Wednesday, November 27, 2013

It's A Holiday Tradition

Thanksgiving Eve.

And I'm taking the day off.

Okay, not exactly. I'm writing this blog post and I'll review emails and likely answer a few.

I might even make some business decisions.

But for the most part I'm taking it easy, or as easy as my hyperactivity will allow.

My daughter came home from college this past weekend for the holiday. My son will be home this afternoon assuming my plane and flying skills are up to the task.

And then we'll probably have a couple beers or some wine, have a spaghetti dinner to prime our stomachs for the festivities tomorrow, and otherwise get some rest so that we can take care of preparations for the Thanksgiving feast.

A lot of families and individuals don't get this luxury. Many don't have relatives to hang with for the holiday. Some are not fortunate enough to even have a place they can call home.

Some might be fending off injury. Others, like my dad, may be wishing for one more day - or not.

Still, there is the tradition. And I think it is a grand tradition.

I get anxious in November. Sales get slow. The weather gets cool (so long as the Santa Ana winds aren't blowing). And then there's gift shopping.

My spouse and I mutually promise every year not to get each other gifts.

And every year we breach that promise. Sometimes in just small ways, other times in big ways.

I guess that's part of the tradition too.

Then there's workers' compensation - commerce and the possibility of work injury doesn't stop just because there's a holiday. Restaurant workers will be serving up food to those folks who don't have a family to go to. Retail clerks will be ringing up sales at those stores that have decided to trump "Black Friday."

Most of us though will relish the time off, watch some football (speaking of work injury), and probably eat too much starchy food.

Because we can.

Because it's tradition.

Because the entire nation pretty much takes a nap for a couple of days.

Then December starts and in between parties, shopping and some family anxiety situations, the economy chugs forward to close out the year.

So here's a shameless plug and I hope you'll forgive me for "content marketing."

This next Friday, December 6, will be our second Holiday Education and Awards Event. Last year we thought it would be great to combine some education with some holiday cheer and came up with this afternoon into evening deal and we had a great time, so we're doing it again, hoping it to be a tradition.

We're holding it at the LAX Radisson because if anyone wants to attend from out of the area it's a snap to get to, and room rates for those of us who enjoy the spirits of the season are very, very reasonable.

We'll be discussing CT claims and extraterritorial jurisdiction, what we can expect out of SB 863 impact in 2014, and probably most interestingly, what's going to happen with lien claims pending the Angelotti injunction and related law suits, all for three continuing education credits.

I'll bring my ukulele to lead everyone in the WorkCompCentral song, we're going to recognize some remarkable people who did remarkable things in workers' compensation this past year, we're going to eat some great food, listen to some great jazz, and otherwise have a great time.

I think you should come, and if you tell the account representative when you call that you heard about the event from this blog you'll get a special deal.

I hope some of you can make it - and if not then that's okay too.

Because I'm thankful that each and every one of you have encouraged me to write about workers' compensation every day.

Tuesday, November 26, 2013

No Other Explanation Necessary

Workers' compensation is all about politics and politics is about money.

In the eyes of lawmakers faced with difficult budget issues and declining tax revenues, second injury funds and other workers' compensation related safe deposit boxes are low hanging fruit that are just too tempting not to pick, despite the intended longer term social purposes of such funds.

So they raid them and then hope that someone, somewhere, doesn't tell them to stop.

Kentucky lawmakers got their wish when that state's supreme court ruled that the state didn't have to return $32 million taken from the Benefit Reserve Fund over the course of a difficult 10 year fiscal period in time.

In the 2000-2002 biennium budget, the governor and legislators appropriated $5 million from the Benefit Reserve Fund for general state purposes. In the 2000-2002 and 2002-2004 budgets, the Legislature and governor made two additional transfers, of $1.7 million and $1.648 million, from the Benefit Reserve Fund to the state's Mines and Minerals Fund.

By 2010, according to the KWCFC director of fiscal operations, the state had taken a total of $32,781,000 from the Benefit Reserve Fund.

The money in the Benefit Reserve Fund is drawn from assessments against workers' compensation premiums paid by private Kentucky employers, and a tax paid by coal-mining firms that amounts to $19 million annually. In 2002, the KWCFC had to increase premium assessment rates from 9% to 11.5% to raise enough revenue to pay the cost of its claim liabilities in some years after the state depleted its reserves. (The rate has now fallen to around 6%.)

The money is used to pay benefits for injured workers who had preexisting work-related disabilities when they suffer a subsequent injury.

A group of Kentucky businesses sued to recover the money and they won at the trial level, which agreed with the arguments of Haydon Bridge Co., the Greater Louisville Auto Dealers Association, the Kentucky Automobile Dealers Association, M&M Cartage Co., the Springfield Laundry 85 Dry Cleaners and Usher Transport, which contended that the state's raid on the Benefit Reserve Fund was an unconstitutional diversion of private funds.

The case made its way to the Supreme Court which agreed with the trial judge, and remanded the matter back down the judicial chain to decide relief.

The trial court then issued an injunction barring the state from making any future transfers of money from the Benefit Reserve Fund to the general fund, or to any other state agency, and also ordered "retroactive injunctive relief" in the form of a judgment ordering the state to return all money it had taken from the Benefit Reserve Fund between 2000 and 2010.

The court further restricted the state from taking money from the Coal Workers' Pneumoconiosis Fund, a separate fund maintained by Kentucky Workers' Compensation Funding Commission that covers black lung benefits for Kentucky coal workers who were last exposed on or after Dec. 12, 1996. The pneumoconiosis fund relies on assessments on the workers' compensation premiums of coal producers and by assessments on coal production.

The Supreme Court didn't like the relief ordered and said that the state can't be ordered to return money it had already spent.

Writing for the court, Justice Lisabeth Hughes Abramson explained that the concept of sovereign immunity "is an indisputable limitation on the power of the judiciary" and that "if the sovereign has not waived immunity or consented to suit an injunction is foreclosed in most circumstances."

Consequently while a federal court may grant prospective injunctive relief against a state officer to compel compliance with federal law, a state court cannot compel a state officer to comply with state law.

The Supreme Court reasoned that the injunction compelling the state to repay the Benefit Reserve Fund was effectively an award for "monetary relief that can only be satisfied by draws on a state's treasury," and thus it ran violated the state's sovereign immunity.

And the injunction was contrary to the separation-of-powers doctrine since it is "exceedingly clear that the state treasury is solely under the control of the legislative branch," and "we are without authority to invade the province of the General Assembly by ordering that funds be drawn from the general fund and deposited to another governmental account."

Left untouched was the order that the state can not transfer any money in the future from the Benefit Reserve Fund to the general fund.

According to reports, as of the end of October the KWCFC had $365.3 million on hand. The permanent injunction should prevent the General Assembly from touching that money in the future.

The Benefit Reserve Fund's outstanding liabilities as of September were estimated to have a present-day value of around $850 million, which officials estimate is about a half a billion short of meeting its liabilities.

Politics, money and workers' compensation. There's really no other explanation necessary for why things are the way they are.

Monday, November 25, 2013

Immigration, Thanksgiving & Comp

Immigration reform has been sidelined by the Affordable Care Act, Sequestration, and other congressional befuddlement and partisan fighting (and even infighting) in politics and the media, but there's no question that something will be done to change immigration laws sometime in the near future.

As we go into Thanksgiving week, where we celebrate the blessing of the harvest (i.e. hard work providing sustenance for living), it is particularly poignant that this tradition was brought to this country by immigrants (our forefathers) dating back as early as the 1600s.

The work of immigrants tilling the land, harvesting its riches.

They weren't illegal immigrants back then because there weren't too many laws regarding immigration.

And they weren't undocumented immigrants because they had documents from the mother country allowing them to traverse the world.

They were just immigrants seeking a better life than was available at the mother country and willing to work hard and sacrifice in order to make a new reality (okay there were some property disputes along the way with the native indians...).

Immigration and the rights of immigrant workers has been a workers' compensation issue for some time and one issue that seems to touch some emotions is whether or not undocumented workers, aka illegal immigrants, are entitled to workers' compensation benefits, and if so, what and how much.

The Iowa Supreme Court recently ruled that an undocumented worker is eligible to receive workers' compensation benefits bringing the state in line with the vast majority of states that recognize a worker's right to assert a comp claim regardless of his or her immigration status.

The case involved Pascuala Jimenez who legally entered the United States in 1991 with a visa that permitted her to stay for 10 years. She settled in West Liberty, Iowa.

Jimenez started working for Staff Management, a temporary employment agency, in 2001, the same year her visa expired. Staff Management sent her to work for Proctor & Gamble at its Iowa City factory.

I won't go into the details of her injury - suffice to say Jimenez experienced what was determined to be a compensable hernia injury, and then an exacerbation of that injury over the course of a couple years,

Jimenez underwent surgery in November 2007 and returned to work without restrictions, but she was unable to perform all of her job duties because of her pain.

