I don't quite remember the year, but likely it was around 1989-1991.
I was a young defense lawyer working for the esteemed firm of Miller & Folse.
My mentor was name partner Rene Folse, JD, PhD. Folse had gained a reputation in the industry due to his education, experience and novel tactics, as The Man in psychiatric cases so we had a good sized inventory of those cases.
This was during the era of psyche-mills and nonsense medical-legal head to toe referrals perpetrated primarily by criminal enterprises taking advantage of liberal reimbursement guidelines, unwitting claims adjusters and unsophisticated claims management techniques.
The job of the defense attorney at that time was to discriminate between the legitimate claims and those that were being trumped up by shady medical practices seeking to make money on unwarranted procedures, or services that weren't even performed.
I was assigned a psyche case, but it didn't fit the mold of the typical mill scenario - the usual suspects of multi-disciplinary clinics were not involved, there was little work up by the diagnostic labs, and the applicant attorney firm was known as being top notch.
Back when depositions took only an hour just to make sure that the claimant was a real person, Folse trained us how to do REAL depositions that involved detailed questioning about the various factors that comprise a diagnosis under DSM-III, the guideline for diagnosing psychiatric maladies in use at the time.
So I took Martha's (the claimant) deposition. And over the course of seven hours I learned of this lady's horrific childhood and tortured (literally) young adult life. I learned about rape, abuse, murder, drugs, alcohol, jail - Martha's life story was captivating, real, devastating, heart-wrenchingly detailed and honest.
This lady wasn't lying - at all.
After these incredibly depressing life events, Martha met her employer - a good natured, compassionate dentist who hired her, trusted her, and gave her a new life for nearly 20 years.
Martha made an incredible psychological recovery and led an uneventful, if not normal, adult life.
Her employer was her hero. She trusted him implicitly. He rescued her from a terrible life and she returned the favor with dedicated service.
Then one bad day the dentist snapped and took it out on Martha, including physical contact (hand slap across the face); an act of violence, albeit nominal, which the employer did not dispute.
This was enough for Martha to de-compensate. The one man that didn't abuse her, that rescued her from depravity, in whom she placed all of her trust and emotional support, breached that trust and that sent the claimant spiraling back into her emotional nightmare.
The skeletons that she had been able to keep hidden in her closet came out like phantoms in the night and haunted her uncontrollably.
At that time there was no differentiation between psychological injuries and physical injuries. There was no minimum threshold of causation. If an injury triggered some underlying condition the employer bought that condition too.
The laws were simple back then. The Labor Code was half the size it is now. The regulations were minimal. Common sense had not yet been supplanted by rigid rules.
I finished the deposition late that afternoon and pulled the applicant attorney aside, a young Ruben Feldsteiner, and engaged him in settlement discussions.
I knew that this was a bad case that would get only worse if I didn't resolve it now. Martha was going 100% if she stayed in the system - that much was absolutely clear to me.
Ruben and I negotiated a $70,000 compromise and release of the case.
That was a lot of money back then, particularly for a psyche only case. But this case was not a medical-mill case. I had a very credible applicant, the employer didn't dispute the events leading up to the claim, and I imagined a life time of psychiatric and psychological care that would cost far more than $70,000, let alone lifetime permanent disability indemnity at the temporary disability rate - and applicant was only in her mid-40s.
I called my claims examiner directly from the deposition and gave her the news and my recommendation for settlement right then, right now.
The claims examiner was erudite and claims savvy. She had been in the industry long enough to know a bad situation getting worse when she saw it. I immediately had settlement authority for $70,000, drew up the compromise and release, and it was signed right there at the deposition with the court reporter, still weeping from this incredible story, as witness.
Case settled, done, gone - experience modification harmed only slightly. Expenses minimal. My attorney bill at that time was probably for no more than 10 total hours (at $90/hour!) on the case: initial receipt and file review and deposition time.
There was no bill review, no independent medical review, no utilization review. I didn't have to go through several layers of carrier bureaucracy to get authorization. I didn't have to write up some lengthy discourse justifying my request.
It just worked the way it should work: clean, fast, efficient.
There is no way this could happen today.
Wednesday, May 8, 2013
Tuesday, May 7, 2013
The Pendulum And Success Neurosis
I know that Mark Walls, senior vice-president and market research leader with Marsh's Workers' Comp Center of Excellence and founder of the LinkedIn group Work Comp Analysis, was hoping to provoke me into debate with his most recent editorial for Risk & Insurance Magazine, "Has the Pendulum Swung Too Far?".
It worked, but probably not as expected.
Because I agree with Mark, at least in part.
Mark argues that the pendulum in the workers' compensation bargain has swung too far against employers.
And perhaps it has. But, I add, likewise for workers too.
In my opinion Mark accurately observes, regarding at least the big work comp systems:
"The complexity of the workers' comp system is also out of control and is significantly increasing the costs. Consider for a moment that workers' comp is supposed to be a benefit delivery system designed to treat the injury and return the injured worker to employment. Sounds simple right? It should be, but it takes more like an army to do this -- doctors, lawyers, companies that review the bills of doctors and lawyers, companies that schedule exams with doctors, companies that dispense pills, companies that test to make sure the pills are being taken. The list goes on and on. And lest we forget, the states also require mountains and mountains of paperwork (in multiple languages) to document each and every transaction of this benefit delivery process.
"All this complexity does not enhance the benefit delivery process, but it does cost money. Lots and lots of money. Who pays for it? Employers. Are you starting to understand why employers are feeling like this 'grand bargain' is not such a great idea?"
The complexity of modern workers' compensation costs lots of money and creates huge friction in the relationship for which the "grand bargain" was supposed to lubricate: that of the employer and employee. Evidence of this is that loss control costs in California (and other large systems) has grown faster than any single costs component - it seems we spend more trying to keep the money that it would cost just to pay it out.
Yesterday I posted about the $240 million judgment against Hill Country Farms, and juxtaposed that against the lack of financial fear held by Sedgwick Claims Services for, essentially, killing a man in the name of money.
Both situations are no less troublesome than the Hill, Texas fertilizer plant explosion that killed 14 people, injured over 200 people and essentially leveled an entire town last month.
I searched the TXCOMP system for coverage information for West Fertilizer Co. There was no listing. That doesn't mean that there wasn't coverage, but based on research by the Los Angeles Times on the incident, likely there wasn't any since the plant only had $1 million in total property & casualty insurance.
The only reference I found to Donald Adair, owner of the West Fertilizer Co. (and Adair Grain, Inc.), was that he said in a statement that he would never forget the "selfless sacrifice of first responders who died trying to protect all of us," adding that a plant employee was also killed responding to the fire.
A plant employee for which there is no recourse because there was no workers' compensation insurance.
And likely Adair's finances are well protected...
