Wednesday, April 30, 2014

Tired of Medicine

On the heels of the National Council on Compensation Insurance coming out with a report that says in some instances medical fee schedules actually increase costs, a physician out of Santa Barbara, CA published an opinion in the Wall Street Journal that doctors can't just be doctors anymore.

NCCI found, in general, that payments by group health plans were 64% of the maximum reimbursements set by workers' compensation physician fee schedules, while the payments for surgeries performed through the workers' compensation system were 96% of the maximums. The median for evaluation and management services through group health were 89% of the maximum, while workers' compensation payments were 98% of the maximum set in workers' compensation fee schedules.

"Physicians know that they can charge fees above what is paid through group health. They know they can bill at the maximum allowable reimbursable because that's what's allowed," John Robertson, a director and senior actuary of NCCI, told WorkCompCentral. "We think in some cases that's actually driving prices up."

Maybe that's true, but I think Dr. Daniel Craviotto of Santa Barbara, CA would disagree.

Dr. Craviotto is a fellow of the American Academy of Orthopedic Surgeons (an organization to which I am a faculty member teaching workers' compensation subject matter), so I assume he also performs services in the work comp arena.

"As a group, the nearly 880,000 licensed physicians in the U.S. are, for the most part, well-intentioned. We strive to do our best even while we sometimes contend with unrealistic expectations. The demands are great, and many of our families pay a huge price for our not being around. We do the things we do because it is right and our patients expect us to," Dr. Craviotto writes.

"So when do we say damn the mandates and requirements from bureaucrats who are not in the healing profession? When do we stand up and say we are not going to take it any more?"

After noting new mandates for electronic health record adoption, declination in reimbursement rates from Medicare and other programs, and the second guessing by remote physicians who do not actually have any clinical relationship with the patient, Dr. Craviotto says he's had enough:

"I don't know about other physicians but I am tired—tired of the mandates, tired of outside interference, tired of anything that unnecessarily interferes with the way I practice medicine. No other profession would put up with this kind of scrutiny and coercion from outside forces. The legal profession would not. The labor unions would not. We as physicians continue to plod along and take care of our patients while those on the outside continue to intrude and interfere with the practice of medicine."

And yet there seems to be a huge disconnect between the physician experience and all of the other participants in the medical treatment rubric.

Because proponents of fee schedules point to studies that reflect greater inflation of medical pricing when regulation is light and there is no fee schedule in place.

Michael Monagle, director of the Alaska Division of Workers' Compensation, told WorkCompCentral Tuesday that the state's usual and customary based fee schedule is responsible for 9.5% annual increases in medical fees paid in both 2011 and 2012, compared to a 3.5% annual increase in the Consumer Price Index for health care.

Alaska is currently reviewing conversion to Medicare's Resource-Based Relative Value Scale with conversion factors.

43 states and the District of Columbia have imposed physician's fee schedules and 28 of those entities rely some RBRVS system.

The arguments are consistent whenever a pay change is proposed: doctors will leave the system, quality of care will decline, access to care will constrict, and injured workers will suffer.

Comparing general health to work comp is a red herring though. Work comp is vastly different than even Medicare due to one simple fact: lack of trust.

Workers' compensation medical services assume that either the physician is lying or the patient is lying and as a consequence there is a huge reliance on reporting.

Medicare, on the other hand, largely trusts physicians and patients, and when that trust is breached the physician is duly punished, sometimes severe enough to end a career.

I have heard from doctors time and again that they are getting out of workers' compensation. My last orthopedic visit (from one of my dumb athletic pursuits) to repair something I broke resulted in a conversation with the physician about how he is no longer accepting industrial claims.

I recently engaged an audiologist to upgrade my mom's hearing aids. He used to do a lot of workers' compensation cases, but is terminating that practice because of low reimbursements and extended latency in getting paid (after months of dunning and other collection efforts which add excessive costs to his practice).

The expectations of the workers' compensation system may be unrealistic versus the willingness of medical providers to participate.

"Fee schedules may have the unintended consequence of increasing some payments. To determine the effectiveness of fee schedules, it is important to consider market rates," NCCI concluded.

NCCI has it partially correct, but they added the term "rates."

It's not just rates, but the whole picture of medical practice market, inside and outside the physician's offices, that affect rates. At some point basic market theory of supply and demand takes over.

We just don't know where that point is ... yet.

Tuesday, April 29, 2014

Intentionally Injuring or Causing Injury

In general most states allow civil actions against an employer outside of the work comp system if the employer intentionally causes an injury.

There's a fine line between intentionally performing an act that may be injurious and intentionally causing the injury.

As reported in WorkCompCentral this morning, the Washington State Court of Appeals ruled that a state troop who participated in taser gun training, which required the trooper to himself be Tasered, may sue the employer outside of work comp for his injuries.

Michael S. Michelbrink Jr. underwent Taser training in March 1999. It was mandatory for troopers, as part of the State Patrol's training program, to be shot with the Taser, presumably to experience the effects of the device.

And while Michelbrink experienced the expected instant temporary pain, discomfort, trouble breathing and incapacitation, he also underwent involuntary muscle contractions from the powerful electric shock that caused serious injuries to his spine.

The Washington State Patrol accepted Michelbrink's fractured vertebrae and slipped disc as compensable injuries. Michelbrink missed almost a year of work before returning to duty, but his permanent partial impairment from his back injury has restricted him to a desk job.

But Michelbrink argues that he is entitled to more because the act of shooting him was intentional.

Like most states, the Washington Workers' Compensation Act immunizes employers from employee lawsuits for injuries in the course of their employment. But the immunity does not apply if an injury "results to a worker from the deliberate intention of his or her employer to produce such injury."

The Washington Supreme Court in the past has said it requires an employer to have actual knowledge that an injury was certain to occur because of its conduct and willfully disregard that knowledge.

The State Patrol sought summary judgment against Michelbrink's suit contending that while it was aware that Tasers posed a risk of injury to its officers, since it had not been certain that the Taser exposure was sure to cause the serious injuries that Michelbrink suffered, it was entitled to summary judgment.

For the less legally erudite, summary judgment in a civil suit is a procedural remedy where the court agrees that there is "no triable issue of fact." In other words, that no ultimate conclusion of fact is subject to disagreement.

And in this case, I can see a triable issue of fact: whether or not the State Patrol had any knowledge that Michelbrink COULD have the injuries he sustained as a result of Taser exposure.

That's how the trial court saw it, and last week the Court of Appeals agreed.

"The Act's exception to employer immunity contains no language making a civil action for excess damages contingent on the severity of the initial injury that an employer deliberately causes in disregard of its knowledge that its action will always produce this 'certain injury," the Court opined.

"Taken in the light most favorable to Michelbrink, as we must on summary judgment, the record shows that (1) WSP required Taser training for troopers opting to use Tasers on the job; (2) WSP knew at a minimum that the Taser barbs would wound and deliver an electric shock on contact with a trooper's back; and (3) despite this knowledge of certain injury, WSP shot troopers with Tasers during training, which it required of all troopers using Tasers in the course of performing their duties," the Court wrote.

Thus, Michelbrink had established a material issue about whether the State Patrol deliberately intended to injure him by providing evidence tending to show it had knowledge that the Taser barbs were certain to cause injury.

The practice of Tasering officers has been controversial. In 2011 the Mississippi Public Entity Workers' Compensation Trust warned against the practice.

But last January, the Montana Supreme Court ruled that a prison guard, who was a member of the prison's elite special response team, could not sue his employer in tort for his Taser-induced spinal injuries.

And the Wyoming Supreme Court last August ruled that a police officer who broke his hand during a Taser training exercise wasn't entitled to workers' compensation benefits for his respiratory problems after his injury.

The Michelbrink case has been remanded to the trial level for further proceedings - the case is not over yet by a long shot.

The case is Michelbrink v. State of Washington, No. 44035-1-II. The WorkCompCentral story contains links to the party's briefs and oral arguments.

