Tag: 2024 News

All California counties have a mandatory duty to provide medical care for their indigent residents.

After years of managing a medical center for this purpose, the Alameda County Board of Supervisors (Board of Supervisors) determined that transferring governance of the center to a hospital authority would “improve the efficiency, effectiveness, and economy of the community health services provided” and would be “the best way to fulfill its commitment to the medically indigent, special needs, and general populations of” the county.

The Board of Supervisors sought the legislative authorization to do so. In 1996 the Legislature enacted Health and Safety Code, section 101850 which authorized the establishment of defendant Alameda Health System (AHS) as a “separate public agency” (Health & Saf. Code, § 101850, subd. (a)(2)(C); see id., subd. (a)(2)(D)) “strictly and exclusively dedicated to the management, administration, and control of the medical center.”

Plaintiffs worked at Highland Hospital, a facility operated by AHS. Tamelin Stone was a medical assistant and Amanda Kunwar was a licensed vocational nurse. In their wage and hour suit against AHS, plaintiffs alleged these positions were subject to requirements of the Labor Code and wage orders, in particular Industrial Wage Commission (IWC) wage order No. 5-2001 (Cal. Code Regs., tit. 8, § 11050).

The operative complaint alleged that AHS frequently denied or discouraged the taking of meal and rest breaks and “automatically deducted ½ hour from each workday” even when meal periods were not taken.

AHS demurred on the ground that it was a public entity not subject to suit for the Labor Code violations asserted. The demurrer was sustained without leave to amend.

The Court of Appeal reversed in part, reasoning that construing the enabling statute, rather than the Labor Code provisions themselves, the court discerned no legislative intent to exempt AHS from the meal and rest period and payroll requirements underlying plaintiffs’ first three causes of action. (Stone v. Alameda Health System (2023) 88 Cal.App.5th 84, 93-94 (Stone).)

The California Supreme Court reversed in Stone v. Alameda Health System -S279137 (August 2024).

The Labor Code and wage order impose meal and rest break obligations on “employers,” and, under the relevant wage order, an “employer” must be a “person as defined in Section 18 of the Labor Code.” (Wage Order No. 5, subd. 2(H).) Accordingly, section 18’s definition of the term “person” is central to resolving the issues here.

However the Supreme Court went on to say “While section 18’s definition of ‘person’ is central to our interpretation of the relevant Labor Code and wage order provisions, this definition by itself is not dispositive.”

Wage Order No. 5, which covers hospital workers, states that, unless specifically noted otherwise, “the provisions of this order shall not apply to any employees directly employed by the State or any political subdivision thereof, including any city, county, or special district.” (Wage Order No. 5, subd. 1(C).) The plain language of the governing wage order thus expressly excludes public employers from most of the wage and hour obligations it places on private employers, including meal and rest break obligations.

“Relevant history of the statutes and wage orders also supports a conclusion that the Legislature did not intend for meal and rest break requirements to apply to public employers.”

“Plaintiffs largely concede that the Labor Code provisions at issue are generally not applicable to public employers. Their primary argument is that the provisions apply to AHS because AHS is not a public entity.”

The enabling statute repeatedly describes AHS as a public agency. In a subdivision devoted to definitions, it states that – Hospital Authority means the separate public agency established pursuant to the enabling legislation.

“Accordingly, as a public employer, AHS is not a ‘person’ subject to liability for the meal and rest break and associated payroll records violations alleged in plaintiffs’ complaint.” In addition “based on the statutory text, legislative history, and public policy, we conclude public entity employers are not subject to PAGA suits for civil penalties.”

The operator of a Reedley lab, who was indicted in November 2023, faces additional charges of conspiracy and wire fraud after a federal grand jury returned a 12-count superseding indictment on August 15.

Jia Bei Zhu, 62, a citizen of China, was previously indicted for distributing adulterated and misbranded COVID-19 test kits in violation of the federal Food, Drug, and Cosmetic Act and making false statements to authorities about his identity and involvement with the biolabs.

The superseding indictment also charges Zhu’s romantic and business partner, Zhaoyan Wang, 38, a citizen of China, who operated the biolabs Universal Meditech Inc. (UMI) and Prestige Biotech Inc. (PBI) in Fresno and Reedley along with Zhu. UMI and PBI distributed COVID-19, pregnancy, and other types of test kits.

