Wednesday, June 27, 2007


It is important to keep in mind that all requests for authorization and all approvals as well as denials, delays and modifications are part of the UR process described in LC 4610 and the UR regs. An employer must have a UR plan with an appropriately credentialed and empowered medical director. Empowered to assure all decisions made in the UR process conform to the UR plan standards which must conform to LC 4610 and the UR regulations. The employer can contract out the UR responsibility thru h/h insurer, through a TPA or directly to a URO. If the employer just gets WC insurance or a TPA which, as part of the contract with the employer provides UR services (whether directly or through a subcontractor URO), that can satisfy the LC 4610 and the regs. However, it's the employer's responsibility to make sure that the contract documents cover the employer's duties under LC 4610 and the UR regs. It's the employer's responsibilities that the process is working.
As long as the Medical Director of the UR plan devises a way to ensure that the employer's claims adjusters (whether in house for a self insured employer or external through a TPA or WC insurer) are applying the standards of the UR plan (the plan the employer relies on to satisfy h/h LC 4610 and 8 CCR 9792.6 et seq responsibilities), the claims adjusters can approve medical treatment authorization requests. In so doing, they will be held to the same standards (timeliness, contents of communications) we would hold the URO to in complying with LC 4610 and 8 CCR 9792.6 for approvals.

Thursday, June 14, 2007

SCHOOL'S OUT FOR SUMMER - From The Law Offices of Mullen & Filippi

Thursday, June 14, 2007
School’s out for Summer! Are you ready for Vacation?

It’s time to pack up the kids (and dog) and head out for that well-deserved vacation. Or, just suit up, and hit the pool. But, before we go, let’s see what this semester’s report card bears.

Move to the head of the class (aka: use the new disability rating schedule) Since the Brodie-Welcher decisions by the California Supreme Court on May 3rd allowing employers to subtract percentages when calculating apportionment and resulting in significant PD award savings, final exams for the term have resulted in another “A+” grade for the Defense:

The Court of Appeals (1st District) has decided in favor of “our school” (employers) on application of the new 2005 PD rating system to pre-2005 injuries. In Costco v. Chavez, applicant’s injury occurred in 2004, and the QME reported in late 2004 that applicant was not P&S. But the report did not mention whether permanent disability was expected or not. Temporary disability continued into 2005, when applicant was found P&S by the AME. Both the trial Judge and the WCAB ruled that the old 1997 Permanent Disability Rating Schedule (PDRS) applied, based on finding that a comprehensive medical/legal report issued prior to 1/1/05 need not show permanent disability in order to anchor the claim within the old rating schedule.

On appeal Applicant, Applicants’ Attorneys Association (CAAA) and the San Francisco office of Mullen & Filippi on behalf of Defendant, argued before the Court of Appeals. The Court ruled in favor of Defendant, stating that because no pre-2005 medical/legal report indicated the existence of permanent disability, Applicant’s PD must be rated under the 2005 schedule. The Court also found that the commencement of TTD payments (rather than termination) was insufficient to trigger the requirements of PD notification found in Labor Code Section 4061, again resulting in application of the 2005 rating schedule.

This decision supports use of the new 2005 PD rating schedule for pre-2005 injuries where there is no pre-1/1/05 report showing permanent disability, and TTD has not yet been terminated. The complete Costco appellate decision may be read through this link.

Although school may be out for now, other challenges to the use of the new schedule for old injuries are sure to come. We will fight those battles… next semester.

If you think gas prices are high… On your way out of town, the price of gas at the pump is not the only thing you’ll notice has gone up. The Department of Labor has posted the State’s Average Weekly Wage (SAWW) for the period ending 3/31/07 of $914.16, an increase of 3.93% over last year. This brings the minimum and maximum TD rates up to $137.45 and $916.31 beginning 1/1/08. This will apply to TD rate limits on new claims, as well as claims over two years old (due to the bump-up statute), provided the two year cap has not been reached for injuries on or after 4/19/04. So, mark you 2008 calendar for these coming increases in TD rates.

