The Audit Joke

Police officers and firefighters in California and Arizona in separate cases are alleging violations of the Racketeers and Influenced Corruption Act against third party administrators York and Corvel and the municipalities those companies serviced.

In California the defendant cities are Rialto and Stockton. In Arizona its Phoenix.

The California complaint say the companies "routinely and improperly chose to hurl frivolous and legally unsound roadblock after roadblock to wrongfully deny care" to injured first responders.

The plaintiffs believe that a "pattern of practice" at the defendant companies together with the involvement of certain personnel for the defendant municipalities created an enterprise to fraudulently deny benefits in violation of RICO statutes.

Michael P. Doyle, a founding partner of the Doyle Raizner law firm, which filed both complaints, told WorkCompCentral the Arizona case already survived a motion to dismiss and he anticipates going to trial by the middle of summer. The California case is just getting started, he said.

The defendant cities paid the administrators based on a flat fee per claim and a percentage of savings from utilization-review and bill-review services that were provided, creating an incentive for improper conduct, the plaintiffs claim.

The alleged pattern of denying legitimate claims allowed the defendants to "lower the liability of the city, while at the same time maximizing the TPA's revenues (and allowing the TPA to maintain and obtain contracts with other public entities based on their 'outstanding' financial performance at the expense of public servants)."

The defendant employers conspired with the defendant administrators and "denied claims in hopes that some plaintiffs will simply not continue to seek benefits under workers' compensation entirely," the complaint says. The complaint also alleges the defendants ignored California law regarding pre-existing injuries that are aggravated by a new incident, as well as statutes creating a presumption of compensability for certain conditions suffered by first responders.

This attitude needs correction.

Representatives for the various defendants would not comment on the cases to WorkCompCentral reporter Greg Jones because of the pending litigation or were not available prior to deadline.

But Jones reports that California Division of Workers' Compensation audits found claims shops run throughout the state by both firms had numerous violations, including late and unpaid indemnity benefits, but in all but one case, the fines were waived because the shops scored high enough to escape financial penalties under the division's profile audit review program.

York was fined $117,036 after the DWC identified 213 violations during a review of claims processed through its shop in Oxnard. Violations included 26 cases in which the company underpaid indemnity benefits by a total of $84,458.42, according to the DWC's 2010 audit report.

The DWC identified 45 violations at York's shop in Fresno in 2010.

The same year, the DWC said it uncovered 80 violations at Corvel's shop in Sacramento, including $2,147 in unpaid indemnity benefits on nine claims.

In 2011, the DWC identified $92,615 in unpaid indemnity benefits on 26 claims from Corvel's shops in Camarillo, Rancho Cucamonga and San Diego. The proposed fines, all of which were waived, for 128 violations at the three adjusting locations were $78,790.

York in the same year had unpaid benefits of $31,562 on 28 claims audited at its shops in Upland, Valencia and Concord. The proposed penalties of $51,115 for 157 auditing violations uncovered were all waived, according to the DWC's 2011 audit report.

In 2012, the latest year for which audit results are available, the DWC said York had unpaid indemnity totaling $7,347 on claims handled by its El Dorado Hills office. The audit also identified 52 cases of failing to comply with the requirements to provide notice to the injured worker of the QME/AME process. York faced penalties of $30,175 for 117 violations, but the fines were waived.

There are two things that come readily to mind.

First, the DWC audit system in California just doesn't work. That injured workers have to resort to seeking civil judicial intervention for redress that the state should be taking care of is sad testament to the respect the state gets.

Kind of like a parent that threatens taking the cell phone or Internet away from the teenager for misbehavior - puh-leeze! Oh! That's a threat...

Second, maybe there's an intentional manipulation of the system by the defendant, or maybe there's a dysfunctional culture that allows such transgression without consequence (see first observation above).

Sadly, what will happen is that the RICO cases will end up in some sort of anonymous settlement, there won't be any penalties or fines from the state auditors, there will be no change to the audit process, and the practices will continue, albeit via some other employers and other administrators.

