The Department of Industrial Relations filed a report this week on its anti-fraud efforts in the California workers’ compensation system, and announced it has stayed more than 200,000 liens worth a combined claim value of more than $1 billion. The liens are associated with 75 medical providers facing criminal fraud charges.
DIR’s efforts were bolstered by two new laws effective January . SB 1160 (Mendoza) requires DIR to automatically stay liens owned by providers who have been indicted or charged with crimes until the disposition of criminal proceedings. And AB 1244 requires the Division of Workers’ Compensation (DWC) Administrative Director to suspend any medical provider, physician or practitioner from participating in the workers’ compensation system when convicted of fraud. DWC has adopted provider suspension regulations and is now issuing notices of suspension to convicted providers.
DIR and the Department of Insurance convened working groups last June to gather stakeholder input and evidence of fraudulent activity. Participants offered a variety of observations on factors that facilitate fraud and strategies to combat it. DIR prepared a report on further recommendations to the Governor and the Legislature.
Proposed solutions included not only statutory and regulatory fixes, but also better enforcement of existing rules and procedural requirements, more information sharing and coordination among agencies, greater vigilance by insurers to identify and combat provider and premium fraud, more and better use of existing data, making examples of bad actors, greater education and transparency for the workers’ compensation system and system participants, and reviewing strategies used in other health-care systems.
The report notes that a “lien filer’s ability to get one foot inside the courthouse door creates tremendous pressure on the insurer to pay something in settlement, rather than taking on the expense of fighting or disproving a clearly invalid claim. A recent internal analysis showed that 10% of the state’s lien filers were responsible for 75% of the lien claims filed between 2013 and 2015. The top 1%, comprising 68 businesses, filed more than 273,000 liens, totaling $2.5 billion, and included five individuals who were being prosecuted or had already pled guilty to fraud. However, it remained possible to continue filing and settling liens notwithstanding fraud prosecutions and other lien-filing restrictions.”
“Over the past year, we have worked to prohibit criminal and indicted providers from lining their pockets through liens,” said DIR Director Christine Baker. “Removing fraudulent providers and their lien claims from the workers’ compensation system will further improve services to injured workers and ultimately reduce costs in the system.” DIR has posted information on its fraud prevention efforts online, including information on indicted medical providers.
DIR’s ongoing work to combat workers’ compensation fraud includes the creation of an Anti-Fraud Support Unit to share and track data from system participants. The department contracted with the RAND Corporation for an independent evaluation and recommendations, including a review of fraud detection in other federal and state health care programs. The study, currently in peer review, is slated for release this spring.
Physicians have been prohibited from referring workers for evaluation or treatment by another office or facility in which the physician has an ownership interest. And from having cross-referral or referral fee arrangements. DIR will be drafting financial interest disclosure rules to improve the transparency and tracking of ownership interests and referrals. DIR will then serve as a repository of information available for use by the workers’ compensation community, medical licensing boards, and other oversight agencies.
DIR is is also currently looking at filing data to identify physicians who consistently overbill for certain services, including through the use of incorrect billing codes, inflating the extent of time spent on an evaluation or treatment, and the “unbundling” of combined services (i.e., making separate claims for each element of service in order to increase the total amount charged).