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Utilization Review

Calif. Case Could Redefine Peer Review

A lawsuit being argued in California could drastically change UR workers' comp statutes and drive costs through the roof.
By: | January 27, 2017 • 4 min read

A case in the California Supreme Court could disrupt the state’s workers’ compensation medical treatment approval process and expose utilization review doctors to medical malpractice liability, said California attorneys on both sides of the issue.

“The entire workers’ compensation community should take notice,” said Mike Lemrick, senior director, operations utilization review and IME at Coventry, because “although the high court is unlikely to uphold the appellate court’s decision, the consequences would turn the workers’ comp process upside down.”

The civil case in question is Kirk King v. CompPartners Inc. et al., in which a husband and wife sued a utilization review (UR) company, CompPartners Inc., and two of its employee physicians, primarily for medical malpractice.

Bernie Baltaxe, partner, Smith & Baltaxe, LLP

King suffered a back injury in 2008, and his treating physician prescribed the sedative Klonopin for depression and anxiety related to chronic pain. Two years later, a CompPartners utilization review physician, an anesthesiologist, determined the Klonopin was medically unnecessary.

When the CompPartners physician decertified the Klonopin, King was obliged to stop taking it or pay for it out of pocket. King’s suit alleged that his sudden withdrawal resulted in four seizures, which in turn resulted in additional physical injuries.

The trial court sided with CompPartners, and the Court of Appeals partially reversed the lower court’s decision. The decision to decertify was within the exclusive jurisdiction of workers’ compensation, said Bernie Baltaxe, partner, Smith & Baltaxe, LLP, a San Francisco law firm specializing in workers’ compensation cases, but the failure to warn was not.

Baltaxe, who filed a brief on the case on behalf of the California Applicants’ Attorneys Association, said the case is noteworthy because it raises questions about:

  • Duty of care for UR doctors
  • The exclusive remedy of workers’ compensation
  • The UR process and preemption

Who Bears Duty of Care?

Among the reasons this is a significant case, Lemrick said, is that it establishes a doctor-patient relationship with the UR peer reviewer.

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Contrary to the appellate court’s findings, he said, UR doctors’ role is not a doctor-patient relationship and so is not subject to duty of care obligations. Instead, their role is limited to “certifying, modifying, or denying treatment per medical treatment guidelines as established by the state.”

“The UR doctor never treats the injured worker or sees the entire medical file,” he said, only those the treating physician provides for episodic review of a specific treatment.

“The UR doctor isn’t allowed to make a diagnosis, a treatment plan or provide alternate treatments.”

“If upheld, it would drastically change the UR workers’ comp statutes and allow civil tort duties. It would change workers’ comp as we know it.” — Mike Lemrick, senior director, operations utilization review and IME, Coventry

Baltaxe disagrees. “When a physician is engaged in medicine and renders a professional opinion that affects treatment,” he said, “there’s a doctor-patient relationship.”

For purposes of malpractice, the court indicated that an essential element of a cause of action for malpractice is the existence of a doctor-patient relationship in order to give rise to a duty of care.

In this case, Lemrick said, “I believe the treating physician bore responsibility for the medical treatment and withdrawing King from Klonopin.”

That decision was made by the UR doctor, Baltaxe said. “There’s no methodology for the treating physician to ask for time to wean.” An appeal can take months, and an abrupt cessation of Klonopin can results in seizure in the first few days.

The UR doctors did, in fact, have a duty to warn, Baltaxe said. “When physicians make a medical recommendation, they’re required to warn of potential side effects. They also have obligation to not take action that will cause harm.”

Failure to warn does not fall within the exclusive remedy or workers’ compensation, he said, and injured workers should be permitted to seek legal recourse outside workers’ compensation statutes.

Workers’ Comp As We Know It

This could be a source of chaos and confusion in California, Lemrick said. If the appellate court’s decision is upheld, he said, “it will be more costly for companies do business in California because UR costs will go through the roof.”

Mike Lemrick, senior director, operations utilization review and IME, Coventry

If the duty of care for physicians who never sees a patient is upheld, all physician reviewers will require extra liability and malpractice insurance. “It will drive workers’ comp costs higher for California and delay care for injured workers,” Lemrick said.

Will the high court’s decision spill over to other states?

Absolutely, said Baltaxe. “Until this case came along, I hadn’t heard of any workers’ comp doctor immunized against negligence.”

Hopefully, he said, the state Supreme Court will rule that the decision to abruptly stop Klonopin does not fall within the exclusive remedy and that the doctor failed in his duty to warn. “All states should take notice.”

Lemrick is equally confident in the reverse outcome.

“If upheld,” he said. “It would drastically change the UR workers’ comp statutes and allow civil tort duties. It would change workers’ comp as we know it.”

Susannah Levine writes about health care, education and technology. She can be reached at [email protected]

More from Risk & Insurance

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Risk Focus: Workers' Comp

Do You Have Employees or Gig Workers?

The number of gig economy workers is growing in the U.S. But their classification as contractors leaves many without workers’ comp, unemployment protection or other benefits.
By: and | July 30, 2018 • 5 min read

A growing number of Americans earn their living in the gig economy without employer-provided benefits and protections such as workers’ compensation.

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With the proliferation of on-demand services powered by digital platforms, questions surrounding who does and does not actually work in the gig economy continue to vex stakeholders. Courts and legislators are being asked to decide what constitutes an employee and what constitutes an independent contractor, or gig worker.

