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Vol 2, Issue 14

Find Solutions & Strategies                                April 4, 2011

Penalty FlagWhatever Happened to Penalties?
SB 899 radically altered the landscape when it comes to penalties
In This Issue
* RECENT PANEL DECISION: Medical Treatment (in vitro fertilization; vacation home modifications)
* BLOG ROUND UP: fraud, CCCs
* NEWS HEADLINES: Pure premium rate

A Note From the Editor

Robin Kobayashi 2010
Dear WC Professionals: 


LexisNexis is the only publisher that gives you a one-two punch when it comes to developing case law: Noteworthy Panel Decisions and California Compensation Cases. Contact me to find out more about these complementary databases on
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LexisNexis Editorial & Content Development
CSIMS Mid-Summer Seminar

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June 16-19, 2011

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The seminar will address cutting edge concepts regarding practice, research, and policy in the field of occupational medicine.


The California Society of Industrial Medicine and Surgery is the only organization exclusively representing the private physician practicing occupational medicine in California.


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Whatever Happened to Penalties? There can be little doubt; Senate Bill 899 radically altered the landscape when it comes to penalties. Not only did SB899 limit the pool of funds upon which penalties were to be calculated (changing the pool from the species of benefits delayed to just the amount of the benefit delayed), SB899 created numerous defenses a defendant could use to defeat penalties. These changes have made penalties not only less economically viable, but much more difficult to prosecute.


But a valid question must be asked; do the substantial changes to penalties wrought by SB899 justify the substantial reduction in penalty issues raised in proceedings before the Workers' Compensation Appeals Board? Are there any recent panel cases providing guidance as to how penalties are currently to be addressed?


Recently, a panel of commissioners with the Workers' Compensation Appeals Board (WCAB) addressed the issue of penalties in Karen White v. Victor Valley Community Hospital, ADJ600047, 2010 Cal. Wrk. Comp. P.D. LEXIS 512. There, the workers' compensation judge (WCJ) found that medical treatment was unreasonably delayed from March 31, 2008 to April 28, 2008, justifying a 25% penalty on all treatment delayed during that time. > Read more subscribers can link to the cases and other citations in this article. Be sure that you're logged into your account.


This article will appear in the May 2011 issue of the California WCAB Noteworthy Panel Decisions Reporter. To subscribe to this reporter, contact [email protected]. The reporter is designed for subscribers only.

medical expenses

CWCICWCI Research Tracks the Continued Growth of California Workers' Comp Medical Expenses.


California workers' compensation medical expenditures fell sharply immediately after the enactment of the 2002-2004 reforms, but that decline was short-lived, and after rising steadily since 2005, average payments for treatment, pharmaceuticals and durable medical equipment (DME), medical management/medical cost containment and med-legal reports are back above pre-reform levels according to a new CWCI study.


For its study, the Institute examined data from more than half a million California workers' compensation indemnity claims with dates of injury from January 2002 through March 2010. The data included policy, claim, benefit and medical service detail based on payment and medical bill review transactions through June 2010, which were used to calculate average medical payments at six valuation points: 3, 12, 24, 36, 48 and 60 months post injury for claims from the nine different accident years. The results reinforce the findings of a 2010 Institute study, noting a decline in average medical expense payments per claim from accident year (AY) 2002 through AY 2005, followed by a steady escalation from AY 2005 through the most recent measurements. For example, after declining 14.1% from $6,381 in AY 2002 to a post-reform low of $5,480 in AY 2005, average first-year medical payments on indemnity claims have jumped 63.4%, hitting $8,956 in AY 2009. > Read more

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Each week we report one or two panel decisions that we're considering for the LexisNexis® services:
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Medical Treatment; Reasonableness and Necessity; In Vitro Fertilization. WCAB, rescinding WCJ's finding, held that applicant/iron worker who suffered industrial injuries to his spine (T-6 paraplegia), legs, arms, head, neurological system, psyche, shoulders and internal system on 9/5/95, was entitled to reimbursement from defendant for portion of in vitro fertilization procedure that involved cost of extraction of his sperm since applicant's inability to father a child was a consequence of his industrial injury, but that defendant was not liable for cost of in vitro fertilization of applicant's wife, because she was not the injured worker.


Medical Treatment; Reasonableness and Necessity; Modifications to Vacation Home. WCAB, rescinding WCJ's finding, held that modifications to applicant/iron worker's vacation home to accommodate affects of  9/5/95 industrial injuries to his spine (T-6 paraplegia), legs, arms, head, neurological system, psyche, shoulders and internal system on 9/5/95, did not constitute reasonably required medical treatment, but that evidentiary record required further development regarding applicant's entitlement to reimbursement for such modifications based upon defendant's agreement to provide  modifications to a third home upon which applicant may have detrimentally relied.

BLOG ROUND UP: lexisnexis workers' comp law community
Fraud SignWorkers' Comp  Fraud Blotter 3/31/2011 - recent arrests, charges, convictions, investigations. Read it.