Monday, April 28, 2014

Cheerleaders Are Employees

Professional sports, and in particular, the NFL have brazenly scoffed at employment laws for years and years.

Then the players unionized and started pressing for greater remuneration for the profits they were delivering to team and league owners.

Still, when backed into a corner (head injury suits by players) not only did the NFL escape any real financial consequences with a questionable settlement after years of denial in spite of their own research, but the league has sponsored workers' compensation and other employment laws that deny players any real protection for their futures - when these injuries finally manifest to significantly disabling degrees.

And the league knows it can get away with it - all one need do is read the public comments by the ignorant fan base when stories are told about players who seek compensation for their injuries.

"They knew what they were getting into," "they are paid gobs of money," - all the same old tired excuses that employers used for years to defeat attempts at fair labor laws.

Right - of course the tone changes when one knows what they are getting into when going to work on an oil platform, or working as a roofer, a firefighter or police officer.

The glorification of sports entertainment and the people employed to provide that entertainment on a large scale is no different than, facetiously of course, glorifying coal mining, or truck driving, or any other hazardous occupation...

The extent to which professional sports exploits its labor is highlighted by the recent spat of NFL cheerleaders suing their teams for wage and other employment violations.

The bottom line allegations to these law suits is that the teams didn't pay these cheerleaders for all of the time they were required to work. They allege that when all of the time is tallied up working under the direction and control of the team they were making a couple of dollars an hour.

The teams have responded, basically, that these women were independent contractors and were "volunteering" for the job.

Well, in most states as measured by workers' compensation laws (and other employment laws) the argument that the cheerleaders signed a piece of paper stating that they were independent contractors doesn't hold up very well.

An independent contractor has her own tools, shows up when she wants to, and delivers a final product or service generally not subject to the direction and control of the employer.

By contrast professional cheerleaders must wear uniforms, had to show up for practices hours at a time or make public appearances at the direction and control of the team cheerleader "coach" and undergo "jiggle tests" among other conditions of their employment.

Forget that a professional cheerleader may be injured on the job - NFL teams calling cheerleaders independent contractors are engaged in what is often decried as fraud: misclassification of workers.

We know that employer misclassification of their work force, whether intentional or not, is a major issue because it puts more pressure on the rest of the work force through employer premium to make up for the shortfall.

Not to mention states that collect premium taxes on work comp policies, assuming correct classification of workers, getting cheated out of revenue.

The trend of professional cheerleader lawsuits has more implications than just back pay.

The way the NFL has purchased legislation I would not be surprised to start seeing proposed laws to redefine what a cheerleader is and limit the availability of employment law protections to them too.

These women are hired to provide entertainment and are a critical component to the entire NFL show (and other sports entertainment), and should be compensated and provided fair employment protections accordingly.

And teams should be paying for workers' compensation coverage for them.

The fact that these positions are glorified with public appearances, fleeting fame and television time is poor remuneration without legally justifiable correlation to labor law.

These cheerleaders provide uncompensated marketing for the teams (and this spans many sports - just look at all the beer company sponsored posters for various soccer clubs in America and other nations). You can bet they signed away any rights to the use of their individual likenesses as part of their "contracts."

It is amazing to me that even in 2014 in America we have such disparity in how workers are treated, and how much we tolerate such treatment (as long as it isn't "us").

What's even more amazing to me is that such chicanery occurs in an industry where, when one really gets down to it, there is very, very little competition.

It's about time professional sports are made to play by the same rules the rest of employing America plays by.

Friday, April 25, 2014

OK Gets Exciting

Since I've been in workers' compensation the tension between employer and employee has increased - but neither stakeholder has felt satisfied that the system of workers' compensation has provided the promises advertised by politicians, nor the value expected for the money invested.

Though Texas has always made participation in workers' compensation voluntary, there was no optional equivalent available.

Oklahoma is the first state in the nation to provide an optional system whereby the protection of employees is not tied to the workers' compensation system.

Many other states have optional workers' compensation provisions within their systems - such as union approved "carve out" alternatives - but those all still revert to the basic work comp system as a back stop.

The Oklahoma option is different. Though opt-out employers in Oklahoma must still meet minimum standards that at least match the provision of benefits under the work comp system, employers are provided much greater freedom of choice and control.

A couple of days ago I reviewed the financial intermediary characteristics of workers' compensation insurance and why claims are such a huge focus.

Claims are the bane of employers. Most employers in my experience don't mind paying for insurance to cover their employees (yes, there are some exceptions - some ruthless business owners who have no regard for the safety and welfare of their workers, but they are fortunately a rare exception).

What drives employers crazy is paying for an expensive product (insurance) and then having absolutely no control over what happens when they need to call upon that product to provide what is guaranteed on paper.

The lack of control over the product purchased disintegrates the perceived value. Sure, a claim is "covered" but only if another person says it's covered, and sometimes maybe it shouldn't be covered but someone else says it is ... etc.

The opt out plan in Oklahoma seeks to change that equation. The provisions of the law are intended to return much of the control over claims back to the ultimate payer - the employer - and that has people excited.

There are now three (with a fourth soon) insurance companies providing insurance that meets the minimum standards of the Oklahoma opt out plan, and from what is being reported, employer appetite for these policies is strong.

Tom Hebson, vice president of development and government relations, business development, for Safety National which was the second carrier to get approval for their optional coverage, told WorkCompCentral that he believes this is a trend that will traverse more state lines.

“That’s kind of the intention,” he said, “to streamline the work comp system a little bit. This does a lot of that for the system. It’s a good alternative.

“I mean, work comp’s great – it’s a great mechanism, and we believe in work comp. It’s just we also know that options are going to be out there, and … we felt we should be a leader of (providing alternatives).”

This is a very exciting time in the evolution of workers' compensation. We have a system that is over 100 years old and has been morphing, particularly in the last 20 years, to cope with changes in work and the economy, and many feel those changes have been negative.

The Oklahoma experiment is bold. Whether it is the beginning of a trend remains to be seen - but it is clear that the early sentiment reflects a sizable appetite for something new.

Thursday, April 24, 2014

Mental Claims & Boundaries

Mental injury claims have always presented some difficulty when they are disputed.

Different states vary greatly on what qualifies as compensable when a claim of psychiatric or psychological injury is alleged.

Some states have tight qualifying requirements, other states are more liberal.

Many states tie any claim for mental injury to a prerequisite physical injury first.

Florida has statutes of that nature - in general section 440.093 generally provides that mental injuries caused by "stress, fright or excitement only" will not be compensable. There was some confusion on how that statute applies, but the First District Court of Appeals has provided some guidance.

(Florida's 1st DCA is the initial reviewing appellate jurisdiction for all workers' compensation decisions issued by a Judge of Compensation Claims.)

Sharon McIntosh had worked at a CVS located at 1875 Capital Circle Northeast, in Tallahassee. An armed gunman burst into the store at around 3 a.m. on Oct. 19, 2010. The gunman ordered McIntosh to get on the floor, but she attempted to run. She was six months pregnant at the time, and she fell, landing on her stomach.

After the robbery, McIntosh went to the emergency room to make sure her baby was okay.

McIntosh had a small abrasion on her knee from the fall. She received treatment and went home.

Nearly two years later McIntosh sought psychiatric treatment. CVS authorized an evaluation, which took place July 11, 2012. The evaluating psychologist determined that McIntosh was suffering from PTSD from the 2010 robbery.

The doctor began a course of treatment, which CVS paid for, and McIntosh sought workers' compensation benefits for her PTSD.

The JCC found that McIntosh sustained a compensable physical injury to her knee when she fell while trying to run away from the robber.

However, he determined that McIntosh's PTSD was not compensable because her PTSD was not "the natural or unavoidable result" of her minor physical injury under section 440.093(2).

McIntosh appealed and the 1st DCA reversed the JCC.

