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The Best Disruptive Writings Of 2013 – Health Care Edition

Clayton Christensen famously coined the term “disruptive innovation” to describe “simple business applications that relentlessly move up market, eventually displacing established competitors.” Disruption is not just change; it is change that gores somebody’s ox. There has never been a year like 2013 for disruptive writing about health care. Here are five “oxen” gored by the best of that writing.

Gored Ox One: The Idea That Someone Else Pays The Bills

The first salvo of the year was David Goldhill’s highly controversial book, Catastrophic Care: How American Health Care Killed My Father – and How We Can Fix It. Goldhill had the audacity to question an assumption accepted as a truism by both proponents and opponents of Obamacare: the notion that Americans can’t pay for their own health care without some kind of health coverage. Goldhill suggests that our nation’s reliance on third-party payors like health plans, Medicare and Medicaid has created – not alleviated – the burdensome problems of cost and bad quality that plague health care, and that we could run a better health care system without them. (Disclosure: Goldhill sits on the voluntary board of my nonprofit, The Leapfrog Group, though Leapfrog isn’t associated with his book).

Goldhill wasn’t the only one asking the impertinent question, “What if you paid your own medical bills directly?” Time published a powerful story by Steven Brill, Bitter Pill: Why Medical Bills are Killing Us, which points out the bizarre oddities of what goes on behind the scenes when the checks are written to pay for patient care. Bills for the same procedure vary tenfold, but few health plans actually pay the full bill. Elisabeth Rosenthal’s reporting in the New York Times pointed out the same bizarre pricing phenomena in her remarkable series on the varying charges hospitals record for their services.

The business community took note of these questions about who pays the bills, since they traditionally pay most of them. A study by S. Eappen and colleagues in the Journal of the American Medical Association found that commercially insured patients were charged an extra $39,000 every time they suffered a surgical site infection at one hospital system. Employers wondered how they missed this enormous surcharge they paid for an undesired outcome.

Where were their health plans and consultants to alert them to this waste? They were AWOL, say Tom Emerick and Al Lewis in their brilliant book, Cracking Health Costs, which all employers seem to have on their desks these days.

The book is getting attention for its strategies on how to bypass health plans and consultants and disrupt health benefits purchasing.

Gored Ox Two: Keepers Of Secrets

The health care industry has long been shielded from the candor other industries live by. Writers this year went beyond complaining about the lack of transparency in health care — now, they are successfully calling out those who want to maintain it. Respected nurse-leader Kathleen Bartholomew writes in a piece in the Seattle Times that the lack of transparency in health care is simply unethical, and she points some fingers. In a blog for the influential policy journal Health Affairs, business leader Francois de Brantes argues that our nation’s remarkable lack of progress on quality and costs is a consequence of having no feedback loops — candid information on performance that provides continuous pressure for improvement. He calls for upending the incentives that keep health care opaque and dysfunctional. A breakthrough piece reported by Charles R. Babcock in Bloomberg News exposed the political underpinnings of why we still don’t have national data on many of the most common errors, accidents and injuries happening every day in hospitals — and he discusses the ongoing movement to preserve what little data we have. Author Rosemary Gibson, one of the decade’s most influential health care writers, writes in a memorable Huffington Post blog, “The military counts its dead and wounded even though politicians would prefer to hide the truth.” When we count the dead from medical errors, she says, we could fill Arlington National Cemetery in nine months.

One writer did try to quantify the problem – John T. James, a father and NASA toxicologist who tragically lost his son to medical errors. In a widely discussed piece published by the peer-reviewed Journal of Patient Safety, he used a scientific method developed by the Institute for Healthcare Improvement to estimate how many people die each year from hospital errors. The dismaying answer: anywhere from 200,000 to 420,000 – in other words, as many people as the population of Miami.

Gored Ox Three: The Passive Patient

The Hollywood-inspired idea of the patient as quiet recipient of physician infallibility is officially over. Patients don’t just do what they are told; they expect to make choices. Beth Howard’s cover story in AARP The Magazine – the most widely read publication in the United States – launched a firestorm with its advice for patients on protecting yourself during a hospital stay, including which hospitals are safest and what to look for in a hospital room.

Crystallizing this era of the disruptive new patient is its leading sage, Dave deBronkart, coauthor of Let Patients Help! Survivor of Stage 4 kidney cancer, deBronkart has a popular TED talk and delivers speeches throughout the world arguing that patients should serve as active members of the team delivering care, a job that includes supplying the wisdom and knowledge physicians and nurses don’t have. The emergence of this new patient cannot come soon enough, as evidenced in a widely discussed report published by the nonprofit Childbirth Connection, Listening to Mothers III: Pregnancy and Birth. The report shows the results of a Gallup survey of women who had recently given birth and reveals a stunning number of maternity patients whose wishes were ignored or manipulated, to the detriment of the women and their babies.

Among the most disruptive writers of 2013 are physicians who found themselves – or their families – on the wrong side of the hospital bed. Dr. Bob Wachter told a fascinating story of his mother’s stay in his own hospital (The University of California San Francisco Medical Center), candidly weighing some of the positive aspects of the care she received with the negatives that caused his family distress. Dr. Ashish Jha talked movingly about his father’s hospital stay, recounting with alarm three errors averted only because Jha happened to be in the room.

