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Erica S. Willis is the assistant managing attorney with the Law Offices of Floyd, Skeren & Kelly, LLP, in the firm's Ventura County/Camarillo office. She received her Bachelor of Arts degree in Sociology from California State University, Northridge. She received her Juris Doctorate from Pepperdine University School of Law in December 2004. Ms. Willis began practicing workers' compensation defense law in 2006 and became a Certified Specialist in 2011. Ms. Willis handles all phases of workers' compensation defense, including fraud detection and referral, § 132(a) discrimination defense, and defense of serious and willful claims. She has extensive litigation experience, and as an aggressive litigator is frequently able to obtain "take nothings" for her clients, both on case-in-chief and Medical Provider Network issues. She has trained other attorneys on MPNs and assisted them with preparation for successful litigation, resulting in the reestablishment of medical control, disallowances of hundreds of thousands of dollars in liens, and control over case direction.

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Workers' Compensation Daily News for Aug 26, 2016

Drug Maker's Free Meals Change Physician Prescribing Patterns
Fri, 26 Aug 2016 10:20:30 - Pacific Time
A study published this month in BMJ offers additional evidence of a correlation between payments by drug manufacturers to doctors and increased prescriptions for drugs developed by the latter.

The analysis of Medicare’s Open Payments program offers a statistical demonstration of a phenomenon supported by more than 20 years of suggestive data, though the study’s authors point out that most previous studies have relied upon self-reporting to obtain payment and prescribing data. Where a recent study published in JAMA established a link between the free meals pharmaceutical companies offer and increased prescriptions, this new study expands that purview to include payments for speaking and consulting fees, as well as indirect payments for education, or for food and entertainment.

Moreover, the authors see a potential connection between payments made to physicians and "substantial differences in regional prescribing." They conclude that "one additional payment in a region [median value $13] was associated with approximately 80 additional days filled of the marketed drug in the region." As damning as that sounds, the authors caution that their study doesn’t prove the payments actually led to the increased prescribing, and say that their findings should not be interpreted beyond a regional level.

Even absent clear evidence of causation, pharmaceutical companies continue to make payments to doctors, most of whom don’t believe they can be influenced, according to the study.

Reporting by ProPublica undermines this claim, showing the industry’s efforts seem to specifically target physicians already under sanction for unnecessary prescribing. The preponderance of the evidence suggests pharmaceutical companies have a profit motive behind their actions, according to Charles Rosen, co-founder of the Association for Medical Ethics, who told ProPublica, "I think it’s crystal clear that their fiduciary duty is not to educate physicians and make public welfare better. It’s to sell a product."

Pharmaceutical and medical device companies are continuing to pay doctors as promotional speakers and expert advisers even after they’ve been disciplined for serious misconduct, according to an analysis by ProPublica.

One such company is medical device maker Stryker Corp.

In June 2015, New York’s Board for Professional Medical Conduct accused orthopedic surgeon Alexios Apazidis of improperly prescribing pain medications to 28 of his patients. The board fined him $50,000 and placed him on three years’ probation, requiring that a monitor keep an eye on his practice.

Despite this, Stryker paid Apazidis more than $14,000 in consulting fees, plus travel expenses, in the last half of 2015.

Stryker also paid another orthopedic surgeon, Mohammad Diab of San Francisco, more than $16,000 for consulting and travel, even though California’s medical board had disciplined him for having a two-year-long inappropriate sexual relationship with a patient, whose two children he also treated. He was suspended from practice for 60 days, required to seek psychological treatment and given seven years’ probation. He is still required to have a third party present while seeing female patients.

According to the ProPublica investigation Stryker is one of more than at least 400 pharmaceutical and medical device makers that have made payments to doctors after they were disciplined by their state medical boards. ProPublica reviewed disciplinary records for doctors in five states, California, Texas, New York, Florida and New Jersey, and checked them against data released by the Centers for Medicare and Medicaid Services on company payments to doctors. The analysis identified at least 2,300 doctors who received industry payments between August 2013 and December 2015 despite histories of misconduct. Read More...

