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WORKERS' COMPENSATION UPDATE

March 2017

 


Compound Interest

In our March 2016 newsletter, we voiced our concerns regarding the rise in the number of compound drug prescriptions, especially the so-called “pain creams,” which generate substantial cost to insurers but little to no benefit to injured workers.  As a reminder, compound drugs are not recommended under the ODG Treatment Guidelines as a first line therapy.

Now, it seems the 85th Texas Legislature has taken up the cause. House Business & Industry Chair Rene Oliveira (D) has introduced an amendment to Section 408.028, pertaining to Pharmaceutical Services, which would require the Division to develop rules for the exclusion of compound pharmaceutical medications from the closed formulary. Thus far, no companion bill has been proposed.



The Compounding Indictments

Last week, a Dallas federal grand jury returned an indictment charging eight individuals – including three doctors active in the Texas Workers’ Comp System – with defrauding the federal workers’ comp program through excessive, unscrupulous, and fraudulent prescriptions for compound drugs. The indicted defendants included doctors Leslie Benson, Michael Taba, and Kevin Williams, as well as James Noryian, David Nourian, Christopher Rydberg, Sherri Mofid, and Leyla Nourian. Each individual was charged with one count of conspiracy to commit health care fraud. James Noryian, David Nourian, Rydberg, Mofid, and Leyla Nourian were also charged with one count of money laundering.

According to the indictment, from May 2014 to March 2017, James Noryian, David Nourian, and Rydberg operated Ability Pharmacy, Industrial & Family Pharmacy, and Park Row Pharmacy (the Pharmacies), and used the Pharmacies to file claims for reimbursement for compound drugs (creams used to treat, scars, wounds, and pain) with the federal workers’ compensation program. The federal reimbursement rates provided up to $28,000 per container for the compounded drugs.

The doctors in the scheme were paid by Mofid, Rydberg, and Leyla Nourian to refer patients to the Pharmacies and to encourage prescriptions for compound drugs. Payments were presented as loans in effort to conceal their purpose as a kickback for sending prescriptions to the pharmacies. James Noryian is alleged to have also paid doctors make unnecessary and excessive prescriptions through payments, free rent, and by other means.

Dr. Taba allegedly allowed James Noryian and employees from Ability to work with Dr. Taba’s staff to fill out prescriptions for the compound drugs, to stamp Dr. Taba’s signature on the prescriptions, and to then follow up with patients to encourage them to obtain prescriptions from the Pharmacies. Additionally, Dr. Taba allegedly instructed his employees to review the patient schedule each day and to write prescriptions for compound drugs for each patient. Each prescription was identical and not specifically tailored to any individual’s needs. Dr. Taba allegedly received payment for his participation in the scheme.

Dr. Benson allegedly enjoyed a rent-free office as well as other inducements and payments courtesy of James Noryian. In exchange, Dr. Benson wrote prescriptions for compound drugs – whether the patients needed the drugs or not – and referred patients to the Pharmacies.

Dr. Williams allegedly wrote prescriptions for wound and scar medications even though the patients had not had surgery. Additionally, Dr. Williams is alleged to have written prescriptions with the intent that refills be automatic, and to have received prefilled out prescription forms from James Noryian. The indictment alleges that Dr. Williams alone was responsible for $90 million in prescriptions being billed to the federal workers’ comp program.

The indictment is just the first step in the process toward trial. We’ll keep you posted on the outcome.



Article of Faith

For those who thought that the Supreme Court of Texas had issued the final word on bad faith insurance lawsuits in Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430 (Tex. 2012), proposed legislation seeks to reopen the discussion.  As a reminder, in Ruttiger the Texas Supreme Court determined that a cause of action under Insurance Code Section 541.060, pertaining to unfair settlement practices, was unnecessary in light of the rigorous administrative procedures and remedies laid out in the Workers’ Compensation Act.  It seems Representative Nicole Collier (D) disagrees. She introduced H.B. 499 in the 85th legislature, which seeks to add an unfair settlement practices cause of action to Section 541.060 that reads: “This section applies to a claim by an insured or beneficiary under an insurance policy for workers’ compensation insurance.” If passed, the change would recreate the bad faith cause of action for workers’ compensation claimants. 
 


When Is a Doctor Who’s Not a Doctor a Doctor?

The Appeals Panel has once again broadened their definition of “doctor” under Section 401.011(17) of the Texas Workers’ Compensation Act, extending that designation to the holder of a Ph.D. While acknowledging in Appeal No. 162270 that a Ph.D. is not a licensed medical doctor, the Appeals Panel concluded that a cancer research biologist with a Ph.D. in biochemistry and biophysics was qualified to testify to more than just his research; his opinion on causation must also be considered an expert medical opinion, even though a Ph.D. is not listed among those healthcare practitioners (a doctor of medicine, osteopathic medicine, optometry, dentistry, podiatry, or chiropractic) identified in Section 401.011(17). 

The decision expands on APD No. 150372, in which it was determined that even though the definition of “doctor” in does not include physical therapists, “medical evidence may be generated by a number of sources other than by individuals who are defined as ‘doctors’” for the purpose of establishing a causal link between a claimed condition and a work injury. 


 

OSHA Makes Waves

Effective December 1, 2016, the Occupational Safety & Health Administration (OSHA) incorporated into 29 C.F.R. 1904.35 two new provisions regarding retaliation against workers who report workplace injuries.

