Big work-comp administrator firm committed fraud, say briefs before court
(Steven Miller of NPRI) – As the Nevada Legislature ponders allowing injured workers to once again choose their doctors, a case now before the state’s high court suggests the current ban on such choice may be facilitating fraud.
The legislation before the current session is Assembly Bill 187, sponsored by 15 assembly members and three state senators.
It aims to greatly expand the universe of qualified medical providers authorized to provide medical care within the state’s industrial insurance system, and — from that greatly expanded list — let injured workers, once again, select their own doctors. That is a right lawmakers eliminated in 1993.
The case at the Nevada Supreme Court bearing on this issue is Reeves v. Division of Industrial Relations and Nevada Department of Administration, case No. 62468.
Evidence submitted to the court by appellant Susan Reeves and her attorney, the latter told the court, shows a 2004 instance of clear fraud by one of Nevada’s largest third-party administrators of workers’ comp claims — Cannon Cochran Management Services (CCMSI), under contract at the time to Bally’s Resort Hotel & Casino, a property of Caesar’s Entertainment.
Context of the case
The background issue was an award of medical and indemnity benefits to Susan Reeves, who’d worked as a room-reservations clerk at Bally’s until 1988 when her car, in the Bally’s parking lot, had been rear-ended. That initial work-comp claim — constant post-accident headache and dizziness — had been denied, only to be later reinstated by the Nevada Supreme Court in 1997 after much litigation.
In mid-2003, CCMSI became Bally’s third-party administrator for its workers’ comp cases and thus joined the firm’s ongoing fight against Reeves’ efforts to secure full benefits.
In early December 2003, however, CCMSI and Bally’s lost before Department of Administration Appeal Officer Nancy Richins, who — relying on the diagnosis of consulting psychologist Louis F. Mortillaro, PhD. — ruled that Reeves’ somatoform pain disorder ultimately derived from the parking lot accident and so was covered by Bally’s industrial insurance.
Richins’ decision reversed that of a hearing-level officer almost three years earlier. Writing under “Conclusions of Law,” Richins said, “This claim should not have been closed, and should remain open for further benefits.”
On that basis, in early January 2004, Reeves’ then-attorney requested CCMSI make temporary disability (TTD) benefit payments. Two months later CCMSI responded with a request that Reeves get her physicians to supply certification of her disability.
On April 13, Reeves’ treating physician, George A. Petroff, MD, duly wrote CCMSI that, “It is doubtful whether [Appellant Reeves] could have worked on any regular basis through the period of 1998 to the present.” He added, “Superimposed neck problems became prominent in the last couple of years. This could further make it difficult to return to the work force.”
CCMSI, not giving up, replied in mid-May to Petroff with an aggressive letter that sidestepped the appeal-officer adjudication just six months earlier that had identified the nature of Reeves’ pain disorder. The contentious letter also appeared to assume that Mortillaro, the psychologist, was more of an authority on physical therapy than MD Petroff.
Five days later, on May 18, Petroff again responded, reaffirming his doubt about Reeves returning to work. Addressing a description of Reeves’ previous job that CCMSI wanted him to review, he wrote:
From a medical standpoint, with respect to the pre-accident job description, I suspect the patient will not be able to return to gainful employment based on the objective evidence of her degenerative cervical spine disease.” (Emphasis added.)
CCMSI, however, still refused to accept Petroff’s professional prognosis. Instead, the third-party administrator (TPA) arranged a June 26 face-to-face meeting at the doctor’s office between CCMSI’s attorney, two CCMSI claims employees, Mortillaro and Petroff. They did not inform Susan Reeves.
Dr. Petroff’s office staff, however, did. Consequently, on the appointed day, Reeves and her husband appeared at the meeting.
They were forced to leave. As Petroff himself wrote in a “To Whom It May Concern” statement he issued that same day:
Susan Reeves was present here in our offices with her husband, but shortly before the meeting and after a discussion with my office manager and the CCMSI representatives, it was determined that the patient was not allowed to be present at this meeting per her worker’s compensation representatives. The patient then left the office.
Though Reeves was not allowed to be present in the meeting, a seven-year-old Nevada law immediately kicked in, as it mandates that she and her legal counsel must be fully informed as to the content of all TPA and insurer communications with a patient’s doctor.
Rights of the injured
That law, currently in statute as NRS 616D.330, was passed in 1997. State lawmakers became convinced it was necessary after they had heard of multiple instances in which workers’ comp claims administrators or insurers had secretly pressured or misinformed doctors to make them change their diagnoses. Such revised diagnoses allow insurers to then deny work-comp claims as “non-industrial,” and thus evade the financial payouts they otherwise would have to make.