Adair's press statement hypocritically professes religious atonement, but certainly says nothing about making his employees, or those innocently injured or dead, or the devastated town, whole.
What does Adair and the West Fertlizer Co. have to do with comp? Money - or rather the lack of accountability, lack of enforcement power or motivation to ensure safe practices and protection of the public at large.
Mark argues that we need to get back to the grand bargain - the employer and the worker, making the workplace safer, and providing medical treatment and wage replacement for injuries sustained at work.
I can't disagree with that statement at all.
Mark argues that the grand bargain doesn't include workers who push their daily aches and pains onto the comp system, doesn't include employers abusing their workers, doesn't include claims administrators shirking their legal and moral responsibilities, doesn't include doctors, lawyers, bill reviewers, underwriters, executives or anyone else that has carved out a business interest in workers' compensation in response to some special interest.
Every single one of these actors push responsibilities, and consequently costs, onto other systems and other people. The Sedgwick/Romano case, for example, cost the taxpayers of California at least $275,439 in Medi-Cal hospital payments because the adjuster denied responsibility for the expenses despite a judge's order. Yeah, Sedgwick will reimburse the state, but probably not without negotiating down to fee schedule...
There is no accounting for personal behavior. There is no remorse for harmful acts. There is no respect for the human condition once that condition has been compromised by some monetary value.
Mark says that there are many who doubt that Oklahoma's new opt-out law will be successful because the employers that could qualify to do so are limited.
But that doesn't mean that opt-out won't expand either in Oklahoma, or to other states, where political pressure is on to improve the living conditions for the people and the businesses that make jobs which turn into tax revenues.
We have to come to terms with the fact that there are a lot of people in workers' compensation with no value to add to anything.
Mark - the pendulum has not swung too far against the employer. The pendulum has not swung too far against the employee either.
The pendulum hasn't swung at all - it has been pushed right off its fulcrum.
Think of the Tacoma Narrows bridge failure.
So many narrow interests have introduced so much complexity that the value to employers and employees is questionable. Hill Country Farms, Sedgwick, West Fertilizer - these are just symptoms of a much larger, more idiopathic problem.
"What's mine is mine, and what's yours is mine too, if I can figure out a way to get it."
This is what is known as the "Success Neurosis": "if success remains - the apparent cultural evidence of value or goodness - this process like any 'good neurotic process' must be repeated endlessly." (Jerome Schulte, MD; The Immortality Complex.)
Workers' compensation has become less about a swinging pendulum and more about the success of the interests that have created an industry around a privatized social support system.
Success in workers' compensation has become synonymous with costs, or controlling costs. Not about delivering on the social promise to either the employer or the employee.
And as Dr. Schulte says, this must be repeated endlessly because of the neurotic character of success as we have come to define it.
THAT's the threat of the opt-out movement. That's the threat to workers' compensation, else we all face a West Fertilizer in our backyard.
It worked, but probably not as expected.
Because I agree with Mark, at least in part.
Mark argues that the pendulum in the workers' compensation bargain has swung too far against employers.
And perhaps it has. But, I add, likewise for workers too.
In my opinion Mark accurately observes, regarding at least the big work comp systems:
"The complexity of the workers' comp system is also out of control and is significantly increasing the costs. Consider for a moment that workers' comp is supposed to be a benefit delivery system designed to treat the injury and return the injured worker to employment. Sounds simple right? It should be, but it takes more like an army to do this -- doctors, lawyers, companies that review the bills of doctors and lawyers, companies that schedule exams with doctors, companies that dispense pills, companies that test to make sure the pills are being taken. The list goes on and on. And lest we forget, the states also require mountains and mountains of paperwork (in multiple languages) to document each and every transaction of this benefit delivery process.
"All this complexity does not enhance the benefit delivery process, but it does cost money. Lots and lots of money. Who pays for it? Employers. Are you starting to understand why employers are feeling like this 'grand bargain' is not such a great idea?"
The complexity of modern workers' compensation costs lots of money and creates huge friction in the relationship for which the "grand bargain" was supposed to lubricate: that of the employer and employee. Evidence of this is that loss control costs in California (and other large systems) has grown faster than any single costs component - it seems we spend more trying to keep the money that it would cost just to pay it out.
Yesterday I posted about the $240 million judgment against Hill Country Farms, and juxtaposed that against the lack of financial fear held by Sedgwick Claims Services for, essentially, killing a man in the name of money.
Both situations are no less troublesome than the Hill, Texas fertilizer plant explosion that killed 14 people, injured over 200 people and essentially leveled an entire town last month.
I searched the TXCOMP system for coverage information for West Fertilizer Co. There was no listing. That doesn't mean that there wasn't coverage, but based on research by the Los Angeles Times on the incident, likely there wasn't any since the plant only had $1 million in total property & casualty insurance.
The only reference I found to Donald Adair, owner of the West Fertilizer Co. (and Adair Grain, Inc.), was that he said in a statement that he would never forget the "selfless sacrifice of first responders who died trying to protect all of us," adding that a plant employee was also killed responding to the fire.
A plant employee for which there is no recourse because there was no workers' compensation insurance.
And likely Adair's finances are well protected...
Adair's press statement hypocritically professes religious atonement, but certainly says nothing about making his employees, or those innocently injured or dead, or the devastated town, whole.
What does Adair and the West Fertlizer Co. have to do with comp? Money - or rather the lack of accountability, lack of enforcement power or motivation to ensure safe practices and protection of the public at large.
Mark argues that we need to get back to the grand bargain - the employer and the worker, making the workplace safer, and providing medical treatment and wage replacement for injuries sustained at work.
I can't disagree with that statement at all.
Mark argues that the grand bargain doesn't include workers who push their daily aches and pains onto the comp system, doesn't include employers abusing their workers, doesn't include claims administrators shirking their legal and moral responsibilities, doesn't include doctors, lawyers, bill reviewers, underwriters, executives or anyone else that has carved out a business interest in workers' compensation in response to some special interest.
Every single one of these actors push responsibilities, and consequently costs, onto other systems and other people. The Sedgwick/Romano case, for example, cost the taxpayers of California at least $275,439 in Medi-Cal hospital payments because the adjuster denied responsibility for the expenses despite a judge's order. Yeah, Sedgwick will reimburse the state, but probably not without negotiating down to fee schedule...
There is no accounting for personal behavior. There is no remorse for harmful acts. There is no respect for the human condition once that condition has been compromised by some monetary value.
Mark says that there are many who doubt that Oklahoma's new opt-out law will be successful because the employers that could qualify to do so are limited.
But that doesn't mean that opt-out won't expand either in Oklahoma, or to other states, where political pressure is on to improve the living conditions for the people and the businesses that make jobs which turn into tax revenues.
We have to come to terms with the fact that there are a lot of people in workers' compensation with no value to add to anything.
