
Illinois Workers Compensation Reform

Christopher M. Breck, CIC, ARM
Managing Director of Healthcare
Alper Services, LLC

Sharon M. Livas
Sr. Vice President – Healthcare
Alper Services, LLC

Illinois
Talks of Workers’ Compensation
Reform

Illinois
Reform
Stakeholders
 Dr’s
 Business
 Labor
 Lawyers
 Workers
 Politicians

Illinois
Reform

Most Expensive Change in Rank
States 2008 vs. 2010
 Montana 2-1
 Alaska 1- 2
 Illinois 10 -3
 Oklahoma 9-4
 California 13 - 5
 Connecticut 20 - 6
 New Jersey 16 - 7

Illinois
Reform
Current Causation
 Accident need only be a causative factor

 May be based on a sequence of events without
medical testimony

 Aggravation of pre-existing condition

Illinois
Reform
Proposed Causation
 Change work related condition to be “caused” by
work as PRIMARY factor

 Current indefensible standard allowing work to
be “a” cause not “the” cause.

Illinois
Reform
Current Choice of Medical Care
 Employee has choice of up to 2 treating
physicians and referrals

Proposed Choices for Medical Care

 1st choice to Employer; 2nd choice to Employee

Illinois
Reform
Current AMA Standards
 Not applied in IL

38 states recognize guidelines
Proposed AMA Standards
 Require objective findings of disability based on
AMA guidelines

Illinois
Reform
Current Wage Differential
 Lifetime benefit requires physical rather than
economic change

 Unlimited Number of awards

 Based on Maximum state average weekly
wage

Illinois
Reform
Proposed Wage Differential
 Cap until Age 67 or 5 years post injury

 Allow modification based on a material increase in
earnings

 Cap benefit at max PPD rate

Illinois
Reform
Current Intoxication Defense
 There is none

Illinois
Reform
Proposed Intoxication Defense
 Create rebuttable presumption that there will be NO
benefits if alcohol level is . 08 or above or any other
illegal substance OR refuses testing

Illinois
Reform
Current Fee Schedule
 Medical Fee Schedule 2nd highest in the country
(WCRI)

Illinois
Reform
Proposed Schedule
 Reduce 15-20%

 Provide reimbursement for out of state
procedures, treatments and supplies

 Cap reimbursements for Implants at cost plus of
25%

Illinois
Reform
REFORM
+ EARLY INTERVENTION
+ SAFETY TRAINING
+ HIRING PRACTICES
=
LOWER COSTS AND
HEALTHY EMPLOYEES

Illinois
Reform

 How does IL rank in costs?

 If my blood alcohol is .06, will my Work Comp
clam be paid?

 What year were the last reforms made to the
system?

Illinois
Reform
 Why have medical costs increased faster in
workers compensation vs. health plans?

 What can you personally do to help reforms be
adopted in Illinois?

Enforcement Overview
Specific areas of regulatory risk
Acquired conditions
RAC
Privacy
Excluded Individuals
Compliance Programs

Overview of the Health Care Industry:
Enforcement Agencies
 HHS Centers for Medicare & Medicaid Services
(CMS)
 Food and Drug Administration (FDA)
 Office of Inspector General (OIG)
 Department of Justice (DOJ)
 Federal Bureau of Investigation (FBI)
 HHS Office of Civil Right (OCR)
 State Attorneys General
 Private Litigants

Centers for Medicare &
Medicaid Services (CMS)

 Within HHS, administers Medicare, Medicaid,
State Children's Health Insurance Program
(SCHIP), HIPAA (transactions) CLIA, other
programs
 90 million beneficiaries
 $650 billion budget
 "Stewards accountable for resources and
effectiveness"

Office of Inspector General
(OIG)
 OIG mandated by law to protect integrity of HHS
programs, and health and welfare of program
beneficiaries
 OIG responsible to report to Secretary of HHS and
Congress problems and recommendations
 OIG duties carried out through a nationwide
network of audits, investigations and inspections

OIG Initiatives
 Annual work plans
 Self-disclosure protocol
 Recently refined
 Good faith disclosures
 Imposes Corporate Integrity/Compliance
Agreements
 Compliance Program Guidance
 Provider-specific (i.e., hospital, home health,
lab, DME)
 Nursing facility guidance

