this year.

And there is relentless push back from the applicant/plaintiff attempting to impose personal bad-faith liability. Insurer employees can be sued personally for bad faith in Washington state, a lower court ruled.

Keodalah v. Allstate Insurance arose from a motorcycle collision with a pickup truck in Seattle, resulting in an uninsured motorist claim. The appeals court ruled that Tracey Smith, the Allstate adjuster, can be sued personally, including claims for treble damages and attorney fees. Liability also would extend to outside experts who assist insurers, such as IME physicians, third-party investigators and defense attorneys.

Keodalah addressed a split of authority in Washington. Several federal court judges issued rulings from 2005 through 2016 that non-insurer entities were exempt from bad faith claims and Consumer Protection Act claims.

In 2017, another Division of Washington’s Court of Appeals in Merriman v. American Guarantee & Liability Ins. Co., held that Washington’s generalized statute requiring good faith in the “business of insurance” applied to the insurer’s third-party administrator.

The Keodalah case has been appealed to the Washington state Supreme Court, and will be closely watched..

Courts in Montana, Texas, Mississippi and Kentucky, have long recognized claims against adjusters for bad faith and violations of statutes governing claim-handling practices. In contrast, numerous other courts – including in Oklahoma, Indiana, Hawaii, Alabama, Tennessee, New Mexico, West Virginia, California, New York and Pennsylvania – have held that adjusters generally cannot be liable for bad faith. Many other jurisdictions are undecided.

The plaintiffs bar has also sought to apply RICO laws as a penalty in workers’ compensation claims in a number of jurisdictions for at least a decade with poor results. The 9th Circuit Court of Appeals just affirmed the dismissal of a California effort in the unpublished case of Black v CorVel Enterprises Comp Inc.

CWCI Reports on Drug Formulary

New CWCI research shows that since California implemented its workers’ compensation formulary last year, an increasing share of drugs prescribed to injured workers are either “Exempt” from prospective utilization review (UR) or “Not Listed” in the formulary, while “Non-Exempt” drugs that require UR before they can be dispensed account for a declining share of the prescriptions.

In 2015, state lawmakers enacted legislation (AB 1124) requiring that the California Division of Workers’ Compensation (DWC) adopt a formulary that meets evidence-based medicine standards.

After two years of development, the Medical Treatment Utilization Schedule (MTUS) Prescription Drug Formulary took effect on January 1, 2018. The intent of the formulary was to improve quality of care by ensuring that drugs provided to injured workers meet evidence-based medicine standards in terms of frequency, duration, strength, and appropriateness; reduce the amount spent on drugs in the system; and reduce delays and frictional costs associated with prescription drug disputes.

The formulary adopted by the DWC includes Exempt and Non-Exempt Drug Lists, based on the need for prospective UR, while drugs that are not on either list (Not Listed) are allowed if the treating physician can show that their use for the specific injury is supported by the MTUS or other applicable guidelines.

To examine the formulary’s impact on the mix of drugs used in California workers’ compensation and the distribution of prescription drug payments, the authors compared pre-formulary data from prescriptions that were filled in the first half of 2016 and the first half of 2017 to post-formulary data from prescriptions dispensed to injured workers in the first half of 2018.

Among the findings, the study showed that after the formulary took effect:

Exempt drugs, which are available without prospective UR, increased to 38.5% of all prescriptions, up from 33.2% and 35.2% prior to the formulary.
Non-Exempt drugs, which require prospective UR, fell to 45.1% of the prescriptions, down from 54.3% and 52.9% in the pre-formulary periods.
Not Listed drugs rose to 16.4% of the prescriptions, up from 12.4% and 11.9% before the formulary took effect.
— The mix of prescription drug payments also changed, as Exempt drugs declined from about 22% of the payments to about 19%;
— Non-Exempt drugs fell from more than half of the payments to 42%; and Not Listed drugs increased from about a quarter of the total drug spend to nearly 39%.

CWCI has issued its study in a Spotlight Report, which includes additional analysis and tables showing the changing distributions of prescriptions for the top 20 drug ingredients overall and for the drugs on the Special Fill and Perioperative drug lists; as well as breakouts showing the changing percentages for the top 20 drugs in the Exempt, Non-Exempt and Not Listed categories.

Cannabis and Psychosis: Review of the Evidence

Many countries have legalized or decriminalized cannabis use, leading to concerns that this might result in an increase in cannabis use and associated harm.

Indeed, when it comes to “medical marijuana” the litigation and legislative trend seems to focus on the question of “cannabis – yes or no, – without contemplating the related questions of “how long” and “what kind.”

As the following study points out, there are highly potent forms of cannabis available in pot shops where an injured worker might fill a prescription. The legislators and litigation outcomes make no reference whatsoever to potent and dangerous types of cannabis which may sit side by side with other types in a pot shop.

