Commission on Health and Safety and Workers' Compensation

Friday, August 24, 2001

In Attendance

    Chair John C. Wilson
    Commissioners Allen L. Davenport, Jill A. Dulich, Leonard C. McLeod, Tom Rankin, Kristen Schwenkmeyer, Robert B. Steinberg, Darrel "Shorty" Thacker
    Executive Officer Christine Baker

Call to Order

Chairman John Wilson called the meeting to order at 10:00 am and introduced new CHSWC member Allen L. Davenport. Commissioner Davenport, who serves as the government affairs director for the Service Employees International Union, was appointed to the Commission by the Speaker of the Assembly, Robert Hertzberg.

Commendation for Thomas J. McBirnie, Consultant to the Commission on Health and Safety and Workers’ Compensation

Chairman John Wilson announced that Thomas J. McBirnie, who worked as a Consultant on legal matters for the Commission on Health and Safety and Workers’ Compensation and who had served as a deputy commissioner in the Workers’ Compensation Appeals Board, was retiring from the State of California in September 2001. Chairman Wilson read a resolution from CHSWC commending Mr. McBirnie for his many years of dedicated service to the people of the State of California. (The text of the commendation is included as an attachment to these minutes.)

Adoption of Minutes

Chairman Wilson asked for a motion on the April 19, 2001 CHSWC meeting minutes. Commissioner Rankin moved for approval of the minutes, Commissioner Dulich seconded and the motion passed unanimously.

CHSWC 2000 - 2001 Annual Report

Commissioners Davenport and Rankin moved to approve the Commission on Health and Safety and Workers’ Compensation Annual Report for 2000 - 2001. Commissioners Thacker and Dulich seconded and the motion passed unanimously. Chairman Wilson commended the staff for an excellent report.

Report on Policies and Strategies to Help Injured Workers Return to Sustained Employment

John Frank, Scientific Director at the Canadian Institute of Health Research-Institute for Population and Public Health
Juliann Sum, JD, SM, Labor Occupational Health Program, UC Berkeley

The Commission voted in December 1999 to engage in a project to develop practical policies and strategies to promote injured workers' prompt return to work and sustained employment. Some of the goals were to understand the barriers to return workers to sustained employment as well as how stakeholders might view solutions in the area. The data was collected through a series of five focus groups: (a) injured workers (b) claims administrators (c) union representatives and (d) management representatives (e) health care providers.

Dr. Frank reported on the findings of the study. He observed that the stakeholders differed in the entire way of thinking about the goal of the system. Secondly, there was widespread feeling of blame and distrust among the constituents and the stakeholders did not concur on how to approach the problem of returning injured workers back to work.

Dr. Frank reviewed some of the recommendations of the report, including that the Commission needs to provide systematic and agreed upon information about the roles of the stakeholders in the system such as: providers' roles and responsibility, their training, etc. The report also states that the Commission could try to transform the stereotyping of injured workers and actively promote specific strategies to overcome problems in the system.


Commissioner Rankin moved to approve the final report titled: "Return to Work in California: Listening to Stakeholders' Voices" for distribution to the public. Commissioners Schwenkmeyer and Davenport seconded and the motion passed unanimously.


Update on Anti-Fraud Activities
Thomas J. McBirnie, Legal Consultant, CHSWC

Mr. McBirnie presented an overview and update of anti-fraud activities. In November 2000, the Commission voted to host a roundtable on workers' compensation fraud and issued a call for information. The workers' compensation community and interested members of the public were asked to respond with their suggestions to six issues: (1) Whether Workers' Compensation fraud is a major problem; (2) The scope of the anti-fraud program; (3) Focus and priority of anti – fraud campaign; (4) Sources and level of funding for anti-fraud activity; (5) Inter-agency coordination; and (6) Ideas, innovations, new approaches.

Following receipt of input, a CHSWC roundtable discussion on anti-fraud activities was held in San Francisco on April 10, 2001 with over 30 members of the workers' compensation community. A draft report on the Workers' Compensation Anti-Fraud Program was prepared from the April roundtable and was circulated to the public for comments. A second roundtable was held on June 26, 2001 followed by a revised draft report presented with ten recommendations at the August 24th Commission meeting.