Less than a month later, Staff Management terminated Jimenez because, the company said, it had discovered she did not have authorization to work in the United States.

The parties dispute why Jimenez was terminated as you might imagine - those arguments are largely irrelevant to whether or not a) an injury occurred, b) whether that injury was industrial, and c) whether Jimenez was entitled to workers' compensation benefits.

The bottom line is that Jimenez filed for benefits in 2009 when a second surgery was deemed necessary. At that time Staff Management argued that Jimenez was ineligible for benefits under the Iowa Workers’ Compensation Act because she was an undocumented worker and that the Iowa Workers' Compensation Act was superseded by the federal federal Immigration Reform and Control Act.

Staff Management lost all the way up the appellate chain.

Eventually the Supreme Court, in a decision by Justice David Wiggins, concluded that the Iowa Workers' Compensation Act had to include an undocumented worker in its definition of a covered "employee" since the act did not specifically list an undocumented worker as someone who would be excluded from coverage.

Wiggins also rejected Staff Management's argument that the IRCA should override Iowa's comp laws.

The IRCA makes it unlawful for employers to hire undocumented workers, or to knowingly continue to employ workers who become unauthorized.

Thus, Wiggins said, it was illegal for Staff Management to employ Jimenez. But, he said this did not mean that Staff Management's employment contract with Jimenez was illegal.

"The goal of the IRCA was to inhibit employment of undocumented workers and to punish the employers who offered jobs to these workers," does not to diminish the labor protection available to workers under state law, Wiggins explained. 

Since Iowa law requires a contract of service between the employer and employee for the employee to be covered by the Iowa Workers' Compensation Act, Wiggins reasoned that declaring an agreement between an undocumented worker and an employer invalid would "undermine the IRCA by encouraging employers to hire undocumented workers because the employers would not be liable under the Iowa Workers' Compensation Act for any injuries those workers sustained."

He added that it would also "undermine the purpose of the Iowa Workers’ Compensation Act to make statutory compensation available to employees when the employees sustain injuries as a result of the hazards of the business."

Thus, Wiggins said, public policy is served by recognizing a contract between an employer and an undocumented worker for purposes of coverage under the Iowa Workers' Compensation Act.

Wiggins went on to say that the payment of benefits to undocumented workers under the Iowa comp scheme did not undermine the IRCA because the receipt of benefits as compensation for a disability caused by a work-related injury does not provide an incentive for workers to work illegally, but merely serves to make an injured worker whole. 

Iowa reached the correct decision. To have ruled otherwise would permit employers to unscrupulously circumvent concepts of basic human dignity and social obligations - what we now celebrate as our harvest in modern Thanksgiving rituals.

It does not matter where one comes from - we have determined long ago that if one provides the service of labor to another there is a social obligation to ensure protection against the consequences of injury incurred in the course of such service.

For that I give thanks...

Friday, November 22, 2013

Maybe It's Not Reasonable And Necessary

One of the big debates concerning California reform is whether changes to Utilization Review process to incorporate the subsequent Independent Medial Review is working.

Skeptics have pointed out the surge in IMR requests when the law mandated that all UR denials are subject to IMR regardless of date of injury or service.

When that happened the IMR company, Maximus Federal Services, saw a huge increase in business.

And the blame game started.

Some blamed the applicant attorneys who are alleged to appeal every single UR denial, despite validity and accuracy, because there is no disincentive to do so and/or they are trying to make a statement.

Others blamed the carriers and administrators for using UR too much and forcing IMR in situation when they should just approve the procedure and payment.

Still others blamed the doctors for requesting procedures without adequate documentation or support.

But I hear from representatives of the various groups involved in the controversy that they want the system to work.

Applicant attorneys tell me that it is destructive to their clients to go through the time and effort for an IMR review, stating that they just want necessary and appropriate care for their clients.

Carriers and administrators tell me that they are just following the law, that sometimes some treatment requests have gone through UR and IMR when the economics didn't justify it but that otherwise their concern is to provide reasonable treatment that complies with the Medical Treatment Utilization Schedule.

Doctors likewise say that all they want to do is get their patients the treatment they think is reasonably necessary.

Some UR denials occur because of a lack of documentation. Some are because procedures fall outside the MTUS. Still others don't meet regulatory or legal requirements.

It seems to me, though, that all of this misses the reality that about one quarter of all UR determinations are overturned by IMR, which is a ratio consistent with what is experienced in the general health sector.

What this means is that what is occurring in workers' compensation, though of greater volume that originally predicted, is mirroring the behavior of the general health market which is mostly Medicare and Medicaid.

So I have to wonder whether IMR is really broken? Perhaps it really IS working. Perhaps all of this attention and complaining is for naught and all of us are just a little shell shocked because we're not used to what is going on.

The thought when IMR was introduced was that there in fact would be a period of high volume, and some discontent with the system, but that the noise would quiet once people adjusted and got used to the system.

I know that there is research pending on IMR utilization and results, and likely there will be more research. IMR drivers will be identified, trends will be noted, suggestions will be made - all of this will help us understand how to best utilize the process and/or navigate the process.

So, I'm wondering if there really is anything to be upset about at this point. Perhaps we really don't have enough information. Perhaps we're panicking because this is a new process to which we haven't adjusted.

When we really get down to it, the problem doesn't stem from UR, or IMR, Maximus or the Administration. The problem doesn't reside with any single, individual, or faction within the system.

The problem is that workers' compensation at the level that UR and IMR operate is an adversarial system.

This means that people fight.

When people fight it costs money.

I think that IMR can work if people will work together. We all have differences of opinion as to what is reasonable and what is necessary.

That's why there are guidelines, rules and regulations - to put some sort of framework around the nebulous terms "reasonable and necessary."

This is supposed to reduce the adversity and increase compliance.

I have a strong suspicion that if one really closely inspects what is going on with UR and IMR the underlying cause for such disputes is because someone somewhere along the path of treatment request failed to follow a guideline, rule or regulation.

When the researchers publish their works we'll find out. In the meantime I've decided I'm not going to panic. We need to make clear, precise, and well informed decisions. At this point our collective decision making capabilities are clouded by uninformed emotion.

Thursday, November 21, 2013

It's My Pleasure

I never really thought about just getting it done, whatever IT happens to be. That has been the driving force of my personality forever. Just get it done. Once it is done, then I don't have to worry or think about IT.

Many people seem to have some blockage towards just getting it done. There always seems to be either an excuse, or a deviation or distraction. Rather than just doing it, some need time to ruminate, think, pause, or whatever the process is.

And then it doesn't get done.

Bruce Wilkinson was the lunch time speaker at the National Workers' Compensation & Disability Conference yesterday. He's a safety guy turned public speaker and his message to us was that workers' compensation is too managed - there is very little leadership - and as a consequence IT doesn't get done.

Management presumes that someone or something requires control and direction. People have to be managed, systems have to be managed, outcomes have to be managed.

Management worries about details, is concerned with processes. The old saying that you can't manage what you don't measure is tell-tale of this mentality.

Leadership is about empowerment. Leadership is doing. An effective leader doesn't tell someone what and when to do it. An effective leader DOES it and shows that it can be done.

And if it can't be done, then a leader will take the hit, get back up, admit mistake ... and try again in a different way.

We in workers' compensation are very good at telling people what to do, when to do it, how to do it, what it will cost, when it will be paid for, etc. etc.

We manage, in other words.

No wonder there is so much failure in workers' compensation.

When we get down to the bottom line, we're all just talk and no walk.

The center of the workers' compensation universe is the injured worker. Without people getting injured at work and a system for dealing with the consequences our jobs would not exist.

But we take the wrong approach to our jobs. We have been trained deeply to make and follow rules. It is ingrained in us time after time that we must measure, compare and measure again.

We tell injured workers when they can file claims, who they can see for treatment, how long they are off work, how much indemnity they will receive and we gather all sorts of data about claims and injuries to help us...

We tell doctors what treatment they will use, how much we will pay for it, and what information we want to help us ...

We gather statistics about frequency and severity, and acquire data and apply it to determine how much an employer is going to pay, and all of this data is used to help us...

All of this to help us ... manage.

We do a great job of managing and the result is abysmal.

Wilkinson put it best when he told the audience that workers' compensation is a people business. We are in the business of dealing with human beings with thoughts, emotions, feelings, weaknesses, desires, hopes.

Emotions are a critical part of workers' compensation claims and we do a terrible job of recognizing this fact and dealing with it. Instead it is much easier to "manage" a claim rather than reach out and "lead" an injured worker and the team surrounding that person to a successful outcome.

People need and love inspiration. The human character is to look to others and see that it can be done.

When Wilkinson was speaking I was reminded of dear Mom back at her home, with her dementia, and how Dad had "managed" her for so long. It wasn't until Dad went into the hospital recently that I realized that Dad had "managed" her right into disability.