CDI Ignores Photograph and Arrests Wrong Elderly Fraud Suspect
Fri, 26 Aug 2016 10:20:24 - Pacific Time
Six California Department of Insurance officers arrested 62 year old Maria Elena Hernandez before sunrise, cuffed her, and drug her off to the Los Angeles County Jail. She protested that they had arrested the wrong person. It took two months before they confirmed their mistake.

When her 25-year-old son stepped toward the detectives to ask for official paperwork justifying the arrest, an officer pointed a gun at his head, Hernandez and her daughter recounted.

Kincaid, the Department of Insurance spokeswoman, said law enforcement officers are trained to have their weapons drawn from their holsters "until entry has been made and the residence or individuals have been secured in a safe manner."

Her arrest warrant was issued after the California Department of Insurance confused her with an insurance fraud suspect, who had used a false date of birth as well as a first and a last name that matched Hernandez’s.

But it is very difficult to understand how an observant team of peace officers could have made this mistake. They had in their possession a photograph of the real suspect, and it did not match this Maria Hernandez, a common Hispanic name.

Hernandez spent nearly two days in the county’s jail in Lynwood before her family managed to bail her out. Her family now owes $2,000 to a bail bonds company. And Hernandez, who cleaned homes for years but is now retired, faces another bill of $1,470 for a medical exam conducted at the direction of jail staff.

According to the story in the Los Angeles Times, the events that led to her arrest began in the summer of 2013, when a woman made a phone call to Access General Insurance saying she’d been the driver of a car involved in an accident. She identified herself as Maria Mercedes Hernandez, according to investigative records.

An insurance investigator had a hard time tracking the woman down, but when he finally found her at her South Park home, she verbally confirmed that her name was Maria Mercedes Hernandez and said her birthday was May 2, 1954, though she did not produce proof of her identification. After prodding from the investigator, the records show, the woman admitted that she hadn’t actually been in an accident. She’d agreed to say she had been, she explained, after meeting a man at a nightclub who promised to give her a cut of the insurance money.

Before leaving the home, the insurance investigator took the woman’s photo.

When Department of Insurance detectives interviewed the real woman at her home a year later, they said they recognized her from the photo in the case file and said that she, again, identified herself as Maria Hernandez. Greg Risling, a spokesman for the Los Angeles County district attorney’s office, said she had given a fake name and birth date. The spokesman said it was unclear if the woman had picked the name and date of birth at random or if she had deliberately used the arrested woman’s identity.

Exactly how insurance investigators mistook her for Maria Elena Hernandez is unclear. Especially when the photograph did not match.

The Department of Insurance spokeswoman declined to explain, citing an internal investigation being conducted by the agency. The district attorney’s office also declined to detail what led to the mix-up or comment on whether detectives know the suspect’s real identity but said the auto insurance fraud investigation is ongoing.

Read More...

California Health Carriers Sued for Defrauding Medicare
Thu, 25 Aug 2016 09:12:50 - Pacific Time
In 2009, James Swoben, a former data manager for California-based SCAN Health Plan, filed a whistleblower complaint against his own employer, and then amended that compliant three times over the next two years to add claims against United Health, HealthCare Partners, Aetna, WellPoint and Health Net.

The Centers for Medicare & Medicaid Services (CMS), administrator of the federal Medicare program, pays Medicare Advantage organizations fixed monthly amounts for each enrollee. CMS calculates the payment for each enrollee based on various "risk adjustment data," such as an enrollee’s demographic profile and the enrollee’s health status, as reflected in the medical diagnosis codes associated with healthcare the enrollee receives. These diagnosis codes are reported by Medicare Advantage organizations to CMS.

Because Medicare Advantage organizations have a financial incentive to exaggerate an enrollee’s health risks by reporting diagnosis codes that may not be supported by the enrollee’s medical records, Medicare regulations require a Medicare Advantage organization, as an express condition of receiving payment, to "certify (based on best knowledge, information, and belief) that the [risk adjustment] data it submits . . . are accurate, complete, and truthful." 42 C.F.R. § 422.504(l), (l)(2).