Recommendations from the revised draft report of August 2001 include that the Legislature should consider increasing the criminal penalty for knowing failure to secure the payment of compensation; that there should be more cooperation between private and public agencies to share information that could aid in the prosecution of suspected fraud to the extent permitted by law; that the Legislature should consider including employee representation on the Fraud Assessment Commission. Mr. McBirnie clarified that one recommendation-broadening civil immunity for reporting suspected workers’ compensation fraud was left off in the revised draft because there are already sections in the Civil and Insurance Code that give these immunities.

Mr. McBirnie submitted the following additional recommendations for the Commissioners’ consideration, labeled (a) through (h):

(a)    Make an employers’ "knowing and material omission" that delays, discourages, or deprives an injured worker from receiving benefits fraud to the same extent as an affirmative representation.

(b)    Change the form generally used for reporting suspected fraud to make it more "user friendly" to injured employees.

(c)    Reduce or eliminate employer funding of the anti-fraud program.

(d)    Allow injured employees who are acquitted (or not convicted) of workers’ compensation fraud to recover their defense costs from the insurance carrier or self-insured employer.

(e)    Make workers’ compensation fraud committed by employees subject only to civil penalties.

(f)    Delay prosecution of employees for alleged workers’ compensation fraud pending completion of their workers’ compensation cases.

(g)    Conduct a further review of the role of insurer special investigation units (SIUs) in reporting suspected workers' compensation fraud.

(h)    Make full restitution to the victims of workers' compensation fraud a more important aspect of the anti-fraud program.

Discussion and Comments

Commissioner Dulich asked if there has been any discussion as to how the sharing of information between agencies will be managed. Mr. McBirnie replied that there has not and agreed that this was a concern. Mr. McBirnie also commented that there has been some suggestions from CWCI and CAAA as to how they envision the information to be managed.

Ms. Peggy Sugarman and Mr. Gil Stein of the California Applicants’ Attorneys Association read the cases of two injured workers who claimed that they were wrongfully accused of fraud in their workers’ compensation cases and suffered high financial losses as a result.

After debate and discussion on the additional proposed recommendations labeled (a) through (h) above, Commissioners approved items (b), (g) and (h).


Commissioner Dulich moved to approve the report on the anti-fraud program with the recommendations of the revised August 2001 report together with the additional three approved recommendations [items (b), (g) and (h) above]. Commissioner Steinberg seconded the motion.

Commissioner Rankin moved that the motion be amended to include further study of the other recommendations [Items (a), (c), (d), (e), (f) above]. Commissioner Davenport seconded and the amendment passed unanimously.

The Commissioners voted on the amended motion to approve the report on the anti-fraud program with the additional (b), (g) and (h) recommendations and to study further the other recommendations [Items (a), (c), (d), (e), (f) above]. The amended motion was approved unanimously.


Report on the Hospital Fee Schedule
Gerald Kominski, PhD, Center for Health Policy Research, UCLA
        Laura Gardner, MD, PhD, Axiomedics

In October 2000, the Commission on Health and Safety and Workers' Compensation voted to conduct a study to evaluate the adequacy of the Inpatient Hospital Fee Schedule (IHFS) and a need for an outpatient surgical fee schedule.

The study was conducted in two phases, with the cooperation and assistance of the Division of Workers' Compensation. The first phase provided an analysis of the adequacy of the current Inpatient Fee Schedule methodology, including comparisons by Diagnostic Related Groups (DRG) to payments for Medicare, Group Health and workers' compensation. The second phase dealt with recommendations regarding instituting an outpatient ambulatory surgery fee schedule.

During the time of the study, DWC adopted amendments to the fee schedule regulations regarding reimbursement for the costs of implantable instrumentation and hardware for spinal related surgeries under DRGs 496-500. Hospitals will also be reimbursed a supplemental outlier fee when charges exceed an allowed amount plus a predetermined hospital-specific outlier factor.

Dr. Gardner presented the main findings of the draft report of the study to the Commission.

Discussion and Comments

Some members of the public including hospital providers contributed their comments with regard to the Inpatient Hospital Fee Schedule. Providers and representatives of hospitals spoke in opposition to the elimination of the exemption of implantable hardware. They stated that the costs to hospitals of the hardware were higher than presented in the report and the elimination of this provision would put hospitals in financial jeopardy eventually deterring access to care for workers' compensation patients.

With regard to the outpatient hospital fee schedule, some provider organizations questioned the validity of data used and urged that more data on cots of providers of ambulatory surgery centers would have to be collected and reviewed. Also, some stated that access to surgeries could be deterred for workers' compensation patients if an outpatient schedule is to be implemented.