Dad put on a good show. He would ask her what she wanted for lunch, and then tell her what she was going to eat. He would ask her where she wanted to go for entertainment and then tell her that they were going to a movie. He would ask her if she wanted to go for a walk and then tell her that she was going for a walk. Mom couldn't just get up out of her chair, Dad had to be there and help her do it correctly so she wouldn't fall.

Dad lovingly managed every aspect of Mom. In his mind he was helping her.

In her mind, though, she was disabled.

When Mom was liberated from this management all of a sudden her dementia seemed less severe. It took a couple of days, but when I showed Mom how to order off the menu herself, that's what she did.

When I helped her understand how to get up out of the chair every time successfully (don't look down, look up because the body always goes where the eyes are looking) that's what she did without further assistance.

Walking and getting exercise wasn't objectionable anymore, and she started asking her care giver to take her for a walk and she began enjoying her daily exercise regimen. She's waking up earlier and with more energy.

She still has dementia - she can't remember my wife's name and repetitively asks the same question.

But the difference is that her level of functioning has increased dramatically.

Because she isn't managed.

Leadership is hard and takes much more initial effort than management. We deal with people and they need to be lead to success.

Wilkinson raised a point that touched on one of my particular peeves - the response of "no problem" when a vendor or service provider is praised or thanked.

The term "no problem" is hugely negative. First, you're telling the customer "no" right off the bat! Second, you are stating there was a "problem" when there may have never been any.

The correct response is, "my pleasure." It should be our pleasure to do our jobs competently, effectively, efficiently, and for the purpose of leading an individual to success.

Make it your pleasure too.

Wednesday, November 20, 2013

Vegas, People, Networking

Annual migration to Las Vegas began Monday for Tuesday preparations to open the National Workers' Compensation and Disability Conference today, Wednesday.

There is an impressive line up of speakers, and an interesting content agenda of mostly claims related sessions.

But what impresses me is the total volume of people that show up to network. Sometimes we forget how many people the workers' compensation industry requires to get the job done, and how many people the industry supports through both claims and employment.

I criticize workers' compensation in this blog quite a bit. Criticism is easy! It's not that difficult to pick a topic, tear it apart with some oblique analysis, and point out the deficiencies and defects.

And indeed sometimes the volume of people in work comp come at the price of efficiency and good work. However, systems as massive and complex as workers' compensation require a lot of people to work.

Work comp is a people business. We don't make things, though we do seem to buy a lot of things (marketed as increasing efficiencies and decreasing defects...). Networking is paramount in work comp, and as most of you know one can make, or break, a reputation in remarkably short time.

Sessions in best practices, drugs, obesity, claims management, rate analysis, law changes, medical information, investigation; all of these are important topics that professionals need to stay atop of in order to do their jobs.

And the jobs in this industry have certainly shifted over time.

It was just over 10 years ago that the big dog in the yard was California's State Compensation Insurance Fund.

From 2002 to 2004, State Fund had more than half of the work comp market in California. In 2003 its $7.8 billion in written premium gave it a 53.0324% share of the market. While State Fund had more written premium in 2004 at $8.2 billion, its market share dropped to 51.0166%.

After absorbing the state's shed policies as carriers either went out of business, stopped writing the state, or shifted their risk portfolios, the State Fund engaged in strategies to move that business to private carriers and shrink its footprint in California.

In the process the State Fund has shed about 1,500 workers, or about 25% of State Fund’s workforce, most of those in recent years as market share for the carrier declined to 10.0359% with $903.8 million in premium in 2012.

The State Fund has reduced operating costs dramatically, has shed non-performing assets, and has gone through a huge transformation in its business.

Over time the State Fund's policy surplus has surged to over $6 billion. Though the carrier has made dividend payments recently, with the latest $100 million dividend announced just a few days ago, one has to wonder what is going on with all of that money - surely it's not all needed to pay for claims. These dividend payments are minuscule when viewed against other carriers.

For instance, if compared to The Zenith, one of the larger private work comp carriers in California, the State Fund's surplus is almost obscene. The Zenith $485 million in premiums and a surplus of $620 million, a ratio of 1.42.

The State Fund's ratio, by comparison, is 6.52.

At some point in time the State Fund will need to come to terms with this imbalance because if the comparison to the private market is valid then the small business and high risk employers in California have been paying way too much for coverage.

And maybe this is what the State Fund's board is recognizing and is shaping the carrier to respond to this market pressure.

The State Fund has always been an interesting animal. It is a constant target of criticism - it is either too large and taking up competitive market share, or it is holding on to too much money, or its claims practices are impersonal and inefficient.

And frankly I don't understand it.

But Tom Rowe, until recently CEO and president of the State Fund, and Dan Sevilla, likewise of former executive position as CFO, likely do. Their surprise "resignations" last week means that Rowe and Sevilla could be among those networking in Vegas this week, along with the other 1,500 who have been severed from the company.

Workers' compensation is a cyclical industry. We see the same trends come and go. There's always some "reform" happening every seven to ten years, and there's always some new "cost driver" that gets identified - usually too late before some significant damage has occurred.

Whether or not the changes at the State Fund hold some predictive value for the rest of the industry remains to be seen. One thing is for sure, the State Fund still holds significant sway over the rest of the industry.

I'll be part of the Blogger's Panel session tomorrow (Thursday 11/21) at 3:30, along with Joseph Paduda of, Rebecca Shafer, J.D. of ReduceYourWorkersComp.comblog, Robert Wilson of, Roberto Ciniceros of Risk and Insurance Magazine and Mark Walls, leader of the LinkedIn WorkCompAnalysis group. I hope you'll come listen to us and please be sure to come up and say "hi" - we're there to network too.

Tuesday, November 19, 2013

Simple Math

Judge Wu's preliminary injunction in Angelotti Chiropractic v. Baker, limited as it may be, has emboldened other medical vendors in the California workers' compensation system to file a challenge to the lien fees, though with some additional allegations such as also challenging the lien-only statute of limitations.

Attorney Matthew D. Rifat of San Diego on Monday filed a federal court complaint on behalf of Dr. Robin Chorn in Los Angeles asserting that SB 863's lien provisions are unconstitutional. Rifat had filed a similar complaint last Thursday in the federal court for Southern California in San Diego on behalf of chiropractor Dirk Kancilia.

Both lawsuits seek to overturn the statute of limitations to file a lien, the $150 filing fee and a provision of the bill that prohibits providers from selling their uncollected debts to third parties.

The plaintiffs in Angelotti only challenged the constitutionality of the lien-activation fee, and Wu's injunction only applies to liens filed prior to Jan. 1, 2013.

Rifat told WorkCompCentral on Monday that he is also working on complaints he will file in state courts alleging that the lien language violates the California Constitution.

Rifat's complaints allege the filing and activation fees violate the 5th Amendment’s taking clause and the due-process clauses in the 5th and 14th amendments, and because the fees are only charged to one group of providers (as Judge Wu noted in the Angelotti case, the fees do apply to insurance companies, health maintenance organizations and labor union benefit plans), they also violate the equal-protection clause of the 14th amendment.

Rifat thinks that Judge Wu got his ruling incorrect on the takings clause and due process arguments because medical vendors who provide authorized treatment under contract (even in medical provider networks) sometimes must still file liens to protect their reimbursement expectations.

Rifat says such reimbursement expectations initiated by authorization to provide treatment represents vested property rights subject to the takings clause and requiring due process prior to summary dismissal.

Jeremy Merz, a lobbyist for the California Chamber of Commerce, said, “We will diligently defend against all efforts to dilute, undercut or roll back SB 863, including legal attacks.”

But the California Chamber of Commerce isn't paying for the defense of these lawsuits (they did file an amicus brief in the Angelotti suit); we are, the taxpayers, because the suit is against the state and state officials, not the Chamber. 

So it's easy for Merz to posture, but this doesn't accomplish anything of value to the system or to employers or injured workers in the state.

The lien filing fee issue has already cost employers plenty. We just don't know how much yet, but much like sequestration and the federal budget debacle, political posturing comes at the expense of the people who ultimately have to pay for everything that goes through government.

That's you and me.

Get back to the bargaining table! Invite everyone who's affected. Yep, this will make negotiations more difficult because there will be more issues. But you might find a path to a workable system as opposed to the slugfest that SB 863 has encouraged.

The more time that is allowed to pass through the SB 863 lien fight the more it is going to cost California employers and injured workers. The math is pretty simple.

But sadly I don't see this happening. The interests are deeply entrenched. The issues are inflammatory and emotions volatile.

I hate to say it, but the divisiveness that is the basis of the lien debate won't allow for compromise without significant collateral damage first.

We'll see you at the next rate hearing...

Monday, November 18, 2013

Dad Just Wants Some Control


It's all about control.

Sometimes conditions don't warrant exercising control despite all good intentions. Sometimes exercising control is detrimental to the outcome. Other times placing control into the hands of others is absolutely necessary to attain the best result.