Citing McKenzie v. Mental Health Care, the court said that Section 440.093(1) involves a different inquiry than Section 440.093(2), requiring a worker to establish a physical injury that required medical treatment as opposed to establishing a mental injury arising from a physical injury.

The matter is being remanded to the JCC to make some factual determinations in light of this interpretation.

Another issue to be determined by the JCC on remand is whether CVS should be estopped from denying the compensability of McIntosh's PTSD.

Florida Statutes Section 440.20(4) requires an employer to deny the compensability of a condition within 120 days of the date that it first provided treatment for the condition, otherwise it loses the right to do so.

Opinions obtained by WorkCompCentral to the courts ruling seem concerned with the vagueness of section 440.093 - some feel that the legislature was mandating a nexus between the physical injury and the mental claim, others feel that the section is "disturbing" because the law denies people who have witnessed horrible atrocities – but were physically unharmed – from receiving any kind of compensation.

To me the troubling aspect of any jurisdiction trying to segregate any mental injury claim from physical injury claims is that the brain is an organ - a biological organism that has physical characteristics: there's plenty of science documenting how neurons in the brain work, the chemicals involved, the synapses that physically generate electrical signals to the nervous system to produce either autonomous or voluntary actions.

While the manifestation of these biological actions in the brain may not be observed by traditional diagnostics used for overt physical injuries, I don't think that any reasonable medical opinion can deny that there is SOME physical activity in the display of psychiatric or psychological symptoms.

But at some point one has to draw a line because of the potential for abuse.

This Florida case highlights just how difficult defining the boundaries are.

Wednesday, April 23, 2014

Just a Financial Intermediary

National Council on Compensation Insurance's Chief Economist, Dr. Harry Shuford, published a great read for anyone in workers' compensation about the cyclicality of the industry.

It is in NCCI's Workers' Compensation 2014 Issues Report, which is a precursor to the organization's great Annual Issues Symposium (May 8 & 9 at the Hyatt Regency Grand Cypress, Orlando, FL).

Most of us understand that workers' compensation seems to go up and down every 7 to 10 years.

We attribute this wave of activity to reforms, the economy, new claims trends, and various other external factors.

And some of these assumptions are correct - workers' compensation IS externally impacted by all sorts of various events and issues over which the industry has little to no control.

Shurford reminds us though that insurance is a financial intermediary.

For all of the fancy terms we throw around to explain how and why insurance behaves like it does, the bottom line is that money comes in, an attempt is made to leverage that money for an investment return, and some of that money is siphoned off to pay claims and expenses. Anything left over is profit.

This is no different than what banks do.

The difference, as Shuford so correctly points out, is that banks generally deal with fixed rates of returns (loans they make on their deposits) so there is a clear link between the money taken in and the returns a bank can generate.

Insurance on the other hand is a bit more difficult, in particular workers' compensation insurance, because a big part of the outflow - claims - is much more volatile and unpredictable; ergo the rate of return on any given dollar can be significantly influenced by size and scope of the claims portfolio.

Still, there is no magic to the up and down cycle in workers' compensation insurance - the fact is that the entire property & casualty insurance market behaves nearly synchronously.

And it's very basic - when money is hard to make in the investment markets money needs to be ushered in through direct sales of the product. This is called underwriting. The basic job of underwriting is to determine how much money is needed from the customer to support the product or service provided and still be able to generate an investment return that will satisfy shareholders.

The average rate of return on invested capital in the P&C business is about 10%, and the workers' compensation industry follows this average very closely.

Moreover, when examining the cycles, Shuford correctly points out that the work comp line really isn't much different that the P&C line, which follows closely what goes on in the general economy.

As he explains, using some PhD-type terms, when the business cycle gets strong, interest rates tend to rise, which is good for the P&C industry so long as "new money" is available to invest in that trend.

The problem, however, is that most insurance investment programs use bonds because they are generally pretty safe and backed by government or big business. When rates on bonds or other safe investments go down (as in the current economic cycle) the "embedded money" (that which was previously invested) that comes to maturity has to be reinvested at the new low rates.

Ergo, "new money" must be brought in generally through premiums and sometimes invested capital from other sources (e.g. Wall Street).

Premium growth can happen only one of two ways: 1) volume; or 2) pricing.

Volume can increase by either expanded payroll of existing customers, or by taking business from a competitor.

Pricing is competitively sensitive, but if everyone is in the same boat and that boat is sinking (i.e. new investment rates are low), then everyone will start bailing - i.e. increased pricing.

The big variable in this whole scheme, and that which we generally tend to focus on in workers' compensation, is claims expense.

Claims expense can put the employer, worker and carrier at odds with each other, or can align interests, in different and surprising ways.

What is in the best interest of the carrier may not be in the best interest of the employer.

And what is in the best interest of the employer may not be in the best interests of the worker.


I think Shuford put it best in his article: "Claim costs ... are remarkably uncertain and vulnerable to economic, regulatory, and environmental shocks."

He forgot emotional shock too - the fact that claims involve the lives of real people and the emotions that, sometimes irrationally, drive the decision making process.

This explains why we in workers' compensation tend to get so wrapped up in claims - because for the most part, we can't really control claims. We try to do so with all sorts of laws, regulations and control processes to manage claims, but it's much harder to manage emotions.

Tuesday, April 22, 2014

Drugs, Testing, and Incentives

In workers' compensation, if there's a cost to contain, then there are enterprising people willing to sell something to contain that cost which in itself ends up being a cost to contain.

Such it seems with drugs and drug testing.

WorkCompCentral reports this morning the California Workers’ Compensation Institute is preparing to release a report documenting that drug testing is one of the top cost drivers in the state’s workers’ compensation system.

Drug testing became popular not too long ago in response to issues with opioid and other pharmacological abuses.

So popular that it’s become one of the most frequently billed codes in the past one to two years.

Treatment guidelines include drug testing as part and parcel of opioid prescription to monitor use.

For instance, the chronic pain section of California's Medical Treatment Utilization Schedule recommends urine drug testing before and after drugs have been prescribed and the proposed opioid guidelines that the California Division of Workers’ Compensation is contemplating recommend doctors begin regular urine screenings when using opioids beyond the four-week “sub-acute” phase.

As part of this, CWCI has found that in 2012 carriers and self-insured employers paid nearly $98 million for drug testing in 2011, comprising about 2.5% of all medical spending that year. In 2004, employers spent just $508,000 on drug testing.

The sad part of the story is that much of this testing is likely unnecessary if physicians followed guidelines.

CWCI has found that many prescriptions for Schedule II painkillers are for relatively minor injuries, such as sprains and strains, conditions for which the use of opioids is not recommended.

“What our data routinely shows is a large proportion of Schedule II opioids are being used for injuries that really fall outside of the evidence-based guidelines,” Alex Swedlow, president of CWCI, told WorkCompCentral. “Now you’re compounding the issue by testing for the presence or absence of these drugs.”

The WorkCompCentral story also points out that the major drug testing laboratories are in a spitting match in Federal court over allegations that they are incentivizing physicians to use drug testing to maximize profits.

The common denominator in both the escalation of opioid frequency and drug testing is the single point of reference - the physician treating the injured worker.

There are many competing interests for the physician's attention in workers' compensation.

Payment for physician services is tightly regulated and puts stress on medical practices because it is more expensive to deliver work comp care (due mostly to the regulatory burden) but payment rates can be among the most conservative.

Vendors, be they pharmaceutical firms or drug testing laboratories, use this dichotomy to market physicians by offering legal, albeit ethically questionable, ways of recouping or supplementing revenues.

In the middle is the doctor who has to make hard decisions based on experience and business realities as to whether any particular individual is prescribed pain medication (and whether that is delivered via the doctor's office or via a pharmacy) and then followed with testing.

It's not just in workers' compensation that these competing interests exist.

At the heart of the Federal case cited above are allegations that Medicare data shows clinical laboratories accounted for 42 of the top 50 providers in terms of how much money they were paid by the federal government in 2012.

