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Tag: 2024 News

Technology Industries Dominate 2024 J.P. Morgan Healthcare Conference

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Every year, thousands of bankers, venture capitalists, private equity investors, and others flock to San Francisco’s Union Square to pursue deals and meet with executives from biotech and other health care companies. And according to the story by California HealthLine, after a few years of pandemic slack, the 2024 J.P. Morgan Healthcare Conference regained its full vigor, drawing 8,304 attendees in early January to talk science, medicine, and, especially, money.

Of the 624 companies that pitched at the four-day conference, the biggest overflow crowd may have belonged to Nvidia, which unlike the others isn’t a health care company. Nvidia makes the silicon chips whose computing power, when paired with ginormous catalogs of genes, proteins, chemical sequences, and other data, will “revolutionize” drug-making, according to Kimberly Powell, the company’s vice president of health care.

Soon, she said, computers will customize drugs as “health care becomes a technology industry.” One might think that such advances could save money, but Powell’s emphasis was on their potential for wealth creation. “The world’s first trillion-dollar drug company is out there somewhere,” she dreamily opined.

Some health care systems are also hyping AI. The Mayo Clinic, for example, highlighted AI’s capacity to improve the accuracy of patient diagnoses. The nonprofit hospital system presented an electrocardiogram algorithm that can predict atrial fibrillation three months before an official diagnosis; another Mayo AI model can detect pancreatic cancer on scans earlier than a provider could, said Matthew Callstrom, chair of radiology at the Mayo Clinic in Rochester, Minnesota.

No one really knows how far – or where – AI will take health care, but Nvidia’s recently announced $100 million deal with Amgen, which has access to 500 million human genomes, made some conference attendees uneasy. If Big Pharma can discover its own drugs, “biotech will disappear,” said Sherif Hanala of Seqens, a contract drug manufacturing company, during a lunch-table chat with California Healthline and others. Others shrugged off that notion.

The first AI algorithms beat clinicians at analyzing radiological scans in 2014. But since that year, “I haven’t seen a single AI company partner with pharma and complete a phase I human clinical trial,” said Alex Zhavoronkov, founder and CEO of Insilico Medicine – one of the companies using AI to do drug development. “Biology is hard.”

Nonprofit hospitals showed off their investment appeal at the conference. Fifteen health systems representing major players across the country touted their value and the audience was intrigued: When headliners like the Mayo Clinic and the Cleveland Clinic took the stage, chairs were filled, and late arrivals crowded in the back of the room.

These hospitals, which are supposed to provide community benefits in exchange for not paying taxes, were eager to demonstrate financial stability and showcase money-making mechanisms besides patient care – they call it “revenue diversification.” PowerPoints skimmed through recent operating losses and lingered on the hospital systems’ vast cash reserves, expansion plans, and for-profit partnerships to commercialize research discoveries.

At Mass General Brigham, such research has led to the development of 36 drugs currently in clinical trials, according to the hospital’s presentation. The Boston-based health system, which has $4 billion in committed research funding, said its findings have led to the formation of more than 300 companies in the past decade.

Other nonprofit hospitals talked up institutes to draw new patients and expand into lucrative territories. Sutter Health, based in California, said it plans to add 30 facilities in attractive markets across Northern California in the next three years. It expanded to the Central Coast in October after acquiring the Sansum Clinic.

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CMS Announces Move to Innovation in Behavioral Health (IBH) Model

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On January 18, 2024, the Centers for Medicare & Medicaid Services (CMS) announced the Innovation in Behavioral Health (IBH) Model.  This model is intended to prepare practices for more advanced alternative payment models and accountable care arrangements in the future.

IBH is focused on improving quality of care and behavioral and physical health outcomes for Medicaid and Medicare populations with moderate to severe mental health conditions and substance use disorder (SUD). Medicare and Medicaid populations experience disproportionately high rates of mental health conditions and/or substance use disorders (SUD), and as a result are more likely to experience poor health outcomes and experiences, like frequent visits to the emergency department and hospitalizations, or premature death.

The IBH Model seeks to bridge the gap between behavioral and physical health; practice participants under the IBH Model will screen and assess patients for select health conditions, as well as mental health conditions and/or SUD, in community-based behavioral health practices. IBH is a state-based model, led by state Medicaid Agencies, with a goal of aligning payment between Medicaid and Medicare for integrated services.