Section 1904.35(b)(1)(i) clarifies that the process for reporting an injury must be a reasonable one.  To avoid a violation, employers must demonstrate both that there is a procedure in place for reporting work injuries, and that the procedure is not unduly burdensome on the injured worker. OSHA would likely deem it retaliatory for an employer to adhere to a strict, pre-determined deadline by which an injury must be reported in instances where an employee could not realistically have been expected to have done so.

Section 1904.35(b)(1)(iv) prohibits three specific forms of retaliation against employees for notifying an employer of an injury. First, an employer may not initiate disciplinary action against an employee merely for reporting an injury. Disciplining an employee for violating any safety procedures that resulted in an injury is still permitted, but not if it is used as a pretext for punishing a worker for reporting an injury. OSHA will investigate whether other employees have been similarly disciplined for the same infraction or whether the employer had a legitimate business interest for punishing the employee. 

Also forbidden under Section 1904.35(b)(1)(iv) is the use of workplace incentive programs as a means for penalizing those who report work injuries.  Though incentive programs that encourage safe workplace behavior are permissible, withholding the benefits of those programs simply because a work injury has been reported is not.  Such actions would effectively punish a worker for reporting and injury and thereby serve to dissuade timely notification of injuries. 

Finally, drug-testing as a form of discipline against those who report an injury is forbidden, but it may be used to investigate the cause of a workplace injury.  The new rule requires an objectively reasonable basis for drug-testing employees who report work injuries, and the employer must have a legitimate reason to believe that an employee’s drug use contributed to the injury.  OSHA will also consider whether other employees involved in the injury event were similarly tested.  Testing performed in compliance with a state or federal regulation would not be considered retaliatory. 

Most importantly for purposes of workers’ compensation disputes, OSHA would likely find it a violation to test an employee whose drug use could not reasonably have caused or contributed to the work injury. 



Texas Two-Step

The DWC conducted free training in its Houston East Field Office on March 30 and 31 for stakeholders interested in learning more about the Division’s self-created “two-step dispute resolution process.”  The goal of the pilot program is to reduce the number of managed cases (those for which a hearing has been held but no decision can yet be issued) by bifurcating the dispute into two hearings: the first for extent of injury issues only, the second for maximum medical improvement and impairment rating.  (The DWC has yet to reveal how two hearings is any more expeditious for system participants than a managed case would be, however.)   

Nevertheless, the DWC asserts that the pilot program, which began in Weslaco and then progressed to Dallas, has been such a success that it will now be expanded throughout the state.  For the time being, the bifurcated CCH program remains voluntary.  How long it will remain so is uncertain. 


 

Coming & Going

The Division has finally found a replacement for Judge David Northup following his retirement in August 2016.  Mikhail Nagorny has been hired as the newest Hearing Officer in San Antonio.  Prior to coming on board with the DWC, Judge Nagorny served in the Soviet Navy from 1971-1976, then attended Moscow State University, where he graduated with a Master’s Degree in International Relations and Arab Studies.  After graduating from South Texas College of Law in 1999, Mr. Nagorny was employed by the Malaise Law Firm in San Antonio, where he practiced workers’ compensation exclusively. 

The vacancy in the Dallas Field Office has likewise been filled.  Latorya Fowler recently signed on to replace Judge John Bell, who departed in December 2016.  Though she is new to the realm of workers’ compensation, Judge Fowler brings with her extensive adjudicative experience. Following her graduation from Southern Methodist Law School in 2006, Ms. Fowler served as a pro tem judge in Fort Worth’s municipal courts. 

Meanwhile, the statewide hiring freeze seems to have impeded the DWC’s efforts to replace their most recently departed Hearing Officer.  Judge Marilyn Allen left the Division in January 2017 to accept employment with a carrier firm, bringing the number of Hearing Officers in the Houston West Field office down to four. 


 

Potential Central Jurisprudential Supplemental

Last July, we informed you that Commissioner Brannan had authorized for contested case hearings to be held in the Metro Center Building (commonly referred to as Austin Central) in addition to the Austin Field Office. The expansion was originally to have been a temporary solution intended to accommodate a surge in the number of workers’ compensation claims filed in Austin area and alleviate congestion on the Field Office docket. 

Now, it appears that not only will hearings be held in Austin Central on a permanent basis, the Field Office itself may become a thing of the past.  The DWC is rumored to be planning a complete closure of the Field Office in September 2017, at which point all Austin workers’ comp cases will be heard in the Central Office, presumably by two of the three traveling judges who are based there. 

Plans are under way to renovate the Metro Center Building to accommodate not only two new hearing rooms, but also offices for Benefit Review Officers and ombudsmen, who will also be relocated. 


 

Sound Advice

The SLS-approved song selection of the Month is “Take Out Some Insurance” by Etta James, the lead track from her 1971 album, Losers Weepers.  Good song, great advice.
 

WE WANT TO HEAR FROM YOU

Please reply back and let us know what you think.

 
Jane Stone: jstone@slsaustin.com
James Loughlin: jloughlin@slsaustin.com
David Swanson: dswanson@slsaustin.com
Erin Shanley: eshanley@slsaustin.com
Dan Price: dprice@slsaustin.com
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