According to court documents, from August 2020 through March 2023, Zhu and Wang conspired to defraud buyers of UMI and PBI’s COVID-19 test kits. They imported hundreds of thousands of COVID-19 test kits from Ai De Ltd., which was a company in China that they controlled, and falsely represented to the buyers that the test kits were made in the United States. They illegally imported the COVID-19 test kits, which they were not approved to import, by falsely declaring them as pregnancy test kits, which they were approved to import.

Zhu and Wang also falsely represented to the buyers that UMI and PBI could make up to 100,000 COVID-19 test kits per week in the United States and that the test kits were made in connection with other labs that were certified by the Centers for Disease Control and Prevention. Finally, they falsely represented to the buyers that the test kits were approved by the Food and Drug Administration (FDA). Zhu and Wang made over $1.7 million through their fraud.

When buyers requested to inspect UMI and PBI’s facilities in Fresno and Reedley, Zhu and Wang denied them access and fabricated reasons for the denial. The fabricated reasons included that the facilities were undergoing construction and renovation, and that proprietary and confidential information and technology was inside. In reality, however, they did not want the buyers to know that UMI and PBI were obtaining the COVID-19 test kits from China.

Zhu is currently detained in custody pending his federal trial. His next status conference is scheduled for Sept. 11, 2024. Wang is not in custody.

If convicted, Zhu and Wang each face maximum statutory penalties of 20 years in prison for the conspiracy and wire fraud charges, and an additional three years in prison for the distribution of adulterated and misbranded medical device charges. Zhu also faces another five years in prison for the false statements charge. Any sentences, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations. Zhu and Wang are presumed innocent until and unless proven guilty beyond a reasonable doubt.

This case is the product of an investigation by the Federal Bureau of Investigation and the FDA Office of Criminal Investigations. Assistant U.S. Attorneys Arelis Clemente, Joseph Barton, and Henry Carbajal III are prosecuting the case.

Current law establishes the Office of Health Care Affordability (OHCA) in the Department of Health Care Access and Information (HCAI), which is responsible for analyzing the health care market for cost trends and drivers of spending, developing data-informed policies for lowering health care costs for consumers and purchasers, creating a state strategy for controlling the cost of health care and ensuring affordability for consumers and purchasers, and enforcing cost targets.

Current law requires a health care entity to provide OHCA with written notice of agreements or transactions that will occur on or after April 1, 2024, at least 90 days prior to entering into an agreement to do either of the following: sell, transfer, lease, exchange, option, encumber, convey, or otherwise dispose of a material amount of its assets to one or more entities; or,transfer control, responsibility, or governance of a material amount of the assets or operations of the health care entity to one or more entities.

Healthcare groups, unions and hospitals are weighing in on a proposed bill in California, AB-3129, that would strengthen review of private equity deals in healthcare. California Attorney General Rob Bonta and Assembly Speaker Pro Tempore Jim Wood introduced the bill in February. It remains pending in the state Legislature.

According to the author, Private Equity acquisitions in health care have exploded in the past decade. From 2013 to 2016, PE firms acquired 355 physician practices. In the four years that followed, PE acquired 578 additional practices and has poured nearly $1 trillion into nearly 8,000 health care transactions during the past decade.

More than 90% of PE consolidations fall below the $101 million threshold that triggers an antitrust review by the Federal Trade Commission and the U.S. Justice Department. The author states that emerging data shows these acquisitions demand attention and increased regulatory oversight to ensure that these transactions are in the public interest.

These PE firms aim to secure high returns on their investments, as much as 20% in just three to five years, by making them more lucrative, which can conflict with the goal of delivering affordable, accessible, high- value health care.

The authors claim that studies “consistently show that PE ownership in the health care industry has resulted in higher health care costs, poor quality and less access to care. The author concludes that transparency and scrutiny of these deals is needed because without proper oversight and regulation, these practices will continue and patients and consumers are likely to experience anticompetitive effects.

The authors cite a 2020 Journal of American Medicine article, “Private Equity Acquisitions of Physician Medical Groups Across Specialties,” that notes that PE has started to play a role in this consolidation in recent years. These firms typically invest in businesses by taking a majority stake with the goal of increasing the value of the business and potentially selling it at a profit. One study found that PE firms acquired 355 physician practices (1,426 sites and 5,714 physicians) from 2013 to 2016.

