Reported in WorkCompCentral News this morning was the forward legislative movement of California bill AB 1168 that seeks to add a new section to the California Labor Code, 5307.7, requiring the Division of Workers' Compensation to adopt by Jan. 1, 2013, a fee schedule that establishes the maximum fees paid for services provided by voc-rehab experts.
The need for this new regulatory environment, proponents say, is due to increasing costs necessitated by the Workers' Compensation Appeals Board's 2009 decision in Ogilvie v. City and County of San Francisco, that held parties can rebut the diminished future earnings capacity portion of the 2005 Permanent Disability Rating Schedule (PDRS) and provided a formula to do so. This requires expert testimony on both sides to either rebut the PDRS or rebut opposing expert testimony.
Testimony at Wednesday's hearing at the Senate Labor and Industrial Relations Committee was that there is an increasing number of bills from vocational experts after the Ogilvie decision and the bills have no limits on the hours worked or rates charged and that almost every other service in the workers' compensation system has a fee schedule, consequently a similar one is needed for voc-rehab.
Obviously vocational rehabilitation vendors object to this regulatory environment because no one likes what they can charge for service to be the subject of an artificial environment, and because vocational experts would then need to file liens to protect their reimbursement, then need to litigate to justify reimbursement, adding delay and costs to claims.
This situation is an example of how the simple concept of workers' compensation escalates to a mind-numbingly complex system and why I oppose AB 1168.
The interests in the contest have at their disposal powerful tools to control the costs in an Ogilvie dispute - market forces. In workers' compensation we seem to have lost the ability to utilize the price of services against competitors in order to control costs.
In particular, this is disturbing because those with the greatest ability to exert market control over costs - the insurance industry with its significant financial clout - do not seem willing to take responsibility for their part of the problem.
And vocational rehabilitation experts likewise have blame in the game for getting out of control with the amount of services allegedly provided, or the billing rate for those services, to prove or disprove an Ogilvie situation.
When I was a defense attorney the insurance industry was adept at controlling defense costs by simply using the competitive environment of shifting case loads to professionals who were more efficient with their time and billing practices. I assume that is still the case today, though most payers also utilize bill review services to determine appropriate pay rates.
So it is with Ogilvie experts - adding another layer of complexity to the system will not control costs and in fact likely will escalate costs. This concept has already been demonstrated with medical treatment utilization review - the abdication of responsibility for controlling costs away from the claims adjuster and onto either a third party vendor or a non-thinking schedule creates another layer of friction and removes control for getting a case closed away from the adjuster.
The biggest cost to employers is NOT the final cost of the claim, but how long that claim remains open! The need to finalize vendor billings by artificial means will provoke the duration of claims, which means the employer loses in the long run.
And, I might note, this bill may not even be necessary. Traditional vocational rehabilitation services were eliminated from the California workers' compensation system in 2004 and the 1st District Court of Appeal, which granted a writ of review in Ogilvie in August 2010 and has oral arguments June 22, may reverse the Workers' Compensation Appeals Board.
AB 1168 is unnecessary and will exacerbate costs.
Thursday, June 30, 2011
Wednesday, June 29, 2011
Electronic Records - Convenience and Risk
Electronic records have a unique quality that is both positive and negative simultaneously.
In exchange for the convenience of electronic record portability we have accepted some risk that information is now also more easily accessed by those not authorized to have such information.
Two recent stories in the WorkCompCentral news demonstrate that while the move to electronic records can provide new efficiencies in the access of vital information, it is also easier for sensitive information to be obtained by others, sometimes negligently, sometimes maliciously.
But the issue is not that other people can access the information - your sensitive medical or workers' compensation case information has always been accessible to people you have no idea are viewing it or desire to have view it.
Paper records are notoriously insecure. Paper files need to be moved, need to be copied, mailed, opened on the recipient side, refiled, etc. In that process a dozen people have access to your information and may view it. And may use that information maliciously.
The real issue is the ease by which sensitive information may be obtained in large quantities, then analyzed and/or utilized for malicious purposes.
While media reports focus attention on companies and agencies that experience security breaches by "hackers" the single biggest risk of any enterprise dealing with sensitive data are its own employees - people whose job it is to handle that sensitive data and may inadvertently leave a computer open to access when away from the desk, losing a lap top, copying files, publishing by accident login information, etc.
