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Tag: 2020 News

No “Work-Spawned Risk” for Auto Accident After RTW

Kim Rushton was employed as a chemist for the City of Los Angeles at the Hyperion Treatment Plant for over twenty years. In 2015 he struck and killed pedestrian Ralph Bingener while commuting to work in his own car and on his usual morning route and was not performing work for the City while driving to work.

As a chemist at the Hyperion Treatment Plant, he was at the time a self-described “lab rat” and his job did not require him to be in the field or use his personal automobile for his employment.

Bingener’s surviving brothers filed a complaint alleging that the City was vicariously liable for Rushton’s negligence in the collision. The City moved for summary judgment based on the going and coming rule, asserting that Rushton was not in the course of employment at the time of the accident.

The trial court agreed that the going and coming rule applied to Rushton, who was engaged in his regular commute at the time of the accident and entered judgment against the Bingeners who then appealed. The Court of Appeal sustained the trial court in the published case of Bingener v City of Los Angeles.

Plaintiffs argued an exception to the going and coming rule – the “work – spawned risk” exception. This exception applies when an employee endangers other with a risk arising from or related to work. For example, where an employee gets into a car accident on the way home after drinking alcohol at work with his supervisor’s permission, courts have carved out an exception to the going and coming rule.

Plaintiffs argued that the City knew about Rushton’s health conditions and how it might impair his ability to drive because certain medical expenses were being paid for Rushton’s back injury through the City’s worker compensation program. According to plaintiffs, Rushton’s then-present injuries and medications rendered him unfit to drive. Despite this knowledge, the City allowed Rushton to return to work prematurely without placing any restrictions on his driving. Given that Rushton was impaired and unfit to drive, his driving to work was a foreseeable risk of the City’s activities. The City, should, therefore, be held liable for “a negligently created work-spawned risk endangering the public.”

The Court of Appeal rejected this argument. Nothing about the enterprise for which the City employed Rushton made his hitting a pedestrian while commuting a foreseeable risk of this enterprise. The “going and coming rule” was created for precisely the situation presented here and its application in this case precludes plaintiffs’ claim of vicarious liability against the City.

“Plaintiffs contend that nevertheless, the City was obligated to review Rushton’s worker’s compensation file and reach a decision that Rushton could not return to work because he could not safely drive a vehicle. That argument ignores the undisputed fact that it was a physician, and not the City, who approved Rushton to return to work and did so without limitation on his driving.”

Reactions to AB5 Differ in Gig Worker Industry

BlueCrew and Wonolo both run on-demand marketplaces for blue-collar gigs. The startups use smartphone apps to connect people to temporary jobs such as warehouse packers, janitors, delivery drivers, forklift operators, line cooks and event staffers.

But according to the report in the San Francisco Chronicle, the two rivals diverge significantly when it comes to employment. Their contrasting approaches crystallize ways AB5 is changing the work landscape.

BlueCrew has always hired its workers as employees. Now, as California makes it harder for companies to claim that workers are independent contractors, it’s seeing a surge of interest from clients trying to comply with the new law and with Dynamex, the 2018 California Supreme Court decision that AB5 codifies.

Wonolo has primarily hired its workers as independent contractors. AB5 has prompted it to drastically shrink its California operations, essentially ending gig jobs here after the first quarter, although it will keep its headquarters in San Francisco.

“Given the limitations of AB5, we anticipate that we may not be able to allow businesses to post jobs in California as of March 31,” Wonolo CEO Yong Kim said in a letter to its workers. “This means you will see significantly fewer jobs on Wonolo in California. We have not made this decision lightly but have done so in order to protect businesses from any unnecessary risks associated with the new legislation.”

In an interview, Kim said that the move, which he characterized as “de-emphasizing” rather than exiting California for good, was a matter of principle in creating a “workers-first company.” Wonolo wants the freedom to devise its own modern ways to meet workers’ needs and feels it would be hamstrung here, he said.

Echoing arguments made by Uber, Lyft and other gig companies, Kim said that what blue-collar gig workers want “is flexibility and autonomy of their schedule, working when and where and for whom they want.”

