DWC Proposes Penalties of $8.25 Million for Untimely Submission of IMR Records

Published on 03/09/2016 by WorkCompCentral, authored by Greg Jones

Eight California claims administrators face a total of $8.25 million in administrative penalties for not submitting medical records to Maximus Federal Services within the time period allowed by law.

Documents provided in response to a public records request reveal the Division of Workers' Compensation started the process of assessing penalties last summer, when it alleged 1,650 instances in which medical records were late by 10 or more days. 

The DWC would not say whether it has collected any of the proposed penalties. 

Erika Monterroza, a spokeswoman for the division, said in an email the agency is "pursuing its legal remedies regarding the various orders to show cause and is engaged in discussions with claims administrators regarding the penalties set forth."

She said those discussions are confidential under state law. It would be "inappropriate at this time to provide any additional information," she said.

Broadspire Services Inc. faces the largest penalty, of $3.525 million for 705 violations. Gallagher Basset Services faces fines of $1.21 million for 242 violations alleged in four separate orders to show cause (hereherehere and here). And Zurich North America faces a $1.1 million penalty for 220 violations.

Other proposed penalties include:

§  Sedgwick CMS – $940,000 for 188 violations.

§  State Compensation Insurance Fund – $510,000 for 102 violations.

§  Los Angeles County – $370,000 for 74 violations.

§  Amtrust North America – $340,000 for 68 violations.

§  Corvel – $255,000 for 51 violations.


It's not clear from most of the orders how long records have been outstanding in the majority of cases. The penalty for not sending records to Maximus within the 15 days allowed by law is $500 per day. But that penalty is capped at $5,000, so whether an administrator was 10 days late or 100 days late, the maximum penalty is the same.

Jesse Ceniceros, president of Voters Injured at Work, said he thinks it's standard practice in the insurance industry to delay and deny. 

"There is absolutely nothing but a slap on the wrist for insurance companies to flagrantly not answer phones and not pay bills," he said.

He said injured workers are not getting the Supplemental Job Displacement Benefit voucher in a timely fashion. And providers have to fight to get paid for services already rendered. So the fact that the DWC is proposing penalties of more than $8 million for administrators who allegedly failed to send records to Maximus isn't a surprise, he said.

"It's blanketed throughout the industry, not just one segment and not just IMR," he said. "It's standard practice to deny care, deny treatment and deny funds they're supposed to be paying other people in the industry for services rendered. It's just standard practice."

Jerry Azevedo, a spokesman for the Workers' Compensation Action Network, cautioned against drawing conclusions, because there is not a lot of detail in most of the  orders.

“From the information available, it’s not possible to determine where the procedural breakdown occurred or whether the employer will ultimately prevail at hearing," he said in an email. "We need more information about these cases and whether they are indicative of a larger trend before considering any procedural or policy changes.”

The DWC sent the first three orders to show cause to Gallagher Bassett in June 2015. Those orders proposed $15,000 in penalties. On Aug. 17, the DWC sent eight more orders to show cause to eight claims administrators, including Gallagher Bassett.

The claims administrators were required to stipulate to the violations and pay the requested penalty, or contest the violations by filing an answer within 30 days of receiving the order. The DWC did not say on Tuesday whether any of the orders were contested.

State Compensation Insurance Fund faced $510,000 in penalties for 102 cases in which it allegedly sent records late, according to an Aug. 17 order to show cause.

But Jennifer Vargen, executive vice president of public affairs for SCIF, said after researching the cases, it learned that it had in fact submitted records in a timely manner in 31 of those cases. The carrier was late on the other 71, she said. 

State Fund shared its findings with the DWC as well as a plan to ensure records are submitted on time in the future. Asked whether State Fund has paid any of the proposed penalty, she said, "I believe it's still under review."

Vargen said the order to show cause did highlight an area that State Fund needed to improve. And she said the carrier has improved its IMR response time.

"We are committed to making sure we respond timely to every Maximus request and that IMR works as quickly as possible," she said.

If State Fund is assessed the full $5,000 for each of the 71 cases in which records were admittedly late, the fine would be $355,000 rather than the proposed $510,000.

The fact that Maximus incorrectly asserted records were late in 30% of State Fund's cases suggests there could be other claims administrators facing penalties for records that were actually submitted on time. 

Robyn Ziegler, manager of media and public relations for Zurich North America, said in an emailed statement that the company will continue to fully cooperate with the Division of Workers Compensation. She said Zurich "as policy, will not be sharing additional information."

No other company responded to requests for comment on Tuesday.