The heavy penalization system that was so criticized by employers, carriers, TPAs and other payers (Labor Code section 5814) for unwarranted cost and expense to the system, was castrated by SB 899 ten years ago because the audit system was in place and was supposed to do the job of enforcement.

Clearly that assumption has proven incorrect.

Enforcement by the state is a joke.

I can pretty much guarantee that if the state had any cajones and actually enforced the penalties instead of waiving them all (except for one as noted) the culture would change, the behavior would change and there wouldn't be any RICO challenges surviving the initial pleading stage.

The ball is in the state's hands - the audit and penalty system is administrative in nature and doesn't need legislative backing to change. All the state has to do is NOT waive penalties.

Until then, expect injured workers to seek civil redress for performing the state's obligation.

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.

How A Federal Take Over Could Occur

Last week I wrote about the expanding influence, and perhaps, jurisdiction of the federal government over our lives, and in particular (of course) workers' compensation.

Yesterday I argued that California Assembly Bill 1309 was bad law and should not get to the governor's desk.

The two may come together - when we look at the various legal and legislative/ regulatory actions going on regarding professional athlete injuries and the politics across the nation concerning the limitation of jurisdiction - we see argument why workers' compensation may need uniformity and consolidation; ergo, federal control.

I'm not saying I'm in favor of a federal take over of workers' compensation, but look at these facts and tell me whether or not, if you were a federal legislator, you would be inclined to mandate a federal system of workers' compensation, at least for professional sports that cross state lines whether via live participation or virtually via television or other media, and other migratory industries.

After arbitrator Michael H. Beck on Dec. 12 issued a decision saying football players signed contracts agreeing to file work comp claims in the state where the team was located, rejecting the player's arguments that the order violated a federal court ruling stating that there needs to be an opportunity to demonstrate where the injuries occurred, a federal judge has granted a hearing on a proposed order that would overturn Beck's decision.

In July, a federal judge in Philadelphia is expected to rule on whether former players can sue the National Football League about concussion-related injuries. An estimated 4,300 former players have filed lawsuits that have been consolidated in the U.S. District Court for Eastern Pennsylvania but the NFL seeks dismissal on the argument that the suits are preempted by the collective-bargaining agreement between the league and the NFL Players Association.

In April, Arizona Gov. Jan Brewer signed a bill similar to California's AB 1309 that prohibits people working for employers in the state from filing work comp claims for injuries sustained while working temporarily in another state.

Other states have also passed laws limiting the ability of professional sports athletes to seek redress in states other than that of the players' contractual domicile, most recently Florida and Tennessee.

Then on Thursday a district court judge in Washington, D.C., allowed Bryan Namoff, a former soccer player to proceed with a $12 million civil suit against his former team for medical negligence alleging his former team, D.C. United, allowed him to play too soon after a head injury.

Judge Natalia M. Combs Greene said D.C. United didn’t have insurance and wasn’t exempt from suit as a consequence.

“The liability of D.C. Soccer is clearly outside the coverage of the WCA,” she wrote. “D.C. Soccer failed to secure workmen’s compensation insurance coverage for Namoff and the WCA grants an employee the right to bring a case at law against an employer who fails to secure such coverage.”

Don't forget the disparity between state jurisdictions on how to handle the ongoing issue of opioids and other prescription drugs.

Some states have drug monitoring programs, others don't. Some states restrict drug repackaging, most others don't.

The migration of drugs across state lines occurs as soon as a neighboring state implements restrictions that impede the prescription, procurement, delivery or ingestion of drugs.

Where's the Food and Drug Administration in all of this?

And don't forget the financial impact of big insurance across state lines, in particular when an insurance company is "too big to fail" and the federal government is inclined to bail that company out, all while evidence mounts that there was surreptitious use of questionable financial instruments to avoid premium taxes and other state obligations.

Still to this day, there are fights between states regarding failed workers' compensation carriers - New York's Liquidation Bureau has filed a petition in New York Supreme Court seeking to be appointed ancillary receiver of Ullico Casualty Co. while in Illinois the Circuit Court of Cook County has refused to stay proceedings involving Ullico despite a Delaware court order to the contrary.

