State News : Texas

The claimant was injured on a large construction project.  As a result, his left leg had to be amputated above the knee.  He recovered workers’ compensation benefits through his employer.  He also sued one of the subcontractors on the job for his injuries.  The jury awarded a total of $43 million in damages.  However, the Fourteenth District Court of Appeals in Houston reversed and rendered judgment that the claimant take nothing from the subcontractor.Berkel & Company Contractors, Inc. v. Lee. 
 
The court held that the subcontractor was entitled to claim the exclusive remedy defense because the subcontractor and claimant were co-employees.  This determination was based on a provision in the Workers’ Compensation Act that deems the general contractor to be the employer of the subcontractor and the subcontractor’s employees if the general contractor enters into a written agreement with the subcontractor to provide workers’ compensation insurance coverage to the subcontractor and the subcontractor’s employees.  It was undisputed that the general contractor agreed to provide workers’ compensation insurance to all its subcontractors.
 
The court also clarified the application of the intentional-injury exception to the exclusive remedy defense. The court held that the evidence was insufficient to show that a vice-principal of the subcontractor knew to a substantial certainty that his conduct would bring about harm to a particular victim, or to someone within a small class of potential victims within a localized area. --James Loughlin, Stone Loughlin & Swanson, LLP

On July 6, 2017, Howard Gregg Diamond, M.D. was indicted on federal criminal charges including conspiracy to distribute controlled substances, possession with intent to distribute controlled substances, health care fraud, aiding and abetting, and money laundering.
           
The indictment alleges that Dr. Diamond conspired with others to write prescriptions for drugs including hydrocodone, oxymorphine, methadone, fentanyl, morphine, oxycodone, alprazolam, and zolpidem, without a legitimate medical purpose.  The conspiracy is alleged to have resulted in the overdose deaths of at least seven individuals.  At the time of his arrest, Dr. Diamond was reported to have on or about him a firearm, possible marijuana, and expired passports. 
 
On July 20, 2017, the Texas Medical Board issued an order temporarily suspending Dr. Diamond’s medical license based on their determination that his continuation in the practice of medicine would constitute a continuing threat to the public welfare. --James Loughlin, Stone Loughlin & Swanson, LLP

On July 19, 2017, Sentrix Pharmacy filed Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of Florida.  How does that apply to Texas, you ask?  
 
Sentrix Pharmacy is located in Pompano Beach, Florida but mails compound pain creams and scar creams to injured workers in Texas.  Past charges include $2,488.99 for a one month supply of pain cream and $12,050.06 for a one month supply of scar cream. 
 
On July 7, 2017, Sentrix Pharmacy filed comments to the Division’s informal compound drug rule proposal we reported on last month.  The proposed amendments would require preauthorization for compound drugs.  Not surprisingly, Sentrix opposed the amendments.
 
In its comments, Sentrix argues with a straight face that compound pain creams are a valuable tool in the fight against the opioid epidemic and that if preauthorization is required for compound pain creams, it could contribute to the opioid epidemic.  No mention is made of all of the other more effective, less expensive treatments for pain than a $2,500 jar of compound pain cream.
 
We commend the Division's efforts to require preauthorization for compound drugs. Preauthorization is typically required for treatments and services that are costly, medically questionable, or subject to abuse.  Compound drugs fit the bill on all three counts. --James Loughlin, Stone Loughlin & Swanson, LLP

The Medicare Secondary Payer Act requires primary payers, including workers’ compensation carriers, to reimburse Medicare for payments it made for healthcare for which the primary payer was responsible.  Many carriers have reported seeing an increase in secondary payer recovery activity by Medicare, particularly with regard to demands for reimbursement of services that bear no relation to the compensable injury. 
 
For example, on a low back sprain/strain claim, the carrier may receive a demand for reimbursement of services for treatment of COPD, diabetes, or other ordinary diseases of life.  In other cases, the provider’s bill may list a compensable diagnosis code but no treatment was actually provided for that condition.  Finally, in some instances treatment may have been provided for both related and non-related conditions, yet the carrier receives a demand for the full amount.
 
It appears that in many instances Medicare is not making an initial determination about whether and to what extent the services it paid for were actually for the compensable injury.  If the beneficiary has a prior workers’ compensation claim, Medicare simply sends a demand letter.  InCIGA v. Burwell, a federal district court case out of California, decided January 5, 2017, the court rejected Medicare’s argument that the primary payer is responsible for both the related and unrelated conditions when the provider combines the services into a single charge.  According to the court, Medicare must attempt to apportion the charges between related and non-related services. 
 
The court also held that Medicare is bound by state law in determining whether the insurance carrier is required to reimburse Medicare.  The Fifth Circuit Court of Appeals reached the same conclusion inCaldera v. Ins. Co. of the State of Pa., decided in 2013.  Therefore, if Medicare contends that a disputed condition for which it paid for treatment is related to the compensable injury, the proper forum for resolving that dispute would be the administrative dispute resolution process provided by the Texas Workers’ Compensation Act.  So far, however, it does not appear that Medicare has attempted to invoke the Division’s dispute resolution process.        
 