I am reminded of this as I deal with Dad dying.

Those of you who have been reading this blog of late know that my dad is slowly checking out. His condition is terminal and I have been busy making arrangements for his return to home under compassionate hospice and full time life care.

Dad is anxious to get home. Saturday he gave the nurses a bad time and wouldn't take his medication, nor let my sister-in-law, who is a registered nurse, clean his teeth and put salve on his dried and bleeding lips.

When I arrived I took control and told Dad, "You're taking your medication - now sit up, shut up, and drink this water."

Which he did.

Then I told Dad that I was going to clean his teeth and put the medicated salve on his lips, and to stop being nasty.

He complied.

Then I told Dad what to expect for the next couple of days, that despite his anxiousness I needed to make arrangements to have everything in place for his move - scheduled for today (Monday).

That didn't keep him from calling me at 2 a.m. on Sunday, and again at 4 a.m., and yet again later that morning, to express that he wanted out of the hospital.

And each time I told him that he will move on Monday, that I needed time to make sure he was safe and that everything was ready.

So in the meantime he used his iPhone to try and access his bank account. I didn't tell him originally that I had changed the password to his online access to the bank account to make sure that no one else tampered with assets. I guess I should have...

Well dang if he didn't exceed the number of failed access attempts, which means that I had to ferret out a whole lot more information to reset the passcode!

Control - Dad just wants control over something, anything, to make his last few days as normal as possible.

I understand that.

It's the mindset of so many injured workers. So many lack any control over their fate and futures. So often the behavior we see from injured workers acting out against their interests is because they have a need to regain control over their lives.

I am reminded about a particularly nasty file I was handling for a major airline. The claimant, a mechanic, had some relatively minor injuries, but the major injury was his psyche - the guys was truly a ticking time bomb.

So much so that my firm decided that security was necessary at all of the hearings.

The employer authorized me an unusually high amount for settlement. This was rejected, over his attorney's vociferous counseling, because the claimant wanted his trial.

So we put on the trial, and honestly I really didn't have to do much at trial. We just let the claimant talk.

A few days after the trial the judge issued her award, which of course amounted to substantially less than what the settlement offer was.

My client issued the check, and it was returned undeliverable several weeks later. Telephone calls to the applicant attorney, some investigative work - nothing; the claimant had disappeared.

We never found him. It seems that his work comp case didn't really matter to him. He just wanted his trial, to be able to tell his story - it was justice in his mind.

He wanted some control back. That's all. It wasn't about the money, it was about control. He took control from his attorney, from his doctors, from the system. Perhaps he had some mental issues, perhaps not. But regardless, he had control issues.

I've written about this before - file a work comp claim and your life is taken away from you as others make all the decisions for you: doctors, attorneys, claims examiners, supervisors, rehabilitation providers, workers' compensation judges, risk managers - so many people involved in setting the path of an injured worker's future.

And the injured worker feels helpless, unable to exert the control they thought they had over their lives.

Like Dad.

Friday, November 15, 2013

Just Apply The Law Literally

"Well, here's another fine mess you've gotten me into!"

Ah yes, Laurel and Hardy - probably the most popular comedy double act of early Hollywood. They were well ahead of their time, and who would predict that their routines could also illustrate SB 863's attempt to corral some, but not all, liens in the California workers' comp system.

Yesterday Federal Judge George Wu signed a preliminary injunction prohibiting the Division of Workers' Compensation from collecting the $100 activation fee or dismissing “unactivated” liens until the federal court in Los Angeles rules on whether the fee created by Senate Bill 863 violates the equal protection provisions of the U.S. Constitution.

The injunction puts a stop to lien armageddon which was scheduled for 1/1/14.

The plaintiffs in the case suffered the dismissal of their causes of action for taking of property and due process, but the receipt of a preliminary injunction on the equal protections argument is huge.

And they made a very compelling argument in my mind to support the assertion that SB 863 violated their equal protection rights.

Most of us in the work comp system in California equate lien claims with pesky, inscrutable medical vendors or leech-like receivables purchasers trying to milk pennies out of already-satisfied bills.

And the argument of the proponents of SB 863's lien armageddon language was that these ne'ar do wells were primary in causing all of the "backlog."

That argument failed in the eyes of Judge Wu, particularly when counsel for plaintiffs pointed out that Kaiser Health System and Anthem Blue Cross are No. 6 and No. 7, respectively, in terms of the most prolific lien filers in the state, yet both are exempted from paying the activation fee.

Imagine that - Big Health Care seeking subrogation of their health care expenses are among the biggest volume lien filers.

Defendants in this case (DWC and related governmental parties) argued that the fee was a “rational response” intended to eliminate the backlog of liens that “threatened the functioning of the entire workers’ compensation system” while also helping to “weed out frivolous lien disputes.”

How do we know that Kaiser and Anthem aren't filing "frivolous lien disputes"? How do we know that each and every single claim of subrogation for health care expenses paid by Big Health Care are: a) legitimate, b) not inflated, c) reasonable and necessary, d) related to industrial treatment, etc. etc. etc?

When DWC first implemented a $100 filing fee for liens, pre-EAMS, it was ill prepared to collect those fees. The result was a financial parody worthy of a Laurel and Hardy skit. So it was discontinued, only to resurface after a Commission on Health Safety and Workers' Compensation report made strong recommendations in favor of reinstating the program, except with more onerous requirements and tighter integration with DWC's processes and plans.

There is no rationality to this lien fee system, just as there is little rationality to the existence of liens in the first place - or at least as managed in the culture of California work comp.

Dealing with liens is very, very simple if anyone would just apply the law as it is written.

See Labor Code section 4903 - if the PLAIN LANGUAGE of that section were ever applied then there would be no issue. That section starts out, "The appeals board may determine, and allow as LIENS AGAINST ANY SUM TO BE PAID AS COMPENSATION...". [Emphasis added.]

Somehow this provision of the law has been perversely interpreted into providing lien claims independent rights over and above the money that is actually paid to the injured worker.

Apply this section literally and there will no longer be a lien problem. An injured worker (or his/her representative) is not going to allow another to take money out of his/her total compensation unless it is truly justified.

Until then, continuation of this aberrant custom of recognizing vendors with liens as having independent rights will simply continue the "problem" and there will always be "another fine mess."

Thursday, November 14, 2013

He Got His Wish

I had put my airplane away for the evening after visiting my mom and dad yesterday, and was exiting the secured gate at the airport when a woman had pulled up and frantically waved me down.

Her 88 year old dad was at the airport, his hangar was "right over there" (we could see it from the gate) and his car was parked out front and the door of the hangar was partially open.

She was panicking. Her dad ALWAYS was home by 4 p.m., but her mom said he hadn't returned yet - it was about 5:15 when this encounter occurred.

So I let her through the gate and escorted her to the hangar where the lights were on and her dad was sitting in the back seat of his Navion, looking asleep.

Except he was cold to the touch when I climbed up the ladder to check on him. I called 911, flagged down airport security, and tried as best I could to offer some condolence to Julie (we finally introduced ourselves).

I couldn't help but think of the irony that I had just returned from yet another trip dealing with my dad in the hospital, on the border of life and death with all sorts of tubes and wires in him, making sure my mom was taken care of and dealing with the Business of Dad, and Julie's father seemed to have passed peaceably, quickly it seemed, in his airplane, still holding an approach chart in his hand.

Julie was distraught and sad, of course, at the sudden death of her father. But she told me that he had always said he wanted to die in his airplane.

He got his wish.

And that little tale has absolutely nothing to do with the difference between what private self insured employers are doing compared to the rest of the California workers' compensation community in achieving continuing stability, if not declines, in claims frequency.

While the rest of the market saw an increase of 3.3% in 2012 from the year earlier, according to an analysis of first-report data by the California Workers’ Compensation Institute, private self insureds saw virtually no increase.

Self-insured employers reported a total of 77,557 claims in 2012, just a 0.22% increase from the 77,386 claims recorded in first-report data submitted to the Office of Self-Insurance Plans in 2011.

Medical-only claims reported by self-insured employers increased 2.34% to 49,492 in 2012, up from 48,360 in 2011, OSIP data shows. But the data show a 3.43% drop in indemnity claims. Self-insured employers reported 28,065 indemnity claims in 2012, compared to 29,026 in 2011.

Self insureds have seen a decline in frequency year over year since 2001 except 2008 and 2012. And while 2008 and 2012 don't represent declines (2008 showed a 0.04% increase), the stability in the numbers is contrary to what the insured market is seeing.

The odd year is 2010 when the numbers went conversely wild, when insured employers saw the 6.7% spike in claims, self-insured employers saw frequency fall by 2.94%.

The insured employer market represents about 75% of the total workers' compensation market in California in terms of payroll and losses.

But maybe these numbers aren't so much as an aberration as they reflect what's going on with the economy.

