PPD Philosophy

A recent Illinois case is exemplary of the kind of legal interpretation that drives employers and their insurance companies nuts, because there seems to be an illogical detachment from reality, even though legally justifiable.

At issue in Jackson Park Hospital v. IWCC (Jenkins) was how to determine a Permanent Partial Disability award - the single most litigious facet of workers' compensation law.

Kathy Jenkins had worked as a stationary engineer for Jackson Park Hospital, in Chicago. It was her job to address plumbing, heating, and electrical maintenance issues throughout the hospital facility.

Jenkins hurt her back in October 2005 while trying to climb into a locked office through a sliding glass window.

Her treating doctor authorized her to return to sedentary work in February 2007. The hospital offered Jenkins a clerical position in its accounting department. The hospital later moved Jenkins to another clerical position in its employee health department, and then to its security department.

Even though the hospital continued to pay Jenkins at the same rate she had earned as a stationary engineer in each of these positions, Jenkins still filed a request for PPD benefits based on Section 8(d)(1).

Section 8(d)(1) of the Illinois workers' compensation statute provides that a worker is entitled to a wage differential award when she is partially incapacitated from pursuing her usual employment, and there is a difference between the average amount that she would be able to earn in her time-of-injury job and in the average amount which she would be able to earn after her accident.

Alternatively, Section 8(d)(2) provides for a PPD award based on a percentage-of-the-person-as-a-whole when the worker is disabled from continuing to her time-of-injury job, but she does not suffer an impairment of earning capacity.

The arbitrator in the Jenkins case determined that Section 8(d)(1) was inapplicable because Jenkins had suffered no actual reduction in her income. He instead awarded her PPD benefits based on a percentage of the person as a whole under Section 8(d)(2).

Jenkins appealed to the Illinois Workers' Compensation Commission. The hospital terminated her while her appeal was pending. She filed an emergency motion to remand the case to the arbitrator in order to reopen proofs to allow additional evidence of her termination.

The commission denied her motion, and later affirmed the arbitrator and adopted the arbitration decision as its own ruling.

Jenkins sought judicial review. The Circuit Court Judge reversed the commission, stating the commission's decision to award benefits under Section 8(d)(2) instead of 8(d)(1) went against the manifest weight of the evidence. He ordered the case remanded for the commission to issue Jenkins a wage-differential award.

On remand, the commission awarded Jenkins $389.60 per week, from Feb. 19, 2007, through the duration of her disability.

The hospital appealed, which was upheld by the Circuit Court, so the hospital petitioned the Appellate Court for relief.

On Friday, the Appellate Court said the "crucial issue" in determining whether an award is appropriate under Section 8(d)(1) or 8(d)(2) is whether the claimant has suffered an impairment of her earning capacity.

"Earning capacity" is not simply the amount that a worker is making.

Since a worker may not have any actual loss of income if she is receiving "an inflated wage in an employer-controlled job that does not otherwise exist in the labor market," the court said that an impairment of earning capacity cannot be determined by simply comparing a worker's pre- and post-injury earnings.

The relevant inquiry needs to be what Jenkins' actual earning capacity would be, in light of her physical limitations from a decade-old back injury and her 8th-grade education, the court said.

If another employer would not hire her for the $23.61 per hour that Jackson Park Hospital was paying her as a security guard, the court said Jenkins' post-injury wages could not be considered an accurate reflection of her earning capacity.

Judicial interpretations can be frustrating for employers in situations such as the Jenkins case, where they thought they were doing the right thing by maintaining an employee in a wage class higher than the replacement job duties dictate.

Business likes stability and predictability - cases like Jenkins are frustrating because there is neither.

And the judicial football that this case highlights challenges some of the basic tenets of the 1917 US Supreme Court's constitutional blessing on compulsory workers' compensation in NY Central Railroad vs. White: no protracted disputes about damages, limited and fixed obligation of the employer, and a speedy remedy.

The employee suffers too - I wonder if Jenkins would still have a job if this dispute about earning capacity had not dominated her case.

Coordinated Medical

One of my duties at the International Association of Industrial Boards and Commissions 101st Convention in Chicago yesterday was to participate in a fast paced Ignite! session.

One of those short presentations caught my interest - Jeremy Jackson of the Ohio Bureau of Workers' Compensation briefed a pilot program the agency is testing to see if they can keep folks from getting "lost in the system."

They surveyed stakeholders and found that there was a big disconnect in medical care; that it wasn't okay for the physician tasked with industrial treatment to be the front person, that while we try to hold that person accountable for results there was no feedback to the worker's regular doctor or the community itself.

But they wanted to effectuate a change in culture without having to go through legal or regulatory changes.

So, with a test bed of about 30 shoulder injury cases the bureau set out to coordinate care between the industrial doctor and the general MD, who may be following the patient for other conditions that may, or may not, affect the industrial condition.

The purpose was to return to the injured worker and his physicians a sense of control. In the workers' compensation world the injured worker, generally, does not have much control over medical care. He or she is told by some doctor that they were referred to by an attorney or insurance company to accept treatment where there is, on the front end, very little trust, very little communication, and certainly not much of a relationship.

But a lot of people have health insurance or use Medicaid, and a primary care physician that is generally trusted, with whom there is a good relationship.

The Ohio test is to see if that trust gap can be bridged.

So when a claim is accepted as industrial the bureau coordinates communications between the industrial doctor and the general physician so they are talking and treating the whole person, rather than just piece-meal stages.

One of the obstacles that they have found is that there may be a time lag between claim initiation and the determination for coordination because of the need to get medical records to everyone - I'm sure that eventually this can be solved with some technology, particularly as electronic health records become more standard.

And of course the one big advantage that Ohio has that most states don't is that it is a monopolistic system, so all of the control resides within a single entity - as opposed to an open market system where hundreds of insurance companies may require coordination.