Testifying, long-time workers’ comp attorney Dean Hardy had explicitly laid that problem at the feet of lawmakers who, in 1993, had eliminated the right of injured workers to select their own doctors.
Because that change in the law gave insurers and TPAs control over payments to workers’ comp doctors, it gave those controlling that cash flow strong incentives to use that leverage for their own benefit, rather than that of the injured worker, he suggested.
Said Hardy, according to the March 6, 1997, minutes of the Assembly Committee on Labor and Management:
Nevada’s managed care system provided that employees injured on the job did not have an opportunity to choose a physician. Often they were placed with a physician by a claims administrator, managed care coordinator, or insurer. As a result, Mr. Hardy commented, there existed some skepticism on the part of injured workers as to whether a physician was “…working for (the claimant), or is he working for the administrator that is paying their bills?
Hardy went on to give, from his personal experience, three examples of improper ex parte communications by claims administrators to workers’ comp doctors.
In one instance, a TPA concealed from Hardy the former’s attempts to secretly sway a doctors’ opinion by pressuring him in multiple ways — pretending the doctor was ignorant of facts, by sending the doctor legal statutes irrelevant to his medical diagnosis, by repeatedly emphasizing that the insurer didn’t want to pay, by insisting that the doctor change his report and by sending him beside-the-point police reports.
In another instance, what a doctor had actually said (namely, that a particular workers’ need for surgery did in fact qualify for industrial insurance) was entirely misrepresented to that injured worker. In a third instance, a TPA claims processor had lied to a doctor in order to get false allegations included in the doctor’s report.
The solution that legislators embraced in 1997 and embodied in AB147, sought to deal with the problem by making it illegal for anyone involved in the workers’ comp claims-determination process — whether on the insurer/employer side or on the injured-employee side — to initiate ex parte oral communications with an injured employee’s treating physician unless the initiator of the oral communication:
(1) Maintains, in written form or in a form from which a written record may be produced, a log that includes the date, time and subject matter of the communication; and
(2) Makes the log available, upon request, to each insurer, organization for managed care and third-party administrator interested in the claim or the representative of each of those persons, the administrator and the injured employee, his representative and his employer… (Emphasis added.)
However, the penalties set by the legislature for violating its new rules were negligible: the standard $1,000 fine that DIR can levy if a complaint makes its way through the division’s cumbersome process, a $10,000 fine for a second such violation — and that’s about it. DIR cannot “pull the ticket” of Nevada’s scofflaw TPAs, insurers and self-insurers. Only the Division of Insurance has the legal power to de-certify such entities, and — according to workers’ comp insiders interviewed by Nevada Journal — that’s never happened to any of the major self-insured political players in the state.
Reeves benefits denied again
Four weeks after its June 29, 2004, ex parte meeting, CCMSI denied all benefits awarded to Reeves six months earlier by Appeal Officer Richins.
After that denial, Reeves asked CCMSI to provide her with the log — required by NRS 616D.330 — for the meeting from which she had been excluded.
Virtually nothing, however, was forthcoming.
The seriousness with which the Nevada Supreme Court is taking the Reeves appeal became evident in October 2013 when it asked for appointment of a pro bono attorney to represent the claimant in the case against the state Division of Industrial Relations (DIR) and the State of Nevada.
“This court has determined that the appointment of pro bono counsel to represent appellant would assist this court in reviewing this appeal,” said the court. Maximiliano Couvillier — then with Lionel Sawyer & Collins, now with Black & LoBello — accepted the appointment to represent Reeves, who had been filing her appeals pro per, as a non-lawyer representing herself.
Immediately, in his supplementary opening brief, Couvillier attacked the CCMSI “log.”
Multiple problems with it, he wrote, reveal it to be “patently false” and “a fraud upon the process.” Those problems include:
- Its mere 20 words don’t even pretend to communicate what CCMSI’s representatives said to Dr. Petroff in those behind-closed-doors communications — completely ignoring the informational requirements of NRS 616D.330.
- The note falsely represents that claimant Reeves and her husband were present at the meeting, when, in fact, CCMSI had expressly prohibited them from attending — as Dr. Petroff recorded, the same day, in his “To Whom It May Concern” memo.
- The entry for June 2004 was almost certainly entered at least two years after the meeting, since it had been preceded by an entry dated September 2006.
