Dirty Business Fears

The single biggest threat to the health of workers' compensation in the United States is a fear of retribution that keeps those in the know about the shenanigans that go on in this "dirty industry."

It's a shame, but it's real.

I get phone calls and emails all too frequently, like the other day from a guy I'll call Mike - not his real name, but as the introduction noted, anonymity is paramount because of fear of reprisal.

But the story is not unusual and, like the others, it goes essentially like this:

Top tier executive in a large claims department puts himself between vendors and claims in exchange for payola.

In other words, extortion for a "guarantee" flow of future referrals, regardless of the quality of services or products, and regardless of outcomes, expense, etc.

Fee schedules and other cost controls are subverted by layering the bills through third party intermediaries, what we like to refer to as "networks."

"I have been in this industry for 23 years," says Mike. "Although I always knew that vendors paid for meals, vacations, and rounds of golf, I never thought that they also paid for the equivalent of vacation homes in Florida and to fund supplemental retirement slush funds for c-suite baby boomers."

"When I asked colleagues about this," he continues, "I was told to 'let it go' because 'everyone is doing it.'

"The problem with workers' compensation today is that policy is driven by people with conflicts of interest.  When 'reforms' call for the potential use of more vendor oversight then you can see what has been happening.  Look no further than the growth in CA MCCP and ALAE costs to prove my point (there are additional 'hidden' vendor costs as well).  Now, expand that same system across the country...wash, rinse, repeat.  Managed care is BIG BUSINESS.  Payers are benefiting because they sometimes own these vendors AND/OR they arbitrage the revenue AND/OR they receive revenue-sharing payments AND/OR they can lower their administrative costs AND/OR key executives are quietly receiving compensation so long as the referrals continue to flow."

This may all in fact be true, and I have no reason to doubt that it isn't. There is enough illogic going on in workers' compensation that I can't discount Mike's cynicism.

Mike suggests several steps to curb or discourage executive cheating of the system, including anonymous hotlines, criminal penalties for bribes or payola, unbundling vendor billings to see what caregivers are actually paid, and transparency disclosures for conflicts of interests.

Many states, however, already have some or all of these requirements or programs in their laws.

The problem is not with the laws or lack of them. The problem is that hardly anyone is willing to spill; without naming names of people and companies, and without willing to testify and/or provide documentation, there will be no stopping such nefarious activity.

And I don't have an answer to that one. I'm quite certain that there are elements of the work comp industry that have ties to organized crime. Most folks don't want to risk disappearing in the middle of the night...

Even if there is no connection to organized crime, work comp is essentially a small industry and word gets around. A sure way to amputate a career is to squeal, because, as Mike was told, "everyone is doing it."

"To conclude," says Mike, "99% of the people in this industry are working every day without knowledge of the corruption that I mentioned above. These are the people who would rightfully defend the integrity of their co-workers and of the system.  If the relatively few bad actors are removed and replaced with good, decent people, then perhaps the WC industry will continue to enjoy its privatization for another 100 years.  If not, a federalized future surely awaits!"

I don't think federalization would be a response to c-suite fraud because wrongful acts can and will occur regardless of who "owns" the system (just look at Medicare as an example).

The bottom line is that without names and sources it's just a story, fiction, unverified and unvalidated.

Anonymity protects the guilty, fosters the hypocrisy, and promulgates the regulatory burden that the 99% must shoulder.

Valdez Wins if Docs Want to Work for Free - Didn't Think So

One of my very first lessons as a workers' compensation neophyte was, "he who controls the medical controls the case."

That is the premise behind the fight in Valdez v. WCAB, No. B237147 (pending in the California 2nd District Court of Appeal) where the Workers' Compensation Appeals Board (WCAB) ruled last April that Labor Code Section 4616 bars the admission of medical reports from doctors who are not a part of an employer's properly noticed and valid Medical Provider Network (MPN). That code section sets forth a multi-level process for an injured worker to change physicians within an MPN and obtain the opinions of additional doctors to dispute a treatment or diagnosis.

John A. Mendoza, Valdez' attorney in the case argues that this ruling conflicts with another Labor Code section, 4605, which provides that "(n)othing contained in this chapter shall limit the right of the employee to provide, at his own expense, a consulting physician or any attending physicians whom he desires."

Mendoza told WorkCompCentral in an interview yesterday that, "every section in 4600 is talking about an employer's obligation. It says an employer 'shall make a medical appointment,' but it never says an employee shall attend."

The argument being, in summary, that if the injured worker wants to "pay for" his or her own medical treatment and evaluation that any evidence from such treatment or evaluation is admissible to prove or disprove an issue.

Honestly I don't have a problem with that - as long as the injured worker ACTUALLY pays for the treatment, exam and/or report - and that NEVER happens!

What actually happens is that the physician providing such services does so on a lien basis and the employer/carrier ends up paying for it anyhow, so section 4605 becomes nearly irrelevant.

