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Tag: 2019 News

California Outlaws Mandatory Employment Arbitration Agreements

As employers with operations in California had feared, Governor Gavin Newsom has signed AB 51, which effectively outlaws mandatory arbitration agreements with employees – a new version of a bill that prior Governor Jerry Brown had vetoed repeatedly while he was in office.

The bill not only prohibits mandatory arbitration agreements, but it also outlaws arbitration agreements in which employees must take an affirmative action to escape arbitration, such as opting out.

And as the statute is written in broad terms that extend to waivers of statutory “procedures,” it appears to extend not just to arbitration of an employee’s claims, but also to waivers of jury trials and of class actions.

In short, effective January 1, 2020, an employer may only enter into an arbitration agreement with an employee in California (or a jury trial or class action waiver) if that employee voluntarily and affirmatively chooses to enter into such an agreement. And the employer may not retaliate against an employee who chooses not to enter into such an agreement.

The analysis of the Senate Rules Committee demonstrates that the legislature was well aware that a bill prohibiting arbitration agreements could be challenged as being preempted by the Federal Arbitration Act (“FAA”).

As the bill’s author stated, “The Supreme Court has never ruled that the FAA applies in the absence of a valid agreement. AB 51 regulates employer behavior prior to an agreement being reached. Further, understanding the Courts’ hostile precedence toward policies that outright ban or invalidate arbitration agreements, AB 51 does neither. Both pre-dispute and post dispute agreements remain allowable and the bill takes no steps to invalidate any arbitration agreement that would otherwise be enforceable under the FAA. The steps help ensure this bill falls outside the purview of the FAA.”

Despite the attempt to draft a statute that avoids FAA preemption, only time will tell if such a preemption challenge is made and if it is successful.

If it is not enjoined, in whole or in part, the new legislation could have a great impact upon employers with operations in California, and upon pending and threatened litigation.

Researchers Discover Disc Damage Blocking

Researchers may have found a way to press pause on spinal disc injuries, giving doctors more time to treat them before worse issues develop.

The Penn Medicine-led team discovered that cells in the outer region of spinal discs become stressed and kick off a subpar healing process after injuries, which researchers then found can temporarily be blocked with drugs that calm the cells down. This study, conducted using specially engineered biomaterials and small animal models, was published in Nature Biomedical Engineering.

“This work sheds light on some of the challenges we are going to face in slowing disc degeneration and preventing back pain,” said Edward Bonnevie, PhD, a post-doctoral fellow in Penn Medicine’s McKay Orthopaedic Research Laboratory. “Most spine research focuses on the inner part of the disc, but our work highlights the fact that we need to treat the whole disc, and we believe doing so may lead to the identification of new targets for therapy.”

Discs in the spine are pressurized and structured similarly to water balloons, with water-attracting proteins in the inner portion restrained by an outer layer of fibrous tissue containing cells that are under a constant stretch. The discs are designed to cushion the vertebrae from directly and painfully contacting each other. Bonnevie, senior author Robert L. Mauck, PhD, a professor of Orthopaedic Surgery and director of the McKay Lab, and their fellow researchers decided to focus their research on the often overlooked outer region of the discs.

“We know that cells in the inner region undergo changes as a result of disc injury and degeneration, and researchers have tried to restore function to those cells,” Bonnevie said. “But you can think of that like trying to fill up a water balloon that already has holes — it isn’t a viable treatment option by itself.”

In biomaterials the researchers created to mimic tissue of the outer region of discs, they saw that when an injury like a slipped disc occurs and pressure is lost, the suddenly released tissue becomes disorganized. When this happens, they found in small animal models that it results in the generation of repair tissue that did not resemble the normal tissue, but instead had characteristics of scar tissue.

Additionally, they found that programmed cell death — known as apoptosis — occurs quickly, within 24 hours of the injury. This poses a challenge because, unlike other areas in the body, cells in the discs lack a blood supply and cannot easily repopulate with the new cells needed for regeneration.

With the discoveries of why disc cells respond the way they do upon pressure loss, the team found that using a biological inhibitor of cell contraction, such as fasudil, could effectively “relax” the cells from the shock of suddenly losing their typical stretched state. Once relaxed, the cells would delay their default healing response, which has the potential to buy doctors what is called a “therapeutic window” to intervene.

“These data show us that treating disc injuries very soon after injury is essential, before this transition in phenotype occurs and the scar tissue forms. This could be done using inhibitors like fasudil applied systemically, or potentially in combination with surgical implantation of biomaterials that are designed to restore the native tissue structure and function,” Mauck explained.

$18B Offer on Table Before Landmark October 21 Opioid Trial

Three drug distributors are in talks with state and local governments to settle opioid litigation for $18 billion, the Wall Street Journal reported on Tuesday, citing people familiar with the discussions.