Mark - the pendulum has not swung too far against the employer. The pendulum has not swung too far against the employee either.
The pendulum hasn't swung at all - it has been pushed right off its fulcrum.
The pendulum can't swing. It's broken and can't be fixed.
The many attempts over the years to re-center the pendulum has created, what they call in engineering circles, resonance frequency - harmonic oscillations that tap into the internal "music" of a structure increasing the internal harmonics as the frequency range broadens to eventually destroy the structure from within.
The many attempts over the years to re-center the pendulum has created, what they call in engineering circles, resonance frequency - harmonic oscillations that tap into the internal "music" of a structure increasing the internal harmonics as the frequency range broadens to eventually destroy the structure from within.
Think of the Tacoma Narrows bridge failure.
So many narrow interests have introduced so much complexity that the value to employers and employees is questionable. Hill Country Farms, Sedgwick, West Fertilizer - these are just symptoms of a much larger, more idiopathic problem.
"What's mine is mine, and what's yours is mine too, if I can figure out a way to get it."
This is what is known as the "Success Neurosis": "if success remains - the apparent cultural evidence of value or goodness - this process like any 'good neurotic process' must be repeated endlessly." (Jerome Schulte, MD; The Immortality Complex.)
Workers' compensation has become less about a swinging pendulum and more about the success of the interests that have created an industry around a privatized social support system.
Success in workers' compensation has become synonymous with costs, or controlling costs. Not about delivering on the social promise to either the employer or the employee.
And as Dr. Schulte says, this must be repeated endlessly because of the neurotic character of success as we have come to define it.
THAT's the threat of the opt-out movement. That's the threat to workers' compensation, else we all face a West Fertilizer in our backyard.
Monday, May 6, 2013
Moral Turpitude Takes Big Money to Correct
There are times when employees and vendors abuse the workers' compensation system.
And there are times when employers, carriers and administrators abuse employees...
I get mad at fraud. I hate cheats.
But I have absolutely no mercy whatsoever for the people that hide behind their corporate powers and resources to exploit workers, whether injured, abled or disabled.
And there are times when employers, carriers and administrators abuse employees...
I get mad at fraud. I hate cheats.
But I have absolutely no mercy whatsoever for the people that hide behind their corporate powers and resources to exploit workers, whether injured, abled or disabled.
It was widely reported that a jury last week awarded $240 million to 32 mentally disabled workers at an Iowa turkey-processing plant to compensate for what attorneys with the the U.S. Equal Employment Opportunity Commission described as abuse by the Texas company that employed and housed them.
The EEOC attorneys are being nice - what this employer did to these people is not abuse. It is pure exploitation of workers who had absolutely no way to defend themselves.
The federal court jury found that Hill Country Farms, doing business as Henry's Turkey Service, of Goldthwaite, Texas, had created an unlawful hostile environment for the men and discriminated against them on the basis of their disability, awarding them $7.5 million each.
The complaint filed by the EEOC against Hill Country Farms describes despicable behavior. The workers at the West Liberty, Iowa, plant were hit and kicked by Hill Country employees, called names, denied bathroom breaks and restrained or confined to rooms. Injuries and complaints of pain or requests for doctor's visits were ignored, the complaint said.
A federal judge last September found that Henry's Turkey Service had violated the Americans with Disabilities Act by paying the workers "severely substandard wages" - $65 a month rather than the average of $11 to $12 per hour given to non-disabled workers who performed the same work, according to the EEOC. Senior U.S. District Judge Charles R. Wolle awarded the workers $1.3 million for the pay discrimination.
Hill Country's original intent, more than 30 years ago, was to give the disabled a job. What started out as something good devolved over time into the despicable situation for which the company is now going to pay - and rightly so.
In my mind those damages are inadequate and I shudder at the thought that there are probably other similarly situated employers taking advantage of the mentally disabled and placing these otherwise defenseless people into such horrific, abusive, environments.
I'm not a fan of turkey in the first place. I sure won't be buying any Hill Country products.
A similar, and just as egregious, situation out of California in the workers' compensation context was reported this morning in the WorkCompCentral news.
Third party administrator, Sedgwick Claims Services, has (finally) been reported to the DWC Audit Unit (of which I have in the recent past been critical, not for their lack of services, but for their castrated enforcement powers) for what I can only call the most heartless, immoral behavior I have seen reported against a carrier or TPA in some time.
In sending a case to the Audit Unit, the Workers' Compensation Appeals Board expressed utter disgust at Sedgwick's behavior:
“We have rarely encountered a case in which a defendant has exhibited such blithe disregard for its legal and ethical obligation to provide medical care to a critically injured worker,” the Appeals Board said. “Sedgwick CMS, acting as claims administrator for the Kroger Co./Ralph’s Grocery Co., demonstrated a callous indifference to the catastrophic consequences of its delays, inaction and outright neglect. In light of defendant’s repeated, unreasonable delays and denials, and its willingness to ignore a 2006 finding and award issued by the Workers’ Compensation Appeals Board, we will refer this case to the Audit Unit of the Division of Workers’ Compensation.”
What did Sedgwick do to draw such ire?
Charles Romano sustained an injury on Dec. 20, 2003, while stocking shelves for Ralph’s in Camarillo, CA (coincidentally only a couple miles from WCC headquarters). After undergoing surgery on Aug. 29, 2005, he contracted methicillin-resistant staphylococcus aureus that caused his lungs and kidneys to fail and paralyzed him below the shoulders.
That's a bad situation. So Sedgwick made it worse.
Sedgwick refused to authorize the treatment. Even after a judge ordered Sedgwick to pay for treatment in October of 2006 Sedgwick failed to authorize critical services, or pay for any services.
In fact, according to the board opinion, the adjuster routinely denied treatment or withheld authorization without even consulting any medical professional or referring to utilization review.
The board said Sedgwick continued to delay and deny care until Romano died. Sedgwick failed to authorize his hospitalization at Community Memorial Hospital where he died on May 2, 2008, from cardiorespiratory arrest, respiratory failure and pneumonia brought on by his MRSA infection, according to the board's findings.
Sedgwick didn’t make any payments for medical care until June 23, 2008.
"[The adjuster] studiously avoided information that might lead to the provision of benefits, a tactic that may have saved her employer some money in the short run – at great cost to Mr. Romano – but which clearly violated the demands of (Labor Code) Section 4600,” the Appeals Board said.
The board imposed LC 5814 penalties - but the punitive effect of 5814 was completely castrated under the Schwarzenegger reforms - and clearly had no deterrent effect on this administrator:
“The WCJ’s report makes it clear that he imposed the harshest penalties possible under (Labor Code) Section 5814 because of defendant’s extensive history of delay in the provision of medical treatment; the effects of those delays on a paralyzed, catastrophically ill employee; the length of the various delays; and defendant's repeated failure to act when the delays were brought to its attention. Indeed, defendant's broad and extended pattern of unreasonable delays rises to the level of ‘institutional neglect,’” the board said.
