Author: WorkCompAcademy

The California attorney general filed a lawsuit against AHMC Healthcare on Oct. 2, claiming the Alhambra-based health system’s service reductions at one Bay Area hospital and closure of another facility violate conditions set by the state when it acquired the facilities in 2020.

The lawsuit alleges that the closure of Seton Medical Center Coastside in Moss Beach and failure to maintain stroke center certification at Seton Medical Center in Daly City breach the terms of the purchase agreement.

In the lawsuit, filed in San Mateo County, the Attorney General alleges that AHMC Seton Medical Center, LLC  violated the Attorney General’s July 27, 2020 conditions by closing Seton Coastside in its entirety. The Attorney General is seeking specific performance and civil penalties. Additionally, the injunctive relief the Attorney General is seeking is crucial to the reopening of the Seton Coastside facilities and the restoration of services at Seton.

“The conditions that were set forth with AHMC were specifically implemented to protect patients, ensure continued access to critical healthcare services, and safeguard the community’s health and well-being,” said the Attorney General. “Unfortunately, AHMC clearly has not upheld its obligations. This failure to meet the required standards is completely unacceptable, and I’m holding them fully accountable for placing patient care and public health at risk.”

Under California law, any transaction involving the sale or transfer of control of a healthcare facility owned by a nonprofit corporation must secure the approval of, or waiver of notice and consent of, the Attorney General.

The Attorney General’s July 27, 2020, conditions required the continuation of services, including emergency departments (ED) at both hospitals, a stroke center certification, STEMI receiving center designation, general acute care hospital (GACH) and the skilled nursing facilities (SNF), among others.

AHMC has permitted the stroke certification and STEMI designation to lapse at Seton Medical Center and has closed the SNF, GACH, and ED at Seton Coastside since April 2024, without notifying nor seeking an amendment of the conditions from the Attorney General.

These reductions in services have negative consequences for the community including requiring people to travel farther for care, increasing volumes of patients at neighboring hospitals that offer those services, and escalating rates for services at those competing hospitals.

In a statement to Becker’s Hospital Review, the health system said it was “surprised” by the lawsuit, calling the attorney general’s claims “misleading” and emphasizing its intention to reopen the facility once structural repairs are complete. It also said the temporary closure was required by regulators and that the state’s health department approved the closure.

“The AG is under the false impression that Seton Coastside could open its doors once the roof replacement was completed earlier this fall,” AHMC said. “Not so. Even after the roof was replaced, the building was still unsafe for human occupancy, and there was no safe option to occupy the building when the other emergency repairs were still required. We believe the claims made by the AG’s office that Seton was merely engaged in cosmetic upgrades and deferred maintenance are false and misleading.

“We have been diligently addressing these matters and undertaking the repairs necessary to reopen the Seton Coastside Emergency Department and SNF and to otherwise comply with the AG’s conditions. We have also been cooperating with the AG office’s investigation into these issues as they relate to the AG’s 2020 conditional approval of the sale of this distressed hospital, which was facing closure if AHMC had not purchased it.”

In taking legal action, the attorney general is seeking to resume operations at Seton Coastside and restore primary stroke services at Seton Medical Center. The move marks his second lawsuit against a hospital this week.

On Sept. 30, his office filed suit against Providence St. Joseph Hospital in Eureka for refusing to provide an emergency abortion to a woman experiencing an obstetric emergency. In doing so, Providence violated multiple state laws, the lawsuit claims.

A new survey from Black Book Research highlights multiple healthcare IT implementations that have failed to meet expectations, with industry technology professionals pointing to issues like poor user experience, lack of interoperability, and high costs. In the third part of Black Book’s “What’s Hot and What’s Not in Healthcare IT Investments.” 907 healthcare professionals shared their insights on which systems have not delivered the return on investment (ROI) expected after deployment.

Every participant in the survey reported having worked in a hospital, physician practice or payer organization where an IT software or outsourcing engagement resulted in financial loss, significant workflow interruptions, reputational damage, or loss of key staff sometime in the past decade.

A 2017 report by Black Book Market Research estimated that U.S. hospitals lost around $1.7 billion annually due to outdated or poorly performing IT systems. In 2024, respondents indicated that the compounding inefficiencies, system downtimes, and ineffective integration of health IT have led to total losses estimated to exceed $8.0 billion annually across the industry. The costs include reduced operational efficiency, data breaches, delayed patient care, and administrative burdens. In some cases, hospitals may lose millions individually due to these issues, especially when productivity and revenue cycle disruptions are factored in.