Currently, cross-sectional and prospective epidemiological studies as well as biological evidence support a causal link between cannabis use and psychotic disorder. Meta-analysis shows a dose-response association with the highest odds of psychotic disorder in those with the heaviest cannabis use.

Nevertheless, it is not clear whether, at a population level, patterns of cannabis use influence rates of psychotic disorder.

For that reason, researchers aimed to identify patterns of cannabis use with the strongest effect on odds of psychotic disorder across Europe and explore whether differences in such patterns contribute to variations in the incidence rates of psychotic disorder.

To accomplish this mission, they targeted 901 patients aged 18 – 64 years who presented to psychiatric services in 11 sites across Europe and Brazil with first-episode psychosis and recruited controls representative of the local populations. The results of the study were published online this month in the Lancet Psychiatry.

Differences in frequency of daily cannabis use and in use of high-potency cannabis contributed to the striking variation in the incidence of psychotic disorder across the 11 studied sites. Given the increasing availability of high-potency cannabis, and the researchers say “this has important implications for public health.”

Daily cannabis use was associated with increased odds of psychotic disorder compared with never users increasing to nearly five-times increased odds for daily use of high-potency types of cannabis.

Use of high-potency cannabis was a strong predictor of psychotic disorder in Amsterdam, London, and Paris where high-potency cannabis was widely available, by contrast with sites such as Palermo where this type was not yet available. In the Netherlands, the THC content reaches up to 67% in Nederhasj and 22% in Nederwiet; in London, skunk-like cannabis (average THC of 14%) represents 94% of the street market whereas in countries like Italy, France, and Spain, herbal types of cannabis with THC content of less than 10% were still commonly used.

Researchers concluded that their findings are consistent with previous epidemiological and experimental evidence suggesting that the use of cannabis with a high concentration of THC has more harmful effects on mental health than does use of weaker forms.

If high-potency cannabis were no longer available, 12·2% of cases of first-episode psychosis could be prevented across the 11 sites, rising to 30·3% in London and 50·3% in Amsterdam.

DWC Updates MTUS

The Division of Workers’ Compensation has posted an order adopting regulations to update the evidence-based treatment guidelines of the Medical Treatment Utilization Schedule (MTUS).

The updates, effective for medical treatment services rendered on or after April 18, 2019, incorporate by reference the American College of Occupational and Environmental Medicine’s (ACOEM’s) most recent treatment guidelines to the Clinical Topics section of the MTUS.

“We are publishing this Administrative Order one month before its effective date to give the public, especially treating physicians and utilization review physicians, 30 days to prepare before these evidence-based updates become effective,” said DWC Administrative Director George Parisotto.

The ACOEM guidelines that are incorporated by reference into the MTUS are:

Ankle and Foot Disorders Guideline (ACOEM July 16, 2018)
Cervical and Thoracic Spine Disorders Guideline (ACOEM October 17, 2018)
Elbow Disorders Guideline (ACOEM August 23, 2018)
Hand, Wrist, and Forearm Disorders Guideline (ACOEM January 7, 2019)
— Workplace Mental Health: Posttraumatic Stress Disorder and Acute Stress Disorder Guideline (ACOEM December 18, 2018)

“DWC has incorporated the most recent guidelines to ensure the MTUS contain the most recent, state-of-the-art current evidence-based recommendations,” said DWC Executive Medical Director Dr. Raymond Meister. The administrative order consists of the order and two addendum:

— Addendum one shows the regulatory amendments directly related to the evidence-based updates to the MTUS.
— Addendum two contains hyperlinks to the updated ACOEM guidelines adopted and incorporated into the MTUS by reference.

Health care providers treating, evaluating (QME), or reviewing (UR or IMR) in the California workers’ compensation system may access the MTUS (ACOEM) Guidelines and MTUS Drug List at no cost by registering for an account.

Prosecutors Recover $317M Including $65M from Prime Healthcare

The United States Attorney’s Office for the Central District of California collected over $317 million in criminal, civil and forfeiture actions in Fiscal Year 2018.

Last year’s collections also include over $235 million worth of assets forfeited to the United States for crimes committed both here and abroad, And $21.2 million was secured through civil enforcement matters in which prosecutors recovered federal funds lost primarily through fraud or other misconduct.

Additionally, the office’s Civil Division worked with other U.S. Attorney’s Offices and colleagues in Washington to collect an additional $162.2 million in civil cases that were pursued in conjunction with these other Justice Department components, a figure that includes a $65 million settlement with Prime Healthcare Services and its chief executive officer to resolve allegations of Medicare fraud.

Prime Healthcare Services, Inc.; Prime Healthcare Foundation, Inc.; Prime Healthcare Management, Inc.; and Prime’s Founder and chief executive officer, Dr. Prem Reddy, agreed to pay the United States the $65 million to settle allegations that 14 Prime hospitals in California knowingly submitted false claims to Medicare by admitting patients who required only less costly, outpatient care and by billing for more expensive patient diagnoses than the patients had (a practice known as “up-coding”).