Gored Oxen Four: Conventional Wisdom About Delivering Care

The role of the patient has changed and so has the practice of medicine and nursing. Hollywood took note of one passionate nurse writer, Sandy Summers, and her colleagues, whose blog on the fascinating website http://www.truthaboutnursing.org analyzes media portrayals of nursing practice. Summers points out how TV depicts physicians performing tasks nurses actually do in real practice and generally portrays nurses as incompetent, unprofessional and/or none-too-bright. This hurts patients, she says, since the vast majority of care patients receive comes from nurses, and we need the best people on the job. Her passion had a direct impact this year, influencing advertiser choices and prompting talks with producers of problematic programs.

Physicians, too, are raising eyebrows by asking impolite questions about their practice. Atul Gawande’s article in the New Yorker asked why providers don’t always do the right thing in their day-to-day practice. It’s not malice, he says; it’s human nature. The piece explores lessons from international public health on a specific peer-education strategy that works to change practice patterns.

Another piece of conventional wisdom stood on its head in 2013 came from the University of Michigan’s John Birkmeyer and his colleagues, concerning surgical skill and its implications for patients. The study in The New England Journal of Medicine prompted tumultuous debate in the surgical suite when it demonstrated widespread variation in the skill of surgeons performing the same surgery. The study also suggested that skill level correlated with complication rates, raising significant new questions about what surgeons and hospitals can do to improve outcomes in health care.

But it’s not enough to identify and test new innovations for delivering care better; if they work, they must be hard-wired into practice, says Paul Plsek in his book, Accelerating Health Care Transformation with Lean and Innovation: The Virginia Mason Experience. He describes how the Virginia Mason Medical Center applied principles of lean manufacturing to balance the seemingly contradictory objectives of expanding innovation and improving adherence to the routine.

Gored Ox Five: Sacred Cows Of Public Health

Almost everyone agrees that the best strategy for improving Americans’ health would be to prevent people from needing health care in the first place. But as these writers demonstrated in their powerful arguments, beware the easy answers.

Does more health coverage mean better health? Not necessarily. A study of the impact of Medicaid in Oregon found that coverage had no impact on emergency room visits or health status (though it did relieve financial stress, an important advantage).

Does employee wellness save money? Not really. That was the reluctant conclusion of Rand researchers in a shocking study: Employee wellness programs did not appear to save money nor measurably improve health status. For more thoughts on the topic, The Health Care Blog’s series by Al Lewis and Vik Khanna is also worth following. The blog posts have prompted employee backlash and even a call for revocation of the C. Everett Koop award for a wellness program with questionable outcomes.

Should we cut the fat to fight obesity? Maybe not. A summary in the British Medical Journal of the research on obesity is prodding the nutrition science community in new directions. The exhaustive research overview by science journalist Gary Taubes found that most of the assumptions and guidelines we rely on are not supported by research, and policymakers ought to rethink our approach to the problem from the bottom up. Among the surprising observations: There’s no evidence that saturated fat is the culprit, and attempts to eliminate it from the diet may have accelerated the obesity epidemic.

Optimism For The New Year

I am confident that health care is headed in the right direction as we welcome 2014, thanks in no small part to the courage and eloquence of these disruptive writers.

This post first appeared on Forbes.com.

A Tale Of Two Broken Hearts

Imagine, if you will, twin boys born on some sunny day not too long ago. Neither one of the boys, nor their parents, nor even the delivering doctors knew that both boys were born with a heart condition. This congenital heart anomaly, a patent foramen ovale, left a small hole open in the walls of each brother’s heart, exposing them to higher risks of stroke.

These twin brothers, let’s call them Keven and Kenny, seemed to be joined at the hip. They enjoyed all the same activities, all the same food, went to the same school, and, when they decided it was time to purchase homes of their own, bought two adjacent houses. Being as close as they were, they tore down the fence between their properties and right in the middle built a small gazebo where they could enjoy breakfast with their families every weekend morning.

In choosing a profession, Keven wanted a job that would keep him physically fit while allowing him to serve the community and even save the lives of his fellow citizens. So he became a firefighter. The job kept him physically fit and allowed him to maintain a clean bill of health … except for that congenital heart anomaly, which no one knew about.

Kenny, on the other hand, decided to pursue the absolute highest calling — the profession which the bravest and noblest aspire to. He didn’t want to become a physician, or an engineer, or even a scientist. He decided to become a workers’ compensation defense attorney (not unlike your humble author).

Still, the two twin brothers were in every other respect exactly alike, and spent every Sunday morning having breakfast together in that shared gazebo, along with their wives and children.

Then, tragedy struck! One morning, as Kenny and Keven sat next to each other, enjoying the morning air, each with a newspaper in the left hand and a piece of toast in the right, they suddenly sat straight up, looked into each other’s eyes, and both collapsed to the ground with strokes.

Their families rushed them to seek medical treatment and, fortunately, each of the two brothers recovered. Before long, they were sitting next to each other in their shared gazebo, when Kenny had an idea. Why not file workers’ compensation claims for the strokes — surely, the stress of being a firefighter caused Keven’s stroke. And, if being a firefighter is stressful enough to cause a stroke, then being a workers’ compensation defense attorney is even more so!