If passed, the bill would require private equity groups and hedge funds to notify the attorney general and obtain their written consent before a transaction with a healthcare facility, provider or provider group. It would also reinforce the existing prohibition on private equity groups and hedge funds interfering with the professional judgment of physicians, psychiatrists, or dentists in making healthcare decisions.

The California Hospital Association opposes the bill, saying it would add costs to the state and reduce healthcare access. “Unfortunately, the recently proposed amendments do not resolve CHA’s concerns and create new questions,” the group wrote in an Aug. 9 letter to the Senate Appropriations Committee. The letter states that the amendments do not remove hospitals from the bill and “go beyond private equity groups and hedge funds by imposing a new AG review process on nonprofit hospitals.”

The California Medical Association supports provisions of the bill that maintain the autonomy and integrity of the patient-physician relationship in medical decision-making.

The association wrote to lawmakers in support, stating: “Given the dangerous consequences PE has on cost, quality and access to care for all Californians, CMA respectfully requests that the bill move forward to ensure appropriate review of PE transactions and protect the patient-physician relationship against private equity in the healthcare delivery system.”

Other groups supporting the legislation include the California Academy of Family Physicians, California Dental Association, California Nurses Association, California Physicians Alliance and California Labor Federation. Other groups opposing the legislation include American Investment Council, Association of Dental Support Organizations and the California Chamber of Commerce.

Chronic musculoskeletal (MSK) pain affects one in three individuals worldwide. MSK pain is a leading cause of work-related disability and productivity impairment, broadly impacting all industry sectors. Productivity impairment can occur through presenteeism (i.e. decreased work performance due to pain) and absenteeism (i.e. missing working hours), and can ultimately lead to early retirement, all imposing a strain to the workforce.

MSK pain-related productivity impairment drives tremendous economic impact at the organizational and societal levels. Total costs of MSK pain-related productivity loss represent up to $335 billion annual spent, outweighing the direct impact of healthcare expenditure.

Current guidelines recommend exercise-based physical therapy combined with education and behavioral interventions as a mainstay treatment for chronic MSK pain. However, insufficient healthcare facilities and professionals, the loss of work hours and travel expenses associated with attending in-person physical therapy sessions, leave many patients with suboptimal or no care. Digital interventions have arisen as a solution to increase access, promoting higher engagement, while driving clinically significant outcomes.

Additionally, evidence suggests that MSK digital interventions are more affordable than conventional in-person rehabilitation.Independently of care delivery mode (digital or in-person), most studies focused on cost-effectiveness from a societal perspective.To date, no study has explored the potential economic impact of digital interventions from an employer perspective.

For these reasons researchers decided to investigate the impact of a DCP in promoting savings associated with recovery of productivity impairment in employees with chronic MSK pain. As a secondary objective, to explore potential savings in different industry sectors. The Study – Recovering work productivity in a population with chronic musculoskeletal pain: unveiling the value and cost-savings of a digital care program – was just published in the Journal of Occupational and Environmental Medicine.

The DCP, developed according to current guidelines,consisted of home-based exercise, education, and cognitive behavioral therapy (CBT) over up to 12 weeks. During enrollment, each participant selected the physical therapist (PT) who supervised the intervention. During the onboarding video call, the PT performed a clinical assessment and prescribed a tailored program.

Exercise sessions were performed at the patient’s convenience (recommended 3 times/week) using an FDA-listed class II medical device composed of motion trackers, a dedicated tablet with a mobile app and a cloud-based portal. The tablet displayed guided exercise sessions through videos with real-time audio and visual biofeedback provided by the motion trackers. Motion data were stored in the cloud-based portal accessible by the assigned PT to asynchronously monitor and adjust the program as needed.

Patient education was provided through a smartphone app in the form of short written articles, focusing on the pathophysiology, pain reconceptualization, active coping skills, the role of exercise, and fear-avoidance behaviors.A CBT program based on mindfulness, acceptance, commitment therapy, and empathy-focused therapy was delivered through email in the form of interactive and audio modules. Patient and PT communication was fostered through a built-in secure chat within the smartphone app available on-demand.

From 11,361 patients screened for study eligibility, 5032 employees from 50 U.S. states started the program. Significant improvements in productivity impairment were observed across all industries, yielding median cumulative savings from $151 (95%CI 128;174) to $294 (95%CI 286;303) per participant at treatment-end. Twelve-months projections estimated median savings of $2916 (95%CI 2861;2972). Additionally, significant improvements in non-work-related daily activities were observed.