This problem will only become more acute as more and more of our lives are communicated by ones and zeroes.
For every convenience modern man invents, there are always tradeoffs of inconvenience. This is a long standing common law principle - all risk is weighed against the benefit to society: motor vehicle operations, mining, construction, publishing, free speech, etc.
And so it is with electronic records - the great benefit to society of ease of access to information - is to be weighed against the risk of such ease of access.
So it is becoming less and less alarming with each media report of an electronics record security breach ... until such an event affects you personally.
The lesson? First, disavow the notion that there is privacy. There isn't. The best one can do is to limit the amount of private information that is made available.
Second, with the Federal Government push towards Electronic Health Records for each and every person in the United States by 2014, it is incumbent upon each person to do the best they can to protect their own personal information, but don't be surprised when someone else has that information.
And when someone maliciously uses that information be prepared to endure the long, arduous process of taking the necessary steps to prevent the abuse from spreading.
In exchange for the convenience of electronic record portability we have accepted some risk that information is now also more easily accessed by those not authorized to have such information.
Two recent stories in the WorkCompCentral news demonstrate that while the move to electronic records can provide new efficiencies in the access of vital information, it is also easier for sensitive information to be obtained by others, sometimes negligently, sometimes maliciously.
But the issue is not that other people can access the information - your sensitive medical or workers' compensation case information has always been accessible to people you have no idea are viewing it or desire to have view it.
Paper records are notoriously insecure. Paper files need to be moved, need to be copied, mailed, opened on the recipient side, refiled, etc. In that process a dozen people have access to your information and may view it. And may use that information maliciously.
The real issue is the ease by which sensitive information may be obtained in large quantities, then analyzed and/or utilized for malicious purposes.
While media reports focus attention on companies and agencies that experience security breaches by "hackers" the single biggest risk of any enterprise dealing with sensitive data are its own employees - people whose job it is to handle that sensitive data and may inadvertently leave a computer open to access when away from the desk, losing a lap top, copying files, publishing by accident login information, etc.
This problem will only become more acute as more and more of our lives are communicated by ones and zeroes.
For every convenience modern man invents, there are always tradeoffs of inconvenience. This is a long standing common law principle - all risk is weighed against the benefit to society: motor vehicle operations, mining, construction, publishing, free speech, etc.
And so it is with electronic records - the great benefit to society of ease of access to information - is to be weighed against the risk of such ease of access.
So it is becoming less and less alarming with each media report of an electronics record security breach ... until such an event affects you personally.
The lesson? First, disavow the notion that there is privacy. There isn't. The best one can do is to limit the amount of private information that is made available.
Second, with the Federal Government push towards Electronic Health Records for each and every person in the United States by 2014, it is incumbent upon each person to do the best they can to protect their own personal information, but don't be surprised when someone else has that information.
And when someone maliciously uses that information be prepared to endure the long, arduous process of taking the necessary steps to prevent the abuse from spreading.
Tuesday, June 28, 2011
TX Case Demonstrates Risk of AOE/COE Denial
Because workers' compensation is a product of legislative enactment, as opposed to being tied to common law, its provisions tend to be very specific, and when the work comp statutes don't apply then the theories of common law negligence may be applicable to the detriment of the employer.
So it is in Texas, as reported this morning in WorkCompCentral News (Comp Denial Did Not Preclude Widow from Filing Negligence Suit: Top [2011-06-28]).
In Barnes v. UPS, the 1st District Court of Appeals ruled that a workers' compensation hearing officer's denial of Barnes' workers' compensation claim did not preclude Barnes' widow from filing a wrongful death suit for gross negligence.
So it is in Texas, as reported this morning in WorkCompCentral News (Comp Denial Did Not Preclude Widow from Filing Negligence Suit: Top [2011-06-28]).
In Barnes v. UPS, the 1st District Court of Appeals ruled that a workers' compensation hearing officer's denial of Barnes' workers' compensation claim did not preclude Barnes' widow from filing a wrongful death suit for gross negligence.
Barnes had a heart condition that his employer was aware of. After a coronary event Barnes was placed on light duty in a warehouse that, Barnes' widow alleged, was inadequately ventilated or cooled, thereby causing or contributing to Barnes' heart attack.