The companies involved in the Federal case both allege that the other used financial incentives to encourage physicians to maximize billings for drug tests.

It's easy to blame physicians because they are the control center. Physicians have the patient, have the control over prescriptions, have the control over drug testing.

It's also easy to blame the drug and the drug testing companies for putting incentives out there to encourage the use of their various products.

This is capitalism working - financial incentives work well most of the time to drive the market to efficient choices.

But in the delivery of medical treatment, where lives and lifestyles are at stake, such incentivizing can be counter-productive. And that's what the data seems to show.

Monday, April 21, 2014

The Gremlin of Reform

A few years ago I participated in a fly-in to Mexico.

To those of you unfamiliar with aviation parlance, a fly-in is where a bunch of pilots fly their airplanes to a common destination to socialize.

When flying into Mexico, this generally means staying a few nights because of the length of the journey.

Consequently it thus means drinking beer and tequila, and eating too much food.

For this particular Mexico fly-in I was renting a nice Cessna 182. Renting a plane is fine, but you never really know what you're getting.

Planes are complex machines, and each one is very different even if it is the same model number because airplanes are like houses - generally hand built. The volume of sales of planes does not warrant investment in automated manufacturing techniques such as used in automobiles.

Regardless, like I said, flying to Mexico is always an adventure because one never knows what is going to happen.

And this trip happened to be accompanied by a gremlin that was mysterious and shy. While not causing any great havoc, this little guy would show up every once in a while to test me and make sure I knew that I wasn't in Kansas anymore.

The gremlin in Mexico captured on film!

Or maybe Oklahoma...

California isn't alone in constitutional challenges to recent, radical, workers' compensation reform.

And just as those who fostered SB 863 in California forged ahead with knowledge that there'd likely be challenges to the new law (albeit I don't think they fully appreciated all of the consequences), proponents of Oklahoma's changes are also finding out that there's some gremlins lurking.

Because like airplanes, workers' compensation law is complex and hand built. One doesn't really know what one is getting until you start flying.

For instance, the Oklahoma Supreme Court ruled last week that the Workers’ Compensation Court of Existing Claims will still handle appeals from cases over which it had jurisdiction when it was still the Workers’ Compensation Court despite that it’s being slowly phased out.

For the uninitiated, last year's Senate Bill 1062 transitioned adjudication of workers’ compensation claims to an administrative court operating under the new Workers’ Compensation Commission, effective Feb. 1. The old court, renamed the Court of Existing Claims, still handles claims for injuries occurring before that date, and will do so until all those claims are resolved.

But SB 1062 directed appeals of the court's rulings from cases before Feb. 1 to the new Workers’ Compensation Commission.

The Supreme Court ruled in Carlock v. Workers’ Compensation Commission that the provision was unconstitutional and that appeals of Workers' Compensation Court decisions fall under the jurisdiction of the old court and thus must remain there.

This in itself isn't really a big deal, except perhaps that the cost of maintaining two separate claims administration systems wasn't contemplated by SB 1062 proponents. 

The Oklahoma WCC doesn't seemed phased.

Commissioner Robert Gilliland told WorkCompCentral the commission was “respectful” of the ruling, and that it would give the commission more time to focus on the appeals from cases filed after Feb. 1.

“So we’re good with that,” Gilliland said, “because we’re dedicating a lot of time and effort to setting up the commission, getting rules and regulations into place, information out to the shareholders.”

But according to the WorkCompCentral report this morning, there's more on the way as challengers to SB 1062 see a number of state constitutional issues.

Though the court in December rejected a challenge to Senate Bill 1062’s overall constitutionality, when the Professional Firefighters of Oklahoma and two legislators contended that the law violated a constitutional ban on bills containing multiple subjects, plaintiff's lawyers in the Carlock case believe that the law has at least 20, and perhaps up to 50, unconstitutional provisions.

They're waiting for the right cases, of course, to make these challenges so appeals to the Supreme Court will occur over time. Nevertheless there is going to be unsettling activity in Oklahoma for some period which means that the people of the state won't be able to rely satisfactorily on the law until those challenges have been vetted.

Reform gremlins - that's what they are.

Gremlins lurk everywhere. Not just in Mexico, or California, but in the Mid-West too!

When that little pesky creature tormented me in Mexico I simply acknowledged his presence and carried on.

He disappeared with a little beer, tequila and food. That's the way things happen in Mexico.

We need to remember that stateside too, whether in California or Oklahoma: Carry On. Beer, tequila and food will make things seem okay. It just takes time.

Friday, April 18, 2014

Procedure Can't Replace Trust

Utilization review and independent medical review in California workers' compensation have come under attack by the applicant's bar, and their arguments are being recognized as legally valid by the Workers' Compensation Appeals Board.

There's the recent en banc decision in Dubon v. World Restoration, and a more recent WCAB panel opinion in Weilmann v. United Temporary Service.

Employer/carrier groups and their representatives are crying foul.

Both groups are seeking appellate consideration of the processes.

Applicant attorneys claim that the IMR process introduced with SB 863 lacks state constitutional foundation and thus is invalid.

They also are carefully scrutinizing every UR denial of treatment for defects, pushing form over substance arguments, and winning.

At the heart of this entire legal wrangling are two very important elements that define California workers' compensation, and perhaps explain why the state's experience is so much different than many other states.

First, there is a HUGE mistrust between payers and beneficiary claimants that use attorneys. This mistrust has been growing for more than 20 years and is getting more acute.

Employer lobbyists and representatives see the applicant attorneys as abusing the system, and taking more out of the system than it was designed for.

They point to statistics that reflect that only 18% of all work comp cases (those that have attorney involvement) comprise 78% of all system costs.

Worker interests counter that they are only ensuring that injured workers get EVERYTHING the law entitles them too - and when they work up a case they are going to turn over every stone to be sure there is nothing left untouched. It's a benefit and a right provided by law - they are ensuring all gets accounted for.

Second, medical control is the key to control of the case. Establishing and maintaining the medical relationship means a much greater chance at a "successful" outcome - i.e. either a great increase, or substantial limitation, in indemnity and other expenses, depending on whether one is applicant or defense.

The WCAB's rulings reflect that judicial officers are not willing to overlook form when it comes to liberally interpreting the law favorable to injured workers (the judicial standard in California work comp disputes).

In the Weilmann case the WCAB ruled that UR decisions issued by doctors who had not signed their decisions and who had not seen the reports of the agreed medical evaluator were invalid. 

The applicant attorneys of course love this decision because there are likely many, many technical, procedural flaws in UR decisions.

Employer/carrier representatives are crying foul, saying that such adherence to procedure over substance will undermine the UR and IMR processes.

Of course both sides decry form over substance (and visa versa) when it suits their arguments.

But what really is happening is: 

1) the WCAB is saying don't be so sloppy; if you are going to challenge a medical request then the applicant/worker/patient is entitled to know who did what, when, why etc. The burden is on the payer to ensure that all procedural details are taken care of because the payer has far more resources than the injured worker.

2) the WCAB clearly recognizes that its job is dispute resolution; that mistrust from years of "reform" has risen to such a level that mere administrative processing where potential life altering events are involved require "listening" and adjudicating.

The applicant attorneys have basically vowed to "chip away" at UR and IMR to ensure medical control and, ergo, increase case valuation/expense.

The practice and application of workers' compensation law has always been sloppy. Now that procedure is such a huge part of the process practitioners can no longer pretend to practice law. They need to pay attention to details and this applies whether you are an attorney, a hearing representative or claims examiner.

That means that defense fees will increase, case expenses will increase, and ultimately objection from the employer community that work comp costs too much.

The reaction will be to try and introduce even more procedural blocks and barricades, which of course is the wrong way to deal with things because:

1) doing so will increase the odds that something will go wrong (like failure to strictly adhere to the procedure), and;
2) will increase mistrust even further.