The issues are how the worker is paid and who controls the work process, said Bobby Bollinger, a North Carolina attorney specializing in workers’ compensation law with a client roster in the trucking industry.

The common law test, he said, the same one the IRS uses, considers “whose tools and whose materials are used. Whether the employer is telling the worker how to do the job on a minute-to-minute basis. Whether the worker is paid by the hour or by the job. Whether he’s free to work for someone else.”

Legal challenges have occurred, starting with lawsuits against transportation network companies (TNCs) like Uber and Lyft. Several court cases in recent years have come down on the side of allowing such companies to continue classifying drivers as independent contractors.

Those decisions are significant for TNCs, because the gig model relies on the lower labor cost of independent contractors. Classification as an employee adds at least 30 percent to labor costs.

The issues lie with how a worker is paid and who controls the work process. — Bobby Bollinger, a North Carolina attorney

However, a March 2018 California Supreme Court ruling in a case involving delivery drivers for Dynamex went the other way. The Dynamex decision places heavy emphasis on whether the worker is performing a core function of the business.

Under the Dynamex court’s standard, an electrician called to fix a wiring problem at an Uber office would be considered a general contractor. But a driver providing rides to customers would be part of the company’s central mission and therefore an employee.

Despite the California ruling, a Philadelphia court a month later declined to follow suit, ruling that Uber’s limousine drivers are independent contractors, not employees. So a definitive answer remains elusive.

A Legislative Movement

Misclassification of workers as independent contractors introduces risks to both employers and workers, said Matt Zender, vice president, workers’ compensation product manager, AmTrust.

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered.”

Misclassifying workers opens a “Pandora’s box” for employers, said Richard R. Meneghello, partner, Fisher Phillips.

Issues include tax liabilities, claims for minimum wage and overtime violations, workers’ comp benefits, civil labor law rights and wrongful termination suits.

The motive for companies seeking the contractor definition is clear: They don’t have to pay for benefits, said Meneghello. “But from a legal perspective, it’s not so easy to turn the workforce into contractors.”

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered in the eyes of the state.” — Matt Zender, vice president, workers’ compensation product manager, AmTrust

It’s about to get easier, however. In 2016, Handy — which is being sued in five states for misclassification of workers — drafted a N.Y. bill to establish a program where gig-economy companies would pay 2.5 percent of workers’ income into individual health savings accounts, yet would classify them as independent contractors.

Unions and worker advocacy groups argue the program would rob workers of rights and protections. So Handy moved on to eight other states where it would be more likely to win.

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So far, the Handy bills have passed one house of the legislature in Georgia and Colorado; passed both houses in Iowa and Tennessee; and been signed into law in Kentucky, Utah and Indiana. A similar bill was also introduced in Alabama.

The bills’ language says all workers who find jobs through a website or mobile app are independent contractors, as long as the company running the digital platform does not control schedules, prohibit them from working elsewhere and meets other criteria. Two bills exclude transportation network companies such as Uber.

These laws could have far-reaching consequences. Traditional service companies will struggle to compete with start-ups paying minimal labor costs.

Opponents warn that the Handy bills are so broad that a service company need only launch an app for customers to contract services, and they’d be free to re-classify their employees as independent contractors — leaving workers without social security, health insurance or the protections of unemployment insurance or workers’ comp.

That could destabilize social safety nets as well as shrink available workers’ comp premiums.

A New Classification

Independent contractors need to buy their own insurance, including workers’ compensation. But many don’t, said Hart Brown, executive vice president, COO, Firestorm. They may not realize that in the case of an accident, their personal car and health insurance won’t engage, Brown said.

Matt Zender, vice president, workers’ compensation product manager, AmTrust

Workers’ compensation for gig workers can be hard to find. Some state-sponsored funds provide self-employed contractors’ coverage.  Policies can be expensive though in some high-risk occupations, such as roofing, said Bollinger.

The gig system, where a worker does several different jobs for several different companies, breaks down without portable benefits, said Brown. Portable benefits would follow workers from one workplace engagement to another.

What a portable benefits program would look like is unclear, he said, but some combination of employers, independent contractors and intermediaries (such as a digital platform business or staffing agency) would contribute to the program based on a percentage of each transaction.

There is movement toward portable benefits legislation. The Aspen Institute proposed portable benefits where companies contribute to workers’ benefits based on how much an employee works for them. Uber and SEI together proposed a portable benefits bill to the Washington State Legislature.

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Senator Mark Warner (D. VA) introduced the Portable Benefits for Independent Workers Pilot Program Act for the study of portable benefits, and Congresswoman Suzan DelBene (D. WA) introduced a House companion bill.

Meneghello is skeptical of portable benefits as a long-term solution. “They’re a good first step,” he said, “but they paper over the problem. We need a new category of workers.”

A portable benefits model would open opportunities for the growing Insurtech market. Brad Smith, CEO, Intuit, estimates the gig economy to be about 34 percent of the workforce in 2018, growing to 43 percent by 2020.

The insurance industry reinvented itself from a risk transfer mechanism to a risk management mechanism, Brown said, and now it’s reinventing itself again as risk educator to a new hybrid market. &

Susannah Levine writes about health care, education and technology. She can be reached at [email protected] Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]