Friday, January 31, 2014

Dad - Volunteer of the Year

Yesterday Dad was awarded volunteer of the year and employee of the quarter by the Oceanside police department in the dining hall of his residence. It seemed like all of the residents were in attendance - it was an event with balloons, cupcakes, beer, wine and a DJ (okay, it was held in the middle of the "happy hour" at the residence).

Dad's "job" was data entry and management of the department's gang identification database. The gang database interfaces with national resources so information input must be accurate and fit a formatting standard, and the information is also highly sensitive protected by privacy laws and potentially dangerous.

I remember when Dad started volunteering - he wanted to manage the gang database because it had been ignored, required special skills and security clearances, and since no one knew what they were doing it would mean he would have top dog status in the department.

Dad likes top dog status. He's a leader. But more than that he likes to be in charge.

Dad worked his way into that top dog status because he figured out the system, understood the shortcomings and developed rules and regulations for interfacing with the system (and him).

He knew that he held the keys to a successful gang remediation program within the city. Because he entered all the data he also knew about all of the gang activity in the city and could identify nearly any gangster.

And Dad being Dad, he quickly made friends with everyone in the department, particularly the top brass, because he wasn't shy in telling everyone what they should know - in particular that he was a VOLUNTEER and that he could quit or leave at any moment, that his job was unique, and he didn't have to do anything he didn't want to so don't abuse him.

Dad and the OPD

Chief Frank McCoy celebrated Dad's efforts with a heartfelt speech describing my father's history with the OPD, how much they relied on him and the importance of the work he did for the officers on the street as well as for the community (gang associated crime was down over 25% in 2013 from the prior year).

It was a pretty special affair and I was very proud of my father; the sort of pride a dad feels for his son, except in reverse!

This is the third time Dad was given volunteer of the year - he has been a volunteer with the Oceanside, CA police department for over 14 years.

That means he started working for them at age 77.

When Dad was awarded "Employee of the Quarter" though it dawned on me that he IS an employee, at least under the eyes of workers' compensation laws in California (Texas has held differently).

Age 91 and he's employee of the quarter. Pretty darned impressive.

Which brings me to the aging workforce trend.

The National Council on Compensation Insurance had identified issues of increased severity and associated medical costs with older workers, while some other entities have published studies that the impact on work comp isn't really going to be all that great.

It all seems kind of irrelevant anyhow. There's plenty of science that working is what keeps people going, providing value to life, a sense of self and worth and overall just something to do with all that extra time.

After all, how many times have you heard that someone "retires" only to die a short time later, largely out of boredom with life.

To Dad, the OPD was everything. He had regular office hours as part of his weekly routine. He knew a lot of the officers in the department and even helped his Captain's daughter get a job at the residence while she attended college.

The first thing Dad wanted when he was released from this last hospital stay was to know when he would be able to get back to his work at the OPD (unfortunately that isn't going to happen).

Working was (and still is) life for Dad and he brought value to the OPD.

So whether there is increased costs or liabilities as a consequence of the aging workforce or not, it seems that as long as an older worker (volunteer or not) is contributing to the overall success of the enterprise - delivering value - the associated incremental increases in workers' compensation risk are de minimis.

I think that we forget this part of the employment equation in workers' compensation. So we deal with claims - those are going to happen. Some employees will be brought back to work, others won't.

It's all so personal. Whether one can, or wants to, work is up to the individual. Some need motivation beyond feeling good, and others can't give enough.

Whether or not age presents an increase in workers' compensation risk is irrelevant to the grand social scheme. It really is about whether or not an individual can, and wants to, continue contributing to society.

My father never quit delivering value to society. He LOVED work, so long as it was on his terms!

The risk of the aging workforce isn't about claims, its about interfering with lives. Older workers are still workers, just older. They don't need special protections, special laws, special anything - just work on their terms so they can continue to have purpose, providing value to society.

Dad can't do that job anymore because of his disability.

At least he had the foresight early last year to advise the Chief and his Captain that they needed to start recruiting another volunteer to do the job because of his age and the uncertainties that advanced age brings to existence on earth; the screening process for the job is arduous and lengthy due to the sensitivity of the information handled.

I was really proud of Dad yesterday. Still am.

Thursday, January 30, 2014

Leave of Absence Means "Leave"

California Labor Code section 4850 provides, "(a) Whenever any person listed in subdivision (b), who is employed on a regular, full-time basis, and is disabled, whether temporarily or permanently, by injury or illness arising out of and in the course of his or her duties, he or she shall become entitled, regardless of his or her period of service with the city, county, or district, to a leave of absence while so disabled without loss of salary in lieu of temporary disability payments or maintenance allowance payments under Section 139.5, if any, that would be payable under this chapter, for the period of the disability, but not exceeding one year, or until that earlier date as he or she is retired on permanent disability pension, and is actually receiving disability pension payments, or advanced disability pension payments pursuant to Section 4850.3."

The key phrase, according to the 3rd District Court of Appeal yesterday is, "leave of absence."

Turns out that phrase actually means what is says, the court reasoned, in that returning to work in a modified or restricted basis is not the same as "a temporary absence from employment with the intent to return."

David Lade injured his right shoulder while working as a deputy for the Nevada County Sheriff's Department in August 2011.

At the time, Lade was working a night shift, which entitled him to a 5% increase in his base salary.

Lade was unable to return to work until September 2011, when he returned to work at full duty with no restrictions. However, in January 2012, his doctor placed him on modified duty.

From that point until his surgery in March 2012, Lade worked light duty on the day shift. And from the date of his surgery until late April, Lade was again off work.

In late April, Lade returned to work full time but remained on modified duty during the day shift. While Lade was off work, he apparently received his regular full pay, including the 5% "shift differential," but Lade was not paid the differential while he was working day shifts.

That 5% inspired Lade to seek benefits and go up the court chain of appeal.

The initial ruling from the workers' compensation judge was that the 5% was part of Lade's regular salary, and a panel of Workers' Compensation Appeals Board commissioners agreed.

But Nevada County convinced the 3rd DCA that "leave of absence" as used in LC 4850 meant that "Lade could not have been on a leave of absence when he was actually back at work for the sheriff's department, even if he was working light duty on a different shift."

Makes sense to me too, albeit one must distinguish from earlier appellate rulings that might seem to contradict the ruling.

Lade argued Johnson v Contra Costa County Fire Protection District. In that case the 1st Appellate district had ruled a public safety officer’s salary during a leave of absence included holiday pay even though at the time the employee received his LC 4850 benefits he was not available to work holidays due to his disability. Contra Costa had argued the employee should be treated as a non-shift employee because he was not working at the time of the holidays but the Court ruled otherwise.

Instead the court in the Nevada County case was persuaded by Collins v County of Los Angeles. The court in Collins held that a former employee was not entitled to LC 4850 full salary benefits while temporarily disabled because he was no longer employed.

The Nevada County court interpreted the decision more broadly on the issue of how to consider a “leave of absence” as required in the statute:

“…At its narrowest, Collins stands for the proposition that a person who is no longer employed cannot be on a leave of absence from his or her job. More broadly, however, Collins supports the conclusion that a “leave of absence” is a temporary absence from employment with the intent to return. This is the common sense understanding of the term. …Applying this common sense understanding here, Lade could not have been on a leave of absence when he was actually back at work for the sheriff’s department, even if he was working light duty on a different shift.

There is nothing in section 4850 that guarantees a worker anything when he is no longer on a leave of absence and is instead back at work. Moreover, there is nothing in section 4850 that can be reasonably understood to mean that a leave of absence is anything less than being absent from one’s employment.”

The case is County of Nevada v. WCAB (Lade), No. C074133, 01/29/2014, published.

Wednesday, January 29, 2014

How Claims End Up Litigated

A recent Colorado Supreme Court case that is being cited for the proposition that a workers' compensation claimant can collect Temporary Total Disability even after reaching Maximum Medical Improvement is actually a lesson in how claims end up in litigation in the first place.

Elaine Loofbourrow worked for Harman-Bergstedt Inc., a company which operated a Kentucky Fried Chicken franchise.

She injured her back in November 2008 while cooking chicken, and Harman-Bergstedt referred her to an authorized treating physician. Loofbourrow received treatment for her back from Nov. 12 until Dec. 9, 2008.

Although her doctor placed work restrictions on her during that time, her employer was able to accommodate those restrictions without wage loss and therefore did not report the injury to the Division of Workers' Compensation or admit or deny liability.

At the conclusion of this period, Loofbourrow's doctor reported that she had reached maximum medical improvement.