“Three-quarters of IT leaders surveyed indicated that they have no plans to allocate funds for replacing these flawed systems in 2025, reflecting a broader trend of financial constraints across the sector,” said Doug Brown, President of Black Book. Additionally, 60% of respondents expressed concern they will likely lack the capital needed to address these critical system issues even through 2027, underscoring the long-term financial challenges that may delay much-needed improvements in healthcare IT infrastructure.

“CIOs are understandably cautious about replacing underperforming systems when the ROI is uncertain, given the track record of many healthcare IT vendors failing to meet expectations,” said Brown. “Without clear evidence that a new investment will deliver tangible financial or operational improvements, justifying the expense becomes challenging.”

The primary IT systems that have drained the most value from hospitals and healthcare providers include:

1. Overly Complex or Unintuitive EHR Systems:  Electronic Health Record (EHR) systems were a significant point of criticism by IT staffers. Among the major EHR systems surveyed respondents have worked with:
– – 77% of users reported ongoing user experience issues, such as cumbersome workflows, poor customization, and difficult navigation. These problems contribute to “click fatigue,” leading to inefficiencies and more time-consuming daily tasks.
– – 91% of small medical practices criticized major hospital system EHRs they were compelled or required to engage with as being overly complex and difficult to implement and maintain without adequate IT support, particularly for independent physician settings.

2. Poorly Integrated Telehealth Platforms:  The rush to adopt telehealth during the COVID-19 pandemic revealed ongoing flaws in many of the leading platforms:
– – 81% of respondents reported that some telehealth solutions failed to integrate well with existing EHR systems, creating data silos, duplicating data entry, and resulting in workflow inefficiencies.

3. Revenue Cycle Management (RCM) Systems with Poor Automation:  Revenue cycle management systems have also faced challenges in delivering value:
– – 70% of respondents gave negative feedback on their RCM software vendor or outsourcing partners, describing them as outdated and lacking advanced automation features such as functioning AI. This led to longer processing times for claims and higher denial rates according to 79% of their clientele.
– – 61% of providers expressed frustration over poor claims scrubbing and denial management capabilities, which led to lost revenue.

4. Health Information Exchanges (HIEs) with Limited Interoperability:  Health Information Exchange (HIE) platforms are another area where systems have fallen short:
– – 23% of physician practices said their early-stage HIE platforms still struggle with data standardization and integration, limiting their ability to leverage shared patient information.
– – 28% of medical practices reported ongoing issues due to EHR interoperability shortcomings, further hampering their ability to access complete patient records and coordinate care.

5. Clinical Decision Support (CDS) Systems with Poor Integration: Clinical Decision Support (CDS) tools have also been problematic for many:
– – 80% of users cited a lack of proper integration with EHRs, which severely undermined the value of CDS systems. First-generation CDS tools often generated excessive or irrelevant alerts, contributing to “alert fatigue” among clinicians.
– – 93% of respondents with outdated or static CDS tools said they lacked real-time, evidence-based guidance, rendering them ineffective in driving clinical decisions.

6. Patient-Engagement Platforms with Low Adoption:  Patient-engagement tools, especially early versions of patient portals, struggled with adoption:
– – 77% of reporting hospital systems with implemented patient portals had poor user interfaces and limited functionality, making them difficult for patients to navigate and reducing their effectiveness in fostering communication and engagement.
– – Smaller vendors offering niche patient engagement solutions also failed to gain traction in 88% of providers, often due to poor EHR integration and a lack of mobile-friendly features.

7. AI and Machine Learning Tools with Unrealized Promises:  Despite high expectations and funding hype for artificial intelligence and machine learning in healthcare, most AI systems have underdelivered so far say health systems:
– – 96% of healthcare IT executives said they faced challenges with AI ROI, with 92% of early adopters reported that their current AI systems were not accurate or actionable enough in clinical settings.
– – 85% of early adopters aimed at automating diagnostics or treatment planning saw little to no ROI, as these AI systems failed to grasp the complexities of real-world clinical environments.