The gist of Swoben’s complaint is that the defendants - Medicare Advantage organizations United Healthcare, Aetna, WellPoint and Health Net, and HealthCare Partners, a physician group providing health care services to the organizations’ enrollees in exchange for a percentage of the organizations’ capitated payments - performed biased retrospective medical record reviews.

According to Swoben, retrospective reviews by Medicare Advantage organizations typically should identify (and report to CMS) two types of errors in the risk adjustment data previously submitted: (1) diagnosis codes supported by an enrollee’s medical records but not previously submitted to CMS (underreporting errors); and (2) diagnosis codes previously submitted to CMS but not supported by the enrollee’s medical records (over-reporting errors). Identifying and reporting the first type of error is favorable to the Medicare Advantage organization; identifying and reporting the second type of error is unfavorable.

Swoben alleges the defendants conducted one-sided retrospective reviews designed to identify (and report to CMS) solely the first type of error. He alleges these reviews were designed to exaggerate enrollees’ health risks and cause CMS to make inflated capitated payments to the defendants. These actions, Swoben alleges, rendered the defendants’ periodic certifications under § 422.504(l) false, in violation of the False Claims Act, 31 U.S.C. § 3729(a)(1).

The district court dismissed the suit without leave to amend The 9th Circuit Court of Appeals reversed and reinstated the claim in the published case of James M. Swoben v United Healthcare Insurance Co, et. al.

CMS has long made clear that, under § 422.504(l), Medicare Advantage organizations have "an obligation to undertake ‘due diligence’ to ensure the accuracy, completeness, and truthfulness" of the risk adjustment data they submit to CMS and "will be held responsible for making good faith efforts to certify the accuracy, completeness, and truthfulness" of these data.

"When, as alleged here, Medicare Advantage organizations design retrospective reviews of enrollees’ medical records deliberately to avoid identifying erroneously submitted diagnosis codes that might otherwise have been identified with reasonable diligence, they can no longer certify, based on best knowledge, information and belief, the accuracy, completeness and truthfulness of the data submitted to CMS. This is especially true when, as alleged here, they were on notice - based on audits conducted by CMS - that their data likely included a significant number of erroneously reported diagnosis codes." Read More...

CWCI Publishes Regional Scorecard Series
Thu, 25 Aug 2016 09:12:42 - Pacific Time
The California Workers’ Compensation Institute has created a new series of research publications, "California Workers’ Compensation Regional Score Cards," which use subsets of data from CWCI’s Industry Research Information System (IRIS) database to measure and analyze various aspects of claims experience within eight regions of the state.

Score Cards for each region will profile claimant characteristics and highlight data compiled from claims filed by residents of the region. Exhibits include distributions of claims within the region broken out by industry sector, premium size; claim type (medical-only, temporary disability, permanent disability); common "nature" and "cause" of injury categories; and primary diagnoses.

Several exhibits, including the percentage of claims with permanent disability; attorney involvement rates; claim closure rates; the top prescription drugs dispensed in calendar year 2014; breakdowns of medical development by Fee Schedule Section at 12 and 24 months post injury; medical network utilization rates; notice and treatment time lags; and the 12-, 24- and 36-month loss development tables compare the results for the specific region against those for all other regions.

Many of the exhibits also provide the combined statewide results, offering a wealth of detailed data not only on workers’ compensation claims experience for the region, but for the entire state.

The first Score Card in the series, released this week, focuses on accident year 2005 - 2015 claims filed by residents of Los Angeles County who, the data show, account for about a quarter of the claims in the state, but nearly a third of all paid losses.

Notably, the Score Card finds a pattern of lower than average first-year payments on the Los Angeles claims, followed by higher losses as the claims age, which tracks with the longer delays in reporting (both to the employer and to the claims administrator), delays in initial treatment, and a higher prevalence of cumulative trauma and non-specific injury claims in Los Angeles County, all of which are documented by the Score Card.