As the cases progressed, each of the two brothers agreed to use an Agreed Medical Evaluator, and each AME came to the same conclusion: the AMEs both found that, in their respective cases, the “stroke … occurred in an individual whose only major risk factor for stroke in terms of this industrial analysis appears to be his congenital heart defect … all of his conditions apportion 100% to non-industrial causation.”

Kenny was crushed — his case was effectively at an end as the workers’ compensation Judge ordered him to take nothing. After all, the Agreed Medical Evaluator had found that there was only one cause for his stroke — a non-industrial condition acquired at birth. How could any legal system, short of denying a defendant-employer due process, require workers’ compensation payment for something so patently and obviously unrelated to any work causes? Keven’s case, on the other hand, was just warming up.

Keven’s attorney argued that, under Labor Code section 3212, “any heart trouble that develops or manifests itself during a period while [the firefighter] is in the service of the office, staff, department, or unit … shall be presumed to arise out of and in the course of the employment.”

Now, isn’t that presumption rebutted? After all, as in both the case of Kenny and Keven, the Agreed Medical Evaluators have found that the sole reason for both strokes was the congenital heart condition — exactly 0% of the causation had anything to do with work as a firefighter or as a workers’ compensation defense attorney.

Well, as Kenny feels once again misused and ignored by the system he so gallantly serves, Keven has another line of defense: “The … heart trouble … so developing or manifesting itself … shall in no case be attributed to any disease existing prior to that development or manifestation.”

Keven’s attorney would have to prove that Keven is a firefighter — something he could establish without much difficulty (showing up at the Board with a fire axe is not recommended, even if you believe you’ve got “an axe to grind”). Then, he would have to prove that Keven’s injury could be considered “heart trouble.” This should be no problem, considering the fact that case-law has established that there are very few non-orthopedic injuries that might be considered not heart trouble (Muznik v. Workers’ Comp. Appeals Bd. (1975)).

But what about that pesky requirement of “in the service of the office …” as required by Labor Code Section 3212? If the firefighter is sitting in his and his brother’s gazebo, drinking coffee on a beautiful Sunday morning and indulging in that antique of an information-delivery device that people so often read, is he really in the service of the fire department?

For example, the Court of Appeal in Geoghegan v. Retirement Board (1990) upheld a retirement board’s denial of benefits for a firefighter who sustained a heart attack while skiing.

Now, before the applicants’ attorneys out there start mumbling something about a ski-lodge burning and a San Francisco firefighter being called in to ski down the slopes and shovel ice onto the flames, your humble author assures you, this was a vacation. The treating physician found that the heart attack was caused by the altitude and Mr. Geoghegan had recently passed the fire department’s physical exams with skiing flying colors.

The Board of Retirement had rejected Geoghegan’s application for retirement benefits, and he appealed. There, the Court of Appeal rejected Geoghegan’s argument that Labor Code section 3212 applied and that he should be, at that very moment, counting his money instead of appealing his case, because the trial court had found that “the conclusion is inescapable that plaintiff’s disability was due to the myocardial infarction caused by the cold and altitude encountered while skiing.”

Previous decisions, as cited by the Geoghegan Court, included Turner v. Workmen’s Comp. App. Bd. (1968) and Bussa v. Workmen’s Comp. App. Bd. (1968). In Turner, a police officer’s heart attack sustained while on duty after a day off spent abalone fishing was found non-industrial, and the presumption of Labor Code Section 3212.5 was rebutted. In Bussa, a firefighter’s exertions on a second job were used to rebut the presumption of industrial causation for his heart attack.

Well, Keven’s attorney could easily fire back that those three cases can be distinguished because they don’t touch on the anti-attribution clause (“[t]he … heart trouble … so developing or manifesting itself … shall in no case be attributed to any disease existing prior to that development or manifestation.”) And, as the Agreed Medical Evaluator in Keven’s case had found that 100% of the disability was caused by a congenital heart defect, that leaves (let me get my calculator here …) 0% available for causes not “attributed to any disease existing prior to that development or manifestation.”

Geoghegan was already a firefighter when he sustained his heart attack; Turner was already a police officer when he sustained his heart attack; and Bussa was already a firefighter when he had his heart attack. On the other hand, each of these cases showed an injury attributed to something other than a condition in existence prior to the start of the applicant’s career with the fire or police department.

Keven, on the other hand, was not exerting himself at all — he was having coffee with his twin brother and their respective families over a relaxing Sunday breakfast.

But doesn’t something seem strange about sticking the fire department with the bill for a condition which existed at birth? After all, we’re talking about medical care and temporary disability and permanent disability and maybe even a pension. That’s not to mention the litigation costs. The city in which Keven is a firefighter could be deprived of a firetruck or several firefighters’ salaries if it is liable for Keven’s stroke.

Your humble author directs you to the recent case of Kevin Kennedy v. City of Oakland. Mr. Kennedy, a firefighter, had sustained a stroke while he was off work and filed a workers’ compensation claim against the City of Oakland, reasonably arguing that the stroke was “heart trouble” as contemplated by Labor Code section 3212. After an Agreed Medical Evaluator found that Mr. Kennedy’s stroke was entirely caused by a congenital heart anomaly, and had nothing to do at all with any work-related activities or trauma, the workers’ compensation judge found that the City of Oakland was not liable for the injury.