8. Interoperability Solutions with Limited Support:  Interoperability remains an ongoing, critical issue for many healthcare providers:
– – 31% of providers expressed dissatisfaction with their data interoperability vendors, citing poor API support and slow updates. Many smaller platforms struggled to keep pace with evolving standards like FHIR (Fast Healthcare Interoperability Resources), leaving 8% of current providers with outdated, non-interoperable systems.

Key Reasons for Failure to Deliver Value:  When asked to identify the one top reason for the failure of healthcare IT systems, professionals ranked the following:

– – Poor User Experience: 48% of respondents cited user-unfriendly systems that increased provider burnout and inefficiency.
– – Lack of Interoperability: 24% mentioned systems that don’t integrate well with other platforms, leading to data silos.
– – High Costs: 20% noted that expensive systems without sufficient ROI are placing financial strain on providers.
– – Lack of Flexibility: 6% pointed to inflexible software that couldn’t adapt to specific workflows or needs.
– – Alert Fatigue: 2% cited excessive or irrelevant alerts from CDS systems, which devalued the software.

“As healthcare IT continues to evolve, addressing these issues will be critical,” said Brown. “Improving the user experience, ensuring seamless integration between systems, and managing the escalating costs are all essential steps for the industry to realize the full potential of these technologies.” Without resolving these pain points, hospitals may struggle to achieve the operational efficiency and enhanced patient outcomes that well-functioning IT systems can offer. “Ultimately, the future success of healthcare IT hinges on its ability to provide real, sustainable value without imposing additional burdens on providers.”

Sam Sarkis Solakyan appealed his jury conviction and restitution order arising from a workers’ compensation fraud that generated $263 million in claims – one of the largest workers’ compensation bribery schemes ever uncovered in San Diego County.

Solakyan was the CEO of several medical-imaging companies, including the Glendale-based Vital Imaging Inc., and San Diego MRI Institute. Solakyan operated diagnostic imaging facilities throughout California, including the Bay Area, Los Angeles and Orange counties, and San Diego.

From no later than mid-2013 to November 2016, Solakyan conspired with physicians and others to perpetrate a scheme in which physicians were paid bribes and kickbacks in exchange for the referral of workers’ compensation patients. The compensation offered to the corrupt doctors consisted of either cash or referrals of new patients in what is known as a “cross-referral” scheme.

After a seven-day jury trial and less than a day of deliberation, the jury found Solakyan guilty on all counts. The district court sentenced Solakyan to 60 months in prison and ordered him to pay $27,937,175 in restitution to the nine largest insurers affected by the kickback scheme. Solakyan filed multiple pre- and post-trial motions challenging the indictment, jury instructions, and restitution proceedings. His appeal to the Ninth Circuit Court of Appeals followed.

In the published case of U.S.A. v Sam Solakyan -22-50023 (Sept 2024) the 9th Circuit panel (1) affirmed Sam Sarkis Solakyan’s conviction for (a) conspiracy to commit honest-services mail fraud and health-care fraud and (b) honest-services mail fraud and aiding and abetting; (2) vacated the district court’s restitution order; and (3) remanded for further proceedings, in a case arising from a workers’ compensation fraud that generated $263 million in claims.

Solakyan contended that the indictment failed to allege the requisite willfulness for health-care fraud as an object of the charged conspiracy. The panel did not resolve a dispute as to the applicable standard of review, concluding that even under de novo review, the indictment, which signaled that Solakyan acted with a bad purpose, sufficiently informed Solakyan of the conspiracy charge predicated on health-care fraud as one of the objects of the conspiracy.

The panel held that the district court did not abuse its discretion in the formulation of its jury instructions regarding the health-care object of the conspiracy. A general mens rea instruction was not misleading or inadequate to guide the jury’s deliberations because the jury was separately instructed on each object of the conspiracy, each with its own delineated mens rea requirement. The jury would have understood that it should apply the “willfully” instruction to the health-care fraud object and apply “knowingly” as to the honest-services mail fraud object. The panel held that the district court did not abuse its discretion by including a “reasonably foreseeable” standard for use of the mails in its conspiracy instruction.

The panel reviewed for plain error Solakyan’s claim that the district court’s inclusion of an attempt instruction constituted a “constructive amendment” to the charges and created a duplicity error that deprived him of his constitutional right to a unanimous verdict. The panel held that even assuming the district court erred in failing to give a unanimity instruction, Solakyan did not demonstrate that such error affected his substantial rights or seriously affected the fairness, integrity, or public reputation of the judicial proceedings.

