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Sams: Familiar Pattern Emerging in Fraud/CT Claim Connection

By Jim Sams

Monday, July 10, 2017 | 924 | 0 | min read

It took California policymakers more than a decade to crack down on spinal fusion surgeries, which makes me think that WorkCompCentral is going to be writing about post-termination cumulative trauma claims for a very long time.

Jim Sams

Jim Sams

It became pretty clear that state regulators intend to do something about stemming the number of post-termination CT claims with last month’s release of the Rand Institute for Civil Justice’s report on provider fraud. The think tank said the fact that Los Angeles-area medical providers are settling liens for an average of 10 cents on the dollar indicates that the number of liens associated with CT claims “are being largely driven by intentionally fraudulent acts.”

Rand, apparently understanding the old adage that politics is the art of the possible, didn’t suggest that California lawmakers simply bar post-employment cumulative trauma claims (although its researchers said that was suggested by system stakeholders in roundtable discussions about the problem). Most claims filed after termination are already banned under Labor Code Section 3600(a), but medical conditions that come to light only after the applicant leaves his job fit one of several exemptions in the statute. 

Instead, Rand recommended that the state allow employers to continue to direct the applicant's medical care even after denying the claim, which the report says is done with 88% of claims. The idea is that the applicant will be forced to deal with the doctors who are in the employer’s medical provider network, who presumably aren’t operating lien mills.

When WorkCompCentral’s Greg Jones asked the Department of Industrial Relations what action is being contemplated in reaction to the Rand report, Director Christine Baker said in an email that the department was studying “how” Rand’s recommendations can be implemented, not whether they should be. 

So obviously, California’s top work comp policymaker thinks something should be done. So with a year-round Legislature, why wouldn’t that action come soon? 

Past history is a guide. In 2001, a consultant hired by the Commission on Health and Safety and Workers' Compensation reported that half of spinal-fusion surgeries cause more harm that good, and the state’s “pass-through” regulation was creating a financial incentive for bad medicine.

Most of you probably remember the pass-through. It allowed doctors to bill not only for their spinal surgeries, but 100% of the cost of the hardware used in the surgeries, plus a handling charge.

Despite the advice of the CHSWC consultant, the state Legislature in 2003 passed a bill to preserve the pass-through, although limited it to a few specific complex spinal surgeries.

Of course, everyone in the California workers’ comp industry knows by now that Pacific Hospital of Long Beach owner Michael Drobot was a key beneficiary of that legislation. He has admitted to bribing state Sen. Ron Calderon, who was sentenced to 42 months in prison last October for working to keep the pass-through in statute books. Drobot remains free on bail, presumably to help prosecutors convict the doctors to whom he was paying kickbacks, and others involved in the scheme.

Today’s chatter about the fraud generated through CT claims is eerily similar to the run-up to the Legislature’s eventual repeal of the spinal fusion pass-through — for all but a few procedure codes in 2012 and then completely in 2013. 

Here’s the pattern: First, the California Workers’ Compensation Institute points to a problem. CWCI did that in a 2010 report that said the pass-through added as much as $177 million to annual system costs. 

Then CHSWC hires a consultant to study the problem and make a recommendation. And so it went with the pass-through: Rand, reacting to legislation already filed at the time, reported to CHSWC in 2012 that there would be “definite advantages” to eliminating the pass-through. 

CWCI pointed to the cumulative trauma claim problem in a 2016 report that said there is a “strong association” between CT claims and attorney involvement, particularly in Southern California. 

Now, Rand has followed up with its own study on medical provider fraud, pointing to CT claims as a likely contributor to the problem. But Rand rejected suggestions from those roundtable meetings (by payer representatives, I’m guessing) that the state just eliminate CT claims — and even liens — entirely.

“The more-radical notions of eliminating all claims for CT, eliminating all post-employment claims or eliminating just those CT claims brought post-employment seem to us to be draconian, baby-out-with-the-bath-water responses to a problem that is created by only a tiny fraction of all providers,” the report says.

For that advice, CHSWC paid $49,000, I was told by a DIR spokesman. Not a bad price for political cover, I suspect. Now we shall see just how fast state lawmakers act on it.

Jim Sams is senior editor of WorkCompCentral.

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