This Could Be Huge

My blog post on fraud and audits on June 7 attracted the attention of Christine Baker, Director of the Department of Industrial Relations, State of California.

She took issue with my statement that the Brown Administration was actively inhibiting audits of anti-fraud activity.

Baker explained that while an audit is a great process for keeping government in check, she has been through this process numerous times in the past and the issue is that the auditors don't understand work comp, don't understand the nature of work comp fraud, they come in and ask a bunch of questions then make budget recommendations and suggest which agencies could or should coordinate more...

In the meantime the auditors do not get to the root cause of the issue and create a huge distraction away from actually combatting the crime.

I get it. Any of us who have been in positions of accounting for where the money goes have been through audits, and for the most part, unless one is truly trying to hide something, audits are a huge expenditure and a significant distraction that take up a lot of resources for little return other than to assuage the bill payer...

In my blog I had suggested that keeping the consumer/injured worker informed via some explanation of benefits or other reporting mechanism would go a long way, not only in deterring fraud, but also towards increasing consumer engagement in their own treatment and case activity.

Baker isn't interested in another form, and another piece of paper to accompany the 30 million medical bills that get through the system every year. She is interested in a more robust solution.

What hasn't been clear to the workers' compensation public is that the administration has been using EAMS data (more specifically lien filings) and marrying it up with Independent Medical Review to see which providers are operating in the shade.

Some of those providers have already been indicted, and surprisingly continue to pursue lien collections (perhaps to fund their legal defenses?); others are in the indictment cross hairs as the administration works with the FBI and other law enforcement to build cases.

This activity is the start of something bigger, more comprehensive, and hopefully will result in not just capturing criminals but getting consumers more engaged in their own claims.

The future will bring us, Baker promises, a portal for anyone on any given case to log in and see everything that is going on, and in particular medical billing. This is the administration's answer to giving consumers/injured workers an EoB for every medical bill - instead of individual pieces of paper, the administration proposes that folks will have essentially real time access to the complete status of their cases (and I'm assuming even those that are not litigated) for more engagement, greater understanding, increased transparency.

This is a huge task.

Making all of this disparate information and complex workers' compensation metrics accessible without violating privacy, and also making it understandable to the consumer is going to be very, very difficult.

I hope that those who are planning this project engage some of the best user interface designers they can hire because while information is great, if it can not be understood by the consumer of that information then it is of no utility.

If the administration can pull this off, however, it will be a model that all other jurisdictions can, and should, adopt.

REFORMED?

There are now two independent reports out that call into question administrative and lawmaker's early assertions that the 2012 reform in California, SB 863, has met target goals.

One goal was to reduce friction in the California work comp system by interposing new administrative paths for various specialty disputes, such as the resolution of medical treatment requests. Another was to reduce costs in the system to pay for benefit increases by building roadblocks for vendors such as independent bill review and lien filing fees.

In the first instance, at least, the law encouraged payers to escalate their spending in response to the bureaucratic burden. In the second instance, it seems, that when push comes to shove those claiming unpaid balances on their vendor bills aren't discouraged by paying a lien fee.

Carriers and self-insured employers paid an estimated $7.647 billion in loss-adjustment expenses, commissions, acquisition fees, general costs and taxes in 2014, according to the Commission on Health and Safety and Workers’ Compensation's 2015 annual report.

Compare to $7.553 billion for medical benefits and $5.079 billion for indemnity benefits in 2014...

Though not the first time that administrative burden has exceeded actual benefits in California, the rapid pace of growth stemming from SB 863 is a worry.

Expenses increased 13.9% to $6.965 billion in 2013 compared to $6.114 billion in 2012. And the $691 million increase in expenses in 2014 was a 9.9% increase over 2013.

A breakdown of expenses by category in the report shows loss-adjustment expenses -- which include costs for IMR and UR, bill review, defense attorney fees, overhead and other costs associated with handling insurance claims -- are the fastest growing component of expenses.

Loss-adjustment expenses increased 12.36% to $4.364 billion in 2014 from $3.884 billion in 2013. Loss-adjustment expenses in 2013 were 18.92% higher than the $3.266 billion paid in 2012.

General expenses, which are not defined in the report, added another $1.229 billion to costs in 2014, but this was only 4.86% more than the $1.172 billion in general expenses reported for 2013.

In the meantime, the volume of liens filed is nearing pre-reform levels, having doubled in 2015, according to the Workers’ Compensation Insurance Rating Bureau.

There were 362,899 liens filed in 2015, according to the agenda for the March 22 meeting of the WCIRB’s Actuarial Committee, which is 91.1% more than the 189,951 liens filed in 2014, and 94.8% more than the 186,264 liens filed in 2013.

Compare to the period of 2000 to 2011, which recorded an average of 373,488 liens filed per year, 2.84% more than the total number filed in 2015. From 2000 to 2014, an average of 402,490 liens were filed each year, 9.84% more than what was filed last year.

Most of the volume increase was due to medical, and yes, Los Angeles County's reputation for leading the rest of the state in medical costs is reflected in the lien stats.

Medical providers filed 309,693 liens in 2015, up 97.6% over the 156,770 liens filed in 2014 and more than double the 137,982 filed in 2013.

A total of 230,436 liens were filed in Los Angeles County (accounted for in the Long Beach, Los Angeles, Marina Del Rey, Pomona and Van Nuys district offices) in 2015, an increase of 92.8% over the 119,522 filed in the county in 2014.

The remainder of the Los Angeles area (Anaheim, Oxnard, Riverside, San Bernardino and Santa Ana) saw a 96.1% increase in liens, with 91,612 filed in 2015 compared to 46,762 filed in 2014. San Diego had the single largest increase, 11,052 liens filed last year which was 108.8% more than the 5,294 filed in 2014.

The rest of the state wasn't immune from lien filing increases though.

Liens filed in Eureka, Redding and Santa Rosa increased 35% to 1,339 from 992; liens filed in Sacramento increased 30% to 2,009 from 1,546; and liens filed in Oakland, San Jose and San Francisco increased 28.4% to 9,207 from 7,169.

Catholic School

Experience, or the number of injury claims, has been going down across the country except for one specific geographic area - Southern California. Ergo, the expense of workers' compensation for employers is also greater in that area than most other geographic zones.

There has never really been a cogent assessment of why. Some have speculated that there's more diversity in the Southland, some have pointed out a larger demographic of unskilled, uneducated workers doing manual labor, and others think it may be a combination of complex factors.

Or it could be that Southern California is just home to more criminals.

But it's not the claimants perpetrating crime. Rather, the real money is in the vending of benefits, particularly medical benefits, and even more so diagnostic and medical-legal services.

We don't learn very well.

Holy Trinity, San Pedro, CA

This criminal pattern has been repeated throughout my 32 years of experience in the work comp industry many times. There are various techniques used to perpetrate the crime, and all of those various techniques have, at some point in various reforms, been the subject of new laws declaring an activity felonious.

And each time the vast majority of vendors who have legitimate practices get punished, and the constituents whom are to be served by the system lose out, only to find that the targeted criminal activity has taken life in yet another scheme.

The basic scheme works on referrals. So long as referrals are kept "within network" it's very difficult to crack the secret code. There's usually a mastermind who controls the network with cash, or violent, incentives. Someone is tasked with finding "patients" who are promised free money and free medical care for whatever ails them. That "patient" is then referred in a big circle generating diagnostic services and medical reports (all of which, upon loose inspection, will reveal surprisingly similar content, sometimes embarrassingly so). Sometimes treatment is even provided, but more often than not treatment takes on a phantom quality. Billings for those services are then submitted and liens are filed, with the sole intent of settling for pennies on the dollar because, what the heck, it's free money since no real services or goods were provided.

In the most recently publicized scheme, the providers and others indicted as part the FBI's "Operation Backlash" have collectively filed more than 33,000 liens, with a total claimed face value of at least $233.5 million, according to a WorkCompCentral analysis of data available from the Division of Workers' Compensation's Electronic Adjudication Management System, or EAMS.