Frank Neuhauser, a researcher with the University of California, Berkeley who studies workers' compensation trends posits that one of the reasons for the jump in frequency is the renewal of activity in the construction industry, which tends to be insured for work injuries.

“Construction is not a huge driver of employment, but it is a huge driver of job injuries,” he told WorkCompCentral. “A 10% to 15% increase in construction employment can drive injury rates up a couple points all by itself.”

There is also the data itself - Neuhauser noted that while the initial data on 2011 showed 77,386 claims filed in the year, the number increased to 78,286 based on more developed data. Tie that to increased payrolls in the insured market (i.e. recovering economy) and the disparity can be accounted for.

“I suspect there is not much difference between these two groups,” he said. “The rates aren’t fully developed in the self-insured data and rates are being driven higher for insured employers because of increased employment in industries that drive rates.”

Bob Young, communications director for CWCI and the author of the report analyzing the OSIP data, said he doesn’t think the difference in frequency for insured and self-insured employers is significant. Young credits the greater control self insured employers exert over safety, claims management, and employee management.

Maybe the numbers really are much to do about nothing. Perhaps there really isn't anything we can learn about claims frequency from the self insured market because it is so different in terms of control, culture, resources, etc.

And maybe the numbers aren't really alarming at all. Maybe these numbers are really showing that the California economy is actually recovering. It seems to me that workers' compensation tends to presage economic trends that don't get recognized by the number crunchers analyzing the economy because those people wait for more information which makes their prognostications generally late.

Maybe we're just getting our wishes fulfilled - we need economic recovery and with that recovery we see increased claims in the base industries that many other industries rely upon for growth.

So I'm not going to be alarmed.

I don't think Julie was alarmed either when she saw her dad in his Navion airplane slouched over in the back seat with an approach plate in his hands. I think she just wasn't prepared for the emotions to come rushing out.

But her dad got his wish - he died in his airplane. There are good things and seemingly bad things that happen, and generally they are tied together. We never get something for nothing.

And so it seems with the economy. Recovery begets frequency. That's how it works.

Wednesday, November 13, 2013

Work Comp Lost Focus

As part of a cadre of bloggers that write about workers' compensation, one of the questions we are often asked to address is, "what is wrong with workers' compensation?".

The California Division of Workers' Compensation largely answered that question by announcing that they have issued a new, mandatory, Form 105 for unrepresented workers to request a panel qualified medical examination.

The new form is at Take a look at it, and tell me if you were not savvy about workers' compensation if you would not be intimidated and/or befuddled by this monstrosity of bureaucratic irrationality.

I know what the administration was thinking when this form was developed - that claims administrators would be the primary users.

But if it is an unrepresented injured worker the amount of data required, the exact procedure to be used, and the terms contained within the form all conspire against a fair outcome for the claimant.

For instance, is an injured worker going to understand that the reason for a QME panel request is based on Labor Code section 4060, 4061 or 4062?


And unless your claim is relatively simple, are you, as an unrepresented, likely unsophisticated consumer of workers' compensation resources really going to know which medical specialty should be performing the services?


And how about this daunting, foreboding warning: "If you do not select a QME from the panel, schedule an appointment with the QME and inform the employer/insurer of the choice within 10 days of the date the Medical Unit issued the panel, you may lose the right to choose the QME and the exam date."

Makes me want to run straight to the closest applicant's attorney I can find. I don't want to lose any rights, but I don't even know what my rights are, let alone having to deal with all of these time deadline pressures while simultaneously trying to recover from my injury!

I understand where DWC is coming from - they need to implement forms, procedures, actions that comply with the law. The legislature told the agency what it wants, so the agency is delivering what it interprets the needs are by issuing forms and rules.

These forms and rules deliver to the agency what it needs.

The problem is that these forms and rules assist the agency, not the injured worker.

In other words, Form 105, its mandatory nature, and the information required/requested (and the bewildering decisions required of an uninformed public) are forced upon persons with little to no understanding of what they are doing, let alone the impact such decisions can have on the outcome of their claims.

All during an exceedingly stressful period.

It's unnecessarily complex, confusing and harms injured workers.

The single biggest problem with workers' compensation, at least in California (and likely many other states) is that it has become a system to support itself, rather than the primary constituents - injured workers.

We have lost focus.

Want to "fix" workers' compensation? Get rid of this madness. Return to simplicity. Allow an injured worker to dispute a medical determination without debilitating rules, complex forms, procedural mandate.

Years ago I visited with Bryan Nix, the head of Nevada's administrative hearing officers, which included the state's workers' compensation system. He was very proud to show me that all an injured worker had to do to request a hearing was put the case number on a piece of paper - could have been a napkin - with the words, "I want a hearing."

I don't see why we can't be that simple.

Tuesday, November 12, 2013

Why Do We Make People Disabled?

How much influence does the behavior of another have when dealing with a person who has a disability?

I think a lot, based on my very recent experiences.

My mom, 89, has dementia. Until recently I would have rated it "moderate." She seemed highly dependent on my father for nearly everything, from ordering food at the residential restaurant, to cleaning up after bodily functions, to even just getting out of a chair and/or walking.

Her short term memory is very limited, and she can not recall something that she was told or that she said just a few minutes earlier.

She will repeat statements, repeat questions, look befuddled at simple things and generally not look entirely cognizant of her surroundings.

The progression of her dementia during this past year seemed to accelerate as well.

And neither I, nor my siblings, really though much about this. We just figured that the disease was taking over, and that there really wasn't much we could do other than try to keep Mom as engaged as possible in life.

Dad, 91, was the primary care taker, and it seemed he had everything under control - he had hired part time help for her, they had their social cliques where they lived, made sure she got her exercise, and kept her engaged in activities.

My family just figured this is just the way it is, because my mom's mother also had dementia so we had some experience with this.

Then Dad went to the hospital two weeks ago with a pulmonary embolism that provoked pneumonia and a ton of other cascading medical issues.

Dad really got hit hard and today they are taking him off the ventilator so he can breath on his own - finally! In other words, Dad hasn't been around for the past two weeks to "take care" of Mom.

During these past two weeks Mom has had 24 hour, seven day a week, professional assistance at home.

And during these past two weeks Mom has demonstrated significant, and remarkable, progress against her dementia.

For instance, driving her to and from the hospital yesterday to visit Dad, a 5 mile trip one way, she knew where she was, knew where to turn, commented on geographical features that were familiar to her and demonstrated good spatial orientation. She hasn't demonstrated this kind of awareness and alertness for at least 2 years.

Since Dad has been in the hospital, she is much more aggressive in getting out of a seating position on her own. She is more mobile, needing a walker less and less.

Her dining companions at home have also noticed a much more engaged Mom, and have commented that she is making more jokes, is more conversant, and can follow discussions much more succinctly than when Dad was driving the train.

Which makes me question just how much of Mom's disease is biological and just how much of it is environmental.

We see this in workers' compensation cases too. People that end up on the disability rolls tend to adopt the disabled role. It's the old mind-set that if someone says what I am, then I must be; if you say I'm disabled then I must be disabled because otherwise why would you be saying that?

Then we see people like Australia's Rosemary McKenzie-Ferguson and her Bags of Love program that brings food and staples prepared and packaged by injured workers to injured workers that need some assistance and hope.

Or Carolyn Arambula and her Center for Injured Workers in Texas advocating and providing assistance to those who have been called "disabled" to realize that their disabilities can be overcome.

We've long heard that disability is a state of mind for the most part. I have always tended to believe that, having been through numerous life altering injuries and hospital stays in the few years I have been on this earth due to my failure at personal risk management.

I have been on the death bed, have had almost as many broken bones as Evel Knievel, and through it all have always come back for more action, more work, more productivity. Nothing was getting in the way of ME enjoying MY life!

And so it seems with Mom. Though it is heart-wrenching to see Dad in the hospital bed hooked up with all sorts of tubes, wires and other things that go "beep," the flip side is seeing Mom come out of her disability shell and doing more than any of us thought was possible.

I know that "disability" in workers' compensation is a state of indemnity. "Disability" is how we measure what someone's monetary value is relative to the system and how we ameliorate the financial disruption that a work injury causes.

But the term "disability" carries negative connotations. It tells the person so labeled that they CAN'T: can't walk, can't bend over, can't lift, can't this or that.

We need to change our labels and change the mindset that ensconces an injured worker who's life is altered.

Maybe this is pipe-dreaming. We encounter daily those who don't seem to want to change, or whom we think enjoy the disability life style, getting paid to stay at home.

But those cases are a distinct minority. The vast majority of injured workers are interested in a normal, healthy life and working and being productive.

It's well known that the longer someone is "disabled" the less likely they will return to work.

So why do we make people "disabled"?

Monday, November 11, 2013

Review of Substantial Evidence

I get questions all of the time on various workers' compensation topics, but probably one of the most common subjects concerns evidence, or more specifically, what kind of evidence do workers' compensation judges rely upon.

