Thursday, January 31, 2013

Medical Networks and Indemnity Caps

California leads the headlines this morning with two very interesting, but unrelated, developments.

First, the Division of Workers' Compensation (DWC) in a public hearing held in Oakland on Wednesday said it is exploring the possibility of using the Department of Insurance or the Department of Managed Health Care to oversee entities providing physician network services.

There are arguments on both sides of the fence on this issue of course.

Greg Moore, president and chief executive officer of Harbor Health Systems in Irvine, said he is concerned that allowing the Department of Managed Health Care (DHMC) to regulate MPNs would create problems in California similar to what is happening with efforts to implement preferred provider program rules in Illinois.

Moore said the proposed rules in Illinois “reflect very much of a group health influence” with certain standards for approval dealing with co-pays and other issues “that have nothing to do with workers’ comp.” The concern is that this would make it more difficult to establish and maintain networks in work comp.

The other side of the argument is that allowing the DMHC to perform the oversight is that they have experience and expertise in the financial health of medical networks.

In response to the failure of several physician organizations in the 1990s, California lawmakers in 1999 passed SB 260, creating a Financial Solvency Standards Board within the Department of Managed Health Care. Organizations are required to submit quarterly reports and take corrective action if they don’t meet solvency requirements.

A white paper by California’s Integrated Healthcare Association said the regulation has made the group health provider network more stable.

I haven't studied the issues enough to take a position on the proposal, but what I do find fascinating is that this represents another step in the evolution of workers' compensation towards the unification of medical care.

The concept of universal care, 24 hour care, single stop shop, etc. has been floating for a couple of decades now with very little progress.

But the passage of the Affordable Care Act, the signing of HB 1 back in February 2009, and other Federal health related laws and regulations including ERISA, have accelerated the fusion of workers' compensation medicine and general health medicine. Outsourcing MPN oversight to a health care related agency is just another step towards this outcome.

On another note, the First District Court of Appeals (1st DCA) ruled yesterday that the limits of Labor Code section 4656 apply to benefits received by a public safety officer (police officer in this case) under Labor Code section 4850.

To the uninitiated, 4656 essentially limits temporary total disability indemnity to 104 weeks (though there are exceptions) from the start of the first payment. 4850 gives public safety officers a salary continuation benefit in lieu of temporary total disability indemnity (i.e. full weekly salary rather than the capped TTD weekly benefit) for 52 weeks.

The net amount to the injured officer can be dramatic.

And the cost of that benefit can also be dramatic in comparison to TTD.

The 1st DCA, in County of Alameda v. WCAB (Knittel), No. A135889, concluded that salary continuation benefits paid to Alameda County Deputy Sheriff Bryan Knittel counted toward the Labor Code's 104-week limit on payments for an injury causing temporary disability.

Police officer's associations are upset, arguing that giving public safety officers three years of benefits will "in many circumstances allow them time to recover and get back to work." Cutting off benefits after two years means that officers have less time to recover, which can effectively "force them out of the job and onto a disability retirement," thus forcing these people onto the public disability roles.

There are many scientific studies regarding disability status and return to work.

If a claimant isn't back to work after two years of being off work, they aren't returning.

That's pretty much the bottom line.

Time to move that person to the permanent disability roles.

Medical networks and public safety benefits - the complex world of work comp is ever evolving, constantly changing, and continuously entertaining.

Wednesday, January 30, 2013

Video and Disclosure - No Big Deal

Iowa is dealing with a typical issue in litigated workers' compensation cases in an unusual way.

By declaring sub rosa video (survelliance video) of an injured "medical evidence," the material is not protected from disclosure as being the "work product" of an attorney which would be protected by attorney-client privilege.

Workers' Compensation Commissioner Christopher Godfrey issued a declaratory order on Oct. 23, 2012 that was upheld by an Iowa district court Monday when the court denied a motion to stay enforcement of the declaratory order.

Consequently, surveillance of injured workers by insurers and employers must be released when requested by the workers or their attorneys rather than being held until the injured workers are questioned about their claims.

This has the defense side rankled because it eliminates the surprise attack and gives the claimant side an opportunity to correct any mal-perception.

The legal theory is that sub rosa video is obtained either in the course of, or in anticipation of, litigation, and thus is not subject to the records release statute.

Godfrey said in his ruling that Iowa Code Section 85.27 "requires release of all information concerning a claimant's physical or mental condition." Iowa-based insurance organizations argue that the section should be "read as applying to the release of medical evidence and information held by third parties."

Godfrey said the section applied to medical evidence and information held by third parties, but said the section is not limited to evidence held by third parties. "The section...references all information that an employee, employer, or insurance carrier has access to concerning a claimant's physical or mental condition," Godfrey wrote.

"Therefore, the issue presented is whether surveillance recordings and reports are evidence of a claimant's physical or mental condition, which is required to be released without privilege if requested under Code Section 85.27(2)," the commissioner said.

The language in question is:

"Any employee, employer or insurance carrier making or defending a claim for benefits agrees to the release of all information to which the employee, employer, or carrier has access concerning the employee's physical or mental condition relative to the claim and further waives any privilege for the release of the information. The information shall be made available to any party or the party's representative upon request. Any institution or person releasing the information to a party or the party's representative shall not be liable criminally or for civil damages by reason of the release of the information. If release of information is refused the party requesting the information may apply to the workers' compensation commissioner for relief. The information requested shall be submitted to the workers' compensation commissioner who shall determine the relevance and materiality of the information to the claim and enter an order accordingly."

Godfrey concluded that "surveillance materials in workers' compensation claims concern a claimant's physical or medical condition."

"The Division (of Workers' Compensation) is not aware of surveillance recordings and reports being used for any other purposes in contested cases before the division," Godfrey wrote.

While the defense representatives in Iowa told WorkCompCentral that they will appeal to the state Supreme Court, I don't see the ruling as a misinterpretation of the law, or a burden to the parties.

The claimant in a contested case has to make a request for the video first - the ruling does not mandate that the carrier release such evidence upon acquisition.

And while surprise attacks are an easy way to refute allegations of disability or other claim, sub rosa video is not without its evidentiary issues and doesn't, in and of itself, prove or disprove injury, disability, or any other contested issue. There needs to be corroboration, or at least some other testament under perjury for video to have any evidentiary weight.

In addition, such video is only a snap shot in time. The value of video is when there is a history of video evidence depicting activities which the claimant actively denies or against which there is a claim of harm or injurious exposure. The vast majority of sub rosa video, in my experience, has very little value in a litigated case.

In addition, the Iowa statute permits the party holding the video to request an in camera review by the court prior to release to "determine the relevance and materiality of the information" - this gives the defense an opportunity at a pre-emptive strike by demonstrating at the pre-trial stage the folly of a claim.

Occasionally video may depict a claimant shedding his or her crutches and engaging in some strenuous physical activity, but the reality is that this is a rare circumstance, and releasing this information is not going to seriously jeopardize the defense. Creative lawyers know how to set up a case for perjurious testimony.

Anticipating litigation, and being in litigation, are two different concepts. Maybe there's a reasonable explanation for the activity depicted in video and maybe not. Nobody likes a cheat - in most situations good video, regardless of the explanations for the activity depicted, will provide the trier of fact with the information necessary to refute the cheat. An early disclosure won't impact evidentiary conclusions, and may on occasion lead to the early resolution of a claim.

More often than not, in my experience, video is not going to make or break a case. The trial lawyer's skills (and the defense client's good practices) in meeting evidentiary standards is much more determinative in the outcome of a case.

From a legal analysis, Godfrey's interpretation seems solid. From a practical analysis, I see no particular impediment to defending against spurious claims.

Tuesday, January 29, 2013

SB 863, Despicable Behavior, Audits & Penalties

I talked to a lot of people at this past California Applicant Attorneys Association (CAAA) Winter Conference, as one would expect.

Of course there were plenty of attorneys - both applicant and defense. There were vendors too: photocopy service vendors, structured settlement consultants, book sellers, medical providers and their marketing and collections folks.

There are always unintended consequences when new laws are passed and this latest reform is no exception.

In speaking with people, an odd theme that emerged - getting paid by the carrier or administrator since the passage of SB 863, California's most recent landmark reform bill, has gotten considerably more difficult.

Surprising to me, the most common obstacle encountered in collection efforts, particularly by medical vendors and document reproduction companies, was the objection by the claims adjuster that a lien filing, or lien activation, fee had not been paid.

Quite often this objection is apparently being raised even when there is no reason, and no intent by the vendor, to file a lien.

Carrier/administrators are now using the new Labor Code sections 4903.05 (filing fee statute) and 4903.06 (activation fee statute) as a defense against payment even before any lien is filed or proposed for filing.

Worse, they are using this defense against paying their own doctors!

Yes, I heard more than one isolated report where the carrier's own Medical Provider Network (MPN) physician was told that unless he filed a lien and paid the filing fee that he would not get paid, and that the adjuster would not even talk with the provider's collections agent until the condition of filing/paying for a lien was completed.

This is preposterous behavior on the part of the carrier/administrators and if this practice is in fact becoming common place then the Audit Unit of the Division of Workers' Compensation (DWC) needs to step up enforcement in a prompt and heavy handed manner lest the entire system collapse from lack of physician participation due to these bone-headed tactics.