Prime Healthcare Services and the not-for-profit Prime Healthcare Foundation constitute one of the largest hospital systems in the nation, with 45 acute-care hospitals located in 14 states. It is headquartered in Ontario, California,

The 10 California hospital defendants owned by Prime Healthcare Services are parties to the settlement agreement: Alvarado Hospital Medical Center, Garden Grove Medical Center, La Palma Intercommunity Hospital, Desert Valley Hospital, Chino Valley Medical Center, Paradise Valley Hospital, San Dimas Community Hospital, Shasta Regional Medical Center, West Anaheim Medical Center and Centinela Hospital Medical Center. Four other hospital defendants owned by Prime Healthcare Foundation are also parties to the settlement agreement: Sherman Oaks Hospital, Montclair Hospital Medical Center, Huntington Beach Hospital and Encino Hospital Medical Center. Prime Healthcare Management, a subsidiary of Prime Healthcare Services, provides management, consulting and support services to hospitals owned and operated by Prime.

“We are focused on securing restitution for crime victims, recovering taxpayer money obtained by fraud, and stripping criminals of their ill-gotten gains,” said United States Attorney Nick Hanna. “The hundreds of millions of dollars we recovered in 2018 stand as a tribute to the tenacity and hard work of our prosecutors and staff.”

The United States Attorney’s Office for the Central District of California is based in Los Angeles and has branch offices in Santa Ana and Riverside. Currently, approximately 275 Assistant United States Attorneys serve about 20 million people who reside in the counties of Los Angeles, Orange, Riverside, San Bernardino, Ventura, Santa Barbara and San Luis Obispo.

Surgical Outcomes Inconsistent Across Hospitals

Hospitals are rapidly consolidating into regional delivery networks. Whether these multihospital networks leverage their combined assets to improve quality and provide a uniform standard of care has not been explored. So, what is the consistency of surgical quality across hospitals that are affiliated with the 2018 US News & World Report Honor Roll hospitals?

This question was asked, and likely answered in a report by researchers published this month in the JAMA Surgery.

This longitudinal analysis of 87 hospitals that participated in 1 of 16 networks that are affiliated with US News & World Report Honor Roll hospitals used data from Medicare beneficiaries who were undergoing colectomy, coronary artery bypass graft, or hip replacement. The task was to evaluate the variation in risk-adjusted surgical outcomes at Honor Roll and affiliated hospitals within and across networks.

The outcomes measured were thirty-day postoperative complications, mortality, failure to rescue, and re-admissions.

The new study shows “you shouldn’t assume that a hospital that is affiliated with a very well known medical center is able to offer the same services,” said the study’s lead author, Dr. Kyle Sheetz, a research fellow at the Center for Healthcare Outcomes and Policy at the University of Michigan in Ann Arbor. “It may, but it may not. You just can’t make that assumption.”

As it turns out, the Honor Roll hospitals didn’t always have consistently better outcomes than their network affiliates, Sheetz and colleagues found. They tended to have higher complication rates compared to affiliated hospitals: 22 percent versus 18 percent. But this may be because the Honor Roll hospitals were getting the more complicated cases, Sheetz said.

The most telling statistic the researchers gathered may have been “failure to rescue rates,” a measure of how well hospitals cope with surgical complications. To avoid “failure to rescue,” hospital staff need to recognize a complication early “and manage it and prevent the accumulation of other complications,” Sheetz explained. “So it’s ‘rescuing’ that patient.”

Honor Roll hospitals had lower failure to rescue rates than affiliated hospitals: 13 percent versus 15 percent.

Given the variability within networks, “if patients are within a bigger system, they should realize it’s okay to ask about where and by whom you would have the safest operation,” Sheetz said

California Cannibis Industry Plagued by Corruption

The “Medical” Marijuana industry is at the doorsteps of the Workers’ Compensation industry. However, according to a report in the Los Angeles Times, political corruption is abundant in an industry that transacts business in green dollar cash. One might wonder if any of that green cash might help push the workers’ compensation political doors open to the pot merchants.

California is awash in cannabis cash from inside and out of the state, partly because pot remains an illegal drug under federal law, so banks won’t accept cash from the businesses. The state’s black market for cannabis was estimated to be worth $3.7 billion last year – more than four times the size of the legal market, according to the firm New Frontier Data.

In the more than two years since California voters approved the licensed growing and sale of recreational marijuana, the state has seen a half-dozen government corruption cases as black-market operators try to game the system, through bribery and other means.