It's likely that I'm missing some details. The program just started in July, so elements are still being worked out.

Nevertheless, Ohio is going to regularly publish the results of this experiment, and I'm excited that there is some fresh thinking in terms of at least attempting to deal with the whole person to the extent that the law allows.

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In the meantime there appears to be an Illinois scandal brewing - arbitrators that had, or have, workers' compensation claims against the state don't get invited back.

WorkCompCentral reported the trend this morning, documenting each arbitrator that was still serving and who had or still has a claim do not get reappointments.

That pretty much sends a message...

Buffalos in Illinois

My daughter and I flew N6641M to Catalina Island yesterday.

Catalina/Avalon airport is 24 miles as the Bonanza flies from Los Angeles Harbor and is, I think, one of those magical places that few ever get to experience.

My daughter was excited to see a few of the famous Catalina buffalo. She asked the airport manager on duty when we checked in if there were any around.

"There were quite a few roaming near the airport yesterday," he said. So we paid our fees and hiked the Airport Soapstone loop - a short 2.3 mile walk without a whole lot of elevation change.

The airport is at 1,600 feet above mean sea level, so the vistas are spectacular, and the nearly unspoiled environment served up red tailed hawks feeding, wild flowers blooming, and a soapstone quarry.

But no buffalos. There was plenty of buffalo evidence and a couple were large enough for discus throws, which of course was tempting, except for the relative freshness of the discs.

In workers' compensation several states serve up more buffalo discs than others.

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Illinois is the one state that has a workers' compensation system as much maligned as California's.

And like California, political attempts to "reform" it focus on costs arising out of the symptoms rather than the underlying "disease" that gives rise to the symptoms.

Newly-elected Republican Gov. Bruce Rauner made workers' compensation reform a center-piece of his campaign, albeit with little detail, but his fellow Republicans in the legislature have some ideas.

In search of buffalo.

A legislative package, filed by Sen. Kyle McCarter, R-Decatur and Rep. Dwight Kay, R-Edwardsville, would, among other things, tighten the rules governing compensation for travel-related accidents, place a 500-week limit on cumulative awards for partial disabilities, reclassify shoulder and hip injuries and define the term "injury" so that claimants would have to prove they are medically impaired to "a reasonable degree of medical certainty, based on the medical findings."

The new definitions are included in Senate Bill 770 and its companion, House Bill 2421, and some companion bills (see below).

Supporters of these bills refer to them as the "causation" bills because the bills try to more tightly define what a work injury is by calling an "accident" an "occurrence arising out of the employment, resulting from a risk incident to the employment, and in the course of employment at a time and place and under circumstances reasonably required by the employment."

SB 770 and HB 2421 also would require workers to show that an "accidental compensable injury" was a major contributing cause of the injury – meaning it was more than 50% responsible for the injury compared to all other causes combined for which treatment and benefits are sought.

The two bills also provide that injuries would be deemed to include the aggravation of a preexisting condition only for as long as the aggravation continues to be the contributing cause of the disability.

Also included in the Kay/McCarty package are:

SB 769 and HB 2419 , which covers instances in which an employee is working for multiple employers and the employers named as a respondent in the claim is aware of the worker's other jobs. Under the bills, the worker's wages from all of the jobs would be considered as being earned from the employer deemed liable for the injury.

SB 771 and HB 2420 would bar temporary partial disability benefits to workers discharged for cause. Claimants would be entitled to a hearing to restore benefits before the Illinois Workers' Compensation Commission and would receive retroactive benefits if the commission rules that worker was not fired for cause. "Discharge for cause" is defined as a discharge resulting from an employee's voluntary violation of a rule or policy not caused by his or her disability.

SB 772 and HB 2422 would limit the maximum cumulative compensation for workers receiving partial disability to 500 weeks. Awards for partial disability would be deducted from any award for a subsequent injury to the same portion of the body. In addition, injuries to the shoulder would be considered injuries to part of the arm and injuries to the hip would be considered injuries to part of the leg.

Seems to me that these bills would simply invite a large dosage of litigation to define what the definitions actually mean when applied to real live facts of a case.

But this is politics, and the point of politics is to propose something that might be distasteful to some in order to get an advantage on something else that may or may not be related.

And with Democrats solidly holding majorities in Illinois' Senate and House, Republican's know they have an uphill battle if they don't compromise on some other topic.

The opinion from business groups is that Rauner may offer an increase in the state's minimum wage as a bargaining chip to pass workers' compensation legislation. Rauner also announced a budget Wednesday that calls for cutting state spending by $6.7 billion, which also may enter into the political debate over business reforms according to sources interviewed by WorkCompCentral.

And we also know that what gets introduced into a legislative session is far different than what ultimately makes it to the governor's desk, if at all. Similar legislation has failed to clear the General Assembly since 2011.

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We didn't see any buffalo on our hike and I didn't toss any discs.

So my daughter and I lunched at the DC-3 restaurant at the airport.

We both ordered buffalo burgers.

They were good.

Whose Body Is It Anyway?

The cardinal rule in workers' compensation has always been, control of the medical is control of the case.

Those in work comp litigation understand this concept very well, on both sides of the fence.

A recent Illinois case is demonstrative.

In Bob Red Remodeling Inc. v. Illinois Workers' Compensation Commission (Lemanski), No. 1-13-0974WC, 12/31/2014, Zenon Lemanski, a mono-lingual Polish immigrant, suffered a traumatic brain injury in July 2007 when he fell 11 feet from a rooftop while working for Bob Red Remodeling.

He was hospitalized for several days after his fall, and he underwent a craniotomy, performed by Dr. Leonard Kranzler.

Lemanski followed up with Kranzler after being discharged from the hospital. He then began seeing Dr. Prasad Gourineni, an orthopedic specialist.

