The last several weeks I’ve had to follow the California workers’ comp scene from afar.

That’s because I was traveling in Asia. It’s always interesting to engage another culture and see one’s own through that other lens.

One can see wacky trends. For example, the nerdy girl look seems to be quite in vogue. Even girls who don’t need glasses were wearing glass frames without……glass.

But what about more substantive stuff?

California’s high speed rail venture is looking quite wobbly now. The Central Valley route under consideration and the economic assumptions of the project are questionable. But a ride on the Hong Kong airport train or Taiwan’s high speed rail makes it crystal clear that high speed rail is a concept worth fighting for.

Like China, Taiwan has been in an infrastructure building boom. Freeways, subways and other transportation projects appeared to be in process al over Taipei and Hong Kong.

Here in the Bay Area, traffic often is snarled between San Francisco or Oakland and Silicon Valley. Taiwan’s Silicon Valley is Hsinchu, about the same distance from Taipei as San Jose is from San Francisco. Yet, Taiwan’s High Speed Rail zips passengers to Hsinchu in about 20 minutes, all in air-conditioned comfort with wi-fi.

There’s plenty of shave ice with red beans awaiting as you disembark.

In Hong Kong an efficient train will whisk you off to Hong Kong Disneyland.

The huge Computex trade show was on in Taipei while I was there, and the HSR as it is called was filled with tech folks making their way to and from Hsinchu.

Hong Kong and Taipei are among earth’s most densely populated cities, however.

So building Asian high speed rail clearly was a logistical feat, but one destined for success, with a huge potential ridership base.

One can’t say the same thing about a California high speed rail plan that would begin by linking some smaller towns south of Fresno.

The urge to build more miles and at cheaper cost in the Central Valley may make sense to some planner or bureaucrat, but the risk is that even if the plan proceeds, it will be a train to nowhere with no riders.

And ultimately a system which never gets built.

I’ll be sad if California’s high speed rail never gets built. Should that be the case, it would appear to be a collective failure of imagination.

We can do a lot better than we are doing.

Julius Young

It’s a strange time.

There’s a lot of populism in the air. Folks on the left and right are suspicious of big money.

But unions have not been able to capitalize on these conditions.

Unions are seen by many as part of the problem, particularly public worker unions. Labor suffered a grievous loss in Wisconsin after staking a large amount of political capital on the recall of Scott Walker. Any alliance between the union movement and the occupy movement fizzled.

Here in California the role of unions is about to come to a boil. In November an initiative will be on the ballot which would prohibit direct union contributions to individual candidates and which would limit use of payroll deductions for political purposes.

The effect would be to limit labor union political power in California. While some independent expenditures could still be undertaken by unions, there would be significantly less money for them to distribute.

An article by Jon Ortiz in the Sacramento Bee notes that:

“Last year, public-sector and general-trade unions contributed $2.7 million to California political candidates and causes, according to campaign finance tracker Business interests, from the telecommunications industry and hospitals to computer firms and beer companies, gave $4.3 million.”

The initiative is sponsored in part by Charles T. Munger, Jr., a Stanford physicist whose father is a partner in Berkshire Hathaway with famed investor Warren Buffett. Berkshire Hathaway owns insurers who write significant amounts of California workers’ comp.

The fight over this initiative will be huge, given that a loss could cripple the political power of California unions and drastically change the California political landscape.

A recent article in the New York Times noted that in New York state there are tensions between public unions who oppose pension reform and building trades unions that are concerned with the impact of pension obligations on the New York budget which may affect construction trade worker employment prospects. But with the upcoming California campaign reform initiative those sorts of issues will not come to the fore, and labor will be united.

It’s curious, though, that we may be in the runup to major California workers’ comp reforms just a couple of months before the vote on the November initiative.

Any perception that California labor signs onto a package that despite some benefit increases has significant takeaways would be a divisive and bad development for labor as the campaign over the campaign finance initiative heats up. A political brawl in the Capitol over workers’ comp or a tepid deal revealed in a “September surprise” carry similar risks. Given what occurred in 2004, there will be intense focus on whether any deal really helps workers or whether benefit increases are illusory for most workers.

