Tag: 2021 News

Despite the pandemic-driven recession, workers’ comp claim frequency among California’s private self-insured employers rose in 2020, fueled by a big increase in the incidence of indemnity claims which more than offset a decline in medical-only claim frequency.  This conclusion was based on a California Workers’ Compensation Institute (CWCI) analysis of data compiled by the state Office of Self-Insurance Plans (OSIP).

OSIP’s annual summary of private self-insured data, released July 8, provides the first snapshot of California private, self-insured claims experience for cases reported in 2020, including the total number of covered employees, medical-only and indemnity claim counts, and total paid and incurred losses on those claims through the end of the year.

The latest summary reflects the experience of private self-insured employers who covered 2.34 million California employees last year, and who reported a total of 86,503 claims in 2020 – slightly more than the 85,852 claims shown in the 2019 initial report.

It is notable that the number of covered employees in the private sector self-insured sector held steady while statewide unemployment soared during the pandemic, though CWCI notes that many large, private self-insured employers fit into the “essential worker” category (e.g., major retail, health care, utilities) where workers were less impacted than the insured work force by furloughs, layoffs, and remote work.

OSIP’s initial report on 2020 private self-insured experience shows 43,779 medical-only claims (down 15.1 percent from 51,545 claims in 2019) and 42,724 indemnity claims (up 24.5 percent from 34,307 in 2019).

The 2020 claim count translates to an overall frequency rate of 3.70 claims per 100 private self-insured employees, nearly matching the overall frequency rates from 2018 and 2019, though the breakdown by claim type underscores the major shift in the claim distribution away from less costly medical-only claims and toward more expensive indemnity claims.  While medical-only claim frequency per 100 employees fell from 2.21 in 2019 to a 15-year low of 1.87 in 2020, the indemnity claim rate rose from 1.47 to a 15-year high of 1.83.

That shift was also evident in the first report paid and incurred loss data.  

Paid losses on the 2020 private self-insured claims through the fourth quarter totaled $268.4 million, $15.6 million more than the comparable figure for 2019, as total paid indemnity (primarily temporary disability payments) increased by $25.1 million (22.5 percent) while total paid medical fell by $9.5 million (6.7 percent).  

Similarly, total incurred losses (paid benefits plus reserves for future payments) increased to $742.4 million, up $48.0 million from the initial incurred amount reported for 2019 claims, as total incurred indemnity at the first report climbed by $40.2 million (6.9 percent) and total incurred medical increased by $7.8 million (1.9 percent).  Average paid and incurred losses in the initial report both rose sharply in 2020, climbing to $3,103 and $8,583 respectively, with all of the year-over-year increase in the average paid amount and most of the increase in average incurred due to increased indemnity.

With a $26 billion nationwide settlement in sight over claims that the three largest U.S. drug distributors and Johnson & Johnson helped fuel a nationwide opioid epidemic, state and local governments will soon turn their attention to pharmacies and a handful of drugmakers.

Reuters reports that U.S. state attorneys general are expected to unveil a settlement proposal this week with distributors McKesson Corp (MCK.N), Cardinal Health Inc (CAH.N) and AmerisourceBergen Corp (ABC.N) contributing a combined $21 billion, while Johnson & Johnson would pay $5 billion.

Noticeably absent from the potential $26 billion deal are pharmacy operators including Walgreens Boots Alliance, Walmart Inc , Rite Aid Corp and CVS Health Corp, which have been accused of ignoring red flags that opioid drugs were being diverted into illegal channels.

The deal also would not include drugmakers AbbVie Inc, Teva Pharmaceutical Industries Ltd or Endo International Plc, which have been accused of misleadingly marketing their pain medicines as safe.

The pharmacies and drugmakers have denied the claims, saying rising opioid prescriptions were driven by doctors, that they followed federal law and that the known risks were included in U.S.-approved labels for the drugs.

News of the proposed nationwide settlement came three weeks into a jury trial in New York, and legal experts said upcoming court proceedings will pressure the remaining defendants to reach a deal.

The drugmakers are currently defending themselves at the New York trial and a trial in Orange County, California, and are expected to face another trial in San Francisco along with the pharmacies later this year. The pharmacies, which settled the New York case shortly before trial, also face an October trial in Ohio.