One of the basic tenets of workers' compensation (which, by the way, I do think is a flaw in the underlying philosophy of the system - but that's the topic of another column) is that all medical services are without expense to the injured worker. That is an entitlement well ingrained in the minds of workers, their counsel and the physicians doing the work.

I think that the position taken by Valdez is extreme, and is not even fully supported by the California Applicant Attorneys Assoc. (CAAA).

CAAA's amicus brief in the case argues that he WCAB decision "was overly broad" in excluding physician reports from non-MPN providers in every administrative proceeding, and that the injured worker should be able to use the treating physician's reports in disputed body parts cases.

A related issue in the case is how Labor Code section 4616.6 interfaces with the whole process.

4616.6 states simply: "No additional examinations shall be ordered by the appeals board and no other reports shall be admissible to resolve any controversy arising out of this article."

"This article" is Article 2.3 governing MPNs beginning with Labor Code Section 4616.

The WCAB said that "Section 4616.6 is not limited to cases where there has been an (independent medical review) under Section 4616.4, because other 'controversies' may arise under the MPN article of the Labor Code before the injured employee gets to the stage of requesting an IMR."

4616.4 is all about the Independent Medical Review process.

CAAA argues that 4616.6 "by its own terms is limited to disputes arising within the … MPN … and specifically, the independent medical review."

Valdez argues that Section 4616.6 is limited to cases where there has been an independent medical review under Section 4616.4, so it was inapplicable to his case.

The California Workers' Compensation Institute (CWCI), an insurance carrier supported research and advocacy organization, argues that the intent of the legislature in 2004 was to secure medical control to the employer. And that may be true, but the argument doesn't really address the technical issue as to whether an employee can go outside the employer controlled medical process at his or her own expense.

Valdez' argument that there is no requirement that an injured worker attend an appointment within an MPN may be true (I'm not completely buying that - there is a process to compel attendance or forfeit rights in the litigation process, but that its very rarely enforced), but the issue then really becomes who is paying for that privilege at the end of the day?

Certainly if Valdez' argument wins, that 4605 grants the injured worker the right to see whoever he or she wants for medical services at his/her own expense, then the court must also make clear that there is absolutely no liability for such medical expense by the employer/carrier. Does the court see that as an issue?

Is there anyone in the medical-legal business willing to paraphrase Larry Miller, president of Southern California bed retailing chain, Sit N' Sleep, in his commercials, "We'll beat any competitor's advertised rating, or your medical report is FREEEEE!"?

{silence except for crickets chirping}

I thought so.

Opinions Differ on Effectiveness of AB 378 Limiting Physician Self-Referral

There's a new fight brewing in California and I suspect it will provide good entertainment, and an abject lesson in legislative drafting, to workers' compensation observers.

The fight is about physician self-referral of pharmacy goods.

Assembly Bill 378, which took effect Jan. 1, adds to the California Labor Code prohibitions against physicians referring patients to pharmacy goods when the physician has a financial incentive for making the referral.

Proponents claim the new law applies to physician-owned companies that supply spinal and orthopedic implants to workers' compensation patients and that a physician who has an ownership interest in a company that provides durable medical equipment would not be able to use devices supplied by that company on an injured worker.

But others claim that the new law doesn't limit their ability to use their own products in treating injured workers.

Brad Tully, a partner at Hooper Lundy & Bookman in Los Angeles, told WorkCompCentral that the legislative history of AB 378 shows lawmakers were focused on overpriced medical foods or compound drugs, and weren't thinking about physician-owned distributors. He agrees the law, through its definition of pharmacy goods does prohibit self-referral for implants, but doesn't think it applies to the standard business model used by physician-owned companies.

It all hinges on the definition of "referral," which is not defined by statute.

Tully said the California Attorney General in 1982 said to refer means "to send or direct for treatment, aid, information or decision" and a referral is "the process of directing… a patient… to an appropriate specialist or agency for definitive treatment."

Tully said AB 378 wouldn't apply to physician companies under the Attorney General's definitions.

"A referral is a recommendation to a patient that they go someplace to obtain something," Tully said. "It's like a physician choosing what suture to use. He's buying an office supply. That is not a referral of the suture company to the patient."

The insurance industry doesn't buy this argument.

Mark Sektnan, president of the Association of California Insurance Companies, told WorkCompCentral News that physician-owned distributors raise the question of whether a doctor has an incentive to use products that aren't medically necessary, and the purpose of AB 378 was to make sure doctors weren't recommending products for financial gain.

"Physician-owned distributorships should be covered," he said. "If they're not, we need to look at how they can be."

Lach Taylor, a consultant to the Commission on Health and Safety and Workers' Compensation, told WorkCompCentral News that the Labor Code says a carrier doesn't have to pay for a device if the provider has a financial interest, so it could come to a point where a bill is submitted and an insurer refuses to pay.

If a lien is filed, a judge will have to decide on how to interpret AB 378, Taylor said. Until a court interprets the law, Taylor said he doesn't anticipate any subsequent legislation to address physician-owned distributors.

And that, my friends, is how legislative "intent" gets interpreted as THE law.workers compensation, work comp, injured worker