The simple answer is that in most jurisdictions the evidentiary standard is "substantial evidence."

I know this doesn't help because the term, "substantial evidence," is one of those esoteric legal concepts that has no meaning outside the context of factual application.

Case law has defined "substantial evidence" as what a reasonable mind might accept as adequate to support a conclusion.

Yeah - that's clear as mud!

Who's reasonable? And "might accept"? What about "might NOT accept"? And "adequate" - oh boy.

Forget those legal scholars and these lame attempts to define the undefinable - bottom line is that "substantial evidence" is just, "good enough."

If you have something that you want to support, the evidence just has to be "good enough" to justify whatever conclusion you are trying to derive from it. It doesn't matter that there are five other reports stating the opposite, or that there are more pages, or better author reputations - though those factors may weigh on the value of the evidence.

This is why, in workers' compensation, medical reports that seem kind of shady are "good enough" to support an award. If the judge wants to get to a conclusion and the evidence is "good enough" to get the judge there, then it is "substantial evidence" even if there is other evidence that may be better.

And there does not have to be any certain quantity of evidence to make anything "substantial." One report that has a conclusion different than a half dozen other reports can still be "substantial evidence" so long as it is reasonable to draw the conclusion for which it is proffered.

This doesn't mean that just any evidence can be "substantial" to support an award. Many states have rules and regulations that define what the medical evidence shall contain and the topics covered. Because these regulations are mandatory in nature, failure of a medical report to meet these minimum standards means that such report can not be "substantial evidence."

For example, a regulation may require certain disclosures, or a declaration under penalty of perjury. The failure to meet these minimum standards would make the report incomplete and as a consequence not "substantial" for purposes of evidence because a reasonable mind can not rely upon the report - the author failed to meet mandatory requirements dictated by law.

But the single biggest failure in medical reporting is an error in history - either the history of the injury or the relevant medical history of the claimant.

The error in history needs to be significant enough that some other conclusion would be inevitable if the error did not exist. For instance, if there were facts that would implicate some other cause of injury, or some pre-existing condition, that were not accounted for by the report, which if were considered would lead to a different conclusion - that would not be "substantial evidence."

Another way for a medical report to fail to meet the substantial evidence standard would be if the author were relying on an incorrect legal theory. An example would be if the author were relying upon standards that existed prior to a change in the law - e.g. the threshold of psychological injury in California.

And the report must be based on a reasonable medical probability, not just possibility. Which is to say speculation can not be substantial evidence.

There are of course many more intricacies of this esoterica, because this is one of those legal things that drives engineers and other digit-minded brains nuts; the notion of "substantial evidence" is vague and soft around the edges. There is no clearly defined boundary.

US Supreme Court justice Potter Stewart drew fame in his short concurrence in the pornography case, Jacobellis v. Ohio (1964) with the phrase, "I know it when I see it." That's the standard of substantial evidence.

Friday, November 8, 2013

How To Keep Me Quiet

“Part of this is growing pains, part of this with IMR is people figuring out what’s going to work and what won’t,” Lach Taylor, acting executive officer of the Commission on Health and Safety and Workers’ Compensation and special counsel to Department of Industrial Relations Director Christine Baker said. “But I’m not sure we’re just going to wait and see.”

Taylor was talking about the unanticipated volume of Independent Medical Review requests at the California Alliance of Self-Insured Groups summit in Sacramento Wednesday.

Taylor also said while some of the IMR requests may not be “in good faith,” claims adjusters can help reduce the volume of applications by making “a little wiser use of UR.”

The Division of Workers' Compensation and its IMR contractor Maximus Federal Services are finding that about one-quarter of the utilization-review determinations are not medically sound and the requested treatment or procedure should have been approved, Taylor said.

One quarter of all UR determinations sent for IMR is a lot of determinations.

“The motivation ought to be there right now for claims administrators to stop bothering to UR-deny a case of 'do you give an $18 heating pad or do you give them six visits of physical therapy,'” he said. “If it’s a $3,000 heating pad, review that one please.”

Again, while we don't know all of the real numbers at this time regarding IMR and its progeny, UR, Taylor's sobering remark should be evidence enough that UR needs some serious re-thinking in the California system. That one quarter of these determinations are not "medically sound" tells me that the "abuse" of the UR/IMR process does not lie entirely with applicants or their attorneys.

There is a battle ground for medical control with UR/IMR as the Gettysburg of comp.

The losers are the injured workers waiting for these ridiculous processes to play out.

And their employers paying more for disability indemnity than is reasonable because the claims administrator is using UR inappropriately.

I would still like to see who all these UR companies are, and who actually owns them - follow the money and you'll find out why one quarter of these UR decisions aren't "medically sound."

Taylor, while noting that part of the backlog with Qualified Medical Examiner requests is that “very few” of the applications contain all the information, made another sobering observation: 

“The fact that [the DWC] are getting so many of them that are wrong either tells me people aren’t really trying or the requirements are unnecessary,” he said. “I think we might want to rethink whether we do panel QMEs in represented cases.” YES!!!

Finally someone near the top who understands the ridiculous nature of the QME process - the requirements in the regulations and forms that so much unnecessary, redundant, and useless information is required in order to request a panel.

Taylor said he was an advocate for how QMEs were used in represented cases before SB 899 introduced the panel concept.

Perfect - an acknowledgement that more regulation does not necessarily result in a better system and that sometimes its better to just let people who are at the ground level every day do their jobs to make the system move along as smoothly as possible.

Prior to the passage of SB 899, each party could pick their own QME and the case would be tried based on the two reports - i.e. battling QMEs. If workers' compensation judges follow evidentiary rules properly, and if the attorneys present their case properly, then most of the time a reasonable result occurs.

Yes there will be cases where results are absurd. Sure, there are going to be times when one or the other of the parties are unhappy with the outcome.

Guess what, that's how life works. It's not perfect all of the time, and in fact rarely is it perfect. The issue is not getting the right result all of the time. The issue is getting a result and moving on.

That's how workers' compensation was designed. And it really can't get much better than that.

Speaking of which, the lien fee injunction case is demonstrating to me that the entire lien process needs to be rethought.

Judge George H. Wu of the U.S. District Court for Central California ordered the parties in Angelotti Chiropractic v. Baker, No. 8:13-CV-01139-GW-JEM, to confer as to the appropriate scope of the preliminary injunction and to submit proposed language for the injunction order to him by Tuesday.

The judge can't decide whether to apply the injunction only to the plaintiffs in the case or to all liens (i.e. a statewide injunction).

In my mind this presents a very rare opportunity for the proponents of lien fees and lien claimant representatives to get together and really come up with a solution to, essentially, get rid of the entire lien process.

And this starts with eliminating senseless provisions of the rules and regulations that declare a lien claimant is not a party to a case until after the injured worker has either settled or been issued an award.

There are two disputes at the heart of work comp cases: those of the injured worker and those of the providers.

Injured workers want their benefits. While provider's payments are derivative of the applicant's rights, nevertheless they are distinctly different in subject matter and scope.

Sure, if services were provided prior to the acceptance of a claim the provider's rights to payment can't be adjudicated.

But once a claim has been accepted by the claims administrator then there is no reason why a provider needs to wait. Having these vendors wait until the end just puts excess pressure on the entire system, kind of like a freeway traffic jam.

If a vendor provides services or goods to a case ultimately adjudicated not compensable then that's too bad for the vendor - they made a bad business decision and should not be rewarded for doing so.

And that includes the provision of medical-legal services. It's a gamble, a business risk. Just because you do something or produce something does not mean you will get paid for it.

There should be a separate vendor dispute resolution process funded by filing fees by BOTH the provider AND the claims administrator - just like in civil court where the plaintiff pays a fee to get heard and the defendant pays a fee to answer; and if the defendant doesn't pay the fee to answer then there is a default judgment and payment is due. And if the vendor doesn't seek adjudication then claim of payment is gone.

The fees could fund the dispute resolution process apart from the injured worker's case in chief once AOE/COE has been determined. If there are issues dependent upon scope, need, or body parts then the vendor will have to wait until those issues are resolved - they can pay the fees, and maybe the wager will pay off or maybe it won't.

And the loser can pay the filing fee of the other party - the loser would be defined by whether or not they got more than what they asked for prior to seeking dispute resolution.

So there you have it. I have resolved California's most pressing workers' compensation dispute resolution problems. Hopefully no one takes my advise seriously though otherwise I wouldn't have much to write about.

Thursday, November 7, 2013

Grading Homework in Texas

I'm in Dallas today speaking at the Texas Workers' Compensation Forum.

So it will be interesting to see how attendees view the announcement Monday that the state's Division of Workers' Compensation is going to change its report card system for scoring carrier performance.

Insurance groups in Texas had been complaining about DWC's rating system alleging that it gave too much weight to how they process requests for reconsideration of medical bills.