The Division’s involvement would be welcomed to help address the problems carriers are having with Medicare reimbursement claims.  In 2014, then Commissioner Rod Bordelon wrote a letter to Medicare to address a related problem in which Medicare would not pay for medical services because the Medicare beneficiary had a previous workers’ compensation claim.  Topics to be addressed in a new letter may include facilitating a process to better identify the compensable injury and related services before a blanket demand letter is sent, and, in the event of a disagreement, clarifying the process for resolving that dispute.  For example, do Medicare or Medicare/Medicaid managed care providers meet the definition of a “health care insurer” under section 409.0091 such that they are required to follow Labor Code section 409.0091 and submit a DWC-026 healthcare insurer reimbursement form? --James Loughlin, Stone Loughlin & Swanson, LLP

Thanks to our wonderful clients who continue to refer more and more of their interesting cases to us, we are growing. This month we welcome attorney Amanda Schwertner to our firm.

Amanda is a native of Big Lake, Texas and attended Texas Tech University where she was a student trainer for the football team. She has two dogs named Willie Nelson and Dolly Parton.

Please go to our website to check out herbiography and, when you have a free minute, give her a call to say hello.

One of our favorite adjusters, who works at a large workers’ compensation carrier, related this conversation she had this month with a claimant:

          Adjuster:             Why didn’t you return to work?

          Claimant:            I had a problem inside myself at the Courthouse.

          Adjuster:             A problem inside yourself at the Courthouse?
                                       Were you in jail?

          Claimant:           Yes, ma’am. I was in jail . . . but it wasn’t my fault.

The adjuster adds that, while taking the claimant’s statement, she heard a loud noise and asked the claimant what it was. He said “it was the toilet . . . I had to pee.”

Do you have a funny industry story to tell? Send it to us for our July newsletter. If we publish it we’ll reward you with a gift card to KFC or another healthy-lifestyle restaurant of your choice.

The TDI-DWC has announced that the 2017 Texas Workers’ Compensation Educational Conference will be held in Georgetown on September 11 – 12 and in Dallas on October 12 – 13. The agenda and registration link are on the TDI-DWCwebsite.

We’ll be at the Georgetown conference and hope to see you there.

When a workers’ compensation carrier issues a policy that waives its right to subrogation the carrier also waives its right to reimbursement from any recovery by a claimant. That is the conclusion of the El Paso court of appeals in its recent decision inWausau Underwriters Insurance Co. v. Wedel.

In that case, James Wedel drove a truck for Cactus Transport, Inc. which regularly picked up asphalt from a terminal owned by Western Refining Company. Western required Cactus to subscribe to a policy of workers’ compensation insurance with a waiver of subrogation rights favorable to Western. Wausau issued the policy to Cactus with a waiver of subrogation endorsement.

Wedel fell and suffered brain and spinal cord injuries while attempting to load asphalt at Western’s facility in El Paso. Wausau paid approximately $1,548,822 in compensation benefits to Wedel, and Wedel then sued Western alleging third-party negligence. Wausau intervened and asserted its comp lien against any recovery by Wedel.

Wausau argued that its waiver of subrogation endorsement waived subrogation only as to the tort-feasor (Western) and did not waive the right to reimbursement from Wedel. In other words, Wausau asserted that its statutory rights of subrogation and reimbursement are distinct and independent rights and it could waive one without waiving the other.

The court of appeals disagreed. It held that by waiving its right of subrogation Wausau waived its right of reimbursement as well.--David L. Swanson, Stone Loughlin & Swanson, LLP

The Texas Legislature last month provided a new source of funding for a prosecutorial unit dedicated to rooting out workers’ compensation insurance fraud, and that new funding will radically change the unit’s operation. The prosecutorial unit is part of the Travis County district attorney’s office in Austin.

In the past, the prosecutorial unit had been funded through a controversial arrangement between the DA and Texas Mutual Insurance Company. Under that agreement, Texas Mutual made the fraud referrals, provided the investigators, and paid bills incurred by the DA for the prosecution of Texas Mutual’s cases. That arrangement came under sharp criticism last year and, in response, the Legislature appropriated money to fund the unit.

The money will come from a maintenance tax collected from workers’ compensation insurers. As a result of the new funding source, the DA will prosecute cases from any insurer. And Texas Mutual will no longer make fraud referrals or furnish investigators. Instead, the TDI-DWC will conduct the initial investigation and, if it believes a case warrants prosecution, it will refer the case to the DA.--David L. Swanson, Stone Loughlin & Swanson, LLP

Hot on the heels of the disturbing findings of the Workers’ Compensation Research and Evaluation Group, the TDI-DWC may be doing something about them. The DWC announced this month that it is accepting comments on an informal draft of amendments to Rule 134.500 (concerning definitions) and Rules 134.530 and 134.540 (concerning requirements for use of the pharmacy closed formulary).

The proposed amendments would change the definition of "closed formulary" to exclude any prescription drug created through compounding and require preauthorization for all prescription drugs created through compounding for claims subject to, and not subject to, certified networks.

The comment period closes July 7.--David L. Swanson, Stone Loughlin & Swanson, LLP