Mr. Kennedy’s attorney made a fairly logical argument: Labor Code Section 3212 prohibits the attribution of heart trouble to “any disease existing prior to that development or manifestation” of heart trouble. Additionally, the same Labor Code section requires heart trouble in firefighters to be presumed industrial, although this presumption may be rebutted by other evidence. Here, there is no evidence available with which to rebut this presumption, because the AME found that 100% of the causation should be attributed to the congenital heart condition.

The workers’ compensation Judge, however, found that Mr. Kennedy could not recover — based on the opinions of the AME, the stroke had absolutely nothing to do with Mr. Kennedy’s employment.

Applicant petitioned for reconsideration, and the Workers’ Compensation Appeals Board granted reconsideration, reasoning that Mr. Kennedy’s patent foramen ovule was a condition existing prior to the development or manifestation of the stroke, and that Labor Code Section 3212 necessitated a finding of compensability. The Court of Appeal denied defendant’s petition for a writ of review.

In issuing its opinion, the Workers’ Compensation Appeals Board was consistent, echoing a similar decision in the matter of Karges v. Siskiyou County Sheriff, finding a deputy sheriff’s congenital heart condition compensable under Labor Code section 3212.5.

So … what’s to be done? Common sense and a basic inclination for fairness militate against this outcome. We’re not talking about a weak heart being aggravated by work conditions, but rather a firefighter at peak physical fitness succumbing to a condition with which he was born and an illness in which his work played no part. It’s entirely possible that if Mr. Kennedy had spent his life behind a desk, much like his imaginary twin brother Kenny, his heart would have been strained by office junk food and a sedentary lifestyle, much like your humble author’s.

As promised, here are a few crackpot arguments to be used only by the most desperate in such cases. Your humble author doesn’t know if these will work, but if they are the only alternative to writing a big check, perhaps they are worth exploring.

  1. As with the Karges decision, the argument should be raised that Labor Code Section 4663 is the more recent law, and therefore reflects the more current legislative intent. In litigated matters, judicial authority should be used to further this Legislative intent and not find impairment caused entirely by non-industrial factors to be compensable.
  2. In the writ denied case of Michael Yubeta v. Workers’ Compensation Appeals Board, a corrections officer’s claim for heart disease was ruled non-compensable when the Agreed Medical Evaluator found cardiovascular disease manifested prior to the start of his tenure with the Department of Corrections. In the Kennedy, matter, the defense might argue that the patent foramen ovule is the “heart trouble” contemplated by section 3212, and it manifested itself at birth, before the term of service with the fire department. Mr. Kennedy’s stroke, being directly and exclusively caused by this manifestation, should not be presumed compensable.

    After all, the poor guy had a hole in his heart — not in the sense that he couldn’t love or open up to other people, but the wall to his heart had an actual hole. Studies had shown that this practically guaranteed that he would sustain a stroke at some point in his life. (Understandably, this one is a stretch).

  3. Webster’s dictionary defines “attribute” as “to regard as resulting from a specified cause.” However, as the Labor Code does not use the words “apportionment” and “attributed” interchangeably, we can only suppose that they mean two different things. So, while section 3212 prohibits us from attributing heart trouble for purposes of AOE/COE (Arising Out Of Employment/In The Course Of Employment), perhaps we are still permitted to “apportion” the heart trouble to non-industrial causes. If such is the case, the Kennedy matter should have found the stroke compensable, and yet apportioned 100% to non-industrial causes.

    In other words, Mr. Kennedy should get the medical treatment but not the permanent disability indemnity.

The Insurance Rate Public Justification & Accountability Act – Does It Get To The Real Problem?

A recent press release states, “The California Secretary of State announced today that a ballot initiative to require health insurance companies to publicly justify and get approval for rate increases before they take effect has qualified for the 2014 ballot.” The release goes on to state, “the initiative would require health insurance companies to refund consumers for excessive rates charged as of November 7, 2012 even though voters will not vote on the initiative until a later ballot.”

The President of Consumer Watchdog stated, “Californians can no longer afford the outrageous double-digit rate hikes health insurance companies have imposed year after year, and often multiple times a year. This initiative gives voters the chance to take control of health insurance prices at the ballot by forcing health insurance companies to publicly open their books and justify rates, under penalty of perjury. Health insurance companies are on notice that any rate that is excessive as of November 7th 2012 will be subject to refunds when voters pass this ballot measure.” This effort was supported by State Senator Dianne Feinstein and California Insurance Commissioner David Jones.

Is there more to the story? Is there something else we should be considering? Is it really this obvious that this is solving a major concern or problem?

As with most sensational statements, there is far more to consider as it relates to the affordability of health insurance. As a professional actuary for more than 41 years, I am afraid there is far more to this story than has been described by the proponents of this initiative. The remainder of this article will address some of the most obvious issues.

Do Carriers Intentionally Price Gouge Their Customers?
Although there always seems to be exceptions to the norm, carriers set rates based upon their historical costs and a reasonable projection of what might happen in the future. These rates are developed by professional actuaries who are subject to Guidelines for Professional Conduct that govern their analysis and review methodologies.

Rates are not made subjectively, but rather based upon extensive analysis of what costs have been. Actuaries spend endless hours reviewing the claims experience, analyzing utilization and cost levels, developing estimates of inflationary trends, analyzing operating costs and carefully projecting what future rates will need to be in order to cover costs and produce needed margins. When prior rates are inadequate, premium rates are increased on particular plans to avoid losses.