The Institute plans to roll out the Injury Score Card series over the next several months, and all eight Score Cards, along with summary Bulletins, will be posted under Research for CWCI members and research subscribers who log on to www.cwci.org.

Anyone wishing to subscribe to CWCI Research and Bulletins may do so by visiting the Institute’s online Store. The next Score Card will be released next month and will examine claims filed by workers living in the Inland Empire and Orange County. Read More...

Researchers Say Drug Prices Are Based on "What the Market Will Bear"
Wed, 24 Aug 2016 10:13:35 - Pacific Time
The increasing cost of prescription drugs in the United States has become a source of concern for patients, prescribers, payers, and policy makers.

In order to determine the origins and effects of high drug prices in the US market and to consider policy options that could contain the cost of prescription drugs, researchers reviewed the peer-reviewed medical and health policy literature from January 2005 to July 2016 for articles addressing the sources of drug prices in the United States, the justifications and consequences of high prices, and possible solutions.

Their review published in the Journal of the American Medical Association concluded that per capita prescription drug spending in the United States exceeds that in all other countries, largely driven by brand-name drug prices that have been increasing in recent years at rates far beyond the consumer price index.

In 2013, per capita spending on prescription drugs was $858 compared with an average of $400 for 19 other industrialized nations. In the United States, prescription medications now comprise an estimated 17% of overall personal health care services.

The most important factor that allows manufacturers to set high drug prices is market exclusivity, protected by monopoly rights awarded upon Food and Drug Administration approval and by patents. The availability of generic drugs after this exclusivity period is the main means of reducing prices in the United States, but access to them may be delayed by numerous business and legal strategies.

The primary counterweight against excessive pricing during market exclusivity is the negotiating power of the payer, which is currently constrained by several factors, including the requirement that most government drug payment plans cover nearly all products. Another key contributor to drug spending is physician prescribing choices when comparable alternatives are available at different costs.

Although prices are often justified by the high cost of drug development, there is no evidence of an association between research and development costs and prices; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear.

Drug prices are higher in the United States than in the rest of the industrialized world because, unlike that in nearly every other advanced nation, the US health care system allows manufacturers to set their own price for a given product. In contrast, in countries with national health insurance systems, a delegated body negotiates drug prices or rejects coverage of products if the price demanded by the manufacturer is excessive in light of the benefit provided. Manufacturers may then decide to offer the drug at a lower price. In England and Wales, for example, the National Institute for Health and Care Excellence considers whether a new drug passes a cost-utility threshold before recommending it for coverage by the National Health Service.

In workers' compensation claims, and in other systems, one factor that undermines competition among treatment alternatives is the separate roles of patients, prescribers, and payers: physicians write prescriptions, pharmacists sell medications, and patients or their insurers pay for them. This separation has traditionally insulated physicians from knowing about drug prices or considering those prices in their clinical decision making and can similarly remove many patients with good drug coverage from considering the price of the medications they "purchase."

The most realistic short-term strategies to address high prices include enforcing more stringent requirements for the award and extension of exclusivity rights; enhancing competition by ensuring timely generic drug availability; providing greater opportunities for meaningful price negotiation by governmental payers; generating more evidence about comparative cost-effectiveness of therapeutic alternatives; and more effectively educating patients, prescribers, payers, and policy makers about these choices. Read More...

Cell Captives Becoming Popular Self-Insurance Tool
Wed, 24 Aug 2016 10:13:29 - Pacific Time
A feature article on the Risk and Insurance website reports that cell captives have become extremely popular self-insurance tools for companies of various sizes across all sectors, with cell legislation enacted in more than half of U.S. states and cell formations now outstripping stand-alone captive formations in many onshore and offshore captive domiciles.

In its simplest form, a captive is a wholly owned subsidiary created to provide insurance to its non-insurance parent company (or companies). Captives are established to meet the risk-management needs of the owners or members. They are essentially a form of self-insurance whereby the insurer is owned wholly by the insured. Once established, the captive operates like any commercial insurer - i.e., it issues policies, collects premiums and pays claims, but it does not offer insurance to the public - and it is regulated as a captive, rather than as a traditional insurer.