The castration of Labor Code section 5814 penalties that was a part of the Schwarzenegger reforms was not reciprocated with increased enforcement powers in the Audit Unit. Yes there was some alteration of the penalties and review elements, but the Audit Unit remained (and still does) incredibly insufficient as a deterrent to aberrant claims administration behavior.
Sedgwick is a privately held company, so its financials are not available for public scrutiny, but you can bet that the company has vast resources (it was purchased in 2010 by a private equity group for $1.1 billion) given its market position and the management of a large public grocery chain's workers' compensation risk.
Let's get real. A single $100,000 penalty by the Audit Unit is laughable. Cost of doing business. Certainly not a deterrent. Perhaps an embarrassment, but nothing to shake the boots of those occupying the executive suite.
What's the answer to such abuse? Perhaps a $240 million judgment from a federal jury would be more appropriate, more noticeable, more attention getting.
Perhaps the loss of Kroger, Inc.'s business for such malfeasance would bring attention to those in charge for failing to properly educate, monitor, and counsel those on the line for doing jobs properly.
And I know I'm going to hear from industry people that this situation is an anomaly, that it isn't normal, and that most of the industry doesn't behave in such manner.
I don't care. Listen people - are you professional? Do you hold yourself to a high standard? Does professionalism include ethical boundaries in your day to day work?
How can this industry profess to be laudable and above reproach - going after fraudulent claimants, employers and vendors - when we can't even keep our own house clean? I don't care that YOU wouldn't do such things - the fact is that someone in our industry does, and it is all of our jobs to call them on it, to make them accountable, to make them PAY for ruining the lives of others, when it is our job to help improve those lives.
In my mind Hill Country Farms and Sedgwick are in the same boat. Both have failed us with moral turpitude. Both have done worse than abuse the system - they have abused PEOPLE.
The insurance industry didn't like LC 5814 because the applicant attorneys used it for profitable gain in unreasonable ways - at least that was the Schwarzenegger argument.
Now we have a system of enforcement that is laughable and nearly ineffective. It seems to me that Romano's case is so far outside the realm of reasonableness that it likewise is far outside the constrictions of exclusive remedy.
Audit Unit, schmaudit unit ... money is a powerful motivator and for big companies it has to be BIG MONEY.
The solution? Either give the Audit Unit BIG MONEY enforcement powers, or let the PEOPLE have at it outside the exclusive remedy.
The EEOC attorneys are being nice - what this employer did to these people is not abuse. It is pure exploitation of workers who had absolutely no way to defend themselves.
The federal court jury found that Hill Country Farms, doing business as Henry's Turkey Service, of Goldthwaite, Texas, had created an unlawful hostile environment for the men and discriminated against them on the basis of their disability, awarding them $7.5 million each.
The complaint filed by the EEOC against Hill Country Farms describes despicable behavior. The workers at the West Liberty, Iowa, plant were hit and kicked by Hill Country employees, called names, denied bathroom breaks and restrained or confined to rooms. Injuries and complaints of pain or requests for doctor's visits were ignored, the complaint said.
A federal judge last September found that Henry's Turkey Service had violated the Americans with Disabilities Act by paying the workers "severely substandard wages" - $65 a month rather than the average of $11 to $12 per hour given to non-disabled workers who performed the same work, according to the EEOC. Senior U.S. District Judge Charles R. Wolle awarded the workers $1.3 million for the pay discrimination.
Hill Country's original intent, more than 30 years ago, was to give the disabled a job. What started out as something good devolved over time into the despicable situation for which the company is now going to pay - and rightly so.
In my mind those damages are inadequate and I shudder at the thought that there are probably other similarly situated employers taking advantage of the mentally disabled and placing these otherwise defenseless people into such horrific, abusive, environments.
I'm not a fan of turkey in the first place. I sure won't be buying any Hill Country products.
A similar, and just as egregious, situation out of California in the workers' compensation context was reported this morning in the WorkCompCentral news.
Third party administrator, Sedgwick Claims Services, has (finally) been reported to the DWC Audit Unit (of which I have in the recent past been critical, not for their lack of services, but for their castrated enforcement powers) for what I can only call the most heartless, immoral behavior I have seen reported against a carrier or TPA in some time.
In sending a case to the Audit Unit, the Workers' Compensation Appeals Board expressed utter disgust at Sedgwick's behavior:
“We have rarely encountered a case in which a defendant has exhibited such blithe disregard for its legal and ethical obligation to provide medical care to a critically injured worker,” the Appeals Board said. “Sedgwick CMS, acting as claims administrator for the Kroger Co./Ralph’s Grocery Co., demonstrated a callous indifference to the catastrophic consequences of its delays, inaction and outright neglect. In light of defendant’s repeated, unreasonable delays and denials, and its willingness to ignore a 2006 finding and award issued by the Workers’ Compensation Appeals Board, we will refer this case to the Audit Unit of the Division of Workers’ Compensation.”
What did Sedgwick do to draw such ire?
Charles Romano sustained an injury on Dec. 20, 2003, while stocking shelves for Ralph’s in Camarillo, CA (coincidentally only a couple miles from WCC headquarters). After undergoing surgery on Aug. 29, 2005, he contracted methicillin-resistant staphylococcus aureus that caused his lungs and kidneys to fail and paralyzed him below the shoulders.
That's a bad situation. So Sedgwick made it worse.
Sedgwick refused to authorize the treatment. Even after a judge ordered Sedgwick to pay for treatment in October of 2006 Sedgwick failed to authorize critical services, or pay for any services.
In fact, according to the board opinion, the adjuster routinely denied treatment or withheld authorization without even consulting any medical professional or referring to utilization review.
The board said Sedgwick continued to delay and deny care until Romano died. Sedgwick failed to authorize his hospitalization at Community Memorial Hospital where he died on May 2, 2008, from cardiorespiratory arrest, respiratory failure and pneumonia brought on by his MRSA infection, according to the board's findings.
Sedgwick didn’t make any payments for medical care until June 23, 2008.
"[The adjuster] studiously avoided information that might lead to the provision of benefits, a tactic that may have saved her employer some money in the short run – at great cost to Mr. Romano – but which clearly violated the demands of (Labor Code) Section 4600,” the Appeals Board said.
The board imposed LC 5814 penalties - but the punitive effect of 5814 was completely castrated under the Schwarzenegger reforms - and clearly had no deterrent effect on this administrator:
“The WCJ’s report makes it clear that he imposed the harshest penalties possible under (Labor Code) Section 5814 because of defendant’s extensive history of delay in the provision of medical treatment; the effects of those delays on a paralyzed, catastrophically ill employee; the length of the various delays; and defendant's repeated failure to act when the delays were brought to its attention. Indeed, defendant's broad and extended pattern of unreasonable delays rises to the level of ‘institutional neglect,’” the board said.
