Friday, April 17, 2015

No Religion For True Religion

An industry friend reminded me the other day that exclusive remedy, and indeed all of workers' compensation, came about, not to protect the injured worker, but to protect the employers. 

And that is absolutely true.

When workers' compensation was first being bandied about in the political circles of the United States, labor unions wanted nothing to do with it. They did not want to relinquish big damages for possible big injuries. In the Industrial Age, when work comp came about, the prospect of some seriously debilitating injury was more prevalent.

People didn't stop working unless they absolutely could not work, and if they absolutely could not work then it really was serious.

Remember back then there was no health or medical insurance. There were no alternative social safety systems. If a worker lost a leg he lost his job, and his life, and so did his family.

But when a worker did succeed against an employer, that employer went out of business.

This would have disastrous repercussions, not only for employer which would go out of business and the owners/shareholders would lose their investment, but the injured workers' family would still end up on the streets, desperate and destitute. Hundreds of other workers would lose their jobs, government would lose tax revenue - the implications were exponential.

Still there are business owners that don't want to participate in workers' compensation, that don't believe in social order, or the Rule of Law (and I'm not talking about Texas where participation is voluntary because that IS the law there, and consequently businesses, their employees and communities - just look at West, Texas - are subject to the aforementioned risks to business and community).

California Insurance Commissioner David Jones announced yesterday that the Department of Insurance in conjunction with the Los Angeles District Attorney's office was pursuing charges against subcontractors for True Religion Jeans who proved, once again, that it is employer fraud that is responsible for most fraudulent activity.

Sung Hyun Kim, 57, former chief executive officer of Meriko Inc., and her sister Caroline Choi, 59, CEO of SF Apparel Inc., were arrested Wednesday and charged with 18 felony counts of workers' compensation insurance fraud and tax evasion. Their certified public accountant, Jae Kim, 71, was also arrested Wednesday and is charged with 18 felonies.

The three are accused of conspiring since 2007 to underreporting $78.5 million in payroll to State Compensation Insurance Fund, Tower Insurance, Star Insurance Co., Granite State Insurance Co., Insurance Co. of the West, National Liability and Fire Insurance Co and Cypress Insurance Co.

Jones said during a press conference on Thursday that Kim and Choi employed as many as 600 workers at their factory on South Santa Fe Avenue in the Los Angeles suburb of Vernon, but reported to carriers that they had as few as 80 employees.

They got tripped up when, in 2012, State Fund identified discrepancies between payroll reports it received from Meriko and SF Apparel and payroll reports the companies filed with the Employment Development Department. An EDD investigation uncovered evidence that many employees were being paid under the table through a bank account that was never disclosed to the department or to carriers.

While True Religion was not accused of any wrong doing, this is a blow to the brand's reputation, which is based on fair employment practices and working with vendors who do the same. Jones was quick to state that True Religion was fully cooperative - sure, why wouldn't they be?

But they are hypocrites deep down - if they really did have a concern for their workers and those of their contractors they would have been much more proactive in detecting this fraud. Nope, they get no compassion from me because we all know what they REALLY were concerned about was how cheaply they could get their overpriced jeans produced.

So while workers' compensation perhaps isn't all that it's cracked up to be, it is better than what it replaced, and still there are scoundrels that abuse labor, abuse society, all for their own greed.

Frankly this is no different than the devastating Rana Plaza building fire in Bangladesh in 2013 - sure people didn't die as a consequence of this fraud, but it is just as despicable in my mind because even in this modern age there are people who don't value humans, don't value the law, don't value society.

In the end, governments in the United States are formed to "promote the General Welfare" (Preamble to the Constitution). Any act must support the public welfare. We may not agree on whether or not work comp does this well, or if it could be done better, but in the least workers' compensation accomplishes the mission if the laws are followed.

Bail is set at $700,000 for Sung Hyun Kim, who faces up to 28 years in state prison. Bail is $430,000 for Choi, who faces up to 15 years in prison. Kim faces 22 years in prison and his bail is set at $520,000. 

That's too little punishment, too late.
Here's my advice - if you, as a business owner, don't like to pay for workers' compensation, then go operate in Bangladesh. When you violate the labor laws there they just put you to death.

Thursday, April 16, 2015

Super-D-Duper

Super-de-duper.

I like that phrase because it makes people smile.