Around the same time her treatment ended, Loofbourrow was demoted from manager to relief manager, apparently due to her store's poor performance and, as a result, experienced a decrease in pay.

In August 2009, Loofbourrow went to see her private doctor, complaining of back pain. Her private doctor recommended work restrictions that Harman-Bergstedt could not accommodate.

Loofbourrow then filed a claim for temporary total disability benefits.

An administrative law judge found Loofbourrow's injury to be compensable and awarded her temporary total disability benefits from Aug. 24, 2009, the date on which she was first restricted from work.

Harman-Bergstedt sought review by the Industrial Claim Appeals Office.

The ICAO panel set aside that portion of the order awarding temporary total disability benefits. The panel concluded that because temporary disability benefits must, by statute, cease when a claimant reaches maximum medical improvement and "may not be paid so long as the claimant continues at MMI," temporary benefits could not be awarded in this case for any period after Dec. 9, 2008.

The Court of Appeals then set aside the panel's order and remanded the case with directions to reinstate the ALJ's award of temporary total disability benefits.

The court reasoned that the statutory scheme did not preclude the assertion of a post-MMI worsening of condition in an open claim like Loofbourrow's.

The Supreme Court of Colorado agreed but that's just the legal analysis.

I suspect that this case would either not be in the books, or would have had a completely different result had Loofbourrow not been demoted and experienced a pay decrease.

The facts aren't entirely clear but I would bet that the timing of her demotion to coincide with her treatment ending provoked her new (ahem...) complaints of back pain, so she went to her doctor and obtained work restrictions that could not be (or would not be...) accommodated by the employer.

No mystery to the origination of this litigation.

The case is Harman-Bergstedt v. Loofbourrow, No. 11SC926, 01/27/2014, published.

Tuesday, January 28, 2014

KKR & Sedgwick - Gold In Hills

If you thought I would have something provocative to say about Kohlberg Kravis Roberts purchase of Sedgwick for $2.8 billion, you'd be wrong.

The deal had been in the rumor mill for months but everyone was mums about it. Those in the know and involved were very good at keeping a big secret.

There seems to be agreement by observers that this move is good for workers' compensation because the resources that KKR brings to the sector will deliver greater efficiency and speed in claims handling and systems.

Some believe that this is just the first of several deals coming down the pipeline for this year as workers' compensation attracts new, fresh investment capital from a variety of sources.

"It's going to be a pretty exciting business for the next few years," industry analyst and principal of Health Strategy Associates Joe Paduda said.

Whether or not this is good for the industry overall I can't say.

But what this deal does tell me is that claims servicing, particularly in workers' compensation, must be much more attractive than what those of us typically think.

We forget that this is a business; a big business, with lots of moving parts, lots of areas where competition, efficiency, and profit can be derived simply by providing expertise in the delivery of medical treatment and indemnity to injured workers and their dependents.

Because of the complexity of delivering medical services and indemnity under one umbrella, there are friction points in the process and if a company can lubricate and minimize the friction then it can profit off a percentage of the trimmed fat.

On the macro scale its easy to get antiseptic in our observations of the industry because it is so heavily metric driven.

For instance, Sedgwick annually handles more than 2.1 million claims and oversees claims payments totaling more than $11 billion, mainly in auto insurance and workers' compensation. It has 11,000 employees in 200 offices in the U.S. and Canada.

That's a big operation.

If we analyze this deal from the operational cash flow perspective then every dollar of claims payment is roughly worth 20% of the company. That cash flow must generate some impressive numbers on the investment back end to warrant the two billion dollar price tag.

EBITDA, Earnings Before Interest Taxes Depreciation and Amortization, is a common deal evaluation metric. It is net income with interest, taxes, depreciation, and amortization added back to it, and can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.

EBITDA is used to evaluate profitability, but not cash flow. EBITDA also leaves out the cash required to fund working capital and the replacement of old equipment, which could be significant, but in a service business such as Sedgwick old equipment is not going to be a big factor.

A typical EBITDA value comes in around 10 times earnings. If a company is highly valued EBITDA can be as high as 20%. So if we reverse engineer the KKR/Sedgwick deal at the 10% level we can assume that Sedgwick generates about $280 million per year in earnings.

This is just a guess of course because I don't have access to the books - just an observation. And there may be other factors that either increased or decreased the typical valuation - since Sedgwick wasn't in distress, then likely KKR paid a premium rather than a discount, which might mean that EBITDA is as high as $460 million per year, or more.

KKR already owns claims-payment technologist, Mitchell International. You see Mitchell at all the big trade shows. So KKR has some previous experience and exposure to the work comp claims industry.

KKR is a big investment firm with lots of money ($90.2 billion in assets under management as of last September). And we have to assume the firm has lots of smart people that understand investment, understand markets, and know where the good money should go.

That they chose workers' compensation claims handling is indicative of the health of the industry.

So whether or not KKR's purchase of Sedgwick is good or not I can't say. What I can say is that obviously, "there's gold in them hills."

I reckon that in the grand scheme of things, workers' compensation is still a pretty good financial deal. Services necessary for the redistribution of wealth to account for work place injury claims are not going away any time soon.

Monday, January 27, 2014

Consumer Directed Work Comp?

I've often thought that one of the primary drivers of dysfunctional behavior in workers' compensation claims is that it is a no-risk system, which in my mind is different than no-fault.

In a no-risk system there largely is no risk in the application for, acceptance of, and provision of, the benefits in making a claim.

Certainly there is some risk in falsifying a claim, but assuming the legitimacy of a claim no one along the claim feed line has any real risk other than being told "no."

For instance, an injured worker has no risk in asking for every available treatment protocol that can be devised other than being told "no."

Physicians likewise have no risk in asking for any form of treatment, and if they provide some treatment that might later be determined infelicitous, then they likely will still get paid something in settlement of the bill.

Insurance companies in reality have no relative risk in claims - sure there might be some penalties for failing to do something timely, or an actual claim may exceed actuarial calculations pinching cash flow, but the truth is that other than losing an account (which will be supplanted by the next employer policy) the failure to carefully watch money on a claim simply translates to an increased ex-mod for that employer that some other carrier may get paid on later.

Third party administrators likewise lack much risk - again if they don't manage the money correctly then perhaps an account will seek the services of a competitor, but unless an employer is self-administered, it's not their money.

The list can go on. Yes, I know, there is some risk to the various participants if they do something wrong.

But there is no risk for NOT doing something RIGHT.

For instance, most workers' compensation systems now rely upon some sort of guideline for directing the "right" thing - treatment guidelines and fee schedules are prime examples.

Follow the guideline and presumably there is no hassle in getting the treatment requested (I know, I know - that fantasy is far from reality, but usually the hassle experienced is a failure in documentation rather than a blatant failure in the guideline methodology); all that happens is that the request is denied - i.e. the answer is "no."

That is not really a risk. Maybe the expectation for surgery is deflated, maybe the want for more therapy or chiropractic services is deferred, but save for those very few instances where death may occur should a treatment request be denied there really is no true risk - i.e. those that make the request have nothing more at stake than maintenance at status quo.

Now status quo may not be a pleasant state of being. Constant pain is never a place where any of us wish to spend any lengthy period of time, but in the grand scheme of things there are generally alternatives that have established acceptance in the medical world, otherwise we wouldn't have physicians specializing in pain management.

Risk is always a variable setting - some things inherently are more risky than others - so we come up with techniques to manage risk.

For instance, in aviation the risk of death is always present. Fail to learn to communicate effectively and clearly and you die. Fail to navigate accurately and efficiently and you die. Fail to manage the aircraft sufficiently to keep adequate air flow over the wings and you die.

You get the picture - we learn how to do things that reduce risk, but the risk is always there: death if you don't so something correctly in flying an airplane.

The key is in most of life there is risk if one does not do something correctly; i.e. NOT do something RIGHT.

There certainly are risks in workers' compensation, but in general the risks are greatly mitigated to a point of near non-existence. Like I said above, for the most part, there is no risk in work comp claims other than the word, "no." There is no risk in NOT doing something RIGHT.

There is a theory in managed care called Consumer Directed Healthcare: if consumers are made more accountable for the cost of their healthcare, they will become more responsible healthcare consumers – and overall healthcare costs will decrease.

This theory springs from the reality that those without health insurance are less likely to use the health care system until something drastically is wrong, and then they avail themselves of the least costly, albeit presumably least effective, medical care - the emergency room paid for by either Medicare or Medicaid.

