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Tag: 2023 News

July 2023 Hospital Analysis Shows Continuing Tight Financial Margins

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The economic outlook for hospitals remains bleak, according to the July 2023 data on hospital financial performance from Kaufman Hall.

Kaufman Hall’s newest Physician Flash Report, with data through the second quarter of 2023, found that provider productivity for medical groups continues to increase, with net patient revenue per provider FTE up 10% from a year ago.

However, this productivity was not enough to offset rising expenses as the median investment/subsidy per provider still rose 5% year-over-year to $224,243. The total direct expense per provider full-time equivalent (FTE) reached $611,519, a 4% increase compared to Q2 2022.

They report that most hospitals underperformed in June as high expenses and economic pressures persist. As margins continue to stabilize on the surface, the gap between high-performing hospitals and those struggling in this new “new normal” is widening.

Key takaways from the July 2023 National Hospital Flash Report are:

– – Hospital margins underperformed in June, compared to the previous month. Despite an overall trend of continued improvement, most hospitals underperformed slightly compared to May. Fiscal year-end accounting adjustments may have also contributed to the performance bump in June.
– – Average lengths of stay continue to decrease, and emergency department visits are down. Patient volumes continue to stabilize, and increases in outpatient revenue indicate people are continuing to shift away from inpatient settings.
– – Bad debt and charity care are increasing. Hospitals are being affected as states step up efforts to redetermine Medicaid eligibility and more people are disenrolled.
– – Inflation continues to challenge hospitals’ performance. Supplies and purchased service expenses remain high. Decreases in labor expenses may indicate higher staff turnover and even reductions in workforce.

“This ‘new normal’ is an incredibly challenging environment for hospitals,” Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall, said in a statement. “It’s time for hospital and health system leaders to begin developing and implementing a strategy for long-term sustainability, including expanding their outpatient footprint and re-evaluating where finite resources are being utilized.”

“As labor continues to be the largest share of expenses, health systems need to think strategically about provider employment models,” said Matthew Bates, managing director and Physician Enterprise service line lead with Kaufman Hall. “Organizations that want to see performance improvement must figure out how best to effectively integrate advanced practice providers into the care team model.”

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WCAB Ordered to End It’s Longstanding Illegal Reconsideration Procedure

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Michele Earley, Ashraf Gorgi, Hyun Sook Lee, Roman Hernandez Aguilar, and Jose Flores Campos were each applicants in a workers’ compensation proceeding. In each case one of the parties had filed a Petition for Reconsideration of a ruling issued in their case.

By statute, the WCAB must act upon such petitions within 60 days. To satisfy this requirement, the Board often grants petitions for purposes of further study without first deciding whether reconsideration is actually warranted. Later – sometimes many months after the petition for reconsideration was filed – the Board issues a decision on the merits affirming, reversing, or modifying the ruling at issue.

In each of these five cases, the Board issued a grant-for-study order. The Petitioners’ grant-for-study orders arose in different situations with different timelines. The cases are different but the Board’s orders were exactly the same. The uniform language of these orders reveals a standard form and not particularized analyses.

The Board explained its grant-for-study procedure. It generally tries to identify significant cases or those requiring en banc review, and cases involving complicated or novel issues. It was able to trace the history of this practice to the 1950’s; an earlier origin existed but is lost in time. The Board surmised the grant-for-study procedure “evolved naturally” from 1913 statutes that allowed the Industrial Accident Commission (a precursor to the Board) either to grant or to deny rehearing and thereafter to issue a decision after rehearing.

According to the results of a public records request that Petitioners served on the Board, as of November 2, 2021, there were 543 workers’ compensation cases awaiting a final decision in which the Board had issued a grant-for-study order between October 1, 2018 and October 1, 2021. The time between the filing of the grant-for-study orders and the Board’s final decisions ranged from five to 21 months.

The Court of Appeal issue a writ of mandate requiring the Board to cease its grant-for-study procedure and to comply with the statute when granting reconsideration in the published case of Earley v. Workers’ Comp. Appeals Bd. B318842 (August 2023).

Labor Code section 5908.5 requires the Board to explain its reasons for granting reconsideration and to identify the evidence supporting its decision. The Court simply said that the “statute is clear. The Board must obey it.”

