As summer rolls along, so do the press releases regarding stats on workers' comp in California.

Now we've heard from the California Workers Comp Institute, reporting on the experience of self-insureds. Here's their press release, chock full of stats:
"California workers' compensation private self-insured claim frequency showed little change in 2011 as the incidence of medical-only claims edged down slightly, while lost-time claim frequency registered a marginal increase according to a California Workers' Compensation Institute (CWCI) review of data released by the state Office of Self-Insurance Plans (OSIP). Initial results for 2011 show the number of new claims reported by private self-insured employers fell 2.1% last year, with medical and indemnity payments on those claims through the end of the year totaling $192 million, also about 2% less than the comparable figure for 2010 claims. On the other hand, total incurred losses (paid benefits plus reserves for future payments) on the 2011 claims rose to nearly $620 million, up $24.7 million, or 4.2 percent more than the initial incurred amount reported for 2010 claims, as average amounts incurred per claim for both indemnity and medical benefits continued to grow.
The OSIP initial summary of private self-insured data, issued July 10, offers an initial look at California private, self-insured claims experience for cases reported in 2011. The summary includes medical-only and indemnity claim counts, and the total paid and incurred amounts on those claims through December 2011. The new report summarizes the experience of private self-insured employers who covered 2.11 million employees last year (vs. 2.15 covered employees in the first report for 2010 claims), and who reported a total of 77,386 claims in 2011 - compared to 79,075 claims in the 2010 first report. That translates to a claim frequency of 3.66 claims (2.29 medical-only + 1.37 indemnity) per 100 employees, vs. 3.66 claims per 100 employees in 2010 (2.33 medical-only + 1.35 indemnity). Wages and salaries for the private self-insured employees totaled nearly $81 billion in 2011, or 1.5% more than the $79.7 billion noted for self-insured employees in the 2010 first report.
Even though the total number of reported claims continues to dwindle, over the past decade, private self-insured loss experience in California has tracked with insured claims experience, with both paid and incurred losses on private self-insured claims now well above the post-reform low of 2005, driven up by sharp increases in claim severity (the average loss per claim). The growth in medical losses has been the biggest cost driver since 2005, though indemnity losses for private self-insured employers have jumped as well. OSIP's initial summary of 2011 results shows that at the end of the year, paid losses for all 2011 California private self-insured claims (medical-only and indemnity claims) averaged $2,483, only $2 off the 10-year high noted in 2010, and up 43.5% from the post-reform low, as average paid indemnity at first report is up 33% from 2005, and average paid medical is up 51%. At the same time, total incurred benefits per claim at the first report level climbed to $8,006 last year, up 6.4% from 2010, and 43% above the post-reform low, as average incurred indemnity was 31% higher than in 2005, and average incurred medical was 51 percent higher.
CWCI's review of more developed loss data derived from private self-insured's 2nd through 5th reports on 1998 to 2010 claims (12 to 60 months' worth of claims experience) found very consistent patterns showing that private self-insured claim severity bottomed out with calendar year 2005 claims, followed by steep increases in the average losses per claim, which despite continuing reductions in the number of reported claims, have driven private self-insured total paid and incurred losses well above the post-reform levels.
OSIP's 2011 summary of private self-insured data, which reports on calendar year data, follows the January release of public self-insured claims data, which is reported on a fiscal year basis. Thus, the data from public self-insured employers now lags the private self-insured data by six months, reflecting claims and losses reported through June 2011 rather than through December. The OSIP annual summaries for both private and public self-insured claims from each of the 10 most recent years are posted online at http://www.dir.ca.gov/SIP/StatewideTotals.html. CWCI members and subscribers may also log on to the Institute's website to view an Institute Bulletin that includes more details and graphics."

Some of the large self-insured have become very prominent in the politics of workers comp in California. That includes some of the large agricultural producers as well as large grocers, entertainment companies, and aerospace/defense contractors.

We're talking enterprises that are very aggressive about containing their costs and protecting their profit margins.

These prominent self-insureds are likely to be at the heart of negotiations about further reforms in California's workers' compensation system.

That's why it's always interesting to follow the results from the self-insureds.

Stay tuned.

Julius Young
www.boxerlaw.com
www.workerscompzone.com

Is physician dispensing of pharmaceuticals an increasing cost driver in the California workers' comp system?

Apparently not, according to a study by the Workers' Compensation Research Institute.

The WCRI noted in a press release about the study by WCRI researcher Dongchun Wang that:
"As states around the country debate or adopt new regulations to limit the prices paid for doctor-dispensed drugs, a new study from the Workers Compensation Research Institute (WCRI) says the regulations reduce costs, but are unlikely to reduce patient access to pharmaceuticals. The study examines the results of a change to the California statute that has become a model for many other states. Critics of the regulations express concern that many patients will not get needed medications if they do not get them at the physicians’ offices."
The study, Physician Dispensing in Workers’ Compensation, examines physician dispensing before and after a 2007 change in the California statute that governed the prices paid to physician-dispensers. Prior to the statutory change, physicians typically charged much higher prices than pharmacies for the same medication. For example, for the most common drug, Vicodin®, physicians were paid $0.85 per pill compared to $0.43 for pharmacies—nearly double the price. After the reforms, physicians were paid $0.52 per pill compared to $0.48 for pharmacies. After the law changed, physicians were paid prices for prescription medications that were similar to those paid to pharmacies for the same medication."