The increase in SAWW also increase payments on life pension awards for injuries on or after 1/1/03.

Don’t be Delinquent. Effective May 26, 2007, new administrative penalties went into effect. Here’s how it works:

The DWC shall monthly submit report cards (actually, copies of decisions, findings and awards of Labor Code Section 5814 violations) to the Audit Unit. Reporting of multiple such violations by a claims administrator at a single adjusting location may prompt an investigation, consisting of an audit of claims and/or utilization review files. The AD may then issue a Notice of Assessment for delay of benefits. These assessments range from $1,000 up to $15,000, depending on the benefit delayed.

Repeat violations earn a return trip to the “Principal’s Office” for:

One Swat: $30,000 fine for unreasonable delay or failure to comply with existing compensation order;

Two Swats: $100,000 fine where AD finds a general business practice of compensation delay.
Fines are doubled and tripled for reoccurrence within five years, up to $400,000 for a single Order.

That’s pretty steep tuition. Fortunately, penalties may be mitigated by a showing of such factors as: the consequences of the violation, good faith of claims administrator, first offense defense, and size and duration of claims adjusting operation. Also, an Appeal may be filed, followed by a hearing and Determination and Order, which itself is can be appealed to the WCAB.

Utilization Regulations Adopted

Claims examiners beware!

Finally, just before school let out, the “Principal” (Administrative Director) adopted regulations governing Utilization Review (UR). The Section 9792 Regulations take effect immediately (no rest for the weary). The Regulations provide for periodic investigation of claims administrators every five years, UR review organizations every three years, and “target investigations” in the interim where prompted by complaints about UR to the Administrative Director (AD). Upon receipt of a “Notice of Utilization Review Investigation” the claims administrator is required to transmit all requested records to the AD within fourteen days (similar response is required by a UR review organization when they receive a Notice). A further “Notice of Investigation Commencement” may issue fourteen calendar days prior to the on-site investigation. (Special Target Investigations require response and production of documents within ten business days).

Numerous fines “shall be assessed” for a variety of compliance violations (Regulation 9792.12), ranging up to $50,000.00 for failure to establish a UR plan, and up to $400,000.00 for repeated failure to meet UR compliance performance standards. For claims administrators, specific penalties apply for failure to timely approve, modify, or deny requests for authorization, or for tardy notification of need for additional material.

Summons to Principal’s Office

Following an investigation, the AD may issue an Order to Show Cause Re: Assessment of Administrative Penalty (Reg. 9792.15). The claims administrator or review organization shall have thirty days to file an answer contesting any of the asserted UR violations with the AD. Within sixty days of the Order to Show Cause, the AD shall notice a hearing. Following an evidentiary hearing, the AD shall issue a Determination and Order Assessing Penalty, if any. Appeal may be filed within thirty days.

Well, just when we thought it was safe to go in the water, based on the new Regulations it looks like it might be time for summer school. Ugh! Yes, there are sharks in the water. But, better to be aware than to dive into unknown waters.

We hope this news and update will help you to be prepared, and allow you to enjoy the summer season.

Need Assistance? Are you interested in having M&F attorneys design a customized training or claim review round-table meeting for your office? We'd be happy to provide on-site assistance as required to help you meet the challenges of today's claims administration issues, and to assist you in complying with all regulatory guidelines. Contact us today at for further details or to schedule a seminar!
DISCLAIMER — The purpose of this e-mail is to review the latest developments in workers' compensation law and related issues which may be of particular interest to the workers' compensation community. The information contained herein has been abridged from various sources and should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.

Wednesday, June 6, 2007

CASE LAW UPDATE: Significant Decisions

The following are recent California case law decisions that may be of interest to our clients:

Utilization Review

SCIF v. WCAB (Sandhagen) - Utilization review decisions not made within the mandatory time frames are excluded from consideration. The AME/QME process is still available to the claims administrator. The case's ruling that utilization review is optional has been appealed by the applicant to the California Supreme Court, and the Court has agreed to make a ruling on the issue.
Smith & Amar v. WCAB; Attorneys are entitled to be paid attorney fees under Labor Code section 4607 for their efforts in enforcing a future medical award where a defendant has been denied a specific form of treatment but did not petition to terminate the award of medical care. The California Supreme Court recently granted the defendant's petition; therefore, this case is not citable authority.