This process is very systematic and based upon detailed actuarial analyses. This process is not arbitrary or capricious, but can be challenging for some product lines. I know of no competent carrier that intentionally tries to gouge its customers, but rather the opposite. Carriers work hard to find ways to provide the greatest value to their customers and keep rates as low as possible.

Why Do Premium Rates Go Up So Much?
There are many reasons why rates increase but the most prevalent reason is the high cost of health care. Most of the premium goes to pay health care bills. Under health care reform at least 80% – 85% of the premium goes to pay for health claims. The carrier has little control over these costs other than their efforts related to negotiating discounts and in the impact of their care management activities. The carrier is subject to the prices charged by health care providers. Hospitals charge what they want to charge and carriers try to keep these down by negotiating and maintaining discounts from billed charges.

Since the government sponsored programs pay deeply discounted prices for Medicaid and Medicare members, sometimes below actual cost of care, the carriers are subject to a significant cost shift, paying prices much higher than their governmental counterparts. When providers increase their prices, carrier costs automatically increase. Other than the limited impact of regulation on prices for Medicaid and Medicaid patients, there is no oversight of what providers charge for their services. The fear by providers of the pending impact of health care reform and how it will expand the Medicaid population has resulted in some dramatic increases in provider charge levels to carriers.

In addition to the increases in provider costs, premium rates increase for other factors which include:

  • Aging: as members age, their costs increase as much as 1.5% – 2.0% per year
  • Selection bias at time of lapse: there is a strong tendency for a bias in lapsed or terminated members. The healthier members tend to lapse more quickly than others since they are more easily able to find alternate coverage. This tends to increase average costs about 1% – 1.5% per year, especially on individual and small group coverage.
  • Impact of underwriting: As individuals are reviewed by carriers for medical conditions at time of enrollment, more healthy individuals are enrolled. As time passes, the impact of this underwriting selection wears off and as a result the average costs increase by as much as 2% – 3% per year.
  • Deductible leveraging: As costs have increased over the years, individuals have preferred higher deductible programs to keep their costs down. Effective trend rates are higher on higher deductible programs based upon a concept known as deductible leveraging, even though the underlying trend is identical to that for a lower deductible program. For example the effective trend for a $3,000 could be a third larger than for a lower deductible. For example, for an underlying trend of 10%, the leveraged trend for a $3,000 deductible is 13.2% or 3.2% greater than what is expected.
  • Utilization trend: In addition to changes in what providers charge, the actual rate by which patients consume services is higher each year, by as much as 1% – 1.5% per year. Some services increase more rapidly.
  • Unit costs vs. CPI: National CPI statistics for health care are based upon a common market basket of services and do not reflect a reasonable norm from which to expect health care services to follow. Recent CPI statistics show a general economic trend of no more than 3%, with their medical statistics showing 5% – 6%. Carrier trends have been even higher for many reasons including the above factors.

The Unique California Situation
In most states the insurance commissioner has the authority to regulate rates carriers use for some of their products. Historically in California, the commissioner’s authority was somewhat limited. They required filing of some rates, but did not have the authority to stop a carrier from using a proposed rate or rate increase. They were able to exert some pressure, many times strong pressure, to stop a carrier from large rate increases, but if a carrier wanted to proceed they usually had the right to do so.

In recent years, the department resorted to some public pressure, some negative PR, and essentially threats to the carriers. The proposed initiative gives them the “authority” to do something meaningful, not just veiled threats. So as far as that is concerned, it is good to give more real enablement to do something meaningful to hold all carriers accountable for their actions. I do not believe there is any real concern about carrier behavior, at least among the major players.

The Real Issue
It’s always better to deal with the real cause of the problem, not just undesirable symptoms. If headaches are caused by a brain tumor, it is better to fix or remove the tumor, not just take a stronger pain killer. If the Insurance Rate Public Justification and Accountability Act is to fix the healthcare cost problem, then it is taking action on a symptom of the problem, not the real cause.

As discussed above, there are multiple reasons why health insurance premiums increase. Regulating the carriers alone doesn’t solve any of the underlying problems. It restricts the behavior of one of the middlemen. It doesn’t get to the core problem. It definitely will have an impact, but if not kept in check, will create perhaps even greater problems, potentially driving some carriers out of the market and perhaps transferring more of the problem to additional government bureaucracy.

Although the author is not a big fan of increased government regulation, some regulation or legislation focused on the prices providers are able to charge for services might be more beneficial. At least the major driving force of premium rate increases would be more stable and controlled which would keep premiums more in line.

Proposed Solution
Although fraught with additional challenges, my favorite solution to the provider charge driver is a shift from today’s system which has different prices for different payers to a system where all payers pay the same price (i.e., called the all-payer system). No matter what type of coverage a person has, the carrier/administrator would be charged the same price. This means that there would be no bias against government payers vs. private sector payers. This would increase the cost for the government for Medicaid, but would substantially reduce what the private sector pays.

Our firm’s analysis shows that setting the prices at Medicare payment levels for all patients would actually be a close proxy for a reasonable price. Private sector prices would drop in most markets by 15% – 17%. Medicaid prices would be increased to a reasonable Medicare payment level. Providers would have no reason not to take any patient since each patient brings the same revenue.