The International Association of Insurance Commissioners (IAIS) defines a captive as "an insurance or reinsurance entity created and owned, directly or indirectly, by one or more industrial, commercial or financial entities, other than an insurance or reinsurance group entity, the purpose of which is to provide insurance or reinsurance cover for risks of the entity or entities to which it belongs, or for entities connected to those entities, and only a small part if any of its risk exposure is related to providing insurance or reinsurance to other parties."

The type of entity forming a captive varies from a major multinational corporation to a nonprofit organization. Captives are held by the vast majority of Fortune 500 companies as an alternative method of risk financing (e.g., Gold Medal Insurance Co. was established by General Mills as a captive and Allstate was originally set up as a captive by Sears & Roebuck Co.). The industries with the greatest number of captives are finance, real estate, construction and manufacturing. Over the past several years, there has been particular growth in areas such as health care, property development and securitization for life insurers. A corporation that forms a captive will normally organize the captive as a subsidiary. Because few companies are in the business of insurance themselves, most captive parents will hire an outside firm, often an insurance company or captive manager, to manage the captive for them.

The captive concept took a while to catch on. It gained momentum in the mid-to-late 1980s during the hard commercial insurance market, when liability coverage was either unavailable or unaffordable for many buyers. Over the past three decades, there has been significant growth in the captive market. Today, there are more than 5,000 captives that do business around the world in a variety of industries, compared to roughly 1,000 in 1980. Almost 3,000 captives are domiciled in the Caribbean; 1,200 captives are domiciled in Europe and Asia; and more than 1,000 captives are domiciled in the United States.

Companies form captives to mitigate their exposure to a wide range of risks. Practically every risk underwritten by a commercial insurer can be provided by a captive. The majority of captives provide mainstream property/casualty insurance coverage such as general liability, product liability, workers’ compensation, director and officer (D&O) liability, auto liability and professional liability (e.g., medical malpractice).

Captives also provide specialized coverage for unusual or hard-to-insure risks (e.g., terrorism risk). Oil companies have used captives to gird against environmental claims related to infrequent but potentially high-cost events. Other types of nontraditional insurance coverage that a captive could underwrite includes credit risk, pollution liability, equipment maintenance warranty and employee benefit risks, including medical benefits, personal accident and, in some cases, whole life insurance.

Captive insurance structures can be classified into three main categories: Single Parent Captives, Group Captives, and Core Cell Captive Insurance Companies also known as Cell Captives or Core Cell Companies. Cell Captives are entities consisting of a core and an indefinite number of cell entities which are kept legally separate from each other. Each cell has dedicated assets and liabilities ascribed to it, and the assets of an individual cell cannot be used to meet the liabilities of any other cell.

Captive Resources L.L.C., a Schaumburg, Ill.-based captive consulting firm, saw nearly $100 million in new premiums last year for the 27 group captives that it advises, said Sandra Duncan, vice president of operations. The member-owned groups include 2,600 companies nationwide in a variety of industries, including manufacturing, distribution, trucking and agriculture. It estimates that the total member-owned group captive market represents $1.3 billion to $1.5 billion in written premiums - about 70% of which has come from companies that joined in the past decade. Recent interest in group captives has been driven by the improving economy, greater credit availability, and a hardening workers comp market, she said. Read More...

Indemnification Clause Obligates Employer to Pay Injured Employee Tort Claims
Tue, 23 Aug 2016 12:31:40 - Pacific Time
Aluma Systems Concrete Construction of California entered into an agreement with Nibbi Bros. Inc. to design and supply the materials for wall formwork and deck shoring at Nibbi Bros. Inc. construction project.

The terms of the Contract included an indemnification provision that required Nibbi to defend, indemnify and hold harmless Aluma against any and all claims, actions, expenses, damages, losses and liabilities, including attorneys fees and expenses, for personal injuries rising from or in connection with this contract "except to the extent such claims, actions, expenses, damages, losses and liabilities are caused by the acts or omissions of [Contractor]..."