Fights between jurisdictions, big money on the line, worker rights over safety and benefits, inconsistency in awards or order enforcement, migratory claims and drugs - the list can go on why some federal lawmakers may want to carve out certain jobs and industries and make them subject solely to federal jurisdiction.

Combine the above with a federal agency examining workers' compensation across the nation, a federal insurance oversight office, and overall expansion of the federal government and it's not hard to see how a federal take over of at least a portion of state workers' compensation systems could occur.

I'm not saying this is inevitable, desirable or reprehensible. I'm just saying ...

AZ Did It, CA's Next; Why Stop There?

Arizona Gov. Jan Brewer signed SB 1148 on April 3.

This new law prohibits people working for employers in the state from filing workers’ compensation claims for injuries suffered while temporarily working in other states.

SB 1148 defines temporary work as fewer than 90 continuous days out of the 365 days immediately preceding the date of injury. In addition to prohibiting an Arizona worker from claiming benefits in another state, the bill also prohibits an out-of-state worker from seeking benefits in Arizona provided:

• The employer has a policy that covers his workers while they are in Arizona.
• The laws of the state covering the workers temporarily assigned to Arizona are the sole remedy against an employer for a workplace injury.
• An Arizona employer with workers temporarily in another state is subject to Arizona workers’ compensation laws, not the laws of the other state.

Arizona is mad at California and apparently isn't going to take it anymore.

Jim Stabler, chief counsel for SCF Arizona, testified in support of the bill during a House Commerce Committee hearing in March. Stabler said SCF has to maintain a full-time third-party claims office in California because of the state’s “nebulous cumulative trauma doctrine.”

"Nebulous" is defined as "hazy, vague, indistinct, or confused."

From Sullivan on Comp, section 5.5:

A cumulative injury is commonly referred to as a cumulative trauma (CT) injury or a continuous trauma injury. Per LC 3208.1, a cumulative injury occurs as a result of "repetitive mentally or physically traumatic activities extending over a period of time, the combined effect of which causes any disability or the need for medical treatment." The California Supreme Court has also stated that a cumulative injury occurs "as the result of a number of minor strains over a period of time" and are "traumas which are minor in themselves but eventually result in disability." The Court of Appeal has added, "A cumulative injury is one which results from repetitive events, occurring during each day's work, which in combination cause any disability or need for medical treatment."

I don't find this doctrine "nebulous" at all - it may be disconcerting to someone not from California, or an insurance executive with uncomfortable with California law, or a professional sports team seeking to escape long term liability for traumatic brain injury medical claims - but I would not characterize it as nebulous.

Yesterday the California Applicants Attorneys Association (CAAA) issued a press release statement officially condemning AB 1309 (Perea, D-Fresno), a measure similar to the one just signed into law in Arizona.

Assemblyman Perea said in a statement after his bill was introduced that “there’s no rationale for burdening our system with thousands of claims for millions of dollars for non-specific injuries from athletes with little connection to our state.” Athletes are entitled to workers’ compensation benefits, “but they should file where they work and live, like anyone else,” he added.

Right.

So are traveling salespeople, truck drivers, flight attendants, migrant farm workers, executives with multi-state jurisdictions, etc.

Oh, and don't forget the coaches, cheerleaders, attendants and all of the other people that travel with the athletes.

Why are athletes singled out?

What is different about professional football, baseball, hockey and basketball players?

That's rhetorical - the difference is long term medical issues - like traumatic brain injury, encephalitis, hip and other joint replacements - medical issues that have root in long term abuse and over use, but otherwise would not be covered by a state's workers' compensation system (other than California's) because they are maladies that build up over time. THAT's what's different.

California recognizes that some injury modalities may not be properly recognized in the context of a single "injury".

Like it or revile it - California grew to the nation's biggest state in part because the government made a promise to the people that moved here that there was a safety net. Some of that safety net is in state disability coverage, some of it is in state unemployment benefits, and some of it is in California's workers' compensation laws.

Is it perfect?