At oral argument, the Board assured the Court of Appeal that it carefully reviews the cases in which it decides to issue a grant-for-study order. A careful review is not enough. Section 5908.5 requires the Board to go a step further and to explain in its order granting reconsideration why it made the decision to grant reconsideration based upon the evidence in the particular case.

However the Court of Appeal noted that “The Board’s grant-for-study orders in these cases fell short. These orders gave no reason for granting reconsideration other than a boilerplate statement that further study is necessary ‘based upon our initial review of the record.’ A rubber stamp could have authored these statements.“

“The Board does not claim that its standard grant-for-study order complies with section 5908.5. Rather, its defense of the grant-for-study procedure focuses on the long tenure of the procedure and the claimed impossibility of issuing a reasoned order in all cases. But a long-standing and incorrect procedure remains incorrect.”

“The Board must comply with section 5908.5 when it orders reconsideration. That is, the Board must state in detail the reasons for its decision and the evidence supporting it. Those reasons must be based on the grounds identified in section 5903. The Board need not, however, issue a final order within 60 days. The review necessary to support a decision to grant a petition for reconsideration within 60 days does not involve the same burden as the preparation of a final ruling. The Board must engage in the analysis necessary to permit a reasoned decision as to whether reconsideration is warranted based upon the factors identified in section 5903 and the evidence in the particular case. The Board then can decide whether to affirm, to modify, or to vacate the order at issue after further consideration and a more thorough review of the record.”

Petitioners met the statutory requirements for an award of attorney fees under Code of Civil Procedure section 1021.5. However the Court of Appeal reduced the requested $221,554.50 in fees by one half because Petitioners’ success was only partial.

“Petitioners successfully challenged the lawfulness of the Board’s current grant-for-study practice, resulting in an order that will require the Board to comply with section 5908.5 when it grants reconsideration. They did not achieve their aim of requiring the Board to issue final rulings on petitions for reconsideration within 60 days.” The Court of Appeal also awarded Petitioners their out-of-pocket appellate costs, which they identify as $7,891.63.

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After SCOTUS Remand, 9th Circuit Reaffirms its Denial of Employer’s Arbitration

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Domino’s sells ingredients used to make pizzas to its franchisees. As relevant to this case, Domino’s buys those ingredients from suppliers outside of California, and they are then delivered to Domino’s Southern California Supply Chain Center. At the Supply Center, Domino’s employees reapportion, weigh, and package the relevant ingredients for delivery to local franchisees but do not otherwise alter them.

The plaintiff drivers (“D&S drivers”), employees of Domino’s, then deliver the ingredients in response to orders from Domino’s California franchisees.

Edmond Carmona and two other “D&S drivers filed a putative class action against their employer, Domino’s Pizza in 2020, alleging various violations of California labor law. Each plaintiff’s agreement with Domino’s requires arbitration of “any claim, dispute, and/or controversy” between them.

But the federal district court denied Domino’s motion to compel arbitration. The 9th Circuit Court of Appeals previously affirmed the district court’s denial of Domino’s motion to compel arbitration, holding that because the drivers were a “class of workers engaged in foreign or interstate commerce,” their claims were exempt from the Federal Arbitration Act by 9 U.S.C. § 1.

But the U.S. Supreme Court granted Domino’s Petition for Certiorari, vacated the 9th Circuit decision, and remanded the case for reconsideration in light of Southwest Airlines Co. v. Saxon, 142 S. Ct. 1783 (2022).

After remand from the Supreme Court, the 9th Circuit Court of Appeals again reaffirmed the trial court’s denial of Domino’s arbitration petition, and distinguished the application of the Southwest decision from the Domino case in its published decision of Carmona v Domino’s Pizza – 21-55009 (July 2023).

In Saxon the Supreme Court used a fact-specific test to determine if a worker is exempt from the FAA under 9 U.S.C. § 1. This test should be focused on “the actual work that the members of the class . . . typically carry out” in that business rather than simply the employer’s business.

In Saxon the Supreme Court held that an employee who “frequently loads and unloads cargo on and off airplanes that travel in interstate commerce” was engaged in interstate commerce. Id. at 1793. The critical question is whether the workers are actively “engaged in transportation” of goods in interstate commerce and play a “direct and necessary role in the free flow of goods across borders.”

In finding that the cargo workers met this description, the Court specifically rejected Southwest’s argument that the cargo workers must themselves cross state lines to be engaged in interstate commerce.