OIG 2011 Work Plan
 Senior services focus includes:
 Nursing home payment and oversight
 Assessment of atypical antipsychotic drugs
 Nursing home resident hospitalizations
 Criminal background checks for nursing home
employees
 Emergency preparedness

FALSE CLAIMS ACT

 31 U.S.C. §§ 3729-2733 imposes civil liability
against a person or entity that:
 Knowingly (can be shown by reckless disregard
for the truth)
 Presents a false claim for payment, or
 Uses a false record or statement to get a claim
paid or approved, or causes a third party to do
either of above
 Treble damage award
 Additional penalty for each claim between $5,000
and $11,000.

FCA Whistleblower ("Qui Tam")
Provisions
 Private citizen whistleblower ("relator") files action
and submits to U.S. Attorney for review
 Government investigates and decides whether to
intervene
 If government does not intervene, relator may pursue
action on his/her own, in the shoes of the
government.
 Relator may receive
 up to 25% of award if government intervenes
 30% if government does not intervene and relator
pursues

Majority of False Claim Actions Come
from Whistleblowers
 Whistleblowers are
everywhere

 From lower level
employees to
professionals or executive
employees

Computation of FCA Judgment
 $334 million judgment (3/07) against AmeriGroup health plan
 Illinois hired Amerigroup to administer Medicaid managed
care program
 Amerigroup alleged to have avoided pregnant women and
others with expensive health conditions
 False Claims Action
 Whistleblower was former head of government relations;
received between 15% and 25% of award.
 Judgment Total: Jury award: $48 million in damages,
trebled (x3) = $144 million, judge assessed penalty of
$10,500 on each of 18,130 claims = $190,365,000
TOTAL: $334 million.
 Other costs – employee time and lawyers' fees

Social Security Act
Relevant Provisions

 42 U.S.C. § 1320a-7: Exclusion of individuals and
entities from participation in Medicare and State
health care programs
 42 U.S.C. § 1320a-7a: Civil monetary penalties
 42 U.S.C. § 1320a-7b: Criminal penalties for action
involving Federal health care programs

Anti-Kickback Statute (criminal)
 Knowingly and willfully
 Offer, pay, solicit or receive
 Any remuneration (in cash or in kind)
 To induce (or, in exchange for)
 The purchasing, ordering, or recommending of
any good or service reimbursable by the
Medicare, Medicaid or other federally funded
health care programs
 Penalties: up to 5 years imprisonment, $25,000
fine, or both

Stark Law (civil)

 Physician (including immediate family members) with a financial
relationship with an entity, may not refer Medicare or Medicaid
patient to that entity, and entity may not bill for "designated health
services." Penalties include refunding improper claims and CMPs
of up to $15,000 per claim
 Designated Health Services:
 Lab -Parenteral, enteral nutrition
 PT -Prosthetics, orthotics
 OT -Home health services, supplies
 Radiology -Outpatient drugs
 Radiation therapy -Inpt/Outpt hospital services
 DME

Health Care Reform – Patient Protection
and Affordable Care Act
(“PPACA”)
 Oversight and enforcement increased, including:
 Fraud enforcement funding: additional $10 million
yearly for years 2011 - 2020; $250 million over
years 2011 - 2016
 Subpoena and testimony powers expanded for HHS
and OIG
 Medicaid exclusions expanded: states must terminate
provider excluded by Medicare or another state;
 Medicaid exclusion for failure to repay
overpayments

PPACA Expansion of
Oversight and Enforcement

 Anti-Kickback intention standard eased;
Stark self-disclosure expectations increased

 Provider enrollment: program participation
screenings depending on “low”, “moderate”
or “high” risk levels

II. Exposure: Acquired Conditions
Payment Rules

Emergence of "Value Based
Purchasing"
 Current Medicare payment system: consumption and
quantity of care
 Center of Medicare and Medicaid Services (CMS)
 transforming Medicare from passive to active
purchaser
 Goal: increase quality, avoid unnecessary costs
 VBP drivers: Congress, MedPAC and IOM reports,
private sector
 Medicare Trust Fund solvency