Those with "good" health care insurance will tend to use medical services more often, and the behavior patterns follow the discretion by which consumer participation is required (read deductibles, co-pays, etc.).

So can consumer directed workers' compensation work given that the laws and the culture of work comp spring from a "no fault" mentality which has been translated over the course of a hundred years into "no risk"?

We won't see deductibles or any other form of outgoing financial participation from claimants - that goes against a hundred years of culture, and many workers in the lower wage scales could not participate which would defeat the purpose of workers' compensation.

But there must be other incentives, ergo risks, that could be implemented to make the injured worker more engaged in the process.

Perhaps looking at medical services from a value perspective would provide some vision. Medical services have a certain value - we have fee schedules and ICD codes that help us establish the monetary value.

I have begun looking at value beyond the element itself. Content is a perfect example. In most media now, content has very little value in and of itself. Actually content has always been that way, but the mode and method of delivery and consumption were the value proposition because most of us lacked the ability or resources to provide those services.

The Digital Age has changed all that. Now delivery and consumption are easily provided and replicated. There is no perceived  value to delivery and consumption, and consequently the value of actual content to us (e.g. music, magazine articles, etc.) has diminished.

There has to be a layer provided that makes the content useful to us on a personal level that goes beyond the content itself.

In the digital world gamification - making a game out of the consumption of content - has provided that layer. The "risk" in gamified content is typically realized in a competitive setting: someone can do something with that content better than you raising your competitive hackles.

Likewise in workers' compensation medical treatment - if you consider that treatment is essentially content to be delivered and consumed, there is not much value in the traditional sense to the injured workers because there is no risk other than "no."

I don't have an answer, at least not yet. In my mind though this clearly deserves some academic attention. I think that if one can unlock the value layer that exists atop the treatment (i.e. gamify the content) then there may be some engagement, some consumer directed care.

Personalizing the experience beyond the victim role that the injured worker now assumes will require some imagination. I believe that can happen, that there can be some "risk" or gamification in workers' compensation. This has to happen if workers' compensation is to evolve beyond the present state of just managing costs versus benefits.

Friday, January 24, 2014

The Alternative to Copy Services

There are a lot of document copy service vendors exhibiting at the California Applicant Attorney's Association winter convention in Rancho Mirage so I talked with a number of them.

The rumor I'm hearing about the stalled copy fee schedule negotiations is that there a couple of hold outs using the Berkley Research Group's recommendations, adopted by the Commission on Health and Safety and Workers’ Compensation, as a bludgeon to force the sub-industry to accept a fee schedule that the copy businesses say is not reasonable nor sustainable.

The copy sub-industry says that BRG's research is inflicted with incorrect metrics and is flawed because the group failed to take into consideration the full scope of the services they provide and was based on a model that is inapplicable to the workers' compensation dispute resolution system.

The fee schedule was initiated as a part of SB 863. Originally drafted to reel in perceived excess by applicant copy services, the proposed schedule would also wrap in defense copy services, and that has former proponents of a copy fee schedule joining the chorus of the applicant folks.

In a story earlier on the issue, D. Diann Cohen, director of training and marketing for defense copy service Macro-Pro, said while she is a proponent for reform, she is completely opposed to the recommendation in the report.

“Fair is fair and right is right, and unfortunately, this is neither,” she said.

On the other hand, Debra Russell, director of the workers’ compensation program for Schools Insurance Authority, criticized the proposed reimbursement rates for being "too generous."

Russell also said she thinks in some cases the methodology used by Berkeley Research Group double-counted subpoena costs and witness fees, which should have been included in the invoices it reviewed. Therefore, the recommendation that the Division of Workers’ Compensation could allow additional payments in addition to the lump sum to cover these costs “is suggesting duplicate compensation for those two parts of an invoice.”

Here's the way I see it - the folks that are in the way of getting a schedule now by holding out for lower fees are missing the big picture and will end up costing the work comp industry a whole lot more than acceding to some of the copy service demands and here's why.

Copy services, both applicant and defendant, have done a tremendous job at systematizing the job of obtaining, copying and distributing records. The job they do is specifically authorized by the Code of Civil Procedure starting with section 2020.410.

That set of code sections permits "the officer" to serve subpoenas, wait for the production of records, then when produced copy them, all without much human interaction, in a reasonably efficient manner.

But these sections provide that procedure as an accommodation.

The PROPER way to get records is a whole lot more complex and costly - and that is the deposition of the custodian of records in addition to the demand for production and inspection of documents by an attorney at law.

I certainly could envision a very nice cottage industry springing up by some enterprising young attorneys who specialize in obtaining records via deposition, charging $400 or more per hour, conducting days long depositions in order to secure and inspect "documents."

And since the depositions would be conducted by an attorney not governed by any fee schedule, time limit or other constriction, it seems to me that such fees would be a medical-legal expense under LC 4620.

Could you imagine the uproar when THAT trend starts? A job that a copy service would have charged $300 to do would cost at least $3,000 if an attorney was performing a deposition of the custodian of records - and it would be a reasonable fee too because the attorney needs to ensure that all of the records are in place and that there was nothing omitted in response to the demand for production.

This is a very easy scenario to envision.

And this could be a new business model for copy services - much in the way that insurance companies have captive law firms to defend claims, copy services could have captive law firms to conduct discovery requests.

The profit margin suddenly climbs to salacious levels.

And the penny pinchers lose an even bigger battle.

Obstinance begets unreasonableness and it plays both ways.

So my message to the hold outs - look at the bigger picture.

But be sure to tell me when the BRG schedule is adopted so I can open up my specialty law practice quickly - I might even discount my hourly fee by 25% if I get paid timely...

Thursday, January 23, 2014

The Good Things

I took a circuitous route to Rancho Mirage for the California Applicant Attorneys Association winter convention, stopping in Oceanside to check on Mom and Dad.

Mom, as you may recall from earlier posts, had gone to the hospital a couple weeks ago with congestive heart failure and pneumonia. She since has been released to a rehabilitation facility.

Dad continues at status quo - too weak to get any better, but too stubborn to deteriorate.

I visited with Mom and checked her status. With dementia she is easily confused, but it seemed to me that otherwise she was just Mom. A bit weak still but, in talking with the therapist, making rapid recovery. I would expect her to go "home" within a week.

Dad breaks my heart of course. Here was a vibrant man, bright in the eyes, quick of wit, and at age 91, in very good shape despite a long history of coronary issues and surgeries, who all of a sudden was reduced to less than 100 pounds of skin and bones.
But he's still very aware, very sharp of mind, and desirous of something other than his current fate - either recovery or death, but anything other than status quo.

And during these past two months of regular visiting, handling "the business of Dad," and watching the progression (or lack thereof), I've noticed considerable fatigue.


I wasn't ready for this. My wife says she hears me in the early morning hours as I work, sighing heavily. I'm not aware of this when it happens, but on reflection do recall such behavior.
I'm tired all day every day. My usual zeal for life has been compromised.

Flying down to Oceanside, in between radio calls to air traffic control and managing flight, I wondered why I was so exhausted.

And it occurred to me that while I have a tremendous amount of help from my brother and sister in law, and some participation in the process from my sisters (who are not well geographically situated and don't have easy air transportation like I do), that there was an element missing from their realities.

That element - I am the primary decision maker.

I've always prided myself that I was a good decision maker. I can make a decision and I'll stick with it and execute it. I don't hesitate and don't second guess. If I made the wrong decision based on subsequently received information then I make another decision to change the original decision, and again execute.

I didn't count on guilt being associated with a decision.

But guilt is what has been dominating my emotions.

Ultimately it was MY decision that put Dad into living-limbo. I see Dad and get overwhelmed with the fact that I decided to pull him out of the hospital and back to home with hospice care.

What I was hearing from all of the professionals, and from Dad himself, at the time was that he wasn't supposed to live more than a couple of weeks.

Now its been eight weeks and I see no declination in health, only a miserable status quo.

If you're a workers' compensation professional for any length of time you can't escape this guilt either.

Claim adjuster, attorney, doctor, judge ... whomever - we have all had those cases where we second guess our decisions because the outcome was much more different than anticipated, and the person most affected by the decision process suffers.

If you've been in workers' compensation for any length of time you can't escape that one case that tugs at your heart, and you do everything you can to remedy whatever the situation is only to see either a failure, or worse, no change.

While we can say we're professionals and that it's our job, we have feelings too. Those feelings can not just be turned on or off. They linger. They affect our behavior. They affect our health.