The model works to improve care through four key program pillars:

– – Care Integration: Behavioral health practice participants will screen, assess, refer, and treat patients, as needed, for the services they require.
– – Care Management: An inter-professional care team, led by the behavioral health practice participant, will identify, and as appropriate address, the multi-faceted needs of patients and provide ongoing care management.
– – Health Equity: Behavioral health practice participants will conduct screenings for HRSNs and refer patients to appropriate community-based services. Participating practices will be required to develop a health equity plan (HEP). The HEP should stipulate how the practice participant will address disparities that impact their service populations.
– – Health Information Technology: Expansion of health IT capacity through targeted investments in inter-operability and tools (including electronic health records) will allow participants to improve quality reporting and data sharing.

CMS will release a Notice of Funding Opportunity (NOFO) in Spring 2024, and up to eight states will be selected to participate. The model will launch in Fall 2024 and run for eight years.

The Innovation in Behavioral Health (IBH) Model is designed to deliver person-centered, integrated care to Medicaid and Medicare populations with moderate to severe mental health conditions and/or substance use disorder (SUD). The practice participants in the IBH Model will be community-based behavioral health organizations and providers, including Community Mental Health Centers, opioid treatment programs, safety net providers, and public or private practices, where individuals can receive outpatient mental health and/or SUD services. These practice participants may include safety net providers who ensure that vulnerable populations are able to access care.

Practice participants will lead an inter-professional care team and be responsible for coordinating with other members of the care team to comprehensively address a patient’s care to include behavioral and physical health, and health-related social needs (HRSN) such as housing, food, and transportation.

The practice participants will conduct an initial screening and assessment, offer treatment or referrals to other care specialists and community-based resources, and monitor ongoing behavioral and physical health conditions and HRSNs. In this value-based care approach, the practice participants will be compensated based on the quality of care provided and improved patient outcomes.

IBH is a state-based model focused on community-based behavioral health practices that treat Medicaid and Medicare beneficiaries and includes both Medicaid and Medicare-aligned payment models. CMS will first issue awards to Medicaid agencies in up to eight states to implement the model. Practice participants within selected states may volunteer to participate in the Medicare payment model. The selected states will partner with their state’s agencies for mental health and/or SUD to ensure alignment in clinical policies, as well as work with at least one partnering Medicaid Managed Care Organization (MCO) or another intermediary partner, where applicable, to develop and implement the IBH Model in their state.

IBH supports behavioral health practices in delivering integrated care in outpatient settings. This person-centered approach to addressing whole-person health represents a “no wrong door” approach that prioritizes close collaboration with primary care and other physical health providers to support all aspects of a patient’s care.

The IBH Model is projected to run for eight years and includes a pre-implementation period (model years 1-3). During this period, states and practice participants will receive funding to develop and implement model activities and capacity building. During model year 1, states will conduct outreach and recruit behavioral health practice participants into the model. Practice participants will receive funding to support necessary upgrades to health IT and electronic health records, as well as practice transformation activities, and staffing to implement the model. Practice participants who elect to participate in the Medicare payment model may also be eligible for additional funding to support model activities.

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Hospital and Health System Financial Pressures are Key 2024 Issue

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In its 2022 year-end report, Kaufman and Hall noted that Merger and Acquisition (M&A) activity had regained momentum following a two-year slowdown in the wake of the Covid pandemic. This momentum continued through 2023 with 65 announced transactions, up from last year’s total of 53. Sixteen of the 65 transactions were announced in Q4.

Yesterday it published its 2023 review. One significant change was the increase in the percentage of financially distressed organizations that sought a partner in 2023.

Hospitals and health systems faced one of their most challenging years in 2022, with median operating margins staying in negative territory throughout almost the entire year. Those financial pressures emerged as a key driver of M&A activity in 2023, with financial distress cited as a factor or otherwise evident in 28% of announced transactions, compared with 15% in 2022. And there is an increasing number of larger systems citing financial distress, a change from the historical concentration of distress in smaller hospitals and health systems.

Many organizations continue to struggle, and the search for partners for these organizations is likely to continue. The struggle is quite evident here in California.

Palm Springs’ Desert Regional Medical Center is as the only Level 1 designated trauma center in the Coachella Valley. According to a report by the Desert Sun, the Desert Healthcare District Board must chart a course of immediate action for the hospital’s survival.

In 1997, the Desert Healthcare District Board voted to lease the hospital to Tenet Systems, the nationwide private hospital behemoth, for 30 years. This prepaid lease “positioned the district to meet outstanding debt obligations” and gave the hospital the chance to be part of a national health care company. Tenet currently runs the hospital while the district retains ownership of the lease as well other assets including Las Palmas Medical Plaza.

Tenet submitted a proposal to purchase Desert Regional Medical Center in 2019.