The castration of Labor Code section 5814 penalties that was a part of the Schwarzenegger reforms was not reciprocated with increased enforcement powers in the Audit Unit. Yes there was some alteration of the penalties and review elements, but the Audit Unit remained (and still does) incredibly insufficient as a deterrent to aberrant claims administration behavior.
Sedgwick is a privately held company, so its financials are not available for public scrutiny, but you can bet that the company has vast resources (it was purchased in 2010 by a private equity group for $1.1 billion) given its market position and the management of a large public grocery chain's workers' compensation risk.
Let's get real. A single $100,000 penalty by the Audit Unit is laughable. Cost of doing business. Certainly not a deterrent. Perhaps an embarrassment, but nothing to shake the boots of those occupying the executive suite.
What's the answer to such abuse? Perhaps a $240 million judgment from a federal jury would be more appropriate, more noticeable, more attention getting.
Perhaps the loss of Kroger, Inc.'s business for such malfeasance would bring attention to those in charge for failing to properly educate, monitor, and counsel those on the line for doing jobs properly.
And I know I'm going to hear from industry people that this situation is an anomaly, that it isn't normal, and that most of the industry doesn't behave in such manner.
I don't care. Listen people - are you professional? Do you hold yourself to a high standard? Does professionalism include ethical boundaries in your day to day work?
How can this industry profess to be laudable and above reproach - going after fraudulent claimants, employers and vendors - when we can't even keep our own house clean? I don't care that YOU wouldn't do such things - the fact is that someone in our industry does, and it is all of our jobs to call them on it, to make them accountable, to make them PAY for ruining the lives of others, when it is our job to help improve those lives.
In my mind Hill Country Farms and Sedgwick are in the same boat. Both have failed us with moral turpitude. Both have done worse than abuse the system - they have abused PEOPLE.
The insurance industry didn't like LC 5814 because the applicant attorneys used it for profitable gain in unreasonable ways - at least that was the Schwarzenegger argument.
Now we have a system of enforcement that is laughable and nearly ineffective. It seems to me that Romano's case is so far outside the realm of reasonableness that it likewise is far outside the constrictions of exclusive remedy.
Audit Unit, schmaudit unit ... money is a powerful motivator and for big companies it has to be BIG MONEY.
The solution? Either give the Audit Unit BIG MONEY enforcement powers, or let the PEOPLE have at it outside the exclusive remedy.
Friday, May 3, 2013
Could X-Mods Become Common Parlance?
American International Group (AIG) has been through the ringers this past decade with a government takeover, accusations of financial manipulations and lawsuits by various state insurance departments, the ouster and subsequent retaliation of former CEO Maurice "Hank" Greenberg, and of course Wall Street's displeasure with all of these shenanigans.
But the carrier is probably facing one of the more significant legal challenges in its history if the plaintiff in a South Carolina case succeeds in obtaining class action status from a federal judge.
Thrift Development, a South Carolina general contractor, alleges that AIG failed to include subrogation reimbursements and recoveries from the South Carolina Second Injury Fund and other third parties in the claims data it reports to the NCCI, thereby denying it and other employers in the state the chance to have their X-Mods appropriately revised.
Federal courts are notoriously difficult for plaintiffs to proceed in - the federal jurisdictions don't like penny-ante cases wasting federal judiciary time and money. That U.S. District Court Judge Mary Lewis last September upheld Thrift Development's complaint against various challenges by AIG relative to stating a justiciable cause of action is significant.
That Judge Lewis hasn't summarily dismissed Thrift's request for class action status also speaks volumes towards the possible legitimacy of the claim.
Now Judge Lewis has also upheld Thrift's discovery request and has ordered AIG to produce documents and information concerning third-party recoveries and reimbursements it received for workers’ compensation claims going back to 1999 and later years within 20 days.
Thrift alleges that in the 2006-07 policy year it paid workers’ compensation premiums to AIG companies that reflected the full loss value of a claim that AIG had submitted for reimbursement from the South Carolina Second Injury Fund.
Also, Thrift says, despite having been reimbursed by SCSIF, the AIG companies failed to revise the unit statistical reports it submitted to NCCI to accurately reflect the reimbursement and recovery.
As a consequence, Thrift alleges that it has overpaid for insurance since then due to an improperly calculated x-mod.
To those of you unfamiliar with the method that workers' compensation premiums are devised, the x-mod, or experience modification factor, is an adjustment to the base rate of an employer's premium based on loss history. In most systems, insurance company recoveries are to be credited against an employer's loss history and such credit would lower the x-mod.
Thrift alleges that AIG didn't report these recoveries and that such failure was intentional in order to boost subsequent year premiums.
AIG counters that Thrift cannot prove that its final premium charged was inflated or otherwise improper in any way. It accuses the employer of failing to exhaust administrative remedies that are provided by the South Carolina Department of Insurance for such disputes.
So far those defenses haven't worked.
Imagine if this case goes across borders, and jurisdiction over AIG's practices in other states with similarly situated plaintiffs is assumed either in the Thrift Development case or in other cases. The costs of defense and complying with discovery are enormous. But if Thrift is right, and AIG intentionally failed to report its recoveries, big damages could ensue.
The time period during which these allegations of malfeasance is also the same time period of other malfeasance that has been litigated, and mostly settled - including lawsuits by other insurance companies claiming that AIG systematically misrepresented financial dealings to state insurance departments.
A witness in the Thrift case, who talked to WorkCompCentral on the condition of anonymity, said, "If this gets litigated and AIG gets into the newspapers, there is going to be a snowball effect of claims. Right now there are a very few people in the whole United States who understand X-Mods and they would want it to stay that way."
This witness predicts a quiet settlement of the case.
But we all know that what one entity does in workers' compensation tends to be replicated by many - there's not really a whole lot of original thought in this industry. Lemming behavior runs rampant. The workers' compensation industry works a lot on routine - just because something has always been done a certain way means that it will be done that certain way by everyone.
Could other carriers face similar allegations? I don't know, but this is a case, like that witness said, which probably will go away quietly.
The consequences of actually fighting this into public attention are too great if people end up actually knowing what an x-mod is.
But the carrier is probably facing one of the more significant legal challenges in its history if the plaintiff in a South Carolina case succeeds in obtaining class action status from a federal judge.
Thrift Development, a South Carolina general contractor, alleges that AIG failed to include subrogation reimbursements and recoveries from the South Carolina Second Injury Fund and other third parties in the claims data it reports to the NCCI, thereby denying it and other employers in the state the chance to have their X-Mods appropriately revised.