Listen folks - you all did it to yourselves. The more procedure you introduce, the greater the risk that procedure will be used against you.

This of course goes both ways.

A self-administering benefit delivery system can only be so without all of the layers of cost and delivery system controls.

This requires trust, and the related relinquishment of medical control.

SB 863 was introduced as an example of a new era in employer/employee relations - proponents touted it as a shining example of a new trust between labor and management since all of the other noisy signals were excluded from the conversation until after the governor's signature.

That trust was superficial.

Thursday, April 17, 2014

It's There; Give It Away

The Rand Center for Health and Safety in the Workplace issued a report a while back following the passage of California SB 863 about the $120 million slush fund.

If you recall, SB 863 was headed towards defeat until a last minute deal brokered literally in the halls of the legislature pitched an undefined fund of money paid for with an assessment on workers' compensation insurance policies and self insured deposits saved the day.

“We negotiated in the closing days and came to an agreement that there would be set aside annually $120 million to create an expeditious, non-judicial process for making sure those workers who can’t return to work get more of the benefit which they need,” Senate President Pro Tem Darrell Steinberg, D-Sacramento, said at the time.

The issue with this fund was that only the allocation of money, $120 million per year, was defined. All other details were left to the Department of Industrial Relations/Division of Workers' Compensation to define.

The administration then asked Rand what it thought.

Rand recommended a minimum three-year waiting period so injured workers are able to demonstrate a post-injury loss of earnings before being eligible for payments from the fund. During a Commission on Health and Safety and Workers’ Compensation hearing in October, Rand researcher Seth Seabury said they’re no way to get around the waiting period “if you want to base the benefits on actual losses.”

That opinion doesn't sit well with politicians.

Steinberg said he was worried that if the administration drafts regulations to implement the $120 million fund that are based on the methodology recommended by the Rand Center for Health and Safety in the Workplace, workers would face long delays before they received any money.

“Administrative and time-based hurdles” were not what he envisioned when negotiating the special fund, Steinberg said.

So David Lanier, secretary of the Labor and Workforce Development Agency (as yet unconfirmed by the Senate), said during a March 26 confirmation hearing that using the voucher to determine eligibility would avoid long delays in getting money into the hands of workers who have suffered significant earning losses as a result of their injuries.

“An alternative that’s come up is some sort of proxy for (identifying) who are these workers who are most financially impacted by their injury,” Lanier said.

He said the Rand study identified “a high level of correlation” between workers who don’t get a return-to-work offer from their original employer and those who have a disproportional loss of earnings.

Therefore, he said, the administration is seriously considering basing eligibility for the supplemental benefit on whether a worker has been offered employment following his injury. That is the same trigger that determines eligibility for the Supplemental Job Displacement Benefit voucher.

“It has the clear advantage of putting the money in the hands of the injured workers sooner,” he said.

Apparently according to reports this morning that is exactly what the administration intends to do.

The California Applicant Attorneys Association apparently likes the idea.

Jim Butler, president of CAAA, told WorkCompCentral that the several CAAA representatives who attended an April 4 invitation-only stakeholders meeting in Oakland support the division’s proposal.

“CAAA has been consistently urging a simple, expeditious method to appropriate these funds: allow all workers who receive a Supplemental Job Displacement Benefit voucher to apply for these funds and divide the total by the number of claimants in a year, with no one receiving more than $20,000,” he said. “CAAA leaders met with the DWC on April 4 to advocate for this method.”

This idea is going to rankle some folks because it is seen as a pure, simple, give away without much qualification.

But really, should anyone care?

The bottom line is that the administration has been collecting money for this slush fund. For many of us a couple extra thousand dollars doesn't mean a whole lot.

For many others it does.

And workers' compensation is called workers' compensation because it is about paying money to workers.

Let's get over the objection that there needs to be some huge qualifying procedure. The idea is to give away money, so just do it.

Why make the process of giving away money more expensive than it needs to be? This is only wealth re-distribution and if there's a system in place that can be used to make some administrative determinations then that is just fine.

I do commend the administration for taking its time to gather information, listen to arguments, and devise different plans and scenarios.

But when it really comes down to it, the discretion for putting together a system was left up to the administration. This does not have to be a complex process, nor was that intended.

So let's get over it - and if more people than forecast apply and obtain money from the fund, then bully for them. The money is there, and it is a finite, fixed sum. So long as employers aren't asked for even more because of demand then there should be no argument.

Wednesday, April 16, 2014

IMR Challenges Communication

Frances Stevens, 46, sustained an injury Oct. 28, 1997, that required a series of surgeries, including the fusion of her first and second metatarsals. State Compensation Insurance Fund provided her a manual wheelchair, but difficulties moving the chair caused her to develop bilateral shoulder problems, according to her case file.

A combination of severe pain and confinement to a wheelchair caused Stevens to become severely depressed. She was declared permanently and totally disabled on Aug. 16, 2013.

Following the declaration of PTD status, Stevens’ physician recommended and prescribed pain and antidepressant medication as well as home health care.

State Fund denied the recommendation of home health care for eight hours a day, four days a week, as well as pain medications on July 25, 2013, and Oct. 17, 2013. Stevens appealed those decisions on Aug. 14, Sept. 19, Oct. 1, Oct. 15, Dec. 9 and Dec. 10, but Maximus did not issue its determination finding the treatments unnecessary until Feb. 20, 2014, according to the petition.

Now the case is being taken to the appellate court, on the grounds that IMR violates the California Constitution, Article XIV, Section 4, which vests with the Legislature authority to enact workers’ compensation laws “that provide substantial justice, without encumbrance” and that these laws be subject to review by a state appellate court.

The petition filed with the First District Court of Appeals avers that a writ of mandate is the only recourse available to Stevens. While Labor Code Section 4610.6(h) allows an injured worker to appeal an IMR decision based on allegations of fraud, conflict of interest, or bias, because the reviewing doctor is anonymous, “the injured worker is not provided any information upon which to make an appeal on any of those grounds.”

“The issue is that since the process is a secretive one, the injured worker has no basis upon which to ever mount an appeal on the grounds cited above,” Stevens' attorney argues in the brief.

“In essence, Labor Code section 4610.6 has rendered petitioner’s WCAB award of future medical care for her devastating and permanently disabling industrial injury meaningless,” the petition says. “Based on these facts, petitioner has no plain, speedy and adequate remedy at the WCAB to enforce the award or seek a ruling on the constitutionality of Labor Code Section 4610.6, or to compel the administrative director and Maximus to render a transparent decision subject to cross-examination and a fair speedy hearing before a WCJ with full appellate rights.”

Will this terminate IMR in California?

I don't know. But the drafters of SB 863 and the IMR provisions were dutifully warned about potential constitutional issues with failing to provide some avenue of judicial review.

There's an old saying in the legal profession - bad cases make bad case law.

This is a bad case. 100% disabled according to both physician opinion and judicial declaration, need for ongoing medical care, and an attorney who knows what he's doing (Stevens' attorney was successful counsel to Wanda Ogilvie, the applicant whose comp claim gave rise to a line of cases addressing how and when an injured worker to rebut the permanent disability rating schedule by showing it didn't fully account for future lost wages caused by the injury).

If any case is going to be successful in challenging IMR this is the case.

I think IMR can be a good thing if it properly disposes of medical treatment requests that are not reasonably evidence based or whatever standard is deemed applicable.

I also believe that there can be no absolutes.

SB 863 made some absolutes. So it is going to be challenged, and likely those absolutes are going to be stricken.

That doesn't mean the death of IMR however, just that some assumptions are changing.

And of course SB 863 proponents are going to argue that system savings are not going to be realized. But that's the gamble. It's not like there wasn't any debate or warning about whether or not those savings in fact were going to be realized, or that the reformation of the system would withstand challenge.

The Stevens case is going to be an emotional debate.