That analysis doesn't include all of the fraudulent billings that were not contested and were paid either at face value, discounted to fee schedule, or negotiated without filing for lien protection.

We frankly don't have a very good system for understanding when an illegal referral/work comp fraud scheme is incubating. By the time suspicions arise, the conspiracies have mushroomed and have provided nice profits, and the only thing that trips up the criminals is plain old basic greed; easy money for too long.

Which is why these schemes will continue, and why, no matter how many laws are passed making this or that illegal, fraud will continue to take money away from injured workers and the services they need, and will continue to batter the black eye that workers' compensation perpetually experiences, at least in Southern California.

Why do workers' compensation criminals congregate in Southern California? I think it's a simple matter of the weather. Criminals are, essentially, lazy - why work for money if you can get it easier. Likewise, why shovel snow, or deal with seasons, if you can live nearly 365 days a year in mild, forgiving climate with a vast array of recreational opportunities?

I've long believed that Southern California's climate was the primary driving force for its robust economy. It takes smart people to start and grow business. Smart people want the same thing everyone wants: comfort. So smart people go where the weather's good and they figure everything else out after that.

So do criminals.

I know, the basic medical fraud scheme isn't the only game in town. Various cheats against work comp take on different permutations depending upon the level and origination. Sometimes it's within the system, sometimes it's external. Sometimes it's penny ante, sometimes it's a huge scale. Sometimes it's white collar within otherwise respected institutions, and other times it's low scale.

At all times it's contemptuous. Sure, the fraud "costs" insurance companies millions of dollars a year - but that's a false conclusion because those costs are simply passed down to the policy payers. When a fraud recovery is made, though, that money doesn't find its way back to those payers...hmmm...

The real damage is to the institution of workers' compensation and everyone in the system that believes in the mission and who try to execute within the constrictions of the law; ergo those are the same people that are punished with fees, procedures, reviews and other sorts of nonsense intended to capture a very small percentage of anti-socials.

It sort of feels like Catholic School to me. I went to Holy Trinity in San Pedro, CA, from kindergarten through sixth grade. There were one or two kids every year who just couldn't tow the line, and for their transgressions the entire class would suffer some punishment. I guess the theory was that if everyone was punished then us do-gooders would blow the whistle and take on vigilante roles against the jerks that were making our days bad.

That never happened though, because the jerks just didn't care and would do whatever they wanted to do regardless of the consequences.

So, big deal - a fraud bust results in the discovery of hundreds of millions of dollars in illegal activity. When those folks are taken out of the system, there's plenty of others ready to fill the gap.

Fraud is, unfortunately, a cost of doing business in workers' compensation. There's no easy answer. There's no easy remedy.

Like Catholic school, we just live with it and say our afternoon prayers in hopes that the punishment for the rest of us isn't so bad.

A Bigger Hammer

My maternal grandfather lived with us when I was growing up.

We called him "Daddy Harry" at his insistence. His legal name was Harry David Bonacci, given to him "by Decree of court from Enrico Davide Bonacci, as part of the Naturalization" according to the testament by Deputy Clerk Martha Stone for Clerk William H. Tallyn.

He was forty seven years old, five foot six and 130 pounds on April 1, 1946. That was thirteen years before I was born when he became an American citizen. He'd immigrated thirty three years earlier, started a trucking company with his five younger brothers, which grew from a single bob tail into the biggest transport company on the East Coast.

Prohibition was in full swing back then, and my grandfather knew that good money could be made, with little risk, by transporting the raw materials needed by the moonshiners.

But his love was mechanics. After getting the business going he handed over management to his brothers so he could run the maintenance shop. Back then the trades were valued, and there was such a thing as a "master diesel mechanic."

That was my Daddy Harry.

Of course he was retired when he came to live with us. He was separated from my maternal grandmother - she lived in Phoenix, AZ. I recall in my teenage years my parents "forcing" the two to live together, and that was a bit acrimonious, and a story for another post.

The glory to my brother and I, though, was Daddy Harry's garage. Well, it was the household garage, but Dad was too busy being a dentist, Mom had no interest in anything in the garage, so it was my brother and I mesmerized by Daddy Harry's meticulously organized and maintained garage.

I still have many of the tools he passed along, and what I don't have my brother does.

As my brother and I grew older we would tease our grandfather about his mechanical skills. He of course was an extraordinary mechanic, and seemingly could fix, or build, anything, even with the most basic of tools.

Which led to a phrase we would attribute to Daddy Harry, but really we made it up as descriptive of his mechanical prowess: "If it doesn't fit ... use a bigger hammer!"

Following that philosophy is dangerous of course. Making things fit by pounding away with a bigger hammer will, in most cases, just ruin whatever is being "fixed." If you're successful in making it fit, generally the fit won't last long, and the collateral damage to the object being "fixed" can be irreversible, or at least more expensive to repair than had finesse and the proper tools been used in the first place.

We seem to use a bigger hammer when it comes to things in workers' compensation.

And the results are predictable.

In California we used a bigger hammer in 2012, and we made things fit pretty well, at least temporarily.

But the problem with that brute force was that the fit tolerances were sloppy. This may be why the Workers' Compensation Insurance Rating Bureau is finding that the first part of 2015 is reflecting an increase in medical costs, running contrary to the first two years that SB 863 hammered those costs down.

Though still well under what the system started out with prior to SB 863, 2015 is showing so far a 4% increase over 2014 - largely due to utilization, or the number of services being provided (as opposed to unit costs).

And utilization is what drives medical inflation in workers' compensation.

What's interesting about this trend is that Independent Medical Review should impact utilization - and for the first two years that's exactly what happened; utilization following SB 863's implementation of IMR dropped significantly.

But the mix of utilization may be changing, causing this reversal in medical inflation. We know, based on recent research by the California Workers' Compensation Institute, that most requests for treatment do not get challenged, and that compliance rate has been growing, which probably reflects adjustments to the environment by medical vendors.

My Daddy Harry used to nap in the television room every afternoon in his recliner. He would snore "like nobody's business" (a phrase, by the way, that he used to use often), mouth wide open, facing the ceiling, lower jaw moving rhythmically to inhales and exhales. I recall vividly the beautiful dental work Dad had executed so nicely displayed to all the world...

The challenge for my brother and I was to input an index finger into his mouth while open, and withdrawing it just in time before being "bitten." The game was to see how long we could pull off this stunt before waking our grandfather.

And when he woke he would yell at us, "Why you little monkeys!"

Of course we snickered, and took on the challenge another day during another nap. It never got old. We just couldn't resist the bait of Daddy Harry's undulating orifice, the rattle of his sinus cavity and the eventual interruption of his snoring when he sensed a foreign digit in his mouth.

Kind of like the workers' compensation medical game. The challenge of not getting an index finger bit is just part of the fun. How long it can go is another part of the dare.

And eventually a big hammer is brought out to try and fix things, and when that doesn't seen to work an even bigger hammer is used until all has been forced back into place.

Daddy Harry never really told us to use a bigger hammer. That was a fiction my brother and I concocted because it was fun.

So was the finger game.

Conspiratorial Profiteering

Does the amount of kickbacks for patient referrals in a specific geographic area correlate to higher medical utilization and severity costs in that region?

Recall that in past studies over just the last couple of years, the California Workers' Compensation Institute pointed out that the Los Angeles metropolitan area was responsible for an inordinately high amount of medical costs in the state.

Also, recall that certain medical vendors, some who have been in the workers' compensation business for quite some time, have admitted to participating in a referral kickback scheme in connection with Michael Drobot, Pacific Hospital of Long Beach, and others related to what has been called the biggest fraud scheme in California.

It turns out that, yes, there is a correlation between kickbacks and higher medical utilization and severity.

WorkCompCentral conducted an analysis of liens in the California Electronic Adjudication Management System and determined that Philip Sobol, MD, who recently admitted to participating in Drobot's scheme, alone was responsible for 13,766 liens filed under his company name since 2005, with a total claimed value of $85.6 million.

