According to Workers’ Comp Executive, California Department of Industrial Relations (DIR) Director Katrina Hagen is stepping down after five years.

The California Division of Workers’ Compensation (CA DWC) reports directly to the DIR, meaning Hagen has held ultimate authority over the CA DWC and its Administrative Director, George Parisotto, during her time in charge.

The Executive quotes sources who described Hagen’s tenure as “chaotic.” But given the current state of the California workers' comp system, "chaotic" feels generous.

We urge Governor Gavin Newsom to take this opportunity to make real change to protect California’s employers and injured workers. California needs a DIR Director who will stand up to the private equity interests currently profiting off employers’ premium dollars at the expense of those the system is meant to protect.

The next DIR leader must restore integrity, accountability, and compassion to a system in desperate need of all three.

A Troubled Tenure

The DIR has made no official announcement concerning Hagen's departure; the DIR website's org chart (above) lists Hagen as Director as of this writing.

But, according to the Executive, Hagen will exit public service in July to become CEO of CPS HR Consulting. Apparently, Hagen kept DIR managers in the dark until this story broke; neither the DIR nor the Governor’s office responded to the Executive’s requests for comment.

Governor Newsom appointed Hagen in March 2020. The question is: Will he make a better choice this time?

A System in Ruins

As Hagen seeks her fortunes in the private sector, she leaves behind California’s injured workers and medical providers, who remain trapped in a system defined by dystopian dysfunction.

It is difficult to quantify the respective percentages of blame for the sorry state of workers' compensation we can attribute to Hagen and CA DWC Administrative Director Parisotto. However, wherever the buck stops, both leaders have utterly failed to protect California’s employers, providers, and injured workers.

Under Hagen and Parissotto, the following are the realities of California workers' comp:

• Improper Payment Adjustments & Denials: Claims administrators routinely underpay or deny providers’ bills in violation of state laws, regulations, and fee schedules—without fear of consequence.
  
• Broken Dispute Mechanisms: Claims administrators routinely mishandle or ignore providers’ appeals disputing payment violations, with no feasible redress for providers.
  
• Abusive Utilization Review (UR) practices: The UR system for approving or denying care creates dangerous delays in care, with a statistically near-hopeless denial appeals process.
  
• Exploited Medical Provider Networks: Payers weaponize MPNs to coerce providers into discount contracts—which open the door to financial chaos for the practice.
  
• Rampant Discount Contract Abuse: Despite theoretical protections in the Labor Code, discount contracting entities and their various vendors consistently gut provider reimbursement to unsustainable levels through sophisticated discount leasing, sharing, and "stacking" mechanisms.
  
• Zero Data or Compliance Monitoring: in violation of state laws, the CA DWC has refused to establish mandatory UR data collection or enforce requirements to contribute data to the Workers’ Compensation Information System—leaving policymakers in the dark.

In this system, injured workers struggle to get timely treatment and providers are financially punished for participating—all while claims administrators, UR and bill review vendors, discount contracting entities, and the private equity firms in the background rake in profits.

A Chance for Real Reform?

Hagen’s tenure represents a dark and ugly period for employers and injured workers.

We urge Governor Newsom to carefully consider who should take the reins and appoint a leader with vision and backbone—someone whose priority is accountability for how employer dollars are spent on the health and recovery of injured workers, not the financial gains of insurers and private equity.

California doesn’t need another Director whose agencies stand by while private interests ransack the system. It needs someone willing to:

• Confront systemic rot
• Enforce the laws and regulations on the books
• Enact meaningful solutions based on verifiable data
• Reclaim the DIR’s regulatory mission

Most of all, the DIR needs someone to light a fire under the hindparts of the CA DWC and hold the agency accountable for its performance (or lack thereof).

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