Emergence of “Value-Based
Purchasing”

 Value-Based Purchasing Initiatives
 Hospital Pay for Reporting
 Hospital VBP Plan
 VBP Nursing Home Demonstration
 VBP programs will affect home health,
physicians & other providers
 Against VBP backdrop, HAC rules emerged

Legal Basis of HAC Payment Rules

 Deficit Reduction Act of 2005, Section 5001(c)

 Required CMS to select at least two conditions:
 High cost, high volume, or both
 Assigned to higher-paying DRG if present as
secondary diagnosis
 Reasonably prevented through using evidence-
based guidelines

Legal Basis of HAC Payment Rules
 Deficit Reduction Act
 October 1, 2007: Hospitals required to submit
claims data indicating whether diagnoses are
"present on admission"
 October 1, 2008: No payment for care associated
with Hospital Acquired Condition (“Never
Event”) unless identified as present on
admission
 Medicare hospital payment regulations specify
Hospital Acquired Conditions and include "Never
Events"

Initial Hospital Acquired Conditions,
including "Never Events"

 Object left in body after surgery*
 Air embolism*
 Blood incompatibility*
 Catheter-associated urinary tract infection
 Decubitus ulcers
 Vascular catheter-associated infection

* “Never Events”

Initial Hospital Acquired Conditions
(cont.)

 Surgical site infection-mediastinitis after CABG
 Falls-specific trauma codes
 Extreme manifestations of poor glycemic control
 Surgical infection post certain orthopedic, bariatric
surgeries
 DVT/PE post hip, knee replacement surgeries

Acquired Conditions and Health
Reform: Medicare

 PPACA requires Secretary of HHS to study expansion
of Medicare HAC regulations to
 Rehab hospitals
 Long-term acute care hospitals
 Hospital outpatient departments
 Skilled nursing facilities
 Others
 Report due to Congress by January 1, 2012
 Impact on quality, safety and cost of care

Acquired Conditions and Health
Reform: Medicaid
 By July 1, 2011, PPACA requires state Medicaid
programs to ensure that Medicaid payments are not
made for conditions covered by Medicare HAC policy
 Certain Medicare HACs may be excluded if
inapplicable to Medicaid populations
 February 17, 2011 proposed regulations
 “Provider-Preventable Conditions,” “Other Provider-
Preventable Conditions”
 Could have reasonably been prevented through
application of evidence-based guidelines
 Not limited to inpatient hospital settings

III. Exposure: Recovery Audit
Contractor (RAC) Program

The RAC Program: Background

Congressional Authority

 Medicare Prescription Drug Improvement and
Modernization Act of 2003
 Directed establishment of demonstration
program

 Tax Relief and Health Care Act of 2006
 Expanded claims RAC nationwide in 2010

The RAC Program: Key Features
 To identify improper payments made on claims
for health care services provided to Medicare
beneficiaries

 RAC Program is separate from/addition to existing
processes for identifying overpayments by
Medicare Affiliated Contractors (MACs)

The RAC Program: Key Features

 Two types of RACs
 Medicare Secondary Payer (MSP) RACs
 Claims RACs
 Affected providers include physicians, hospitals,
SNFs, inpatient rehab, clinical labs, DME
 Medicare Advantage and Part D claims excluded
from RAC review
 RACs receive contingency payments

RAC Program: Key Features

 RAC Review Process
 RAC review of claims data files
 Look-back period—Was 4 years in
demonstration, now 3 years
 RACs may not review claims already reviewed,
ongoing post-payment medical review claims,
claims under fraud, criminal investigations
 Automated and Complex claims reviews

RAC Collection / Appeal Process

 Collection same as for Medicare contractor –
identified overpayments
 Recoupment via offset unless provider submits check
or valid appeal
 Appeal timeframes
http://www.cms.gov/MLNproducts/downloads/
MedicareAppealsProcess.pdf

Medicaid RAC Program
 PPACA requires states to contract with one or more
RACS by December 31, 2010 (postponed)
 November 10, 2010 proposed regulations; new
implementation date with final regulations
 State plan amendments due December 31, 2010
 Contingency fee payments (like Medicare RACS)
 State may use current Medicaid appeals process for
RAC appeals
 State variations likely – look-back periods, types of
claims reviewed