Walking away from California, its largest market by far, “will be a financial burden to us,” Kim said, but the business is growing elsewhere in the country. “It’s a drastic move, but we stand for what we think is the right thing for providing new kinds of benefits for Wonoloers and other gig workers.”

By contrast, BlueCrew, based in Chicago with offices in San Francisco, has received dozens of client inquiries and new customers since the Dynamex decision in April 2018, and that intensified leading up to AB5’s Jan. 1 implementation, said CEO Adam Roston.

“Over the past few months there was a steep change of interest in California in what we offer,” he said. “We are designed to access workers quickly on demand but are also a compliant solution because 100% of our workers are (employees). Customers are coming to us who were using gig labor because they’re no longer comfortable with that.”

In California’s tight labor market, most of BlueCrew’s jobs pay about 50% above minimum wage – or else it couldn’t attract workers, he said. The company covers mandated benefits such as workers’ compensation and disability insurance.

Court Rules Truckers are Exempt from AB-5 ABC Test

A Los Angeles judge ruled that California’s new “gig worker” law does not apply to independent truck drivers because they are subject to federal statute, handing a victory to one industry that is challenging a state effort to clamp down on labor abuses.

The law, known as AB5 and which took effect on Jan. 1, makes it tougher for companies to classify workers as contractors rather than employees, a classification that exempts them from paying for overtime, healthcare and workers’ compensation.

According to the report in Reuters, truckers have mounted the strongest defense against AB5, which is best known for striking at the heart of high-profile “gig economy” businesses like Uber Technologies and Postmates Inc, which depend on freelance workers to provide low-cost transportation and deliveries.

In a decision on Wednesday, Los Angeles Superior Court judge William Highberger said AB5 “prohibits motor carriers from using independent contractors to provide transportation services” and therefore is preempted by the Federal Aviation and Administration Authorization Act of 1994.

Highberger ruled in favor of NFI Industries’ Cal Cartage Transportation Express and other trucking companies that were sued by Los Angeles City Attorney Mike Feuer for allegedly misclassifying truck drivers as independent contractors rather than employees.

Feuer said his office would appeal.

“As the Court itself stated, ‘… there are substantial grounds for difference of opinion,’” Feuer said in a statement emailed to Reuters.

Highberger’s decision came eight days after the California Trucking Association won a temporary restraining order in a separate challenge to AB5. Another hearing in that federal case is scheduled for Jan. 13.

California is home to 450,000 contract workers. Roughly 70,000 of them are independent big-rig owner-operators who transport everything from ocean cargo containers to strawberries.

“California cannot simply eliminate that business model and force truck drivers to be employees,” said Gibson Dunn partner Joshua Lipshutz, who represented NFI.

Uber and Postmates on Wednesday asked a federal judge to issue a temporary injunction. They argue that AB5 is unconstitutional because it singles out their workers in violation of equal protection guaranteed under the constitutions of the United States and California.

Gov. Newsom Announces Plans to Enter Drug Business

California would get into the business of selling prescription drugs under a sweeping plan to reduce health costs that Gov. Gavin Newsom unveiled Thursday.

Newsom’s office provided a memo summarizing the proposal but declined to answer questions about how it would work and how it would be funded. Even some supporters say it will be hard to accomplish.

The Sacramento Bee reports that the plan, which will be part of Newsom’s 2020-21 budget proposal, would make California the first state to create its own generic drug label. Newsom also wants state agencies and private insurers to negotiate drug prices together to leverage lower prices.

Under the plan, California would contract with existing drug manufacturers to produce pharmaceuticals for the state. Newsom’s office argues that would increase competition and lower prices in the market for generic versions of brand name drugs.

Generics companies were surprised by Newsom’s announcement Thursday, said Jeff Francer, general counsel for the Association for Accessible Medicines, which represents generics manufacturers.

State government partnering with generics companies could help California leaders address problems the manufacturers face related to patents and anti-competitive practices by brand-name pharmaceutical companies, Francer said. But he added he’s waiting to see more details from Newsom’s office before taking a position on the plan.