I got hooked on "super-d-duper" watching Sponge Bob Square Pants when my children were little. That cartoon program was revolutionary in the sense that Bugs Bunny was when I was growing up. The slap stick is decidedly childish, but adult humor is subtly interwoven. Pay attention and you'll find political satire, contemporary comedy, and just downright funny adult stuff.

Sponge Bob Square Pants did an episode about workers' compensation entitled The Splinter, and the only reason, I'm convinced, that it did not draw the ire of the industry like the article series by ProPublica, or Texas Tribune, or OSHA's report is because there is no humor in those reports - they are stark vignettes that hit nerves sharply in those professionals who really do care and who really are trying to make a positive difference in people's lives.

But Sponge Bob's "The Splinter" was just as critical, if nor more bitingly, than these more recent publication. Because the criticism is hidden in satire, though, most wouldn't see the critique.

I'm not sure Sponge Bob, or any other character in the series, ever really says "super-d-duper" but it seems like a phrase that he would utter with his characteristically goofy laugh.

Super-d-duper is an unwitting powerful phrase that uncovers the happiness that all of us want to feel.

At Mom's memory care facility I see how Alzheimer's destroys a person's sense of humor and life. The long, drawn out faces of despair reflect acknowledgment and frustration that the mind no longer works the way it used to.

These people know something of the past. They know that they used to feel. They know that there are things that would make them smile.

But they can't access those emotions anymore.

There's something about Alzheimer's that inhibits those mental capacities.

For instance, Juanita is a resident at Mom's memory care facility. She has the distinction of being a prolific world traveler, and she has a twin sister in her home town of Minneapolis. But she is alone most days in the dining room. Mom doesn't dislike her, but doesn't like to be around her either. Most people I talk to at the facility don't like her. Juanita is negative most of the time, and at times can be downright nasty - that's part of the Alzheimer's legacy.

But Juanita does have emotions and does want to feel happy; her disease gets in the way.

Except when I ask how she's doing. She'll reply curtly, "fine" and I'll tell her, in a sort of Sponge Bob sort of voice, "Well Juanita, you're looking super-d-duper to me today!"

Her smile upon hearing that is as sincere and happy as if there were no brain impairing disease.

Jim was a Navy Seal Commander, and led a very successful business executive life after retiring from the Navy. His face is mostly blank. I can't imagine the torture that must go on from time to time as he tries to communicate, or remember, or do any of the most natural mental tasks we all take for granted.

But he lights up when he's told he's looking super-d-duper.

I've written about Sargeant Major Tommy Smith before. Super-d-duper always exacted a huge toothy grin and a salute.

The phrase works wonders in nearly every setting. 

Yesterday I was traveling to Gulfport, MS for the Mississippi Workers' Compensation Educational Conference. Flying out of LAX, I give myself 3 hours to commute from my house to departure time. It's only 60 miles.

For whatever reason, all southbound arteries to LAX were jammed. Even the parking garage I use was so packed with vehicles that I ended up leaving my truck literally in the middle of the parking entrance with the gate up.

Consequently I missed my flight to Houston, which is a prerequisite to getting to Gulfport. There was another flight but I would miss my connection, and there were no later connections into Gulfport. Frustrated and exhausted I opted to stay in Houston and catch the first flight into Gulfport the next morning.

At the Houston Airport Marriott restaurant that evening, still frustrated, and hungry, the nice waitress greeted me with the inevitable, "how are you today?" Nearly out of habit I replied, "super-d-duper!"

She laughed. I felt better.

Workers' compensation is serious business. We're in an industry that is tasked with taking care of people that are down on their luck through no fault of their own (perhaps sometimes a little bit of stupidity, but when does that get in the way of humanitarianism?). There are issues of medical care, drug monitoring, changes to legal standards for compensation, reimbursement schedules, and of course exclusive remedy.

When things work well, the splinter gets removed, Sponge Bob returns to flipping burgers and Mr. Crabs is a happy employer.

Everything ends up super-d-duper.

So, when you talk to an injured worker and they're sounding down, tell them that you hope they have a "super-d-duper day." When dealing with your client and they ask how you are doing, exclaim "super-d-duper!" When a colleague tells you that they aren't feeling so happy, tell them, "well you're looking super-d-duper to me!"

It's ridiculously simplistic and of course isn't applicable all of the time. But often enough all that stands in the way of a normal day in our world and a really good day, whether its dealing with workers' compensation, traffic, travel rearrangements, or any other little frustration in life, is a simple "super-d-duper."