IV. Exposure: Health Information
Privacy & Security

HIPAA Basics
 HIPAA applies to Covered Entities
 "Covered Entities"
 Health care providers who transmit electronic
standard transactions
 Health plans, including employer sponsored
health benefits plans
 Health care clearinghouses: entities that process
electronic data formats

HIPAA Basics

 HIPAA also regulates "Business Associates"
(effective February 17, 2010)
 A Business Associate performs functions or
activities on behalf of a Covered Entity and uses or
accesses PHI to do so.
 Business Associate functions include management,
administrative, legal, actuarial, accounting and
consulting
 Business Associate Agreement required between
Covered Entity and Business Associate

HIPAA Privacy Rule Basics
 Basic Rule
 No use or disclosure of PHI by Covered Entities
unless authorized by the individual or permitted
by the Privacy Rule
 Permitted uses/disclosures include
 For treatment, payment and health care
operations purposes ("TPO")
 To the patient
 Specific exceptions list in the regulations

HIPAA Enforcement Basics
 HHS Office of Civil Rights ("OCR") enforces
HIPAA privacy and security regulations
 Statutory civil monetary and criminal penalties for
HIPAA violations
 No private right of action under HIPAA, however
State Attorneys General now authorized to bring
suit, in addition to U.S. Attorneys
 OIG Work Plan targets hospital security controls
for PHI on portable devices, privacy and breach
response compliance

HIPAA Enforcement
 Resolution Agreements: (Providence Health,
CVS/Caremark, Mass General)
 HIPAA prosecutions
 Criminal cases involving the use/disclosure of
PHI for personal gain (Gibson, Ferrer and
Machado, Ramirez)
 Criminal cases involving inappropriate access
to PHI (Zhou, Holland, Miller and Griffen)
 HITECH clarified that individuals may be
prosecuted

HIPAA Updated by HITECH
 American Recovery and Reinvestment Act of
2009, February 17, 2009 (ARRA)
 Title XIII, Health Information Technology for
Economic and Clinical Health Act (HITECH)
 Bureaucracy for national EHR infrastructure to
set EHR standards, administer EHR stimulus
funding
 Medicare and Medicaid reimbursement
methods to incent EHR adoption
 New HIPAA privacy and security requirements

HITECH: New Federal breach
notification requirements
 Prior to HITECH, covered entities were not
required to notify patients of breaches of PHI,
unless required by state law
 HITECH breach regulations 45 C.F.R. 164.400-414
 Effective 9/23/09, covered entities must notify
patients whose unsecured PHI has been breached
 HIPAA business associate must notify covered
entity when unsecured PHI has been breached

Illinois Personal Information
Protection Act
 Notice to IL residents of unauthorized acquisition
of computerized data that compromises the
security, confidentiality or integrity of personal
information
 Personal information: first initial or name/last name
with SSN# or driver’s license #/state ID # or
account/credit/debit card # with or without access
code
 Notice must be made in the “most expedient time
possible” and “without unreasonable delay”

"Breach" under HITECH

 Not all impermissible uses or disclosures are
breaches
 "Breach" = unauthorized acquisition, access, use
or disclosure of PHI which compromises the
security or privacy of the information
 "Compromises" = poses a significant risk of
financial, reputational or other harm to the
individual

Breach risk assessment

 Must be performed in order to determine whether
there is a significant risk of harm
 Must be documented, as covered entity's (and
business associate's) burden of proof includes
demonstrating that a use or disclosure was not a
breach

Breach risk assessment under
HITECH
 Data files containing
 Patient names

 Patient names and social security numbers

 Patient names in files labeled "CHF“

 Health plan identification numbers

 Claims information including procedure codes

Breach investigations and Business
Associates
 HITECH requires
 BA to notify CE of breach of unsecured PHI
 Notice shall include, to extent possible,
identification of each individual affected
 BA to provide CE with any other available
information that CE is required to include in
individual notice
 Notice must be provided without unreasonable
delay and in no case later that 60 days after
discovery of breach