Title 8, Code of Regulations, section 10109 requires the claims administrator to deal with all persons, "including lien claimants" in good faith.

There is absolutely no requirement in any code or regulation section that mandates a vendor file a lien and pay either the activation or filing fee before negotiations or discussions can be initiated relative to bill resolution.

In my mind, failure to deal with such obligations is a failure in the duty of good faith as mandated by 10109.

Regulation 10106.5 provides that information indicating the possible existence of practices assessable as a civil penalty will invite an audit.

A civil penalty occurs under Labor Code section 129.5 where it can be shown that the "employer" (read carrier/administrator) "knowingly committed or performed with sufficient frequency as to indicate a general business practice" of, among other things, making it necessary to resort to adjudicatory proceedings in order to secure compensation, refusing to comply with "indisputable" compensation obligations, or acted dishonestly.

If this is found a penalty of up to $100,000 may be issued.

A failure in two or more similar audits constitutes a business practices violation and the Administrative Director is instructed to refer the offender to the Insurance Commissioner or the Department of Industrial Relations for license revocation.

And a possible $400,000 penalty may issue.

The carrier/administrator that is engaging in this behavior does so at its own peril, and I'm quite certain we will see an enforcement action publicized and reported in the news when one of these entities is hit with an audit and penalties per above.

My advise to any vendor that is experiencing this recalcitrant behavior on the part of carriers/administrators is to make sure that this behavior is documented. Have the claims adjuster put in writing that they will not negotiate on the bill unless and until a lien is filed with attendant fee and/or activation fee is paid.

If the claim administrator will not do so, then confirm the conversation with correspondence to that claims handler documenting the fact of refusal to negotiate conditioned upon lien filing and/or activation.

Stock up enough of this documentary evidence and send the package to the Audit Unit with a request for investigation. Instructions on how to do so are at

My advise to any claim administrator that is engaging in this behavior - keep your network of employment contacts fresh and active. You may need a new job shortly.

Monday, January 28, 2013

Professionalism in Comp Requires Constant Training

In California, as in many states, workers' compensation claim adjudication is an administrative system.

I have expounded upon the advantages of having an administrative system deal with claim litigation over a civil court process, namely as some other states such as Oklahoma ponder the creation of an administrative adjudication process.

One of the downsides to having an administrative process is that, technically, anyone can "appear" before the adjudicatory board. In California this board is known as the Workers' Compensation Appeals Board (WCAB).

While rules of professional conduct and code sections governing attorney practices would prohibit lay persons from representing other persons in most situations, in administrative claim adjudication, particularly in California practice, they are virtually inapplicable. There are some restrictions against lay persons representing the interests of injured workers, but the practice of using "hearing representatives" is well established.

Some hearing representatives have formal legal education and some are very, very good at what they do - in fact I have met some who were much more knowledgeable about work comp practice and much better at representing their client's interests before the WCAB than many licensed attorneys.

But they are the exception. Unfortunately, a large quantity of these people either lack sufficient training and education or just don't care.

This produces unprofessional work product, and causes the administrative system to bog down: arguments are illogical or are unsupported; briefs and petitions lack clarity, are full of grammar and spelling errors; and many times documents are not filed timely or served on the parties in accordance with procedural rules.

The WCAB is tired of the lack of professionalism in the practice of workers' compensation litigation, so I am impressed with and support the board's push towards cleaning up this aspect of the system.

At the California Applicant Attorneys' Association (CAAA) Winter Conference in San Diego this past weekend, the Commissioners pointed out that it's not going to be business as usual any longer, and that sloppy practices will be met with dismissals, and if abusive enough, with further discipline such as restrictions against appearing at board hearings.

Commissioner Marguerite Sweeney said that she has been "astounded" by the number of petitions coming before the board that are filed by non-attorneys and the "lack of quality and competence" in them.

Expanding on the theme, Chairperson Ronnie Caplane said, "please tell us what relief you want" in Petitions for Reconsideration.

This would seem to be very, very basic. Don't whine. Don't complain. Set forth your argument and let people know what you want - in short, clear, concise terms.

The folks who have decided to put their names on these documents, or are placed into a position of making arguments before judges and commissioners, need to step up their professionalism.

Sure the rules of evidence are lax in administrative hearings. But that doesn't mean you can dress like a slob. Wear a suit. Present yourself professionally. Address the bench and the opposition with respect. Learn to speak eloquently, articulately - avoid slang, make logical sense, and have support (case law, statutory or regulatory citation) for your position.

Become educated - there is a lot of course work available from all sorts of sources. WorkCompCentral (shameless plug) has hundreds of specialty courses on line and hosts over 20 live seminars and webinars every year presented by respected professionals; judges, attorneys, doctors who not only know their stuff but want you to know it too.

CAAA has their bi-annual conferences, LawWorm has course work, CEB and the State Bar also provide educational opportunities, and none of these are restricted to people with professional licenses. There's no reason that non-lawyers (and lawyers as well) can't have the training necessary to be competent and professional in workers' compensation litigation.

The workers' compensation bar can do a lot by itself to improve the professionalism of the practice by making sure there are training programs in place for new hires as well as ongoing training for established practitioners, whether attorneys or hearing representatives. The resources are there - it's simply a matter of accessing them.

Education isn't cheap. But losing a case or position because one isn't up to date on either the substantive or procedural law is a lot more expensive, particularly if it causes the loss of an ongoing source of case referrals as can happen with the defense side.

Caplane said she was happy SB 863 explicitly authorized the board to suspend the privilege of any non-attorney to appear before it. Her sentiment was backed up by Commissioner Alfonso Moresi who said the commissioners had "really wanted that piece of legislation and we're glad we got it."

We all have to acknowledge that workers' compensation is a very technical, complex area of the law that requires special knowledge and skills. It is up to us, the day to day people in the trenches, to make sure that matters that go before the board don't, as Commissioner Sweeney commented about petitions, have a "lack of quality and competence."

Friday, January 25, 2013

The Trend Against DR Dispensing Is About Cheating

Idaho has decided on a pre-emptive strike and enact rules and regulations concerning repackaged drugs before there is any evidence that the state's workers' compensation system has become infected with profit driven prescription practices.

The Idaho House Commerce and Human Resources Committee on Wednesday approved a regulatory proposal that would tie the payments for repackaged drugs to the original manufacturer’s average wholesale price and provide no separate reimbursement for the doctors who dispense the medications.

The trend to control repackaged drugs and physician dispensing has gained considerable momentum.

According to CompPharma, seven states prohibit physician dispensing. Ten states have regulations that attempt to control physician dispensing and repackaged drugs with pricing controls.

Other states have imposed variables such as time and quantity limits. For example, Arkansas limits physicians to dispensing a 72-hour supply and New Jersey limits doctor dispensing to a seven-day supply. Minnesota requires physicians to disclose their profits from dispensing to patients.

A bill pending in Maryland would authorize provider reimbursement only in situations where drugs are dispensed within 72 hours of an accident or the discovery of an industrial disease and would limit doctors to dispensing a 30-day supply.

Hawaii is contemplating a bill introduced this year that would set reimbursement for physician-dispensed repackaged drugs at the average wholesale price of the original manufacturer, plus an additional 40% for brand-name medications and 60% for generic drugs. This is similar to what was proposed, and defeated, in last years legislative session.

Florida, home of repackaging and physician dispensing, may never get that issue under control.

The Florida Medical Association said it will oppose any effort to limit the ability of physicians to dispense medications directly to their patients, general counsel Jeff Scott said in an email to WorkCompCentral.

“Rather than imposing arbitrary caps on dispensing repackaged medications, it would be more productive for business groups to focus on the real cost drivers in the workers compensation system – a system, unlike medical malpractice, in which statewide premiums are not the highest in the nation,” Scott wrote. “Furthermore, the FMA strongly believes that dispensing by physicians leads to innumerable benefits, including increased patient compliance, reduced drug diversion and better access to care – important factors in complying with the federal (Affordable Care Act).”

I don't see how a physician, as opposed to a pharmacist, has any better control over patient compliance. In my mind that makes no sense.

Likewise it escapes my rather stifled imagination how physician dispensing reduces drug diversion - if recent headlines are any indication, it seems the exact opposite: inscrutable physicians seem to be quite willing to turn their heads and cough, while their patients load up on prized pills.

In a 16-state study released in April, 2010, the Workers Compensation Research Institute (WCRI) found Florida’s drug claims were 38 percent above average. It also found that workers were getting more drugs than those in other states, especially painkillers and muscle-relaxers that can be abused.

The main reason for the higher prescription costs in Florida, WCRI says, was that some physicians wrote prescriptions and dispensed the prescribed medications directly to their patients. When physicians dispensed prescription drugs, they often were paid much more than pharmacies for the same prescription.

The truth in Florida is that Automated Healthcare Solutions (AHS), a Miramar, Fla.-based company that provides claims management software to assist physicians in the dispensing of repackaged drugs, had given state lawmakers $3.2 million since 2002 according to the Florida Independent in a story published January 2012.

So better access to care is really just another red herring.