Wednesday, April 15, 2015

It's An Exclusive Relationship


The timing can't be better.

Tomorrow I will be in Biloxi, MS for a presentation on exclusive remedy, or more precisely whether the concept of exclusive remedy has eroded, at the Mississippi Workers' Compensation Educational Association conference.

Exclusive remedy is the linch pin concept to workers' compensation. Without exclusive remedy workers' compensation makes no sense. I dare to say it is the single most important element to the viability of work comp.

In recent years we have seen challenges to exclusive remedy come about in various permutations. In Texas that state's Supreme Court recently extended the concept to the employer's insurance company, essentially removing "bad faith" from work comp. We have legislative attempts that would allow employers to opt out of work comp in Oklahoma and Tennessee, with various alterations of the concept. Immigrant labor, without legal residency status, are still bound by work comp's exclusive remedy, but can't get subsequent employment after a work injury. In Florida a trial court found the system could no longer be exclusive because of inadequate benefits.

There are many examples of challenges to exclusive remedy.

The Oklahoma Supreme Court last week, in a narrowly divided opinion, refused to extend exclusive remedy to Wilson Paving & Excavating because Steven Broom wasn't its "employee."

Wilson contracted with temporary staffing company Labor Ready to get workers for a renovation project at Sand Springs Memorial Stadium at Charles Page High School.

Wilson's job was digging trenches and laying pipe for a storm drainage system being installed under the school's athletic field. Labor Ready sent Broom to work on this project.

Broom began laying pipe inside a trench that was approximately 5- to 6-feet deep, 4- to 5-feet wide and 50 feet long. After he had been on the job about four hours, the trench collapsed.

Broom was covered with dirt up to his waist, and then the trench collapsed a second time, burying him up to his neck.

Emergency personnel removed Broom from the trench after it was safely reinforced. He was transported to the hospital where he was treated for serious injuries, including rib fractures, collapsed lungs, pulmonary contusions, blood within the chest, fluid around the spleen and kidney, and a left kidney laceration.

Broom received workers' compensation benefits from Labor Ready for his injuries, and he filed a third-party action against Wilson in the District Court of Tulsa County.

Wilson had workers' compensation coverage through American Interstate Insurance Co. in effect at the time of Broom's accident. AIIC had obtained a declaratory judgment in 2009 establishing AIIC owed no coverage to Broom.

Thus, Wilson never paid any benefits to Broom, and it didn't participate in the comp proceedings for Broom's claim against Labor Ready.

Wilson's commercial general liability carrier, Mid-Continent Casualty Co., also sought a declaratory judgment as to whether it had a duty to defend Wilson from Broom's lawsuit.

The GCL policy that Mid-Continent provided Wilson provided that a "temporary worker" – defined as "a person who is furnished to you to substitute for a permanent 'employee' on leave or to meet seasonal or short-term workload conditions" – was not an "employee."

Broom was found to be a "temporary worker" at every stage of the litigation, so under the plain language of the policy, the exclusion for injuries to Wilson's "employees" was inapplicable.

The Supreme Court noted that Broom was a direct employee of Labor Ready and that he had recovered workers' compensation benefits through Labor Ready.

While Oklahoma law makes the workers' compensation system the exclusive remedy for an employee to recover from his direct employer for an on-the-job injury, the state Supreme Court has said civil immunity will not extend to a party standing in the position of a special master of a loaned servant if that party is not liable to the worker in comp.

Wilson had a workers' compensation insurance policy with the American Interstate Insurance Co. in effect at the time of Broom's accident, but AIIC obtained a declaratory judgment in 2009 establishing AIIC owed no coverage to Broom.

Thus, Wilson never paid any benefits to Broom, and it didn't participate in the comp proceedings for Broom's claim against Labor Ready.

In addition, as part of its contract with Labor Ready, Wilson expressly agreed to waive any immunity provided by the workers' compensation laws as a condition of using Labor Ready's services.

Mid-Continent won at the trial level and the first level of appeal, both victories based on different language and interpretations of the policy.

But the Supreme Court concluded that the policy did provide coverage because Broom met the policy definition of a "temporary worker."

Dissenting justices focused on a provision about earth movement in the policy.

"The policy's plain language excludes coverage for any movement of land, earth, or mud," they argued. As the cause of those events is not limited by the policy, they insisted the court "cannot in turn choose to limit those causes."