However the 9th Circuit pointed out that the Saxon decision did not address the question in the Domino’s case. Rather, the Saxon Court expressly pretermitted whether “last leg” drivers like the D&S drivers in this case qualified for the exemption.

The decision after remand in the Domino’s case squarely rested upon the 9th Circuit reading of Rittmann v. Amazon.com, Inc., 971 F.3d 904 (9th Cir. 2020), “a case whose continued validity Saxon expressly declined to address.”

Rittmann confronted whether delivery drivers who transported goods from Amazon warehouses to in-state consumers were exempt from the FAA under § 1, and concluded that, because the Amazon goods shipped in interstate commerce were not transformed or altered at the warehouses, the entire journey represented one continuous stream of commerce.

Here in the Domino’s case the issue is whether the D&S drivers operate in a single, unbroken stream of interstate commerce that renders interstate commerce a central part of their job description. The pause in the journey of the goods at the warehouse alone does not remove them from the stream of interstate commerce.

“Because the goods in this case were inevitably destined from the outset of the interstate journey for Domino’s franchisees, it matters not that they briefly paused that journey at the Supply Center.”

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CWCI Study Shows IMR Volume Increased in First Half of 2023

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A new California Workers’ Compensation Institute (CWCI) review of the Independent Medical Review (IMR) process shows that after hitting an all-time low high in 2022, the number of IMR decision letters rose 4.1% in the first six months of 2023 compared to the first half of 2022. However the number of letters and individual decisions remained below pre-pandemic levels.

CWCI’s review encompassed more than 1.3 million IMR decision letters issued from 2015 through June 2023 in response to applications submitted to the state after a Utilization Review (UR) physician modified or denied a workers’ comp medical service request.

As in prior reviews, Institute analysts tallied the number of letters issued each quarter based on the letter date; determined the distribution and uphold rates by medical service category for the disputed treatment requests, as well as the distribution and outcomes of pharmaceutical IMRs by major therapeutic drug group; and calculated the percentage of IMRs associated with high-volume medical providers.

The data show that total IMR volume trended down for four consecutive years (2019 through 2022), as the number of work injury claims fell during the pandemic and pharmaceutical disputes declined after the state adopted the evidence-based Medical Treatment Utilization Schedule (MTUS) Prescription Drug Formulary and Pain Management and Opioid Guidelines.

After climbing to a record 184,735 letters in 2018, IMR letter volume declined 31.1% over the next four years, falling to 127,215 letters in 2022. While IMR decisions were down across all medical service categories, the addition of the Pain Management and Opioid Guidelines into the MTUS in late 2017 and the implementation of the MTUS Formulary in January 2018 had a huge effect as prescription drug disputes fell from 47.3% of all IMRs in 2017 to 33.3% in 2022, while the initial data from 2023 show prescription drug disputes fell to 32.6% of the IMRs in of the first half of this year.

From 2018 through June of this year, opioids’ share of the pharmaceutical IMRs has dropped from nearly a third to less than a quarter of all prescription drug IMRs. With prescription drugs representing a smaller share of the IMR disputes, there has been a shift in the distribution of services submitted for IMR since 2018, with the biggest percentage increases noted in physical therapy, which jumped from 10.3% to 13.4% of the IMRs; injections, which increased from 9.0% to 12.1%; and durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), which rose from 7.1% to 8.9% of the IMRs over the past 5-1/2 years.

As in previous reviews, the latest data show that a small number of physicians continue to drive much of the IMR activity, with the top 1% of requesting physicians (80 doctors) accounting for 40.3% of the disputed service requests that underwent IMR in the 12 months ending on June 30 of this year. The top 10 individual physicians alone accounted for 11.6% of the disputed requests, and notably, 9 of the 10 individual providers with the highest number of IMR requests a year earlier were still on the top 10 list in the latest review.

IMR outcomes remained fairly stable, with IMR physicians upholding UR doctors’ modifications or denials 89.2% of the time in the first half of 2023 versus 91.1% of the time in 2022. The 2023 uphold rates by type of service request ranged from 75.7% for evaluation/management services to 92.9% for acupuncture.

CWCI members and subscribers will find a more detailed summary of IMR experience through June 2023 in Bulletin 23-11 at www.cwci.org, and Institute members can also access updated IMR slides under the Research tab.