There's a lot of money at stake. In Florida the issue is accused of increasing system costs by $27 million per year. The average payment per claim for prescription drugs in Florida’s workers’ compensation system was $565—38 percent higher than the median of the study states, according to WCRI. The price per pill paid to Florida physician dispensers for Carisoprodol was 4 times higher than if the same prescription was filled at pharmacies in the state.

I bag on California quite a bit because often I feel that my home state doesn't live up to its potential. But at least with regards to this issue, California leads the nation. WCRI shows the percentage of prescription payments for physician-dispensed drugs increased in 16 of 17 states studied between 2008 and 2011, with California being the only state in which the percentage decreased.

The California Division of Workers' Compensation adopted a regulation in 2007 that capped the price of repackaged drugs.

Much is made about this issue being a cost driver. But in my estimation, costs aren't what really rankles people's emotions on this topic.

What gets people upset, as in many areas of life, is someone taking unfair advantage of a system - using loopholes in the law to generate revenue at the expense of the social good.

In other words, people just don't like cheats.

Thursday, January 24, 2013

Cynism, or Experience - WA Reform Is Just Politics

The State of Washington is demonstrating that a monopolistic system, where the state provides the insurance, the administration and management of claims, and the adjudication of any disputes, isn't necessarily any better than an open competition system.

While Washington's Department of Labor and Industries (L&I) has kept rates flat the past two years, it has done so at the expense of drawing down its reserves.

Now it is floating a 10 year plan to increase rates 5.5% per year on average in order to meet estimated liabilities.

And employer groups active in workers' compensation are making the same noise they make in every other state every seven or so years - the call for "reform," which loosely translated means trimming benefits, disguised as liberalizing system rules to expedite benefit delivery.

The same tired arguments are being tossed around.

Kris Tefft, general counsel and government affairs director for the Association of Washington Businesses, said during the Senate Committee on Business and Labor hearing on Wednesday concerning a package of work comp bills that the cumulative effect of the department’s plan could drive employers out of business or out of the state.

If an employer's margin is so thin that a 5.5% increase in insurance in a year is going to make or break it, then the management of such a business has larger problems than an insurance premium.

Here's what's being floated:

Senate Bill 5127 would make settlements an option in all claims regardless of the age of the injured worker. The bill also states that the Legislature in 2011 intended to require the Board of Industrial Insurance Accidents to rule on whether a settlement was in the best interest of an unrepresented worker before approving an agreement, but does not have to make a determination about the best interest of a worker who has hired an attorney.

Senate Bill 5128 would allow parties to settle all aspects of a claim, including future medical benefits which can't be settled in a lump sum under current law. The bill also calls for a study of voluntary settlements every five years until 2026, a study of a stay-at-work program that subsidizes employers who bring injured workers back to transitional jobs due in 2016 and a study of occupational disease due Sept. 1.

The thinking behind SB 5127 and 5128 is that being able to close more claims, freeing up reserve money that would allow businesses to invest in growth. Injured worker representatives say this would entice claimants to accept lower settlements than they would be entitled to over time, and would push them to other state and federal disability/unemployment programs when the claimant can't get back to work or find work post injury.

I have never seen a study reflecting that reserve money that is released as a consequence of a lump sum settlement actually makes its way back into the economy. It may be true, but I have never seen any publication where a dollar is followed from premium collection, to claim reserve, to reintroduction back into the economy. My guess is that any such dollar, at best, represents a neutral investment and does nothing to contribute to economic growth or stimulation.

Senate Bill 5112 would allow employers who are enrolled in the department’s retrospective rating program to schedule independent medical exams and vocational rehabilitation assessments appointments, provided they notify L&I in writing and use doctors and rehabilitation experts who are approved by the department. L&I would be permitted to intervene in any dispute arising from how a retrospective rating plan employer handles a claim and allow the director of L&I to take corrective action such as requiring additional monitoring, additional training or placing on probation an employer that doesn’t following proper procedures.

The bill does not authorize fines for any violations, and it would not allow the director to remove an employer from participating in retrospective rating.

Supporters of this provision say L&I is too slow in setting exams which increases disability duration and forestalls return to work. Opponents argue that turning this over to employers allows them to game the system with employer friendly physician examiners thus decreasing claimant recoveries or causing a return to work too early.

My opinion - if the employer must choose from a state approved list of examiners there likely is no net impact on claimant benefits and if an employer can be removed from the retrospective rating group as a consequence of abusing the process then that is good incentive to stay clean.

Senate Bill 5126 would calculate an injured worker’s wages based only on monetary payments and exclude from the calculation fringe benefits such as health insurance coverage. The bill would eliminate a provision that calculates benefits using 60% of the wages for workers who are unmarried and 65% for workers who are married, as well as a 2% increase for each of the worker’s children. All benefits be calculated at 66.67% of the injured worker’s wages. It would also cap maximum monthly time-loss and survivor benefits at 100% of the state’s average monthly wage, as opposed to 120% as it is currently calculated.

Here is where the real savings come from - reducing benefits.

Workers' compensation, as I have said before, starts with a bucket. That bucket never gets bigger, on a relative scale. The most that can be done with the contents of that bucket is adjust who gets how much.

This is just part of the grand compromise - and is at the core of the friction between employer and worker groups.

Workers' compensation is a political animal. Though over 100 years old and with some culture behind it, the bottom line is that what comes out of the political process - which means deal making, bargaining, back scratching, and sometimes just plain vindictiveness - is what we call work comp.

Washington just went through a "reform" cycle in 2011. Some question whether it is logical for the state to visit more "reform" topics when the effect of the 2011 legislation has yet to fully materialize.

That is not a proper analysis. The proper analysis is who has the political muscle to implement what any particular interest group deems beneficial at any particular point in time.

And it all comes down to money - the tug and tussle of shifting resources to benefit one constituency or another.

Us jaded professionals in the system have learned to just deal with whatever gets thrown at us. We see the net effect, both in macro and micro terms, where most of the population doesn't because the majority of voters and their representatives don't deal with this day in and day out.

Call me cynical. Or maybe just experienced. At least it makes good news.

Wednesday, January 23, 2013

CA & OK: Drug Monitoring Program Dichotomy

California's Attorney General, Kamela Harris, is involved in drafting and promoting legislation to get more money for the state's Controlled Substance Utilization Review and Evaluation System (CURES), a computer network intended to give doctors and pharmacists information about a patient's drug prescriptions.

The state's budget for the 2011-12 fiscal year cut funding for CURES, which has been criticized by users as complex, slow and non-responsive to the needs of its users. Harris wants to get more money to finance technological upgrades and staff members to operate the drug-monitoring program.

She would do this through surcharges to physician and pharmacists licensing fees.

In 2010, Sen. Mark DeSaulnier, D-Walnut Creek, authored SB 1071, which would have imposed on every manufacturer and importer of a Schedule II, Schedule II or Schedule IV controlled substance a tax of 0.0025 cents per pill sold. The Senate Committee on Health refused to pass the bill, and DeSaulnier withdrew the measure from consideration.

According to the article, doctors aren't necessarily opposed to this, though it would be preferred if the funding came from the General Fund. But there needs to be increased usability of the system and better technological capabilities before they will adopt the system for wide-spread use.

For instance, current protocol requires that a physician register to use the system by submitting notarized documents to the Department of Justice. An example of state government departmental disconnect - why notarized documents? Why can't the physician or pharmacist be confirmed via communication with professional boards?

Other states don't seem to have such big problems with their computerized drug monitoring systems. Oklahoma is far ahead of tech savvy California (sarcasm here...).

Rep. Richard Morrissette, D - Oklahoma City, would have the Bureau of Narcotics and Dangerous Drugs Control notify doctors when possible problems − such as the use of multiple prescribers or large numbers of refills − are detected by the state's prescription drug-monitoring program.

Unlike some previous proposals, which would have required doctors to check the monitoring system before prescribing controlled drugs for a patient, Morrissette's House Bill 1419 would use a form of "unsolicited reporting," meaning that notices would be sent to practitioners automatically, without the doctor having to go to the monitoring system.

Since Jan. 1, 2012, all Oklahoma dispensers have been required to report the dispensing of prescription drugs within five minutes of the drugs being delivered to the customer, with that information going into the monitoring system. The information is then available online immediately to doctors and pharmacists.

Mark Woodward, spokesman for the narcotics bureau, told WorkCompCentral Tuesday that use of the prescription drug-monitoring system by physicians and pharmacists has grown steadily since it began operating in 2006. More people realize the value of the system and are using it, he said.

Currently, the system is responding to 26,000 to 30,000 calls for information each month, Woodward said.

Those calls represent approximately 70% of the individuals licensed to prescribe controlled drugs, Woodward said. Some physicians, such as pediatricians, would not be participants because they aren't prescribing drugs that fall within the system.

I guess what bugs me is that Oklahoma, a state with a total population the size of Los Angeles, is more able to effectively control prescription drugs within its borders than California, which has ten times the population and presumably ten times, or more, the resources, because Oklahoma's prescription drug monitoring system seems to actually work.

Tuesday, January 22, 2013

NV to Lead Telemedicine Regulation

With a population of 2.8 million people, but 1 million of them spread out across 110,000 square miles of remote and difficult terrain, Nevada may benefit by leading the nation with proposed regulations for telemedicine.