Sometimes I sit here writing this blog and come to a pause. I reflect on what's going on with Mom and Dad. It makes me weepy. Should I have done something different? Did I explore all of the alternatives adequately? Did I make the right decision?

Of course I'm much more close to the situation than one would typically be to a workers' compensation case. We have this way of distancing ourselves through language, numbers, paper so that we are not burdened with the emotions tied to making decisions that can drastically affect the life of another human being.

It's not an easy place to be and I can't help but think that many of us who have dealt with claims for any length of time have been there too.

A friend counseled me lately on my guilt. He said, "Don't forget to tell yourself the good things about you. You are getting too much negative feedback from your own inner judgement gland. Blast it with some positive inner-reinforcement. Like most things in your life, you are doing your level BEST with this, given what you have to work with."

As we go through our days, managing injured workers, doing our level BEST with the best judgement and decision making skills we have, we need to remind ourselves that there are good things that we do.

Our industry isn't perfect. What we do is tough work. There are a myriad of laws, confusing regulations, complex emotions that we have to deal with.

At the end of the day we're exhausted.

And there are good things we have done for others.

Wednesday, January 22, 2014

The Rancho Mirage Metaphor

Today I, along with a thousand other interested folks, will migrate to Rancho Mirage, CA for the annual Winter Conference of the California Applicant Attorneys Association (actual start of the conference is Thursday and continues through Sunday).

CAAA has two conferences a year. The Summer Conference has been held that past few years in Las Vegas. I don't go to that - Vegas in June, 110 degrees, glitz, noise and smoke ... no thanks.

Coachella Valley in the winter, however, is usually mid fifties at night, upper seventies during the day, clear air and lots of peaceful space to talk to people and do some recreation.

It's not on the agenda, but rest assured that much of the talk on the sidelines will be about lien claims and the current standing temporary restraining order against the Division of Workers' Compensation's collection of the lien activation fee that SB 863 imposed.

Recent reports indicate that it's nearly business as usual back at the district offices where initial hearings on disputes are held.

“Most lien claimants with small balances, or who had already been paid pursuant to fee schedule, or who had little chance of prevailing at trial, decided not to pay the fee and simply have their liens dismissed,” Lois Owensby, an associate attorney with Laughlin, Falbo, Levy & Moresi said in an email to WorkCompCentral. “As a result, and directly because of the activation fee, defendants were making progress in the elimination of frivolous liens and were able to devote more time to resolving viable lien claims.”

Now, she says, “The issuance of the injunction has resulted in lien claimants now fiercely pursuing their balances at every lien conference, as no one knows when the court will issue a final ruling re the constitutionality of the activation fee.” Consequently the district offices are again glutted with lien issues taking up resources that should be directed towards cases in chief.

And that would make sense - the injunction is only temporary, and if the ruling is adverse to lien claimants (i.e. the lien fee provisions are found constitutional) then there is no remedy for millions of dollars of claims.

On the other hand, if the injunction becomes permanent then new life is born into these claims, and the fact that there are other procedural hurdles just means more issues to litigate, ergo more resources diverted from the main case.

The negotiators of SB 863 knew they were running the risk of the lien fee program being challenged, and knew that there was a risk that there could be some interruption to the savings plan that was to offset an increase in indemnity to injured workers. That's why there's a provision in the bill that enables portions that may be challenged to be extricated without destroying the entire package.

Many of the exhibitors at the CAAA conference are entities that file liens to secure payment for their services - or at least used to file liens. What practices are now will be an interesting question to review on the exhibitor floor.

In the past, when I have talked to these people their nearly universal complaint is that they don't get paid fairly or timely and must file liens to protect their positions.

One copy service vendor that I know said the normal course of business is to render the service, wait for the applicable period of time before filing a lien, then wait for the two years or so before receiving some communication from the defendant for payment - and typically the bill is paid at or near claimed value. The accounts receivable wait is factored into the bill and lien.

I don't know who's right or who's wrong in this situation, if any. Ascribing fault isn't going to change the outcome. It's not going to change the reality of dealing with the complication of this injunction and related law suits.

In my mind the defect with the lien fee provisions of SB 863 is that some lien claimant categories are excluded from the fees - namely big medicine seeking subrogation of medical treatment paid through a general health plan. To me that is an equal protection problem that could quickly be remedied with some legislative action should the fee provisions be found unconstitutional.

But this issue isn't going to go away easily or any time soon. In the meantime any savings that were projected as a consequence of the dismissal of liens and the monetary road block to filing liens have evaporated. The numbers that we will see at the end of the year from the measuring entities will no doubt raise the hackles of payers and there will be more controversy, more debate, more lobbying, more legislation and more regulation.

When I'm in the desert I like to ride my bike up the Palms to Pines Highway, State Route 74. The road elevation tops out at about 5,000 feet near Idylwild, and that's where I typically turn around for the descent back to the hotel. There's not a lot of opportunity to reflect on much of anything on that ride. Going up the mountain the road is narrow and one must stay alert to passing traffic. Going down is pretty fast so concentration on the ride is necessary to prevent a high speed crash.

Overlooking Coachella Valley from SR 74

That's what's going to be needed to deal with this present lien claim issue - there was some traffic going up the hill towards passage of SB 863 but there weren't any accidents. Heading down however is going to require some skill, and a lot of concentration to keep the system from crashing.

Perhaps I'll get a sense of whether the "riders" in this contest will have the necessary concentration and skills to navigate the course back down to workers' compensation reality. The question is whether there is an appreciation for the reality.

Rancho Mirage is a fitting setting for a gathering of California workers' compensation industry participant - think about it: palm trees, golf courses, lakes, all out in the middle of the desert. Environmental elements that should not be there but for man's manipulation. I see it as a metaphor for California workers' compensation.

Is all of this real?

Tuesday, January 21, 2014

Why Fighting Fraud Will Never Work


Mention workers' compensation to nearly any lay person on the street and nearly everyone knows someone who has defrauded the system as either a lying, cheating worker, or as a lying, cheating employer.

Even in our own ranks we all believe that there is fraud in abundance, and that it not only pervades the system but contributes disproportionately to the costs of procurement and administration.

Consequently many states have special funds to collect and distribute money in an effort to curb fraud and other programs intent on combating abuses.

Yet, it seems, these funds and programs are not particularly effective. Criminals will engage in criminal behavior regardless of programs designed to discourage such behavior.

In his book "The Immortality Complex" Jerome Schulte, MD, a forensic psychiatrist who has worked with the criminal mind for over 40 years, basically concludes that the criminal is going to engage in crime regardless of the consequences. There are certain issues in the criminal mind that make it work the way it does.

Yet we spend oodles of money trying to get people to comply with the law by prosecuting "fraud."

For instance, the California Fraud Assessment Commission controls how $51 million in funding from an assessment on employers is granted to fight fraud this year. An estimated $31 million is divvied up among county district attorneys statewide that apply for funding help in their fraud investigative units.

The new chairman of the commission, Don Marshall, is very frustrated that despite all of the funding workers' compensation fraud seems to run rampant.

"I am very aware of the fraud that is currently ripping the workers' compensation system apart," said Marshall. "I believe it's that bad."

"We've got to look at better ways to go after this fraud," he said. "It's continuing."

Fingers get pointed at the district attorneys that receive money from the commission for not doing their jobs. Other fingers get pointed at the Department of Insurance for not sharing data. Still other fingers get pointed at the industry itself for not taking the issue seriously.

Competitive strategies are implemented to get various entities and people to engage in crime fighting tactics, and rewards are placed to bait others into action.

Yet the "fight" against "fraud" seems ludicrously ineffective, and fails to make any substantial return on investment.

For instance, the California Department of Insurance says that, for fiscal 2011-2012 the Fraud Commission was allocated $53 million from employer assessments. District attorneys reported a total of 819 arrests, which also included the majority of Fraud Division arrests (only 132 arrests). During the same timeframe, district attorneys prosecuted 1,332 cases with 1,565 suspects, resulting in 708 convictions. Restitution of $53,006,082 was ordered in connection with these convictions and $5,943,570 was collected during Fiscal Year 2011-12.

Yet the Fraud Division of the DOI says that total estimated damages from workers' compensation fraud totals nearly a half billion dollars.

And doing the math, no reasonable business person would spend $100 to recover $10. That's a huge negative return on investment.

Comments to the WorkCompCentral story last week about the Fraud Commission thus far total 23 - fraud is a very emotional topic for nearly everyone in the system. With all that passion, you'd think we could do something about it.

Commissioner Joel Sherman said "it's disconcerting" at the end of funding years to learn that no progress has been made in the fight against workers' compensation fraud. He, too, noted that criminals are evolving.