Texas law requires the agency to evaluate carriers' performance during even-numbered years and health care providers' performance during odd-numbered years. The program is to establish performance standards and encourage carriers and providers to communicate in a more efficient manner.

It has been a source of contention for years, and as you can imagine the more competitive carriers see the numbers the state publishes as both validation of their jobs and as important marketing information (though insurance representatives counter that insurance consumers - employers - don't care about the numbers because they are driven by price).

And of course there are issues with the quality and accuracy of the data that DWC uses. DWC has in the past accused some carriers of submitting inaccurate or false data and/or no data, and carriers have accused DWC of messing up the data acquisition process and/or the data itself.

Having worked with governmental agencies in the work comp field regarding the data acquisition, transmission and reporting area I can sympathize with both sides - likely it is a combination of all of these reasons.

DWC's response has been to fine, sometimes quite heavily, those carriers it does not believe are playing ball.

In October, Commissioner Rod Bordelon said that DWC has been more aggressive in penalizing carriers, issuing "about twice" as many penalties for inaccurate reporting than it has in the past, with repeat offenders receiving the more costly penalties.

Some of those penalized felt they were being singled out for reasons other than data quality because DWC has not issued a financial penalty for every data-reporting error in the past. There's always going to be someone who's unhappy with a process though.

DWC has taken a stick and carrot approach - penalties of course for those deemed noncompliant.

But the carrot is that those carriers scoring high in reports are less subject to audits, which are time consuming and costly.

The arguments really boil down to whether or not the Performance-Based Oversight program is worth the time and money necessary to carry out administering the program.

Carriers see no value in it. And I can understand that.

Trey Gillespie, senior workers' compensation director for the Property Casualty Insurers Association of America, told WorkCompCentral that, "we do not have any members who feel as though they receive any benefit from being labeled a high performer under PBO."

But I don't know how carriers market themselves (via brokers) other than through base line pricing.

I have long argued that claims performance does matter to employers who value long term stability in their workers' compensation programs, which means keeping the experience modification stable. And the only way to do that is to make sure that the claims department is performing at a very high level providing ultimate service to injured workers and keeping the employer active in the process.

Making claims performance a top priority in presenting a value proposition to a prospective employer/policy holder isn't an easy job. It takes marketing savvy. Selling on price is easy. Selling on quality is a more difficult proposition.

The insurance community wants to do away with the PBO program. I think that would be an error.

Texas is one of the few states now where the insurance industry makes an underwriting profit in workers' compensation. While benefits are low compared to other big states, the system in Texas does function relatively well. This may be due to "market competition" in that work comp is optional in Texas, but I don't think that's the entire answer, because prior to last decade's reform which abolished the Texas Workers' Compensation Commission and shuffled up administration of claims the Texas system was a poor performer under almost every measure.

No, part of the reason why Texas' system performs as well as it does is because of these standards and the mandatory reporting requirements.

It's sort of like grading homework in grammar school - there isn't a whole lot of emphasis towards the final grade in class based on homework performance, but grading homework keeps everyone conscientiously moving towards a good goal.

That's what the Texas legislature was really doing when it prescribed the PBO program. Yes, it needs refinement every once in a while - all systems and programs undergo phases of deployment, testing, usage, error experience and refinement. But I think that PBO is one of the elements necessary to keep workers' compensation honest, and healthy.

Here are the new 2014 performance criteria:
  • Timely payment of initial temporary income benefits will account for 40% of each carrier's score.
  • Timely processing of initial medical bills will be 30%.
  • Timely processing of requests for reconsideration of medical bills will account for 10%.
  • Timely submission of initial payment data via Electronic Data Interchange, or EDI, will be 10%.
  • Timely submission of medical bill-processing data via EDI will account for 10%.

Wednesday, November 6, 2013

Let the Man Do His Job

The political nature of workers' compensation is being played out in Iowa, a state that is used to being in the political spotlight during national election years as the first state to vote in presidential primaries since 1972.

Rates in Iowa have increased 17.3% during the course of the past 4 years and this has Republicans who back the governor on the offensive.

That averages out to 4.325% per year which is too much for Iowa Republicans to bear, so they are calling for the head of Commissioner Chris Godfrey.

Iowa state Sen. Jake Chapman, R-Adel, authored an editorial published by the Des Moines Register newspaper on Oct. 28 complaining that Godfrey was biased and too eager to award injured workers benefits.

This is part of a campaign by supporters of Republican Gov. Terry Branstad, who upon election called for the resignation of Godfrey.

Godfrey refused. He said that he was entitled to serve out the rest of his term, which ends in April 2015.

So the Governor took vengeance by slashing Godfrey's salary from the statutory maximum of $112,069 to the statutory minimum of $73,250.

The salary cut prompted Godfrey to file employment discrimination suits against Branstad that are now pending in both state and federal courts. The suits contend that Branstad discriminated against Godfrey because he is gay and affiliated with the Democratic Party.

Godfrey was first appointed into office by Democrat Gov. Tom Vilsack in 2006 and reappointed by Gov. Chet Culver in 2009.

In the meantime state Republicans have been aggressive towards Godfrey, stating that he hands out money.

Godfrey says he is simply following long standing case law that interprets the state's labor laws.

Iowa has held its ground against pressure to compete on workers' compensation laws against neighboring states for business.

Neighboring states have reformed their laws to reduce benefits by changing qualifying standards for benefits. So those states are held out as examples by Republicans against Godfrey and the state's system.

But Godfrey correctly notes that Iowa is one of only four states that don't have any medical fee controls in place, and says the statistics implicate the rising cost of medical benefits as the genesis for rate increases, not actual benefits paid on claims that have close fact patterns.

"I believe Iowa is one of only four states in the country that has no medical cost containment," he told WorkCompCentral. "We do not have a mechanism in our statute, we do not have a fee schedule, we don't have treatment guidelines. Many people would say that is a good thing, but I also say that makes it unlikely for us to enjoy the stability that we have had over the last 20-some years. Medical care costs are 61 cents out of every premium dollar, and if we do not control those medical costs, that is going to be pretty devastating."

Iowa hasn't made any radical changes to its system in 30 years, which likely contributes to the state's relative stability when compared to more active, reform-minded, states. Godfrey notes that rates, on an inflation adjusted basis, are the equivalent of what they were in 1994.

Certainly we can't say that what happens in Iowa workers' compensation is indicative of trends nationally like in national elections, but we can say that politics and workers' compensation generate muddy results. We see this time and time again.

Godfrey said Tuesday that some Republicans have been more vocal about their opposition to him in recent weeks because they fear that his lawsuits will go to trial. Maybe that's true.

In which case the right thing to do is to stop with this misguided political folderol, reinstate Godfrey's salary, and let the man do his job.

Tuesday, November 5, 2013

Wu Decision Could Force Renegotiations

Probably some of the biggest news this year in California workers' compensation is Judge Wu's tentative indication that he is inclined to stay enforcement of SB 863's lien fee collections pending a constitutional challenge.

Judge George H. Wu of the U.S. District Court for Central California is presiding over the case of Angelotti Chiropractic v. Baker, No. 8:13-cv-01139-GW-JEM which is challenging SB 863's lien fees.

Though the judge has issued his tentative ruling he has directed the parties to return to his courtroom on Thursday for further argument on whether his tentative decision should be made final into a preliminary injunction which would temporarily halt enforcement of lien fees.

While the lien claimant plaintiffs are tentatively going to be denied their arguments of a taking of property because liens aren't a property right, the judge was persuaded that SB 863's discrimination against only certain classes of lien claimants may be violative of equal protection values.

Judge Wu wasn't persuaded that the imposition of filing and activation fees bore a rational relationship to the alleged back log of liens as argued by the government when discriminating between the types of liens.

"The backlog is the backlog, and if clearing it is your purpose, then you attempt to clear it," he wrote. "It makes little sense to clear only part of it." And if the exempted types of lien claimants are not major contributors to the alleged backlog, Wu questioned that other lien claimants who might also not be major contributors to the backlog were not similarly exempted from the lien-activation fee.

In other words, the law does not provide any rational means for determining whether one lien is more burdensome than another.

Wu also noted that the plaintiffs' business "are likely to suffer grievous harm, if not outright elimination" if they are forced to pay the activation fees, but the comp system "will proceed as it has been" if the state were enjoined from collecting the fees. For that reason, he said he was inclined to issue a preliminary injunction to stop the state from continuing to collect the activation fees from lien claimants until he could rule on the merits of the plaintiffs' equal protection claim.

Well, Wu is partially correct - yes, the work comp system will continue to function. But the chaos that will result during the interim for lien claimants, payers and the government will be substantial. And if a permanent injunction follows there's going to be some significant difficulty a) processing reimbursements of lien fees, b) reinstating liens previously dismissed for failure to pay fees, c) reconfiguration of EAMS to permit filing without payment, d) increased pressure on payers to deal with newly invigorated claimants.

