As Berkshire Hathaway HomeState Companies (BHHC) persists in its failure to compliantly process thousands of valid Second Review appeals, the California Division of Workers’ Compensation (DWC) Audit and Enforcement Unit should immediately undertake a Targeted Audit of the insurer, as mandated by California Code of Regulations Section §10106.1.

A Targeted Audit of BHHC is both appropriate and necessary, as demonstrated by concrete Electronic Data Interchange (EDI) data collected over several months, from hundreds of DaisyBill clients.

The data generated by electronic billing for workers’ compensation is the most powerful tool for providers to conclusively prove payment abuse by claims administrators. For DaisyBill clients, the case for auditing BHHC does not rely on anecdotal evidence; hard numbers reveal that BHHC’s actions constitute repeated, egregious violations of California regulations.

Backed by the evidence provided by our EDI data, DaisyBill will submit over 2,400 confidential Audit Complaints on behalf of the affected providers to the DWC Audit Unit. These Audit Complaints will report BHHC's systematic failure to timely respond to Second Review appeals with compliant Explanations of Review (EORs) in the mandated 835 electronic file format.

California regulators, mount up.

DWC Has the Power to TARGET Audit

For California workers’ comp, Electronic Data Interchange (EDI) offers more than faster, more efficient billing and payment. EDI data provides documented facts to help the DWC uphold the law.

This enormous quantity of detailed Audit Complaints will demonstrate beyond question that BHHC is currently, as CCR §10106.1 states, “failing to meet [its] obligations” under California Labor Code, and the regulations of the DWC Administrative Director.

California Labor Code Section §129(b)(3) empowers the DWC to conduct either a “targeted profile audit review” or “full compliance audit” at any time. This Labor Code instructs that target audit criteria shall be based on information from:

“...reliable sources providing factual information that indicates an insurer, self-insured employer, or third-party administrator is failing to meet its obligations under this division or Division 4 (commencing with Section 3200) or the regulations of the administrative director.”

Pursuant to LAB §129, CCR §10106.1(c)(3) provides the DWC Audit Unit may target audit subjects based on:

“...credible complaints and/or information received by the Division of Workers' Compensation that indicate possible claims handling violations, except that the Audit Unit will not target audit subjects based only on anonymous complaints unless the complaint(s) is supported by credible documentation.

Further, CCR §10106.1(c)(3) instructs that the DWC will keep all complaints confidential if confidentiality is requested by the complaining party.

Penalties: Gravity, Frequency, and Good Faith

Labor Code §129.5(a) allows the Administrative Director of the DWC (currently George Parisotto) to assess administrative penalties against an insurer, self-insured employer, or third-party administrator for failure to either:

1. Pay the “reasonable cost of medical treatment of an injured worker” or
2. Comply with any rule or regulation of the administrative director

This Labor Code requires the Administrative Director to impose penalties which give “due consideration” to the following three factors:

1. The gravity of the violation - BHHC violated California laws and regulations by failing to respond to Second Review appeals. Without a final EOR from BHHC, a doctor is forbidden from disputing incorrect BHHC reimbursements via Independent Bill Review; certainly a grave violation.

(The EDI data shown below for a sample of five Second Review appeals includes a field labeled ‘Fee Schedule: Balance Due’ which demonstrates BHHC reimbursed these providers amounts below the OMFS. Clearly, these doctors should be submitting Second Reviews to dispute the BHHC reimbursement, and California law mandates BHHC should be processing these Second Review appeals in 14 calendar days.)

2. The good faith of the insurer, self-insured employer, or third-party administrator - As the violations increase daily, despite BHHC’s having been alerted of the problem by DaisyBill, BHHC has not rectified the violations. Further, these violations are presumably not limited to DaisyBill clients; BHHC and its bill review vendor have thus far shown no signs of addressing the continued noncompliance, and certainly appear to be systematically failing to process Second Review appeals. Bad faith indeed.

3. The frequency of the violations - DaisyBill EDI data clearly indicates thousands of BHHC violations. In this case, the frequency (and impunity) is extraordinary.

In addition to the Audit Unit’s power to audit and penalize, the Administrative Director retains the authority to impose significant civil penalties. Pursuant to LAB §129.5, the Administrative Director may assess an administrative penalty against an insurer, self-insured employer, or third-party administrator if:

Upon finding, after hearing, that an employer, insurer, or third-party administrator has knowingly committed, or performed with enough frequency as to indicate a general business practice, a refusal to comply with known and legally indisputable compensation obligations.

To translate from the legalese, the Administrative Director has the authority to impose significant civil penalties on a payer if the DWC determines that the payer knowingly or frequently refuses to comply with their legal obligations regarding compensation.

It is certainly reasonable to conclude that BHHC knew — after all, we alerted them to the noncompliance, twice.

EDI Data Support Over 2,400 Credible Complaints 

DaisyBill will submit over 2,400 detailed Audit Complaints to the DWC Audit Unit to report the continued, unabated noncompliance by BHHC. (Please see our previous article to preview a sample Audit Complaint that will be submitted on behalf of our clients).

CCR §10106.1(c)(3) instructs that the Audit Unit “shall review and compile complaints” that indicate a claims administrator is “failing to meet their obligations under Divisions 1 or 4 of the Labor Code or regulations of the Administrative Director.”

To help the DWC Audit Unit, in addition to the 2,400+ Audit Complaints, DaisyBill will compile and submit our EDI data in CSV format to the DWC Audit Unit (below is a small sample of the “compiled” EDI data). Most damningly, this EDI data includes a field labeled “EOR (835) Receipt Date” which is blank; for over 2,400 valid Second Review appeals this field remains blank because BHHC failed to send the provider an electronic EOR, as required by law.

Yes, DaisyBill collects this EDI data on every single submission → for all claims administrators.

In 2022, the EDI data generated by electronic billing will bring the power of transparency to bear on systemic violations by California workers’ comp claims administrators. Starting with this bulk submission of Audit Complaints against BHHC, DaisyBill will do its part to end the payment abuse of the providers who — often against their own financial self-interest — continue to treat injured workers.

BHHC Second Reviews EDI Data

No Carrot, No Stick, No Compliance

BHHC’s actions — and its persistence in doing nothing to correct a systemic issue — demonstrate clearly that action by the DWC Audit Unit is warranted.

Too often in workers’ comp, a lack of enforcement extends the boundaries of tacitly accepted noncompliance from payers. In the absence of any incentive for compliance or penalties for misbehavior, BHHC is violating state laws and regulations without fear of consequence.

As we mentioned in our previous post, the laws and regulations of which BHHC is currently in violation have been on the books for over a decade. Claims administrators do not tolerate noncompliance from providers; they simply deny payment. Our EDI data shows it is past time for compliance to become a two-way street.

As doctors adhere to California workers’ comp laws, BHHC ignores the same laws with impunity. We can only hope that the DWC will conduct a Targeted Audit of BHHC, for the sake of doctors, injured workers, and the remaining shreds of the integrity of the entire California workers’ comp system.

Make workers’ comp a better investment. From fee schedule calculators to billing software to complete managed billing, DaisyBill has your back. Contact us to learn more.

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