On the advice of his attorney, Lemanski later switched to Dr. Victor Forys as his treating physician.

Bob Red also had Lemanski see Dr. Felise Zollman for an evaluation.

Zollman recommended vestibular rehabilitation for Lemanski's vertigo, further neuropsychological testing, speech therapy, psychological testing and perhaps counseling for depression.

Bob Red authorized the course of treatment recommended by Zollman, but it refused to authorize treatment from Dr. Anna Wegierek, a psychologist to whom Forys had referred Lemanski.

Let's hit the pause button here for a moment: 

The employer controlled physician recommended evaluation for potential depression. Lemanski goes to see a psychologist (which to me seems reasonable under the case facts), just not the specific psychologist that the employer wants.

Play button:

Bob Red filed a motion to terminate the payment of benefits to Lemanski based on his failure to obtain care in accordance with Zollman’s recommendations.

An arbitrator denied the motion, because Bob Red could not show that Zollman’s recommendations offered a reasonable prospect of restoring Lemanski to a level at which he could perform work, and instead found Lemanski to be permanently and totally disabled.

The Illinois Workers' Compensation Commission upheld the arbitrator's ruling, and Bob Red sought judicial review.

A judge from the circuit court of Cook County dismissed the appeal based on Bob Red's failure to file an effective appeal bond, but the judge proceeded to address the merits of the dispute anyway. The judge opined that it was not an abuse of discretion for the Commission to deny Bob Red's motion to terminate.

Bob Red appealed, after correcting the deficiency with its appeals bond.

The appellate court said that Lemanski's decision to follow the advice of his treating physician rather than the advice of Zollman was not unreasonable.

"Admittedly, Zollman’s credentials with respect to brain injuries are more substantial than those of Forys," the court said, but "Forys is board certified in internal medicine, and his credentials are not insignificant."

But the relevant inquiry "is not which course of treatment was superior, it is whether claimant’s behavior was reasonable under the circumstances," the court said, and it found Lemanski wasn't unreasonable in listening to Forys.

This isn't an issue of compliance with a set of medical treatment guidelines, it's a dispute over who is going to invade the psychological space of the patient: a doctor that is chosen by the patient (well, in this case, the patient's attorney), or a doctor that may be better controlled by the "payer" employer.

In other words, who's body is it?

The likelihood is that Lemanski doesn't really know which doctor, if any of them, is best for his physical and mental health. But he chose to put trust in his attorney, for better or for worse.

As in the majority of workers' compensation treatment cases, Lemanski himself wasn't in control of his medical destiny.

At least relative to litigation outcomes, the attorney-directed medical was probably a better choice as this got Lemanski a finding of permanent total disability, and frankly based on the facts recited by the appellate opinion, that's probably a fair award.

Perhaps Lemanski did receive the very best care for traumatic brain injury ... or maybe he did. We don't know.

The kicker: Bob Red was liable for the cost of Forys' treatment.

Just The Way It Is

Anyone that doubts that workers' compensation is a "political compromise that obfuscates medical science to achieve a financial outcome" simply needs to read this morning's WorkCompCentral story about Illinois governor-elect Bruce Rauner, and the anticipated strategy the Republican plans to use workers' compensation as a bargaining chip to achieve other promised campaign goals.

Democrats hold about 60% of the vote in the Illinois legislature so whatever Rauner comes up with, to be successful, will need Democratic support.

And while Rauner never clearly outlined exactly what kind of reforms he had in mind during his election campaign, Michael Lucci, director of jobs and growth at the Illinois Policy Institute, noted for WorkCompCentral that Rauner said he would raise the minimum wage in the context of reform for workers’ comp and other tort liabilities.

“You can see that he is sort of framing a compromise there,” Lucci said.

Illinois went through a big reform of its system in 2011, but the state has been criticized for lagging in its execution resulting in a number seven ranking of the most expensive work comp states according to the last Oregon biennial study, although Illinois was ranked fourth in the nation when the last study was published in 2012 indicating some progress in shrinking costs, primarily by reducing medical treatment payments.

The pro-business lobby in the state is crowing that it's next border state, Indiana, has one of the lowest rankings in the Oregon study.

This of course, in my opinion, is a red herring argument - any business that says that it is moving to another state only because of workers' compensation evidences to me a management that doesn't know how to control its other costs since work comp is really a very small part of a business' overall expense budget; there's a lot more problems under the hood than just work comp.

Here's the political challenges facing any more tinkering with the Illinois system at this stage:

Otto Von Bismarck

1) Republicans and pro-business leaders want to change the causation standard to make it more difficult for workers to make a claim for benefits. Labor opposes this idea, and says that more insurance industry regulation is needed.

2) Illinois has gone through major changes to its comp system 3 times in the last 10 years - Rauner faces legislative fatigue on the issue.

3) Rauner is tying a promised minimum wage increase to $10 an hour to workers' compensation and tort reform, attempting to forge a compromise between Labor and Business in a face off where both sides must essentially come to the bargaining table in order to make any changes - Lucci says the members of the Illinois Workers' Compensation Commission must all sign off on any changes that are made to the policy, making some reforms harder to push through than others.

What's interesting about the minimum wage issue is that on Election Day, 67% of voters supported an advisory initiative to raise the state’s minimum wage to $10 an hour, reflecting Illinois' strong Blue roots.

Regardless, workers' compensation has always been a political compromise clearly dating back to the very first iteration introduced by Otto Von Bismarck in his 1884 Workers' Accident Insurance system.

I've said before that workers' compensation works as it is designed, but not as it is intended. That is because it is, always has been, and always will be, a political tool tied to unrelated social objectives of elected officials (or perhaps more often the objectives of those financing those politicians).

And that's just the way it is.