Proposition 64, approved in 2016, allowed the state to license businesses to grow and sell pot but required the firms to also get approval from the cities and counties, most of which have outlawed pot operations. Proposition 64 also outlawed the transportation of cannabis out of the state, which was an issue in the Siskiyou County indictments against Chi Yang and his sister, Gaosheng Laitinen.

Yang allegedly approached Jon Lopey, the sheriff in his county office in Yreka in the summer of 2017, and initially suggested the $1 million could go to a foundation headed by Lopey. Lopey notified the FBI.

At one of the subsequent meetings Laitinen allegedly sought assurances about what their payments would buy: “Are we talking about protection from being raided?” she asked the sheriff, according to a DEA agent’s affidavit attached to the criminal charging document. The pair allegedly paid Lopey $10,500, including four $500 cash bonuses, before they were arrested, according to court records.

That case is just one of several that have involved cannabis sellers and growers allegedly bribing or trying to bribe government officials, or public officials acting illegally to get rich from marijuana.

Last year, Jermaine Wright, then the mayor pro tem of Adelanto, was charged with agreeing to accept a bribe to fast-track a marijuana business. Wright’s trial is scheduled for August. In May, FBI agents served search warrants at the home of Rich Kerr, who was mayor of Adelanto at the time, as well as at City Hall and a marijuana retailer.

Also in May, Humboldt County building inspector Patrick Mctigue was arrested and charged with accepting $100,000 in bribes from marijuana businesses seeking expedited help on county permits, according to the Humboldt County Sheriff’s Office.

Last March, a federal jury reached guilty verdicts to bribery and extortion charges against Michael Kimbrew, who was a field representative to then-Rep. Janice Hahn when he accepted cash from an undercover FBI agent while pledging his “undying support” to protect a marijuana dispensary that the city of Compton was trying to close.

This March, developer Dorian Gray was held to answer by a judge in a preliminary hearing on charges of offering bribes to then-Oakland City Council President Larry Reid and Assistant City Administrator Greg Minor, according to court records. Gray allegedly offered the councilman cash to help obtain a cannabis dispensary permit, and Reid reported the offer to authorities. Gray is charged with offering Minor, who oversees marijuana permitting for Oakland, a free trip to Spain.

Not all of the recent cases involve elected officials. Los Angeles County Sheriff’s Deputy Marc Antrim pleaded guilty two weeks ago to federal charges stemming from his arrest for robbing a warehouse of a half-ton of marijuana in October.

California was the first state to legalize the sale of marijuana for medical use two decades ago. The former mayor of the city of Cudahy was sentenced to one year in federal prison in 2013 for taking cash bribes in exchange for supporting the opening of a “medical marijuana” store in the city.

The head of the city’s code enforcement division and a city councilman were also convicted of taking part in the corruption scheme.

Law enforcement agencies are currently investigating possible corruption in other Southern California cities, according to Ed Muramoto, a private attorney for medical pot dispensaries that have complained about cities locking them out of competition for permits.

Sam Clauder, the former congressional aide and San Bernardino County Democratic Party official pleaded guilty in 2017 to charges in Texas of possessing 130 pounds of cannabis that he was transporting back east from California.

Pain Clinic Resolves Fraud Claim for $860K

Advanced Pain Diagnostic & Solutions Inc. and owner Kayvan Haddadan, M.D. have agreed to pay $860,000 to resolve allegations that the clinics violated the federal False Claims Act by knowingly submitting claims for reimbursement to California’s Medi-Cal program for services rendered by a provider who was excluded from participation in the Medi-Cal program.

At the time of the alleged conduct, Advanced Pain operated pain management clinics in Sacramento, Roseville, and Rocklin. The clinics employed staff physicians and nurse practitioners (NP) who provided medical treatment to patients, including drug therapy and injections. Today’s settlement resolves allegations that Advanced Pain billed Medi-Cal for services rendered by an excluded nurse practitioner under Haddadan’s billing number as if the services had been rendered by Haddadan.

“This settlement is part of our commitment to fight fraud in federal health care programs,” said U.S. Attorney Scott. “Health care providers who do not follow the law need to know that we actively investigate this type of fraud and hold accountable those who take advantage of the programs for their own gain.”

“HHS OIG maintains a publicly available database of more than 70,000 individuals and organizations excluded from billing federal healthcare programs – based on legislation and regulation,” said Steven J. Ryan, Special Agent in Charge of the Office of Inspector General for the U.S. Department of Health and Human Services. “Employers intent on billing for services provided by excluded individuals and entities can expect to pay a high price.”

The allegations resolved by this settlement were first raised in a lawsuit filed against Advanced Pain under the qui tam, or whistleblower, provisions of the False Claims Act by a nurse practitioner who worked at Advanced Pain. The False Claims Act allows private citizens with knowledge of fraud to bring civil actions on behalf of the government and to share in any recovery. The whistleblower in this matter will receive approximately $154,860 of the recovery proceeds.