The workers' compensation death claim filed by Barnes' widow was denied because Barnes' death did not meet the statutory heart attack requirements for AOE/COE.
In upholding the wrongful death civil case against the employer's summary judgment on res judicata and collateral estoppel grounds, the 1st DCA noted that there are different legal and factual standards in the workers' compensation forum versus the civil forum.
While the facts of this case are unique, the important lesson to learn is that, in business as in life, there is balance.
Many current attacks on state workers' compensation systems seek to limit liability or restrict access to benefits by narrowly defining the grounds for compensability.
The risk in doing so is to create civil liability.
Workers' compensation is nothing more than a risk management tool - the employer's risk of civil liability is managed by providing coverage regardless of fault, and the employee's risk of financial destitution is managed by receipt of some financial assistance and medical coverage.
Risk management fails when neither goal is achieved.
So I ask those who pay the premium and seek "reform" to trim their bills, is it better to deny and risk civil liability, or provide coverage and spread the risk of civil expense and judgment to a defined benefit plan (i.e. workers' compensation)?
In the ongoing debate of state workers' compensation reforms, these questions should always be in the foreground through out the legislative debate process.
Monday, June 27, 2011
Debate on Access to Care Lacks Validation
Access to medical care (or impairment thereof) is often cited when a state imposes either regulations (California change to RBRVS) or statutes (Illinois' most recent "reform") that either restrict or cut medical fees.
But does this really happen?
I ask this because this morning in our WorkCompCentral News correspondent Peter Mantius asked participants affected by the recent Illinois "reform" whether this effort went far enough. The medical community proclaimed that there would be a mass exodus of physicians from workers' compensation because of new fee schedule and treatment restrictions. The business community said there wasn't enough "reform".
But the drum beat of the medical community in response to restrictions put on either the practice of medicine (e.g. guidelines) or billing that physicians are going to go elsewhere for their business lacks scientific validation.
In other words, I have not seen one study in any state following the restriction of fees or procedures that documents that there is a corresponding failure in the delivery of treatment to injured workers (and if there are studies please send them to me!).
This drum beating is no different than employer drum beating that failure to control workers' compensation costs will ship business to other states. The truth is that this statement has never been validated and in fact the evidence is contrary.
For example, though California business proclaimed that business, and ergo jobs, were fleeing the state like a forest of animals running from a fire, the statistics reflect just the opposite - prior to the workers' compensation "crisis" business in California continued to expand at an accelerated rate. It wasn't until after workers' compensation reform in 2004 that there was a decline in business expansion.
The above graph was generated when typing "business expansion california history" into Google - and the data is supported by reference to various historical documents and periodicals. If you were to believe the logic of the drum beating pundits, workers' compensation reform in California in fact was responsible for an exodus of business, not the opposite!
We know that in reality it's the old Bill Clinton cliche - "It's the economy, stupid!"
It's NOT workers' compensation that affects whether a business stays or goes - especially when one considers the reality that overall, nationally, workers' compensation represents only 1.4% of total payroll costs. What causes business exodus are economic factors well beyond the impact of work comp.
And just the same with the medical equation. There is nothing statistically that I have seen, or argued, that would suggest that access to medical care would be restricted when fee schedules are in place or when treatment guidelines are enforced.
What DOES happen is that surgical specialists see a decline in business while general practitioners, those first line of care physicians, see an increase. And frankly this is good, because there is too much surgery going on out there that is not medically warranted - reference all of the various studies throughout the years that cite the devastating effects of unnecessary back surgery (Melhorn, Talmadge, Barth, amongst may others etc.).
In the meantime Illinois continues to debate the efficacy of its "reform" with the business community stating it did not go far enough and the medical community stating it went too far. I was taught in law school that if both sides are unhappy with a bargain it's probably a good deal. Ergo Illinois - business and medicine, stop complaining and get back to work just like you want your injured workers to do!
But does this really happen?
I ask this because this morning in our WorkCompCentral News correspondent Peter Mantius asked participants affected by the recent Illinois "reform" whether this effort went far enough. The medical community proclaimed that there would be a mass exodus of physicians from workers' compensation because of new fee schedule and treatment restrictions. The business community said there wasn't enough "reform".