McKesson Corp, AmerisourceBergen Corp and Cardinal Health would collectively pay the amount over 18 years under the deal currently on the table, according to the Journal.

Around 2,600 lawsuits by state and local governments are pending nationally, accusing drug manufacturers of deceptively marketing opioids in ways that downplayed their risks, and drug distributors of failing to detect and halt suspicious orders.

The three companies, which together control about 85% of the U.S. prescription drug market, are among the six that are slated to be defendants in a landmark trial set to begin in federal court in Cleveland, Ohio, on Oct. 21, presided over by a federal judge who has long pushed for a global settlement in the litigation.

Johnson & Johnson is also involved in the discussions to contribute additional money, the WSJ reported. (

Opioid addiction claimed roughly 400,000 lives in the United States from 1999 to 2017, according to the U.S. Centers for Disease Control and Prevention.

Shares of Cardinal Health jumped 7.2% in extended trading, while those of McKesson rose about 6%. AmerisourceBergen shares were up marginally.

A spokeswoman for Cardinal Health declined to comment while the other companies did not immediately respond to Reuters’ requests for comment.

Newsom Vetos 4850 Time for School Police

Existing law provides that certain peace officers, firefighters, and other specified state and local public employees are entitled to a leave of absence without loss of salary while disabled by injury or illness arising out of and in the course of employment.

The leave of absence, or “4850 time” is in lieu of temporary disability payments or maintenance allowance payments otherwise payable under the workers’ compensation system.

Assembly bill AB-346 would have added police officers employed by a school district, county office of education, or community college district to the list of public employees entitled to a leave of absence without loss of salary, in lieu of temporary disability payments, while disabled by injury or illness arising out of and in the course of employment.

Without passage of AB 346, if a local public agency wants to grant employees certain benefits of employment, it is able to accomplish that goal without need for a statutory change. In fact, the City of Los Angeles has provided “4850-like” benefits to a range of employees without need of a statute mandating the benefit for those employees. Thus some argued that the collective bargaining process, and not legislation, may be the better approach to enhancing the benefits of this class of employee.

According to the author, school peace officers face the same inherent dangers as other safety officers, and should receive the same benefits. In particular, the author notes that school district police officers employed by the Los Angeles Unified School District already receive this benefit. The author notes that in 2014, there were an estimated 700 peace officers employed by school districts and community college districts, and that 410 of these worked for Los Angeles Unified.

Thus, approximately 60% of school police officers already have this benefit.

The proposed law was widely supported by at least 13 organizations or pubic employee unions, and there was no organized opposition to the law.

The California Legislature sent Newsom 1,042 bills this year, with more than 70% of them landing on his desk in the state Capitol around the time that lawmakers adjourned last month.

When the dust settled on Sunday, the legal deadline to act, Newsom’s veto rate was looking as if it would be quite low until he rejected 68 of the 80 bills left to consider in the final hours this Sunday, including AB 346. Newsom said most of the bills he vetoed on Sunday were because of money concerns.

Another LAPD Officer Charged with Comp Fraud

A stunning investigative report published in July 2018 by the Los Angeles Times provided several examples of Los Angeles police officers and fire fighters filing and recovering what it claims are exaggerated or outright fake “skin and contents” workers compensation claims costing taxpayers billions of dollars.

And now, more than a year later, reports of alleged fraudulent workers’ compensation claims by LAPD officers continue to make the news.

A former Los Angeles Police Department officer has been charged with illegally collecting workers’ compensation insurance benefits before resigning in 2016, Michael Simon (dob 12/6/79) is charged in case BA481662 with two felony counts of workers’ compensation insurance fraud and one felony count of grand theft of more than $950.

Arraignment has not yet been scheduled. The prosecutor is requesting that bail be set at $40,000.

In 2015, Simon is accused of engaging in activities inconsistent with his claimed injuries while he was off work on disability.

In 2016, he allegedly falsely represented the nature of his injuries to his employer in order to collect additional financial assistance to which he was not entitled, according to Deputy District Attorney Arunas Sodonis of the Healthcare Fraud Division.

The case was filed for warrant on Oct. 8 and the defendant was just arrested.

Simon faces a possible maximum sentence of six years and eight months in state prison to be served in county jail if convicted as charged.

The case remains under investigation by the LAPD’s Workers’ Compensation Fraud Unit.

Acupuncturist Pleads Guilty to $3.8M Fraud

A licensed acupuncturist pleaded guilty to federal criminal charges and admitted fraudulently billing Amtrak’s health care plan for millions of dollars’ worth of acupuncture, massages and facials that either were medically unnecessary or were never provided.

Guiqiong Xiao Gudmundsen, 52, a.k.a. “Kimi” Gudmundsen, of Anaheim Hills, pleaded guilty to one count of health care fraud and one count of money laundering.