Subsequently, two lawsuits were filed by Nibbi employees against Aluma alleging that in August 2011, the employees were injured after a shoring system designed by Aluma collapsed. The Employee Lawsuits alleged the collapse was due to Aluma’s negligence. Aluma tendered the Employee Lawsuits to Nibbi for defense and indemnification, but received no response.

Subsequently, Aluma sued Nibbi for indemnification based on a specific provision in the parties’ contract. The trial court sustained Nibbi’s demurrer to Contractor’s complaint without leave to amend, relying on the allegations in the underlying lawsuit that set forth claims only against Aluma and not against Nibbi the employer. Thus they argued that the exception applied since the allegations claim only "acts or omissions" of Aluma.

The Court of Appeal reversed and remanded in the published case of Aluma Systems Concrete Construction v Nibbi Bros. Inc.

The parties agreed that pursuant to Labor Code section 3864, an employer is only liable to indemnify a contractor pursuant to the terms of the contract. They dispute whether the indemnity provision - which applies to claims and damages in connection with the Contract "except to the extent" they are "caused by the acts or omissions of Aluma - applies to the Employee Lawsuits.

Nibbi argues the Employee Lawsuits allege solely Aluma’s negligence and the indemnification provision therefore does not apply. Aluma argues that the provision may apply because Aluma is jointly and severally liable for all economic damages in the Employee Lawsuits, including any attributable to the negligence of Nibbi or others, as long as Aluma’s negligence is partially responsible.

Because the employees were working for Employer at the time of their injuries, they cannot sue Employer for damages but must pursue benefits through the workers’ compensation system. This limitation on Employer’s liability does not extend to third parties, however, and the employees may sue Contractor for damages caused by its negligence.

Here the indemnification provision applies to "claims: and the Employer argues this indicates the allegations of the Employee Lawsuits control the provision’s application. But the provision also requires indemnification for Contractor’s "damages" and "losses."

The court of appeal concluded that there is "no basis to restrict the damages and losses so indemnified to the allegations of the Employee Lawsuits, rather than to the damages Contractor is ultimately found liable for." Read More...

Pasadena Physician Sentenced to Four Years in Fraud Case
Tue, 23 Aug 2016 12:31:35 - Pacific Time
A doctor from Pasadena who falsely certified that at least 79 Medicare and Medi-Cal patients were qualified for hospice care because they were terminally ill - when, in fact, the vast majority of them were not dying - has been sentenced to four years in federal prison.

Boyao Huang, 43, was sentenced on Monday by United States District Judge S. James Otero. In addition to the prison term, Judge Otero ordered Huang to pay $1,344,204 in restitution.

At the conclusion of a two-week trial in May, Huang was found guilty of four counts of health care fraud for participating in a scheme related to the Covina-based California Hospice Care (CHC). Between March 2009 and June 2013, CHC submitted approximately $8.8 million in fraudulent bills to Medicare and Medi-Cal for hospice-related services, and the public health programs paid nearly $7.4 million to CHC.

A second doctor who was convicted at trial - Sri Wijegoonaratna, known as Dr. J., 61, of Anaheim, who was found guilty of seven counts of health care fraud - is scheduled to be sentenced by Judge Otero on February 13, 2017.

"This scheme preyed upon dozens of patients and their families who were led to believe that their worst nightmare had come true - that they had life-ending illnesses," said United States Attorney Eileen M. Decker. "Criminals such as the defendants in this case who steal from taxpayers by defrauding the Medicare system and who victimize vulnerable individuals like medical patients deserve significant prison sentences."

In addition to the two doctors, eight other defendants were charged in the scheme and have pleaded guilty to health care fraud charges. Those other defendants include a Placentia woman who purchased CHC in 2007 and operated the facility after being charged and incarcerated in another health care fraud scheme. Priscilla Villabroza, 70, who pleaded guilty in December 2015 to one count of health care fraud, was sentenced in June to eight years in federal prison.