Brenda Ramirez, Claims Operations Consultant from the State Compensation Insurance Fund, commented that she supported the recommendation for both the inpatient and outpatient data made in the report.



Commissioner Rankin moved to release the draft report to the community for comments and feedback. Commissioner Dulich seconded and the motion passed unanimously.

The Commissioners decided to postpone the decision on the recommendation of implementing a fee schedule of outpatient surgeries until the next meeting. In the interim, the Commissioners asked the researchers to prepare a report on the public comments expressed at this meeting.


Briefing on the CHSWC Study of Return-to-Work by RAND
Robert Reville, PhD, Research Director, Rand Institute for Civil Justice
        Edward M. Welch, Director, Workers’ Compensation Center, Michigan State University

Mr. Reville and Mr. Welch presented briefings on ongoing studies of return-to-work being conducted for CHSWC. Please note that these findings are from in-progress reports that have not yet been technically reviewed by RAND.

Earning Losses and Compensation for Permanent Disability in California and Four Other States

The study entitled "Earnings Losses and Compensation for Permanent Disability in California and Four Other States" is part of an ongoing evaluation of workers' compensation permanent partial disability system in California that the Commission began in 1996.

Mr. Reville stated that the study examined the losses experienced by workers with permanent disability in New Mexico, Washington, Wisconsin, Oregon and California and compares the adequacy of compensation received from the states' workers' compensation systems. Preliminary findings indicate that none of the study states have adequate benefits as measured by the two-thirds wage replacement rate (absolute) standard. In California's PPD system, the study has found that the workers have the highest earnings losses and lowest return to work; more injured workers receive PD benefits in California and that taking account of the proportion of injured workers receiving benefits, California has the highest replacement rate (i.e., fraction of wage loss that is replaced by benefits).

Following his remarks on the "Earnings Losses Study," Mr. Reville briefed the Commission on RAND’s ongoing studies relating to permanent disability and return to work. The return-to-work study includes a survey of return-to-work practices of self-insured employers to determine the practices of firms that have the best return to work outcomes. RAND and UC Berkeley are also working on the evaluation of the impact of vocational rehabilitation. Another RAND project will focus on improving disability ratings in California.

Survey of Return to Work Programs and Policies in Other States

Mr. Welch reported that he conducted interviews with system participants of seven states assessing the impressions as to how well statutory provisions that should encourage return-to-work functioned. Mr. Welch mentioned that there are some basic features of workers' compensation systems that encourage return-to-work. These features include savings in vocational rehabilitation costs if the worker returns to the employer, a 2/3 wage-replacement rate, and the ability of states to terminate temporary total benefits if the employee refuses a job offer. Several states have particular provisions and programs to encourage return to work such as Oregon's Employer-at-Injury Program. The Oregon Employer-at-Injury Program offers a fifty percent wage subsidy for up to 3 months to employers who return their injured workers to light duty while their workers’ compensation claims are still open. Mr. Welch believes it would be difficult to implement such a program in California although most system participants in Oregon were very happy with it.

Mr. Welch recommended that if California decided to implement Oregon's return-to-work programs, a consensus should be built among participants. Other recommendations of Mr. Welch for California included educating employers regarding return to work and considering changing the permanent partial disability structure to include an incentive for return-to-work.

Discussion and Comments

Commissioner Steinberg asked when the return-to-work reports would be completed. Mr. Reville stated that the draft reports of "Earnings Losses and Compensation for Permanent Disability in California and Four Other States" as well as the Return to Work Study are expected to be completed within one month. A draft report on disability ratings is expected to be completed by the end of this year.

Mark Gerlach, consultant for the California Applicants’ Attorneys Association, commented that in the evaluation of permanent disability benefits one should consider not just wage loss as an effect of disability but also other factors such as: loss of promotions and personal impacts. Mr. Gerlach also noted that returning the workers back to work does not cure the disability. Mr. Gerlach urged the Commission to consider all of these factors in any design of permanent disability rating structure.


A Briefing on the Study of the DWC Judicial System by RAND
Robert T. Reville, PhD, Research Director, RAND Institute for Civil Justice
        Nicholas M. Pace, RAND Institute for Civil Justice

At the urging of the Division of Workers’ Compensation and others in the workers’ compensation community, the Commission voted to engage in a major study and evaluation of the DWC judicial function. The RAND Institute for Civil Justice was chosen to perform this research by a competitive proposal and bidding process and began the project in October 2000.