Federal courts are notoriously difficult for plaintiffs to proceed in - the federal jurisdictions don't like penny-ante cases wasting federal judiciary time and money. That U.S. District Court Judge Mary Lewis last September upheld Thrift Development's complaint against various challenges by AIG relative to stating a justiciable cause of action is significant.
That Judge Lewis hasn't summarily dismissed Thrift's request for class action status also speaks volumes towards the possible legitimacy of the claim.
Now Judge Lewis has also upheld Thrift's discovery request and has ordered AIG to produce documents and information concerning third-party recoveries and reimbursements it received for workers’ compensation claims going back to 1999 and later years within 20 days.
Thrift alleges that in the 2006-07 policy year it paid workers’ compensation premiums to AIG companies that reflected the full loss value of a claim that AIG had submitted for reimbursement from the South Carolina Second Injury Fund.
Also, Thrift says, despite having been reimbursed by SCSIF, the AIG companies failed to revise the unit statistical reports it submitted to NCCI to accurately reflect the reimbursement and recovery.
As a consequence, Thrift alleges that it has overpaid for insurance since then due to an improperly calculated x-mod.
To those of you unfamiliar with the method that workers' compensation premiums are devised, the x-mod, or experience modification factor, is an adjustment to the base rate of an employer's premium based on loss history. In most systems, insurance company recoveries are to be credited against an employer's loss history and such credit would lower the x-mod.
Thrift alleges that AIG didn't report these recoveries and that such failure was intentional in order to boost subsequent year premiums.
AIG counters that Thrift cannot prove that its final premium charged was inflated or otherwise improper in any way. It accuses the employer of failing to exhaust administrative remedies that are provided by the South Carolina Department of Insurance for such disputes.
So far those defenses haven't worked.
Imagine if this case goes across borders, and jurisdiction over AIG's practices in other states with similarly situated plaintiffs is assumed either in the Thrift Development case or in other cases. The costs of defense and complying with discovery are enormous. But if Thrift is right, and AIG intentionally failed to report its recoveries, big damages could ensue.
The time period during which these allegations of malfeasance is also the same time period of other malfeasance that has been litigated, and mostly settled - including lawsuits by other insurance companies claiming that AIG systematically misrepresented financial dealings to state insurance departments.
A witness in the Thrift case, who talked to WorkCompCentral on the condition of anonymity, said, "If this gets litigated and AIG gets into the newspapers, there is going to be a snowball effect of claims. Right now there are a very few people in the whole United States who understand X-Mods and they would want it to stay that way."
This witness predicts a quiet settlement of the case.
But we all know that what one entity does in workers' compensation tends to be replicated by many - there's not really a whole lot of original thought in this industry. Lemming behavior runs rampant. The workers' compensation industry works a lot on routine - just because something has always been done a certain way means that it will be done that certain way by everyone.
Could other carriers face similar allegations? I don't know, but this is a case, like that witness said, which probably will go away quietly.
The consequences of actually fighting this into public attention are too great if people end up actually knowing what an x-mod is.
Thursday, May 2, 2013
Work Comp Legislation Active Across the Country
Workers' compensation is a product of legislative action.
And legislatures across the country have been active this year, and this was particularly noticeable to me as I read the news this morning about all of the activity around the country.
Yesterday I noted that Alabama's proposed thorough work comp reform legislation failed to make it out of committee, though that doesn't mean it won't resurface next year.
In California, several work comp related bills were put in the suspense file pending further analysis - AB 638 by Luis Alejo, D-Salinas, would allow expedited hearings to determine whether an injury arose out of and in the course of employment when the injured worker has not hired an attorney and the employer is illegally uninsured. AB 454 by Roger Dickinson, D-Sacramento, would say a worker injured on a prevailing wage project should receive workers’ compensation benefits calculated using the prevailing wage rate, not the wages actually paid to the worker.
Florida legislators are fighting over different approaches to bills that would expand the use and funding of the state's 19-month-old prescription drug-monitoring program, amid warnings from supporters of the database that both time and money are running out.
In addition, the Florida House and Senate have approved legislation sought by insurance regulators that will allow creation of a new database designed to crack down on construction subcontractors that skirt workers' compensation laws by laundering their payrolls through check-cashing houses. That bill now goes to Gov. Rick Scott.
And the Florida House voted 115-0 on Wednesday to approve a Senate compromise version of the proposed cap on the price of repackaged drugs in the workers' compensation system and sent the measure to Gov. Rick Scott for his signature.
The Minnesota Workers' Compensation Advisory Council's legislative proposal motivated State Rep. Tim Mahoney, D-St. Paul, to amend House Bill 1359 to reflect the Council's recommendation to cap the services of a vocational rehabilitation counselor at 20 hours a month per claimant. After three months, regulators could review the claimant's progress and extend the vocational rehabilitation services to six months, if necessary.
In Missouri, the state House of Representatives has scheduled two bills that impact the state's workers' comp system for potential floor votes in the immediate future: SB 1 would restore the state's Second Injury Fund by increasing the surcharge on workers' compensation premiums to 4.5% for the next two years and as high as 6% in the future; SB 34 would require the Division of Workers' Compensation to create and maintain a claims information database.
During the next few weeks, the Illinois House Insurance Committee will examine a bill that would allow the Department of Insurance to fine government self-insurance pools that fail to submit solvency reports.
New York Financial Services Superintendent Benjamin Lawsky has approved a change in the split point used by the New York Compensation Insurance Rating Board to determine experience modifications in the workers' compensation system.
Indiana Gov. Mike Pence is being urged to sign House Bill 1320, which would install a hospital fee schedule with reimbursements set at 200% of Medicare.
Arizona Gov. Jan Brewer signed into law a bill that would allow property and casualty insurers to post policies online and send a link to policyholders, rather than sending a hard copy of the policy (in addition to signing into law earlier this year a bill restricting jurisdiction on professional sports athletes' claims).
Phew - and that's just one day in the news.
And legislatures across the country have been active this year, and this was particularly noticeable to me as I read the news this morning about all of the activity around the country.
Yesterday I noted that Alabama's proposed thorough work comp reform legislation failed to make it out of committee, though that doesn't mean it won't resurface next year.
In California, several work comp related bills were put in the suspense file pending further analysis - AB 638 by Luis Alejo, D-Salinas, would allow expedited hearings to determine whether an injury arose out of and in the course of employment when the injured worker has not hired an attorney and the employer is illegally uninsured. AB 454 by Roger Dickinson, D-Sacramento, would say a worker injured on a prevailing wage project should receive workers’ compensation benefits calculated using the prevailing wage rate, not the wages actually paid to the worker.
Florida legislators are fighting over different approaches to bills that would expand the use and funding of the state's 19-month-old prescription drug-monitoring program, amid warnings from supporters of the database that both time and money are running out.