As part of the CHC fraud scheme, Villabroza and her daughter - who was the nominal owner while Villabroza was in custody - paid patient recruiters known as "marketers" or "cappers" to bring in Medicare and Medi-Cal beneficiaries. CHC nurses performed "assessments" to determine whether the beneficiaries were terminally ill and, regardless of the outcome, Wijegoonaratna and Huang certified that the beneficiaries were terminally ill - even though the vast majority of them were not dying. CHC personnel altered medical records in response to Medicare audits to make the beneficiaries appear sicker.

By the time the scheme was shut down in June 2013, Medicare and Medi-Cal had paid millions of dollars for medically unnecessary hospice-related services.

The investigation into California Hospice was conducted by the United States Department of Health and Human Services, Office of Inspector General; the Federal Bureau of Investigation; the California Bureau of Medi-Cal Fraud & Elder Abuse; and IRS Criminal Investigation.

This case is being prosecuted by Assistant United States Attorney Steven M. Arkow of the Major Frauds Section and Assistant United States Attorney Leon W. Weidman, Special Counsel to the United States Attorney. Read More...

Indicted or Convicted Criminals Filed $600 Million in Liens
Mon, 22 Aug 2016 09:44:34 - Pacific Time
The Department of Industrial Relations and its Division of Workers' Compensation reported that $600 million in liens against injured employees' claims for workers' compensation benefits have been filed by convicted or criminally indicted parties from 2011 through 2015.

"While California has made great strides in increasing benefits to injured workers, improving appropriate care and reducing employers' costs, we are pursuing legislation to prohibit criminal and indicted providers from lining their pockets through liens and to address the assignment of liens," said Christine Baker, DIR Director.

California's workers' compensation law allows certain claims for payment of services or benefits provided to or on behalf of injured workers to be filed as a lien against an employer in an employee's claim for workers' compensation benefits.  The filing of a lien generates collateral litigation between the lien filer and defendant (insurer or employer) over the validity of the claim and the necessity, extent and value of any services provided.  The parties may then settle on an amount due or adjudicate the dispute in a lien trial before the Workers' Compensation Appeals Board.

SB 863 (De León), which took effect on January 1, 2013, included a number of provisions to reduce costs by reducing the volume of lien claims and lien claim litigation in the workers' compensation system, including the reestablishment of lien filing fees to preclude frivolous lien filings, creation of an Independent Bill Review system to remove most billing disputes from litigation, and restrictions on the ability of third parties to collect on assigned lien claims.

Despite these efforts, the 68 businesses comprising the top one percent of lien filers filed more than 273,000 liens totaling $2.5 billion in accounts receivable on adjudicated cases between 2013 and 2015.  Two of the business owners are indicted and three others have pled guilty.  Legislation is underway to stay liens of physicians or providers who are criminally charged with workers' compensation fraud, medical billing fraud, insurance fraud, and Medicare or Medi-Cal fraud.

Assignments of Accounts Receivables are proving fertile ground for fraud

The assignment of liens by service providers to those who file and collect on liens are, in essence, the buying and selling of injured workers' treatments and fertile ground for presenting fraudulent claims.  DIR's review of filing dates indicates that lien claimants tend to wait until after the primary case is settled rather than seeking early resolution of medical necessity.  Even if lien claimants - especially those who bundle and buy or sell accounts receivables - only make pennies on the dollar, returns can still be high.  

DIR say it is leading an effort to identify and address strategies for improved anti-fraud efforts in the workers' compensation system. DIR and the Department of Insurance convened working groups in June to gather stakeholder input and evidence of fraudulent activity in the system.  At the direction of the Secretary of the California Labor and Workforce Development Agency, DIR will be preparing a report on further recommendations to the Governor and the Legislature by no later than Fall of 2016. Read More...