The Motel 6 of Justice

Jose Nunez worked as a laborer and driver for Dig Right In Landscaping in Illinois. He claimed that he injured his right shoulder while loading a piece of equipment onto a truck at work in July 2008.

Nunez did not lose any time from work as a result of his injury.

About a month later, Nunez cut his left hand in a work-related accident. He received treatment for this injury from Dr. Hasan Kahn. Dr. Kahn's treatment records contain no mention of shoulder pain complaints or the alleged July 2008 accident.

Dig Right terminated Nunez for cause in September 2008 after learning he was using company equipment to perform "side jobs."

When Dig Right fired him, Nunez made no requests for medical treatment or disability benefits related to his right shoulder.

In March 2009, Nunez sought treatment for right shoulder pain at St. Anthony's hospital. He reported that he had fallen about six months prior, in September 2008. The hospital referred him to an orthopedic surgeon, but Nunez never followed up.

In July 2009, Nunez filed an application for adjustment of claim regarding his alleged July 2008 (or was it September of 2008 ...) injury. His doctor reported that he had a right shoulder impingement. The doctor recommended right shoulder arthroscopy, subacromial decompression and debridement.

"We'll leave the lights on for you..."

Something obviously smelled fishy about this claim and that odiferous feeling didn't escape the trial level arbitrator who found that Nunez's shoulder problems were not causally-related to his July 2008 accident.

The Illinois Workers' Compensation Commission reversed, but a circuit court judge set aside the commission's decision and reinstated the decision of the arbitrator.

On further appeal the Appellate Court ruled that the Commission's award of benefits was not against the manifest weight of the evidence, conceding however that it was "a close case."

It is the exclusive function of the Commission to judge credibility and assign weight to medical opinion testimony, the court said, and the trial judge had erred in setting aside the Commission's award to Nunez.

In other words, Nunez got his benefits.

I've often said that workers' compensation litigation is the poor man's dispute resolution system - when you look at the facts of this case through the glasses I'm wearing this morning, it's pretty obvious that Nunez was upset at getting fired for using company equipment on his own jobs without authorization.

And the latency between the "shoulder injury," the continuity of working post injury date, the fact that there was an intervening industrial injury without mention of a shoulder issue, and the failure of Nunez to follow up on the initial medical referral...

I know there are probably plenty of excuses for this chain of events.

But really, from my vantage point, this is just an example of "sticking it to The Man."

Workers' compensation courts provide an avenue to vent in a relatively civil manner feelings of disparagement, unfairness and wrongdoing. It's not the purpose of work comp, but it is the reality.

Which is why workers' compensation is the Motel 6 of justice. Cheap, no frills and the lights are left on for anyone to check in at any time.

The case is Dig Right In Landscaping v. Illinois Workers' Compensation Commission, No. 1-13-0410 WC, 07/28/2014, published.

Long Tail Whips IL Pool

Workers' compensation claims are often described as having a "long tail," meaning that they take some time to close out in general.

About 200 Illinois school districts that are part of a self-insurance trust are finding that out.

Because of claims from 2008 and 2009, the Illinois Workers’ Compensation Self-Insurance Trust has a negative fund balance.

So on April 1 it sent member school districts a letter stating that it would soon be assessing them to cover the negative fund balance.

According to a June 30, 2012, financial statement, WCSIT’s net assets fell from $473,235 on June 30, 2010, to negative $1.27 million a year later, and to negative $4.27 million on June 30, 2012. 

The Chicago Tribune reported that the deficit ballooned to $7.24 million in 2013. 

The decrease in net assets was $1.10 million in 2010, $1.75 million in 2011 and $3.00 million in 2012, and just under $3 million in 2013. 

Part of the negative financial picture is likely due to decreasing membership.

According to the Tribune, WCSIT’s membership had dropped from 365 districts in 2003 to 193 districts in 2013.

We know that workers' compensation is a cash flow system. Despite reserves, any workers' compensation mechanism must have fresh cash coming in to make investments for the future because reserves tie up capital.

Less members means less money.

WCSIT is administered by the Sandner Group, a for-profit claims manager in Chicago. The Tribune reported that James Woodard, who manages the pool, said the pending assessment would amount to about $9 million. 

Districts will pay an average of about $36,000, depending on their size. Districts that were members during 2008 and 2009 may be required to contribute even if they have since left the pool.

On the flip side, according to the story, WCSIT has paid out about over $29 million in surplus distributions and royalties, in addition to distributing about $175 million in claims, in the past.

Meanwhile, regulators at the Illinois Department of Insurance have sought to investigate the finances of the pool and its administrator, the Sandner Group, the newspaper reported.

Pool officials have refused to turn over requested documents because they don't feel the state has a right to examine the books, prompting an Insurance Department lawyer to write a letter that said the refusal “has created a high level of concern” about the business conduct of the pool’s managing company, according to The Tribune.

An attorney for the pool says it has done nothing wrong and that they are taking a stand against what they feel is an overreach by regulators, and notes that the pool has to pay for the financial examination - costing the trust even more money it doesn't have.

Many of the pool's participants are small school districts. One district cited in the story has only one building. So the assessment hits these participants particularly hard.

In the meantime, Sen. John Mulroe, D-Chicago, sponsored to passage of SB2339, which went into effect Jan. 1, 2014. That new law clarifies the Insurance Department's authority to monitor self-insurance pools. 

The law mandates annual auditing and permits examination of financial documents, and imposes penalties against governmental entity self-insurance pools for failure to comply. It is not limited to workers' compensation.

Self insurance pools, trusts and other attempts to lower the cost of coverage have their own internal risks. Initially, as membership grows the financial pictures are rosy because the infusion of cash masks the lurking expense of claims.

But those tails are long, and we all know that "adverse developments" get radically more adverse, nearly exponentially, the longer claims remain open. And because the market for such pools is relatively small, they are less able to spread the risk, and thus absorb adverse situations so pool members can end up, as in this case, with retroactive liability.