Newsom also wants state agencies that purchase drugs, including Medi-Cal, CalPERS and Covered California, to team up with private insurers and other entities to negotiate as a group with pharmaceutical manufacturers.

His plan would create a single market for drug purchasing in California, forcing drug manufacturers to sell their drugs at the same price to everyone in the state. To sell drugs in the California market, Newsom’s office says the state would require manufacturers to sell drugs at or below the prices they charge other states, nations or global purchasers.

Priscilla VanderVeer, a spokeswoman for the pharmaceutical trade group PhRMA, declined to comment on Newsom’s proposals until his office releases more information.

Mary Ellen Grant, spokeswoman for the California Association of Health Plans, which represents insurers, said the association is waiting to see more detail.

O.C. Register Calls for Privatizing the SCIF

The Los Angeles Times recently published a scathing article about claims of excessive executive salaries and nepotism at the State Fund, a quasi-governmental agency that is one of the largest providers of workers’ compensation coverage in the state.

The Orange County Register response to this report was “Maybe it’s time give the State Fund its wish and privatize it.” Here is the logic behind the newspaper’s suggestion:

At first glance the story seemed like business as usual: more waste, fraud and abuse of taxpayer money. A deeper read actually suggests a less serious problem.

But it is still time for the state to consider the very future of this agency that’s spent much of its history engulfed in controversy.

As the Times reported, salaries for seven executives at the State Fund exceeded $500,000 annually, making them some of the highest-paid public employees in California. By contrast, the governor gets paid $210,000 a year.

Throw in some light claims of nepotism, critics calling the salaries “beyond the pale” and a lawmaker calling for an oversight hearing and you have the makings of a standard Sacramento scandal.

Looking deeper though, we find the salaries are not paid by the government, which lets some air out of the outrage balloon. As far as the nepotism was concerned, one son of the CEO was making $50,400 annually as an underwriter and another son had previously made $16 an hour as an intern.

Inappropriate? Probably, but as far as scandals go, it lacks the criminal investigation that serves as the State Fund-scandal benchmark. It’s doesn’t even come close the scandals surrounding Ricardo Lara, the state’s insurance commissioner. But it does raise a good question about why the State Fund is still attached to the government in any way.

The State Fund is considered quasi-governmental because its board is publicly appointed (it’s often a cushy landing spot for former lawmakers and other well-connected types) and because it has a mandate to provide insurance no matter what, a market of last resort.

The State Fund exists because California is a no-fault state where employers must pay workers’ comp claims and, in exchange, workers can’t sue the employer for fault. Someone needed to insure the previously uninsurable.

But times have changed. There are other options. West Virginia, for example, moved to a competitive market with an assigned-risk pool and it seems to be working fine. And that’s a state that was previously dependent on coal mining. In other words, an expensive place to provide coverage.

The State Fund wants to pay its executives like executives in the private market and has asked for waivers from certain civil service requirements. Perhaps it’s time to reconsider its quasi-governmental status and privatize this agency, which really wants to be private. This would give lawmakers one less cushy place to go after life in the Legislature, but the state would survive.

Public employee unions would have a fit because State Fund’s approximately 4,200 employees are eligible for public pensions, but the state would survive that, too.

Lawmakers would argue that the State Fund’s quasi-governmental status makes it subject to scrutiny, like legislative oversight and sunshine laws. But if there’s one thing both the Times story and recent history have shown, it’s that oversight isn’t really happening and if it is, it’s not effective.

Employer’s Delay in Interactive Process Supports FEHA Claim

Antoinette Alvarez was a studio manager for Lifetouch, in which position she spent 20 to 25 percent of her time taking photographs. After Alvarez suffered a workplace injury to her neck and right shoulder in 2013, she provided Lifetouch a doctor’s note placing restrictions on her work, but for the first two months thereafter

Alvarez continued to take photographs without any accommodation or discussion with Lifetouch on how to accommodate her restrictions. When her condition worsened in 2014, Lifetouch provided Alvarez a part-time staff member to assist with Alvarez’s photographic duties as an accommodation for Alvarez’s injuries.