Telemedicine is the practice of medicine using modern telecommunications systems and protocol. It is the use of medical information exchanged from one site to another via electronic communications to improve a patient’s clinical health status. Telemedicine includes a growing variety of applications and services using two-way video, email, smart phones, wireless tools and other forms of telecommunications technology.

The American Telemedicine Association (you KNEW there would be an association for this special service!) says:

"Telemedicine is not a separate medical specialty. Products and services related to telemedicine are often part of a larger investment by health care institutions in either information technology or the delivery of clinical care. Even in the reimbursement fee structure, there is usually no distinction made between services provided on site and those provided through telemedicine and often no separate coding required for billing of remote services. ATA has historically considered telemedicine and telehealth to be interchangeable terms, encompassing a wide definition of remote healthcare. Patient consultations via video conferencing, transmission of still images, e-health including patient portals, remote monitoring of vital signs, continuing medical education, consumer-focused wireless applications and nursing call centers, among other applications, are all considered part of telemedicine and telehealth."

The practice requires special skills and a physician will need to be licensed by the Nevada State Board of Medical Examiners to provide telemedicine services, but the physician could be located anywhere. The board offers a special-purpose telemedicine license for physicians who are licensed in other states.

Telemedicine services are sometimes used in prisons and in remote worksites such as offshore oil rigs. Additionally, 35 Medicaid programs in states including Arizona, California, Illinois, Texas and Washington use telemedicine, according to a 2012 report by the Connecticut Office of Legislative Research.

But the practice is not very common in workers' compensation.

Only Oklahoma has mandated that the service be made available to injured workers. The Oklahoma Telemedicine Act says workers’ compensation programs can’t require face-to-face interaction between a provider and a patient “for services that a health care practitioner determines to be appropriately provided by means of telemedicine.”

Nevada's Division of Industrial Relations is proposing rules that would standardize the requirements and reimbursement for providing telemedicine services in the state's workers' compensation system. The rules provide for authorization protocol, appointment protocol and of course reimbursement protocol.

States in the Western region, which have broad swaths of open land where people work and live in remote areas, stand to benefit from the technology and regulation of the practice.

Proponents of telemedicine say the technology offers advantages to employers at remote work sites, such as the 48 mines, 12 geothermal power plants and six oil fields scattered throughout Nevada. After an accident, a doctor or specialist could examine a worker remotely and diagnose the severity of the injury, then make a determination as to the next step - emergency room, hospital, local minor treatment, etc.

The key in implementation in workers' compensation settings is the development of regulatory protocol, and of course particularly a reimbursement schedule.

Telemedicine stands to be the most useful in medical-legal examinations where getting the patient to the examining physician requires extraordinary travel arrangements or transportation is difficult, if available at all.

While there may be a physician that is close to the injured worker, travel to an independent medical examination for medical-legal purposes may not be practical. In those instances telemedicine could be implemented so that the local physician is guided in the examination process by the remote, independent medical examiner.

Nevada is leading the way with the Division's proposed rules. In my view this is an exciting development and one that will be embraced by other states, particularly in the west. It will help provide workers' compensation services to folks outside urban areas.

The Division of Industrial Relations will hold a public hearing on proposed telemedicine rules on Feb. 19 at 9 a.m. The hearing will be held by video conference at the Sawyer Building, 555 E. Washington Ave. Suite 5100 in Las Vegas, and in the Guinn room of the Capitol. 101 N. Carson St., in Carson City.

Written comments can be submitted until 5 p.m. on Feb. 19. Comments can be mailed to Terry Simi, Division of Industrial Relations, 1301 North Green Valley Parkway, Suite 200, Henderson, NV 89074.

Monday, January 21, 2013

Work Comp and Independent Counsel

I think one of the more interesting aspects of workers' compensation litigation is the relationship of the parties, and in particular the relationship of the defense parties: employer, carrier/administrator and the attorney.

Most employers believe that when the insurance company hires a lawyer to defend a claim that the lawyer either has some duty towards the employer's interests, or that the lawyer should be communicating with the employer.

Back when I was practicing work comp defense it was quite routine for the defense lawyer to communicate directly with the employer because it simply was more efficient. Many times correspondence would be copied to the employer at the request of the employer and/or carrier/administrator. 

Conference calls and meetings were conducted with both parties present wherein all information on a claim, and strategy, would be discussed.

Often I would participate in routine claim file reviews along with representatives from both carrier and employer. Documentation would be shared, communications were freely discoursed.

There wasn't much consideration given to whether or not attorney-client privilege would be compromised. It was thought that everyone was on the same team, even though it was clear from disclosures and other communications that the lawyer hired by the carrier was the lawyer for the carrier.

This assumption was, and is, erroneous.

As reported this morning in WorkCompCentral news, a pair of state supreme court cases from Montana and Texas are making a distinction between counsel for the carrier, the administrator, and the employer.

Texas Supreme Court's decision last June in In Re XL Specialty Insurance Co. and Montana's Supreme Court March decision in America Zurich Insurance Co. v. Montana 13th Judicial District Court et al hold that the attorney-client privilege does not extend to communications between a carrier's counsel and a third-party claims adjuster or a claimant's employer.

The Texas Supreme Court cited the fact that the carrier and employer were not joint clients of the same defense attorney, nor that the employer was joined to the workers' compensation dispute as a party that shares a joint defense with the carrier, as a failure in the attorney-client privilege between XL Specialty Insurance Co. and the employer, Cintas Corp., rejecting XL's argument that the communications between its attorney and Cintas regarding a claim by Cintas employee Jerome Wagner were protected by privilege.

Since disclosure of privileged materials to a party outside of the attorney-client relationship waives the privilege, and Cintas was outside the relationship between XL and its attorney, the court said the communications between the attorney and Cintas were subject to discovery by Wagner in his claim against XL for the alleged bad-faith handling of his claim.

In the Montana case, Phillip Peters filed a claim against the Roscoe Steel & Culvert Co.

Roscoe's insurance carrier, Zurich, accepted liability. Zurich then contracted with Employee Benefit Management Solutions (EBMS), a third-party adjuster, to manage the claim.

When Peters and Zurich could not agree on the level of his impairment, Zurich consulted an attorney who prepared an evaluation of Peters' claim. The attorney sent a copy of this report to EBMS, and the Montana Supreme Court said this action waived the privilege that would have otherwise attached. In light of this, the court said, when Peters later sued Zurich for mishandling his claim, he was entitled to obtain the evaluation during discovery.

The essence of these rulings is that the courts find that each party has their independent legal interests, and each party thus waives any attorney-client privileges if a party permits counsel to communicate with another party directly without first establishing an attorney-client relationship.

While legal pundits and those who argue that the courts perpetuate the lawyering of America (after all, judges and justices are themselves lawyers), these holdings make sense.

If one of the parties engaged in conduct that was either illegal, unethical or in some other way against the interest of one of the other parties without the knowledge of that other party, sharing counsel communications without having that protective relationship means the innocent party also shares putative knowledge of the untoward acts or omissions.

There is no independent layer of protection. And if the communications reflect action that is either illegal, unethical or worse having a single lawyer could present a conflict of interests, particularly if an action may result in some damage to one of the defendant parties.

Texas observers told WorkCompCentral that the Supreme Court's opinion suggests that if the employer and the carrier both retained the same counsel then the privilege should extend to both parties, but I have reservations about this tactic. Carrier interests and employer interests are not necessarily aligned in workers' compensation cases.

The carrier's interest generally is to close the claim as quickly as possible to free up reserve money. Usually that's the employer's goal too, but sometimes we have seen the employer pursue protracting the litigation for one reason or another - perhaps in retaliation, perhaps because there is a disbelief in the claim, perhaps just because there is a misunderstanding.

A simple example - in California there is an anti-discrimination statue generally referred to as Labor Code 132a. This section prohibits an employer from discriminating against an employee (not necessarily an injured worker) who either alleges, reports or witnesses an industrial injury. The statute has been interpreted broadly to include all sorts of employer actions against employees.

California workers' compensation policies state that a defense MAY be provided in 132a allegations, but that there is no coverage for any damages or indemnity that may be awarded on such a claim - this is because 132a claims are regarded as intentional acts and public policy prohibits insuring against deliberate misdeeds.

In such situations, while the employer may be relieved that there is counsel on the claim, the better practice is for the employer to retain independent counsel to represent its interests, and to keep communications that may be privileged separate and apart of the communications that concern the case in chief - better to not poison the well with information that could be damaging in the wrong hands.

While employer and carrier should be aligned in an ultimate disposition of a claim, those interest cease at the policy declarations page. These cases illustrate that carriers, administrators, and employers will at times have opposing interests.

Friday, January 18, 2013

OK to Provide the Drama in 2013

As anticipated, workers' compensation is at the top of legislative agenda items in Oklahoma this year.

House Bill 1362 by Rep. Arthur Hulbert, R-Muskogee, was introduced before Thursday's filing deadline for the 2013 session.

The bill seeks to create an administrative workers' compensation system as the Division of Workers' Compensation under the Oklahoma Insurance Department, effective Jan. 1, 2015.