Heck no - far from it. And we have seen the response from business groups since the early 1990s trying to rectify what they see as an impediment to their thinking of how business should be done.

The real danger with AB 1309, as CAAA rightly points out, is that it is the first step towards the entire elimination of the cumulative trauma doctrine.

As much as I dislike the multitude of presumptions that favor certain classes of workers making injury claims, I also dislike the discrimination against certain classes of workers.

And more importantly, I disfavor the disintegration of laws that seek to provide redress and remedy where an injury, as real as any other injury, doesn't fit neatly within the context of a specific event.

Arizona can have their SB 1148 (thought I think the people of that state will live to regret it). But California doesn't need AB 1309.

Supporters of AB 1309 should be truthful and admit that they'd just rather get rid of workers' compensation ... if only they could also avoid civil liability for using up the working class.

Biology IS Different in Arizona, When Driven by Politics

The American College of Occupational and Environmental Medicine (ACOEM) and the Work Loss Data Institute (WLDI) have a constant public relations campaign going on convincing states that have not yet adopted medical treatment guidelines that it is more efficient and ethical to adopt national based standards rather than drafting state specific guidelines.

Representatives for both WLDI and ACOEM told WorkCompCentral last week that states that adopt their own state-specific treatment guidelines are missing an opportunity to employ evidence-based medicine to drive good outcomes.

“Biology is not different across state lines," said Phil LeFevre, a senior account executive at WLDI.

LeFevre is correct - biology is not different. But politics are.

LeFevre said the trend of states establishing their own set of treatment guidelines, a process typically hammered out in committee, results in consensus-based, not evidence-based, medical protocols. Worse, lawmakers are relying on the testimony and recommendations of profit-minded lobbyists and health care providers to create a new model, he said.

“This is being driven by self-interest,” LeFevre said.

No kidding...

A few weeks ago I gave a presentation to a group of orthopedists at Loma Linda University Medical Center. I received a very nice (hand written I might add) thank you note from my host. He commented that he didn't realize how politicized workers' compensation was!

I don't think that most people give much thought to how workers' compensation came to exist and how it has evolved over the years. Most folks just take it for granted that if one gets hurt at work (or claims to be hurt at work) that there is insurance to take care of the injury. Folks forget that workers' compensation is solely a product of legislative fancy. There is no real history behind it, like common law, unless you're a mariner (then one need only read up on the history of pirating to understand Jones Act codification of maritime injury law).

The folks who have figured out that workers' compensation is nicely manipulated through the political process, however, are in the best position to influence the direction and control of the system to ensure that interests are protected, or at least not significantly compromised.

For instance, in Arizona where the debate over treatment guidelines is really just starting, bio-tech behemoth, Medtronic, Inc. is weighing in on the debate stating that the company would endorse the current Arizona proposal (House Bill 2365) if a proposed amendment eliminated a provision that calls for defaulting to national standards if new guidelines cannot be agreed upon by July 2014.

Rep. Karen Fann, R-Prescott, introduced House Bill 2365 earlier this year. The measure would require the Arizona Industrial Commission adopt treatment guidelines by July 1, 2014. If the commission failed to meet that deadline, then ACOEM's guidelines would automatically become presumptively correct in the state's workers' compensation system (California did this in 2004).

“Medtronic is not opposed to Arizona-specific, state-developed treatment guidelines created with local physician input that is fair and balanced,” Marybeth Thorsgaard, senior director of public relations and communications for Medtronic, said. “We believe physician input should include specialists and subspecialists who are expert in treating workers’ compensation patients and familiar with the types of therapies being reviewed and prescribed in this population.”

And, I presume, are also expert at the installation of Medtronic's spinal implant hardware and other products the company manufactures...

The House Banking and Insurance Committee did not vote on HB 2365 after hearing three hours of testimony on the measure and other workers' comp bills during a hearing on Feb. 8. The committee proposed an amendment that would delete the requirement that ACOEM become the state standard after hearing opposition from Medtronic and medical providers.