But after a doctor in her workers’ compensation case opined Alvarez was permanently disabled and could no longer perform photography, Lifetouch terminated Alvarez’s employment.

When Alvarez threatened to sue, Lifetouch reinstated her employment in a position that did not require photography, but on less favorable terms. Alvarez briefly worked in the new position before taking leave and later resigning.

Alvarez brought claims under the California Fair Employment and Housing Act for failure to accommodate; failure to engage in a good faith interactive process; discrimination; retaliation; harassment; failure to prevent discrimination, retaliation and harassment; wrongful termination; and constructive discharge. Alvarez also alleged interference with her right to leave and retaliation in violation of the California Moore-Brown-Roberti Family Rights Act.

The trial court granted summary judgment, finding Alvarez could not perform the essential job function of photography, she was not denied an accommodation or leave, and the conduct of Alvarez’s supervisors was not sufficiently severe or pervasive to constitute harassment under FEHA or support a claim for constructive discharge. The court of appeal reversed in part and remanded in the unpublished case of Alvarez v. Lifetouch Portrait Studios.

Although Lifetouch engaged in the interactive process and provided accommodations for Alvarez’s injury after a flare up in the summer of 2014, its failure to take any steps during the first two-month period following Alvarez’s injury raises a triable issue of fact.

Similarly, Alvarez presented evidence that at the time of her termination in July 2015, she could perform photography with assistance from a second employee when necessary to perform certain tasks.

Whether the photography studio where Alvarez worked was typically staffed with a second staff member who could assist Alvarez is also a disputed question of fact which cannot be resolved by summary judgement.

As to her harassment claim, however, Alvarez has not presented evidence to show severe or pervasive harassment by her supervisor. Nor has she shown the conditions of her employment were intolerable when she resigned during her medical leave in July 2016. The summary judgment on this issue was therefore affirmed.

Rehab-Recovery Mogul Pleads Guilty in $175M Fraud Case

The the Los Angeles County District Attorney’s Office announced that the founder of Community Recovery Los Angeles, a drug and alcohol treatment facility, pleaded no contest to running a $175 million fraudulent healthcare billing scheme.

Over the years, Community Recovery grew into a veritable empire, comprising more than 20 sober-living houses and outpatient clinics in Anaheim, West Adams, Calabasas, Malibu, Woodland Hills, Hollywood and Colorado.

The owner, 58 year old Christopher Bathum, entered the plea this week to 14 felony counts: seven counts of grand theft, five counts of insurance fraud and one count each of identity theft and money laundering.

The California Department of Health previously issued a number of cease-and-desist letters against CRLA houses, accusing them of being unlicensed drug and alcohol treatment centers. At one point, a judge granted an injunction against two CRLA facilities – on Melrose and in Calabasas – which ordered them to stop providing treatment.

Around 2016, Bathum publicly stepped down as head of his own company, which then changed its name to Commonwealth Global.

Sentencing is scheduled on Feb. 14 in Department 105 of the Foltz Criminal Justice Center. Bathum faces 20 years in state prison as a result of the plea.

Co-defendant Kirsten Wallace was sentenced in 2018 to 11 years in state prison after she pleaded no contest to 46 felony counts related to the same healthcare billing scheme.

The two defendants obtained multiple health care insurance policies for their clients, using their personal identifying information and falsified the clients’ circumstances to obtain the policies. The patients were unaware that policies had been issued in their name, the prosecutor said

Bathum and Wallace also billed for former clients after their treatment ended while those clients were still working at CRLA and no longer receiving treatment.

Between June 2012 and December 2015, Bathum and Wallace fraudulently billed an estimated $175 million. In most instances, bills were sent for services never provided. About $44 million was paid out by five insurance companies, the prosecutor added.

Additionally, Bathum was convicted last year of 31 felony counts for sexually assaulting seven women at his rehab facilities in case BA451669. Sentencing in that case also is scheduled on Feb. 14.