But the drum beat of the medical community in response to restrictions put on either the practice of medicine (e.g. guidelines) or billing that physicians are going to go elsewhere for their business lacks scientific validation.
In other words, I have not seen one study in any state following the restriction of fees or procedures that documents that there is a corresponding failure in the delivery of treatment to injured workers (and if there are studies please send them to me!).
This drum beating is no different than employer drum beating that failure to control workers' compensation costs will ship business to other states. The truth is that this statement has never been validated and in fact the evidence is contrary.
For example, though California business proclaimed that business, and ergo jobs, were fleeing the state like a forest of animals running from a fire, the statistics reflect just the opposite - prior to the workers' compensation "crisis" business in California continued to expand at an accelerated rate. It wasn't until after workers' compensation reform in 2004 that there was a decline in business expansion.
The above graph was generated when typing "business expansion california history" into Google - and the data is supported by reference to various historical documents and periodicals. If you were to believe the logic of the drum beating pundits, workers' compensation reform in California in fact was responsible for an exodus of business, not the opposite!
We know that in reality it's the old Bill Clinton cliche - "It's the economy, stupid!"
It's NOT workers' compensation that affects whether a business stays or goes - especially when one considers the reality that overall, nationally, workers' compensation represents only 1.4% of total payroll costs. What causes business exodus are economic factors well beyond the impact of work comp.
And just the same with the medical equation. There is nothing statistically that I have seen, or argued, that would suggest that access to medical care would be restricted when fee schedules are in place or when treatment guidelines are enforced.
What DOES happen is that surgical specialists see a decline in business while general practitioners, those first line of care physicians, see an increase. And frankly this is good, because there is too much surgery going on out there that is not medically warranted - reference all of the various studies throughout the years that cite the devastating effects of unnecessary back surgery (Melhorn, Talmadge, Barth, amongst may others etc.).
In the meantime Illinois continues to debate the efficacy of its "reform" with the business community stating it did not go far enough and the medical community stating it went too far. I was taught in law school that if both sides are unhappy with a bargain it's probably a good deal. Ergo Illinois - business and medicine, stop complaining and get back to work just like you want your injured workers to do!
Friday, June 24, 2011
AB 228 is Good for California Small Business
One of the big debates ongoing during this California legislative season is whether to grant The State Fund (aka SCIF) an exemption to partner with other carriers to provide coverage to out of state workers whose employer is primarily California based.
The bill being debated is AB 228.
The business logic behind AB 228 is that SCIF would not see licensure in other states, but would partner with other carriers to provide coverage. SCIF would "front" the policy - meaning the employer would pay only one bill. Presumably SCIF would find the best financial alternative for the employer to cover the out of state employees.
Many in the insurance industry are opposed to this bill believing that SCIF's tax-exempt status gives it an unfair competitive advantage and that SCIF would thus take business away from the private market.
This is a ludicrous analysis, and one that has not stood the test of history.
In fact, recent history suggests just the opposite - if it were not for SCIF the California workers' compensation market would be in complete disarray.
Presently SCIF writes under 20% of the market. This is the segment of the market that the private carriers don't want to touch - generally small businesses, with very little payroll, ergo premium generation.
During the tough early 2000's, SCIF had to cover over half of the market. Why? Because private carriers bailed as insolvencies rose and those that were left were too scared to handle the risk. Insurance lobbyists were successful in bringing about the 2004 historic "reform" and as a consequence the private carriers saw good business opportunity and relieved SCIF of the burden of covering the market.
There is nothing in this history that suggests that SCIF would engage in predatory practices to expand its reach. In fact just the opposite - SCIF has routinely demonstrated that it has no appetite for taking market share on a competitive basis.
If we use WorkCompCentral as an example, we have employees in both California and Texas. We used to be covered by SCIF in California, and had to obtain a separate policy from Travelers for our Texas employees.
Farmers came in and gave us a more competitive quote for the California employees so we switched. SCIF did not put up a fight - there was no competitive bidding. We still have Travelers for Texas.
Yes, its a pain to pay two different carriers for the separate policies, and its a pain when they confuse our payroll reporting, but its workable.