The panel held that the district court did not err in ordering a restitution amount that is distinct from the loss amount calculated for purposes of sentencing. A court’s leniency on the loss calculation for sentencing purposes does not hamstring its discretion to impose a larger restitution order in an amount fully borne by a defendant’s victims.

The panel held that the district court abused its discretion in failing to make specific findings as to why it did not deduct from the $27,937,175 restitution amount payments the insurers would have made for medically necessary MRIs in the absence of fraud. The panel therefore vacated the restitution order and remanded for the district court to determine whether the total loss amount should be reduced, at least in part, by the cost of reimbursement for medically necessary MRIs the insurers would have incurred had Solakyan acted lawfully.

The California Stem Cell Treatment Center operates two clinics in Beverly Hills and Rancho Mirage. At those clinics, as part of what they call “patient-funded investigational research,” Defendants offer stem cell treatments to “[p]atients who are looking for non-surgical alternatives to their degenerative disorders.”

The companies advertise that they have “technology to produce a solution rich with your own stem cells” that they say can alleviate dozens of medical conditions, including Alzheimer’s, arthritis, asthma, cancer, macular degeneration, multiple sclerosis, heart problems, pulmonary problems, Crohn’s, Parkinson’s, and erectile dysfunction.

The treatments are not covered by insurance, so patients pay out of pocket. A single treatment typically costs $8,900, and a twelve-treatment option costs $41,500. Defendants have treated thousands of patients.

Through the Cell Surgical Network, the companies also operate a network for “physicians who want to bring regenerative medicine into their own practices.” Affiliates agree to follow Defendants’ treatment protocol and pricing guidelines; share “research data”; and purchase Defendants’ equipment for isolating cells, called the “Time Machine,” for about $30,000.

The substance that the companies produce is called “stromal vascular fraction,” or “SVF.” SVF is “a liquified mixture of cells and cell debris” derived from fat tissue. Fat tissue, which looks a bit like honeycomb when magnified, is a connective tissue primarily made up of fat cells. Fat tissue also comprises many other types of cells, including mesenchymal stem cells. Most of the cells are embedded in an “extracellular matrix,” a structure made partly of collagen fibers that holds the cells in place. Fat tissue also contains interspersed blood vessels.

That entire process is sometimes done on one day: The patient undergoes liposuction, waits for the tissue to be processed, and receives SVF all during one visit. But in the “expanded” version, the collected tissue is not processed onsite. Instead, the tissue is sent to a cell bank for processing and the cells are replicated (“expanded”) for later use in the same patient.

In 2017, the FDA inspected the California Stem Cell Treatment Center clinics. The inspectors concluded that the clinics were manufacturing and administering unapproved drug products. They found violations of the FDA’s manufacturing requirements and a lack of proper documentation of adverse health events related to the clinics’ SVF treatments.

In 2018, the FDA filed this lawsuit against the companies, it’s founders Elliott B. Lander, M.D., and Mark Berman M.D. and sought injunctive relief, alleging that Defendants were violating the Food, Drug, and Cosmetic Act by improperly manufacturing and labeling SVF. After a seven-day bench trial, the district court entered judgment in favor of Defendants, holding that Defendants’ treatments were not subject to FDA regulation.

The district court held that Defendants’ SVF is not a “drug” under federal law, reasoning that “Defendants are engaged in the practice of medicine, not the manufacture of pharmaceuticals.” The court also alternatively held, as to the same-day procedure, that Defendants’ use of SVF falls within an exception to regulation for certain surgical procedures.

The 9th Circuit Court of Appeals reversed in the published case of U.S.A. vs California Stem Cell Treatment Center 22-56014 (September 2024).

The parties first dispute whether Defendants’ SVF constitutes a “drug” under the Under the Food, Drug, and Cosmetic Act (“FDCA”). Based on the plain text of the statute, the 9th Circuit agreed with the FDA that Defendants’ SVF is a drug. The FDA is not asserting authority over surgery as a general category. Rather, it is asserting authority over doctors’ creation or use of products that fall within Congress’s definition of “drugs.”

Defendants next argue that even if their SVF is a “drug,” their same-day SVF treatment is completely exempt from FDA regulation under what is called the “same surgical procedure” exception (“SSP exception”).

The 9th Circuit held that that Defendants’ same-day version of the SVF treatment does not qualify for the SSP exception.