This would also level the playing ground for managed care plans and carriers since network differences would be eliminated. The plans could compete on more important items such as care management effectiveness, clinical efficacy, comparative effectiveness, and quality of the provider network.

Under this approach, Medicare would be the agency essentially regulating the reasonableness of prices. Significant administrative costs would be eliminated from both the carriers and the providers.

There would be a cost to the various states for raising the price they have to pay for Medicaid beneficiaries since they often have to pay 50% of the cost of these patients. Some of this could be offset by some increased federal payments from the savings generated in the system.

Bottom Line
California’s proposed initiative is interesting but probably not as big of a deal as it could be. Here’s hoping for some “real” legislation that could save more of us more “real” dollars and eliminate some of the administrative costs of the current system.

The Medical Provider Network Battle Continues: Life after Valdez

In an attempt to bring some finality to the issues presented in the Valdez decision (at least for the time being), the California Court of Appeal recently addressed the admissibility of non-Medical Provider Network (MPN) reports.

In their May 29, 2012 decision (Elayne Valdez v. WCAB and Warehouse Demo Services, 2012 Cal. App. Unpub. LEXIS 4023), the Court of Appeal reversed a Workers' Compensation Appeals Board holding that precludes the use of non-Medical Provider Network treating physician reports. They concluded that “If the Legislature intended to exclude all non-MPN medical reports, the Legislature could have said so; it did not.”

In reaching their decision, the court partially dissected Labor Code § 4616 to address what they believe is the true intent behind the establishment of Medical Provider Networks. In particular, they focused attention on Labor Code § 4616.6, which discusses the limitation of additional examinations beyond that which is found in Labor Code § 4616.4. § 4616.4 describes in detail the process of obtaining independent medical examinations after the applicant has sought out second and third opinion examinations upon disagreement with treatment recommendations or medical determinations of the primary treating physician.

The court also focused on the Tenet decision (Tenet/Centinela Hosp. Medical Ctr. v. Workers' Comp. Appeals Bd. (2000) 80 Cal.App.4th 1041) and argued that the case does not imply that the applicant cannot select someone outside the Medical Provider Network to serve as the primary treating physician. They concluded that Tenet does not support the conclusion that “[a]ccordingly, the non-MPN reports are inadmissible to determine an applicant's eligibility for compensation.” Valdez, supra, 2012 Cal. App. Unpub. LEXIS 4023, 15.

In sum the Valdez decision annulled the lower court ruling and remanded the case back to the lower court for further proceedings. On its face, this seems like a huge victory for the applicant. But is it really? Did the Court of Appeal provide us with any information we did not already know? The original Valdez decision focused on the attempts of one applicant to bring in non-Medical Provider Network reporting to the claim, despite being provided with the opportunity for treatment within the Medical Provider Network. The Court of Appeals appears to expand the original Valdez findings. Regardless, if non-Medical Provider Network reports are to be permitted, then the defense against these reports simply shifts focus.

In preparation for this article, I found out that my colleague Michael D. Peabody of Bradford & Barthel's Tarzana office was in the process of litigating a nearly identical case I was working on that involved non-Medical Provider Network care.

In both cases, the applicant was participating in an established Medical Provider Network and was receiving care from a Medical Provider Network physician. In both cases, this promptly ended when the applicant obtained representation. Treatment promptly started with a non-Medical Provider Network physician.

We are both litigating the admissibility of these reports for purposes of further medical discovery, settlement, and for consideration and review by the Workers' Compensation Appeals Board should our cases go all the way to trial. We both are ultimately asking for the judge to either find the reports inadmissible, or have applicant's attorney to agree that payment will be the responsibility of the applicant.

On my current case, applicant's attorney has demanded I notify my client to re-start benefits and to allow treatment with his selected physician in light of this decision. I informed him I would be doing no such thing. As our case is nearing the end of litigation, my strategy and thoughts can be mentioned here.

The Court of Appeal identified a few of the types of non-Medical Provider Network reports which may be considered. They mention treating physician reports to the Agreed Medical Evaluator (AME) or Qualified Medical Evaluator (QME) under Labor Code § 4062.3(a). Self procured medical reporting under Labor Code § 4605 is permitted. A properly pre-designated treating physician prior to the start of a claim is another. Court ordered evaluations and independent medical examination reports may also be allowed. Treating physician reports obtained when the Medical Provider Network is not properly established, or notice under the Knight decision is not properly provided is another option. And, we have the AME/QME report process under Labor Code § 4061 and § 4062.

Again, these are all reports which were already known to be admissible. The trick is to identify which of these categories the non-Medical Provider Network care falls under. If the reporting does not fall under one of these categories, you should always consider litigation on the admissibility of the report(s).

It is important to remember that the original Valdez decision focused time and time again on the fact that the applicant left an established Medical Provider Network to obtain non-Medical Provider Network care. The court took issue with applicant attorney's attempt to circumvent the established program, only to argue later that the care was self-procured. In reality, the applicant simply began treatment outside of the Medical Provider Network.

The Workers' Compensation Appeals Board initially found that the medical care sought in that particular case was inadmissible because it strayed from within the Medical Provider Network. The Court of Appeal punted on the issue of proper notice to the applicant. As did the Workers' Compensation Appeals Board when deciding the original decision. Lip service to proper notification was provided, and it was “assumed” the notices to the applicant were proper.