Couvillier then draws attention to the refusal of the Nevada Department of Administration hearing and appeals officers, the Clark County District Court and the Nevada Division of Industrial Relations — all — to confront the violation by CCMSI of NRS 616D.330, a violation during which, wrote the attorney:
… the insurance company somehow influenced Appellant Reeves’ doctor into completely reversing his prognosis and suddenly opining that she could return to work — after he had time and again concluded that Appellant Reeves could not return to work…
Somehow, writes Couvillier, “CCMSI turned Dr. Petroff completely around [so that] he suddenly concluded that ‘it would be reasonable to recommend the patient undergo a trial back to work, sedentary, under appropriate adaptive conditions, including no lifting, carrying or pulling more than five pounds’” — a “suspiciously changed conclusion” that CCMSI then relied upon to deny Reeves’ request for TTD benefits.
Couvillier argues that Nevada’s entire, subsequent workers’ comp process “was unfair and tainted by CCMSI’s clandestine misconduct and false and fraudulent misrepresentation.”
As the record shows [writes the attorney], the DIR’s determination of Appellant Reeves’ substantive rights was infected by an unfair, unjust, suspicious and fraudulent process. Appellant Reeves did not even get a semblance of a fair process as the DIR also failed to make any findings regarding whether the false “Claim File Log of Oral Communication” even complied with NRS 616D.330. (Emphasis added.)
Claimant Reeves and her attorney argue that “The procedural wrongs which tainted the substantive resolution of Appellant Reeves’ worker’s compensation rights sufficiently prejudiced Appellant Reeves’ rights and interests that the Court should vacate the administrative decisions below.” They have also asked the Supreme Court to determine “whether she is entitled to a benefit penalty under NRS 616D.120 until it determines whether her workers’ compensation claim was properly closed…”
The court has not yet reached a decision in the case, although briefing has concluded.
Reeves and AB187
The relevance of the Reeves case for AB187 — the legislation currently before the 2015 Legislature — is that it appears to show a hidden significance of the Nevada Legislature’s 1993 decision to deprive injured workers’ of their common-law right to select their own physicians. The case also appears to lend weight to long-running allegations by many injured workers — and even some employers — that the State of Nevada, throughout its workers’ comp regulatory apparatus, regularly stares at the ceiling while misconduct by large self-insurers and third-party administrators goes on.
What has been the response of the State of Nevada to Couvillier’s assertions? The attorney, after all, argues that the Division of Industrial Insurance, the Department of Administration and the Clark County District Court all “abused their discretion by failing and refusing to consider that CCMSI’s ‘log’ was a fraud upon the administrative process — a phony made up years after-the-fact.”
First, DIR signed on to an argument made by CCMSI, which — proclaiming itself the real party in interest — had been permitted to join the case before the Supreme Court. CCMSI contended that all matters regarding the “log” are now beside the point, because they supposedly had been addressed at lower levels in the appear process, and
The only issue before the Court under this appeal is whether the Appeals Officer had substantial evidence in regards to her Order affirming Respondent, Nevada Division of Industrial Relations’ (hereinafter referred to as DIR) findings that there were no violations of NRS 616D.120 benefit penalty provision as it relates to TTD.
DIR itself, however, then went further, stating that when Reeves asked the agency “to assist her in obtaining oral communications/written records of [the] meeting she alleged to have taken place,” DIR then “conducted a review of the file and found no violation occurred. DIR determined that Reeves was provided with a complete copy of the claims file.”
In other words, the “claim file log of oral communications” presented above — notwithstanding all its problems suggesting fraud — was entirely acceptable to DIR.
It seems difficult to deny that the agency, however, was ignoring the clear intent of the Nevada Legislature when it first passed NRS 616D.330. If all an insurer or TPA had to record was, “Talked to claimant’s doctor,” and not record the important points of what was talked about, why would lawmakers have bothered to require “logs of oral communications” at all?
DIR also argues that when Reeves asked it for assistance obtaining records of CCMSI’s clandestine meeting with her doctors, she did not at that time ask it for a benefit penalty, Had she done so, the agency suggests, it would have triggered a formal DIR investigation, the decision of which, once DIR ruled against Reeves, could have been appealed to a Department of Administration appeals officer.
“[T]he record shows,” wrote Couvillier, “the DIR did not protect Appellant Reeves’ rights to a fair and just process,” but instead “ignored (or simply turned a blind eye to)” a “fraud upon the administrative process” committed by CCMSI with “a patently false log” of a meeting with Reeves’ doctor.
An original version of this column can be viewed at the Nevada Journal, click here.
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