This is an idea that has been floated before in the state but did not make it out of the legislature, because, as Oklahoma Senate President Pro Tempore Brian Bingman, R-Sapulpa, has said, "the devil is in the details."

I'm not sure which devil Bingman is referring to, but Oklahoma remains one of the few states where workers' compensation disputes are handled in the civil courts.

As workers' compensation advances with various amendments declaring different constrictions on qualifications and benefits, the complexity increases. Workers' compensation is a product of statutory law and has no basis in "common law." Because of these characteristics, workers' compensation tends to become a complex area of the law, and the civil courts, frankly, are not in a position to deal with such specialization.

Civil courts are structured to deal with many preliminary procedural matters, and more rigid rules of evidence.

Workers' compensation on the other hand plays by much more liberal rules.

The contrast can be difficult for civil courts to deal with in a quick, efficient, manner.

HB 1362 includes provisions for:

  • Designating the Insurance Department as the state agency to oversee the workers’ compensation system.
  • Creating the Division of Workers’ Compensation within the department.
  • Specifying the duties and authority of the division, the department, the insurance commissioner and the workers’ compensation commissioner.
  • Providing for appointment of the workers' compensation commissioner by the governor with the advice and consent of the Senate.
  • Setting procedures for promulgating rules and handling complaints.
  • Establishing goals for the workers’ compensation system, including fair treatment of injured employees, promoting workplace safety and prompt return to work, providing quality medical care and minimizing disputes.
The switch to an administrative adjudication system is supported by the Oklahoma State Chamber, the state Labor Commissioner and the state Insurance Commissioner.

They point to the Oregon Department of Consumer and Business Services that ranked Oklahoma as the sixth-most expensive state for workers' compensation. Arkansas was ranked 49th.

Oklahoma has many more issues to deal with that make it the 6th most expensive work comp state other than where claims are adjudicated, but in my opinion moving to an administrative system should help increase the efficiency in which disputes are resolved - so long as employers are willing to abide by what will likely be an increase in the liberality of rulings!

Administrative systems, as noted, tend to become much more liberal and loose in the name of efficiency. Rules of evidence are lax. Procedural penalties are more rare. But, because fighting over non-substantive issues are minimized, the real underlying issues, e.g. AOE/COE, get to hearing much more quickly. So employers are going to have to endure a cultural shift for several years before such a system becomes accepted.

Because of the likely increase in liberality, Oklahoma is going to have to amend its benefits in order to realize any significant savings. I suspect that a change in the amount of and qualification for benefits will also become part of the negotiations.

And Oklahoma is also going to see another attempt at an opt-out system.

Nathan Atkins, spokesman for Bingman, told WorkCompCentral that Bingman has filed several "shell bills" that can be revised to carry specific proposals, one of which may be the "Oklahoma Injury Benefit Option" (OIBO).

I have it on good authority that the OIBO is in the process of making its way to legislative review, adding another element of drama in the Sooner State.

Oklahoma, is the 29th largest economy in the US, according to the US Department of Commerce with economic output of $146 billion in 2008. 

I think what is most interesting is who will benefit from these changes. The biggest player in the state's economy is the government itself, which contributed $23 billion in economic development in 2008, or 15.7% of the total economic output of Oklahoma.

Mining comes in second at $20.9 billion or 14.3% of the Oklahoma economy in 2008, Manufacturing accounted for 10.8% of the economic output with a contribution of $15.7 billion, fourth and fifth biggest sectors in the state were real estate $11.3 billion and healthcare $9.9 billion, respectively.

How these interests line up in the work comp arguments before the Oklahoma legislature is going to make for some good political drama.

Thursday, January 17, 2013

Pay Docs for Listening and Caring

Perhaps one of the more contentious issues in California's SB 863 reform bill, at least as far as medical providers are concerned, is the mandate that the medical fee schedule convert to the Medicare Resource Based Relative Value Scale (RVRBS) by Jan. 1, 2014.

California lags several other key states in adopting Medicare's schedule, and SB 863 authors and proponents see this as a significant method of controlling not only costs, but the variety of treatment options available to injured workers because reimbursement rates directly affect procedural motivations.

The California Division of Workers' Compensation (DWC) has said its general approach will be to adopt the Medicare ground rules, and only make changes to the payment ground rules “where appropriate in light of special needs of the workers’ compensation system.”

Public comment thus far has identified several areas where the special needs of workers' compensation require deviation from Medicare's system. DWC is taking public comments until Feb. 8 on possible changes to the ground rules that would be necessary to make RBRVS work as the basis for determining provider reimbursement in California.

For instance, according to Greg Krohm, former executive director of the International Association of Industrial Accident Boards and Commissions (IAIABC) and who remains a research consultant for IAIABC, when Texas adopted RBRVS in 2003, it also adopted a single conversion factor that paid all providers 125% of Medicare’s rates.

A 2007 study by Dr. Steven E. Levine and Dr. Ronald N. Kent found that the single conversion factor drove neurologists away from workers’ compensation. In 2002, 63% of neurologists were willing to treat workers’ compensation patients. By 2007, the number fell to just 9%.

I agree with Krohm, who said using multiple conversion factors for different specialty providers is one area where it is appropriate to deviate from Medicare’s rules that use only a single conversion factor. If the DWC is interested in maintaining physician participation in the system then it can not alienate potential medical vendors and thus risk medical access issues.

Deborah E. Kuehn, vice president of coding and reimbursement for U.S. HealthWorks, identified another area of concern and that is Medicare's discount when services are provided by physicians’ assistants and nurse practitioners. These providers are reimbursed at 85% of what would be paid to a physician who provided the same service.

Kuehn argues that until access issues to primary care physicians have stabilized it would be inappropriate to reduce fees to physicians’ assistants and nurse practitioners.

I agree with this analysis too. Physicians’ assistants and nurse practitioners perform more routine medical functions that don't require the expertise of a Medical Doctor and consequently help to keep the medical provider's costs low, and ergo, the overall cost of medical treatment lower than if these professionals were not available. 

If it is not profitable to employ physicians’ assistants and nurse practitioners then the routine care duties fall upon the M.D., and if there aren't enough M.D.s to provide such services access issues occur and the overall cost of a claim increases.

But the single most important recommendation in the public comments, in my opinion, is to provide for consulting with patients - the basic office visit. Medicare doesn't pay providers for consulting with patients.

In my opinion, much of the failure of the medical delivery system in workers' compensation, nay general health, is that medical doctors don't spend sufficient office visit time with the patients. Often medical patients just need someone to listen to them.

Workers' compensation is a volume medical business. Office visits with the professional are very time limited. The human and psychological components of medical treatment are virtually non-existent in work comp care.

Yet there are many studies suggesting that actual treatment costs and indemnity costs would be greatly reduced if injured workers felt their physicians were actually listening to their complaints.

It turns out that "bedside manner" is vitally important to the delivery of medical services.

Medical care is highly personal. Depersonalizing the delivery of care occurs when the professional lacks interest in the patient. This is communicated to the patient primarily by the allocation of time for each patient interaction. This allocation of time is directly affected by how and for what the professional is being paid.

If the professional is being paid to perform a particular procedure - surgery for instance - the professional is going to direct his or her services towards that reimbursement goal, even if the medical issue could be more appropriately dealt with by some other procedure that isn't reimbursed (i.e. the office visit with some good listening and counseling).

Bring back good medicine. Pay physicians for actually listening and caring for their patients rather than just performing some specific procedure. The system will benefit enormously when injured workers know that someone actually cares.

Wednesday, January 16, 2013

Drugs & Guns; Arming Investigators

If there was any clearer evidence that the nation's prescription drug problems are the product of large, organized criminal enterprises is the fact that the Texas Medical Board (TMB) has asked the state’s attorney general to rule on whether the board may authorize its investigators to carry concealed handguns as private citizens when investigating pill mills in recognition of the danger agents face when serving warrants or conducting other investigatory activity related to illegal distribution of prescription drugs.

Under current law, the investigators can be licensed as peace officers, but they are not authorized to carry firearms or make arrests.

The argument in favor of arming investigators is, as TMB Executive Director Mari Robinson said in her request to Attorney General Greg Abbott, because "investigators are sent into areas where guns are kept.”

Ohio has already determined that these situations pose grave danger to investigators. The Ohio State Medical Board authorized its investigators to carry weapons in August 2011, in response to similar dangers posed by pill mills.

Robinson said representatives from the U.S. Drug Enforcement Agency and the Harris County District Attorney's Office appeared at the TMB’s June 2012 meeting and told of finding weapons in pill mill clinics, including handguns and a shotgun mounted behind the reception counter at one facility.

A medical clinic where guns are kept is not in the business of healing people...

“The potential for violence…is also present because many ‘patients’ are buying drugs to re-sell them on the street, a criminal activity that increases the likelihood these people will be carrying cash, contraband and weapons,” Robinson said.