In addition, the Florida House and Senate have approved legislation sought by insurance regulators that will allow creation of a new database designed to crack down on construction subcontractors that skirt workers' compensation laws by laundering their payrolls through check-cashing houses. That bill now goes to Gov. Rick Scott.
And the Florida House voted 115-0 on Wednesday to approve a Senate compromise version of the proposed cap on the price of repackaged drugs in the workers' compensation system and sent the measure to Gov. Rick Scott for his signature.
The Minnesota Workers' Compensation Advisory Council's legislative proposal motivated State Rep. Tim Mahoney, D-St. Paul, to amend House Bill 1359 to reflect the Council's recommendation to cap the services of a vocational rehabilitation counselor at 20 hours a month per claimant. After three months, regulators could review the claimant's progress and extend the vocational rehabilitation services to six months, if necessary.
In Missouri, the state House of Representatives has scheduled two bills that impact the state's workers' comp system for potential floor votes in the immediate future: SB 1 would restore the state's Second Injury Fund by increasing the surcharge on workers' compensation premiums to 4.5% for the next two years and as high as 6% in the future; SB 34 would require the Division of Workers' Compensation to create and maintain a claims information database.
During the next few weeks, the Illinois House Insurance Committee will examine a bill that would allow the Department of Insurance to fine government self-insurance pools that fail to submit solvency reports.
New York Financial Services Superintendent Benjamin Lawsky has approved a change in the split point used by the New York Compensation Insurance Rating Board to determine experience modifications in the workers' compensation system.
Indiana Gov. Mike Pence is being urged to sign House Bill 1320, which would install a hospital fee schedule with reimbursements set at 200% of Medicare.
Arizona Gov. Jan Brewer signed into law a bill that would allow property and casualty insurers to post policies online and send a link to policyholders, rather than sending a hard copy of the policy (in addition to signing into law earlier this year a bill restricting jurisdiction on professional sports athletes' claims).
Phew - and that's just one day in the news.
Wednesday, May 1, 2013
AL DRs Dodge Bullet ... This Time
In workers' compensation there's only one pot of money from which everything must get paid.
Consequently when one subject of workers' compensation is targeted to get more money, another subject is targeted to get less money.
In most attempts at "reform" the subject of more money is usually the claimant/employee, and quite often the subject targeted for reductions is the medical provider community.
That was tried in Alabama, but didn't quite make it this year.
Senate Bill 453, by Sen. Del Marsh, R-Anniston, failed to get enough votes to clear the Alabama's Senate Business and Labor Committee and is done for the year.
The bill would have increased the payment period for nonscheduled permanent partial disability awards from 300 weeks to 400 weeks, raised the maximum attorney fee from 15% to 20% and hiked burial expenses from $3,000 to $6,500. It would have also altered the formula used to calculate weekly PPD benefit rates and allowed workers with salaries above the state's average weekly wage to collect as much as $447.18 a week. Currently, the maximum weekly benefit is capped at $220 a week.
The increases would have come at the expense of medical treatment reimbursement.
Existing Alabama law caps medical reimbursements at the "prevailing rate," which requires consideration of "the most commonly occurring reimbursements for health services" procedure codes and use of assistant surgeons. SB 453 would have eliminated the "prevailing rate" language from Alabama's workers' compensation statutes and would have implemented firm caps detailed in the workers' compensation fee schedule.
It may have been that SB 453 could have survived except for the provision shifting control over the workers' compensation fee schedule from the Medical Services Review Board to the Alabama Department of Labor. Existing statutes give the Medical Services Review Board control over the fee schedule, which is comprised of five physicians.
The bill would have reduced representation on the Board from five physicians selected from a list of 15 submitted by the Medical Association of Alabama to 2 physicians, one appointed by the medical association, and another representative of hospital interests from the Alabama Hospital Association.
Al Henley, president of the Alabama AFL-CIO, told WorkCompCentral, "They omitted the medical community, who was (previously) allowed to be on the board to determine the rates. That is what had them fired up."
Alabama remains one of the few states left that pays doctors according to a prevailing rate.
I don't know if lawmakers in Alabama will revisit "reform" next year. My suspicion is that the issue is not dead.
The national trend is clearly towards fee schedules, and "guided" utilization practices (not to mention administrative adjudication of disputes). Eventually, states succumb to the prevailing trend because of the threat of competition for business, which means competition for jobs. And lawmakers need to retain and grow jobs in order to maintain the tax base.
Alabama's medical community dodged a bullet. The leaders will need to start bargaining now though, because clearly medical vendors are in the cross hairs of "reform" when it comes around in next year's session.
Consequently when one subject of workers' compensation is targeted to get more money, another subject is targeted to get less money.
In most attempts at "reform" the subject of more money is usually the claimant/employee, and quite often the subject targeted for reductions is the medical provider community.
That was tried in Alabama, but didn't quite make it this year.
Senate Bill 453, by Sen. Del Marsh, R-Anniston, failed to get enough votes to clear the Alabama's Senate Business and Labor Committee and is done for the year.
The bill would have increased the payment period for nonscheduled permanent partial disability awards from 300 weeks to 400 weeks, raised the maximum attorney fee from 15% to 20% and hiked burial expenses from $3,000 to $6,500. It would have also altered the formula used to calculate weekly PPD benefit rates and allowed workers with salaries above the state's average weekly wage to collect as much as $447.18 a week. Currently, the maximum weekly benefit is capped at $220 a week.
The increases would have come at the expense of medical treatment reimbursement.
Existing Alabama law caps medical reimbursements at the "prevailing rate," which requires consideration of "the most commonly occurring reimbursements for health services" procedure codes and use of assistant surgeons. SB 453 would have eliminated the "prevailing rate" language from Alabama's workers' compensation statutes and would have implemented firm caps detailed in the workers' compensation fee schedule.
It may have been that SB 453 could have survived except for the provision shifting control over the workers' compensation fee schedule from the Medical Services Review Board to the Alabama Department of Labor. Existing statutes give the Medical Services Review Board control over the fee schedule, which is comprised of five physicians.
The bill would have reduced representation on the Board from five physicians selected from a list of 15 submitted by the Medical Association of Alabama to 2 physicians, one appointed by the medical association, and another representative of hospital interests from the Alabama Hospital Association.
Al Henley, president of the Alabama AFL-CIO, told WorkCompCentral, "They omitted the medical community, who was (previously) allowed to be on the board to determine the rates. That is what had them fired up."
Alabama remains one of the few states left that pays doctors according to a prevailing rate.
I don't know if lawmakers in Alabama will revisit "reform" next year. My suspicion is that the issue is not dead.
The national trend is clearly towards fee schedules, and "guided" utilization practices (not to mention administrative adjudication of disputes). Eventually, states succumb to the prevailing trend because of the threat of competition for business, which means competition for jobs. And lawmakers need to retain and grow jobs in order to maintain the tax base.