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Bipartisan Law Allow States to Recruit Foreign Doctors to Fill Shortages

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U.S. Senators Susan Collins (R-ME), Amy Klobuchar (D-MN), Jacky Rosen (D-NV), and Thom Tillis (R-NC) introduced bipartisan legislation to build the healthcare workforce in rural and medically underserved areas. The Conrad State 30 and Physician Access Reauthorization Act, cosponsored by Senator Angus King (I-ME), would allow international doctors to remain in the U.S. upon completing their residency under the condition that they practice in areas experiencing doctor shortages.

The legislation is endorsed by the American Medical Association, the American Hospital Association, the Federation of American Hospitals, the National Rural Health Association, the Niskanen Center, the American Academy of Neurology, and the Public Affairs Alliance of Iranian Americans.

The Conrad State 30 and Physician Access Reauthorization Act extends the Conrad 30 program for three years, improves the process for obtaining a visa, and allows for the program to be expanded beyond 30 slots if certain thresholds are met. The bill also provides worker protections to prevent doctors from being mistreated. A version of the bill was included as an amendment to the comprehensive immigration bill that passed the Senate in 2013.

The Conrad 30 Waiver program allows states to waive the two-year home residency requirement for J-1 visa holders who agree to practice medicine in an underserved area for at least three years. Under the bill, the number of waivers that a state can obtain each year would be increased from 30 to 35, and the program would be extended for three years.

“As we work to address medical workforce shortages, it’s critical that we make sure talented doctors trained and educated here in the U.S. can remain in our country,” said Senator Klobuchar. “The Conrad 30 program has brought nearly 20,000 physicians to underserved areas, filling a critical need for quality health care in our rural communities. Our bipartisan bill to reauthorize this program would encourage doctors to use their talents and training in underserved communities, improving health care for families across the nation and boosting our rural medical workforce.”

The bill would also make a number of other changes to the Conrad 30 Waiver program, including:

– – Allowing alien physicians to be employed at an academic medical center to meet the program’s employment requirements if the alien’s work is in the public interest, even if the medical center is not in an underserved area.
– – Requiring employment contracts for alien physicians under the Conrad program to contain certain information, such as the maximum number of on-call hours per week the physician shall have to work.
– – Allowing states to use waivers to recruit and retain physicians who have already practiced in underserved areas for at least three years.

The bill has not yet been passed by the Senate, but it is expected to be considered in the coming months.

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California Short 36,000 Nurses – But Nursing Schools Are Full

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Nursing turnover continues to be a substantial challenge for healthcare organizations as the nursing shortage remains high nationwide, and in California, with no particular solution on the horizon.

A study from Nursing Solutions Inc. (NSI) showed that actual reported hospital and staff RN turnover increased from 18 percent in fiscal year 2020 to 27 percent in fiscal year 2021; the same March 2022 study reported that the workforce lost about 2.5 percent of RNs in 2021. In the latest NSI report (March 2023), turnover reduced to 23 percent in fiscal year 2022 but still remains elevated compared with prepandemic levels.

A Health Affairs study published in April 2022 found that the RN workforce fell by about 100,000 by the end of 2021, which is a “far greater drop than ever observed over the past four decades.” This decline was particularly pronounced among midtenure nurses (aged 35 to 49).

Career satisfaction, intention to leave jobs, and mental health and wellbeing issues among registered nurses have gotten significantly worse since the midst of the COVID-19 pandemic, according to the AMN Healthcare 2023 Survey of Registered Nurses.

The AMN Healthcare 2023 Survey of Registered Nurses, based on responses from more than 18,000 nurses in January 2023, found that career satisfaction dropped by 10 percentage points since the middle of the pandemic in 2021. In addition, the likelihood of encouraging others to become a nurse declined 14 points since 2021.

So this data begs the question about possible solutions.

In 2022, the US Department of Labor budgeted $80 million to encourage not-for-profit organizations, educational institutions, and tribal organizations to apply for grants of up to $6 million each to train current and former nurses to become nursing educators and frontline healthcare workers to train for nursing careers.

At the local level, CalMatters reports that the California Legislature is looking at several ideas to address the nursing shortage by bringing more early-career nurses into the field. But so far, the groups with most to gain – or lose – are at odds over how to solve the staffing problems afflicting California’s health care workforce.