If your goal is to defend non-Medical Provider Network care that is not self-procured, not ordered by the court and not part of the medical-legal process, then your Medical Provider Network house must be in order.

Always Follow The Knight Decision And Establish Your Medical Provider Network
The Workers' Compensation Appeals Board stated in their original opinion that “it is those applicants who have chosen to disregard a validly established and properly noticed MPN, despite the many options to change treating physicians and to challenge diagnosis or treatment determinations within the MPN, who have removed themselves from the benefits provided by the Labor Code.” Elayne Valdez v. Warehouse Demo Services, America 76 Cal. Comp. Cases 970, 980.

Employers are required to provide workers' compensation information to their employees. Their duty to provide notice of workers' compensation information begins prior to an injury. New employees are required to be provided with written information about the workers' compensation process and where and how to obtain medical treatment at the time of hire or before the end of the first pay period. Lab. Code § 3551; Cal. Code Regs., tit. 8, § 9880.

Other employees must be provided documentation prior to injury as well, including at the time of transfer into an existing Medical Provider Network, or at the time a new Medical Provider Network is created. The employer must also post the California State approved Notice of Information about the workers' compensation process and where and how to obtain medical treatment. Lab. Code § 3550; Cal. Code Regs., tit. 8, § § 9881 and 9881.1. If the employer fails to do so, the employee is permitted to treat with their personal physician. Lab. Code, § 3550(e).

Second, notice must be provided at the time of injury. Under Labor Code § 5401 and § 5402, within one working day of receiving notice of injury, the employer must provide the applicant with a claim form, information about benefits available to the applicant and the workers' compensation process. For additional reference, see California Code Regs., tit. 8, § § 9810 through 9812.

Additionally, the employer is required to give the applicant notice of information about use of the Medical Provider Network and provide them information on the right to be treated by a Medical Provider Network physician of choice after the first visit. They must also provide information on the Medical Provider Network and how to access it, and must also discuss the second and third opinion process.

Establishment and proper documentation of the Medical Provider Network is important. We frequently see challenges to documentation that was allegedly not provided to the applicant at the proper time. Or, claims that the documentation was incomplete, or in an improper language. The challenges will only increase due to extra scrutiny. Attorneys will challenge the Medical Provider Network paperwork as an attempt to treat outside of the Medical Provider Network. It becomes even more important for employers to work with carriers and Third Party Administrators to document when and how paperwork was provided.

I cannot stress enough the importance of adhering to these guidelines in order to mount a proper Medical Provider Network defense. This is the foundation which all additional layers of defense are built upon. While defects can be corrected (See the Helen B. Jakes panel decision and Babbitt v. Ow Jing (2007) 72 Cal.Comp.Cases 70 (Appeals Board en banc)), one should not make it a point to start to defend their position by cleaning up a mess.

Look At The Other Non-MPN Treatment Options
Fortunately, most of the remaining options for non-Medical Provider Network care are simple to review and digest. An independent medical examination, or other discovery ordered by the Court is just that, a court order. As long as the decision is sound and rational, the discovery will likely move forward.

The § 4061/4062 process is another large animal that has many facets and issues. This does not need to be addressed in detail, except to make mention that the request for a Qualified Medical Evaluator must be made after a valid Agreed Medical Evaluator offer is rejected or not responded to. The timeframes under Messele must be adhered to. Replacement panels must comply with the code of regulations. The strike process and applicable guidelines must be followed.

Information presented to the Agreed Medical Evaluator or Qualified Medical Evaluator is an area that will bring about litigation as a result of this decision. If a Medical Provider Network was not properly established, treatment can commence until the issue is resolved (see above). And, we have instances where the Medical Provider Network cannot be enforced due to limitations in the number of physicians or specialties in a geographic region.

Argue Against The Claim Of “All Relevant Medical Evidence” Being Admissible
The Court of Appeal spent a decent amount of time addressing Labor Code § 4062.3(a) and the language “any party may provide to the qualified medical evaluator selected from a panel any of the following information: (1) Records prepared or maintained by the employees treating physician or physicians (2) Medical and nonmedical records relevant to determination of the medical issue”.

If non-Medical Provider Network reports are to be submitted in this manner, then we must first clarify how they are being submitted and what category they fall under. One option for applicants is to argue Labor Code § 4600 and treatment “that is reasonably required to cure or relieve the injured worker from the effects of his or her injury.” Which, they claim includes non-Medical Provider Network treatment reports.

The Court of Appeal focused quite a bit on legislative intent and the use of particular wording in prior decisions. We can now apply the same method of thinking. The Court of Appeal may have clarified the use of non-Medical Provider Network care, but they did not do two things. First, they did not do away with Medical Provider Networks, or their relevance. They did not say a Medical Provider Network could not be enforced and benefits made contingent on compliance within it. Second, they did not provide for non-Medical Provider Network reports to be admissible aside from the options listed above.

As an added bonus, I included some other non-Medical Provider Network options for reference. Contrary to the opinion of a growing number of applicant attorneys, the 5/29/12 decision did not say that any non-Medical Provider Network treatment was permitted. It simply clarified what non-Medical Provider Network treatment is permitted.