Another $1 million was filed under his name personally.

Over the same 10-year period, at least 1,505 liens were filed under the name of Griffin Medical Group, owned by chiropractor Alan C. Ivar, with a claimed value of $6.7 million. Ivan also admitted to participating in Drobot's game.

Both Sobol and Ivan have agreed to plead guilty to conspiracy charges.

The combined $93 million represents a big chunk of the $580 million that prosecutors say was fraudulently bilked from the work comp system over the years by the Drobot cartel.

Interestingly, the plea agreement between prosecutors and Sobol included a statement that the stipulated facts are not intended to indicate that he provided any patients with "substandard medical care or that any treatment he provided or prescribed was not medically necessary."

Who are they trying to fool? Sounds to me like lawyerese nonsense intended to downplay the incredible greed of someone addicted to $70,000 to $130,000 per month in "fees" from Drobot-controlled entities.

My guess is that Sobol is trying to protect some of his ill-gotten gains from sure to follow patient lawsuits for malpractice.

A little bird told me the other day that Sobol was also the number one source of Independent Medical Review antagonism, writing on average 9 letters per day contesting the utilization review denials of his treatment requests.

Nope - no substandard or unnecessary care.... Sure.

The National Council on Compensation Insurance just recently released a study across its covered states on medical treatment utilization noting wide disparity in geographic zones for specific injury codes under a "common fee" analysis to account for fee schedule (or none) discrepancies.

NCCI found that certain states had much higher utilization than other states.

The study authors don't offer any explanation, but speculate that treatment guidelines have something to do with this phenomenon.

Certainly, based on California's experience, conspiratorial profiteering by unscrupulous medical vendors should also be entertained as a reason.

The Doctor Has No Comment

One of the curious anomalies in statistics about cost drivers in California is that the southern part of the state is disproportionately represented.

Researchers have implied, but never out-right said, that perhaps one explanation is nefarious activity by various vendors operating in the territory.

Prosecutors recently unsealed an indictment alleging individuals connected to an chiropractor and physician in an illegal kickback scheme - the WorkCompCentral analysis of the size of that scheme revealed that it was responsible for at least $240 million in claimed medical, and that's just from a review of liens that were filed.

Likely the gross amount is much more assuming other bills were paid without contest.

According to the indictments that were unsealed Tuesday after authorities executed search and seizure warrants related to the case, Ronald Grusd, 69, a Los Angeles radiologist, paid kickbacks to a chiropractor in exchange for patient referrals. 

San Diego chiropractor George K. Reese, 50, is accused of referring patients to Foremost Shockwave Solutions in exchange for kickbacks.

WorkCompCentral reporter Greg Jones found 33,260 liens filed under the names of Grusd, Reese, their medical companies and Foremost between 1990 and 2015 with a total claimed value of $240.68 million.

Jones went further in the analysis by combing the Division of Workers' Compensation's case management system, EAMS, and found the providers and related companies paid $1.57 million in filing fees on the 10,471 claims submitted since 2013.

Another 3,093 liens filed between 2006 and 2012 are marked "paid" to indicate payment of the $100 activation fee imposed by Senate Bill 863.

The total claimed value on the liens for which mandatory fees have been paid is $110.8 million.

EAMS also indicates 1,813 liens filed between 2004 and 2014 are "unpaid" and 17,761 claims filed between 1990 and 2012 are "payable." The total claimed value of all these liens is $128.69 million.

Jones found that the volume of liens filed by these providers accelerated unnaturally beginning in 2011.

Then when the drop dead date to file liens to be the implementation of SB 863 filing and activation fees, these vendors doubled their lien filing.

Jones was not able to reach Grusd on Thursday. A receptionist at his office said, "the doctor has no comment."

Likewise, Fernando Valdes, chief executive officer of Foremost had no comment.

No comment indeed.

There's an old axiom in criminal law about invoking the right against self-incrimination: guilt may be assumed by silence.

There's another axiom well known to criminologists: crooks go for the low hanging fruit.

I was asked once what constitutes a "kickback."

The question isn’t really whether something is a kick back or not. It’s about disclosure and transparency.

Incentives only become an issue if they are hidden (unless expressly prohibited by law).

In other words, if you have no comment, then you should probably think twice about that incentive.

Good Call

"Good call man."

Those anonymous words were received over the 121.8 frequency as N6641M headed south yesterday, transporting me to a Sunday visit with Mom.

President Obama was in Southern California and when the President is in town the aviation equivalent of a rat maze is created by Federal fiat.

These are called Temporary Flight Restrictions.

TFRs, particularly presidential TFRs, can seem complex because the times and geographies vary, and can change at a moment's notice.

There's a TFR out there, somewhere...

And every single time a TFR comes into existence there are several general aviation pilots that get a wing-side visit from an Air National Guard F-16 and a radio command from Air Traffic Control (if they're in communication with ATC) to write down a phone number.

The Federal Aviation Administration is one of the most powerful and broad reaching regulatory authorities in America, and the security of the President takes a higher priority than nearly anything else, including flight safety by some Schmoe in a Cessna.

Busting a TFR can result in significant punishment, including revocation of the airman's certificate from the unwary pilot.

It's not a friendly spot to be in.

But TFRs are just rules, and they are always written (albeit sometimes they need some legal interpretation) and widely distributed by known publications, including by the FAA itself. Though it may take some extra time in the flight planning stage, TFRs aren't hard to find out or figure out.

However, because the enforcement rules are draconian, I leave nothing for chance when I am flying during a period when TFRs are active in the area.

Sunday's TFR engulfed Oceanside's Bob Maxwell field just on the fringes of a 30 mile ring centered off the Mission Bay VORTAC.

The normal Sunday "traffic jam" that is Southern California skies was non-existent south of Long Beach, the radio abnormally quiet. I presumed that the Presidential TFR kept more than a few general aviation operators on the ground despite Ceilings And Visibility Unlimited.

And that was fine by me - less to worry about. Except whether or not ATC in fact recognized that I was on an active VFR flight plan, destination Oceanside.

I mentioned that TFRs are just rules. Because they are just rules, they define how to operate within the TFR, and generally anyone can do so as long as the aircraft is on a flight plan, either instrument or visual, and acquires a discreet transponder code prior to entering the TFR area.

The rule uses many more words to say that, but what I described is the bottom line - so I departed Oxnard on a Visual Flight Rules plan (something I haven't done since flight school - usually I will just fly under an instrument plan). Oxnard isn't equipped to issue me a transponder code, and Point Mugu's radar was out of service in the morning, so I opened my plan and acquired my code with the first sector of SoCal - 134.2 mhz.

After passing through the Los Angeles corridor I wanted to be sure I was following the rules, because ATC won't warn you if you are about to enter a TFR. Sort of like a mouse trap type of game - though ATC is part of the FAA's function, for some reason it is NOT ATC's function to warn unsuspecting pilots that they are about to enter a TFR - then, boom, the pilot gets a visit from circling F-16s and a command to take down a number.

Even when queried, ATC is rather vague and un-authoritative - I guess because the communications are all recorded and they don't want to say anything that will get THEM in trouble.

So I asked the 121.8 controller if I was on an active VFR flight plan, "because I don't want to bust the Presidential TFR." The controller responded with a "let me see" and a "what's your destination."

See? That kind of communication makes one a little suspicious that things aren't what I thought they were - because the flight plan clearly states that my final destination is KOKB (Oceanside) and my cruise altitude was 5,500, etc.

And after about 10 seconds ATC responded with an "affirmative." That's all. Nothing more to indicate that in fact I was "legal."

That's when I got the anonymous accolade (which by the way, inflated my pride and ego - pilots don't usually hand out compliments like that in the air over public frequencies).