The goal of this study is to evaluate how well the judicial process of the California Workers’ Compensation Appeals Board fulfills its constitutional duty to accomplish substantial justice in all cases in an expeditious, inexpensive, and fair manner. Mr. Pace is the project manager of the study and Mr. Reville and Deborah Hensler are the co-principal contributors to the study.

Mr. Pace reported that as a part of the report, the study team has made six intensive site studies of representative WCAB courts (Sacramento, Stockton, Los Angeles, Van Nuys, Pomona, and San Bernardino) and established a resource group comprised of representatives involved in California’s workers’ compensation court system. The data from the research activities is being analyzed.

Mr. Pace presented the preliminary recommendations of the study to the Commission. Some of the recommendations are that clerical positions are the core of WCAB’s ability to do business with the public and clerical staffing should be given the highest priority in future resource allocation decisions; that resolving liens at the time of case disposition should continue to be given a high priority for WCAB Judges; and that management skills and a commitment to cutting delay should be the primary characteristic of new presiding judges. The findings will be broadly distributed and roundtable meetings will be held to enable stakeholders to comment. Final report of the study is expected in late 2001.

Discussion and Comments

Richard P. Gannon, Administrative Director of the DWC, expressed appreciation to CHSWC for funding the Judicial Study. He further commented that the Division of Workers’ Compensation is experiencing a shortage of resources and noted that many of RAND’s suggestions for improvement would require additional funding. Mr. Gannon commented that the study will be very helpful to guide the DWC in more effectively focusing and allocating resources, to correct inequities in staffing, and to revise the rules and policy and procedure manual so that employees know what’s expected of them. DWC assigned a committee of staff that includes members of the Appeals Board, regional managers, presiding judges and others to start taking the information that RAND has provided so far and begin making changes.


Chairman Wilson adjourned the meeting at 5:00 pm.

Approved: Respectfully submitted,

SIGNATURE ON FILE                         NOV.16, 2001                               SIGNATURE ON FILE

__________________________________________                                 ______________________________

John C. Wilson, Chair                                          Date                                   Christine Baker, Executive Officer




COMMENDATION for Thomas J. McBirnie

WHEREAS, Thomas J. McBirnie has served the California Commission on Health and Safety and Workers’ Compensation (CHSWC) since 1999 as a consultant in legal matters; and

WHEREAS, Thomas J. McBirnie has served as a Deputy Commissioner on the Workers’ Compensation Appeals Board in San Francisco from 1996 through 1998 and as an appellate counsel (1990-1996) and staff counsel (1972-1978) for the WCAB; and

WHEREAS, Thomas J. McBirnie served as a Workers’ Compensation Judge at the WCAB office in Sacramento (1978-1983) and at the WCAB office in Santa Rosa (1983-1990); and

WHEREAS, Thomas J. McBirnie served as Naval intelligence officer in Chu Lai, Vietnam (1970-1971), earning a Bronze Star (combat "V"), served as commanding officer of Naval Operational Intelligence Center Unit 320, as Legal Officer on the USS Northampton (CC-1), and retired as Captain in the US Naval Reserve; and

WHEREAS, Thomas J. McBirnie earned a Juris Doctor degree from Stanford University Law School in 1967, a BA cum laude from Notre Dame University in 1964, and was graduated from Navy Officer Candidate School and Naval Justice School (JAG course) in 1968, and Naval Intelligence Training in 1969; and

WHEREAS Thomas J. McBirnie has announced his retirement from the Commission on Health and Safety and Workers’ Compensation effective in September 2001; and

WHEREAS, Thomas J. McBirnie has dedicated his knowledge and expertise to the betterment of the workers’ compensation system for many years;

NOW, THEREFORE, WE, THE MEMBERS OF THE COMMISSION ON HEALTH AND SAFETY AND WORKERS’ COMPENSATION, do hereby commend Thomas J. McBirnie for his dedication and service to the people of the State of California.

Allen Davenport                                     Jill A. Dulich
Leonard C. McLeod                              Tom Rankin
Kristen Schwenkmeyer                           Robert B. Steinberg
Darrel "Shorty" Thacker                          John C. Wilson, Chairman

August 24, 2001
San Francisco, California

For Question relating to this minutes, please contact the Commission on Health and Safety and Workers' Compensation.
455 Golden Gate Avenue, 10th Floor
San Francisco,  CA  94102
(415) 703-4220        Fax:  (415) 703-4234         Email:         Contact:  Christine Baker