The cases were investigated by the Los Angeles County Sheriff’s Department, the Los Angeles County District Attorney’s Bureau of Investigation and the California Department of Insurance.

Study Claims 1/3 of Healthcare Costs are Insurance Co. Overhead

U.S. insurers and providers spent more than $800 billion in 2017 on administration, or nearly $2,500 per person – more than four times the per-capita administrative costs in Canada’s single-payer system, a new study finds.

Over one third of all healthcare costs in the U.S. were due to insurance company overhead and provider time spent on billing, versus about 17% spent on administration in Canada, researchers reported in Annals of Internal Medicine, and summarized in an article by Reuters Health.

Cutting U.S. administrative costs to the $550 per capita (in 2017 U.S. dollars) level in Canada could save more than $600 billion, the researchers say.

The average American is paying more than $2,000 a year for useless bureaucracy,” said lead author Dr. David Himmelstein, a distinguished professor of public health at the City University of New York at Hunter College in New York City and a lecturer at Harvard Medical School in Boston.

To calculate the difference in administrative costs between the U.S. and Canadian systems, Himmelstein and colleagues examined Medicare filings made by hospitals and nursing homes. For physicians, the researchers used information from surveys and census data on employment and wages to estimate costs. The Canadian data came from the Canadian Institute for Health Information and an insurance trade association.

When the researchers broke down the 2017 per-capita health administration costs in both countries, they found that insurer overhead accounted for $844 in the U.S. versus $146 in Canada; hospital administration was $933 versus $196; nursing home, home care and hospice administration was $255 versus $123; and physicians’ insurance-related costs were $465 versus $87.

They also found there had been a 3.2% increase in U.S. administrative costs since 1999, most of which was ascribed to the expansion of Medicare and Medicaid managed-care plans. Overhead of private Medicare Advantage plans, which now cover about a third of Medicare enrollees, is six-fold higher than traditional Medicare (12.3% versus 2%), they report. That 2% is comparable to the overhead in the Canadian system.

Why are administrative costs so high in the U.S.?

It’s because the insurance companies and health care providers are engaged in a tug of war, each trying in its own way to game the system, Himmelstein said. How a patient’s treatment is coded can make a huge difference in the amount insurance companies pay. For example, Hammerstein said, if a patient comes in because of heart failure and the visit is coded as an acute exacerbation of the condition, the payment is significantly higher than if the visit is simply coded as heart failure.

This upcoding of patient visits has led insurance companies to require more and more paperwork backing up each diagnosis, Himmelstein said. The result is more hours that healthcare providers need to put in to deal with billing.

Some folks estimate that the U.S. would save $628 billion if administrative costs were as low as they are in Canada,” said Jamie Daw, an assistant professor of health policy and management at Columbia University’s Mailman School of Public Health in New York City.

“That’s a staggering amount,” Daw said in an email. “It’s more than enough to pay for all of Medicaid spending or nearly enough to cover all out-of-pocket and prescription drug spending by Americans.”

Santa Monica Reports 23% Increase in Comp Claim Costs

The Risk Management Division of the City of Santa Monica compiles its Workers’ Compensation Annual Report every year in an effort to provide local stakeholders with information and statistics related to the city’s medical and indemnity payments, claim settlements as well as general claim and cost trends.

As it has every year since 2009, the city’s Workers’ Compensation Program once again saw an increase to its total program liabilities, according to a report recently presented to City Council.

“In summary, in FY 2018-19, medical and indemnity payments increased 23% from the prior year, claim settlements were up 53% over the prior year and total program liabilities – the total value of all open claims from 1979 forward – grew to $32.6 million by June 30, 2019,” Risk Manager Oles Gordeev said in the report. This was an 8.3 percent or $2.4 million increase from the prior year.

The lion’s share of this increase was attributable to the Police Department and reflects the impact of an aging workforce,” Gordeev said. “Fortunately, first-quarter data from (this fiscal year) shows that total liabilities are again on the decline,” and staff is hopeful this trend will continue.