Last September Tenet proposed another 30-year lease. At the commencement of a new lease, Tenet’s terms included an initial payment of $75 million, followed by annual lease payments beginning in 2027. But a wrinkle that the district did not anticipate is the option for Tenet to purchase the hospital at the end of the lease, by making a final payment of $75 million.

With Tenet’s lease expiring in 2027, district leaders and Tenet leaders are stuck in a tug of war as two huge unknowns loom:

1) Will Tenet re-up their proposed 30-year lease? If not, who will take over the hospital?
2) Senate Bill 1953 mandates that by Jan. 1, 2030, all hospitals rebuild or retrofit and must be able to remain fully functional in the event of an earthquake. If a hospital does not make this deadline they will, under current law, be required to close their doors and cease operation – it’s estimated this will cost $222 million – so, who will foot the bill?

Structural seismic retrofits are needed at three buildings – the main hospital and additions, east tower and north wing – and nonstructural retrofits at 20 buildings at Desert Regional’s campus, according to a 2019 report from engineering firm Simpson Gumpertz & Heger Inc.

By comparison, Eisenhower Hospital, as a nonprofit, got big donations and has already completed their retrofits ahead of schedule.

Yet were Desert Regional Medical Center forced to close their doors, Eisenhower cannot absorb the valley’s medical needs and airlifting people in emergencies to Loma Linda is problematic.

The mandate to do seismic upgrades to California hospitals is not a new requirement. Senate Bill 1953 mandating the seismic upgrades of California hospitals was passed in 1994. Thirty years ago.

The district needs to provide Tenet with a proposal and give them something to work with. Tenet is the 10th largest hospital management company in the U.S., but if negotiations fail, here might be other potential service providers. It could be a hard sale at this late date and with the huge cost of the required upgrades.

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Trial Courts Lack Power to Reject “Unmanageable” PAGA Litigation

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Royalty Carpet Mills Inc., operated facilities located on Derian Avenue and the other on Dyer Road in Orange County. Jorge Luis Estrada worked at Derian.

Estrada filed a complaint against Royalty alleging various claims, including one asserting that Royalty violated Labor Code provisions requiring that it provide first and second meal periods, and one seeking PAGA penalties for various alleged Labor Code violations. Estrada and plaintiff Paulina Medina, a former Royalty employee who worked at Dyer, filed a second amended complaint that realleged Estrada’s individual claims as class claims and retained the PAGA claim from the original complaint.

Estrada, Medina, and 11 other plaintiffs then filed the operative third amended complaint. The third amended complaint alleged a total of seven class claims, one which was based on the failure to provide first and second meal periods, and one which sought PAGA penalties for various Labor Code violations, including those related to meal periods.

Several named plaintiffs moved for class certification in June 2017. The trial court certified a Dyer/Derian class composed of former nonexempt hourly workers who worked at the two facilities between December 13, 2009, and June 14, 2017. The court also certified three Dyer/Derian subclasses, including a meal period subclass to determine whether “class members were provided timely first meal periods and/or deprived of second meal periods.”

The trial court held a bench trial on plaintiffs’ claims. Plaintiffs presented “live testimony from 12 of the 13 named plaintiffs, deposition testimony from four different managers and officers of Royalty, live testimony from two of Royalty’s human resources employees, and live testimony from an expert witness.” In defense, Royalty presented testimony from two former employees and an expert witness.

After hearing this evidence, the trial court entered an order decertifying the two Dyer/Derian meal period subclasses alleging the first and second meal period violations, on the ground that there were too many individualized issues to support class treatment. In the same order, the trial court dismissed the PAGA claim seeking penalties for the alleged Dyer/Derian meal break-related violations with respect to persons other than the named plaintiffs as being unmanageable and subsequently entered judgment. Plaintiffs appealed from the decertification order and the judgment.

In the Court of Appeal, plaintiffs claimed that the trial court abused its discretion by decertifying the Dyer/Derian meal period subclasses and erred in dismissing the subclasses’ PAGA meal period claims on manageability grounds. The Court of Appeal agreed with plaintiffs on both issues.The Court of Appeal, in it’s published decision, directed the trial court to hold a new trial on both claims on remand, and added, “[a]s to both, we leave it in the court’s discretion to determine whether additional witnesses or other evidence will be allowed in light of the principles set forth in this opinion.” Estrada v. Royalty Carpet Mills, Inc. (2022) 76 Cal.App.5th 685).

The California Supreme Court granted Royalty’s petition for review to resolve the issue dividing the appellate courts: whether trial courts have inherent authority to strike a PAGA claim on manageability grounds. The Supreme Court affirmed the Court of Appeal and concluded that “trial courts lack inherent authority to strike PAGA claims on manageability grounds in the case of Estrada v. Royalty Carpet Mills, Inc. -S274340 (January 2024).