Gudmundsen owned Healthy Life Acupuncture Center, which operated in Riverside and in Los Angeles. From January 2008 until December 2015, Gudmundsen recruited Amtrak employees to visit Healthy Life and then, among other things, billed the Amtrak health care plan for acupuncture, which she knew wasn’t being provided, according to her plea agreement.

Gudmundsen also admitted to billing the health plan for medically unnecessary services such as massages and facials, as well as for work-related injuries she knew the Amtrak plan did not cover. She also provided medical services to non-Amtrak health care plan participants and then billed the plan for it under the name of an actual Amtrak plan participant, the plea agreement states. Gudmundsen admitted that she regularly waived co-payments, co-insurance, and deductibles for Amtrak health care plan participants, something the plan did not permit.

Gudmundsen also knowingly and routinely funneled her ill-gotten gains through bank accounts opened in the names of a shell company and her relatives, according to the plea agreement.

The government estimates the total loss to the Amtrak health plan to be at least $3.8 million.

United States District Judge Dolly M. Gee has scheduled a January 22 sentencing hearing, at which time Gudmundsen will face a statutory maximum sentence of 30 years in federal prison.

This matter was investigated by Amtrak Office of Inspector General, IRS Criminal Investigation, and the U.S. Department of Labor, Employee Benefits Security Administration. This case is being prosecuted by Assistant United States Attorneys Scott D. Dubois and Jenna Williams of the General Crimes Section.

Purdue Obtains Brief Litigation Stay to Pursue Opioid Settlement

OxyContin maker Purdue Pharma LP won a court order on Friday briefly pausing the sprawling opioid litigation against the company so it can try to make headway on its proposed legal settlement that it says is worth $10 billion.

Privately-held Purdue filed for bankruptcy last month to help it implement the proposed deal, which will transfer Purdue’s ownership to a public trust owned by the plaintiffs. In addition, the family has also pledged to contribute at least $3 billion to the settlement.

The plaintiffs in the bulk of those cases support the proposed settlement, but at least 24 states oppose it.  U.S. Bankruptcy Judge Robert Drain on Friday approved a stay of all litigation until Nov. 6.

The company hopes over the coming weeks it can to convince the hold-out states to agree to extend the stay on litigation to six months, as the governments backing the settlement have agreed to.

Drain also hoped the brief stay would give the parties time to hammer out a protocol for sharing documents and financial information about Purdue and the Sackler family in a way that would win the trust of the hold-out states.

Just prior to Friday’s six-hour hearing, Purdue attorney Marshall Huebner said the company, the official committee of unsecured creditors and the Sacklers worked out an information sharing agreement.

The agreement would allow the committee to assess the settlement, and the Sacklers also agreed to provide information about their wealth and would agree to refrain from taking any material action with their property.

Drain said the public deserves an accounting of the company’s role in the crisis, which has led to some 400,000 deaths from 1999 to 2017, according to U.S. statistics. However, he said he feared a “trial becomes an autopsy” that destroys the value of Purdue, adding that most trials leave many unresolved questions.

“There are trials where people stand up and say ‘I did it.’ But that mostly happens on Perry Mason,” he said, referring to the popular TV show from the 1950s and ‘60s featuring a lawyer who won virtually every case. Drain also urged the parties to determine the best way to divvy up the settlement proceeds, echoing comments he had made on Thursday.

New MPN Provisions Apply Over Next Few Years

Governor Gavin Newsom signed SB 537 which was passed this year without any “no” votes by legislators. The law mostly effects the operation of Medical Provider Networks, and some of the timing and reporting issues. The provisions of the law will phase in at various times up to January 2014. Thus the industry will have ample time to adopt the new provisions when they become effective.

SB 537 is the product of several reform efforts spearheaded by a variety of stakeholders. Broadly speaking, the main thrust of SB 537 can be seen in two areas: reducing medical disputes and improving the operation of medical provider networks (MPNs).

New law requires the DWC administrative director to issue a report to the Legislature, on or before January 1, 2023, comparing potential payment alternatives for providers to the official medical fee schedule.

The bill would also require, on or before January 1, 2024, and annually thereafter, the administrative director to publish on the division’s internet website provider utilization data for physicians, who treated 10 or more injured workers during the 12 months before July 1 of the previous year, including the number of injured workers treated by the physician and the number of utilization review decisions that resulted in a modification or denial of a request for authorization of medical treatment based upon a determination of medical necessity.

This new law would revise the definition of a normal business day for these purposes to specifically exclude every Saturday, Sunday, and specified other holidays. The bill would also make technical changes.

This law would, commencing July 1, 2021, require every medical provider network to post on its internet website a roster of participating providers and to provide to the administrative director the internet website address of the network and of its roster of participating providers.