Labor organizations and hospitals want nursing schools to prioritize certain applicants for admission, such as people who already have experience in the industry. But the schools say that won’t help them graduate more nurses. They need more faculty and more hands-on training opportunities to increase class sizes.

Hospitals and unions say they don’t have much time to waste. Estimates show California faces a shortage of about 36,000 licensed nurses, according to the UC San Francisco Health Workforce Research Center on Long-Term Care.

Labor advocates say the nursing shortage creates a vicious cycle. The nurses on shift wind up doing more work. They get burned out and flee the industry, worsening the problem.

Service Employees International Union (SEIU) and the United Nurses Associations of California/Union of Health Care Professionals turned their attention to the state’s community college system, where graduates can earn degrees to become nursing assistants, licensed vocational nurses or registered nurses. Both groups say community colleges offer the most affordable and efficient way to earn a nursing degree.

But community college and some university nursing school leaders contend they cannot boost the number of graduates. Nursing programs are full, they say, and the proposals do nothing to expand the number of admission slots.

About 14,000 new students enrolled in nursing programs during the 2020-21 school year, according to the Board of Registered Nursing’s annual school report. That’s about 1,000 fewer students than the previous two years due to smaller class sizes, but schools across the state received more than 55,000 applications, a 10-year record.

United Nurses Associations of California/United Health Care Professionals lobbied for a $300 million investment over five years to double the state’s nursing school capacity. It was included in the state budget Gov. Gavin Newsom signed earlier this summer. The details of how the money will be spent have not been decided.

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Last Two Defendants Plead Guilty in $66M San Diego Pharmacy Scam

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Jimmy and Ashley Collins, the husband-and-wife owners of a Tennessee medical practice have pleaded guilty to charges that they used Marines and sailors in San Diego County as pawns in a nearly $66 million medical insurance scheme. They are the last members of the major conspiracy to plead guilty.

The married couple living in Birchwood, admitting that they worked with others to recruit TRICARE beneficiaries who were willing to sign up to receive expensive compounded medications, even though the beneficiaries did not really need the medications.

The beneficiaries’ information was sent to Choice MD, a Tennessee medical clinic co-owned and operated by the Collinses. Doctors and medical professionals employed by the Collinses at Choice MD, including Dr. Susan Vergot, Dr. Carl Lindblad, and nurse practitioner Candace Craven, then wrote prescriptions for the TRICARE beneficiaries, despite never conducting a medical review or examination of the patients in person.

Once signed by the doctors, these prescriptions were not given to the straw beneficiaries, but sent directly to The Medicine Shoppe, a pharmacy in Bountiful, Utah, which filled the prescriptions and received massive reimbursement from TRICARE.

Between December 2014 and May 9, 2015 – the day that TRICARE stopped reimbursing for compounded medications – the doctors working for the Collinses at Choice MD authorized 4,442 prescriptions and billed TRICARE $65,679,512 for these prescriptions.

The owners of The Medicine Shoppe then paid kickbacks to the Collinses based on a percentage of the TRICARE reimbursement paid for the prescriptions referred by the Collinses’ recruiter network. Between February and July 2015, these kickback payments to the Collinses totaled at least $45.7 million dollars.

The Collinses, in turn, paid kickbacks to the recruiters working as part of their network, including defendants Josh Morgan, Kyle Adams, and Daniel Castro, among others.

The United States has seized property and items purchased by the Collinses and others with the proceeds of the scheme. Included among these items is an 82-foot yacht; multiple luxury vehicles, including two Aston-Martins; a multimillion-dollar investment annuity; dozens of pieces of farm equipment and tractor-trailer trucks; and three pieces of Tennessee real estate.

The Collinses are the last members of the conspiracy to plead guilty. The doctors and nurse practitioner who prescribed these unnecessary prescriptions, the corporate owner of the pharmacy that filled these unneeded prescriptions, and the patient recruiters have all pleaded guilty for their roles in the conspiracy to commit healthcare fraud and admitted their roles in this fraudulent scheme.

Jimmy and Ashley Collins are scheduled to be sentenced on October 27 at 9 a.m. before U.S. District Judge Janis L. Sammartino.

The two doctors, Susan Vergot and Carl Lindblad, were previously sentenced to 24 and 28 months in custody, respectively. in a San Diego federal court for participating in the health care fraud scheme.