In 2003, the Legislature enacted PAGA to remedy “systemic underenforcement” of the Labor Code. Civil penalties recovered on a PAGA claim are split between the state and aggrieved employees. PAGA suits exhibit virtually none of the procedural characteristics of class actions.

The term “manageability” and its variants may be used more specifically to refer to a factor utilized in determining whether a class may be certified. This factor looks to whether issues pertaining to individual putative class members may be fairly and efficiently adjudicated.

Under federal law, manageability refers to the rule that a court consider “the likely difficulties in managing a class action” in determining whether the class action certification requirements of predominance and superiority are met.

Royalty and some amici curiae claim that trial courts have broad inherent authority to strike any type of claim, irrespective of its nature, to foster judicial economy.Contrary to Royalty’s contention “case law has recognized that the inherent authority of trial courts to dismiss claims is limited and operates in circumstances that are not present here.” The California Supreme Court explained the limits of a court’s “inherent discretionary power to dismiss claims with prejudice” in Lyons v. Wickhorst (1986) 42 Cal.3d 911,

In reaching this conclusion, the Supreme Courts emphasized that trial courts do not generally possess a broad inherent authority to dismiss claims. Nor is it appropriate for trial courts to strike PAGA claims by employing class action manageability requirements. And, while trial courts may use a vast variety of tools to efficiently manage PAGA claims, given the structure and purpose of PAGA, striking such claims due to manageability concerns – even if those claims are complex or time-intensive – is not among the tools trial courts possess.”

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New CMS Rules Targets Access to Health Records

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The Centers for Medicare & Medicaid Services (CMS) finalized the CMS Interoperability and Prior Authorization Final Rule (CMS-0057-F) today. The rule sets requirements for Medicare Advantage (MA) organizations, Medicaid and the Children’s Health Insurance Program (CHIP) fee-for-service (FFS) programs, Medicaid managed care plans, CHIP managed care entities, and issuers of Qualified Health Plans (QHPs) offered on the Federally-Facilitated Exchanges (FFEs), (collectively “impacted payers”), to improve the electronic exchange of health information and prior authorization processes for medical items and services. A fact sheet for this final rule is available. .

Together, these policies will improve prior authorization processes and reduce burden on patients, providers, and payers, resulting in approximately $15 billion of estimated savings over ten years.

The announcement noted that while prior authorization can help ensure medical care is necessary and appropriate, it can sometimes be an obstacle to necessary patient care when providers must navigate complex and widely varying payer requirements or face long waits for prior authorization decisions.

This final rule establishes requirements for certain payers to streamline the prior authorization process and complements the Medicare Advantage requirements previously finalized.

Beginning primarily in 2026, impacted payers (not including QHP issuers on the FFEs) will be required to send prior authorization decisions within 72 hours for expedited (i.e., urgent) requests and seven calendar days for standard (i.e., non-urgent) requests for medical items and services.

For some payers, this new timeframe for standard requests cuts current decision timeframes in half. The rule also requires all impacted payers to include a specific reason for denying a prior authorization request, which will help facilitate resubmission of the request or an appeal when needed. Finally, impacted payers will be required to publicly report prior authorization metrics, similar to the metrics Medicare FFS already makes available.

The rule also requires impacted payers to implement a Health Level 7 (HL7®) Fast Healthcare Interoperability Resources (FHIR®) Prior Authorization application programming interface (API), which can be used to facilitate a more efficient electronic prior authorization process between providers and payers by automating the end-to-end prior authorization process.

Medicare FFS has already implemented an electronic prior authorization API, demonstrating the efficiencies other payers could realize by implementing such an API. Together, these new requirements for the prior authorization process will reduce administrative burden on the healthcare workforce, empower clinicians to spend more time providing direct care to their patients, and prevent avoidable delays in care for patients.

CMS is also finalizing API requirements to increase health data exchange and foster a more efficient health care system for all. CMS values public input and considered the comments submitted by the public, including patients, providers, and payers, in finalizing the rule. Informed by public comments, CMS is delaying the dates for compliance with the API policies from generally January 1, 2026, to January 1, 2027.

In addition to the Prior Authorization API, beginning January 2027, impacted payers will be required to expand their current Patient Access API to include information about prior authorizations and to implement a Provider Access API that providers can use to retrieve their patients’ claims, encounter, clinical, and prior authorization data. Also informed by public comments on previous payer-to-payer data exchange policies, we are requiring impacted payers to exchange, with a patient’s permission, most of those same data using a Payer-to-Payer FHIR API when a patient moves between payers or has multiple concurrent payers.