Medical Provider Network

Bruce Knight v. Liberty Mutual - If an employer or insurer fails to provide the proper medical provider network notice to its employees, treatment can be obtained outside of the MPN.
Norman Pyle v. American Insurance and Fireman's Fund Insurance Company - Failure of an employer or insurer to have MPN providers available to treat employees is equivalent to terminating a future medical award, and attorney fees are owed under Labor Code section 4607.
Babbit v. Ow Jing & Golden Eagle – MPN statute applies to all injury dates. Thus, employers or insurers may transfer older cases into the MPN.

Permanent Disability

Pendergrass v. Duggan Plumbing & SCIF - The old permanent disability rating schedule is not triggered by the commencement of temporary total disability prior to January 1, 2005. Instead, the new schedule will apply. This replaces a previous finding by the same court that the payment of TTD prior to January 1, 2005 actually triggered a rating under the old system, generally producing a higher permanent disability rating.
Baglione v. Hertz Sales & AIG - A comprehensive medical legal report prior to January 1, 2005 does not trigger the old permanent disability rating schedule unless the report describes the existence of permanent disability.
Costco v. WCAB - Upholds the findings in Pendergrass II and Baglione II. The commencement of TTD prior to January 1, 2005 does not trigger the use of the old permanent disability schedule. Further, if the Comprehensive Medical Legal Report on a claim does not comment on the existence of permanent disability, the case cannot be rated under the old permanent disability schedule.
Costa v. SCIF - The new permanent disability rating schedule was validly adopted. Vocational rehabilitation evidence may be used for rebuttal of schedule, and fees may have to be adjusted. The WCAB has now granted the defendant’s petition for reconsideration. Therefore, this case is not citable authority.


The California Supreme Court has determined that the percentage (Welcher) method must be used for calculating apportionment in permanent disability cases. This resolves the issue as to which method should be used to calculate apportionment - the percentage or the dollar method.

Please see the illustration below of the two methods:

Assume '06 injury is 50% or $62,387.50 and prior award for '05 is 30% or $28,820

- Welcher - subtracting the percentage

- 50% - 30% = 20% or $17,365

- Nabors/Dykes - subtracting the money

- $62,387.50 - $28,820 = $35,567.50

- Variance of $18,202.50

Utilization Review Enforcement Regulations

New Regulations That All Claims Administrators and Employers Should be Aware of:

The California Administrative Director filed the final version of the utilization review enforcement regulations with the Office of Administrative Law on April 26, 2007 with an effective date of May 26, 2007. The regulations carry high dollar monetary penalties for failure to meet any of the provisions of the utilization review regulations. The following are examples of the penalties in the most recent version of the regulations:

$50,000 for failure to establish a utilization review plan
$5,000 for failure to include all of the plan requirements
$10,000 for failure to file the utilization review plan or a letter in lieu of the plan
$5,000 for failure to file a modified utilization review plan after a material modification
$50,000 for failure to employ or designate a physician as a medical director
$25,000 for issuance of a decision to modify or deny a request for authorization regarding a medical treatment, procedure, service or product where the requested treatment, procedure or service is not within the reviewer’s scope of practice
$25,000 for failure to comply with the requirement that only a licensed physician may modify, delay or deny requests for authorization of medical treatment for reasons of medical necessity
$15,000 for failure to communicate the decision in response to a request for an expedited review
$5,000 for failure to approve the request for authorization solely on the basis that the condition for which treatment was requested is not addressed by ACOEM
$10,000 for failure to discuss reasonable options for a care plan with the requesting physician prior to denying authorization of or discontinuing medical care, in the case of concurrent review