These savings, estimated from real-world data, disclosed the underlying burden of presenteeism, which was the major responsible for overall productivity loss. The observed results advocate for the use of a DCP to promote productivity recovery, and to improve quality of life in non-work-related activities, consequently supporting employers in maintaining a competitive workforce, while attaining significant savings.

John’s Grill is “a historic, family-owned, landmark restaurant located in the heart of downtown San Francisco.” Its business, like many others, was heavily impacted by the COVID-19 pandemic and related state and local public health orders.

For example, between March 2020 and September 2020, indoor dining – “the lifeblood of John’s Grill’s business” – was prohibited. After September 2020, indoor dining was limited to 25 percent of restaurant capacity. As a result of these restrictions, “John’s Grill suffered substantial financial losses and had to let 54 workers go.”

Moreover, even absent these restrictions, John’s Grill alleges it “would have had to close and suspend its operations due to the worsening pandemic-level presence of the Coronavirus in, on, and around the Insured Premises.”

John’s Grill sought compensation for its losses from its property insurer, Sentinel Insurance Company, Ltd. Sentinel denied coverage on various grounds, including that the loss or damage claimed by John’s Grill did not fall within the insurance policy’s “Limited Fungi, Bacteria or Virus Coverage” endorsement.

The Limited Fungi, Bacteria or Virus Coverage endorsemdent generally excludes coverage for any virus-related loss or damage that the policy would otherwise provide, but it extends coverage for virus-related loss or damage if the virus was the result of certain specified causes of loss, including windstorms, water damage, vandalism, and explosion. The validity of this specified cause of loss limitation is the focus of the parties’ dispute.

John’s Grill acknowledged it cannot meet this limitation, but it contends the limitation is unenforceable because it renders the policy’s promise of virus-related coverage illusory. John’s Grill alleged in is lawsuit that when “physical droplets containing COVID-19 land on or otherwise attach to surfaces, [the virus] renders those surfaces and the immediate surrounding area unusable because there is substantial risk of people getting sick, transmitting infection to others, and possibly dying as a result of touching those surfaces.”

In the trial court, Sentinel successfully demurred to John’s Grill’s operative complaint for damages and other relief.

The Court of Appeal agreed with John’s Grill. It held that the promise of coverage was illusory because John’s Grill had no realistic prospect of benefiting from the virus-related coverage as written. (John’s Grill, Inc. v. The Hartford Financial Services Group, Inc. (2022) 86 Cal.App.5th 1195, 1224.) It therefore invalidated the specified cause of loss limitation and allowed John’s Grill’s claims for virus-related losses or damage to proceed. (Id. at p. 1212.)

The California Supreme Court reversed in it’s John’s Grill, Inc. v. The Hartford Financial Services Group , Inc., Opinion -S278481 (August 2024).

It concluded the Court of Appeal erred by declining to enforce the specified cause of loss limitation under the circumstances here. “The terms of the Limited Fungi, Bacteria or Virus Coverage endorsement are clear and unambiguous. It provides virus-related coverage, but only if the virus results from certain specified causes of loss. In accordance with long-settled principles of contract interpretation, the plain meaning of the policy governs. Because John’s Grill admits that it cannot satisfy the specified cause of loss limitation, it has no claim for coverage under the policy.”

“John’s Grill cannot escape this conclusion by citing the so-called illusory coverage doctrine. This court has never recognized an illusory coverage doctrine as such. The doctrine as articulated by John’s Grill does not appear in our precedents. But even assuming some version of the doctrine may exist under California law, we conclude that an insured must make a foundational showing that it had a reasonable expectation that the policy would cover the insured’s claimed loss or damage. Such a reasonable expectation of coverage is necessary under any assumed version of the doctrine.”

“Here, however, John’s Grill has not shown it had a reasonable expectation of coverage under the policy for its pandemic-related losses. It has therefore failed to establish that the policy created the illusion of coverage that rendered any contrary policy language unenforceable. Moreover, even setting aside this hurdle, and accepting John’s Grill’s articulation of the doctrine, it still cannot demonstrate that the policy’s promised coverage was illusory.”

“Even with the specified cause of loss limitation, the policy offered John’s Grill a realistic prospect for virus-related coverage. Because the Court of Appeal held otherwise, we reverse and remand for further proceedings.”