Workers' compensation, particularly California work comp, is widely derided for its complex set of codes and regulations. In fact, I'm willing to bet that the "Blue Book," LexisNexus' compilation of California law, is actually more voluminous that the applicable aviation US Code and Federal Aviation Regulations.

Sometimes one has to check with the authorities to make sure there is compliance, and sometimes to test the validity of the rule against the body of law against which it was created.

California lien law went through this process with the passage of SB 863 and the imposition of fees for filing a lien or activating a previously filed lien.

The courts have spoken, at least the jurisdictions queried so far, that the scheme imposed by SB 863 and resulting regulations is, in fact, legal, constitutional, and effective.

The United States 9th Circuit Court of Appeals last week said, "affirmative" after a request for rehearing.

Presumptively the 9th Circuit will return the case to Judge Wu at the federal trial level and Wu will determine the grace period for lien claimants to "activate" their liens with a $100 payment to the state if they wish to pursue lien enforcement. The court has 7 days from denial of the rehearing request to do so.

Under SB 863, all liens with unpaid activation fees shall be dismissed as a matter of law as of Jan. 1, 2014. Judge Wu will need to decide if there is a grace period, and if so, how long.

So far the Angelotti case did not turn out the way the plaintiff lien claimants had hoped, and there is still more appellate room to maneuver in, though flying in that airspace is getting more and more expensive and the "TFR rings" more convoluted.

And while certainly there is more litigation to be had concerning SB 863's heavy handed way of dealing with liens, the parties have queried the system. They don't have to write down a phone number. It was a "good call" though the answer wasn't what they wanted to hear.

Now it's time to go through the landing check list; the airport is in sight...

Reality and Perception

There was a debate in one of the LinkedIn forums the other day, which I can't seem to find anymore, about "reality." A big part of the argument going around was about the difference between reality, and perception.

I differentiate the two only on the basis of perspective.

Perspective is everything.

Horace Mann

Reality is an objective observation. Reality can be measured. It is either on or off. It's nemesis is fantasy.

Perception may encompass reality, just as much as it may encompass fantasy. Perception is a subjective observation. The experience is personal, and filtered through one's experiences, which may generate bias and opinion.

The subject of lien filings in California was, and continues to be, a sore one to vendors, payers, and the government.

SB 863 introduced radically different qualifications for making claims of lien against compensation cases, introducing filing and activation fees, along with alternative medical bill resolution processes.

The reason for these changes was the perception that liens were clogging the system, denying injured workers of dispute resolution services as a result, and costing the payer community untold millions of excess and unnecessary dollars.

The reality is that no one actually knew, or knows now, exactly how many liens there were, or are, how many actually end up before a workers' compensation judge in place of an injured worker's dispute, how many get settled, how much the value is in both gross and net numbers, and whether or not in fact (not perception) these liens clog the system.

We do know the quantity of liens actually filed and/or activated.

But everything else is anyone's guess.

Division of Workers' Compensation spokesman Peter Melton said in an email to WorkCompCentral on Friday the division doesn't know how many viable liens are in the system, because many have been negotiated out or sold to third parties.

And unless a lien claimant notifies the Workers' Compensation Appeals Board that a lien has been resolved, it will show up in the system even though the provider is no longer pursuing the claim.

The 2011 Lien Report by the Commission on Health and Safety and Workers' Compensation provides some information on the average amount claimed per lien. According to the report, the average amount claimed per medical lien was $7,774 based on a 2010 survey of claims adjusters.

The WCIRB in its November 2014 SB 863 Cost Monitoring Report said the average amount demanded for all liens in 2012 was $6,009. For 2013 and 2014, the average was $6,662. The WCIRB report did not break down average cost by lien claimant type.

These are all very nice numbers, and demonstrate the amorphous nature of the problem - in workers' compensation we tend to solve problems that we don't understand because our perceptions govern our actions, not reality.

The California lien issue hit a lot of emotional nerves.

Payers objected to "phantom liens" - claims that arise years after a case is closed because some entrepreneur purchased a book of receivables that may or may not have been previously resolved. Payers ultimately decide it's cheaper to throw money at the paper than to litigate and risk being ultimately liable anyhow. This engenders more of the same...

Vendors argued that payers don't take bill resolution seriously and lien claims are necessary to ensure payment at some point in time in the litigation.

Neither position is supported by fact, even though the state has had a computing system for 25 years that was originally designed to manage lien claims (the Electronic Data Exchange or "EDEX"). EDEX is still operational even though much of its function has been merged with the Electronic Adjudication Management System ("EAMS").

But for whatever reason, these systems cannot provide the division with precise numbers. We're left to conjecture based on some reasonable assumptions and assessments ... i.e, perception.

I'm not sure much of this matters in the end anyhow.

We're all in The System. The bottom line of our jobs, whether you're a vendor, a payer or the government, is to serve the two (and only two) intended beneficiaries - injured workers and employers.

We can't prevent accidents (they are called accidents for a reason, 'An unexpected event usually with negative and harmful consequences.'). We can't make everything (anything) perfect.

Our job is to make it better than it might have been had we not worked on it.

It's pretty simple. Accidents hurt people and they cost money. Our jobs are to minimize that impact.

Horace Mann, in 1859, said, "Be ashamed to die until you've scored a victory for Humanity."

I think he meant, "Leave the world a better place."

In other words, "Clean up your mess for the next person that occupies this space and leave a mint on the pillow."

That should be the only reality that matters.

The Sandbox

In California we have lien claimants - vendors of goods or services not directly a party to a workers' compensation case but who nevertheless attain party status to participate in litigation upon the filing of a piece of paper making their claim, and paying a fee.

Other states have similar procedures but call them different things.

In Minnesota, such participation is called "intervention" and an "intervenor" files a "motion" for such privilege - but basically it all works the same. An intervenor has no independent rights and is dependent upon the case in chief.

Those derivative rights also mean that special procedures can be instituted without offending the basic principles of due process and right to be heard, which means that the vendor needs to be on top of things in order to enforce payment claims.

So when the statute says "appear" then the vendor needs to show up - otherwise dismissal of any derivative rights becomes imminent with no further recourse.

That's what the Minnesota Supreme Court ruled.

In Sumner v. Jim Lupient Infiniti, the Court said that under Minnesota law, a provider has no right to initiate a reimbursement claim – it can only intervene in a claim filed by the claimant.

Once the provider files a motion to intervene, Minnesota Statutes Section 176.361 says that the providers "shall attend all settlement or pretrial conferences, administrative conferences, and the hearing" unless a stipulation has been signed and filed, or the care provider's right to reimbursement has otherwise been established.

The statute also provides that the intervenor's "failure to appear shall result in the denial of the claim for reimbursement."

Generally, the statutory use of the word "shall" denotes that something is mandatory, the court observed, and a majority of the justices reasoned that the words "appeal" and "attend," as used in Section 176.361, were synonymous.

Thus, the court said if an intervenor does not show up for a hearing, its claim can be denied.

What the court is really saying (and what courts around the country that deal with ancillary rights in comp cases are really saying) is that workers' compensation is about the injured worker and the employer.

Everyone else intervenes to do something to that basic relationship. But there is no direct connection because without the injured worker, and without the employer, there is no workers' compensation.

And because of that, unless there is some statutory or contractual relationship that alters that connection, there are no rights.

Whether or not one agrees with that position is irrelevant because that's just the way it is. You either want to play in the sandbox, or you go to some other playground.

Nausea On Final

John Swan, Director of Sales and Marketing for DocuCents, flew home with me early Saturday morning from the Summer California Applicants' Attorneys Association conference in Las Vegas.

We had a dinner meeting the night before and of course drank more wine than reasonable people should - but this was Vegas...

The plan was to meet in the hotel lobby at 5:30 a.m., get a cab to Henderson Executive Airport, and be wheels up by 6:30 a.m. before the desert got so hot that density altitude would become a problem (for non-pilots, density altitude is how high the airplane thinks it is as a consequence of temperature and other factors; the higher it is, the less performance available to a piston aircraft so climbing becomes compromised).