Fann said she would not oppose the amendment stating a desire to improve medical service to injured workers and adhere to her state’s tradition of self-determination.

“The people of Arizona want to have their own medical treatment guidelines that fit the needs of its workers, not the so-called medicine in a can. Arizona has always been its own state. We do things our own way,” she said.

Right. Good buzz words: medicine in a can; textbook medicine; cookbook medicine; independence - after all, that's what America is all about, independence - right?

“How do we get medical service as quickly as possible to the right doctors with the right diagnosis and proper treatment? The primary goal is to improve access to medical treatment and get everybody back to work as soon as possible,” Fann said. “Secondly, we want to increase cost-effectiveness and create jobs.”

More good buzzwords: right doctors, right diagnosis, proper treatment, back to work, cost-effectiveness and increase jobs.

So, explain to me how deviating from carefully reviewed science does that? How is it that Arizona knows more about biology than California, or Nevada, or Texas or the Federal government?

Oh, that's right - they have people there - lobbyists and special interest representatives - that know more than the rest of us.

Okay, I get it now. Biology IS different depending on which state you're in. Glad we all figured that out.
**********

Christopher J. Wolfkiel, Ph.D., Director, ACOEM Practice Guidelines, provided this clarification of ACOEM's position.

AZ Debate on Guidelines: It's All About Big Medicine

Arizona is going through the treatment guideline debate, and experiencing the influence that Big Medicine can have on politics that can cause illogical policy creation.

The Arizona House Banking and Insurance Committee on Monday heard more than three hours of testimony on three bills, one of which would create a presumption of correctness for national evidence-based treatment guidelines. That bill was deferred for further research and to address concerns that were expressed during the hearing.

The guidelines debate is all about the state creating its own set of guidelines, as if people in Arizona have different biology than people in California, New York or Texas.

House Bill 2365 would give the Arizona Industrial Commission until July 1, 2014, to develop evidence-based treatment guidelines. If the commission is not able to produce guidelines by that date, the bill would mandate that either American College of Occupational and Environmental Medicine's (ACOEM) Practice Guidelines or the Work Loss Data Institute's Official Disability Guidelines (ODG) are presumed correct for the extent and scope of treatment.

Objection came vociferously from Medtronic.

Marybeth Thorsgaard, senior director of public relations and communications for Medtronic, told WorkCompCentral on Wednesday that the device manufacturer is opposed to the bill because using only ACOEM guidelines will limit the ability of injured workers to access widely-accepted medical treatments.

"ACOEM guidelines reflect the very conservative world view of one professional society, considered expert in most areas and therapies reviewed," she said. "This conservative philosophy is reflected in numerous therapies not allowed by the guideline -- therapies that are widely accepted, evidence-supported treatments, procedures, tests or therapies that are currently covered under Medicare, Medicaid, most commercial policies, the Department of Defense Veterans Affairs -- creating a two-tiered system for workers' compensation patients."

And, I might note, therapies in which Medtronic has considerable business interests.

Thorsgaard said lawmakers in Arizona should follow a trend seen in other states, such as Colorado, Montana, Delaware and Wisconsin, by tweaking the guidelines, using input from providers. She said guidelines for treating back injuries should have input from back specialists in Arizona. Pain treatment guidelines should be based on input from pain specialists in the state.

Is that because back and pain specialists in Arizona know more than doctors in the other 49 states? Or because the population of Arizona is unique?

Thorsgaard said Medtronic would remove its opposition to the bill if the amendment removed the default to ACOEM or the Work Loss Data Institute.

Medtronic makes implantable surgical hardware. Traded on the New York Stock Exchange (symbol MDT), and last year sold almost $15 Billion in goods.

"We would have no objection to a bill that established an independent medical panel to create an Arizona-specific guideline with no default to a national guideline," she said. "This would give Arizona providers input into their own guideline and give specialists the ability to provide expertise in specific areas under review."

And would give lobbyists an ability to influence state regulators to ensure Big Medicine is included in treatment guides. Divide and conquer is long been a successful business practice where an industry has 50 or more different regulators.workers compensation, work comp, injured worker