The case is complex because it involves insurance contract interpretation and some arcane legal concepts, and arguably is limited to the specific facts of the case, particularly the insurance contract language.

But I think the ruling supports my impression that exclusive remedy isn't dead despite all the challenges.

Exclusive remedy is based on a relationship, legally defined, between the employer and employee. Any extension of that concept is dependent on controlling law, contractual language and intent of the parties.

So long as workers' compensation exists, exclusive remedy will continue to be the single defining concept that underlies the theory of work injury protections.

Tuesday, April 14, 2015

It's Mandatory

A recent California Workers' Compensation Appeals Board panel decision may cause a bit of tumult in the already contentious forum of Independent Medical Review.

In an order granting reconsideration by applicant Diane Garibay-Jimenez, Commissioners Rick Dietrich, Deidra Lowe and Cristine Gondak found that not only is it the employer/administrator's sole responsibility to make sure that IMR is provided with all relevant medical records (in a timely fashion) but that failure to do so means that an IMR reviewer, and thus the Administrative Director under Labor Code section 4610.6, acts without or in excess its powers.

Garibay-Jimenez had an admitted injury to her cervical spine and elbows. The treating doctor sought authorization for surgery: left ulnar nerve decompression.

Utilization review denied the request and that denial was upheld by IMR.

IMR did not get a copy of reports issued by the Agreed Medical Examiner that allegedly support the treatment recommendation.

The applicant filed an appeal of the decision of the Administrative Director (IMR decisions get formally adopted by the AD as, essentially, an "order") which the Workers' Compensation Judge denied.

The WCJ held that applicant failed to establish a statutory basis for the appeal because she did not provide the Agreed Medical Examiner reports to IMR, and that it would be unreasonable to make the defendant pay for another IMR. Specifically the WCJ noted that the applicant "provided various medical records" but "inadvertently left out submitting the AME reports, notwithstanding they were in their possession at the time the other records were forwarded to IMR."

By the time applicant noted the omission and mailed the AME reports to Maximus an IMR denial had already issued.

The WCAB panel reversed noting that it is the employer's statutory, mandatory obligation to provide all relevant records under Labor Code section 4610.5(1). This is supported by Administrative Director's Rule 9792.10.5, again using the word "shall" relative to supplying records.

Consequently the WCAB said there were grounds for the appeal:

"By failing to provide the IMR reviewer with all material and relevant medical records, the determination of the IMR organization, and thus the Administrative Director, was an act without or in excess of its powers," the Board ruled. "The IMR process can only work if the parties meet their obligations to provide the necessary medical records. The WCJ's determination that it would be unfair to defendant to pay for another IMR appeal fails to recognize that it is defendant, not applicant, who is mandated to provide the medical records... unfairness to defendant is not a valid basis upon which to make a determination, where defendant has not met its statutory obligation to serve medical records."

The WCAB also chastised the WCJ for failing to formalize the record on review:

"The preparation of an adequate record is mandatory. When a case is submitted for decision to the WCJ, it is the responsibility of the parties and the WCJ to ensure that the record of the proceedings contains, at a minimum, the issues submitted for decision, the admitted evidence and the stipulations of the parties.."

The case goes back to IMR now for another bite at the apple, so to speak.

While a panel decision is not citable as binding precedence, it is demonstrative of the WCAB's current thinking on immediate issues. Certainly the WCAB has had issues with IMR in the past...

The latest issue with IMR involved the Maximus spreadsheet reflecting a lot of missing medical records. Some blame Maximus, some blame counsel, some say it's not a problem.

And the Division of Workers' Compensation is mulling electronic records submissions.

Regardless, the point is that IMR can't work unless it is procedurally sufficient. IMR can't be procedurally sufficient if mandatory statutory and regulatory processes are not followed.

I've railed against the heavy procedural burden that has overtaken California workers' compensation in the past, but if we're going to have procedures, then they have to be followed as written, particularly when procedure is mandatory (as in "shall").

Monday, April 13, 2015

Too Close for Corvalis

Flying is a constant process of learning. No two flights are the same.

I often tell others that learning to fly should be a requirement for executives and professionals because of very common elements: planning, decision making and communication. Fail at any of these elements in aviation and ... you die (and perhaps your passengers).