Alabama's medical community dodged a bullet. The leaders will need to start bargaining now though, because clearly medical vendors are in the cross hairs of "reform" when it comes around in next year's session.
Tuesday, April 30, 2013
FL Repackaged Drugs - People Are The Losers
As I've mentioned before, in particular with the Florida repackaged drug bill that is circulating the legislature there, compromise means that somebody isn't going to be happy.
And that's the case with Florida school districts, and other public entities, that relied on Florida Statute 440.13(12) (c).
The provision allows carriers and employers to pay for drugs at the discounted rate for which they have contracted, even if an injured worker elects to obtain the drugs through a provider that is not a party to the contract.
According to Scott B. Clark, risk and benefits manager for the Miami-Dade Public School District, that provision of law has saved the school district $3 million since November 2009.
Not an insubstantial amount of money when public funds for education are squeezed tight.
Florida state lawmakers continued toward passing the repackaging bill on Monday. The House Health and Human Services Committee held an emergency meeting Monday morning and amended HB 605, filed by Rep. Matt Hudson, R-Naples, to reflect the compromise included in SB 662, which eliminates 440.13(12)(c). The Senate passed its version of the bill by a vote of 39-0 on Monday.
The legislative staff of the Florida Senate said in an analysis released last Thursday that eliminating the ability to pay the discounted rate also will cost the state Division of Risk Management $210,337 a year.
Though te National Council on Compensation Insurance (NCCI) has not released an official report on the compromise, interest groups were told last week that the bill should reduce overall workers' compensation costs by 0.7% and save about $20 million a year.
The deal was negotiated by the Florida Insurance Council, the Florida Chamber of Commerce and Associated Industries of Florida on one side and the Florida Medial Association and Automated Healthcare Solutions on the other.
Interestingly, the states pharmacies aren't opposed to this deal.
"We feel that it's better than the status quo at this point," said John Fleming, communications director for the Retail Federation, which represents Florida's major pharmacy retail chains.
This could be because of the increased competition against pharmacies represented by well-financed direct to patient marketing ability of physician dispensing outlets.
And it could be that retail pharmacies are just tired of the whole argument.
As part of the compromise, proponents also added language that would require doctors to pay for repackaged drugs within 60 days in order to retain a supply of the drugs. The amendment would prohibit dispensing physicians from possessing any repackaged drugs for which payment hasn't been made to the "supplying manufacturer, wholesaler, distributor or repackager within 60 days of the doctor dispensing the drugs.
This provision was added to encourage doctors to pay repackagers in situations when the drugs aren't dispensed within 60 days.
Of course there isn't any enforcement or inspection mechanism, so this provision has no reality to it and won't make any difference on the street. It's just malarky language - there to appease someone with no real chance of having any effect on behavior.
Where does insurance stand?
Sam Miller, executive vice president of the Florida Insurance Council, said business groups and insurers saw the compromise as the only way to get a price cap on repackaged drugs written into Florida law.
"This is a big issue and NCCI is saying we're going to save $20 million," Miller said. "With a vote of 39-0 in the Senate, it's fairly clear they're going to bring this home for landing."
I called this Ali Law in an earlier post; - where a special interest plays "rope a dope" and is obstinante for so long, that eventually everyone else gets tired and just gives up, so they work up something to make the issue go away. Clearly, that is the case with this bill.
Usually in a compromise everyone walks away with something - not everything they want, but at least a tidbit to ease the pain of what was given up in return.
But in the case of the Florida repackaged drug war, there are only losers - the people of the State of Florida.
It's a bad law, but it will be the law because those in the ring punching it out are tired.
And that's the case with Florida school districts, and other public entities, that relied on Florida Statute 440.13(12) (c).
The provision allows carriers and employers to pay for drugs at the discounted rate for which they have contracted, even if an injured worker elects to obtain the drugs through a provider that is not a party to the contract.
According to Scott B. Clark, risk and benefits manager for the Miami-Dade Public School District, that provision of law has saved the school district $3 million since November 2009.
Not an insubstantial amount of money when public funds for education are squeezed tight.
Florida state lawmakers continued toward passing the repackaging bill on Monday. The House Health and Human Services Committee held an emergency meeting Monday morning and amended HB 605, filed by Rep. Matt Hudson, R-Naples, to reflect the compromise included in SB 662, which eliminates 440.13(12)(c). The Senate passed its version of the bill by a vote of 39-0 on Monday.
The legislative staff of the Florida Senate said in an analysis released last Thursday that eliminating the ability to pay the discounted rate also will cost the state Division of Risk Management $210,337 a year.
Though te National Council on Compensation Insurance (NCCI) has not released an official report on the compromise, interest groups were told last week that the bill should reduce overall workers' compensation costs by 0.7% and save about $20 million a year.
The deal was negotiated by the Florida Insurance Council, the Florida Chamber of Commerce and Associated Industries of Florida on one side and the Florida Medial Association and Automated Healthcare Solutions on the other.
Interestingly, the states pharmacies aren't opposed to this deal.
"We feel that it's better than the status quo at this point," said John Fleming, communications director for the Retail Federation, which represents Florida's major pharmacy retail chains.
This could be because of the increased competition against pharmacies represented by well-financed direct to patient marketing ability of physician dispensing outlets.
And it could be that retail pharmacies are just tired of the whole argument.
As part of the compromise, proponents also added language that would require doctors to pay for repackaged drugs within 60 days in order to retain a supply of the drugs. The amendment would prohibit dispensing physicians from possessing any repackaged drugs for which payment hasn't been made to the "supplying manufacturer, wholesaler, distributor or repackager within 60 days of the doctor dispensing the drugs.
This provision was added to encourage doctors to pay repackagers in situations when the drugs aren't dispensed within 60 days.
Of course there isn't any enforcement or inspection mechanism, so this provision has no reality to it and won't make any difference on the street. It's just malarky language - there to appease someone with no real chance of having any effect on behavior.
Where does insurance stand?
Sam Miller, executive vice president of the Florida Insurance Council, said business groups and insurers saw the compromise as the only way to get a price cap on repackaged drugs written into Florida law.
"This is a big issue and NCCI is saying we're going to save $20 million," Miller said. "With a vote of 39-0 in the Senate, it's fairly clear they're going to bring this home for landing."
I called this Ali Law in an earlier post; - where a special interest plays "rope a dope" and is obstinante for so long, that eventually everyone else gets tired and just gives up, so they work up something to make the issue go away. Clearly, that is the case with this bill.
Usually in a compromise everyone walks away with something - not everything they want, but at least a tidbit to ease the pain of what was given up in return.
But in the case of the Florida repackaged drug war, there are only losers - the people of the State of Florida.
It's a bad law, but it will be the law because those in the ring punching it out are tired.
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