“There is a great discrepancy between what doctors and pharmacies charge for dispensing the same drug,” observed Dr. Richard Victor, WCRI’s Executive Director. “One question for policymakers is whether the large price difference paid when physicians dispense is justified by the benefits of physician dispensing. Policymakers can learn from the California experience.”

"One of the chief concerns expressed by supporters of physician dispensing (in California and in other states) was that doctors would stop dispensing needed prescriptions when it became less profitable. However, the California post-reform experience shows that physicians continued to dispense prescriptions, even when the prices paid were lower. Before the reforms, 55 percent of all prescriptions were dispensed at physician offices. Three years after the reforms, 53 percent of all prescriptions in California were physician-dispensed so patients had similar access to physician dispensed medications, but at a much lower cost."

"The report also examines several other concerns expressed by supporters of physician dispensing. One is that spending on prescription drugs might increase if a California-type reform were adopted. They argue that physicians almost always dispense less expensive generic versions of drugs, while pharmacies dispense both brand names and generics. The study found that for the specific medications commonly dispensed by physicians, generics were almost always dispensed by both physicians and pharmacies. In many states, when generic drugs were dispensed, physician-dispensers were paid much higher prices per pill than pharmacies for the same prescription."

"The data used for this study include nearly 5.7 million prescriptions paid under workers’ compensation for approximately 758,000 claims from 23 states over a period from 2007/2008 to 2010/2011. The 23 states in this study represent over two-thirds of the workers’ compensation benefits paid in the United States. These states include Arkansas, Arizona, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin. Several of the states in this study (Arizona, California, Georgia, South Carolina, and Tennessee) recently adopted reforms aimed at reducing the prices of physician-dispensed drugs."

The WCRI study compare results from 2007/2008 with 2010/2011. California physician dispensing, which was 53% of all California workers' comp dispensing, decreased 3% and the percentage cost of that dispensing was said to be 52% of system dispensing costs.

The study concludes that 2007 efforts in California did help control the costs of physician dispensing. Moreover, the study compares those results to results in other states which have not undertaken cost controls.

Here is a link to the WCRI study, which is available for purchase:
http://www.wcrinet.org/whats_new.html

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

1%

Betcha thought I was going to write about the 1% versus the 99%.

No, today the 1% in the news is the 1% that CalPERS earned during its fiscal year that ended June 30th. CalPERS is working off of projections of over 7% annual return per year, so returns of a mere 1% can cause severe funding gaps in a system that is already underfunded.

Lately we've seen municipal bankruptcy filings by Stockton and San Bernardino, so possible future problems at CalPERS and ongoing funding shortfall in California's unemployment fund aren't welcome news.

This is all background noise for California's workers' comp system, but it all has potential effects as workers' comp does not operate in a vacuum.

Worthy of your attention is a study highlighted in a New York Times article today on the State Budget Crisis Taskforce. Here is a link to that study, which compares the long term budgetary challenges of many of the largest states including California, Illinois and Texas:
http://www.statebudgetcrisis.org/wpcms/ ... e-Full.pdf

The article in The New York Times, titled "Fiscal Crisis in States Will Last Beyond Slump", by Mary Williams Walsh and Michael Cooper, can be found here:
http://www.nytimes.com/2012/07/18/us/in ... nted=print

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

Has opioid prescribing in California's workers' comp system started to tail off?

Perhaps. At least that's the trend noted by the California Workers Compensation Institute in a July 9, 2012 study "Changes in Schedule II and III Opioid Prescriptions and Payments in California Workers Compensation":
http://www.cwci.org/research.html

THe study, authored by John Ireland, Bob Young and Alex Swedlow concludes that:
"Over the past ten years, there has been growing concern about the increased use of opioid painkillers – especially Schedule II drugs such as OxyContin, Fentanyl, Morphine and Methadone – which have become widely used for the treatment of chronic pain in injured workers. This study finds that in the second quarter of 2010, Schedule II opioids accounted for 5.8 percent of all California workers’ compensation prescriptions and 19.7 percent of the prescription dollars -- nearly five times the proportions noted in 2002. However, the latest California workers’ compensation
pharmaceutical data, updated through the end of 2011, indicates a recent reversal in this trend, with Schedule II painkillers declining to 3.4 percent of the workers’ compensation prescriptions and 12 percent of the prescription payments in the fourth quarter of last year, though the use of Schedule III drugs such as Vicodin has remained relatively stable.
The recent decline in the use of Schedule II opioids was not associated with any significant or explicit changes in California workers’ compensation legislation or regulations pertaining to the use of these medications. This suggests that the reductions may be associated with increased public awareness of the dangers of Schedule II drugs, as well as enhanced medical management and pharmaceutical controls implemented by the payor and medical provider communities."