After start of the Orange County case earlier this year, Allergan defense counsel Donna Welch, in her opening statements in front of Judge Wilson, initially threw co-defendants in the opioid litigation “The Pharmacy Chains” under the bus, claiming they were the responsible party in unleashing hundreds of millions of prescription opioids, the “firewall” in mitigating the now defense asserted, non-existent opioid crisis.  This illustration of the “blame others” defense strategy has fewer targets as supply chain participants settle cases, removing opportunities for remaining defendants to shift blame.

Richard Ausness, a law professor at the University of Kentucky, said a settlement this week reduces the groups of defendants in the litigation and makes it harder for the remaining companies to blame others.

Endo is scheduled to go to trial next week to assess damages over a lawsuit brought on behalf of Tennessee counties and an infant allegedly born addicted to opioids, in which a judge has already ruled the company liable. District Attorney General Barry Staubus of Tennessee’s Sullivan County told WHLJ television that the company offered to settle, but the deal would be limited to that case.

Peter Mougey, a lawyer representing the local governments pursuing opioid litigation around the country, said at a news conference to discuss proposed settlements that he was “frustrated” pharmacies were not part of the nationwide deal.

“They’ve had ample time to assess where they are with their liability, and we all have the common goal of trying to end this opioid epidemic,” he said.

The pharmacies did not immediately respond to requests for comment.

One of the largest hospital systems in the nation and two of its doctors will pay $37.5 million to resolve violations of the False Claims Act and the California False Claims Act. The settlement – which resolved two cases – is a joint resolution with the U.S. Department of Justice and the California Department of Justice.

The United States and California entered into a settlement agreement with the Prime Healthcare Services system; Prime’s founder and Chief Executive Officer, Dr. Prem Reddy; and interventional cardiologist Dr. Siva Arunasalam to resolve alleged violations of the False Claims Act and the California False Claims Act based on kickbacks paid by Prime to Arunasalam for patient referrals.

Prime includes the Ontario-based Prime Healthcare Services Inc., Prime Healthcare Foundation Inc., Prime Healthcare Management Inc., High Desert Heart Vascular Institute (HDHVI), and Desert Valley Hospital Inc.

Under the settlement agreement, Arunasalam will pay $2 million. Reddy has already paid $1,775,000, and Prime has paid $33,725,000. The United States will receive $35,463,057 of the settlement proceeds, and California will receive $2,036,943.

In 2018, Prime and Reddy paid $65 million to settle unrelated allegations of false claims and overbilling.

The settlement resolves allegations that:

– – Prime paid kickbacks when it overpaid to purchase Arunasalam’s physician practice and surgery center because the company wanted Arunasalam to refer patients to its Desert Valley Hospital in Victorville. The purchase price, which was substantially negotiated by Reddy, exceeded fair market value and was not commercially reasonable. Prime also knowingly overcompensated the doctor when HDHVI entered into an employment agreement with him that was based on the volume and value of his patient referrals to Desert Valley Hospital;
– – For approximately two years between 2015 and 2017, HDHVI and Arunasalam used Arunasalam’s billing number to bill Medicare and Medi-Cal for services that were provided by Dr. George Ponce, even though they knew Ponce’s Medicare and Medi-Cal billing privileges had been revoked, and that billing Ponce’s services under Arunasalam’s billing number was improper; and
– – Certain Prime hospitals billed Medi-Cal, the Federal Employees Health Benefits Program, and the U.S. Department of Labor’s Office of Workers’ Compensation Programs for false claims based on inflated invoices for implantable medical hardware. Arunasalam was not implicated in this conduct.

In connection with the settlement, Prime and Reddy entered into a five-year Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). The CIA requires, among other things, that Prime maintain a compliance program and hire an Independent Review Organization to review arrangements entered into by or on behalf of its subsidiaries and affiliates.

The civil settlement includes the resolution of claims brought under the qui tam, or whistleblower, provisions of the False Claims Act in two lawsuits filed in federal court in Los Angeles. One suit was filed by Martin Mansukhani, a former Prime executive. The second suit was filed by Marsha Arnold and Joseph Hill, who were formerly employed in the billing office at Shasta Regional Medical Center, a Prime hospital in Redding, California.

Under the qui tam provisions of the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of any recovery. Although the United States did not intervene in these cases, it continued to investigate the whistleblowers’ allegations and helped to negotiate the settlement announced today. Mr. Mansukhani will receive $9,929,656 as his share of the federal government’s recovery.

Loews Hollywood Hotel, LLC employed Jessica Ferra as a bartender. Loews paid Ferra hourly wages as well as quarterly nondiscretionary incentive payments.