There's never something for nothing. Risk pools are a neat idea when they work. And they can throw monkey wrenches into budgets when they don't.

Out of State UR - I Don't Understand

I know this post is going to provoke some argument and discussion so here goes: I don't understand why it is so important that a medical treatment review physician be located within the state that the claim necessitating review originates.

The issue has come up in Illinois, which just recently passed its utilization review statute and is in the process of implementing regulations.

The Illinois statute, known as the Managed Care Reform and Patients’ Rights Act, has no mandate that reviews be done in state, but regulators have raised hackles in the state with a Department of Insurance bulletin saying that utilization review of Illinois cases must be conducted within the state's borders.

This debate has been going on for some time in Texas, California and other utilization review states.

David Menchetti of Cullen, Haskins, Nicholson and Menchetti in Chicago, a claimant's attorney, told WorkCompCentral, that reviewers "need to be familiar with how medicine is practiced in Illinois...which may be different from how it's practiced in Indiana or India."

Dr. Robert L. Weinmann, of San Jose, Calif., an openly critical and long-time advocate of requiring in-state residency for reviewing doctors in the California system argues that physicians who are not licensed in California will not be responsive to the needs of California residents.

Because reviewing doctors out of state can't be controlled by California licensing authorities, insurance companies are then "free to scour the country" for doctors who are willing to give favorable reviews to the insurers, Weinmann told WorkCompCentral.

I'm not convinced - the only real requirement is that the reviewing doctor follow the treatment guidelines as adopted by a particular state system, and if there is no guideline for the proposed treatment (hardly the case, very few ailments, diseases or injuries aren't covered by some guideline) then other protocol can be followed.

And most states have some sort of secondary review process where a treatment protocol that was originally denied can be "appealed" which provides the party denied the treatment an opportunity to raise other medical evidence of appropriateness.

In Texas, utilization review companies must be licensed in the state, and use health care providers who are licensed in Texas. However, the companies and providers may be located outside of the state.

That's a nice compromise, but I still don't see licensing within a particular state as being any assurance of quality or the ability to regulate the process.

Utilization review is like having an editor - the process is all paper (okay, probably digital now) driven. The reviewing doctor has no relationship with the patient, no face time, no contact other than the assignment to review a file and the proposed treatment then render an opinion based upon approved guidelines whether the treatment is warranted or not.

Last I checked, human anatomy and biology has not changed from state to state. The laws are different, but the reviewing physician isn't being asked to make a legal determination. The practice of medicine may be different in India, as noted by Menchetti, but not if its "Western" medicine.

Leaving carriers "free to scour the country" for doctors who are willing to give favorable reviews as an objection doesn't cut it either, in my opinion. If a carrier is predisposed to deny a treatment request there are plenty of in-state physicians who would be willing to opine such (and visa versa - just as many for the claimant side to opine the opposite). It doesn't matter where the doctor is located.

Utilization review companies, like most everything else in workers' compensation, deal in volume. Volume is what makes profitability in the highly regulated atmosphere of workers' compensation possible, from policy selling to medical management to claimant representation. Workers' compensation on the business side is all about volume.

When dealing with the economics of volume, cost control is critical, and if a review company based in Arizona using doctors from Nevada charges less for a review of an Illinois case than a Chicago physician then the market will demand that course of action. To make utilization review economically viable a review company needs to be as efficient as possible, which may mean having out of state physicians doing the work because it is cheaper.

How does a claimant, and proposed treatment, in California differ from the same circumstances in Illinois other than perhaps the actual standard of review (which is all in writing)? The reviewing physician has no doctor-patient relationship so there is no malpractice issue, thus the licensing of the physician in the review state is irrelevant.

A reviewing doctor or organization that gets routinely overturned on appeals is not going to be used for long because the payor is not going to tolerate the unnecessary expense of review that is ineffective.

I don't know this for fact, but my assumption is that general health insurance has been down this path a long time ago, and that treatment decisions are reviewed by physicians not located in the same state (perhaps even country) in which the requested treatment is being sought. Perhaps someone can enlighten me.

Mandating that utilization review be conducted by physicians located in the state doesn't make any logical sense. I'm sure someone will try to enlighten me.

The Supply and Demand of Work Comp

Workers' compensation reform is all about trades within the boundaries of the supply and demand of costs versus benefits. California is going through a seismic shift in the allocation of supply and demand, and a couple of other big states are feeling tectonic pressures too.

Both New York and Illinois have received considerable criticism since both states attempted to implement "reform" several years back - both states failing to realize the cost savings that were promoted as the cause 'd reform.

Now there is movement afoot since both states received unflattering cost rankings in Oregon's latest survey. 

The study showed Illinois had the fourth-highest workers’ compensation costs in the nation. In 2010, the state ranked third.

New York was ranked the fifth-most expensive in the nation for employers in the Oregon Department of Consumer and Business Services' biennial premium survey. Two years ago, New York ranked No. 13.

Illinois Chamber of Commerce President and Chief Executive Officer Doug Whitley told attendees at the chamber’s fourth annual Workers’ Compensation Conference on Thursday that the agenda includes changing the causation standard to include a primary cause of an injury standard and definitions of work-related accidents will be a major component of reform.

The Chamber feels that because a work accident does not currently have to be the sole proximate cause or even a primary cause of an injury to be compensable, too much of workers' compensation pays for issues that should be covered by general health insurance or the injured's own pocket.

I don't know if this is accurate, nor do I know of any studies or other attempts to measure whether in fact workers' compensation in Illinois is paying more than its fair share for employee health problems.

If you recall, just a few months ago Emily Spieler and retired Rutgers University professor John Burton released their report, , "The Lack of Correspondence Between Work-Related Disability and Receipt of Workers' Compensation Benefits," which was published by the American Journal of Industrial Medicine in January, found regulatory and reform efforts in recent decades have been focused on employers' and insurers' needs and are inducing systematic complexities that push workers away.