Opioids have gotten lots of bad press in the last decade as use soared and reports surfaced of some overdose deaths, allegations of some drug diversion and concerns about the safety of long term use (including dental consequences) grew. Not to mention concerns about cost.

But these concerns have not been unique to California, as the paradigm of pain management treatment changed over the last couple of decades and new, more aggressive procedures for treatment were adopted. Moreover, in a larger sense medical care in the country is very oriented toward pharmaceutical solutions, and workers' comp is no exception.

But have some of these trends now crested?

Yes, according to the CWCI data.

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

An employer or an injured worker is entitled to an advocate who will represent their point of view in proceedings at the California Workers' Compensation Appeals Board.

But what are the limits to such advocacy, particularly where the parties are using a panel QME to resolve issues?

A 2010 2-1 panel decision, Ferniza v. Rent A Center, caused some consternation in the workers' comp legal community when it appeared to construe advocacy letters from attorneys to the QME as being "information" within the meaning of Labor Code 4062.3(b). Furthermore, the majority opinion in Ferniza held that "We also construe "medical and non-medical records" to encompass letters from attorneys that discuss medical and non-medical information, particularly where the letter engages in advocacy".

Under the Ferniza panel's approach, unembellished letters transmitting neutral information would be only "communications" and not "information", but advocacy type letters would be "information", requiring that the proponent of the letter serve it on the opponent 20 days before it was provided to the panel QME. This would trigger a right of the opposing party to object to the advocacy letter, which could then not be sent absent approval by the WCAB.

The Ferniza panel was composed of former WCAB Commissioner James Cuneo and Deputy Commissioner Neil Sullivan. Dissenting was Commissioner Deidra Lowe.

Although hardly cited in any subsequent WCAB panel decisions, Ferniza remains worrisome for both employers and injured workers.

Employers may wish to have their attorneys point out inconsistencies in the factual record, entries in the medical records as well as the context of the claim. Such matters can bear on the worker's credibility and may be very important in determining issues such as injury AOE/COE, apportionment. and overlap.

Lawyers for workers may wish to point out matters that will have bearing on
the effect the injury has had on the worker. Many workers comp cases involve issues regarding compensable consequences of injuries . Where there are issues such as diminished future earning capacity under the Ogilvie case, Almaraz Guzman issues, allegations that a workers is total disabled under LeBoeuf and/or Labor Code 4662, Subsequent Injuries Fund issues, to name a few, the worker's attorney may have a number of points to advocate.

Both sides may feel the need to educate the panel QME on intricacies of workers' compensation law. A long line of WCAB cases has noted that medical opinion that assumes incorrect legal theories does not meet the substantial evidence standard.

To some extent the Ferniza case may have been an overreaction by a WCAB panel to some inflammatory statements in an advocacy cover letter to the panel QME from the defense counsel in Ferniza.

Moreover, Ferniza may reflect the worldview of some stakeholders who wish for a streamline process where worker sees a doc-in-the box QME, report is written and a simple result is rendered. I call that the "Horn and Hardart" workers comp model where the workers' benefits are essentially delivered through an automat-type system.

But the deeper problem may be that Rule 35, cited extensively in Ferniza, is overbroad and inconsistent with the QME statute Labor Code 4662.3.

If so, it would not be the first time that the WCAB has rejected a rule.
Rule 30 was rejected by the WCAB several years ago in a case, Mendoza v. Huntington Hospital.

In prepping for a recent Summer 2012 CAAA convention panel presentation that I did with attorneys Art Johnson and Joanne Helvig, I noted at least 5 ways that Rule 35 was inconsistent with Labor Code 4062.3:

1. Rule 35(a)(3) expands the term "information" used in 4062.3(a) to include
an issues letter addressed to the QME evaluator. Labor Code 4062.3(a) makes no reference to issues letter to evaluators. Indeed, that is covered under a separate subsection, Labor Code 4062.3(e).
2. Rule 35(c) seems to incorporate the expanded definition of "information"
under 35(a)(3) as an item that needs to be served on the opponent 20 days before it is provided to the evaluator
3. 35(d) incorporates the expanded definition of 'information" under 35(a)(3). Under 4062.3 and allows the opposing party 10 days to object to the "information" (defined as including the issues letter) being provided to the evaluator. Contrast this with 4062.3 which provides for a 10 day objection period for consideration of "non-medical records".
4. Whereas 4062.3(f) provides a remedy for ex parte communication violations of 4062.3(e), Rule 35(k) provides a remedy for violations of 4062.3, not just 4062.3(e).
5. Rule 35 specifies items that are not to be sent to the panel QME; Labor Code 4062.3 does not specify those items.

In coming cases the WCAB will undoubtedly be forced to revisit these issues that it addressed in Ferniza.

It would be most unfortunate if the WCAB handicaps the ability of lawyers for employers and workers to advocate for their clients. Forcing attorneys to go the board over disputes about cover letters will greatly burden an already clogged WCAB.

In dealing with these issues, the WCAB needs to look carefully at the requirements of 4062.3. To import Rule 35 into the analysis brings a host of problems into the mix, as Rule 35 does not track the statute.

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com