Finally, the rule also adds a new Electronic Prior Authorization measure for eligible clinicians under the Merit-based Incentive Payment System (MIPS) Promoting Interoperability performance category and eligible hospitals and critical access hospitals (CAHs) in the Medicare Promoting Interoperability Program to report their use of payers’ Prior Authorization APIs to submit an electronic prior authorization request. Together, these policies will help to create a more efficient prior authorization process and support better access to health information and timely, high-quality care.

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Google’s Articulate Medical Intelligence Explorer (AMIE) Outperforms Doctors

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The physician-patient conversation is a cornerstone of medicine, in which skilled and intentional communication drives diagnosis, management, empathy and trust. AI systems capable of such diagnostic dialogues could increase availability, accessibility, quality and consistency of care by being useful conversational partners to clinicians and patients alike. But approximating clinicians’ considerable expertise is a significant challenge.

Recent progress in large language models (LLMs) outside the medical domain has shown that they can plan, reason, and use relevant context to hold rich conversations. However, there are many aspects of good diagnostic dialogue that are unique to the medical domain. An effective clinician takes a complete “clinical history” and asks intelligent questions that help to derive a differential diagnosis. They wield considerable skill to foster an effective relationship, provide information clearly, make joint and informed decisions with the patient, respond empathically to their emotions, and support them in the next steps of care. While LLMs can accurately perform tasks such as medical summarization or answering medical questions, there has been little work specifically aimed towards developing these kinds of conversational diagnostic capabilities.

Inspired by this challenge, Google developed Articulate Medical Intelligence Explorer (AMIE), a research AI system based on a LLM and optimized for diagnostic reasoning and conversations. It trained and evaluated AMIE along many dimensions that reflect quality in real-world clinical consultations from the perspective of both clinicians and patients. To scale AMIE across a multitude of disease conditions, specialties and scenarios,  scientists developed a novel self-play based simulated diagnostic dialogue environment with automated feedback mechanisms to enrich and accelerate its learning process. We also introduced an inference time chain-of-reasoning strategy to improve AMIE’s diagnostic accuracy and conversation quality. Finally, then  tested AMIE prospectively in real examples of multi-turn dialogue by simulating consultations with trained actors.

Researchers designed a randomized, double-blind crossover study of text-based consultations with validated patient actors interacting either with board-certified primary care physicians (PCPs) or the AI system optimized for diagnostic dialogue.  They set up the consultations in the style of an objective structured clinical examination (OSCE), a practical assessment commonly used in the real world to examine clinicians’ skills and competencies in a standardized and objective way. They We then trained AMIE on real-world datasets comprising medical reasoning, medical summarization and real-world clinical conversations.

The performance was tested in consultations with simulated patients (played by trained actors), compared to those performed by 20 real PCPs using a randomized approach. AMIE and PCPs were assessed from the perspectives of both specialist attending physicians and our simulated patients in a randomized, blinded crossover study that included 149 case scenarios from OSCE providers in Canada, the UK and India in a diverse range of specialties and diseases.

The result showed AMIE had greater diagnostic accuracy and superior performance for 28 of 32 axes from the perspective of specialist physicians, and 24 of 26 axes from the perspective of patient actors. However the research has several limitations and should be interpreted with appropriate caution.

Twenty (20) generalist clinicians were then asked to evaluate 303 challenging, real-world medical cases sourced from the New England Journal of Medicine (NEJM) ClinicoPathologic Conferences (CPCs). Each case report was read by two clinicians randomized to one of two assistive conditions: either assistance from search engines and standard medical resources, or AMIE assistance in addition to these tools. All clinicians provided a baseline, unassisted DDx prior to using the respective assistive tools.

AMIE exhibited standalone performance that exceeded that of unassisted clinicians (top-10 accuracy 59.1% vs. 33.6%, p= 0.04). Comparing the two assisted study arms, the top-10 accuracy was higher for clinicians assisted by AMIE, compared to clinicians without AMIE assistance (24.6%, p<0.01) and clinicians with search (5.45%, p=0.02). Further, clinicians assisted by AMIE arrived at more comprehensive differential lists than those without AMIE assistance.

AMIE is Google’s exploration of the “art of the possible”, a research-only system for safely exploring a vision of the future where AI systems might be better aligned with attributes of the skilled clinicians entrusted with care. It is early experimental-only work, not a product, and has several limitations that we believe merit rigorous and extensive further scientific studies in order to envision a future in which conversational, empathic and diagnostic AI systems might become safe, helpful and accessible..