Cal Comp CasesCal. Comp. Cases April Advanced Postings (3/30/2011). Read it.
Take Control of Your Insurance Settlements With A Brand New Resource From LexisNexis!


Thumbs Up  "Ms. Jordan and her contributors provide concise, practical analysis of the multiple layers and nuances of Medical Secondary Payer compliance. The Guide is a valuable resource for plaintiff and defense counsel, as well as insurance carriers, employers, and third party administrators."


- Ronald E. Weiss, Esq., Hamberger & Weiss, Rochester, New York. 


Thumbs Up  "The range of topics included in the book and updates is a beacon of wisdom in the confusing MSP compliance field."


- Tim Nay, Esq., Law Offices of Nay & Friedenberg, Portland, Oregon. Mr. Nay is a co-founder of the National Alliance of Medicare Set-Aside Professionals (NAMSAP). 


Thumbs Up  "I have a copy of Jennifer Jordan's book The Complete Guide to Medicare Secondary Payer Compliance and I am most impressed by same! I have recommended it to a number of attorneys here in Georgia."


- Richard C. Kissiah, Esq., Kissiah & Lay, Alpharetta, Georgia. 


Thumbs Up  "Finally, someone delivers a clear, concise reading in this area, with some definitive answers for both lawyers and claims specialists and accurate reporting dealing with MSP compliance and MSA allocations with all of the necessary resources found in one place."


- Brad Bleakney, Esq., Bleakney & Troiani. Read his complete review at Illinois Workers Compensation blog.

Thumbs Up "An excellent new book ... a one-of-a-kind resource ... [Jennifer C. Jordan's] straight-talk is much appreciated when it comes to this illusive area of the law." 


- Rebecca Shafer, JD, President, Amaxx Risk Solutions, Inc.

There are many people who don't understand that the Centers for Medicare and Medicaid Services' approval process of a Medicare set-aside arrangement is voluntary and carries P1130 R12 coveran inherent cost. In fact, many of the decisions that need to be made in a settlement negotiation are risk management decisions rather than being truly Medicare Secondary Payer-oriented. Once you understand why CMS wants what it wants, you will realize that its preference may not be the only way to achieve MSP compliance. The Complete Guide to Medicare Secondary Payer Compliance, Jennifer C. Jordan, Editor-in-Chief, will help you take control of your insurance settlements. > Read more about the contents (1,350 pages). List Price: $179


CA: Christine Baker Appointed Chief Deputy Director, Dept of Industrial Relations

CA: Zenith Names Steven O'Gorman Executive VP, Field Operations and Risk Sharing

CA: American Claims Management Appointed TPA for California Restaurant Mutual Benefit Corporation

CA: SB 457 Would Allow WCAB to Authorize Lien Payments in Excess of Fee Schedule

CA: CWCI Elects William Mudge as Chairman of Board of Directors

CA: AB 228 Would Exempt SCIF Employees From Work Furloughs

CA: AB 335 Would Require Better Procedures, Notices to Inform Workers of Rights

CA: Former TPA Employees and Wives Plead Guilty to Taking More Than $1M From LA County

CA: Former SCIF Claims Adjuster Pleads Guilty to Seven Slayings

CA: Governor Proposes Major Reforms to Public Employee Pension System

CA: Assembly Committee Passes Two Bills to Streamline Workers Comp Claims System

CA: WCIRB Sees Continued Deterioration of Pure Premium Rate Adequacy by More Than 10 Percentage Points

CA: SCIF Posts 2010 Annual Report; $171M Net Income

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penalties, continued...

penDefendant sought reconsideration of the WCJ's decision, contending that there was no unreasonable delay of medical treatment, that the WCJ failed to address the issue of unreasonableness under Labor Code section 5814, that the WCJ erred in using utilization review (UR) to determine whether there was unreasonable delay, and that the medical penalty award was excessive.


The relevant facts in White were that prior to March 31, 2008, applicant's attorney had been pursuing the provision of medical treatment per the Medical Provider Network (MPN) without success. Applicant's attorney sent a letter to the defendants on March 31, 2008 advising them that none of the doctors was available, that he was not getting any response from their MPN contact person, and requested treatment outside the MPN. Defendant did not respond to the letter within 10 days. Defendant agreed to provide the treatment at the Expedited Hearing 28 days later on April 28, 2008.


The WCJ determined that the defendants should have responded within ten days of the March 31, 2008 letter. He compared this time frame to the ten day requirement for utilization review. The WCJ opined that failing to provide or authorize treatment within that period was unreasonable and subjected the defendants to a penalty on all treatment delayed after March 31, 2008.