In an exceedingly similar case regarding “body-fat derived stem cell therapy,” the Eleventh Circuit agreed with the FDA that, to qualify for the SSP exception, “such HCT/Ps’ must be in their original form (rather than subjected to extensive processing).” United States v. US Stem Cell Clinic, LLC, 998 F.3d 1302, 1305, 1310 (11th Cir. 2021)

Sunshine Behavioral Health, LLC employed Britnee Campbell as an hourly, nonexempt worker from approximately October 2018 to March 2019. Sunshine contends that when Campbell began her employment, she signed an arbitration agreement that included a class action waiver.

On May 23, 2022, Campbell, as the lead plaintiff in a putative class action, filed the instant complaint. The complaint alleged a single cause of action for violations of Business and Professions Code section 17200, et seq., based on violations of employment law. Among other things, the complaint alleged employees had not been paid proper overtime compensation, had been required to work through meal and rest breaks without compensation, had not been paid minimum wage, and had not been paid in a timely manner.

Sunshine filed an answer on August 3, 2022. The answer included an affirmative defense that “one or more of the putative class members” signed an arbitration agreement that precluded them from participation.

According to Campbell’s counsel, prior to the initial status conference, which was set for September 15, 2022, defense counsel proposed the idea of early mediation to explore settling the case. Campbell’s counsel represents that in the joint status conference statement, Sunshine represented to the court that “formal discovery is premature at this time, as Defendant believes that the parties would benefit from early informal settlement discussions, including attending private mediation”  Sunshine also stated: “Defendant is amenable to private mediation and a stay of the case pending the completion of mediation. Participation in private mediation would include an informal exchange of data and information sufficient to prepare for settlement negotiations.” The status conference was continued to December 14.

The parties agreed to mediate the case. On October 27, 2022, they entered into a detailed agreement entitled “Joint Stipulation Regarding Discovery and Mediation” (the joint stipulation). The joint stipulation stated, among other things, that the parties agreed to participate in private mediation on April 18, 2023, and to stay discovery. Sunshine agreed to produce documents and data prior to the mediation and to refrain from certain conduct with regard to potential class members. The parties also agreed that if mediation was unsuccessful, the parties had met and conferred on an appropriate notice to the class pursuant to Belaire-West Landscaping, Inc. v. Superior Court (2007) 149 Cal.App.4th 554 (a Belaire-West notice), which would be mailed out by an agreed-upon company seven days after the failed mediation. According to Campbell’s attorney, reaching the joint stipulation required “substantial negotiations,” including “weeks” spent on the Belaire-West notice.

On November 22, 2022, Sunshine asserted it located, for the first time, an arbitration agreement in Campbell’s personnel file. No explanation was offered as to why this document was not or could not have been located earlier. Sunshine did not inform Campbell of this discovery until December 7, 2022, when preparing the status conference report for the court.

Months later, on May 3, 2023, Sunshine filed its motion to compel arbitration. The motion was not particularly complex or voluminous.

At the May 10 status conference, the court noted the failure to participate in mediation was “a violation by defendant of the Court’s stipulation and order which was filed on [March 24, 2023].”

The court held a hearing on the motion to compel arbitration on July 14, 2023. The court, after discussion, found that Sunshine, “under an analysis of the St. Agnes factors, . . . waived its right to compel Plaintiff’s claims to arbitration. Sunshine appealed.

The court of appeal affirmed in the published case of Campbell v. Sunshine Behavioral Health -G062886 (September 2024).

“Like the trial court, we do not unquestioningly accept Sunshine’s representation that it discovered the arbitration agreement for the first time on November 22, 2022. The trial court was highly skeptical, using quotations around the word “discovered” at several points in the minute order denying the motion to compel.”

As in Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, the defense raised by Campbell was waiver. “The waiver inquiry is exclusively focused on the waiving party’s words or conduct; neither the effect of that conduct on the party seeking to avoid enforcement of the contractual right nor that party’s subjective evaluation of the waiving party’s intent is relevant. [Citations.] This distinguishes waiver from the related defense of estoppel, ‘which generally requires a showing that a party’s words or acts have induced detrimental reliance by the opposing party.’ [Citations.] To establish waiver, there is no requirement that the party opposing enforcement of the contractual right demonstrate prejudice or otherwise show harm resulting from the waiving party’s conduct.”