HITECH Breach Notice Requirements
Individual Notice

 To each individual whose unsecured PHI has
been breached
 If 10 or more individuals for whom there is
insufficient contact information, substitute notice
required
 Conspicuous website posting for 90 days
 Notice in major print or broadcast media
 Toll-free number active for 90 days
 To next of kin or personal representative of
deceased individuals, if address known

Individual Notice
 "Without unreasonable delay," but no later than 60
days after discovery of breach
 In writing, by first class mail, unless individual as
agreed in advance to email communications
 By telephone, if possibility of imminent misuse of
PHI
 Law enforcement delay: Upon written or oral
statement by law enforcement official that notice
or posting would impede investigation

Content of Individual Notice
 Description of what happened, date of discovery
 Types of PHI involved
 Steps individual can take to protect from potential
harm
 Description of what health plan is doing to
investigate, mitigate losses and protect against
further breaches
 Contact for questions, including a toll-free phone
number


 Notice to the media
 Breach involving more than 500 residents of a
state or jurisdiction
 Prominent media outlets serving the state or
jurisdiction
 Same content and timing requirements as for
individual notice
 Press release indicated by OCR as expected form
of media notice

 Notice to the Secretary
 If breach involves 500 or more individuals,
notice to be provided contemporaneously with
individual notice
 If breach involves fewer than 500 individuals,
log must be maintained and reported annually
not later than 60 days after end of each calendar
year
 Forreports of 500 or more, expect indication of
further follow-up by OCR

Additional requirements
 Policies and procedures for compliance with
HITECH breach notice requirements

 Training workforce regarding breach policies and
procedures

 Sanctions for non-compliance

Breach response realities
 Have ready to go
 Data breach reporting policies and procedures,
consistent with HIPAA policies and training
requirements
 Data breach response policy, pre-selected
response team
 Risk assessment documentation template
 Template notice letter
 Data breach liability policy?

V. Exposure: Excluded Individuals

Excluded Individuals
 Bases for exclusion from Medicare or Medicaid
program participation
 Sexual assault
 Patient abuse
 Failure to repay HEAL loans
 Criminal convictions related to program
 Criminal convictions related to controlled substances
 Licensure issues

 No Medicare, Medicaid or any other Federal health
care program payment may be made for items or
services (1) furnished by an excluded individual,
or (2) directed or prescribed by an excluded
physician (itemized claims, cost reports, fee
schedules or PPS payments)
 Civil monetary penalties (CMPs) may be imposed
for submission of improper claims, including
claims submitted by an excluded individual

 OIG Special Advisory Bulletin
 Prohibition extends to administration and
management services not directly related to
patient care
 Prohibition continues to apply even if individual
changes health professions while excluded
 No Federal program payment may be made to
cover individual’s salary, expenses or benefits
regardless of whether direct patient care is
provided

 OIG Special Advisory Bulletin

 To avoid CMP liability, check OIG List of
Excluded Individuals/Entities prior to hiring or
contracting and periodically

 Check Excluded Parties List System
(maintained by the GSA) also

 State Medicaid list

Compliance Programs – Today Voluntary
 OIG Compliance Guidance for Nursing Facilities
(2000; Supplemental guidance 2008)
 Quality Care (staffing, training)
 Accurate claims (upcoding, therapy services,
excluded individuals, anti-kickback
 Involvement of board of directors and senior
officers
 Annual reviews
 Self-reporting

Compliance Programs – Soon Mandatory

 PPACA Section 6102
 Medicare SNFs and Medicaid NFs must have
compliance and ethics program with 3 years of
PPACA enactment
 HHS and OIG to establish regulations
 Organizations with 5 or more facilities must
have more formal program with written policies
and procedures


 SNF/NF compliance program – reasonably
designed, implemented and enforced to be
generally effective in preventing and detecting civil
criminal and administrative violations, as well as
promoting quality of care
 Required components
 Compliance procedures to guide employees
 Assigned compliance responsibilities to senior
individuals within operating organizations


 Required components (cont.)
 Restriction of at-risk individuals from
involvement with compliance responsibilities
 Effective communications
 Auditing and monitoring
 Appropriate disciplinary measures, including for
failing to detect offenses
 Appropriate response mechanisms

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