And maybe this is actually going to be a good thing - maybe the threat of ultimate judicial review will cause the parties go start talking again and settling issues rather than perfunctory reliance on a system devoid of rational communication.

Tuesday, April 15, 2014

PAYG Efficiency

Workers' compensation and innovation are not usually used in the same sentence.

But competition from outside the industry is forcing innovation, and the employer market - the people that actually pay for the insurance - is reaping the benefits.

Some time ago the big payroll service guys, ADP, PayChex, and others, started making partnership deals with insurance companies to provide workers' compensation coverage in conjunction with managing payroll.

The advantages are obvious if done successfully - since work comp is based on payroll, integrating the two should result in greater efficiency with tighter reporting, more accurate accounting and overall better service.

The insurance industry is notoriously slow, however, at adapting to change.

But change happens and in the case of the payroll/insurance hybrid, seems to be catching on quickly.

Carriers are now starting to offer payroll services to compete with the traditional payroll management companies. The fuse has been lit, and competition is heating up.

The big advantage to employers is that they get a pay-as-you-go (PAYG) service. Rather than getting one big insurance bill once a year (or maybe twice a year if the carrier permits bifurcating the bill), through carrier initiated PAYG payroll, the work comp premium is integrated into payroll, so the employer's cash flow is more smooth.

This also produces more smooth income for carriers.

The downside is that it may be more difficult for employers to monitor their premium because in most companies payroll is not static, and neither is workers' compensation - particularly if there's a claim or two.

The trend seems to be driven by demand from brokers and agents, who are losing business to the payroll services. Brokers and agents get their income from commissions, and if their customer buys insurance from another source the brokers and agents are more directly impacted.

Having an option to provide employers who like the idea of integrated payroll and work comp insurance provides brokers and agents a big competitive advantage in being able to retain their customers.

Banks are in on this too.

I recently was lunched by our banker, who represents Wells Fargo. Wells Fargo has an insurance division. I didn't know it also did payroll, but it does, and my banking representative is working hard to get me to switch, promising me savings for WorkCompCentral and better service.

We'll see about that - in the meantime it might make sense for me to look at PayChex' (our payroll service provider) work comp offering.

I think the PAYG model of payroll/work comp integration will continue to grow and bring new competitive advantages to employers.

[The Paychex and ADP images are registered trademarks and copyrighted to their respective owners.]

Monday, April 14, 2014

Long Way Down

Maybe I will, and maybe I won't.

I like the ambivalence of that - and that vagary is only possible when I go to Big Sur.

The last time my wife and I went to Big Sur a couple of years ago was following a big slide at the north portion of coast, about 10 miles below Carmel. That slide cut off all of the normal traffic that would flow from the Monterey Peninsula, so the coast was eerily quiet.

Big Sur makes you forget...

The night prior to our departure from Lucia Lodge we learned there had been a slide south of our position, leaving the only way in and out of Big Sur via a hair raising single lane road with multiple pin point tight turns, and no guard rails, up over the Santa Lucia range and into Fort Hunter Liggett/Camp Roberts to Highway 101 (post script - Nacimiento-Fergusson Rd).

We would have enjoyed staying a few more nights and the complete solitude afforded by the slides and difficulty people would face getting into the area, but work schedules for both of us compelled our departure.

Going up and over the ridge required careful navigation because most of the road was single lane with many blind corners.

And I mentioned the lack of guard rails... a couple thousand feet at the bottom of a canyon was not where I wanted to be!

No guardrails and a LONG way down...
There wasn't a lot of opposing traffic, but enough to keep you alert.

Kind of like the news this morning - enough workers' compensation fraud to keep you alert.

There's the story of a Florida fire inspector who failed to advise state officials that he was working while simultaneously collecting about $143,000 in benefits.

And the Bell Gardens, CA police officer who tried to pin his injury to his job when in fact he got injured during a try out for another police department.

Or the California trucking company owner who misrepresented his in state payroll to avoid some $108,000 in premiums.

Speaking of trucking, an Ohio man was sentenced for working as a truck driver while drawing permanent total disability benefits. 

An insurance agent in Georgia failed to forward some $30,000 in premium payments to carriers, and a U.S. Postal Service employee was prosecuted for doing massages for profit while claiming total disability because of a shoulder injury. 

And in San Bernardino, CA couple pleaded guilty to workers' compensation fraud charges after an investigation revealed that the teacher's aide was exaggerating her injuries with the assistance of her boyfriend, who pushed a wheelchair that she didn't need to use. 

So maybe I will, and maybe I won't - post to this blog during the few days of hiding in the Santa Lucia mountains that is.

In the meantime, I know that there is no shortage of new and interesting ways that people find to get around limitations in the system that are perceived to inhibit personal gain at the expense of everyone else.

The problem, as we see, is that the road is twisty, single lane with no guard rails. It's a long way to the bottom.

Friday, April 11, 2014

Go Forth and Compromise

One of the more controversial elements of California workers' compensation law is the requirement in litigated cases to use Qualified Medical Examiners to resolve disputed medical and disability issues (other than treatment since SB 863 came out).

In the old days the litigants would get their own doctors to say what they wanted them to say.

Often enough there would be multiple doctors opining on different medical issues due to specialization and the number of body parts allegedly injured or diseased during the employment risk.

The applicant would procure reports favorable to his or her position, the defense would do likewise, and then they would go to court and ...

... settle. Usually.

Sometimes, and not very often, cases would not settle and then a judge would determine which report would govern the case.

Remember that the evidentiary rules in workers' compensation are very lax, relying on the "substantial evidence" standard, which means that if the evidence is good enough to support what the conclusion for which it is proffered, then it is "substantial" and can be relied upon by the court.

There were two major objections to this historically revered process: 1) medical legal expenses were at least duplicated because not only did both sides have to get expert opinion that were duplicative, but there often would be repetitive diagnostics; and 2) some were rankled because of the perception that money was being given away needlessly under the veil of compromise.

Of course it didn't help that if one went before a judge to determine which medical evidence would rule the case that more often than not it was the applicant's report because, more often than not, it was substantial and judges follow the overarching rule in workers' compensation that the law is to be liberally construed in favor of the injured worker.

So the QME process was born a dozen years ago. The thought behind this was that if the parties could not agree which medical professional was going to govern the case then the government would decide, thus cutting down on litigation, ergo costs, and resulting in less dispute.

The theory didn't translate into practice and one of the more common complaints I hear as I travel the state is that the QME process a) doesn't work as intended, b) is not timely, c) doesn't have enough physicians who know what they're doing, and d) has not reduced litigation.

The Workers' Compensation Appeals Board in a recent decision known as Navarro v. City of Montebello declared invalid administrative QME Regulation 35.5(e), which says, “In the event a new injury or illness is claimed involving the same type of body part or body system and the parties are the same, or in the event either party objects to any new medical issue within the evaluator's scope of practice and clinical competence, the parties shall utilize to the extent possible the same evaluator who reported previously.”

The Board's legal reasoning was that the regulation over-interpreted the Labor Code section that mandated the QME process, and thus there was not requirement to return to the same QME for subsequent injuries.

Honestly, when I read that regulation section I don't interpret it in the same way the WCAB did - because of the last part of the sentence that qualifies it with "to the extent possible."

In my mind that means that there is no requirement or mandate that the parties go to the same QME - because it may not be "possible" to do so for a variety of reasons.

But the Division of Workers' Compensation, which issued the regulation, interpreted it differently and conservatively, that the section mandated a return to the first QME unless there was some emergency or reason why that QME could not perform - thus we got the Navarro ruling.

The DWC has capitulated by DWC saying that its medical unit will issue new panels for claims made after the initial evaluation has taken place.

I was speaking at an event earlier this week and had engaged in conversation with a defense attorney about the QME process. He opined how ridiculous the entire process has gotten because of the shortage of physicians willing to participate in the process and because of the tight regulatory framework.