Robinson asked Abbott to rule on four questions:
  • May the TMB allow, but not require or request, its investigators to carry concealed handguns as private citizens while on duty with the board?
  • Can the TMB legally adopt a resolution to allow its investigators to carry concealed handguns but at the same time indicate that such action is not required by the board or the employees' job descriptions?
  • Would the TMB's adoption of a resolution allowing such action be protected by sovereign immunity from suit and liability?
  • Does Texas Government Code Section 411.208 (which grants immunity to agencies for actions of individuals licensed to carry concealed handguns and creates a right for Texas citizens to carry the concealed weapons) protect the board and its officers and employees from liability and suit when they allow investigators to carry concealed handguns if the employees are licensed to carry the weapons?
Gay Dodson, executive director of the Texas State Board of Pharmacy, told WorkCompCentral that its investigators are commissioned as peace officers and are allowed to carry firearms. “They generally don’t walk into a pharmacy with a gun on their hip,” Dodson said, but the investigators may be armed when serving warrants.

Texas is a big state. The likelihood of an investigator finding him or herself in a remote area where there are no additional law enforcement resources is much higher than in an urban setting.

Drugs are big business, as we all know. Whether they are prescription drugs or banned substances, criminal enterprises find that the demand versus supply ratio makes this business irresistible especially since it is mostly a cash business which helps avoid taxation.

Interesting too, is that this debate comes at a time when the nation is reviewing its gun policies in the wake of several tragedies involving gun violence - albeit not concerning law enforcement or drug operations.

It makes sense to me that investigators from one board (medical) be on the same legal playing field as investigators from another board (pharmacy) when conducting similar operations for related violations of the law. Whether the underlying perpetrator is a physician or a pharmacist, that they are engaging in the same criminal activity (and may be under the same criminal organization) is a compelling argument in favor of armed investigators.

Still, TMB is taking the right approach in first asking for a legal opinion from the attorney general's office. It's much faster and less expensive than asking for a direct change in the law.

The criminal enterprise knows no bounds. Agencies that are tasked with law enforcement need to have the resources necessary to protect themselves and the public. I'm sure if Abbott's office decides the law is not in TMB's favor that the legislature will be asked to, and will, make the requisite changes.

One part of the prescription drug epidemic this country is in has its resolution in the education of physicians and patients.

The other, and larger, part of the equation has its resolution in the neutralization of organized crime - and unfortunately this takes guns. That's just the way it is.

Tuesday, January 15, 2013

FEHA: Bad Facts Make Bad Law

This is not about a workers' compensation case, but it is about disability discrimination and what I perceive as a good example of how job dissatisfaction clouds judgment.

The consequence is case law that probably isn't the clearest statement of the law, and just may make it a little more difficult for injured workers to claim a violation of the California Fair Employment and Housing Act (FEHA). 

The reason is because a claim of total disability means that one can not work, which means that one can not perform the essential functions of a job, and thus there could be no violation of FEHA. T'his would seem evident, but the timing of the claim of inability to work is the salient issue and failure to elucidate on that prime date can be fatal to a claim.

The facts in the U.S. 9th Circuit Court of Appeals ruling in Lawler v. Montblanc North America, No. 11-16206 are important because the court fails to distinguish WHEN the claim of disability is relevant to return to work, and because the plaintiff failed to meet the initial burden of proof leading to this ambiguity.

Lawler had worked as the manager of the Montblanc boutique at the Valley Fair Shopping Center for roughly eight years.

In June 2009, Lawler's doctor diagnosed her with a chronic condition known as psoriatic arthritis and recommended that Lawler cut back on her hours. Store managers typically worked 40 hours per week, but for the store's peak sales period – from Thanksgiving until New Year's – would work 60 to 70 hours per week.

Lawler contacted her regional manager to request a reduced work week of 25 hours, and the manager asked her to provide additional information about the nature of her impairment and the accommodations she would require.

A few days after receiving the manager's response, Lawler fell while at home and broke two toes. She said her arthritis was to blame, since it had caused her hip to give out while she was turning to grab her purse.

A podiatrist set her foot and said Lawler could return to work on Sept. 2, 2009.

Lawler then called her regional manager to request a temporary disability leave. The manager asked Lawler to fax over documentation regarding her foot injury. Since Lawler did not have a fax machine, she drove to the Valley Fair store to use the fax machine there.

While Lawler was at the store, Montblanc's President and Chief Executive Officer Jan-Patrick Schmitz, and Vice President of Retail Mike Giannattasio, happened to drop in.

Schmitz allegedly confronted Lawler about her manner of dress, her failure to have the company's newest eyewear products on display, and the way repair parts were being stored. Lawler said Schmitz spoke to her in a tone that was "intimidating, abrupt," and "gruff."

Lawler said he also made other demands. According to her version of events, Lawler told Schmitz she was on disability leave and couldn't do the work, but Schmitz told her to "do it or else."

After that incident, Lawler complained about Schmitz's conduct to her regional manager and she obtained a letter from her doctor advising that she take an extended leave of absence through Jan. 5, 2010.

Montblanc sent the doctor a letter asking if there were any accommodations it could make that would allow Lawler to be regularly present at the store and performing her job duties. The doctor responded that Lawler needed to remain off work until January.

A week later, Lawler's regional manager called her and told her that she was being terminated, effective Oct. 31, 2009. Montblanc did not hire a replacement manager until May 2010.

After her termination, Lawler filed a complaint with the California Department of Fair Employment and Housing against Montblanc and Schmitz. She received a right-to-sue letter and then filed suit in the Santa Clara County Superior Court, asserting claims for discrimination, retaliation, harassment and the intentional infliction of emotional distress.

Montblanc removed the case to federal court where summary judgment was granted in favor of the company.

The trial court said it was incumbent on Lawler to show that she was capable of performing these in-store job duties, but Lawler failed to show she was capable of working in any capacity at all.

On appeal the 9th Circuit noted that Lawler admitted that her arthritis prevented her from working at all, so it did not matter that Montblanc did not offer to accommodate her. Lawler had not met her initial burden of proof.

The criticism of the case from outside observers is that the court did not distinguish the timing of the disability status - i.e. at what point was there a declaration that Lawler would be able to return to work despite her disability? Note that the facts show that Lawler was taken off work until Jan. 2010, but that the company terminated her in Oct. 2009 and didn't hire a replacement until May 2010.

There does not appear to be any evidence either that Lawler was ready to return to work Jan. 2010, or that she was permanent totally disabled from returning to work in any capacity after that date.

But, other observers note that there are several cases across the country holding that a managerial position in a retail establishment inherently requires a high number of hours per week and that's an essential function of that job, so a person who needs a reduced schedule is not qualified to the position.

What it all really comes down to is basic evidence at the time the case is brought - Lawler needed to prove at the time she filed her case that she was capable of performing the essential functions of the job, including working up to 70 or 80 hours per week. According to the court opinion Lawler admitted that she couldn't work at all. We don't know when this admission occurred, but it obviously was a paramount fact in the court's ruling.

The lesson for injured workers is to make yourself available for work, or at least present evidence of capability to perform essential job functions. Then it's up to the employer to decide whether or not they will risk failure to reasonably accommodate.

While injured worker representatives may view the Lawler case as a Catch-22 situation, I see it as a common sense application of the law to the facts. If you, as an injured worker, claim an inability to work, then you can't complain later of FEHA discrimination where no reasonable accommodation would be applicable since there is no ability to work at all.

What really happened in the Lawler case is that she jumped the gun and brought suit too early. Reading between the lines, she was upset at her treatment by CEO Schmitz.

Personality conflicts make poor reasons to sue but I suspect this is a more frequent cause of suit than is generally recognized. The old law school saying - bad facts make bad case law - applies here.

Monday, January 14, 2013

Budgetary Acknowledgement of Reform Complexity

I have mixed feelings about California Governor Jerry Brown's proposed budget for the Division of Workers' Compensation (DWC).

Brown’s budget, which was released on Thursday, proposes an increase of $145.5 million – or 88.6% – in the Workers’ Compensation Administration Revolving Fund, which would grow to $309.5 million in the fiscal year that begins July 1, from $163.1 million budgeted for the current fiscal year.

Remember that the fund gets its financial life from surcharges on employer policy premiums and self-insured deposits. There had been a significant increase in these surcharges for the this year, with insured employer's assessments increasing by 44%. Self insured employer's surcharges are increased 35%.

To be fair, the allocation to the fund itself was increased by 21% in order to raise $303 million for 2013. The balance of surcharge increases are due to other funds that derive income from premium surcharges.

The increase includes $120 million that will be directed to a program to make supplemental payments to workers whose permanent disability benefits "are disproportionately low in comparison to their earning loss," which was created by new Labor Code Section 139.48 in SB 863. This provision is still subject to regulatory rule-making, and final rules are not expected until September 2014.

Here's what I like about the budget: it allocates $3.4 million to add 53 new positions at the DWC including $134,000 for an associate medical director, $353,000 for five research program specialists and $860,000 for 14 workers’ compensation consultants.

The budget also allocates $287,000 to add four new positions at the Office of Self-Insurance Plans (OSIP), including one senior audit evaluator, one staff services manager and two associate governmental program analysts.

Through the years of Governor Schwarzenegger, the DWC was starved of allocations, even though the division was not subject to the General Fund, because the administration at that time wanted to be sure that all governmental divisions shared equally in the pain of the recession even though not all divisions derived their income from the same places.

Now under Brown the DWC is finally getting the breathing room it needs to carry out its very necessary governmental functions - functions that are critical, in my mind, to a healthy economy by ensuring the timely and adequate administration and regulation of the essential economic lubricant we know as workers' compensation.