From what I understand, if the judge's tentative ruling stands, then the advocates for the lien fee are going to have a very difficult time - the percentage of preliminary injunctions maturing into permanent injunctions is very, very high - like over 90% - when constitutional challenges are asserted against legislation.

The "lien problem" has never been about DWC's inability to process liens. Lien FILING isn't the problem. It's only paper, or in the post EAMS era, it's only digits. The filing of liens bears no additional administrative burden on the government.

But when cases get resolved and lien claimants come out of the wood works to collect their claims there can be unruliness and unreasonable pressure on the system as payers attempt to close their files without having to pay additional amounts that may cause re-reserving and lien claimants force the issue by taking everything to court in anticipation that the additional expense would extract a few more pennies.

The "lien problem" stems from reconfiguration of the law a long time ago when someone had the bright idea to declare that lien claimants were not parties to a case until it settled. This part of the law was implemented because of a different lien problem at that time - lien claimants were taking up too much claim adjustment time because of incessant calling and dunning letters depriving adjusters the ability to pay attention to the case in chief, i.e. re the injured worker.

The thought at that time was that if a lien claimant wasn't a party then they could not force the case to a hearing for collections before the injured worker's medical status was stabilized and the case was ready for resolution.

Some argue that California's unique lien system is itself the problem - that there should be no liens and that if a vendor provided services that were warranted then they should be paid per schedule and that's it.

But not all claims are that straight forward and the lawmakers (and enforcers) long ago determined that just because an insurer doesn't believe in the validity of a claim, that the injured worker should not get the services needed. So provisions were made to ensure that an injured worker got services pending acceptance by the payer.

And of course that liberality got abused by the nefarious who saw an opportunity to use the system to generate undeserved revenues.

So long as workers' compensation is compulsory and there is no risk to anyone to participate in the system there are going to be abuses. Penalties and fines are too random and inconsequential to alter this behavior.

The fundamental concepts of workers' compensation need to be reexamined in light of these competing interests.

In the meantime my guess is that some new negotiations are going to happen in the near future regarding liens if a preliminary injunction in fact issues from Wu's desk.

Monday, November 4, 2013

Follow the UR Dollars

The Workers' Compensation Insurance Rating Bureau's latest report, released Thursday, on SB 863 shows just how difficult it is to estimate human behavior.

While savings from the bill's lien constrictions and payments to ambulatory surgery centers are better than expected, initial projections for Independent Medical Review were way off.

The WCIRB had initially said that IMR would save $390 million a year, including $230 million in losses and $160 million in loss-adjustment expenses.

A total of 870 IMR requests were filed in the first six months of the year when the alternative process for resolving disputes about utilization-review decisions was limited to 2013 dates of injury, but 4,410 applications were filed in July, and increased to 15,731 in August and 14,990 in September.

If this trend continues the number of IMR requests will be more than three times what the WCIRB had projected in its initial cost estimates, “potentially eliminating any savings in administrative costs due to IMR and also potentially negatively impacting medical treatment costs.”

What wasn't anticipated by WCIRB actuaries was how the time limitations and lack of risk for injured workers would drive requests. Also unaccounted for were unnecessary (which perhaps are driven by some other independent profit motives) utilization reviews, as had been pointed out in the past by Christine Baker, director of the California Department of Industrial Relations.

Last month at the California Workers' Compensation Forum in San Diego Baker noted that some IMR requests are for unusually small amounts, which she attributed to overaggressive adjusters who were too quick to deny treatment.

"We had some cases of Salonpas pads rejected that were $15, go onto IMR for $500," she said. "In that sense, we really need to be careful and provide the care and request when needed."

In that example Baker isn't appreciating human behavior, and in the case of workers' compensation, the compulsory nature of the beast which some participants use to drive mandatory, thus profitable, procedures even when unwarranted.

I am reminded of when I was a young lawyer. Our firm was retained by a large self-insured non-profit entity to help them negotiate the next contract with their third party administrator.

This was at a time when bill review was starting to come into its own as a "maturing" sub-industry of work comp.

Everything on the TPA's menu of services was negotiable. We secured concessions in nearly every aspect of the claims management process except for one - bill review.

The TPA would not budge on bill review one iota. Their rules mandated that every singe provider bill go through the bill review process, and the fees for bill review were likewise non-negotiable.

It got to the point that we told them we did not want ANY bill review and that we would accept it if medical treatment bills were just paid at face value - we had calculated that we would in fact see savings if the bills were just paid on time rather than go through review, appeal, etc.

Even that was non-negotiable. This TPA had such a huge profit center built into the bill review process (as it turns out the bill review company was owned by the TPA) that any attempt to mess with that revenue system was off the table.

The TPA would have rather lost the account than negotiate its bill review policies.

So it lost that account, and likely made up for it with other, more gullible contracting entities to continue feeding the bill review food chain and whatever profit system the TPA had in place.

Utilization review now is not unlike bill review was (or perhaps still is) back then. There is nothing in the Labor Code that mandates that all treatment requests go through UR. The only mandate is that carriers and administrators have an UR process in place.

But it is a) easier to mandate that everything go through UR because that eliminates the cost of decision making at the adjuster level; b) the cost of UR isn't borne by the carrier or administrator - it gets passed on to the employer; c) there is no downside in mandating that all requests go through UR (except to the injured worker who's treatment is unnecessarily delayed and the physician who's expertise is second guessed); and d) perhaps there are new profit centers built around UR.

So peel back the onion a bit. There are many layers that contribute to the results of any particular measure of workers' compensation costs. Human behavior is complex. We can't assume that just because one hole has been plugged that others won't spring.

My suspicion is that part of what's driving IMR volume is UR over-utilization by profit-minded administrators. I don't think there would be any surprises if we followed the UR dollars.

Friday, November 1, 2013

Business As Usual, Unfortunately

Some of the biggest news in workers' compensation occurred yesterday when it was released that the Federal Bureau of Investigation had filed an affidavit in federal court seeking a search warrant of California Senator Ron Calderon's office.

The affidavit implicates several of the who's who politicians active in workers' compensation law: the senator’s brother, former Assemblyman Thomas Calderon; Senate President Pro Tem Darrell Steinberg, D-Sacramento; Sen. Kevin De Leon, D-Los Angeles; Sen. Ted Lieu, D-Torrance, and Sen. Ricardo Lara, D-Bell Gardens.

According to the affidavit, each played some part in Calderon's alleged schemes, although there is no indication from the affidavit that they were aware of any alleged bribes.

The affidavit says that Calderon, D-Montebello, accepted $28,000 in bribes from Michael D. Drobot, who was the owner of Pacific Hospital of Long Beach (now owned by College Health Enterprises Inc. as of October).

Drobot has been accused of illegally abusing a provision of California workers' compensation law to pass through the cost of spinal hardware.

Calderon then allegedly used his political influence to kill bills that would have eliminated the pass-through and to water down the pass-through language in Senate Bill 863, according to the affidavit.

Thomas Calderon had been getting $10,000 a month from Drobot to act as his “consultant” on spinal surgery legislation the affidavit says.

Ron Calderon and Tom Calderon have not been charged with any crime.

Though the affidavit does not specifically name the bills which may have been unduly influenced by the scheme, WorkcompCentral reporter Greg Jones' research indicates SB 896 from 2011, and SB 959 and SB 863 from 2012, each having to do with spinal hardware pass through, were the targeted bills.

Sen. Kevin De Leon, D-Los Angeles, introduced SB 896 on Feb. 18, 2011. He pulled the bill in May 2011. The affidavit alleges that De Leon was looking for some "help."

In March 2012, Sen. Ted Lieu, D-Torrance, introduced SB 959, which would have repealed Labor Code Section 5318 and eliminated the pass-through. Allegedly the Calderon brothers and Drobot put pressure on Lieu to drop sponsorship of the bill. Lieu denies "dropping" the bill.

Lieu said in a statement he has been contacted by federal officials who informed him that he is not a target of the investigation.

Tom Calderon's relationship with Drobot dates back to 2002 according to the filing, and he allegedly still plays some role in Drobot's business.

There are many, many more details in the stories breaking about the affidavit, the implication of prominent California politicians and workers' compensation, and I need not go into them for this opinion.

Because, frankly, none of this is shocking.

Workers' compensation is a political construct that uses the law to obfuscate medical science in the reallocation of money.

That bribery, favors, political wrangling and phony schemes are a part of the process is old news - we have all known that politics is dirty, that politicians covet powerful positions for something "more" than the salaries that come with them.

The real issue is the byzantine mess that these guys make of a process that should otherwise be a rather simple system.

Workers' compensation fraud news makes good headlines - employers get busted for misreporting payroll; workers see court time for inflating or making false claims; carriers and their executives get implicated for redirecting reserve money.

But what the FBI alleges is that the dishonesty starts at the top, in the legislature, where deals are made to ensure the flow of money to those who have paid for the favor.