He relayed to me a situation where he and the applicant attorney both struck from the QME panel list the same QME! What to do? So he called up the applicant attorney and they settled on one of the other physicians on the list.

In essence they agreed to the same QME - they compromised, and settled.

THAT's how workers' compensation should work - get through the muck of the regulatory process (mandatory requirements be damned) to get a matter resolved.

I think at least in California workers' compensation this attitude has been lost - procedure has overtaken substance and gets in the way of resolving cases.

The Navarro case may or may not be a big deal from a technical perspective, but what the WCAB is really saying is, "get over it." Procedure needs to take a step back so that the substance of a case can get through the system to some resolution.

So, to my litigating brethren out there - compromise. Settle those cases and move on. There's a lot more in the pipeline that need resolution, particularly since the latest statistics from the Workers' Compensation Insurance Rating Bureau indicate that frequency is rising...

Thursday, April 10, 2014

New Bills, Same Dangers

Political machinations create the complexity we know as workers' compensation law.

California is the prime example, with several bills moving around the legislature that bestow special treatment to certain classes of workers.

One bill, Assembly Bill 1035 by House Speaker John A. PĂ©rez, D-Los Angeles, would allow dependents to file claims for deaths caused by cancer, tuberculosis, methicillin-resistant Staphylococcus aureus infections and other bloodborne infectious diseases up to 420 weeks from the date the disease is diagnosed.

Similar bills in the past had made it through the legislature but Gov. Jerry Brown had vetoed them ostensibly because he was waiting for reports from the National Institute for Occupational Safety and Health and the California Commission on Health Safety and Workers' Compensation.

AB 1373, which passed in 2013 and AB 2451, which passed in 2012 differed in that both extended the limitations period to 480 weeks.

And the new bill includes a sunset provision that would allow the governor and Legislature to revisit the appropriateness of the new time frame in five years.

Supporters say AB 1035 is necessary because with advances in medical science, safety officers who develop cancer and other diseases through their employment are living longer.

The emotional appeal is that these brave public servants fight for their lives, only to succumb to the disease after the death benefits limitation period expires so dependents can not collect the benefits.

Of course that same argument could be made for any worker who contracts the same diseases covered in AB 1035 - but they're not of the class of employees with the lobbying power before the legislature.

The NIOSH study published last year found that firefighters are at an increased risk for developing certain types of cancer.

A report submitted to CHSWC in March estimated extending the deadline to 480 weeks (as proposed in the original prior two bills) would cost the state and local governments about $4.75 million.

While the usual arguments are being made about cost increases and necessity for the bill, the real concern in my mind is unintended consequences, particularly if a couple of other bills pass.

The Assembly Insurance Committee voted 8-3 to pass AB 2052 on April 2, which would extend the presumption that heart trouble, cancer, hernias and other conditions are compensable to anyone who meets the statutory definition of “peace officer” under six sections of the Penal Code. The bill would apply to school district and college police, railroad and transit safety officers, park rangers, welfare fraud investigators, utility security officers and coroners.

SB 1234, Sen. Marty Block, D-San Diego, would authorize one year of salary continuation benefits under Labor Code Section 4850 for the same safety workers who would be made eligible for the presumption by AB 2052.

After the Senate Labor and Industrial Relations Committee had unanimously passed SB 1234 by Sen. Marty Block, D-San Diego, on March 26 the bill was placed on the Senate Appropriations Committee suspense file Monday, a holding spot for measures that are expected to cost the state at least $50,000.

And AB 2378 by Fresno Democrat Henry Perea, chairman of the Assembly Insurance Committee, would declare that any benefits paid under Labor Code Section 4850 do not count against the two-year cap for collecting temporary disability benefits.

Unrelated to public safety officers, but nevertheless an example of the political pressure put on workers' compensation, the nurse's presumption of injury is back.

Berkeley Democrat Nancy Skinner has amended Assembly Bill 2616 to propose language that is identical to a measure she introduced in 2012 and also similar to what she proposed in 2011that would create a rebuttable presumption that methicillin-resistant Staphylococcus aureus is an occupational injury for hospital workers who provide direct patient care.

An MRSA infection that develops while a person is working at an acute care hospital or that develops within 60 days following termination would be presumed to arise out of and in the course of employment under the bill. The presumption could be rebutted by other evidence.

I've been critical of the nurse's presumption in the past and I still don't believe it is necessary.

Public safety presumptions have been a part of the law for a very long time, and the extension of the death benefit statute of limitations probably won't have that big of an impact overall on the operational expenses of public safety departments.

But, as I have said in the past, "in the world of litigation, the limits of applying a presumption are restricted only by the imagination and creativity of the lawyers articulating an interpretation that may, or may not, have been considered by the legislature."

THAT's why we end up with unintended consequences!

Wednesday, April 9, 2014

I Don't Remember

We know that work comp generally is liberally construed in favor of the claimant. The barriers to proving industrial causation and thus liability are very low.

But in the least the claimant needs to remember some details that would implicate work as the origin of claimed injuries.

That's hard to do when one has a black out, and unfortunately in this Washington case the injuries were significant.

Rudolph Knight admitted he had been drinking heavily in the hours before paramedics pulled him from the water, and he said he had no recollection of what had happened to him.

Knight worked as a catastrophic claims adjuster for State Farm, based in Seattle. State Farm sent him to Galveston, Texas, in 2008 after Hurricane Ike destroyed the area.

Knight spent two months in Texas, staying in a hotel outside of Houston and using a company van to get around. He was able to see his family for the Thanksgiving weekend, and then returned to Texas on Monday, Dec. 1, 2008.

The next day, Dec. 2, Knight was not scheduled to work, but he decided to drive 30 miles from his hotel to Galveston Island to survey Ike's devastation.

He later explained that he had wanted to take another look at the damage from the storm to get "back into the frame of mind of dealing with that specific situation."

While Knight was driving back to his hotel, he noticed some men riding dune buggies. He pulled onto the beach to watch and spoke to his wife on his cell phone at around 1 p.m.

At 5:30 p.m., paramedics responded to a 911 call and found Knight lying on his back along the shore, mumbling "help me."

The lead paramedic, Craig Wunstel, reported that Knight had some small lacerations and bruising. Wunstel said he asked Knight if he had been drinking or using drugs, and Knight admitted he "had a lot of alcohol" earlier.

Knight also allegedly told Wunstel that the last thing he remembered was getting tired and passing out on the beach.

Police Officer Ernesto Garcia also responded to the scene. He reported having noticed that Knight smelled of alcohol.

Dr. Blake Chamberlain treated Knight at the local hospital emergency room. Chamberlain testified that Knight smelled of alcohol and that Knight admitted having drunk "a lot" of alcohol.

Knight also said he remembered "riding in (the) dunes," but he did not remember what type of vehicle he had been riding on, according to the doctor's testimony.

Based upon Knight's actions, slurred speech, sleepiness and the smell of his breath, Chamberlain's initial diagnosis was alcohol intoxication.

Chamberlain did not report noticing any large bruises or signs of apparent trauma, but he ordered two computed tomography scans of Knight's brain.

The scans showed a subarachnoid hemorrhage.

Knight was then transferred to Methodist Hospital because it was better equipped to handle his brain injury.

Testing at Methodist Hospital indicated that Knight's subarachnoid hemorrhage was likely caused by a brain injury and not an aneurysm. Bruising on Knight's face further indicated that he suffered a "contrecoup injury," meaning there was some kind of blunt trauma to his head that caused his brain to knock against the other side of his skull, causing the hemorrhage.

Chamberlain testified this type of injury could be sustained by falling on sand and was not consistent with an injury caused by a blow to the head with a fist, but the doctor said he had no way of knowing for sure how Knight was hurt.

While Knight was at Methodist Hospital, his cognitive condition worsened. He had lost the ability to express himself clearly and he developed a wandering eye.