The law would revise the authority of the administrative director by giving the administrative director authority and discretion to investigate complaints, conduct random reviews, and take enforcement action against medical provider networks, an entity that provides ancillary services, as defined, or an entity providing services for or on behalf of the medical provider network or its providers, regarding noncompliance with, among others, the internet address and roster requirements imposed on those networks.

This new law would prohibit an entity other than the requesting physician or provider from altering or amending a request for authorization for medical treatment prior to the submission of the request to the claims administrator, and would state that this provision is declaratory of existing law. The bill would require an itemized request for payment for services to be submitted to an employer with the physician’s or provider’s national provider identifier number.

This law, on and after July 1, 2021, would require an entity that provides physician or ancillary network service to provide a payor with a written disclosure of the reimbursement amount paid to the provider with a rate sheet if a contracted reimbursement rate is more than 20% below the official medical fee schedule, as specified.

The bill would authorize an entity that provides physician or ancillary network services to require a payor to sign a nondisclosure agreement before providing that disclosure.

9th DCA Rules CIGA Need Not Reimburse Medicare

The California Insurance Guarantee Association provides funding when one of its member insurers becomes insolvent and unable to pay its insureds’ claims. California state law prohibited CIGA from reimbursing state and federal government agencies, including Medicare.

CIGA filed this declaratory action in federal court, after Medicare paid for and demanded reimbursement from CIGA for medical expenses of certain individuals whose workers’ compensation benefits CIGA was administering. The federal district court ruled in favor of Medicare, concluding that federal law preempted California law to the extent it prohibited CIGA from reimbursing Medicare.

The 9th Circuit Court of Appeal reversed in the published case of California Insurance Guarantee Association v Alex M. Azar, Secretary of HHS.

Medicare regulations define “primary plan” to mean, “in the context in which Medicare is the secondary payer, a group health plan or large group health plan, a workers’ compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan), or no-fault insurance.” 42 C.F.R. § 411.21 (emphasis added); accord 42 U.S.C. § 1395y(b)(2)(A). CIGA does not fall within the plain meaning of this definition because it is not a workers’ compensation law or plan.

CIGA is “an insurer of last resort” and thus “assumes responsibility for claims only when no secondary insurer is available.”

The Court went on to say that “It makes little sense to interpret the statutory phrase ‘primary plan’ to refer to a payer of last resort. The Medicare statute describes Medicare only as ‘secondary.’ Under agency regulations, the term ‘secondary’ refers to benefits that ‘are payable only to the extent that payment has not been made and cannot reasonably be expected to be made under other coverage that is primary to Medicare.'”

Because CIGA is not a primary plan under the Medicare Act’s secondary payer provisions, it has no obligation to reimburse CMS for conditional payments made on behalf of workers’ compensation insureds. Therefore, the district court was reversed and the case remanded for further proceedings consistent with this opinion.

Foremost Shockwave Solutions Waives Liens

San Diego chiropractor, George Reese, with offices on El Cajon Boulevard, was indicted in 2015 for referring patients to a Los Angeles area medical service provider. Foremost Shockwave Solutions in return for bribes.

The bribes were set by the conspirators at $100 per patient and paid through an intermediary. After taking a cut amounting to $25 per patient, the intermediary would pay the remaining $75 per patient to Reese.

Foremost Shockwave Solutions was allegedly controlled by attorney Lee Mathis and Fernando Valdes its president. Both were also indicted. Although disguised as “office rent” payments, the illegal bribes were allegedly paid in cash during clandestine exchanges in restaurants and parking lots.

The indictment alleged that defendant Foremost Shockwave Solutions and others engaged in a $22 million kickback and bribery scheme through which co-conspirators paid bribes and kickbacks to physicians to refer California Workers’ Compensation patients to Foremost.

For example, $6,000 in cash was delivered to Reese in the parking lot of the Jolly Roger in Oceanside, hidden in a gift bag. Other times, it was passed in envelopes or stashed inside newspapers.

According to the indictment, Reese and his codefendants generated and submitted bills to insurers totaling in the tens of millions of dollars. Most of these treatments involved the providing of “Shockwave therapy,” which uses low energy sound waves to initiate tissue repair. Proceeds from the insurance claims generated through this scheme were paid to Mathis and Valdes.

Reese pleaded guilty in June 2016. and began serving a one year one day sentence. Valdez entered into a plea agreement in July 2017.

Foremost Shockwave Solutions has just entered into an agreement with prosecutors that provided the following. Foremost agrees that “it will not, directly or indirectly, attempt to collect or collect on any bills, claims, or liens filed by FOREMOST SHOCKWAVE SOLUTIONS or on its behalf.”

In exchange, the United States will dismiss, without prejudice, the pending charges against Foremost.