I woke up with a slight headache, showered, and reported for duty. Swan was ready to go as well. Neither of us ate anything before take off.

Swan is an enthusiastic flyer. He likes small airplanes. I doubted his ability to stay awake during the flight because of altitude, consumption of alcohol the night before and lack of sleep. He discounted my concerns however, stating he would be awake the entire flight despite my opinion that altitude would deprive his brain of oxygen, already challenged by the prior night's activities.

I should have know something was up when we jumped the cab and the driver didn't know where Henderson Executive Airport was - oh boy...

We eventually made it to the airport, the long way due to the cabbie's reliance on unreliable GPS, and after a careful pre-flight we were on our way.

Swan passed out at about 5,000 feet en route to our cruise altitude of 8,500. He awoke momentarily a couple of times, but otherwise was snoring. I was dehydrated so I gulped a few bottles of water during the hour and half flight while Swan slept peaceably.

Oxnard was overcast as anticipated so I requested the ILS 25 approach.

"Bonanza Six Six Four One Mike, fly heading two one zero, descend to four thousand five hundred feet, expect approach clearance with the next controller," came the order from So Cal.

And then it happened - all that water I had gulped to cure my dehydration on an empty stomach wanted to come back up, probably with a few particles of undigested food from the night before.

I woke up Swan, and concentrated really hard, breathing deeply, trying to keep everything down. Of all the times to get sick, preparing for an instrument landing is NOT THE TIME TO GET SICK! I couldn't even reach the barf bags...

Fortunately my zen-like focus quelled the queasiness, and I made an otherwise uneventful landing, and I actually felt quite fine on final approach.

And yesterday the U.S. 9th Circuit Court of Appeals affirmed SB 863's imposition of a lien activation fee in Angelotti Chiropractic v. Baker.

The appellate court said that there was no constitutional issue and that SB 863's lien activation fee was not against the law. The court lifted the injunction and took the initiative to dismiss the Equal Protection claim.

Lien claimant representatives are stunned. SB 863 supporters are ecstatic.

Questions loom: What about all those pending liens that weren't activated during the injunction period? What about the payment system - will it be able to handle a predicted rush of backlogged payment requests? Are there going to be temporary rules to deal with this (at least Division of Workers' Compensation spokesperson Peter Melton told WorkCompCentral that there will be further announcement on some procedure in the next couple of weeks)?

Noted defense attorney, Richard "Jake" Jacobsmeyer in an email to interested persons summed it up nicely, stating, "Lien claimants are now in something of a no man’s land with the faint hope that a further appeal may save them from the lien activation cost but the compliance clock will probably be ticking and once it stops, the jig will be up on their liens."

So there's panic in the lien-represented community. The stomach full of gulped water is gurgling. It's feeling a bit uncomfortable.

Take a deep breath though, and exercise some zen-like concentration.

What has happened during these past 19 months that Angelotti was pending? During that time period pending liens could have (and should have) been activated without paying any fee and they would have been decided. We don't know how many cases have already been through the gauntlet and are now out of activation fee burden.

Indeed, post SB 863 medical bills are subject to Independent Bill Review. We know that IBR has been, compared to estimates, largely underutilized, suggesting that what gets paid is not worth appealing when there's a fee involved and unknown recovery prospects.

Will the Angelotti case further discourage medical providers from treating workers' compensation patients? I suggest that's not an issue and that any medical access problems have nothing to do with being able to prosecute a lien - those issues are much more complex than recouping an account receivable years after it was due...

Will there be any further lien-based system savings with the Angelotti decision? I doubt it. I think those savings have all been realized, and the actual filing fee for liens post SB 863 is more responsible for that cost containment.

In short, though the court's decision is perhaps surprising, in the big picture it doesn't really mean a whole lot except to a few vendors with small liens, such as photocopy services.

After we put Forty One Mike away in the hangar I took Swan to the parking lot to meet his ride, and I returned to the hangar.

As I pulled my truck up in front of the hangar the nausea returned in shockingly quick manner and I barely got out the door before expelling water and a few undigested chunks onto the ramp.

Yech.

But I felt better and went on a bicycle ride.

A Grammar Lesson

California has its rather unique "lien" system, where a vendor of services or goods to an injured worker can enforce payment by asserting a lien against a claim or case.

SB 863 inserted provisions into the process requiring payment of a filing fee, or for those liens already pending in the system but not yet resolved, an "activation" fee before the issue could be brought to a workers' compensation judge.

Both fees have been challenged in court and there are cases pending on the constitutionality of these provisions.

In the meantime, the lien fees were credited with reducing system costs a whopping $690 million dollars, nearly 40% than the $480 million that was originally projected by the Workers' Compensation Insurance Rating Bureau.

Filings dropped precipitously, lien hearings fizzled to a blip on the screen, and the system proceeded along with its other dysfunctional, frictional, processes.

Many were declaring early success and the defeat of those pesky lien claimants.

Then something happened - a statute of limitations showed up.

Lien filings all of a sudden surged, increasing 73% in the first quarter of 2015 compared to the same period in 2014, and 34% more than the last quarter of that year.

The Division of Workers' Compensation has had to make adjustments all along. One court ordered the activation fee stayed pending a hearing on its validity. Another court refused to inhibit collection of the filing fee.

Lien claimants complain that payers don't deal with them fairly, adequately or in good faith.

The payer community argues that lien claimants get in the way of the case in chief, assert ridiculous if not fraudulent demands for payment, and the process encourages nefarious behavior.

Nothing in workers' compensation highlights the crazy dysfunction of the system better than the lien claim debate. Even lien claimants themselves disagree on how all of this affects their positions in the system.

Reid Steinfeld, in-house counsel for the Calabasas-based receivables firm of Grant & Weber, told WorkCompCentral Thursday that anyone who provides a reasonable and necessary service to an injured worker on a lien basis deserves to be paid, but he didn't think it was necessarily unconstitutional to require the service provider to pay for the privilege of getting the lien claim resolved.

The sad part of this entire argument is that it is a distraction to the primary mission of workers' compensation; that is, "workers' compensation."

The system is aptly named. I've argued in the past, as has fellow blogger Bob Wilson, that renaming the system to reflect a better motivation would help steer processes in the right direction. I still believe that, but as the system stands in its present form, it is "workers'" (that's plural possessive for those who forgot about third grade) "compensation" (money, benefits or remuneration).

Let's break that down to it's basics.

"Workers'" as I said is plural possessive. That means that every worker regardless of status (that's the plural) essentially owns something.

That "something" is "compensation": "something given or received as an equivalent for services, debt, loss, injury, suffering, lack, etc.; indemnity."

Somewhere along the way we forgot about this basic element. Others who are not workers became infused with rights to compensation.

Why do vendors have to "lien" a case in the first place? Is it because the underlying reason for benevolence in the system is that injured workers can't be trusted to pay their own providers? 

Or is it because the vendors can't be trusted not to harass, hassle, and threaten people in desperate times to extract an unfair payment?

Or a combination of the above and other reasons?

I don't have an answer to these questions, and perhaps you don't either. I say it doesn't matter - we have what we have.

Workers' compensation is like the ocean tide. It surges up and it recedes back down. It is never stagnant. Sometimes the workers' compensation tide surges too much and floods big areas creating a mess. Sometimes it recedes much further than is normal or comfortable and leaves harbors dry.

But when you come to the table as either a payer, provider, worker, or whomever, remember that you are in the "workers' compensation" system - that's a plural possessive description. It's not yours, mine or anyone else's compensation; it's the "workers'".

IBR, Filing Fees and Liens

Probably the single facet of SB 863 that has the greatest bragging rights is its effect on liens.

Providers who frequented the lien provisions of California workers' compensation law certainly aren't enamored with the heavy handed manner in which SB 863 beat lien filings down with filing and activation fees, and the alternative dispute resolution process called Independent Bill Review (which also has a process fee attached of $250), but proponents of the reform law certainly can boast of success.