Review any aviation accident, and more often than not there is no single element that doomed the flight, but a combination, or series of events that, when combined, create the ultimate failure.

I came close to personal observation of these aviation truths on Friday when making a "routine" business flight to Northern California.
Above the clouds, looking for traffic.

My plane is based at Oxnard Airport (KOXR). It is a quiet airport. Camarillo just five miles east is far busier with many more operations per day than Oxnard. Usually, there is no more than one other aircraft in staging awaiting departure clearance, and more often than not it's just 41M.

Friday I arrived in the run up area and there was a Cessna Skywagon awaiting departure at the hold short line, I heard another Cessna, a 172, on ground control getting taxi clearance to the runway, there was a new Corvalis (a sexy, fast Cessna that formerly was the Columbia Aircraft line - controllers still call it a "Columbia").

And there were several aircraft in the traffic pattern doing touch-and-goes, and other practice maneuvers.

In other words, KOXR was uncharacteristically busy, particularly for a Friday morning, and there was a lot of traffic on the ground and in the air.

The Corvalis had obtained an instrument flight rules clearance for a short flight to Van Nuys (she received her clearance on ground frequency while I was still tuned in), and I was instructed to get in line behind her.

Clue number one that this was not a "routine" flight - the Oxnard controllers seemed a bit rushed, a little anxious and perhaps not quite paying attention to details, what with all of the aircraft in the air, and on the ground ready to launch.

I mentally noted this, but it did not register as anything to be alarmed about; my anxiety (at it's normally heightened level due to the fact of aviating) was not unusually elevated.

After the first couple of Cessnas were released, the Corvalis was cleared for take off. 41M was next and I received an immediate take off clearance, "no delay" as one of the planes doing touch-and-goes was on final.

I had advised Tower that my flight was west-bound. But as I was on my take off roll Tower advised, "41 Mike, right downwind departure approved."

KOXR controllers are used to me departing to the east for my bi-weekly missions to see Mom.

Clue number two that something with ATC was amiss.

As 41M left the ground and I retracted the landing gear I mic'd up KOXR Tower , in between other aircraft calls, and advised, "Tower, there may have been some confusion - I'm departing to the west today."

The controller jumped right in, "Sorry about that - 6641M cleared to depart to the west."

At 2,000 feet KOXR airspace jurisdiction ends. I was flying visual flight rules because there was no adverse weather en route (kind of like the entire California winter...). I almost always, however, get Flight Following which is when Air Traffic Control assigns a unique transponder code so they can track your flight to the destination and provide traffic alerts en-route along with other safety communications.

Just above 2,000 feet I switched radio frequencies to Point Mugu Approach on 124.7. That frequency was likewise uncharacteristically busy, and every time I tried to mic in to get Flight Following services I would get trumped by another aircraft or by the controller. Communications were occurring lightning fast and aircraft that had already established communications with ATC get priority.

The Corvalis was on an IFR plan, and I noted had been getting vector assignments by Mugu Approach, which is normal practice. I tried to keep a mental picture of where that aircraft would be in relation to 41M.

In aviation this is called "situational awareness."

6641M has a traffic "radar" system aboard, called a Ryan TCAD (Traffic and Collision Avoidance Device). It is a invaluable piece of equipment that has saved my bacon on innumerable occasions when other aircraft get too close and ATC fails to call it out. I rely on the Ryan TCAD in busy airspace, particularly when I travel around the Los Angeles basin. Traffic picked up on the TCAD is graphically displayed on 51 Mike's Garmin 530 multi-function navigation/communication computer.

During the climb out I zoomed in the display of the Garmin 530 so I could "see" traffic near me.

Sometimes, though, an aircraft may not display on the TCAD enhanced 530 even if they are "squawking" a transponder code.

As I was climbing out west-bound through 3,500 feet, trying to get a call into Mugu, I heard the Corvalis pilot exclaim, "Mugu, there's an aircraft heading straight for us!"

I knew that was me. The Corvalis was not showing on the Ryan TCAD. I did not see any aircraft at my twelve o'clock. Fortunately my habit is to keep the landing light on when climbing out and the Corvalis pilot obviously saw that bright light ... getting far bigger and brighter than she would have preferred to observe.

Keep in mind that when an aircraft is flying IFR it is ATC's job to keep other aircraft away from it.

Mugu Approached excitedly called up with rapid speech, "Columbia [tail number], traffic alert, twelve o'clock, 3,700 feet, appears to be climbing, I'm not talking to him."