The political power of the California labor movement could be on life support if this initiative passes. A workers’ comp deal would come just as unions are trying to muster rank and file enthusiasm and help from progressives to fight the initiative.

For more information about the initiative, including links to its language and information in its funders, here is a link to ballotpedia: … nitiative_(2012)
Julius Young

One area of potential cost savings that are clearly in the political crosshairs are spinal hardware costs.

The issue is currently hot a the legislature considers AB 959.

Spinal hardware costs have been under increased scrutiny since a 2005 report prepared for CHSWC by RAND, written by Barbara O. Wynn and Giacomo Bergamo, “Payment for Hardware Used in Complex Spinal Procedures Under California’s Official Medical Fee Schedule for Injured Workers”:

That study concluded that:
“Under current policies, the OMFS allowances for spinal surgeries essentially pay for the hardware used in spinal procedures twice: once through the DRG payment and again in the pass-through payment. Moreover, the cost-based payment plus handling provides no incentive for prudent purchasing and use of hardware. Also, there is considerable administrative burden involved in establishing the appropriate pass- through amount through pricing of each claim individually.”

RAND continued:
“The data analyzed in this study does not support a continuation of the pass-through. The comparison of Medicare and workers’ compensation discharges shows that on average injured workers are less costly than Medicare patients and have a shorter length of stay. The DRG-mix adjusted Medicare cost per discharge is about 14% higher than the cost per discharge for workers’ compensation patient. Although more hardware is used for workers’ compensation patients in certain DRGs (namely, DRGs 4, 497 and 498) than for Medicare patients, shorter length of stays for workers’ compensation patients in these DRGs generally offset the added costs. The comparison suggests that the 1.20 multiplier to the Medicare payment rate should be sufficient to assure that OMFS allowances on average for complex spinal surgeries are substantially more than the cost of providing care. This does not mean that the payment for every workers’ compensation discharge will be higher than the costs for that patient. The DRG system is built on a system of averages, where some discharges are more costly than others, and the goal is to assure that on average the payment is adequate.
The results of the payment simulation are based on an overall cost-to-charge ratio and should be interpreted with some caution since hospital markups may differ for spinal surgeries. The likelihood, however, is that the payment-to-cost ratios are understated rather than overstated since hospital markups tend to be relatively high for orthopedic cases. Not unexpectedly, the results indicate payment-to-cost ratios are lower when expensive hardware is used than when it is not. However, even when costly hardware is used, the payment-to-cost ratios on average are above 1.20 for most spinal surgery DRGs. The 1.20 is comparable to the average ratio for private payors.10 The only exception is DRG 496, where the payment-to-cost ratio is 1.09. Moreover, hospitals that use substantially more hardware than other hospitals still have payment-to-cost ratios that are comparable to the overall average for workers’ compensation patients and the concern that these hospitals might be underpaid is not supported by the data. While the payment simulation results are not definitive given the limitations of the methodology, they lend further support to the conclusion that a pass-through is unnecessary to assure payments are adequate for workers’ compensation spinal surgeries.
The OMFS has adopted Medicare’s temporary add-on for quality-enhancing costly hardware. This provision is intended to assure that FDA-approved high-cost quality-enhancing new technology is recognized before the higher costs are reflected in the charge data used to establish the DRG relative weights. If desired, a higher percentage of the estimated cost could be paid for technology qualifying for the add-on. After the expiration of the add-on payment, the high cost outlier policy provides some protection for hospitals that have a disproportionate share of procedures using high-cost technology.
Any special payment policy for hardware and instrumentation should be evaluated for its likely impact on financial incentives for appropriate utilization of these products during spinal surgery and on administrative burden. There is no support in the data for continuing to pay for relatively inexpensive hardware and instrumentation that is used during spinal surgical procedures. If there is a continuing concern that the payment-to-cost ratios are lower when hardware is used than when it is not, alternatives to the current pass-through could be considered. For example, the multiplier could be reduced for most spinal surgery discharges and increased when specific high cost technology is used, such as those examined in this study. This approach would minimize administrative burden by keeping any additional payment within the DRG per discharge payment and would eliminate the duplicate payment. While it retains an incentive to use hardware and instrumentation during spinal surgery, it creates an incentive to use less costly instead of more costly products of comparable quality. Establishing a separate fee schedule for the individual products that would be eligible for special payment would improve payment accuracy but would also add the administrative burden of maintaining the fee schedule and pricing the claims.”