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32% of Academic Physicians Plan to Leave Workforce, Fueled by Burnout

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In 2020, the Association of American Medical Colleges (AAMC) reported that 6% to 7% of the physician workforce left practice settings each year. Recent data suggest that physician turnover has increased substantially; a 2022 survey of more than 500 physicians by CHG Healthcare found that 43% of survey respondents had changed jobs over the course of the prior 2 years, including 8% who retired and 3% who left medicine to pursue nonclinical careers.

Another 2023 survey of 500 physicians by the Massachusetts Medical Society found that 27% of survey respondents indicated that they would “definitely” or “likely” leave medicine within the next 2 years, suggesting that high rates of physician turnover are likely to continue.

Prior studies have shown that burnout is associated with higher physician turnover. A cross-sectional study of 1840 health professionals (including physicians, nurses, and midwives) employed by public hospitals and rehabilitation clinics in Switzerland found a significant association between burnout and thoughts of leaving medicine. Work-life imbalance was the strongest predictor of burnout symptoms among physicians, but effort-reward mismatch was the strongest predictor for having thoughts of leaving the medical profession.

Another study looking at burnout and physician attrition in a cohort of 472 physicians at 2 Stanford University system hospitals who had completed a physician wellness survey reported that individuals who met criteria for burnout were more than twice as likely to have left the institution over the ensuing 2 years as compared with individuals who did not meet criteria for burnout4; importantly, in this study, individuals who reported moderate or greater intention to leave (ITL) the institution within the next 2 years on the baseline survey were at significantly increased risk of attrition during the ensuing 2 years compared with those who did not endorse ITL, suggesting that ITL is a significant risk factor for subsequent physician turnover.

And last December new research was published in the JAMA Network Open which addressed the question of what proportion of academic physicians intend to leave their current institution within the next 2 years, and what factors are associated with intention to leave?

In this new cross-sectional study of 18,719 academic physicians, approximately one-third reported moderate or greater intention to leave. Burnout, lack of professional fulfillment, and other personal and organizational factors were associated with intention to leave.

“These results underscore the importance of the connections between academic physicians and both institutional leadership and mission, as well as point to the need for developing initiatives with a comprehensive approach that considers burnout, professional fulfillment, and other organizational and individual level well-being factors to help prevent physician turnover.”

In California, about half, or 49.09%, of the state’s primary care needs were met in 2022, according to data from the Kaiser Family Foundation.

Dr. Scott Robertson, the President and CEO of Pacific Central Coast Health Centers, was asked if there are enough doctors to match the need of our population. “We absolutely do not,” he said. “I’ve been here for 20 years, both practicing primary care and being an administrator with Dignity Health, and during my entire time here we have not had enough.”

Dr. Robertson says, on the Central Coast, it often takes several weeks to a few months to get an initial appointment with a primary care physician. If there wasn’t a shortage, that would be one to two weeks.

The American Medical Association expects a wave of retirements as a significant portion of the physician workforce is nearing the retirement age. That’s a third of doctors in California.

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NCCI Reports Workers’ Compensation System is Strong and Healthy

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The National Council on Compensation Insurance (NCCI) recently conducted its annual survey of insurance executives on top-of-mind issues in the workers compensation (WC) industry. The survey functions as a barometer of current industry sentiment and examines future challenges and opportunities. NCCI uses this extensive input to respond to the needs of its stakeholders in the workers compensation system.

The 2023 Carrier Executive Survey includes responses from 101 executives representing 98 companies, including the largest multiline, multistate carriers; as well as many smaller, regional, and single-line workers compensation insurers.

Insurers’ top concerns include rate adequacy, the shifting workplace and workforce, medical inflation, and economic uncertainty. While these results are somewhat consistent with NCCI’s recent surveys, executives also noted the emergence of new, complex topics that they are watching closely heading into 2024. This article connects what’s top of mind for carrier executives with current and relevant insights that NCCI delivers.

NCCI’s workers compensation data shows a strong and healthy system. NCCI expects a 2023 combined ratio under 100, which would be the 10th consecutive year of underwriting profitability. Several factors give  it confidence in this assessment:

– – Claim frequency has steadily decreased for two decades. While data showed some volatility during the COVID-19 pandemic, 2022 returned to the long-term decline in claim frequency.
– – Medical severity has been moderate in recent years. Even over the last two years as inflation has climbed, price pressure on medical WC claims costs has been slow to rise. Additionally, fee schedules in most states are functioning well as a control mechanism for most categories of medical costs.
– – Wages have risen significantly since the pandemic and higher wages generally translate to higher indemnity payouts. However, because premiums are based on wages, higher indemnity costs are naturally offset by increasing premiums.
– – Strong employment and wages, declining loss frequency relative to premium, and moderate changes in claim severity all contribute to a continuation of declining loss costs.