Labor Code § 4605 And Self-Procured Medical Treatment
In the limited time since 5/29/12, and even prior to this decision, I have seen this as the most contentious and likely litigated issue. As my esteemed colleague Mr. Peabody so eloquently stated, there will be a thin line between the interpretation of what is “self-procured” and lien claimants who risk not being paid.

In the case I am presently litigating, this is an important distinction. Labor Code § 4605 specifically mentions care provided at the applicant's own expense will be permitted. The applicant was treating with a non-Medical Provider Network provider despite being provided with proper documentation and compliance under the Knight decision. They started their claim with treatment in the Medical Provider Network. Our Medical Provider Network will stand up under scrutiny.

When I filed for a conference to address the non-Medical Provider Network care, applicant's counsel produced a miraculous Permanent & Stationary report just prior to the conference. His new argument was that the matter was now moot and we could proceed with settlement or review by the Qualified Medical Evaluator given our objection to the report.

Not so fast. I argued that if we are to go to a Qualified Medical Evaluator, I did not believe the reporting of the non-Medical Provider Network should be reviewed. He argued the care was self-procured and alternatively, it was a lien issue. This is a complete contradiction. How can treatment be paid for by his client, yet there is also a demand that we pay?

When I asked for something in writing to confirm that the lien would be withdrawn as the applicant would assume financial responsibility for the “self procured” medical care, applicant's attorney would not agree to this.

At our hearing, the Judge was hesitant to set the matter for further litigation as well. My argument remained the same the payment of the services and person responsible for the same must be resolved prior to further discovery or settlement. If the medical reporting truly is self-procured, then the reports are admissible and we can continue. If the treatment was provided on a lien basis, then I have a Medical Provider Network argument to address, and I wanted a judge to rule on whether or not we are responsible for payment, or if the reports were admissible. The matter cannot be deferred until after settlement as a medical-legal evaluator may comment on them. And if I consider any of the disputed reporting for settlement, then I give merit to the charges and open my client to exposure.

To clarify, we must distinguish between treatment resulting in a lien and self procured care. Treatment that results in a lien includes a demand that the defendant pay for the medical care.

The medical provider is arguing that the care is reasonable, necessary and proper. They have a dispute with the complete lack of payment or approval, or a partial denial of payment or approval. At the conclusion of the claim, they expect the Defendant to come out of pocket to resolve their billing dispute.

Self-procured care is quite different. Labor Code § 4605 specifically mentions the cost of the self procured care is to be the responsibility of the applicant, not the defendant. There is also a difference between “self-procured” care and “free choice” in treatment.

If the Medical Provider Network in question is properly established and noticed, the employer retains significant medical control. Changes of treating physicians within the Medical Provider Network and second or third opinions are the options the applicant has to exercise their “free choice” within the Medical Provider Network itself.

Contrary to the narrow interpretation of Labor Code § 4903(b), medical expenses incurred under the Labor Code § 4600 series should not include § 4605 specifically. Why? The right to reimbursement for self-procured medical expense arises only when the employer has neglected or refused to exercise their duty to provide medical treatment. This generally occurs in an outright claim denial. The Medical Provider Network treatment they are offering and providing is satisfying their obligation to provide medical care. Referring to the original Valdez decision, recall that the employer provided multiple options to the applicant within their Medical Provider Network. The applicant ignored the offer.

So What Can Defendants Do?
Multiple steps to a proper defense have been addressed above. Further recommendations are as follows:

  • Never be afraid to litigate an issue in which you believe you are correct, and in which you have solid case law and the Labor Code on your side. Despite various interpretations, I do not see the most recent decision by the Court of Appeal discarding Medical Provider Networks. They remain a powerful and effective tool defendants should use.
  • As a practice tip, the Workers' Compensation Appeals Board can take judicial notice of the Medical Provider Networks listed on the State web site of participating programs.
  • Involve the employer in the process. Make sure they provide proper documentation of their attempts to provide the proper paperwork in compliance with Knight. Simply having someone testify as to the proper procedure is not always sufficient. Maintaining written documentation in a personnel file is always best.
  • Keep quality claims file documentation. I always recommend sending important documents, even “form” documents with a proof of service to verify the document and any attachments included were actually sent.
  • Fix Medical Provider Network defects as seen in the Jakes and Babbit decisions. Be aware of any claims for “chronic” conditions during this process, as it could affect your ability to return the applicant to the Medical Provider Network.
  • Make sure your defense attorney is aggressive and researches the issues thoroughly.
  • Attempt to compromise if there is some error in the notification process or Medical Provider Network specialists are not available in the region of the applicant.
  • If the applicant insists the care is self-procured, then obtain this in writing before you agree to send any documentation for review by a medical provider or settle the claim.
  • If possible, try to get the lien withdrawn.
  • If you have a properly established Medical Provider Network and applicants refuse to use it, make the liens their problem — not yours. Go to trial on the issue of whether non-network treatment is truly “at the applicant's own expense.”
  • If the reports are sent for review without consent, argue the admissibility of not only the non-Medical Provider Network reporting, but also of any further report that is tainted.

Valdez may be remanded at this point, but it is not dead. And the core issues presented in the original case still stand strong. Use them to your advantage.

With special thanks to Michael D. Peabody, Esq.