However, I can not imagine having more than one other state to worry about as a small business. Dealing with more than two carriers because I happen to have an employee in Arizona, an employee in Nevada, one in New York, and a couple in Texas, would be unworkable. We're just too small for that kind of silliness.
If I had a single source for dealing with our workers' compensation obligations that benefits me, a California business. If it benefits the California business, then its good for California - the private market be damned!
George Miller, State Fund's lobbyist, told the Assembly Insurance Committee yesterday that, "On a competitive advantage that our tax status confers upon us, it's conferred such a great competitive advantage that we've gone from 56% of market to 16% of market. It hasn't really worked to our advantage there, that I can see."
The bill being debated is AB 228.
The business logic behind AB 228 is that SCIF would not see licensure in other states, but would partner with other carriers to provide coverage. SCIF would "front" the policy - meaning the employer would pay only one bill. Presumably SCIF would find the best financial alternative for the employer to cover the out of state employees.
Many in the insurance industry are opposed to this bill believing that SCIF's tax-exempt status gives it an unfair competitive advantage and that SCIF would thus take business away from the private market.
This is a ludicrous analysis, and one that has not stood the test of history.
In fact, recent history suggests just the opposite - if it were not for SCIF the California workers' compensation market would be in complete disarray.
Presently SCIF writes under 20% of the market. This is the segment of the market that the private carriers don't want to touch - generally small businesses, with very little payroll, ergo premium generation.
During the tough early 2000's, SCIF had to cover over half of the market. Why? Because private carriers bailed as insolvencies rose and those that were left were too scared to handle the risk. Insurance lobbyists were successful in bringing about the 2004 historic "reform" and as a consequence the private carriers saw good business opportunity and relieved SCIF of the burden of covering the market.
There is nothing in this history that suggests that SCIF would engage in predatory practices to expand its reach. In fact just the opposite - SCIF has routinely demonstrated that it has no appetite for taking market share on a competitive basis.
If we use WorkCompCentral as an example, we have employees in both California and Texas. We used to be covered by SCIF in California, and had to obtain a separate policy from Travelers for our Texas employees.
Farmers came in and gave us a more competitive quote for the California employees so we switched. SCIF did not put up a fight - there was no competitive bidding. We still have Travelers for Texas.
Yes, its a pain to pay two different carriers for the separate policies, and its a pain when they confuse our payroll reporting, but its workable.
However, I can not imagine having more than one other state to worry about as a small business. Dealing with more than two carriers because I happen to have an employee in Arizona, an employee in Nevada, one in New York, and a couple in Texas, would be unworkable. We're just too small for that kind of silliness.
If I had a single source for dealing with our workers' compensation obligations that benefits me, a California business. If it benefits the California business, then its good for California - the private market be damned!
George Miller, State Fund's lobbyist, told the Assembly Insurance Committee yesterday that, "On a competitive advantage that our tax status confers upon us, it's conferred such a great competitive advantage that we've gone from 56% of market to 16% of market. It hasn't really worked to our advantage there, that I can see."
Indeed - the private carrier lobby should be more concerned with providing quality service than worrying whether SCIF will compete with them out of state. That's where the competitive advantage is.
Thursday, June 23, 2011
Illinois' Flirtation with ADR a Positive Step
The Illinois reform bill pending signature before Governor Quinn provides for a pilot program of "carve out" alternative dispute resolution (ADR) for workers' compensation claims involving collective bargaining agreements.
As noted in the WorkCompCentral story this morning (Illinois Explores Pilot Carve-Out Program in New Bill: Top [2011-06-23]), presently there are 12 other states that provide for ADR in collective bargaining situations.
Here's the argument against Illinois carve outs, expressed by Robert Maciorowski of the Chicago law firm Maciorowski, Sackmann & Ulrich:
“Plaintiff attorneys are concerned about turning over responsibility for pursuing a claim to the employee’s union rep,” he said in the WorkCompCentral story. “On the defense side, construction companies were required to be represented by attorneys, and now it could be handled by non-attorneys, usually HR (human resources) people.”
Do I detect a position being taken to protect a special interest?
Indeed, the states that do have ADR systems in place have experienced significant success in controlling litigation costs and improved system performance overall with respect to medical treatment and return to work.
Some of the most powerful labor unions in the country prefer ADR systems because, frankly, it is better for workers with better treatment, less acrimony, and most importantly better return-to-work statistics.