Since 2019, workers compensation medical severity has grown at 1 percent annually. At the same time, medical indices show that price pressure is moderate, in the 2.5% to 3.5% range annually. That tells us that there are other factors in the mix offsetting overall increases in medical claim costs. The mix in medical conditions treated and the type and volume of medical services all contribute to changes in medical costs. In addition, as mentioned above, fee schedules in most states are functioning well as a control mechanism for most categories of medical costs. Projections from the Centers for Medicare & Medicaid Services (CMS) for the Personal Health Care index remain in the 2.5% to 3.5% range for 2024 through 2031.

NCCI’s Quarterly Economics Briefing – Q3 2023 indicates a shift toward a more balanced labor market, rather than a deteriorating labor market. Although employment growth has slowed, it still remains healthy, while wage growth remains elevated compared to the pre-pandemic levels, which in turn supports premium growth. The probability of a recession has diminished in the past quarter as consumer spending remains supported by strong employment levels, real income growth, further capacity for debt, and still-elevated excess savings.

NCCI pays close attention to the concerns voiced in its annual Carrier Executive Survey and through its myriad of daily interactions with carriers, regulators, and other key stakeholders. This input helps to shape its plans to bring additional value to the workers compensation system through a set of strategic initiatives:

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Arbitration Battles Now Targeting Auto Insurance UIM Claims

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There have been heated battles in courtrooms and appellate courts over a parties contractual right to arbitrate disputes. These battles are largely fought by plaintiffs lawyers seeking to avoid arbitration in favor of jury verdicts in forums such as employment law, PAGA actions, and other arenas. This month the arbitration battled was at issue again in the arena of uninsured motorist coverage which is part of most automobile insurance policies.

Kathryn Tornai had an automobile insurance policy with CSAA Insurance Exchange which provided uninsured motorist coverage of up to $300,000 per accident. On February 2, 2022, she was injured in a traffic accident with another driver. In September,Tornai settled with the driver’s insurance carrier for $25,000, his policy limits.

Tornai than made a written demand to CSAA Insurance Exchange under the policy for $275,000 – the policy limits of $300,000, less the $25,000 she had already received from the settlement with the UIM. CSAA Insurance Exchange refused to tender the $275,000 demanded, or make any offer.

She filed a lawsuit against CSAA Insurance Exchange for breach of contract and bad faith. The policy had a clause in the UM/UIM coverage endorsement, which read in part that the carrier would pay damages for bodily injury caused by the driver of an uninsured vehicle. “Determination whether an insured person is legally entitled to recover damages or the amount of damages shall be made by agreement between the insured person and us. If no agreement is reached, the decision will be made by arbitration.”

CSAA Insurance Exchange filed a motion in Superior Court to compel arbitration of her underinsured motorist claim.

The trial court denied the motion, citing Insurance Code section 11580.2 and several cases. The trial court concluded that her “claims involve different alleged wrongdoing and disputes. She alleges [in her opposition] . . . , and provides evidence demonstrating, that after she made a demand under the Policy, Defendant unreasonably failed to investigate the claim or settle the claim, Defendant has failed to make any effort to address Plaintiff’s request for payment, resolve the matter in any way, or pay any funds whatsoever, even though Plaintiff demonstrated that her medical bills and expenses amount to $30,451.98, so that she is unequivocally entitled to at least that amount.”

The Court of Appeal concluded that the denial of arbitration was error, and reversed in the published case of Tournai v. CSAA Insurance Exchange -A167666 (Decided on 12/18/23, Certified for Publication on 1/11/24).

One of the issues raised by the Plaintiff was a claim the carrier “waived” arbitration for a number of reasons. One of them relied on was Davis v. Blue Cross of Northern California (1979) 25 Cal.3d 418 where the Supreme Court concluded that a health insurance carrier had waived its right to arbitrate a dispute by deliberately failing to advise its insureds of the availability of and procedure for initiating arbitration at the time it rejected the insureds’ claims.

However, in Davis the arbitration clause was ‘buried in an obscure provision of a hospitalization agreement, such that the carrier knew the insureds would not be aware of it, and that the insureds were proceeding without legal representation. In this case the Court of Appeal concluded that none of the concerns regarding “basic fairness of the arbitration process” presented in Davis exists in this case and that none of the Plaintiff’s claims of waiver were meritorious.  