District attorneys are tasked with prosecuting criminals. But one of the problems is that there are so many criminals! And most of those criminals aren't too concerned with workers' compensation...

Here's the deal - we won't and can't stop fraud. That will never happen. The absolute best we can do is slow it down and minimize the impact, and even then such efforts are questionable.

Why? First off, fraud is extremely difficult to prove in a criminal court of law. Not only must the prosecutor prove beyond a reasonable doubt that the alleged had a specific intent to make a false representation of a present or past fact, there must be action in reliance upon such representation to the detriment of another, and there must be damage as a result.

Second, the prosecutor must convince 12 people of this. All 12 people, and if just one doesn't agree then the alleged goes free. What you and I think of as fraud may not, in the eyes of the law, be fraud.

The problem with our efforts to stem fraud in workers' compensation is because it is so emotional. When we humans get emotional we make irrational decisions.

Like trying to throw money in all the wrong places for all the wrong reasons.

Why are we funding district attorney's offices with excess money in a competitive game to see who can get more fraud convictions? Sure this may seem like a cause and effect representation of the efforts, but as noted above, it hardly makes any economic sense. And it simply encourages district attorneys to take on the easy cases for easy convictions to get easy money on an annual basis.

Commissioner Jiles Smith at the Fraud Commission meeting last Wednesday called for a three-year strategic plan to increase the effectiveness of fraud investigations.

We don't need three years nor do we need more effective fraud investigations.

District attorneys rely on the collection of evidence by system participants, namely workers' compensation insurance company Special Investigation Units. These SIUs have gotten much, much better at acquiring, collecting, preserving and presenting evidence since I was a young attorney, but the truth is that they are still largely ineffective as noted in the dismal rate of prosecution and poor return on investment.

We get anecdotal evidence of small time fraud prosecution due to the collective efforts of these SIUs and district attorney involvement, but what about that $53 million in funding? Remember that does not count the cost of an insurance company's SIU. Add that in and the actual money spent combatting fraud (and ergo, the pathetic return on investment) grows substantially.

What we don't need is better workers' compensation fraud investigation. What would bring a better result is the income tax evasion that results from fraudulent workers' compensation activity.

What brought down Al Capone? It wasn't his criminal misdeeds - it was failure to state income on his returns.

Want to bring down a criminal medical enterprise? Investigate the sources and reporting of income.

What to stick it to the premium skirting payroll falsifying employer? Check those income returns for false statements (they're there ... guaranteed payroll expenses are buried as some form of "other" deduction).

Need to find the injured worker who is still getting benefits along with other income? You got it - look at the tax records.

It's not all that hard. Yep, income taxes have a level of confidentiality to them and certainly they are protected from someone just sniffing around, but guaranteed if there's reasonable suspicion to issue a subpoena then the evidence is in the numbers.

The funding shouldn't be going to district attorneys offices. The funding should be going to the Treasury Department.

Battling workers' compensation fraud directly is like trying to enforce the prohibition against alcohol (and in modern times marijuana). It didn't work then, and it won't work now.

Get the tax records and find your crime.

But try to prove to 12 people that someone intentionally misrepresented a fact for the purpose of cheating the workers' compensation system and you get a prosecution rate of point zero three percent.

Monday, January 20, 2014

Innovation At The Front End

Most of what we become concerned with in workers' compensation is the end result: claims.

But the front end of the equation, preparing against the financial risk of claims, should draw attention too, particularly when some very creative techniques and methods are being devised and deployed. After all, the first part of the grand compromise was devised to spread the risk of financial ruin to a broad base of employers.

A lot of attention recently has gone towards Oklahoma and its newly passed "opt out" laws, but under more traditional systems self insured employers have found relief by partnering up in groups and then seeking alternative security programs.

The ability to engage in such a strategy is highlighted in California with last year's SB 863.

While most of the work comp world and media has focused on the extreme changes to claims processing, medical treatment and billing (including liens), what has largely been passed over is that nearly half of SB 863's voluminous tome was all about self-insurance.

A huge change to the law regarding security deposits coming out of SB 863 is that the bill eliminated the requirement that self-insured employers and groups post collateral at or above 135% of their estimated future liabilities. Instead, security deposits are now calculated based on actuarial studies due Dec. 31 of each year projecting liabilities at an 80% actuarial confidence level.

Some smart brokers have figured out that they can pool self insureds into groups, then collateralize their security requirements with a more traditional insurance mechanism. A bank issues a letter of credit that the groups can post to satisfy security deposit regulations. The letter of credit is backed by a credit insurance policy that transfers the risk back to the insurance market.

In 2003, Marsh & McLennan Cos. created the Alternative Security Program as a way to free up working capital for some self-insured employers. But it wasn't until SB 863 that there was any viability to the program.

In addition to the new rule requiring actuarial-based security deposits, California already required that the claim administrator, the company managing the group and the group's actuary all be independent. 

“When you're looking at the credit worthiness of groups, you look at the regulatory framework,” Quentin Hills, managing director of MMC Securities Corp. told WorkCompCentral. “California, which requires segregation of duties, is a positive. If you didn't have that, you'd increase the risk and then get into questions of price and whether you can do it at all.”

The Alternative Security Program for self-insured employers was the first of its kind in the nation and has since been implemented in North Carolina. Several other states, including Minnesota and Washington, are also looking to implement similar programs.

Groups typically would have had to rely on bonds to ensure adequate cash flow, but bonds require collateral of about 50% and the instrument also costs about 2% of its value, consequently the market was limited, which constricted the ability of the self insured employer to negotiate a better deal. Being able to use an insurance product to ameliorate the risk frees up this cash.

While being part of a self insured group may be more expensive initially, the huge upside of freeing up cash flow because of the reduced security requirement makes the alternative much more attractive to large self insured employers with the resources to use the strategy.

The alchemy of finance has always amazed me.

My finance professor in business school reiterated every single class from day one the golden rule of business finance: "Cash is King." SB 863's amendment to security deposit requirements and the ASP strategy embraces that maxim.

Keep the cash flowing so the bills can be paid which keeps everyone working. After all, if there is no work, there is no workers' compensation...


Post script - clarification from Joe Burgess, Sr Exec VP at CHSI: the 80% confidence level referenced is not in the regs now and the requirement per 863 is that the security deposit equate to reserves at the expected confidence level, as opposed to 80%.  At the time 863 went into effect on 1/1/13, Jon Wroten included in the emergency reg package a change to expected from 80%.

Friday, January 17, 2014

The Conflict Between NAFTA and Comp

It's the long arm of the law.

When the North American Free Trade Agreement was signed into law conservatives applauded that it would open up the forces of economic powers from Mexico that were previously running underground.

Liberals said that NAFTA spelled the end of domestic work for Americans.

Of course, neither of the extreme views became reality.

What did become reality, however, is that Mexican firms sending employees into the United States became subject to the same workers' compensation laws that domestic employers are subject to - a real leveling of the playing field - at least according to a unanimous Arizona Court of Appeals panel opinion.

The court's decision in Porteadores Del Noroeste S.A. v. Industrial Commission of Arizona, No. 1 CA-IC 12-0038 held that the North American Free Trade Agreement did not pre-empt Arizona's workers' compensation statutes and that Porteadores del Noroeste could face liability in Arizona for the additional compensation that one of its workers, Adan Valenzuela, claimed he was due.

Valenzuela worked for Porteadores as a driver, hauling diesel fuel from Phoenix, Ariz., to Nogales, Mexico.

He suffered injuries in a wreck on April 30, 2010, after falling asleep behind the wheel. Valenzuela was ejected from the cab of his truck before his fuel tanker exploded. Valenzuela injuries were, amazingly enough, not substantial.

Valenzuela received treatment at a Nogales hospital and was then transferred to University Medical Center in Tuscon, Ariz. After being discharged from the hospital, Valenzuela returned to his home in Mexico and requested a determination of disability and benefits from the Instituto Mexicano del Seguro Social.

The IMSS, established in 1943, describes itself as the largest social security institution in Latin America. It provides disability benefits, health care, and life insurance coverage to some 49.1 million Mexicans.

If an employee of a Mexico-based employer suffers an on-the-job injury, IMSS will compensate that employee for 100% of his lost daily wages. IMSS also covers medical expenses arising from work-related injuries if the care is obtained from within the IMSS network of doctors.