Indian Tribe PEO Organizer Gets Prison Sentence
Mon, 22 Aug 2016 09:44:25 - Pacific Time
Former Roseville businessman Gregory J. Chmielewski had what seemed like a brilliant idea: Create an alternative low-cost version of workers’ compensation insurance, at a time when the price for traditional coverage was soaring out of sight in California. Chmielewski was one of a handful of entrepreneurs who thought they could profit from the crisis by partnering with Indian tribes. He convinced the Fort Independence Community of Paiute Indians, in Inyo County, to bankroll a company that would offer discount coverage by using tribal laws to cut through the red tape plaguing the state-run system.

The company they created, Independent Staffing Solutions of Roseville, signed up dozens of clients but fell apart after four years in business. Independent Staffing was unable to pay its bills despite hauling in $225 million in revenue from employers during its brief life.

What went wrong? In a written plea agreement filed in U.S. District Court in Sacramento, Chmielewski said he siphoned $7.3 million from Independent Staffing in order to fund his personal real estate investments.

And last week he was sentenced by U.S. District Judge Garland E. Burrell Jr. to three years and five months in prison for mail fraud in connection with his misappropriation of funds from his insurance business into his own personal accounts for his personal use,

Chmielewski set up a professional employer organization called Independent Management Resources (IMR), later operating under the name Management Resources Group (MRG). He diverted and misappropriated millions of dollars from MRG accounts for his personal use. He caused over $7.3 million to be paid out of MRG’s accounts to other unrelated companies that he controlled. Eventually, the company experienced serious cash flow problems and was forced to cease operations, leaving approximately 117 injured workers with approximately $1.8 million in unpaid claims.

Acting U.S. Attorney Talbert stated: "Many of the victims harmed in this scheme were companies in California’s construction industry, whose employees worked as roofers, general laborers, and other jobs where injuries can occur. The defendant’s actions left many injured workers without the benefits they expected and deserved. Our office is committed to prosecuting large-scale schemes such as this that hurt employers and workers alike."

"The license to operate a business is not a license to steal from those whom you are hired to protect," said Cindy S. Chen, Acting Special Agent in Charge, IRS Criminal Investigation. "The misconduct of Chmielewski harmed those that needed his help during a time they were very vulnerable. Today’s sentence demonstrates IRS Criminal Investigation’s determination to combat financial fraud in all types of schemes."

This case was the product of an investigation by the United States Postal Inspection Service; the Internal Revenue Service, Criminal Investigation; and the California Department of Insurance. Assistant U.S. Attorneys Heiko P. Coppola and André Espinosa prosecuted the case. Read More...

Past Week News Archive


Yet Another Study Questions Value of Meniscus Surgery: Thu, 18 Aug 2016 08:57:14 - Pacific Time: Read More...


New Study Supports Apportionment in Degenerative Joint Disease Claims?: Thu, 18 Aug 2016 08:57:07 - Pacific Time: Read More...


WCAB Permits Settlement of SJDB With "Thomas" Finding: Wed, 17 Aug 2016 08:11:10 - Pacific Time: Read More...


9th Circuit Says DOJ Cannot Prosecute Marijuana Violators: Wed, 17 Aug 2016 08:11:02 - Pacific Time: Read More...


DCA Says WCAB Has Jurisdiction Over CHP 4800.5 Benefits: Tue, 16 Aug 2016 09:36:50 - Pacific Time: Read More...


Aetna Announces Exit Plans for 70% of ObamaCare Market: Tue, 16 Aug 2016 09:36:44 - Pacific Time: Read More...


DWC Publishes Updated MTUS With Opioid Guidelines: Mon, 15 Aug 2016 12:26:00 - Pacific Time: Read More...


Yates Memo Leads to Corporate Healthcare Executive Convictions: Mon, 15 Aug 2016 12:25:54 - Pacific Time: Read More...


Employer's Failure to Provide DWC-1 Prevents Carriers' Laches Defense: Fri, 12 Aug 2016 09:40:35 - Pacific Time: Read More...


WCIRB Files Fourth Consecutive Premium Rate Decrease: Fri, 12 Aug 2016 09:40:28 - Pacific Time: Read More...