Why? Maciorowski hits the nail on the head with his quote above - because in a traditional workers' compensation system decisions are taken out of the hands of both the injured worker and the employer and are made by third parties with entrenched financial interests that conflict with prompt case resolution.
Workers' compensation has only three real stakeholders: the injured worker, the employer and the State. All others are just vendors.
ADR returns the management of a claim back to the stake holders, where it belongs.
As noted in the WorkCompCentral story this morning (Illinois Explores Pilot Carve-Out Program in New Bill: Top [2011-06-23]), presently there are 12 other states that provide for ADR in collective bargaining situations.
Here's the argument against Illinois carve outs, expressed by Robert Maciorowski of the Chicago law firm Maciorowski, Sackmann & Ulrich:
“Plaintiff attorneys are concerned about turning over responsibility for pursuing a claim to the employee’s union rep,” he said in the WorkCompCentral story. “On the defense side, construction companies were required to be represented by attorneys, and now it could be handled by non-attorneys, usually HR (human resources) people.”
Do I detect a position being taken to protect a special interest?
Indeed, the states that do have ADR systems in place have experienced significant success in controlling litigation costs and improved system performance overall with respect to medical treatment and return to work.
Some of the most powerful labor unions in the country prefer ADR systems because, frankly, it is better for workers with better treatment, less acrimony, and most importantly better return-to-work statistics.
Why? Maciorowski hits the nail on the head with his quote above - because in a traditional workers' compensation system decisions are taken out of the hands of both the injured worker and the employer and are made by third parties with entrenched financial interests that conflict with prompt case resolution.
Workers' compensation has only three real stakeholders: the injured worker, the employer and the State. All others are just vendors.
ADR returns the management of a claim back to the stake holders, where it belongs.
Wednesday, June 22, 2011
New York A Tale of Two Treatment Standards
New Yorkers may soon have two separate workers' compensation systems, at least so far as medical treatment is concerned.
A bill to restrict the application of treatment guidelines only to injuries or disabilities that occurred after regulatory implementation, which occurred last December 1, has cleared the Assembly and is pending before the Senate Rules Committee.
The bill is being promoted by the AFL-CIO and the New York Workers' Compensation Alliance. A 6294, filed by Assembly Labor Committee Chairman Keith L.T. Wright, D-New York City, provides that, "No guidelines providing for medical treatment, or rules or regulations pertaining thereto, shall be applied retroactively to cases with a date of accident or date of disablement that is prior to the date of any such guideline, rule or regulation."
The argument for the bill is that application of treatment guidelines to older injuries or disabilities would abruptly terminate treatment that had been ongoing for workers affected by the sudden implementation of the guides.
What the proponents of A 6294 are really saying is that the perpetuation of bad medicine is more important than getting injured workers to face reality - i.e. that their lives are changed, treatment has limitations, and ensuring provider security is more important than dealing with the new reality.
The bill is expected to clear the Senate and will likely become law.
A 6294 is a prime example of how simple issues in workers' compensation become exceedingly complex, and why incremental "reform" to control system costs never works in the long term.
A bill to restrict the application of treatment guidelines only to injuries or disabilities that occurred after regulatory implementation, which occurred last December 1, has cleared the Assembly and is pending before the Senate Rules Committee.
The bill is being promoted by the AFL-CIO and the New York Workers' Compensation Alliance. A 6294, filed by Assembly Labor Committee Chairman Keith L.T. Wright, D-New York City, provides that, "No guidelines providing for medical treatment, or rules or regulations pertaining thereto, shall be applied retroactively to cases with a date of accident or date of disablement that is prior to the date of any such guideline, rule or regulation."
The argument for the bill is that application of treatment guidelines to older injuries or disabilities would abruptly terminate treatment that had been ongoing for workers affected by the sudden implementation of the guides.
What the proponents of A 6294 are really saying is that the perpetuation of bad medicine is more important than getting injured workers to face reality - i.e. that their lives are changed, treatment has limitations, and ensuring provider security is more important than dealing with the new reality.
The bill is expected to clear the Senate and will likely become law.
A 6294 is a prime example of how simple issues in workers' compensation become exceedingly complex, and why incremental "reform" to control system costs never works in the long term.
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