Valenzuela, however, sought treatment from outside the IMSS network. Then, when IMSS refused to pay for all of his bills, he filed a claim under the Arizona comp system seeking payment of $17,000 for his care from Dr. Miguel Millan Ramirez and additional compensation.

In September 2010, Valenzuela filed an injury report with the Industrial Commission of Arizona naming Porteadores as his employer. Because Porteadores did not have Arizona workers' compensation coverage for its employees at the time of his accident, the ICA claims division referred the matter to the Special Fund/No Insurance Section.

At the time Valenzuela filed his injury report, the only medical bills presented to the Special Fund for payment were those related to the emergency visit to UMC, which the Special Fund paid. Valenzuela later asked the Special Fund to pay Dr. Ramirez's bills, but the Special Fund declined his request, determining he had already received "full compensation benefits" from the IMSS.

Valenzuela objected and requested a hearing on the Special Fund's decision. Porteadores argued that the ICA did not have jurisdiction over the dispute because it was a foreign company and because its corporate activities in the United States were governed by the North American Free Trade Agreement, not Arizona comp law.

The Administrative Law Judge decided that subject matter jurisdiction over Valenzuela's claim existed, and he went on to determine that Valenzuela's 2010 accident was compensable under Arizona law.

The ALJ determined that Porteadores and/or the Special Fund therefore had to pay for all of Valenzuela's care, including the care from Dr. Ramirez, subject to an offset for the benefits that Valenzuela had received from IMSS.

Porteadores sought judicial review, but not long after the parties had the oral argument before the Court of Appeals last March, the Arizona legislature amended the state's workers' compensation laws.

As of Sept. 13, 2013, the law in Arizona is that a worker who has a claim in Arizona and a claim in a foreign country based on the same injury, is entitled to the full amount of compensation to which the worker is due under Arizona law. If the worker receives compensation on the claim in the other country, then the employer or carrier will be required to pay the worker additional compensation to the worker, up to the amount that the worker would be entitled to receive under Arizona law.

Though the new law doesn't apply to the case, the opinion is in line with the new law.

The court said that the unambiguous language of NAFTA provides that only the United States may challenge a state law as conflicting with the terms of the agreement between it, Mexico and Canada.

"Given this express limitation, Porteadores is precluded from asserting that Arizona's workers' compensation statutes, or any application thereof, are preempted by NAFTA ," the court said.

What's interesting to me is that it doesn't appear that the court considered that Arizona 10 years ago passed laws to deny undocumented workers benefits - seems the same logic however does not apply in a reverse situation!

Porteadores is seeking a rehearing.

Thursday, January 16, 2014

The Metaphysics of Work Comp

Life takes surprising turns sometimes, which is what makes it so interesting.

Very early yesterday morning Mom went into the hospital.

Remember Mom has dementia, but otherwise has been in excellent health save for an occasional infection or two, quickly remedied with some antibiotics.

But the message I got at 3 a.m. was that Mom was short of breath, flushed in the face and perhaps running a fever.

So I flew on down to Oceanside to see what was going on.

When I arrived Mom was asleep. Her nurse explained the current working diagnosis was pneumonia and congestive heart failure.

Hmmm - that's exactly what put Dad in the downward spiral to his current stable, but degenerative state.

A course of antibiotics, rest, fluids, etc., the nurse expected hospitalization for several days. Then of course likely release to therapy.

This has made Dad distressed.

To me, it's amazing how things in life just seem to revolve back around to status quo. Dad is caregiver, gets sick and near death, Mom gets matronly within her abilities, gets sick ... Perhaps this IS one of those stories where the couple that's been married for 69 years (yep!) exit life together.

There are connections that defy the physical world: metaphysics.

It's sort of like this in workers' compensation. Work comp has been married to the economy for over 100 years. It has evolved with the economy in some respects, and in other respects, like a married couple, has taken on its own interests.

There are people concerned with fraud. Others have concern with maximizing benefits to injured workers.

Courts weigh in on whether a disability rating is "correct." And legislators tinker with systems in response to some perceived issue.

Workers' compensation responds to economic issues long before any economist declares the existence of a trend.

Sometimes we engage in lengthy debate about the efficacy of certain programs or policies.

But we always come back to the basic question of whether there is a reasonable compromise between an employer's liability for work injuries and an employee's need for medical treatment and compensation.

The basic workers' compensation premise, as we all know, was that an employer gave up certain common law defenses against an injured worker's claim and the injured worker gave up the possibility of a big money judgment, all in exchange for a promise by the employer to provide without dispute medical treatment and some money at a defined level.

The reason it is called "workers' compensation" is because it is part of the employment package - it IS compensation because there is only one payer, the employer, and basically only one recipient, the employee.

We debate whether calling this system a different name would engender beneficial change, and we concern ourselves with the cost of one program over another.

When we get down to the basics though there is only one mission. That mission is to provide medical treatment and money to injured workers. Of course this simple concept gets diluted when deployed on the grand scale, but when all the layers are peeled back we still get to the same basic premise.

That premise hasn't changed despite over 100 years of marriage to the economy.

It's the metaphysics of workers' compensation; we can't explain this phenomenon with basic physical attributes. And while we can change some of the operating details, the grand scheme has remained the same through the years.

I wonder if Mom and Dad will exit this world together, or at least close in time to be considered rather synchronous.

I hope workers' compensation doesn't exit this world though - if that happens then I fear we have much bigger problems with our economy, and society, than whether or not a premium is too high, or a worker isn't getting enough money.

Wednesday, January 15, 2014

Disability, Working and the Legal Fiction

Disability is a legal fiction that has nothing to do with whether in fact someone can actually work.

I've made that statement many times, and have a number of blog posts that discuss that very point such as this, and this one, among others.

I can't tell you how many times I've been challenged on that statement, particularly by newer members of the claims community.

I recall one claims adjuster at one of my presentations who who held the opinion was that if someone is 100% disabled then they are essentially of vegetative state incapable of doing anything of value and can not work - period. From her standpoint the payment of disability indemnity precluded any other form of income.

The concept that someone could work and still be considered 100% disabled did not settle well with her. She was a claims adjuster and could not accept that someone may be able to, or in fact was, doing some form of work but able to be compensated as though unable to work.

A recent Iowa case highlights that disability is only for the purpose of determining a number - because that's how we deal with injury and displeasure in America, by handing out money.

In the published opinion Wal-Mart Stores v. Henle, No. 3-913 / 13-0366 and No. 3-1071 / 13-0721, 01/09/2014, Julie Henle suffered injuries while at work in May 2006 when a 60-pound stack of plastic totes fell approximately 15 feet, landing on her head and shoulder.

Thereafter Henle complained of unremitting headaches and dizziness. She was able to continue working, but her doctor restricted her to working four hour days.

She also missed a lot of work because of her headaches.

A deputy workers' compensation commissioner determined that Henle was permanently and totally disabled from competitive employment, and ordered Wal-Mart to begin paying her PTD benefits from May 30, 2006, onward.

The deputy ordered that the benefits be paid in a lump-sum, with Wal-Mart receiving a credit for past payments it had made and for the dates when it made accommodation for Henle to work.

Wal-Mart appealed to the Workers' Compensation Commissioner, but the commissioner affirmed the deputy's decision in April 2012. So Wal-Mart took the case further up the ladder.

Eventually, after remitter from the Supreme Court, the Court of Appeals upheld the commission's affirmation.

The court went on to reject the suggestion that an employee must be 100% disabled to qualify for a total disability award, so that Henle could not be totally disabled when she was employed and earning wages.

In Iowa an employer's accommodation of an injured employee—like Henle's part-time job and excused sick days—can only be factored into an industrial disability award if the commissioner finds a position equivalent to the newly created job is available in the competitive labor market, the court said.

The court said it agreed with the commissioner's finding that Henle's accommodated work situation is not generally available in the marketplace, and so Henle was entitled to a PTD award.

Granted this Iowa case rests on Iowa specific law but the general point is the same - the LAW defined the disability, not the facts. Disability is a legal fiction.

Whether someone can work or not does not necessarily determine one's indemnification status. There may be some overlap, and ability to work or not may be EVIDENCE that is weighed into one's indemnification status, but it is not synonymous with complete inability to gain or earn an income.

As the Iowa Court of Appeals found, because at the trial level the hearing officer relied upon substantial evidence (I have quite a few posts on that fiction as well), then the finding was "good enough." Yes Iowa, someone can be 100% disabled and still do some work.

And isn't that the outcome we all want anyhow regardless of compensation? Return to work?

Tuesday, January 14, 2014

2009 - Bad Year to Compare Spine Surgery

A study recently published in the professional journal, Spine, found the rate of lumbar fusions was 47% higher in California than Washington.