At the Division of Workers' Compensation's Annual Educational Conference yesterday in Los Angeles, the administration said that 469,000 liens were filed in 2011, 219,000 in 2013, and it looks like about 194,000 in 2014 based on numbers for the first four months of 2014, when providers filed 64,808 liens.

IBR is, by the administration's account, underutilized. Through November 2014, service providers submitted just 2,827 IBR requests.

George Parisotto, acting chief counsel for the DWC’s Legal Unit, said the administration expected the IBR process to be used more than Independent Medical Review.

There were 188,864 requests for IMR through August 2014, according to data in materials presented to conference attendees.

This makes sense to me because there is no fee for injured workers to seek IMR, while providers seeking more reimbursement on their bills have to go through a couple rounds of the payor's bill review within specified time frames, and if not satisfied, then must pay $250 (with some exceptions) for IBR, before paying another $150 to file a lien if a dispute remains.

But, those that do avail themselves of IBR end up much more successful increasing payments than injured workers seeking treatment decisions reversed.

Providers who use the IBR process get paid more than they were originally offered, and consequently are reimbursed the application fee for the service, the DWC statistics show.

Out of 508 decisions issued through July 2014, reviewers for IBR contractor Maximus Federal Services found providers were entitled to more money 59% of the time. That trend is holding true on the preliminary numbers through the end of 2014 too, said Katy Lind Evelyn, a registered nurse and nurse consultant at the DWC Medical Unit.

Disputes about payments for physician services were resolved in favor of the provider in 167 out of 266 cases, or 63%. Disputes about the category classified as “multiple” in the DWC data were resolved in favor of the provider in 73 out of 88 cases, or 83%.

While payments to physicians accounted for the largest number of disputes, the average paid per IBR was only $418, the lowest of the five categories used by the DWC. An average of $1,953 was paid for the “multiple” category.

There were 67 disputes involving hospital outpatient departments and ambulatory surgical centers. Of these, 31 were resolved in favor of the provider, who received an average of $3,443.

The greatest amount was paid in disputes involving invoices for inpatient hospital services. Although just three of the 25 disputes were resolved in favor of the provider, the average payment was $16,195.

Through July 2014, employers paid $385,360 in IBR disputes, an average of $2,308 per case, Evelyn said.

The biggest issue facing providers seeking reimbursement if blowing statutes of limitations - untimeliness of requests was the single most common defect observed by the DWC.

More than one-third of requests – 222 out of 642 – were not submitted within 30 days of receiving the response to the second bill review, as required by regulation, according to DWC.

102 IBR applications were rejected for being incomplete, 52 involved services not covered by a fee schedule, 41 were for dates of service not subject to IBR and 30 were for unauthorized services.

So, as with IMR, it seems that providers need further education on IBR and the bill review process in general.

The non-compliance numbers aren't alarming given the infancy of SB 863, and likely timeliness and incompleteness issues will resolve even further as people improve their work flows.

The DWC’s 22nd annual educational conference at the Los Angeles Airport Marriott concludes today. A Northern California version will take place at the Oakland Marriott City Center February 19-20.

Real Questions Unanswered

Now we're in the last quarter of the year, things are winding down, and the industry is still debating the impact of SB 863.

Yesterday some new data was released by the Workers' Compensation Insurance Rating Bureau on whether, and by how much, SB 863 has had on expenses in the California system and the verdict is that gross initial projections seem accurate, but the breakdown of where those savings came from is different than expected.

The cost of liens dropped more than anticipated. WCIRB spokespeople put the reason on the filing fee and that is certainly a big component as many of the small liens, such as those from interpreting services and copy shops, aren't worth much more than the fee itself.

And while that certainly may be the case, I know by talking with some of these folks that they have been waiting on the sidelines for the fee schedules on interpreting and copy services - they weren't going to risk a $150 fee on a lien if they didn't really know the value of their services and can enforce payment; payors likewise aren't going to honor a bill for services that may not be "within fee schedule," and with no certain penalty for late or non-payment there's no reason to incur such costs.

Requests for Independent Medical Reviews continues to increase.

WCIRB reports a total of 37,083 applications were submitted for IMR in the first quarter of 2014, compared to 40,930 in the final quarter of 2012. In the second quarter of 2014, the number of applications climbed to 59,967. It increased again in the third quarter to 61,793.

Quarterly increase in IMR requests.

The WCIRB's projections that IMR would save $390 million a year were based on the assumption that, at most, 5,000 applications would be filed each month.

According to WCIRB, Maximus, the IMR review company contracted to perform the service, has a backlog of about 26,431 undecided cases at this point, but has completed more than 120,000 reviews, generating about $34 million in carrier payments so far, with the WCIRB projecting that the total amount carriers will have paid for IMR in the first two years of the program to be about $77 million.

Maximus shareholder equity past 5 years.

"The unanswered question is how much was saved by denying unnecessary medical care," the WorkCompCentral story this morning queries, stating that Greg Johnson, director of medical analytics for WCIRB, said the WCIRB simply can't answer that question.

Honestly, there's no way the WCIRB will ever be able to answer that question because it is not germane to IMR filings - we don't really know that IMR is denying unnecessary medical care. We only know that IMR is upholding Utilization Review denials, which may, or anecdotally more often than we admit, may not, be about appropriate care.

As I mentioned before, the anecdotal evidence suggests that UR is being used too often for cost containment rather than directing care. And frankly the amount of time it takes to get through a couple of UR denials and appeals, and then IMR review, denial and appeal, is incentive enough not to push for any particular treatment request - it's easier just to go to a general health doctor to get treatment for an ailment of "unknown origin."

And this is peripherally supported by current data the WCIRB reported.

The Rating Bureau projected that IMR would resolve disputes faster than going to the Workers' Compensation Appeals Board, which could reduce the average number of paid temporary disability days by 5% in 2013.

But the average number of paid TD days actually increased to 92.5 in calendar year 2013 from 88.6 in 2012.

Spokespeople for the WCIRB deflect, and state that this is due to getting the program up and running, and they expect the paid TD days to ameliorate; regardless nearly 90 days or three months is too long with or without IMR, particularly compared to nearly every other jurisdiction.

The dollar value of permanent disability indemnity is falling in line with projections - and that's understandable because the historical data on PD is robust; there's a lot of history in the data, but there are still many unanswered questions because it takes time for cases originating within the SB 863 era to get to final disposition where the information is reported.

My take away from the reporting is that uncertainty continues to dominate the California system - there just are too many components to SB 863 to say whether anything is actually working or not. Traditional analyses, in my opinion, aren't sufficient to explain the behavior patterns of system vendors because there are too many moving parts that have not settled into a business practice pattern.

In the meantime, while the insurance industry continues its narcissistic conversation about costs and expenses, the real questions are: a) are employers paying less for workers' compensation insurance now compared to before SB 863? and b) are injured workers getting better treatment, faster and more efficiently than before SB 863?

So far the answer to both is ....

no.

******************SHAMELESS PLUG******************

On December 6 at the Sheraton LAX Gateway hotel I will be presenting the WorkCompCentral Word on the Industry report, which will be followed by a debate between Department of Industrial Relations Director Christine Baker, Vons/Safeway VP of Risk Management Bill Zachry, applicant attorneys James Butler (No Cal) and Robert Rassp (So Cal) with a special motivational appearance by injured worker Dwight Johnson. We'll also be presenting the Comp Laude Awards, there will be networking, food, drink, music, dancing and all of the other year end, holiday event accoutrements. Tickets are on sale now and going fast (claims adjusters call for pricing).

It's Not About Them

While SB 863's introduction of the controversial lien filing and activation fees has been credited with reducing the quantity of filings, law enforcement crackdowns on allegedly fraudulent vendor practices demonstrate how the lien culture in California work comp became so pervasive and caused this legislative reaction.