Their conclusion was that workers' compensation was cost shifting responsibility to the general health insurance market, and not the other way around.

Illinois may be different - that's certainly possible. With medical costs being the primary component to workers' compensation insurance premiums it is understandable why business would want to make sure that expenses are properly accounted for, in addition to the availability of "extras" in work comp such as indemnity and return to work costs.

Again, it comes down to what people want.

“Causation is the No. 1 issue,” Whitley said. “The Illinois standard is so minimal that most employers feel the system is stacked against them. Every employer knows the causation standard makes it practically impossible for claims to be disputed and denied."

Challenging a claim at its inception would then seem to create a culture where the first dollar is sought from the general health market - and maybe that's the way it should be, and maybe that's the way it shouldn't be...

In all honesty, segmenting the provision of health benefits depending upon delivery system seems at its heart to be inefficient and a cost driver in itself. And whether creating a new causation standard in fact would lower costs is debatable, since doing so would, in my opinion, create a new "litigation point."

Workers' compensation is fundamentally skewed in favor of the employee, with liberal interpretation the predominant standard, so making work the "predominant cause" or some other amorphous standard won't really reduce that many cases going into the system, but will greatly increase the number of friction points in the processing of claims.

Eight hundred miles away, in New York, State Workers' Compensation Board (SWCB) Executive Director Jeffrey Fenster is on the hot seat, still trying to get the 2007 reforms into place.

Fenster told WorkCompCentral that the first phase – implementing the Spitzer reforms – is now complete. He said the second phase includes overhauling the board's computer system. Finally, he said the board is discussing legislation to expand on the Spitzer reforms.

He said the board wants to address "misaligned incentives" that have delayed the imposition of duration caps imposed on permanent partial disability (PPD) benefits by the Spitzer reforms.

In February, Fenster said, SWCB analyzed its databases and identified 4,000 injured workers who appeared to have reached maximum medical improvement (MMI).

New York law requires judges to classify a worker's loss of wage-earning capacity once they have reached MMI. Fenster said the board sent 4,000 letters to carriers and self-inured employers on Feb. 1 requesting details on those cases and seeking submission of the board's "medical report of permanency" form.

So far, he said, the survey has received a 13% response rate.

Fenster said New York carriers appear to be delaying classification of PPD claims, in part, because of another piece of the Spitzer reforms – a requirement that carriers deposit the present-day value of classified PPD claims into the state's Aggregate Trust Fund.

"The response rate on those 4,000 letters is incredibly poor. The motivation to classify doesn’t appear to be out there," Fenster said. "The ATF deposits are certainly part of the answer."

Fenster said the need for workers to reach MMI in order for the PPD caps to kick in has increased litigation, while the classification of PPD cases remains slow.

"In essence, we have created a new litigation point over MMI," Fenster said. "When you start drilling down to find out the problem with MMI, fundamentally, it’s a culture of litigation. (In some states) you just don't have the heavily litigated points that we do."

It's all a trade off - which is what workers' compensation is in the first place. Business traded off some defenses and labor traded off some jury awards. Business benefitted by getting some reasonably predictable risk, and labor benefitted by getting some reasonably predictable benefits.

Costs and benefits are essentially the commodities of the workers' compensation marketplace. There are limited supplies of both.

Reform talks are all about trading within the available supply. The demand can be constricted to some extent, but at some point, in particular if the economy becomes healthy and there is an increase in employment, the pressure will task available supply, and the political power allocation at any given moment defines the supply/demand boundary.

Illinois & Iowa Interesting, but No Match for CA

“What you have to realize is that just nine years ago, in 2003, there were more than 65,000 new claims…What you’re seeing is workers’ compensation attorneys business drying up.”

That's what Chicago, IL, defense lawyer Gene Keefe told WorkCompCentral yesterday after the National Council on Compensation Insurance (NCCI) released its recommendations for voluntary market rate changes in the state.

Keefe told WorkCompCentral that as of Aug. 1, there were approximately 26,000 new claims filed for the year, “pointing to an all-time low” of 45,000 for 2012.

NCCI proposed a 3.8% decrease in rates and Keefe thinks a reduction in the number of litigated claims is a key factor.

According to Keefe there are a number of reasons for the drop in claims including economic factors, increased safety awareness and better claims management.

In addition the implementation of medical networks (called preferred provider programs or PPPs) in the state should contribute to the decline, Keefe said.

NCCI reported Illinois saw a decline in medical severity which offset an increase in frequency, and improved indemnity loss ratios “driven by a decrease in average indemnity severity.”

Jay Shattuck, executive director of the Illinois Employment Law Council, told WorkCompCentral that the reductions don't appear to be "specific to the reforms", but reflect improved experience in several areas and data from previous years, when there were high numbers of claims, “dropping out of the formula.”

In the meantime, NCCI proposed a rate increase of 7.9% for low cost neighbor Iowa.

Driving that increase is a rise in claim frequency in 2010 of 3.2% and ongoing rise in medical costs, up another 2.5%.

Still, Iowa in the last Oregon Department of Consumer and Business Services cost survey ranked Iowa 36th at $1.82 per $100 of payroll. In 2010 the median cost was $2.04 per $100 of payroll.

Illinois was ranked third most costly with a 2010 cost of $3.05 per $100 of payroll.

Keefe's analysis seems to have some validity if compared to Iowa. According to the Iowa Workforce Development, Iowa's total inventory of litigated claims is only about 4,500 and has remained relatively stable at that number for several years.

Taken as a percent of total population both Illinois and Iowa have relatively low litigation rates.

Illinois' total population is 12,830,632 according to the US Census Bureau. Iowa's population totals 3,046,355.