Just as Mugu said "I'm not talking," I saw out of the corner of my eye the Corvalis pass right underneath 41M - WAY too close for comfort, for anyone involved.

I think the controller was stunned into silence - for the first time in those precious climb out minutes there was a break in communications on 124.7.

I chimed in: "Mugu, Bonanza 6641 Mike - I'm the aircraft the Corvalis saw."

The controller responded, "6641 Mike, did you have a visual?"

"No visual, Mugu," I responded, "and no aircraft showed on my radar."

Shortly thereafter, the Corvalis received a vector instruction from Mugu and she headed off to Van Nuys, and I got a squawk code for my trip to Chico, CA.

No harm, no foul. But it took the better part of that 2 hour, 20 minute flight for me to settle down, and I'm sure it took the Corvalis pilot's nerves some time to settle too. Likely the controller also had to take a break.

There's risk in everything we do. Life is, by definition, risky. We do everything we can to manage risk, and this requires planning, decision making and communication.

Like aviation, workers' compensation administration is a team effort. There are people that calculate the risks, and what it will take to sufficiently manage those risks. Others sell the product that the people who do the calculating come up with. Still others are responsible for dolling out money and services when a risk does occur. And there are teams of other people who deliver medical and legal services and goods, among other tasks.

The tight coordination of all team members, including the employer and injured worker, generally results in what we would consider a good outcome - good outcome of course is a relative concept depending upon the nature and severity of the risk that occurred.

Plans are created, decisions are made, and communication of those decisions to the people that need to know - all necessary elements of a successful workers' compensation program.

Sometimes, though, certain members of the team get overwhelmed, or there is too much "traffic" to manage and consequently things go awry.

And sometimes those things don't show up on our radar in time.

I recall when I was still practicing work comp law a "disaster" file that I inherited. It seemed that everything in the file resulted in the wrong result. There were mis-communications, there were no plans, and the decisions that were made were a consequence of these errors. The file had been through multiple adjusters, attorneys, doctors - you name it, seems like all team members had changed several times through the course of the file.

The file was a simple back claim that had mushroomed into a skin and contents claim - every step of the claim resulted in something worse occurring. It wasn't all the claimant's fault, nor just the adjuster's fault, or the doctors'... it was everyone's fault. Everyone of the claim had failed in at least one of the three necessary elements.

The case had been through a dozen adjusters, as many physicians and therapists, probably nearly as many attorneys, and on...

After my review the adjuster on the file at the time authorized me to come up with a plan, which I thereafter prepared and communicated to everyone that needed to know. The plan was approved, and we began the execution of the plan - everyone had a part in the decision making process, including the claimant.

And after 6 months it seemed that the plan was working. The claimant was getting the services that we all knew were necessary to bring the injured worker back to some reasonable function (and maybe even back to work!), and it was clear that we were heading toward the light in the tunnel.

Then sight of the "Corvalis" was lost ... the file changed adjusters, again, and this time the adjuster didn't have the time, or take the time, to understand this huge, disaster of a file.

Communications stopped. Ergo, decision making became paralyzed, and the plan was not followed.

Shortly thereafter I left that law firm to start WorkCompCentral.

And a few years after that I visited the old firm to catch up with my friends, and to no surprise on my part, learned that the disaster claim was still ongoing, and had run amok once again. There simply was no continuity in claim handling.

I don't know whatever happened to that claim ultimately. I'm sure by now there's been some resolutions - after all it's been over 15 years.

Or maybe not.

Like Friday's flight, the signs were there. I was fortunate to have picked up on those signals during my short tenure on the file. Unfortunately, the rest of the team didn't see that plane coming straight at them.

And it costs everyone dearly.

Friday, April 10, 2015

Money in Pills

We all know how big drugs are in workers' compensation, heck in general health drugs are big.

Really big.

The various alphabet soup organizations that spit out statistics and make policy recommendations remind us regularly that pharmaceuticals represent not only some of the single largest expenditures in health care, but that they also represent the single most inflating factor.

That the companies that are supposed to manage all of the drug dispensation in this country keep merging into billion dollar Goliaths (and with some pharmacies getting into the prescription management business themselves - sort of a fox watching the hen house type of situation) speaks volumes of the size of the market, and the profit margins.