Dr. Douglas J. Abeles of Castro Valley was arrested on 31 felony charges for allegedly submitting bills for the review of drug test reports under the names of various providers who have said they did not submit the bills, were not aware they had been submitted and were never paid by Abeles.

A warrant filed Oct. 22 in the Alameda County Superior Court alleges that about 30,000 bills totaling $73,545 were sent to six carriers, including State Compensation Insurance Fund, Zenith Insurance Co., Berkshire Hathaway Homestate Cos., Liberty Mutual Insurance Co., Travelers and Fireman's Fund.

WorkCompCentral reporter Greg Jones queried the Electronic Adjudication Management System and found 417 claims totaling $994,520.15 from Abeles and his companies, Redwood Laboratory Management and Physicians RX Network.

The rapid rise in Abeles' and related entity lien filing volume shows how the culture in California promotes this excessive behavior.
https://ww3.workcompcentral.com/education/course/course_pk/830
From 2009 to 2011, 13 claims were filed under the name "Douglas Abeles" with a combined value of $111,630. Six claims were filed under the name "Redwood Laboratory Management" in 2011 and 2012 with a total value of $9,231.

The remaining 398 liens, with a total value of $873,658, are in the name of "Physicians RX Network."

The EAMS data also shows a dramatic escalation in lien filing that started in 2010 and peaked in 2011.

PRXN filed just 10 liens from 2000 to 2008, according to the EAMS data. The total value of these claims was $12,550. In 2009, PRXN filed 45 liens worth a combined $90,615, while Abeles filed a single claim for $11,569.

"It's not my fault, but it is my responsibility."

In 2010, when prosecutors allege the billing scheme started, PRXN and Abeles filed 153 liens for a combined $396,353. The next year, PRXN, Abeles and Redwood filed 202 claims seeking a total of $474,768.
https://ww3.workcompcentral.com/education/course/course_pk/830
At that point, the lien filings all but stopped. Redwood filed two claims for a combined $3,488 in 2012 and PRXN filed three claims for a combined $4,473, according to EAMS data.

It seems to me that the perception of little risk in getting caught because of the veil of "no fault," and the easy road to collections via an administrative dispute resolution system that recognizes vendor "rights," is a combination that is responsible for clogging the system.

We all have been saying for a long time that workers' compensation is "broken."

I disagree. Work comp isn't broken - the system will work as designed if we allow it to.

But it won't work as we "intend" it to - those of us that aren't "essential" to the grand compromise: i.e. employer, employee, and government - get in the way with OUR intent.

Doctors are necessary to render medical treatment, but the system isn't about them.

Attorneys are necessary for dispute resolution, but the system isn't about them.

Medical equipment and pharmaceutical vendors are necessary to supply requested treatment, but the system isn't about them.

Interpreters are necessary to assist non-English language workers understand, but the system isn't about them.
https://ww3.workcompcentral.com/education/course/course_pk/830
Insurance companies are necessary to spread the risk and ensure no single employer endures financial catastrophe, but the system isn't about them.

The system is about employers, workers, and the government is to stitch it all together to keep them honest.

It's no fault of the employer (with rare exception) that an employee gets hurt.

It's no fault of the employee (with rare exception) that he or she got hurt.

It is the responsibility of the rest of us (including the government) to keep it that way.

Certain Uncertainty

One of the major cost drivers in workers' compensation, particularly in California, is uncertainty.

Each major reform bill in the past 20 years has introduced more and more uncertainty into the system, and before the dust settles and folks have adjusted some other solution is identified to resolve a problem that we didn't know about...

Which leads to court intervention, interpretation opposite legislative/regulatory intent, more adjustment, increased uncertainty, etc.

It's a vicious cycle.

One particular example is the challenge to the lien fees introduced by SB 863, and in particular the Angelotti case that calls into question the constitutionality of the lien activation fee of $100.

In short, SB 863 introduced a filing fee of $150 for new liens against cases, and an "activation" fee of $100 for liens that had already been filed in cases but had not yet been adjudicated prior to the effective date of SB863.

The plaintiffs in Angelotti v. Baker brought suit for declaratory relief in Federal District Court and about this time last year U.S. District Court Judge George H. Wu issued a stay on the enforcement of the activation fee on the grounds that it violated the parties' constitutional equal protection rights, while dismissing causes of action based on the improper takings and due process claims.

The matter was appealed to the 9th Circuit Court of Appeal and is pending a ruling.

The wheels of justice of course turn slowly so that the court system can allow as much argument as interested parties wish to provide in order to allow the justices to be as fully informed and vetted on an issue as possible.

Sometimes this leads to disagreement in and of itself, as has been the case with the 9th Circuit's allowance of various new amicus parties to the Angelotti case.

The California Chamber of Commerce, State Compensation Insurance Fund, California Workers' Compensation Institute and American Insurance Association all petitioned the court for permission to file amicus briefs in support of the state.

The chamber's brief supports Wu's decision to dismiss the takings and due process claims.

A brief filed jointly by AIA and CWCI argues there is no evidence that the medical plans exempted from paying the activation fee are involved in the "lien mischief" the fee is intended to stamp out.

And SCIF argues in its brief that a medical provider is incentivized to "take a shot at making a profit" by filing a lien. The entities exempted from paying the activation fee are already out of pocket for any amount claimed in a lien, according to SCIF.

SCIF also asked the court for permission to participate in oral briefs.

SCIF's request has drawn the rancor of the plaintiffs, who say that request skews the balance of argument before the court.

In particular, the California Society of Industrial Medicine and Surgery was the only amicus to file a brief supporting the lien claimants, but did not request oral argument participation.

The 9th Circuit on Oct. 23 granted SCIF's motion to participate in oral arguments, "subject to defendants' willingness to share their allotted time with SCIF." Similarly, the court said it would grant motions by CWCI, AIA and the Chamber of Commerce to participate in oral arguments only if the defendants are willing to share their allotted time.

Likewise, the court will grant a motion by CSIMS if the plaintiffs will share their allotted time.

Plaintiffs and defendants will each have 20 minutes to make their case during proceedings that begin at 9 a.m. on Nov. 18 in Pasadena.

In the meantime, the system is held in abeyance, uncertain as to what the outcome will be, and how to react once a decision is rendered, assuming a court decision is definitive enough to draw a clear line.

The unfortunate part of this uncertainty is that the ones that receive the least benefit, the injured workers, are harmed the most.

Here's the deal - work comp is really very, very simple: injury occurs at work, injured worker to get benefits; employer pays for that protection.

Everything else just gets in the way.

Perhaps getting rid of "exclusive remedy" for everybody else in work comp other that the actual injured worker and actual employer would help. Work comp is meant to be the 'sole remedy' for the employers and their employees - not the carriers, not the providers, not vendors...

When you get down to it, the entire lien process has evolved over time into complete nonsense. It can be all very simple: "You authorize the work, I do the work, I send you a bill. If you don't pay, I will see you in court."

Likewise the inverse is true: "You do unauthorized work, you send a bill, I don't pay, see you in court."

Trust me, you do not want to be there (small claims judge or jury of your peers), in court, in front of the injured worker, hopefully with the employer standing beside them.

Because nothing irritates a business owner more than paying for something and then not getting it.

The uncertainty of recovery in a civil court would introduce certainty in the work comp system by removing opportunists who see work comp as a guaranteed payment, even if it is only ten cents on the claimed dollar...

Procedural or Substantive?

When a new law passes there are always issues concerning whether the law also applies to cases that are pending. If the new law doesn't specifically say it does apply to pending cases, then whether it does depends on whether the provisions are jurisdictional/procedural or substantive.

In general, substantive law prescribes duties and rights, and procedural law concerns the means and methods to apply and enforce those duties and rights.

New legislation may not deprive one of the remedies afforded by the existing cause of action. Thus, a substantive amendment will not apply to a statutory cause that accrued before the amendment’s effective date.

In workers' compensation, substantive law is generally controlled by the date of injury pled or discovered. But in the instance of a lien claimant, for instance, the applicable date may be the date services were provided since a lien claimant has separate status from, though dependent on, the injured worker.