This means that Illinois' workers' compensation litigation experience rate compared to total population is 0.35%, or 3.5 litigated claims for every 1,000 people; Iowa's is 0.15% or 1.5 litigated claims for every 1,000 people.

Compare to California, with a population of 37,253,956 and new litigated filings last year of about 350,000, and the rate is 0.94%, or 9.4 litigated claims for every 1,000 people.

Despite the heavy litigation rate, California's cost per $100 of payroll was $2.68 in the last Oregon study ranking the state 5th most costly. 

I'm not sure whether this is good news, or bad news. While there is less litigation in Illinois, the cost to the system based on payroll is disproportionately high. 

Or California litigation is unusually efficient...

IL Wisely Tackles Repackaged Drugs

Repackaged drugs have been in the headlines this past year for good reason - there are several studies indicating that the high cost of repackaged drugs do not correlate to a high return of value in workers' compensation systems.

The Illinois Workers’ Compensation Commission’s Medical Fee Advisory Board recommended by a 4-3 vote against a proposed rule that would regulate the price of repackaged drugs.

The proposed rule would provide that all prescriptions filled and dispensed outside of a licensed pharmacy "shall be billed at the average wholesale price, plus a dispensing fee of $4.18."

"If a prescription has been repackaged, the average wholesale price used to determine the maximum reimbursement shall be the average wholesale price for the underlying drug product, as identified by its National Drug Code from the original manufacturer," the rule states.

The rule also provides that the "average wholesale price or its equivalent as registered by the National Drug Code shall be set forth for that drug on that date as published in Medispan.”

Not surprisingly, the two employee and two medical representatives on the nine-member Advisory Board voted against the rule. The three employer representatives voted for it. One medical representative was absent for the vote and one employee slot is vacant.

What was surprising is that the full nine member Commission disregarded the Advisory Board's vote and on Tuesday voted 9-1 to continue the rulemaking process. According to Illinois observers, it is unusual for the Commission to disregard the advisory board's recommendation.

The debate included the usual arguments for and against.

Jason Keller, legislative director for the Illinois AFL-CIO and a member of the advisory board, said board members opposed to the rule cited various concerns, including injured workers’ ability to get prescriptions quickly, and the potential administrative costs of the program.

Employer representative Barbara Molloy, head of Molloy Consulting, Chicago, said she voted in favor of the rule because she believes other states’ experience with the increased costs due to repackaging illustrates the need for regulation. Molloy said she doesn’t believe opponents of the rule have demonstrated that it would deny access to, or delay delivery of, medications to injured workers.

Dr. William Werner, president of the Illinois State Medical Society, said in a statement to WorkCompCentral: "We do not believe that tying reimbursements to the average wholesale price ... is reasonable." Werner said that many physician offices rely on third-party vendors to obtain prescription medications and purchase them at levels above the average wholesale price.

Physicians also have overhead expenses associated with administering prescriptions, Werner said.

In my mind the physician's arguments are not substantial. States that have implemented price caps on repackaged drugs have not experienced denial of access to care issues. Physicians that are paying more than the average wholesale price for drugs aren't engaging in good business practices. If there are increased overhead expenses associated with administering prescriptions then that is a business administration problem, not a medical problem.

Repackaging of drugs has very little increased value to workers' compensation systems. There has been no demonstration that injured workers are better off with physician prescription fulfillment other than on an emergency basis or that they are unduly harmed.

Workers' compensation exists in part to provide injured workers with medical care at a cost that can reasonably be distributed and borne by employers, not to ensure the livelihood of vendors. It seems to me that Commission Chairman Mitch Weisz and his colleagues understand this.

IL Arbitrators In Crosshairs Again

Illinois has 11 arbitrators that are tasked with resolving disputes that arise in the state's workers' compensation system.

Over the past couple of years some arbitrators came under heat for conflict of interest and judicial misconduct: one who attempted to interfere with her own workers’ compensation claim and others who allegedly failed to adequately screen claims by state employees, in particular those of prison guards at the Menard Correctional Center. 

As a consequence, House Bill 1698, which took effect last year, terminated the appointments of all serving arbitrators on July 1, 2011. The legislation also provided that those serving would continue to serve until they were appointed to a new term or replaced.

Three new arbitrators were subsequently appointed: Gerald Granada, Oct. 14, 2011; Nancy Lindsay, Nov. 7, 2011; Brandon Zanotti, Feb. 6, 2012.

HB 1698 provided that in the future, arbitrators would be appointed initially by the governor, with the advice and consent of the Senate, rather than by the Workers' Compensation Commission.

However, the legislation provided that upon the expiration of an arbitrator’s term, the commission chairman “shall evaluate the performance of the arbitrator and may recommend that he or she be reappointed to a second or subsequent term by the full commission.”

Illinois Governor Pat Quinn now has on his desk HB 1084, by Rep. Michelle Mussman, D-Schaumburg. The bill deals with notes on legislative mandates affecting businesses, but was amended in the Senate to require that the governor reappoint arbitrators (with the advice and consent of the Senate) rather than by the commission.

The floor amendment was sponsored by Senate President John Cullerton, D-Chicago. The bill was passed, with the amendment, and sent to Gov. Pat Quinn (D) on June 15.

Quinn's Press Secretary, Annie Thompson, said in an email to WorkCompCentral that "we are aware of the legislation -- which seems to build on the success of the appoint(ment) process implemented last year -- and are reviewing (the bill). Having championed the workers’ compensation reforms, we are always open to finding ways to further increase transparency and oversight of the workers’ compensation process."

That sounds to me like the Governor is going to sign the bill.

It also sounds to me like a power grab for the Governor's office that doesn't belong there in the name of doing something about workers' compensation without really doing anything.