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Researchers Say DWC Data Shows 20,000 Annual Heat Related Injuries

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The new 93 page working paper – Temperature, Workplace Safety, and Labor Market Inequality – by researchers from the University of California, Los Angeles and Stanford University documents, for the first time, the growing safety risks of excessive heat for U.S. workers in occupations not just where the work is mostly outside but also indoors.

The researchers examined 11,146,912 confidential records of workplace injuries in California from the Department of Workers’ Compensation (DWC) over the period 2001 to 2018 combined with zip code level information on daily temperature from the same period. The data also included the medically determined cause (e.g. fall), type (e.g. strain), and body parts affected (e.g. knee) by the incident, as well as some limited demographic information including age and gender for each claim.

They found that hotter temperature significantly increases the likelihood of injury on the job. A day with high temperatures between 85 and 90 leads to a 5 to 7 percent increase in same-day injury risk, relative to a day in the 60’s. A day above 100 leads to a 10 to 15 percent increase. Causal identification relies on the premise that idiosyncratic variation in daily temperature within a given zip code-month is plausibly exogenous, and that the resulting effect on injuries is not driven by potential endogenous changes in labor inputs.

Higher temperatures also increase injuries in some industries where work typically occurs indoors. In manufacturing, for instance, a day with highs above 95 increases injury risk by approximately 7 percent relative to a day in the low 60’s. In wholesale, the effect is nearly 10 percent. They also found that claims for many injuries not typically considered heat-related rise on hotter days. These include injuries caused by falling from heights, being struck by a moving vehicle, or mishandling dangerous machinery. The increase in injuries affects a wide range of body parts, suggesting that the mechanisms may not be limited to heat-illnesses such as heat stroke or heat syncope.

The risks are “substantially larger for men versus women; for younger versus older workers; and for workers at the lower end of the income distribution.“

“These are previously undocumented facts with possibly significant policy implications, given the nearly exclusive attention to date on outdoor workers and heat illnesses: i.e. incidents that are medically coded as due to heat exposure.”

The researcher estimated that hotter temperature has caused approximately 360,000 additional injuries in California over the period 2001-2018, or roughly 20,000 per year relative to a hypothetical benchmark in which all workers experience only optimal temperatures.

“For perspective, this is roughly eleven times the number of workplace concussions, and at least nineteen times the annual number of workplace injuries the worker compensation microdata records as caused by extreme temperature.”

They estimate the socioeconomic costs of these injuries are on the order of $525 million to $875 million per year, given the costs of healthcare, lost wages and productivity, and other knock-on costs such as work disruptions and potential permanent disability.

However researchers also found evidence of significant adaptation potential, as they noted that the effect of temperature on injuries falls significantly during the study period.  For instance, the effect of a day above 90 falls by roughly a third between 2000 and 2018, and the effect of days above 100 is statistically indistinguishable from zero after 2005.  The temporal profile of heat’s effects on injuries coincides with the introduction of what was at the time the nation’s first heat safety mandate, the California Heat Illness Prevention Standard (Q3 2005), which applied only to outdoor workplaces.

“While we remain agnostic to the source of the decline in heat-related injuries, our findings are consistent more broadly with the possibility of adaptation using existing technologies.”

A new AB 1643 – California Heat Study: Advisory Committee is set to use this data as part of a roadmap to tackle hot workplace issues. The group of state agency staffers and scholars will examine persistent problems with underreported heat-related illness and injuries, as well as gaps in data collection and the financial toll on workers and businesses when temperatures rise and production falls.

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Workers Compensation National Insurers Show Strength and Profitability

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U.S. workers compensation insurers were able to underwrite profitably between 2019 and 2022 even as significant changes occurred in the nation’s workforce due to the pandemic, according to a new report by the Insurance Information Institute.

“Overall, we see a healthy and strong workers compensation system,” said NCCI’s chief actuary, Donna Glenn, FCAS, MAAA. “Premiums written have returned to pre-pandemic levels, and claims frequency has resumed a long-term average decline.”

Workers comp net written premiums improved in 2022, with an 11.2 percent increase, compared with 8.4 percent for the overall industry.

Since 2014, workers compensation insurers cumulatively saw a net combined ratio of below 100 and, since 2017, that figure has consistently stayed below 90, with a 2022 net combined ratio of 87.4 for workers compensation insurers (when including state funds, in comparison to 84.0 for private carriers only). U.S. auto, home, and business insurers, across all insurance lines, had a net combined ratio last year of 102.4, according to Triple-I’s Issues Brief.