Of course the cost is higher per surgery by about 23%, but that's not disconcerting by itself.

What does cause some deliberation is that Californian's undergo fusion for “controversial indications” at a higher rate than similarly situated patients in Washington with 28% of fusions in California for complaints of nonspecific back pain, compared to 21% of the fusions in Washington. About 37% of the procedures performed in California were on herniated discs, compared to 21% in Washington.

“How Do Coverage Policies Influence Practice Patterns, Safety and Cost of Initial Lumbar Fusion Surgery? A Population-Based Comparison of Workers' Compensation Systems,” examined 4,628 patients who underwent an inpatient lumbar fusion for degenerative disease in 2008 and 2009.

Both states use "evidence based medicine" guidelines to regulate medical procedures.

I guess Washington has better evidence? Or are there incentives that existed creating a path to such disparity?

While the study compares and contrasts different procedures and outcomes in the two states, what is most shocking is that injured workers receiving spinal fusions in California were 2.28 times more likely to need a second surgery, 2.64 times more likely to have “wound problems” and 2.49 times more likely to have device complications, as compared to those in Washington.

These are not small margins.

In the meantime, yesterday the California Division of Workers' Compensation held its first meeting on the well publicized "problem" of utilization review and independent medical review volume in Van Nuys yesterday.

Much like the volume of IMR requests, DWC didn't anticipate the volume of people interested in the topic. The auditorium of the Van Nuys State Office Building was filled past capacity, with roughly 150 people attempting to crowd into a room with a maximum occupancy of 117.

There were a handful of injured workers and doctors present and about a dozen attorneys. Most of the audience identified themselves as being claims adjusters or employer representatives.

The meeting, which many thought would be a complaint session, or at least an open forum for discussing UR/IMR backlog and volume, was more about DWC telling everyone that things are working, and for those things that aren't working, they'll be working shortly.

But DWC Medical Director, Dr. Rupali Das, told the audience that the agency next month hopes to release an update to the medical treatment utilization schedule.

The MTUS hasn't been updated since 2009. Other developments have occurred in this time frame that would affect any of the statistics behind the Spine study.

Dr. Gary Franklin, Washington Department of Labor and Industries Medical Director, and one of the authors of the Spine study, said broader lumbar fusion coverage policies such as those in effect in California in 2008 and 2009 were associated with greater use of lumbar fusions, use of more invasive procedures, more follow-up operations, higher rates of complications and greater inpatient costs.

The numbers examined by the Spine study were before attention was brought upon Tri-City Regional Medical Center in Hawaiian Gardens, Pacific Hospital of Long Beach, Michael Drobot, and Paul Randall by the U.S. attorney's office and the Wall Street Journal alleging excessive and unnecessary surgeries to take advantage of the hardware pass-through provisions of the Labor Code.

The Journal reported that Pacific Hospital of Long Beach, owned by Michael Drobot, performed 5,138 fusions between 2001 and 2010, billing workers' compensation carriers $533 million for the procedures. Drobot and Randall worked together from 1998 until 2008, when the two parted ways because of a business dispute and Randall went to work for Tri-City.

I don't think the numbers are any coincidence. My suspicion is that Washington doesn't have any better evidence. The state likely just didn't have as many profiteering incentives.

Friend, fellow blogger and sometime co-panelist at conferences Joe Paduda told WorkCompCentral that "people in California are saying UR and IMR are denying care unfairly to workers. What the Washington research indicates is that, in fact, the lumbar fusions in California are more expensive, there are far too many and they are far more damaging to the claimants than the similar claimant population in Washington.”

I don't think the Washington research says that at all. I suspect that if the Washington study cohorts were geographically isolated we would see significant concentration in the Los Angeles area, and particularly in Long Beach and Hawaiian Gardens...

Monday, January 13, 2014

Sits And Thinks or Just Sits

"Sometimes I sits and thinks and sometimes I just sits" is a classic quote from baseball great Satchel Paige.

That quote from Paige seems appropriate for this stage of California workers' compensation politics. A couple years ago some folks sat and thought, and what we got was SB 863.

And right now it seems that we should just be sitting and letting this thing work its way through the growing pains.

But others have been thinking.

Sen. Jim Beall, D-Campbell, introduced SB 626, a bill that employer and insurance groups say will not only unwind major components of SB 863, but will introduce more chaos, more uncertainty and more unnecessary costs into the system.

The bill would remove the restriction against judicial overview of medical treatment approval or denial decisions. Currently once a medical treatment determination has been made through the Independent Medical Review process it can be overturned only under very limited circumstances.

The volume of IMR reviews and the quality of those determinations is currently the subject of debate and public meetings with the Division of Workers' Compensation starting today.

Other IMR language in SB 626 would require doctors performing independent medical review and utilization review be licensed in California.

The bill would also strike SB 863's prohibition against the use of psychiatric disorders when calculating impairment ratings and language that has been in place since 2004 prohibiting chiropractors from serving as the primary treating physician after 24 office visits by eliminating the 24-visit cap on chiropractic, occupational and physical therapy.

Finally, SB 626 would increase the number of voting members on the Commission on Health and Safety and Workers' Compensation to 10 from eight. The two new members would be appointed by the governor, with one representing injured workers and the other representing employers.

Beall told WorkCompCentral that his biggest concerns with the current law is that it forces workers to use prescription medications for pain by cutting them off from chiropractors after just 24 visits and it limits the compensability of certain mental conditions.

The California Workers' Compensation Institute in 2011 reported that 50.2% of prescriptions for Schedule II opioids such as oxycodone and fentanyl were for back injuries with no spinal cord involvement, meaning strains and sprains.

It seems to me that the cure for this conflict is for claims adjusters to approve reasonable chiropractic and physical therapy beyond the 24 visit cap in lieu of a doctor's recommendations for pain medication - I'm sure physicians who practice pain control would agree that successful pain management requires a multi-faceted approach that may include some chiropractic, some physical therapy, some counseling or other mental health care, and perhaps some medication.

Each case is different.

One of the more difficult things facing the folks making decisions about the provision of care is what is appropriate for any particular individual. This can not be remedied by broad strokes of the legislative brush.

Because each case is different, reasonable minds will differ. What may be appropriate for one individual will not be appropriate for another. Some discretion is necessary. Some folks will be happy. Some folks will not be happy. Those that are not happy will be louder about their plight.

In the meantime the economic recovery is resulting in an increase in injuries.

The number of reported work injuries and illnesses increased 2.4% in 2012, but because of an increase in the number of people working in the state, the frequency of injuries per 100 workers was unchanged, the California Workers' Compensation Institute said Friday.

Public and private sector employers in California reported 451,500 work injuries and illnesses in 2012, 10,600 more than they did in 2011.

The injury and illness rate was highest among local government workers, who averaged 7.4 cases per 100 workers in 2012, down slightly from 7.5 in 2011. State government workers had the second-highest rate in 2012 with 5.9 of every 100 workers reporting an injury or illness, up from 5.4 in 2011.

Nationwide, the injury and illness rate across all sectors stayed the same at 3.7 per 100 workers from 2011 to 2012. California's overall rate for all sectors during the same period was 4.

The numbers might be alarming - after all why are government jobs so much more likely to generate injury claims?

But when one considers that many government jobs, particularly municipal, involve public safety it is not surprising at all. Alex Rossi, Los Angeles County Workers' Compensation Chief Program Specialist once said in a presentation I attended that, unlike the private sector, when someone yells, "fire!" his employees run to it...

Listen, SB 863 changed the playing field. A lot. There's no question that the bill was manhandled through the Legislature. And there's no question that there are some questionable elements in SB 863 and that many provisions require a lot of work by the regulators and system professionals.

But it's not time to take the bill apart. A change as massive as those introduced by SB 863 is not only disruptive, but is a huge cultural shock. We are still experiencing the ripples of the big rock that was thrown into the pond.

In other words this thing is going to take time - a lot of time.

In the meanwhile, while not getting any better in terms of costs, California's economy is just starting to get back on its feet. For instance, the LA Times reported yesterday that the Central Valley's almond industry supplies over 80% of the entire world's consumption creating jobs, and of course stress on resources. This means that more people working are going to result in bigger insurance premiums and ultimately more workers' compensation claims.

In other words, this is a period of time where we need to just sits. It's not time for SB 626. At least not yet.