Illinois has been cleaning house, attempting to reel in its workers' compensation system. There were a series of "reform" bills over the past 24 months that made some radical changes to the system's culture, changes that many believe were not enough.

The legislation would change the process to require the chairman to recommend reappointments to the governor -- and make all appointments subject to Senate approval.

Illinois' workers' compensation dispute resolution system is small. There are only 11 arbitrators. While that makes the appointment process relatively manageable by the Governor's office, I think it also makes arbitrators vulnerable to political pressure and actually decreases transparency and accountability in my opinion.

Eugene Keefe, Chicago defense attorney with Keefe, Campbell and Associates, seems to agree, stating in his blog on Monday “we assume the supposed-reformer Governor may do what he always seems to do, fire a bunch of veteran administrators without any true reason other than to claim he is reforming something. He will then appoint and reappoint his trusted buddies to the positions for which they have little to no experience or background.”

IL & Discipline - the Causation Argument

A new reform fight in Illinois is of particular interest to me because the fight is all about the causation standard of proof (attorney Robert Rassp and I are co-authors of a chapter in the Second Edition of the AMA Guides to the Evaluation of Disease and Injury Causation, to be release either late 2012 or early 2013).

If you have been following "reform" in Illinois you know that the past couple of years have been contentious with some new laws put on the books that changed many elements of the Illinois system.

In 2011, Democrat Gov. Pat Quinn signed House Bill 1698, which ungraded requirements for utilization review, changed fee schedules and instituted caps on wage-loss benefits and carpal tunnel syndrome awards. The bill also required the use of the American Medical Association Guides to the Impairment of Permanent Disability, authorized preferred provider programs for employers and revised requirements for the appointment of workers’ compensation arbitrators.

But the one element that did not change to the chagrin of business was the burden of proof standard for an injured worker to be eligible for benefits.

Under existing Illinois law, a work accident is compensable even if it aggravates a pre-existing condition, and the employer is then liable for workers’ compensation benefits and must incur the costs of all resulting care and disability even for the pre-existing condition.

This is sometimes called the one percent rule - if even one percent of an injury or disease was caused by work then it is a workers' compensation claim.

I don't know specifically how many states employ this standard, but my educated guess is that this is the majority rule.

While some claimants take unfair advantage of this liberality, an underlying purpose of the rule is simply administrative efficiency. Contesting causation on standards that employ degrees of proof requires judicial intervention to interpret facts into the law.

SB 2521, by Sen. Kyle McCarter, R-Lebanon, would amend Section 1 of the state's Workers' Compensation Act with the following language change in the definition of "accident" and "injury":

(e) The term "accident" as used in this Act means an occurrence arising out of the employment, resulting from a risk incidental to the employment, and in the course of the employment at a time and place and under circumstances reasonably required by the employment.

(f) The term "injury" as used in this Act means a condition or impairment that arises out of and in the course of employment. An injury, its occupational cause, and any resulting manifestations or disability must be established to a reasonable degree of medical certainty, based on objective relevant medical findings, and the accidental compensable injury must be the major contributing cause of any resulting
injuries. For the purposes of this Section, "major contributing cause" means the cause which is more than 50% responsible for the injury as compared to all other causes combined for which treatment or benefits are sought. "Injury" includes the aggravation of a pre-existing condition by an accident arising out of and in the course of the employment, but only for so long as the aggravation of the pre-existing condition continues to be the major contributing cause of the disability.

(1) An injury is deemed to arise out of and in the course of the employment only if:

(A) it is reasonably apparent, upon consideration of all circumstances, that the accident is the major contributing cause of the injury; and

(B) it does not come from a hazard or risk unrelated to the employment to which employees would
have been equally exposed outside of the employment.

(2) An injury resulting directly or indirectly from idiopathic causes is not compensable.

It is unlikely the bill will make it out of committee this year - it was referred to the Senate Committee on Assignments on April 26 - but the Illinois Chamber of Commerce is going to push for causation reform in 2013.

The sticky part in my opinion is the definition of "major contributing cause" - that there be some factual determination that at least 50% of the accident be responsible for the injury "as compared to all other causes combined".

Most cases won't have to tread on the causation standard determination. But it's the 20% that take the 80% of resources that will, in my opinion, increase expenses for both the evidence to prove or disprove causation and the judicial resources necessary to make these determinations.

And I won't get into the legal technicalities that will put holes into this causation standard. But there certainly are going to be problem cases where judicial interpretation will undermine the Chamber's intent with this restrictive language.

California employed a similar tactic in the mid 1990s on psychiatric claims - requiring a heightened burden of proof for mental injury cases. Labor Code 3208.3 was instituted and used language very similar to the proposed Illinois standard.

The purpose of the California law at that time was to undermine the medical-legal mills that were generating ridiculous claims of psychiatric injury where there was clearly no injury but where medical bills for both preparation of evidence and treatment were disproportionately large.

Discipline was lacking in the California system necessitating this law change.

Even after the passage of 3208.3 it took some time for the new standard to be accepted into the system but the demise of the medical-legal mills churning out bogus psychiatric claims was more the result of concerted efforts on the parts of payers and the judiciary than any change in the law.

Illinois defense attorney and outspoken critic of the state's system, Eugene Keefe, told WorkCompCentral that he thinks changes to causation can be made by forcing hearing officers to use common sense.

Keefe also said he thinks House Speaker Michael Madigan, the father of the attorney general, is already talking to hearing officers telling them to stamp out some of the claims that appear to be abusive and that Madigan doesn’t want to see reports about the problems with Illinois’ workers’ compensation system, so he will try to make changes without pursuing legislation.

“It will not happen in the open and it won’t be on the news,” Keefe said. “It will all be very quiet, but I think it’s going to happen. I think we’re going to keep seeing changes.”

In other words, Keefe believes that discipline will be instituted into the Illinois system which will obviate the need for legislative action.