The city settled 150 claims with a total value of about $4 million during the 2018-2019 fiscal year, which was up from the 98 claim settlements that were worth a total value of $2.3 million the year before. City staff said the increased number of settlements in FY 2018-19 represented an improvement over the past year and reflects the city’s commitment to resolving claims in a timely manner.

“Further, there were two significant and positive trends that emerged in FY 2018-19,” the report states, before addressing the “impressive results” of the Big Blue Bus’ Third-Party Administrator pilot program.

“In short, the TPA’s efforts have resulted in a significant reduction in BBB’s total program liabilities – the single most important financial performance measure for a workers’ compensation program,” Gordeev said in the report, describing how the three-year pilot program came to fruition back in 2017. Despite a 28% increase in claim frequency since its inception, the pilot has resulted in a reduction of total program liabilities from $7.44 million to $6 million.

The key challenges the City faces are steep increases in pension costs over the next seven years as the effects of the California Public Employees’ Retirement System (CalPERS) discount rate decrease from 7.5% to 7.0% impact pension contribution rates starting in FY 2018-19, and continued increases in workers’ compensation costs and healthcare costs, all of which are outpacing revenue growth.

Even without an economic downturn in the next two years, the report warns that the “City will face increasingly hard choices in the next budget cycle.”

Palmdale Internist Sentenced to Two Years in Kickback Case

Kain Kumar, 56, of Encino, a former doctor was sentenced to 24 months in federal prison for engaging in a multi-faceted Medicare fraud scheme, and also for illegal prescribing thousands of opioid painkillers and muscle relaxants.

Kumar pleaded guilty in April 2019 to one count of health care fraud and one count of distribution of hydrocodone. He practiced internal medicine, maintained medical offices in Palmdale, Rosamond, and Ridgecrest and surrendered his medical license last year.

Kumar was also ordered to pay financial penalties totaling more than $1 million, consisting of $509,365 in restitution, $494,900 in asset forfeiture, and a $72,000 fine.

Kumar defrauded the Medicare health care benefit program by prescribing unnecessary home health services in exchange for the payment of illegal kickbacks to him from a La Verne-based home health agency called Star Home Health Resources, Inc. According to the indictment in this case, Medicare paid $4,398,599 to Star based on the illegal kickback-tainted referrals from Kumar.

In furtherance of this scheme, Kumar caused false and fraudulent claims for reimbursement to be submitted to Medicare for Medicare beneficiaries that he did not personally examine or for patients he only briefly examined. Kumar also prescribed drugs that were not medically necessary and which were paid for by the Medicare Part D program.

Kumar admitted in his plea agreement that he illegally prescribed 23,826 pills of the opioid drug hydrocodone (commonly sold under the brand name Vicodin or Norco) and 38,459 pills of the muscle-relaxer carisoprodol (sold under the brand name Soma). Kumar directed his office staff – who were not medical professionals – to issue prescriptions for these drugs to patients even though Kumar had not examined the patients.

Kumar directed his office staff to sign his name on prescriptions for opioid drugs and also provided his staff with pre-signed prescriptions. In one instance, although Kumar examined a patient only once on the patient’s very first visit, and thereafter he caused prescriptions to be issued to the patient for hydrocodone and carisoprodol on a monthly basis for approximately a year and a half even though Kumar did not actually see the patient for any subsequent physician examination.

Kumar is the fifth and final defendant sentenced in this case. Elaine C. Lat, 50, of Fontana, was Star’s chief operating officer and the case’s lead defendant. She is serving a 30-month prison sentence in this matter after pleading guilty in May 2017 to one count of conspiracy and four counts of paying illegal kickbacks. Three other defendants, including Lat’s parents, each pleaded guilty to criminal charges and were sentenced in this matter.

This conviction was a violation of the terms of his probation with the California Medical Board arising out of a 2014 finding of gross negligence in the care of a 16 year old patient. He surrendered his medical license in September 2019 following a Medical Board disciplinary action seeking to revoke his probation.