And since almost a third of SB 863 changed the rules on self-insurance the additional bodies at OSIP is particularly noteworthy and welcome.

So the fact that DWC is getting the financial love needed to carry out its mission is a positive sign.

I'm a little apprehensive, though, about some other aspects; namely, that the budget adds 53 new positions at DWC and 4 new positions at OSIP...

Greg Edwards, chief financial officer of the Department of Industrial Relations, said in an email to WorkCompCentral that the positions are being proposed as permanent, meaning they would not be eliminated after the administration has finished implementing SB 863.

I'm not a fan of big government, and I don't like it when a governmental expansion is slated to be "permanent." This is a Democrat move that plays right into the hands of Republican critics, and is an example of how government gets into financial trouble in the first place - by creating expense that is difficult, if not impossible, to remove in times of austerity.

Have money, will spend - it won't be too many years before the agency cries about lack of money because at some point employers in this state are going to object to premium surcharges. Like homeowner association dues, these kind of things always seem to increase.

The Brown Administration in a budget summary states, “These resources will support the reforms to medical provider networks, workers’ compensation liens, fee schedules, medical care administrative procedures, permanent disability benefits, the special earnings loss supplement program and independent medical and bill review processes.”

So in one breath the Brown Administration, which pushed hard for SB 863 to decrease costs in workers' compensation, essentially acknowledges that savings from one basket will increase the costs in another basket and that this law is going to require quite a bit of human power to make happen.

Since the personnel changes are going to be permanent - at least until the next reform - it essentially seems to me that the Administration acknowledges that SB 863 and its regulatory implementation is hugely complex; so much so that it requires 57 new people just to keep things running after the changes have been made.

In my mind this doesn't bode well for workers' compensation in California. If the government has to add all this extra labor, what about all of the other firms in work comp: the insurance companies, third party administrators, law firms, medical firms, etc.?

For example, I have heard several defense firm partners acknowledge that SB 863 will increase business. Seems to me that the more that defense firms are involved in the processing of claims the more costs are going to increase.

And the lien genocide that has started is a one time savings. Vendors that used to seek reimbursement through the lien process are building alternative strategies. Independent bill review, independent medical review, new fee schedules - all of this contributes to an unforeseen future that has no precedence.

There are so many moving parts to SB 863 that it will be years before anyone fully understands the impact on costs and benefits.

There's a reason why analysts were completely unable to agree on what savings, if any, SB 863 would generate.

I remain skeptical too - when there is complexity of such magnitude that it necessitates a significant increase in staffing to execute, savings are more likely to be phantom in nature, or in the least temporary.

Savings here, costs there. My suspicion is that over the next couple of years there will be no net difference in the total cost of the system. SB 863 is simply a reallocation of resources, for better or for worse.

Friday, January 11, 2013

Employee vs. Independent Contractor - Again

When does an employer win suit against its workers' compensation carrier but still lose?

When it argues that employees are independent contractors and a jury doesn't understand the difference.

Senn Freight Lines, in South Carolina, bought three workers' compensation policies from Travelers Property Casualty Co. An audit revealed that the owners and operators of Senn Freight's trucks were statutory employees of Senn Freight.

Citing the audit, Travelers increased the premiums owed and attempted to bill Senn Freight. Senn Freight disputed the higher premiums, contending that its drivers were not employees. The two parties also disputed how many employees each driver had.

Travelers filed a debt collection suit against Senn Freight. Senn Freight filed a countersuit for bad faith cancellation of insurance policy.

At the trial court, the jury ruled for Senn Freight. Travelers filed a motion for judgment notwithstanding the verdict (JNOV), which the trial court denied. Travelers appealed.

At the South Carolina Court of Appeals, Travelers argued that the trial court should have granted its JNOV, and other motions on its debt collection claim. The insurer cited a dispute over how many employees worked for Senn Freight's truck drivers, which was important because it dictated the premium cost.

". . . evidence in the record indicates only that the owner/operators were statutory employees of Senn Freight," the court wrote. "The drivers transported loads for Senn Freight, and that responsibility was an important, integral part of Senn Freight's trade, business, or occupation. Third, evidence in the record indicates only that Senn Freight is liable to Travelers for unpaid final premiums based upon remuneration paid to the owner/operators. Travelers produced evidence the owner/operators were statutory employees of Senn Freight, but no evidence in the record indicates Senn Freight provided Travelers with 'proof' the owner/operators 'lawfully secured their workers' compensation obligations.'"

Senn Freight did not produce any evidence that each of the owner/operators had workers' compensation coverage, and Senn Freight's owner appeared confused about his obligations under the workers' compensation policies.

"As a result, evidence in the record indicates only that Senn Freight is liable to Travelers for final premiums based upon remuneration paid to owner/operators on all three policies," the court wrote. "Because it would be inappropriate to grant a directed verdict on the amount of damages owed to Travelers, we reverse and remand for a new trial as to damages."

This is the old employee versus independent contractor dispute which we in the industry all know what the outcome ultimately will be, but employers remain (and likely will in the future) stubbornly ignorant. I don't need to go into the qualifying elements here.

Brokers and agents out there that read this blog should see this case as a reminder to continually review your client's employment practices and counsel them on the difference between employee and independent contractor status in the workers' compensation world.

They don't like to hear it because it costs money, but employers need to know that if it smells like an employee, looks like an employee and tastes like an employee, then it doesn't matter what the package label says. Education does work, and paying the premium is cheaper than paying lawyers to pursue an untenable legal position.

The case is Travelers Property Casualty Co. v. Senn Freight Lines, No. 2013-UP-015, 1/9/13, unpublished, and yes, the employer also lost on the policy cancellation argument.

Thursday, January 10, 2013

Fraud Money - Perception Is Reality

“The referrals speak for themselves,” Jiles Smith told attendees at Wednesday's meeting of the California Fraud Assessment Commission. “(They’re) about the same, but you want more money. How does that work?”

Indeed - how does that work?

Smith, who was re-elected as vice-chairman of the commission during Wednesday’s meeting, told members that he's looking for "outside-the-box" thinking.

And what Commission chairman Don Marshall pointed out is not surprising - that many district attorneys submit grant requests each year that ask for a 20% increase in funding over the previous year’s allocation, but they don’t always show how the money will be used to fight fraud.

“Every time a prosecutor comes in asking for more and more and more funds, knowing that there’s no more funds available, it’s going to push us into that situation every year where we are trying to do our best, reading thousands of pages to determine whether or not the District Attorney’s Office does, in fact, grasp what it is they’re supposed to be doing with these funds to impact the workers’ compensation fraud problem in the state and those cost drivers that continue to make workers’ compensation (in) California one of, if not the most expensive in the country,” he said.

The district attorney offices though complain that the application process is not intuitive and there are no stated criteria in how the commission evaluates the applications.

"If there was some way to work to streamline that or get better direction to make the process more efficient for the review panel and for the prosecutors I think that would be a worthwhile activity,” Gary Fagan, chief deputy of special units at the San Bernardino District Attorney’s Office and co-chairman of the California District Attorney Association Insurance Fraud subcommittee, told the commission.

The public statement from the commission is that the lengthy applications for fraud assessment distributions to district attorneys offices must show well a rounded understanding of how fraud is investigated and prosecuted - and of course must demonstrate claimant fraud prosecution because, as Mashall told the audience, it's "personal."

Personal to employers who hate paying workers' compensation premiums because they believe that everyone is a fake...

While Fagan has a point, it seems to me that what the commission is really looking for is just plain ol' good marketing. District attorney offices that want more money not only have to open more investigations and close more prosecutions, but need to market those efforts more effectively.

We all know how that works. Numbers. Lots of numbers. And the only way to get lots of numbers is to go after the smaller cases because there are a lot more small fraud cases than there are big fraud cases and they are way easier to prove.

And there needs to be publicity concerning these fraud investigations and prosecutions.

District attorneys really need to invest in their marketing departments with more press releases, more press conferences, more posters about fraud, more community outreach - to demonstrate to the commission that they are serious about claimant fraud.

Whether that is a smart use of money is up for debate - but at least in the eyes of this commission there is no debate.

Workers' compensation is a volume business. And so is the business of investigating and prosecuting fraud.

Want more money for your district attorney's office?

Commissioner John Riggs said be creative and identify ways to use the grant money to get ahead of the curve through collaborative efforts and new methods to investigate and prosecute fraud.

But while Riggs said the district attorneys need to focus more on what they’re doing to fight fraud – as opposed to talking about successful prosecutions in the past – and what their plans are for the upcoming year, the reality is that last year's prosecution numbers demonstrate the level of commitment a DA's office has, and the dedicated use of grant funds.

This is why it is so important for a district attorneys office to master the use of the media - because the employers will talk to their politicians who will talk to commission members who will decide how that money is divvied up. While the public statement is that the commission wants to see innovation and creativity, the reality is that prosecutorial success is what demonstrates a district attorney's commitment to the program.

My word of advise to the district attorneys is hire a really good marketing person to put together a solid plan. Next, execution of that plan with press releases, commercials, posters, community outreach, dinners with politicians and insurance company executives, fraud prosecution golf tournaments - heck, the ways of marketing workers' compensation fraud are endless.