In reviewing the arguments raised by defendants, the commissioners noted:


"At the outset, we disagree with the WCJ's analysis that defendant's failure to respond to applicant's attorney's letter of March 31, 2008 is subject to the ten-day requirement for utilization review, and that defendant's failure to provide or authorize treatment within that 10-day period is automatically unreasonable and subjects defendant to a penalty under section 5814. For instance, an employer who delays immediate treatment necessary to save an injured worker's limb may be subject to a penalty for a delay of something less than 10 days. On the other hand, a delay of more than 10 days in authorizing a treating physician's recommendation for treatment by a different specialist or sub-specialist might not be unreasonable depending on the circumstances. There is no "bright line" ten-day rule for reasonableness in furnishing medical treatment. Rather, the touchstone of a penalty under Labor Code section 5814 is a delay or refusal to pay benefits that is unreasonable under the circumstances. (State Comp. Ins. Fund v. Workers' Comp. Appeals Bd. (Stuart) (1998) 18 Cal. 4th 1209 [63 Cal. Comp. Cases 916, 919.])"


The commissioners nevertheless did find a forty-five day delay and further found that delay to have been unreasonable. The court opined:


"Thus, the evidence presented at trial shows that applicant had a prior award of medical treatment, her attorney requested treatment pursuant to that award on March 14, 2008, and there was no effective response to the request until April 28, 2008, a delay of 45 days. Applicant proved the delay in medical treatment, upon which the burden shifted to defendant to show genuine doubt about liability for treatment. (Kerley v. Workmen's Comp. Appeals Bd. (1971) 4 Cal. 3d 223 [36 Cal.Comp.Cases 152]; Kamel v. West Cliff Medical (2001) 66 Cal.Comp.Cases 1521 (Appeals Board en banc).) However, defendant presented no evidence of genuine doubt. In the face of a Stipulated Award of further medical treatment, followed by an apparently empty offer to investigate whether Dr. Feilteau was in defendant's MPN, the delay of 45 days was unreasonable. Thus applicant established an unreasonable delay in authorizing medical treatment and the basis for imposing a penalty under section 5814. We also agree that the WCJ was correct in assessing a penalty of 25% of the expense of medical treatment incurred between March 31, 2008 and April 28, 2008."


In examining whether a full twenty-five percent penalty was appropriate, commissioners observed:


"In Ramirez v. Drive Financial Services (2008) 73 Cal. Comp. Cases 1324 [en banc], the Appeals Board held that the amount of the penalty under Labor Code section 5814(a), which allows up to 25%, is discretionary and should be determined upon consideration of the various factors enumerated in the Ramirez opinion. Those factors include recognition that the purposes of section 5814 are both remedial and penal, that each of these purposes is equally important, that the penal aspect of section 5814 provides an incentive to employers and insurance carriers to pay benefits promptly by making delays costly, and that the remedial aspect of section 5814 is to ameliorate the economic hardship on the injured employee that results from the delay in the provision of benefits. In addition, some factors relevant to the assessment of reasonableness also are relevant to the assessment of the amount of the penalty to be awarded, i.e., up to 25 percent of the amount delayed or $10,000, whichever is less. These factors include, but are not necessarily limited to: (1) evidence of the amount of the payment delayed; (2) evidence of the length of the delay; (3) evidence of whether the delay was inadvertent and promptly corrected; (4) evidence of whether there was a history of delayed payments or, instead, whether the delay was a solitary instance of human error; (5) evidence of whether there was any statutory, regulatory, or other requirement (e.g., an order or a stipulation of the parties) providing that payment was to be made within a specified number of days; (6) evidence of whether the delay was due to the realities of the business of processing claims for benefits or the legitimate needs of administering workers' compensation insurance; (7) evidence of whether there was institutional neglect by the defendant, such as whether the defendant provided a sufficient number of adjusters to handle the workload, provided sufficient training to its staff, or otherwise configured its office or business practices in a way that made errors unlikely or improbable; (8) evidence of whether the employee contributed to the delay by failing to promptly notify the defendant of it; and (9) evidence of the effect of the delay on the injured employee."


Based on these factors, the commissioners concluded that the WCJ properly assessed a penalty of 25% of the medical treatment billed between March 31, 2008 and April 28, 2008.


This case illustrates that the WCAB continues to apply the pre-SB899 cases in evaluating whether a defendant has engaged in unreasonable conduct. Though the value of the penalty assessed in this particular case is not evident from the decision, there are many instances where a 25% penalty on the delayed benefit may be significant. The penalty, particularly when combined with an attorney fee under Labor Code Section 5814.5, may prove to be a more significant deterrent to unreasonable conduct, not to mention a more valuable remedy, than many may have assumed post-SB899.


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enewsletter archives
Take a deep dive into our past eNewsletters for 2011 and prior...warning - some links to articles may not any linking problems to [email protected].

March 28, 2011

March 21, 2011

March 17, 2011 (Special Alert)

March 14, 2011

March 7, 2011

February 28, 2011
February 21, 2011
February 14, 2011
February 7, 2011
January 31, 2011

January 24, 2011 (addendum)
January 24, 2011 

January 17, 2011 

January 10, 2011 

January 3, 2011



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