Thus spake RAND.

But now we have the California Workers Compensation Institute weighing in, finding in a research study that current payment system for spinal hardware “pass-through payments added almost $67.5 million to the basic inpatient hospital facility fee payments for California workers’ compensation spinal surgeries.”

At a time when policymakers are focused on finding ways to free up money for benefit increases for workers in a way that does not drive rates significantly higher, $67.5 million becomes an inviting target for reform.

Readers can find the CWCI study by Alex Swedlow and John Ireland here:

Here is a link to information about AB 959 (Lieu): … uthor=lieu

Stay tuned.

Julius Young

The Court of Appeals decision in Valdez got me thinking further about MPNs.

If reports from non-MPN doctors are admissible, will this just accelerate efforts by some attorneys and defendants to “treat on a lien”, accelerating the lien problem that plagues California’s workers’ comp system, particularly in the Los Angeles area?

Clearly Valdez tells us that if all of the MPN doctors are dismissive of my problem, I can contract with a doctor of my choice, get an MRI or lab tests to show that I do in fact have the problem, and have my doctor’s report deemed admissible.

Now, if I have the ability to do that, does that eviscerate the process of second and third opinions in the MPN and the little-used MPN independent review process?

If I have a pool of doctors willing and able to treat on a lien, then I might try to “gain medical control”.

Part of the problem here which is at the root of so many lien disputes is the issue of when a worker must treat within the MPN in order for the treatment to be paid.

Savvy applicant attorneys have scoured the MPN statute and MPN regulations in order to come up with checklists of dozens of MPN requirements.

If you look hard, in many cases there may be non-compliance with some of these rules.

In some cases the violations may be serious. A selection of doctors is not available within a reasonable distance of the applicant’s residence.

Or take the circumstance where the defendant fails to send the MPN doctor list after it is requested. An en banc case, Knight v. UPS, allows applicants to treat outside MPN at defendants expense in such a circumstance.

But what is not clear is how the board really intends to deal with the myriad other circumstances where there may be MPN technicalities that are not met. What are de minimis violations and what are substantive violations of the MPN regs? When is retrospective compliance sufficient to recapture the worker in the MPN? although there may be some WCAB panel decisions addressing this in certain circumstances, there is a lack of clear bright line rules that parties can rely upon.

And how do these issues about MPN applicability get officially determined?

In many instances, it’s “off to the races” with treatment on a lien when the applicant believes there is non-complicance with the MPN rules. And thus a lien dispute issue is generated, an issue that may be sorted out years later.

What would help is if there is a fast track to resolve issues about whether one is required to treat within the MPN in order to have the physician paid.
An early determination resolution process on these issues would probably benefit all concerned. Moreover, it would encourage the board to clarify the standards for allowing treatment outside the MPN at defendant’s expense.

Valdez tells us that a worker will always be able to contract for their own treatment. The question with that will be whether the doctor is entitled to be paid. Probably not if there was a valid MPN unless the worker exhausted the MPN process.

And there will always be use of non-MPN doctors where defendants have denied a claim or have admitted certain body parts were injured but denied other body parts alleged. those cases will not be amenable to fast tracking.

But fast tracking more routine MPN-coverage issues would be helpful.

Dealing with this should be at the heart of any future reform discussions.

Julius Young