While it's not clear in the majority of the cases how long Maximus was allegedly waiting for records, at least three cases allege that records were late by more than three months.

In two of those cases, the mix-up was caused by the fact that Maximus was apparently not notified that Gallagher Bassett had replaced Chubb as the claims administrator. 

Orders to show cause sent to Gallagher Bassett on June 26, 2015 say Maximus initially requested records from Chubb. Maximus eventually learned Gallagher was the claims administrator and asked it to send medical records.

In one case, Gallagher sent records 53 days after receiving the first request from Maximus. The records in that case were ultimately late by 129 days. 

In another, Gallagher sent records 62 days after the first request from Maximus. The records in that case were ultimately 138 days late.

A third order to show cause sent to Gallagher Bassett, in which there is no mention of confusion about who was administering the claim, alleges the company did not provide records until 110 days after Maximus first asked for the documents. 

In all three cases, after eventually receiving the records from Gallagher Bassett, Maximus affirmed the underlying utilization review decision, finding the requested treatment was not necessary, according to IMR decisions posted to the DWC's website. 

Alan Gurvey, managing partner of applicant's law firm Rowen, Gurvey and Win, said any penalties the DWC might ultimately collect mean little to injured workers. What injured workers care about is that their treatment is denied, and it sometimes takes "forever and a day to hear about the denial," he said.

"The penalty, if enforced, does nothing for the injured worker, while it apparently pads the coffers somewhere in the administration," he said. "Why aren't the injured workers being provided with these penalties, assuming they are being collected, so that they can pay out-of-pocket for the treatment that has been denied? And, if the penalties are not being collected, or a portion of them are, why are the carriers getting off the hook without any public scrutiny and legal enforcement?"

Gurvey said the proposed penalties also call into question how serious the requirement really is for Maximus to issue timely decisions.

The majority of Workers' Compensation Appeals Board commissioners in the Sunders and Southard panel decisions said the requirement in the Labor Code that Maximus issue decisions in 30 days means a late IMR ruling is invalid. 

But a different panel of WCAB commissioners in the Arredondo decision said IMR was a governmental action, and the 30-day requirement is "discretionary."

"Apparently, the DWC, if it is collecting on these penalties, seems to believe that the failure to provide an IMR determination within the requisite timeframe is a serious offense," Gurvey said.

Gurvey also questioned the lack of transparency on the part of regulators in disclosing the penalties for not submitting medical records on time.

The DWC did not issue a statement announcing its plans to assess more than $8 million in administrative penalties last year. The legal actions weren't disclosed until a staff attorney said during the DWC educational conference in Los Angeles last month that the division had issued orders to show cause.

Steve Cattolica, director of government relations for the California Society of Industrial Medicine and Surgery, was also critical about the division and the Department of Industrial Relations not discussing the penalties earlier.

"In light of the DIR and DWC's underlying pledge of transparency, now, nearly seven months later, the lack of any announcement, and more importantly no indication that any money was actually collected, is disturbing," he said. "If it is subsequently found that these penalties were forgiven, otherwise uncollected or only partially so, we'd hope the Legislature would be interested."

He said the fact that the maximum penalty for not sending records to Maximus is capped at $5,000 is a clear disincentive to comply after 10 days. One way to rectify this would be to change the penalty structure such that the cap automatically doubles every two days, he said.

Cattolica also said he found it disturbing that in three cases in which records were outstanding for more than 100 days, the IMR process still upheld the UR decision.

He said another proposed change to improve the process would be that if records are missing after 20 days, the burden of proof shifts to the claims administrator to prove the utilization review physician was correct in the denial and has 10 more days to submit records. If no records are submitted in 30 days, the UR denial is automatically reversed.

Assemblyman Tom Daly, D-Anaheim, who is chairman of the Assembly Insurance Committee, was not available for comment on Tuesday, according to a spokesman.

A voice message and email sent to a spokesman for Sen. Tony Mendoza, D-Artesia, chairman of the Senate Labor and Industrial Relations Committee, were not returned on Tuesday.

Daly and Mendoza recently chaired a joint hearing about implementing a workers' compensation prescription drug formulary that included a discussion of whether utilization review and independent medical review should be part of the process for approving medications.

California Labor Federation spokesman Steve Smith did not respond to a request for comment on Tuesday. Angie Wei, chief of staff for the California Labor Federation, was the primary lobbyist representing injured workers during the SB 863 negotiations. Wei is also chairwoman of the Commission on Health and Safety and Workers' Compensation, a labor-management panel charged with investigating and recommending ways to improve the state's workers' compensation system.