United HealthGroup’s subsidiary, OptumRx, announced on March 30 that it would acquire PBM Catamaran Corp. in a deal worth about $12.8 billion making it the third largest PBM according to market analysts.

The deal is subject to shareholder approval and there is a pending class action lawsuit filed by a shareholder alleging that the company didn't negotiate a fair deal.

According to Vishnu Lekrah, an analyst for the financial publication Morningstar, Express Scripts processes about 1.3 billion pharmacy claims per year, while CVS Caremark processes about 1.2 billion per year. Combined, OptumRx and Catamaran process about 1 billion.

CompPharma President and prolific blogger on all things managed care, Joe Paduda, told WorkCompCentral reporter Joey Berlin that the industry has seen considerable consolidation during the past several years, which should help drive down the prices for medications.

The pace of consolidations in the PBM industry is blazingly fast too - Catamaran itself just picked up a smaller PBM, HealthCare Solutions, announcing that it had closed a deal to acquire HCS for $405 million in cash.

And pharmacy chain Rite Aid announced Feb. 11 that it had entered into an agreement to purchase the PBM EnvisionRx for $2 billion.

Whether you sell them, or regulate them, it seems no matter which way one looks at it, there's money in them pills.

Thursday, April 9, 2015

Don't Dispute - Resolve!


Bobby Stokes, a defense attorney in Texas with the Flahive, Ogden & Latson, uttered what I consider an immutable truth in his presentation Insurance Council of Texas' Spring Seminar yesterday.

Speaking to claims adjusters and defense attorneys, Stokes said, "The focus of our job, our mission, is to provide benefits to people. We can't do that unless we peel away those that aren't proper. That's what the dispute resolution process is for."

I couldn't have said it better.

When I was a young lawyer my managing partner and mentor, Rene Folse, would explain to me over and over again that we, speaking about the defense attorney, were the gate keepers. Our job was to ensure that the people that were entitled to benefits and supposed to get benefits, got them.

And those that were not supposed to get benefits, according to The Law, didn't.

Sometimes that mission gets confused and the dispute resolution process gets used to "punish" or obtain retribution. And sometimes it is used as a club, to wear down or beat up a party or position, or as an economic tool.

We've all seen cases where the injured worker seeks "justice" when he or she feels wrongly treated by the employer (not necessarily the claims administrator).

And we've seen cases where the claims administrator seeks some advantage by forcing a case into the dispute resolution system.

These things occur across all state lines and in every jurisdiction - it's part of living in a "civilized" society. We're supposed to resolve disputes via civilized procedures - we commonly call this "court" though in workers' compensation most jurisdictions use an administrative process that is loosely based on the court system, albeit with much less formality in process and procedure.

The reasons for such informality is because work comp is a benefit delivery system, as noted by Stokes. The job is to provide benefits. When benefits are not provided then the process for determining whether or not benefits are owed and due goes to the dispute resolution process.

What I have seen over the past 30 or so years that I've been involved in work comp, however, is an increase in procedures in the dispute resolution process, certainly in California but in other states as well. In fact Jane Stone, a defense attorney on the same panel as I at the ICT seminar used an illustration we often use in the Golden State, pointing out that the Texas "book" now is much more thick and dense than 10 or 15 years ago.

Back in "the good ol' days" attorneys in California were up in arms when the Division introduced the multi-page mandatory settlement conference statement that had to be completed before anyone conference with the judge.

That was nothing.

Now the procedural morass that confronts the parties seems to create more focus on form over substance. It seems the parties are more engaged today in winning on procedure than getting to the substantive issues.

There are only a handful of substantive issues in work comp - it's designed that way to eliminate disputes. So dispute resolution in work comp should not be complicated, nor should it take up much time in the life of a claim.

What we have seen over and over again, however, is that litigated claims make up the vast majority of expenses - by a wide margin - and a good part of that I believe is the increase in procedural litigation.

I'm not putting blame or fault on anyone party, constituency, demographic, etc. It is what it is - this is the system we work in, so we are obliged to play "by the rules."

But Stokes is right - the dispute resolution process in workers' compensation claims is to ensure that the people that are supposed to get the benefits of the system in accordance with the law in fact get them, and those that aren't supposed to get them don't.

It's not supposed to be used as a cost control system.

If we remember that mission then I would be quite willing to bet that overall system efficiency, and ergo expense, would be less, and there'd be more injured workers off the rolls and back to work more quickly, even with all the procedure.