If the law is procedural, then it's another story and the law will apply to an existing dispute.

So it's interesting that a medical billing dispute that existed prior to the passage of California's SB 863 will be heard by the 4th District Court of Appeal to determine if it belongs in Independent Bill Review rather than subject to a trial judge's award.

The parties in CIGA v. WCAB (Elite Surgical Care Centers) will present oral argument to a 4th DCA panel at 9 a.m. on Nov. 12 as to whether the changes made by SB 863 in the resolution of billing disputes apply - i.e. whether such disputes go to IBR or not.

Are those changes procedural, simply changing the means and methods to apply in the resolution of the dispute?

"Hmmm ... procedural or substantive?"

Or does SBR arise to a substantive change that involves the duties and rights of the parties?

Elite Surgical Centers and two other commonly managed ambulatory surgical centers collectively filed several thousand liens based on services they provided to injured workers in the years leading up to the passage of SB 863.

Several of these liens were consolidated in 2009 and a Workers' Compensation Judge issued findings as to the reasonable fee the providers could collect on epidural injections against eight insurance carriers.

The carriers sought reconsideration, which the WCAB denied last October. The carriers then petitioned for judicial review in December, and the 4th DCA granted review of the case in April.

The California Workers' Compensation Institute has filed an amicus brief in support of CIGA and the California Society of Industrial Medicine & Surgery has filed an amicus brief in support of the WCAB.

My prediction is that the 4th DCA will find that the matter is procedural, and will invalidate the WCJ's award, simply based on the fact that the court has an interest in the dispute.

Of course that's no reason to think the court will rule that way. But that's where I'm putting my money.

************

In the meantime there are less than 2 weeks to make your nominations for the Comp Laude Awards - categories include injured worker, employer, and all the usual industry positions. Nominations close 10/12, and winners will be announced at the WorkCompCentral Comp Laude Gala on 12/06.

Proposed CA Copy Rules Nonsensical

You already know how I believe that California workers' compensation is so sensationally micro-managed with complex regulations that the attempts at generating savings ends up costing more. I think this is what the proposed copy service fee schedule regulations are about to accomplish.

Here are the issues:

Define "Authorization"

The Statement of Reasons for proposed regulation section 9980 states, “It is necessary to define each of the key terms used in the copy service fee schedule to ensure that their content and meaning are clearly understood by the workers compensation community.”

The word “authorization” is used several times in the series of new regulation sections, yet there is no definition of “authorization” in regulation section 9980 (Title 8, California Code of Regulations), or anywhere else for this important term. If a term is going to be used in several different places for different purposes there should be a definition unless there is a clear and unambiguous general meaning.

In the case of these proposed regulations there is no clear, unambiguous meaning of "authorization" because of the contexts in which the term is used.

What California Code, Regulation or authority is referred to when the regulations speak to using an “authorization”? While many copy services depend upon Evidence Code 1158 for the use of an “authorization,” that Evidence Code section clearly does NOT apply once the Application for Adjudication has been served and a case number assigned, or the defendant has appeared on the case: "Whenever, prior to the filing of any action or the appearance of a defendant in an action, an attorney at law or his or her representative presents a written authorization therefor..." [emphasis added].

In other words, the term "authorization" as defined by Evidence Code section 1158 doesn’t apply to the very situations described in the proposed fee schedule.

That’s a problem… and the DWC has no authority to change the Evidence Code or incorporate any other Codes other than the Labor Code into its regulatory references, and even then only with whatever express authority that is contained in the Labor Code. This not nit picking. Rather than provide “clarity,” I see this and other parts of these proposed regulations creating entirely NEW copy service disputes and friction within the system (ergo more costs).

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The Declaration of Completion

Section 9981(b)(2) -  Bills for records obtained by the so called “authorization” must include a declaration of completion of records pursuant to section 9984(a)… And 9984(a) requires SOMEBODY (otherwise completely unidentified) sign an affidavit under penalty of perjury itemizing in detail all the records produced, etc.

So, who is to sign this affidavit, the COPY SERVICE? Because if it’s the Custodian of Records, what authority will the copy service have to COMPEL the Custodian to sign such a thing? Again, what is the authority for the “authorization” in the first place? What Code or Regulation is the DWC referring to so that copy services can OBTAIN this CRITICAL document from WHOEVER should sign it, and that MUST BE attached to the copy service Bill for services? The copy service can’t sign such a declaration because they aren’t PRODUCING any records – they are only COPYING the records. 

Consequently the bill from the copy service is apparently INVALID and not subject to payment if the copy service was naïve enough to use an “authorization” - as described in this regulation - to obtain the records, and was not able to convince the custodian to sign one of these declarations.

Record custodians are NOT going to sign a Declaration attesting to records produced by a signed authorization. They don’t have to, and they know it.

Curiously though, the proposed regulations fail to require the defense to certify the records they produce to the applicant. 

Billing Codes

I can't make sense out of the 9981(b) - Billing Codes. I don't know what HCPHCS level 2 codes are. I went to "findacode.com" to look these up - I don't see anything there about copy services. Maybe "temporary codes," but even that doesn't make sense. Listen, I was an English major in college, and yeah I have an MBA so I can read a balance sheet, but I guess I just don't understand billing code nomenclature and process application.

There are charges listed in Regulation 9983 in subsections: (1), (2), (4)(a), (4)(B), (4)(C) and (4)(D). How would the three (or is it just two?) Billing Codes listed in 9981(b) be applied to the various approved charges in 9983? The Statement of Reasons for the regulations said the Regulations were to simplify the copying industry, and reduce dispute. Then why start with an unintelligible Billing Code section and require compliance on every copy service bill?

Allowable Services

Section 9982 (a) through (d) describe several situations where services are “allowable,” but does this mean services are allowed if ANY of these situations arise, or only if ALL of the situations arise?

That’s important - is the copy service “all clear” if no records were produced under regulation 10608 within 10 days (plus mailing time), or must the copy service ALSO wait for 30 MORE days? This is not giving me “clarity”… Especially since (b), (c) and (d) are situations where services are allowed, but (a), (e) and (f) are situations where services are NOT covered by the fee schedule, or are NOT allowed. 

And, nobody OTHER THAN A PROFESSIONAL PHOTOCOPIER would have authority to “produce” or “serve” records on the applicant under 9982 when the “request” is made via a form or document that is clearly titled “Authorization and Request to Produce Records Under Labor Code Section 5307.9 and Regulation 9982(c).”

In other words, if the applicant makes their request to be served with records that are in the “Claims Administrator’s” possession, as required by Labor Code 5307.9 and these regulations, with something called an “authorization,” it would FORCE the Claims Administrator to produce the AFFIDAVIT or DECLARATION under Section 9984(a).

At least I would assume the California Applicant's Attorney Association will interpret it this way, or something similar, because they want some sort of ASSURANCE that all the records were served - and not tampered with.

I've written before that mistrust is what drives workers' compensation - so let's create more mistrust, more procedural litigation, more cost and expense that was supposed to be controlled by this fee schedule...

139.32 Declaration

My last rant: I like the declaration about not violating LC 139.32, but nobody has a clue how that code section is to be interpreted relative to copy services, so that requirement doesn't seem like it's worth anything but another dispute driver. DWC should provide some clarity as to how LC 139.32 must be complied with (by copy services) in this regulation if we are to cleanup the copy service industry. 

The copy service fee schedule has been a long time coming since SB 863 passed in 2012 and most of the debate has been what the actual fees were going to be. I think most of the debate needs to be how to make this work without unduly burdening the entire system with more nonsensical detail that doesn't get to the heart of what the underlying issue was - a level playing field for copy services and reduction of friction in the system.

The DWC will hold a public hearing on the proposed rules on July 1 at 10 a.m. at the Elihu Harris state office building, 1515 Clay St., in Oakland. Written comments will be accepted until 5 p.m. on that day.