For the days when she had to work during lunch or a rest break, her employer paid Ferra only the hourly wage and did not include a percentage of the quarterly incentive.

Ferra filed a class action suit against Loews. Ferra alleged that Loews, by omitting nondiscretionary incentive payments from its calculation of premium pay, failed to pay her for noncompliant meal or rest breaks in accordance with her “regular rate of compensation” as required by Labor Code section 226.7(c).

The trial court granted summary adjudication for Loews on the ground that calculating premium pay according to an employee’s base hourly rate is proper under Labor Code section 226.7(c). The court agreed with Loews that “regular rate of compensation” in section 226.7(c) is “not interchangeable” with the term “regular rate of pay” under section 510(a), which governs overtime pay.

The Court of Appeal affirmed, holding that “regular rate of compensation” in section 226.7(c) and “regular rate of pay” in section 510(a) are “not synonymous, and the premium for missed meal and rest periods is the employee’s base hourly wage.”

The California Supreme Court reversed in the case of Ferra v Loews Hollywood Hotel, LLC.

The question is what the Legislature meant when it used the phrase “regular rate of compensation” in section 226.7(c). Neither the Labor Code nor Wage Order No. 5-2001 defines the term, and the words by themselves may reasonably be construed to mean either hourly wages, as Loews contends, or hourly wages plus nondiscretionary payments, as Ferra contends.

After review of the legislative history and case law, The Supreme Court held that the term “regular rate of compensation” in section 226.7(c) has the same meaning as “regular rate of pay” in section 510(a) and encompasses not only hourly wages but all nondiscretionary payments for work performed by the employee.

This interpretation of section 226.7(c) comports with the remedial purpose of the Labor Code and wage orders and with our general guidance that the “state’s labor laws are to be liberally construed in favor of worker protection.”

It also rejected Loews’s request that the decision be prospectively applied. The decision shall have retroactive effect.

In 2007, Purdue Pharma paid out one of the largest fines ever levied against a pharmaceutical firm for mislabeling of its product OxyContin, and three executives were found guilty of criminal charges. The company is seen by many as the origination of what became the opioid crisis.

After becoming the target of multiple civil actions across the states, Purdue Pharma, is seeking Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in the Southern District of New York.

Nine states have yet to agree to the Purdue Pharma bankruptcy plan. They include Connecticut, where the company is headquartered, as well as California, Delaware, Maryland, New Hampshire, Oregon, Rhode Island, Vermont and Washington. The District of Columbia also hasn’t agreed to the deal. They seek further liability from Purdue’s owners. Specifically, the states say individual members of the Sackler family directed marketing that misled the doctors who wrote OxyContin prescriptions and the patients given the addictive painkiller recklessly.

Courthouse News reports that Connecticut Attorney General William Tong had harsh words Friday when attorneys representing the family who owns the bankrupt OxyContin maker Purdue Pharma, threatened a demand for sanctions against four states and the District of Columbia.

Tong said the Sackler’s attorneys sent an email the previous day with a motion for sanctions, complete with about 165 pages of exhibits, against Connecticut, California, Maryland, Rhode Island and the District of Columbia.

In the draft motion, the Sackler family’s attorneys said they sought the sanctions, including fees and reprimands, because the states made allegations that lacked evidence.

One example quoted in the filing is that Connecticut ignored the Sacklers’ demand that it produce documents to back up its allegation that the family engaged in “Knowing Participation in Deception.”

“There is no evidence that Beverly, David, Jonathan or Richard Sackler had any involvement in the drafting or approval of the content of marketing material or what sales representatives said, were authorized to say or prohibited from saying during the Relevant Period,” the draft motion states. Attorneys for the Sackler family wrote that they were serving the draft 21 days before they intended to file it to give the states an opportunity to back up their assertions.

Tong said the Sackler family attorneys withdrew the motion Friday morning “after they got tremendous blowback from a lot of different parties” for the move. In a sharp series of comments, Tong described the withdrawn proposal as a threat against his state, “an organized crime family intimidation tactic” and “colossally idiotic.”

Tong said he made the allegations at issue in a complaint filed more than two years ago, and the last-minute filing was an attempt to pressure the state to accept a settlement proposal. “The Sacklers are trying to use the company’s bankruptcy to shield themselves from liability and from paying what they ought to pay for their role in causing and fueling the opioid crisis,” Tong said.