Friday, January 10, 2014

DWC's IMR Meetings Premature

The noise over the volume of Independent Medical Review requests and Maximus' inability to cope with that volume is at top level and the California Workers' Compensation Institute's latest research paper is certainly going to add to the fury.

The Division of Workers' Compensation has scheduled round table meetings with interested groups for Monday and Tuesday. CWCI's release couldn't be more timely.

CWCI says that basically IMR (and underlying Utilization Review) are working as intended.

The say that only 5.9% of requested medical procedures are delayed, denied or modified through utilization review, and that three out of every four medical treatment requests are approved by claims adjusters without the need for additional oversight.

Moreover, CWCI found 76.6% of the 919,370 treatment requests it evaluated that were sent out for physician review were approved, 6.6% were modified and 16.9% were denied.

One-in-four treatment requests being sent for physician review and one-in-four of those physician-reviewed requests denying or modifying the recommendation means that 94.1% of treatments are approved and 5.9% are denied.

CWCI also reviewed 1,141 independent medical-review decisions that had been issued as of Jan. 2 and found 78.9% of denials are upheld by the administrative review and 21.1% are overturned.

Of the 919,370 medical treatment requests reviewed by CWCi researchers, "pharmacy" garnered fully 43% of all events - this is an astounding number and debunks quite a bit of what I previously thought was driving UR. Out of that amount 74% were approved, and 7.2% were modified, leaving 18.7% of the pharmacy requests denied.

What this really means is that out of all of the denied requests is that 395,329 "elevated" UR requests involved only pharmaceutical issues. Of that, 73,927 were denied, which means that about 18.5% of pharmaceutical requests end up denied.

CWCI recommends looking at a closed pharmacy formulary, like other states have implemented, to close that number even further.

What isn't answered is where all of these treatment request appeals to IMR are coming from.

As Jim Butler, president of the California Applicants' Attorneys Association, noted, CWCI looked at all treatment requests coming into the system including medical only claims, not just those from litigated cases or those involving severe injuries.

“Even if the percentage of denials appears small in relation to the number of requests approved, that still represents a large number of cases in which workers are not receiving the treatment recommended by their physician,” he said. “We estimate there could be 30,000 to 40,000 UR denials every month, and that needs to be addressed.”

I don't understand why that has to be addressed. UR denials do not equate to the same number of injured worker claims. A single injured worker may be making a dozen treatment requests from a couple of pills to diagnostic to surgical, all in a single treatment plan. To me this argument is obfuscating what really needs to be addressed - where the volume is coming from.

The study does not appear to answer why there are so many denials of treatment requests on cases that involve more severe injuries, Butler told WorkCompCentral.

But the study does sort of say what is going on, albeit indirectly - the more severe cases with attorney involvement likely are associated with elevated pain relief requests; i.e. narcotics and other associated opiate derivative drugs. That would explain why pharmacy requests are the bulk of IMR review events.

CWCI's paper is a good start, but only a start. IF interested persons are honest with themselves and each other at the table on Monday and Tuesday then there should be some very solid evidence concerning the cause of the unanticipated volume of IMR requests.

But I'm not counting on that. Everyone has their position to protect, and no one is going to be willing to take the heat and look like a bad guy nor give up a potential bargaining position when it comes time to modify regulations and/or lobby Sacramento.

The next step is to figure out WHO is making the IMR requests - whether there is any correlation to attorney involvement, whether there is any correlation to geographic zones (for instance earlier this week the Workers' Compensation Insurance Rating Bureau released numbers showing the Greater Los Angeles are bucking the trend on frequency by quite a large number) and whether such requests are part of some other strategy on either side of the bargaining table.

In my opinion the meetings scheduled by the DWC on IMR issues are premature. We know how much, but we don't know from whom or where. Answer those questions and some meaningful solutions can be crafted.

Without those answers everyone is just wasting time and resources. And frankly this may be one of those situations where in a couple of years everyone has adjusted and the volume declines because folks will know where the boundaries are.

CWCI's study can be viewed here.

Thursday, January 9, 2014

Put the Butcher Knife Away

A Pennsylvania case about home care hit ... ahem ... home, since my parents are under the watchful eyes of 24 hour caretakers, particularly in regards to Mom.

Mom, as you likely are aware, has dementia and it is progressing normally. The problem with dementia is that the person with the disease not only forgets, but that forgetting can lead to very erroneous conclusions that might provoke unwanted behavior.

For instance, last week the caretaker on duty early that morning was asleep on the living room couch while my parents also slept. For some reason Mom got up and migrated to the living room where she encountered her caretaker.

This caretaker had been working with my mother now for at least 6 months. She is not a stranger to the household.

But Mom forgot this! Mom assumed that her caretaker was a burglar, and shouted for her to get out of the house and actually began physically challenging her. My sister-in-law had to intervene at 3 a.m. to get Mom calmed down and to sort things out.

The caretaker wasn't hurt, but it demonstrated that even a mild dementia patient can have symptoms that can result in a dangerous situation for the patient and the help.

In Pennsylvania the mother of a disabled man taking care of him in her house under the state Department of Welfare program for transition to independent living was attacked by her son in the middle of the night.
Pennsylvania Coat of Arms

Originally found compensable by a workers' compensation judge, then reversed by the Appeals Board, the state Commonwealth Court agreed with the original ruling finding compensability.

The case is O'Rourke v. WCAB (Gartland). Gartland is the son, O'Rourke is the mother/caretaker.

Gartland had not lived with his mother since he was 15 years old, and he had significant health issues resulting from a long history of drug problems. His leg was amputated in 2007, after which he spent six months at the Riverside Rehabilitation Center.

A nonprofit organization that helps people with disabilities in gaining independence approached O'Rourke and asked if she would be willing to care for Gartland until Gartland was capable of caring for himself.

O'Rourke agreed, and since Gartland did not have a residence of his own, Gartland moved in with his mother on July 7, 2008.

The state Department of Welfare provided funding for Gartland's care through a program that established him as a Pennsylvania employer. Through the program, Gartland received a tax identification number and a workers' compensation policy, and another nonprofit organization served as his payroll agent.

The state program did not pay for 24-hour or night-time care for Gartland, but under the terms of O'Rourke's employment, he could request care to be provided during evening or night-time hours. The program also did not require Gartland's caregiver to live with him, only that the care be provided in his home.

O'Rourke generally worked 40 hours from Monday through Friday and 12 hours per day on Saturday and Sunday.

On Friday, April 10, 2009, O'Rourke indicated on her time sheet that she stopped working at 4:10 p.m. She then left the residence to play Bingo.

When she returned at around 10 p.m., Gartland asked her to prepare him something to eat. O'Rourke and Gartland argued because she wanted to change her dress first. She then went to change her clothes, prepared some food for Gartland and then made the couch up as a bed for Gartland before going to bed at around 11:30.

Roughly two hours later, while O'Rourke was sleeping, Gartland attacked her with a butcher knife. Gartland cut her throat and inflicted three other stab wounds.

Gartland later pleaded guilty to attempted homicide, simple assault, aggravated assault and reckless endangerment of another person.

O'Rourke allegedly lost function in her left arm and developed post-traumatic stress disorder from the attack by her son.

The workers' compensation judge found compensability and awarded benefits.

The WCAB reversed, finding that O'Rourke had finished her employment duties for the day, and her employment no longer required her to be present in Gartland's residence.

She was present, the majority posited, only because Gartland's residence was her residence as well. The WCAB said she was not present in her capacity as an "employee" at the time of the attack.

The Commonwealth Court found the matter compensable under the bunkhouse rule.

While the assault had taken place in a house that actually belonged to O'Rourke and not Gartland, the majority said that this was still the premises of O'Rourke's employer since it was the place where O'Rourke performed services for Gartland for up to 64 hours per week, in exchange for payment.

And while the services O'Rourke performed for Gartland did not occur within O'Rourke's bedroom, the majority posited that since O'Rourke's job basically required her to live with Gartland, and sleep "is a necessity of life," under the bunkhouse rule, the area where she slept had to be treated as part of her employer's "premises."

Judge Bonnie Brigance Leadbetter dissented stating that it defied logic to call the claim compensable because O'Rourke was stabbed by her own son while she lay sleeping in her own bed, in her own home.

Was the majority stretching to find a remedy for O'Rourke? Or is this just one of those very close cases that could have gone either way where reasonable minds differ?

I don't know whether there was any alternative insurance to cover O'Rourke's injuries such as homeowner's insurance. I'm sure there are some underlying facts that are not part of the official court opinion that swayed the majority opinion.

The dangers of home care. I hope Mom doesn't pull out any butcher knives...