We'll see who's most interested in fraud grant money this coming year by seeing who issues the most press releases about claimant fraud arrests and prosecutions.

It's kind of a shame because small dollar claimant fraud is not significant in the big picture, but this is the reality of public perception.

And perception is reality.

Wednesday, January 9, 2013

In Politics, Impropriety Is In the Eye of the Beholder

Georgia doesn't come up often on the workers' compensation scene because, frankly, not a lot of new or exciting things happen in that state, though its gross domestic product of about $395 billion is the size of Austria.

But this doesn't mean that interesting things don't happen at all in Georgia. Workers' compensation trends to have a way of circulating among the states and sometimes a smaller state initiates those trends.

One of the trends that Georgia may initiate is capping medical benefits. In this case, capping medical benefits is in exchange for boosting indemnity benefits.

John Poole, executive director of the Georgia Self-Insurers Association, told WorkCompCentral Tuesday that self-insurers and the Georgia Chamber of Commerce have endorsed a package of reforms agreed to by the Georgia Workers' Compensation Advisory Council in October.

Like most states, Georgia currently requires insurers and self-insured employers to pay lifetime medical benefits for all workers regardless of how catastrophic an injury is. Indemnity benefits are capped at 400 weeks, except in the case of catastrophic injuries. Catastrophic injuries are defined by Georgia law as severe paralysis, amputation, severe brain and closed head injuries, second or third-degree burns and industrial blindness.

The draft legislation would also cap medical benefits at 400 weeks, except in the case of catastrophic injuries.

"Capping medical benefits should give employers better leverage in settlements and should help with the thorny issue of Medicare set-asides," Poole said.

Curiously, the reform package has the backing of claimants' attorneys and has a good chance of passage during the 2013 session of the Georgia General Assembly, which convenes on Monday, according to the report.

Atlanta claimants' attorney Marvin Price, who is reported to have helped negotiate the deal, said claimants' lawyers have accepted the compromise package because business stands to get some reforms from Republican Gov. Nathan Deal and the GOP-dominated state House and Senate.

"It's a compromise, and it's a major change. But we had to agree to it to avoid some other really Draconian changes," Price said.

The maximum weekly benefits under the proposal would increase in 2013 from $500 to $525. Claimants' lawyers sought to index future benefits to the statewide average weekly wage.

I understand the dilemma. Still, is it really acceptable to have claimants' attorneys negotiating away injured worker benefits - particularly something as significant as lifetime medical - when they stand to benefit from the flip side of the bargain, i.e. increased indemnity? Because like most other attorneys representing injured workers, Georgia lawyers work on a contingency basis, getting a percentage of a workers' indemnity award.

This irony was made even more poignant when, as also reported in WorkCompCentral this morning, a disbarred Georgia claimants' attorney admitted in federal court on Tuesday that he pocketed $2.5 million of his clients' money for personal use.

According to the story, Miles Lamar Gammage of Cedartown, Ga., admitted to defrauding more than 50 injured workers out of settlement funds, federal prosecutors told the Atlanta Journal-Constitution.

Prosecutors told the Journal-Constitution that Gammage, 59, didn't notify clients when they received settlements, forged their names on checks and deposited them into bank accounts that he controlled. When clients demanded their money, Gammage would extend them "interest-free loans" or "advance" them the funds, the newspaper said.

I'm not saying that the good claimants' attorneys are not looking out for the best interests of injured workers in Georgia, but I do remember from my ethics classes in law school that the APPEARANCE of impropriety is nearly the same, ethically, as actual impropriety.

Workers' compensation is a political animal made up of special interests negotiating for the preservation and/or expansion of their wants and needs. In political negotiations, I guess, impropriety is in the eye of the beholder.

Just sayin'...

Tuesday, January 8, 2013

Job Satisfaction and Ability

Mr. Crabbs: Phew! For a second there I thought I was gonna have to pay you workman's comp-er-sation.

SpongeBob: What's workers' compensation Mr. Crabbs?

Mr. Crabbs: You know. When you get paid for sitting at home.

SpongeBob SquarePants, "The Splinter."

I've often opined that the reward system in workers' compensation is backwards.

Workers' compensation rewards people for not working - being disabled in the parlance of the industry. My impression is that if the reward system were reversed so that people injured at work would be compensated for productivity, as opposed to disability, there would be much less controversy and ultimately costs would decline as a consequence.

There have been several published studies in the past 20 years that have basically concluded that single biggest determinant of an injured worker's "disability" is job dissatisfaction, which can come in many forms from hating the boss, boring work, pay grade, etc.

The reverse is likely quite true - that really good jobs attended to by happy employees result in much less "disability."

While not a workers' compensation case, nevertheless a prison guard demonstrated this notion when he got demoted due to an inability to perform the physical aspects of the job following return from a severe automobile accident injury.

Bruce Furtado worked as a guard for the California Department of Corrections and Rehabilitation. The department promoted him to a lieutenant position in 1994.

As a lieutenant, Furtado was classified as a peace officer. The court opinion doesn't go into this, but the promotion to "peace officer" carries with it increased pay and benefits - substantially so - over non-peace officer positions.

But, as a peace officer, Furtado was required to be certified annually in the use of a baton.

In December 1997, Furtado sustained serious injuries to his left shoulder, forearm, elbow and hand in an off-duty car accident. The injuries to the nerves in his left upper arm and his hand resulted in an overall loss of grip strength, loss of range of motion, and difficulty in forming a fist, and caused permanent decreased functioning in his left arm and elbow.

Furtado's physician released him to return to work in September 1998. Since the doctor said Furtado was not able to perform the duties of a correctional lieutenant, the department medically demoted Furtado to a non-peace officer position of Staff Services Analyst.

The department reinstated Furtado to the position of correctional lieutenant after he obtained a medical release from his physician in December 2002, but after a few days, the department reassigned him to the Staff Services Analyst position based on concerns with his physical abilities.

The department asked Furtado to undergo a test in his use of a side handle baton. The instructor who administered the test said Furtado failed multiple aspects of it because of his physical limitations.

The department then gave Furtado eight hours of baton training and had him tested by a second instructor. This instructor also said Furtado failed the certification test, primarily as a result of problems with his left arm and hand.

In August 2003, before the department had taken any action with respect to Furtado's failure to certify with the side handle baton, Furtado submitted a written request for accommodation. In his request for accommodation, Furtado stated that his physical limitations were permanent and asked that he be relieved of the requirement that he certify with the baton.

The department then scheduled Furtado for a "fitness for duty" evaluation by Dr. William Davidson.

Davidson noted that Furtado had a limited range of motion in his left shoulder, left elbow and left wrist. The limitations were permanent and rendered Furtado unable to perform a number of the duties required of correctional lieutenants, Davidson said.

The day after Davidson submitted his written report to the department, Furtado submitted a letter from his doctor stating he was "Okay to resume full duty."

Based on Davidson's evaluation and the fact that Furtado had failed two side handle baton tests, the department determined that Furtado was unable to perform the essential functions of the correctional lieutenant position. The department offered him other positions, and Furtado accepted an Associate Government Program Analyst position at the California Institute for Men.

After that, though, Furtado sued the department contending he had been denied a reasonable accommodation for his disability and discriminated against on the basis of his disability by medically demoting him from his correctional lieutenant position.

Let's pause a minute to reflect on this fact pattern. The accident was in 1997. Furtado returns to work in 1998 but in a non-peace officer position which doesn't carry with it the same pay and benefits as a lieutenant peace officer. Eventually, four years later, Furtado convinces his physician to release him to full duties - but the employer actually witnessing the physical demonstration of his abilities on the job feels he can't do it.

As one might imagine, this decision is not done lightly and the time frame exemplifies this. Whether for the safety of the employee, the safety of the prisoners, the liability of the state and department - it is clear that if Furtado could have done the job the department would willingly allow him to do so.

And the motivation for Furtado to do the job was there - he actively sought to be placed back into his former position. Whether it was pay, benefits, the work itself, his bosses; the bottom line is that Furtado was motivated to return to his old job. In a reversal of what we callously expect, Furtado had Job Satisfaction

When one has Job DISsatisfaction, then one has DISability.

When one has Job Satisfaction, then one tends to have Ability.

The 4th District Court of Appeal upheld the trial court's refusal to grant mandate, supporting the California State Personnel Board opinion that the department had reasonably determined that Furtado was unable to perform the essential functions of his correctional lieutenant position even with reasonable accommodation. The board said the department also acted properly in medically demoting Furtado to the position of Associate Governmental Program Analyst.

The court said substantial evidence also indicated that using a baton in a prison facility was in fact a significant requirement of peace officer's job because it is one of the methods that prison staff members use to defend themselves against armed inmates, and to disarm, subdue and apply restraints to inmates.

So, unfortunately for Furtado, who obviously had the motivation to return to his pre-injury position, circumstances worked against him.

What would workers' compensation be like if the rewards of returning to work instilled the motivation that Furtado demonstrated in this case?

I think we would be looking at an entirely different world.

Case: Furtado v. State Personnel Board et al., No. D059912, 01/07/2013, published.