“Commercial lines achieved lower net combined ratios than personal lines in both 2021 and 2022, and we forecast that to continue through at least 2025,” said Dale Porfilio, FCAS, MAAA, chief insurance officer, Triple-I. “Workers comp had the lowest combined ratio among major product lines in 2021 and 2022, resulting from many years of deliberate efforts by insurance carriers and their policyholders to improve workplace safety.”

Claim frequency is the main cost driver in workers comp. Due to improved workplace safety and increased use of automation, frequency has been low – averaging 3 percent declines annually over the past 20 years. After an 8.3 percent decline in 2020, frequency rebounded by exactly the same amount in 2021, reflecting the impact of the pandemic and the subsequent recovery.

From 2019 to 2021, claim frequency fell slightly (0.7 percent), reflecting rises in the Manufacturing (5.2 percent) and Miscellaneous (6.7 percent) industry groups, offset by a 12.1 percent drop in the Office and Clerical group. Manufacturing and Miscellaneous – which includes package delivery, warehousing, and transportation – are groups that have seen a great deal of new hiring, so it’s possible these increases reflect accidents related to employee inexperience and insufficient training during the pandemic. The drop in Office and Clerical claim frequency almost certainly is due to the pandemicdriven rise in remote work. NCCI estimates that claim frequency for 2022 is consistent with the long-term downward trend.

Unlike claim frequency, medical and indemnity severity have increased about 60 percent over the past two decades. In 2022, indemnity severity rose 6 percent, and medical severity was up 5 percent.

Workers compensation has benefited from a generally strong economy in recent years, most notably due to the growth in payrolls, the Issues Brief states. Private employment surpassed its pre-pandemic level in 2022 and employment growth remains faster than pre-pandemic norms, according to the U.S. Department of Labor’s Bureau of Labor Statistics.

Improved workplace safety, coupled with more employers allowing remote work arrangements, have combined to drive down the number of workers compensation insurance claims filed annually since 2021, Triple-I found. Moreover, many states have medical fee schedules, reducing medical inflation as insurers and medical providers set fixed prices for the services and products needed by injured workers.

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Owners of Bakersfield Construction Co. Face $4M Payroll Fraud Charges

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Brian Hill, 64, and Leslie Hill, 68, a husband and wife from Bakersfield, have been charged with multiple felony counts of insurance fraud and conspiracy after a Department of Insurance investigation found the couple under-reported over $4 million in employee payroll for the construction company they owned.

The Department began an investigation into Brian Hill Construction, Inc., owned by the Hills, after receiving information that the company paid an employee with a combination of check and cash, and that the cash pay was not reported to the company’s workers’ compensation carrier.

Between July 2017 and October 2019 Brian Hill Construction Inc. held a workers’ compensation insurance policy through State Compensation Insurance Fund and between October 2019 and October 2020 held a workers’ compensation insurance policy through Benchmark Insurance.

An investigation into Brian Hill Construction, Inc., revealed the company reported approximately $135,667 in employee payroll between July 2017 and October 2019 to State Compensation Insurance Fund. However, an audit by the Department revealed the business actually had over $3.6 million in employee payroll for the same time period.

The investigation also revealed Brian Hill Construction, Inc. reported approximately $9,140 in employee payroll between October 2019 and June 2020 to Benchmark Insurance, but an additional Department audit revealed the company actually had over $500,000 in employee payroll for the same time period.

Over the course of three years, Brian and Leslie Hill failed to report over $4,025,250 in employee payroll to their insurance carriers. The hiding of employee payroll resulted in the illegal reduction of workers’ compensation insurance premiums paid and $2,542,365 in premium owed to the insurance companies.

The investigation also discovered one employee of Brian Hill Construction Inc. was injured on the job and sent to a local hospital where they received minimal medical treatment. By law the employer was required to file a workers’ compensation claim, but the Hills circumvented the workers’ compensation process by paying the medical facility directly and eliminating benefits the injured worker may have been entitled to.

Brian Hill was arraigned yesterday and Leslie Hill is scheduled to be arraigned on Thursday, July 27, 2023. The Kern County District Attorney’s Office is prosecuting this case.

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