Moving then to the arbitrability of the dispute, Insurance Code Section 11580.2 requires insurers to provide coverage for bodily injury or wrongful death caused by uninsured or underinsured motorists. The California Supreme Court in Bouton v. USAA Casualty Ins. Co. (2008) 43 Cal.4th 1190 explained, “section 11580.2, subdivision (f) requires the parties to arbitrate the narrow issues of whether the insured is entitled to recover damages from the uninsured or underinsured motorist, and if so, the amount of those damages.”

As such, “an insurer’s contractual right to arbitrate the value of a UIM claim does not prevent an insured from filing suit for bad faith.” Put slightly differently, “if the insured files a lawsuit for ‘bad faith’ before resolving the UM/UIM claim, the UM/UIM claim is still subject to arbitration, even if the ‘bad faith’ action is not subject to arbitration.”

The parties here “plainly failed to reach an agreement as to the amount of damages owed, thereby triggering the requirements of section 11580.2, subdivision (f) and the terms of the policy for arbitration of that issue.” Therefore that issue must be sent to arbitration pursuant to the policy and section 11580.2, subdivision (f).

In declining to order arbitration in this case, the trial court erred. It cited a number of reasons for its ruling, but in our view, none of those reasons justified the denial of defendant’s motion to compel arbitration. The Court of Appeal reviewed those cases including was McIsaac v. Foremost Ins. Co. Grand Rapids, Michigan (2021) 64 Cal.App.5th 418 (McIsaac), which “held that an insurer was entitled to arbitration under . . . section 11580.2(f) where there was a dispute over the amount of damages owed to the plaintiff, even though the plaintiff had brought a bad faith claim against the insurer”

“The quoted language plainly supports defendant’s right to compel arbitration of the amount of UIM damages.”

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18 Years of Undisclosed Conflicts of Interest Taint DSM-5 Mandated by LC 3202.3

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The Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition (DSM-5), is the 2013 update to the Diagnostic and Statistical Manual of Mental Disorders, the taxonomic and diagnostic tool published by the American Psychiatric Association (APA). In 2022, a revised version (DSM-5-TR) was published.

In the United States, the DSM serves as the principal authority for psychiatric diagnoses. In 1993 Labor Code 3208.3 was amended to require that a compensable psychiatric injury must be diagnosed “using the terminology and criteria of the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders, Third Edition-Revised, or the terminology and diagnostic criteria of other psychiatric diagnostic manuals generally approved and accepted nationally by practitioners in the field of psychiatric medicine.” Pursuant to L.C. 3202.3, diagnosis in California industrial injuries must now be made using DSM-V-TR which is the latest edition published by the APA.

Financial conflicts of interest are a pernicious problem across medicine, including psychiatry. A study, published in 2006, found that there were strong financial ties between the pharmaceutical industry and DSM-IV panel members in charge of developing and modifying the diagnostic criteria for mental illness. These connections were notably strong in diagnostic areas that had pharmacological treatment as the first line intervention. In 2007, the American Psychiatric Association (which produces the DSM) developed a conflict of interest policy.

In 2012, a year before DSM-5 was published, the same authors replicated their earlier study. Unfortunately, the American Psychiatric Association’s new disclosure policy had not been accompanied by a reduction in financial conflicts of interest. In fact, on three quarters of the panels a majority of members had financial ties to the pharmaceutical industry. Once again, the panels with the most conflicts of interest were concentrated among mental disorders where drugs are the first line of treatment. Perhaps this is not surprising: transparency alone won’t prevent academics or researchers from having financial relationships with industry, and more robust measures are needed to protect the integrity of the DSM’s revision process.

And this January 2024 a new study was published in the BMJ examined the extent and type of conflicts of interest of panel and task force members of the recently published text revision of DSM-5, the Diagnostic and Statistical Manual of Mental Disorders, fifth edition, text revision (DSM-5-TR).

In this newest study, 168 individuals were identified who served as either panel or task force members of the DSM-5-TR. 92 met the inclusion criteria of being a physician who was based in the US and therefore could be included in Open Payments. Of these 92 individuals, 55 (60%) received payments from the industry. Collectively, these panel members received a total of $14.2 million.

The authors of the study concluded that “Conflicts of interest among panel members of DSM-5-TR were prevalent. Because of the enormous influence of diagnostic and treatment guidelines, the standards for participation on a guideline development panel should be high. A rebuttable presumption should exist for the Diagnostic and Statistical Manual of Mental Disorders to prohibit conflicts of interest among its panel and task force members. When no independent individuals with the requisite expertise are available, individuals with associations to industry could consult to the panels, but they should not have decision making authority on revisions or the inclusion of new disorders.”

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