Knight filed an application for workers' compensation benefits, but the Department of Labor & Industry denied his claim. He then unsuccessfully sought review by the Board of Industrial Insurance Appeals and the King County Superior Court.

Knight was deemed a traveling employee by the court under Washington law, which would make him in the course of employment continuously during his entire trip, unless he makes a "distinct departure on a personal errand."

L&I argued that Knight had clearly abandoned his employment when he drank to the point of intoxication. The court agreed and granted summary judgment in favor of L&I.

This was held up on appeal.

Assuming that Knight was within the course of his employment when he stopped to watch the dune buggy riders at around 1 p.m. on Dec. 2, 2008, the appellate court said that there was substantial evidence that at sometime between 1 p.m. and 5:30 p.m., Knight drank to the point of intoxication and suffered his head injury.

The court noted there was "no direct or circumstantial evidence as to which event occurred first," and based on this lack of evidence, it was impossible to discern whether Knight was injured before or after he became intoxicated. "Therefore, the outcome of this case depends upon who had the burden of proving whether or not Knight was on a distinct departure from his employment due to his intoxication at the time of his injury."

L&I made the motion for summary judgment and raised sufficient evidence to demonstrate no triable issue of fact that would implicate industrial causation. The burden then would shift to Knight to refute that conclusion by presenting some triable issues.

But Knight couldn't do that because he blacked out - he could not raise any argument that would refute L&I's interpretation of the facts.

Some states have a presumption of injury in favor of traveling employees, but Washington doesn't.

The arguments from observers interviewed by WorkCompCentral on this story lamented the lack of a presumption, and some argued that intoxication to the point of blacking out is clearly a deviation from employment.

But the fact is that it is unknown if the brain injury happened before or after (or during) extreme intoxication. If Knight can't remember and there are no other witnesses, then the order of events can't be established. In Washington this is fatal.

The case is Knight v. Department of Labor & Industries, No. 69514-2-1.

Tuesday, April 8, 2014

Good To Be a CA Carrier

Life's not too bad right now if you're an insurance company writing workers' compensation in California, at least on the aggregate according to the most recent report issued by the Workers' Compensation Insurance Rating Bureau.

With a preliminary accident year combined ratio for 2013 of 113, this is the lowest since a 96 was reported in 2007 and about 20% lower than the period between 2009 and 2011 when they averaged about 141%.

The combined ratio is no doubt helped by the biggest premium intake increase in years, with the WCIRB projecting gross industry premiums of $14.8 billion, up 18.4% from last year's $12.5 billion (net written premium, which excludes credits, dividends and other deferrals was up 12% from $9.2 billion in 2012 to $10.9 billion in 2013).

The loss ratio of 70 for 2013 is also the lowest since 2007.

Total ultimate losses and allocated loss-adjustment expenses of $12.5 billion for the accident year 2013 resulted in an ultimate accident year loss and ALAE ratio of 86.5% for accident year 2013, lower than it’s been in each of the past four accident years.

What's going on here? I thought that the California workers' compensation market was moribund into the annals of financial disaster.

The number crunchers at the WCIRB will have some more educated guesses than me, but there are a couple of factors that likely are at play.

For one thing we are still in an economic recovery, and because California's economy is so big it takes a bit more time to spool up and get spinning at normal RPM. Some of this premium increase can be therefore attributed to increased payrolls since work comp premium is directly related to the size of payroll: the more people working, the bigger the payroll, the more workers' compensation premium paid.

But what about those expenses? Aren't the increases antithetical lower loss and combined ratios?

Actually, the numbers seem perfectly logical. The more people working, the more people get hurt and seek workers' compensation benefits.

What is not accounted for is the geographic distribution of those claims.

While the WCIRB says that the projected claim frequency for accident year 2013 is 4.7% higher than 2012 and 6.6% above 2011, it disclaims that it is, "largely attributed ... to increases in cumulative injury claims, permanent disability claims, claims involving injuries to multiple body parts, and claims from the Los Angeles/L.A. Basin regions."

California never recovered from the odd spike in frequency that occurred in 2010 - this increase was experienced nationally according to the National Council on Compensation Insurance.

The difference is that, for the rest of the country that spike was isolated to one year, and then frequency returned to below baseline.

California's experience remained above that baseline.

Still, "the 2013 frequency remains approximately 30% below the indemnity claim frequency experienced prior to the 2002 through 2004 reforms."

As I noted in yesterday's post, the anticipated cost savings from SB 863, principally from Independent Medical Review, were not realized. I postulated that the expectations were incorrect because the assumptions made (that there were approximately 5,000 medical treatment disputes per year) was incorrect.

And the failure to realize those savings results, according to the WCIRB report, in about a 3% growth in allocated loss adjustment expenses, which is a whopping 88% higher than in 2005 (and this excludes medical cost containment program costs, which were not tracked separately until 2011).

Still, when you put all the numbers together, the insurance industry in California can't complain.

Well, there's room for improvement because the investment environment could be better - but there are lots of smart people with top degrees from leading financial institutions that steer conservative money around.

The flip side is that employers may not be happy paying almost 19% more for insurance coverage than they did last year. The question is when will they start complaining ... again.

The WCIRB report on December 2013 Insurer Experience is here:

Monday, April 7, 2014

IMR Removed Compromise

The Independent Medical Review process in California was developed to take medical decision making out of the workers' compensation courts so that the judges can spend more time deciding things that they presumably have more expertise on: evidence, disability rates, causation, etc.

And as in most things in workers' compensation, on the face of it the IMR process seemed reasonable. Certainly to me it seemed reasonable.

The Workers’ Compensation Insurance Rating Bureau in October 2012 projected the IMR process would save $390 million a year by keeping about 5,000 disputes from going before workers’ compensation judges each month.

At first the estimates seemed accurate. There were only 870 applications for IMR submitted in the first six months of 2013.

But then trouble transpired.

The number of requests increased to 4,410 in July when all dates of injury were eligible and then spiked to 15,731 in August. Since then Maximus has received more than 10,000 IMR requests each month.

Now there's a big blame game.

Employers and carriers blame the applicant attorneys for requesting IMR for everything.

Applicant attorneys blame employers and carriers for unreasonably denying everything.

Physicians seem caught in the middle and just throw up their hands in frustration.

The truth is probably that everyone is correct.

What the WCIRB failed to estimate is how many medical disputes never made it to workers' compensation judges in the first place because issues were negotiated, compromised and settled. The WCIRB measured cases before judges.

But work comp is no different than any other dispute resolution system; i.e. most cases never make it to a judge because the parties figure out how to settle.

The IMR process has completely eliminated any incentive to compromise and settle on disputed medical issues. The mandatory nature of the process has removed discretion from the claims management process on both sides of the fence.

We have seen this before in other areas of workers' compensation disputes - the attempt to reduce disputes by mandating a process takes away discretion thereby increasing burden on the alternative process beyond expectations.

In fact this is exactly what occurred when California mandated that every claims organization have a Utilization Review program in place. Nothing in the law said that every single request for a medical procedure must be reviewed, but for many operations it was much easier to simply mandate UR on every request.

Removing discretion is an organizational trick - and based on what is being measured could arguably result in better efficiency. Autonomous procedure has long been used to move goods and services through a system more economically.

The problem though is that a workers' compensation claim isn't a tangible item that can be mechanized.

We deal with human beings. Humans have emotions and engage in complex decision making processes that are influenced in part by those emotions.

Whether or not a requested procedure fits within the text book of medical treatment fails to take into account all of the other, numerous, complex factors that go into the decision making process and the human emotions that influence those decisions.

The reality is that the IMR process removed the ability to compromise.

THAT's why the volume of IMR requests has escalated well beyond estimates - because we didn't understand how many disputes never made it to court - we were only counting the ones that ended up there.

The likely truth is that many, many more medical disputes existed, but were settled before getting to a judge.

Maybe IMR isn't "broken." Maybe it's doing just what was intended. We just didn't measure the right thing to start with so our expectations were distorted.