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Employer Fights Bizarre Fraud Conviction for 15 Years

WorkCompAcademy

In 2003, defendants Jose Luis Alvarez, and Kim Marugg, (at the time known as Kim Alvarez) pled guilty to charges they had defrauded the State Compensation Insurance Fund. At the time, Alvarez and Marugg were husband and wife and operated Alverez Construction Company. Some of the workers were paid in cash by an intermediary and as a result SCIF was not paid workers’ compensation premium.

Marugg later claimed that, although she “was not guilty of the charges and . . . insistent on moving forward to trial,” she nonetheless pled guilty in December 2003 because the plea agreement “sounded like a sound financial decision.”

Marugg and Alvarez separated in February 2003; and began dissolution of marriage proceedings in 2004. She then married the prosecutor in her criminal case after she and the prosecutor began a personal relationship on some undisclosed date. The prosecutor died in October 2013, while they were still married.

Marugg testified she had “since learned” that, at time she pled guilty in 2003, her criminal defense counsel was colluding with Jose Luis Alvarez’s family law attorney. and her criminal conviction had an adverse effect on her community property rights.

In January 2007, Marugg started her court battled and filed what she calls a “Petition for Expungement” of the conviction, seeking relief under Penal Code sections 1203.4 and 1203.4a which was taken off calendar and not resolved.

In November 2009, Marugg discovered another woman who previously had been prosecuted by the same deputy district attorney, and with whom the prosecutor later engaged in a romantic relationship. This other woman’s story was “almost identical” to Marugg’s.

This woman complained to the district attorney’s office, and at some point during the August – October 2010 time period, the office commenced an internal affairs investigation of the prosecutor. During the investigation, Marugg learned that the prosecutor had engaged in “personal” and “romantic” relationships with other defendants he had prosecuted, as well as one of the principal witnesses, the SCIF investigator, whom the prosecutor had presented to the grand jury in May 2002 in his effort to indict Defendants.

After the investigation, in May 2011, the superior court ruled in favor of this other woman, finding in her case “that there have been substantial irregularities in the prosecution of this case, of which the court was unaware until this petition, that undermine the lawfulness of defendant’s conviction.”

In September 2011, at Marugg’s request, the prosecuting deputy district attorney (who, by this time, was Marugg’s husband) provided Marugg with a declaration that she submitted to the State Bar of California as part of a complaint she filed against the defense attorney who represented her at the time she pled guilty and was sentenced in 2003. In part, the prosecutor testified that, as early as 2002, he knew that “[Marugg] was not the guilty party.”

A year later, in September 2012, Marugg wrote a letter to the district attorney, asking that the People stipulate to allow Marugg to withdraw her plea. The People declined Marugg’s request in an October 2012 letter.

After gaining information in 2015 regarding what Marugg considered to be criminal behavior of one of the SCIF investigators who testified before the grand jury in May 2002, Marugg requested and obtained copies of all of the state’s records from its investigation into the activities of Alvarez Construction that led to the grand jury evidence, the indictment, and the convictions. She received the initial documents in July 2015 and retained a forensic accounting firm in November 2015.

In 2016, Marugg filed petitions for writs of error coram nobis and section 1473.7 motions to vacate her convictions. Much of Marugg’s January 2017 testimony attempts to impeach evidence presented to the grand jury in May 2002. Marugg denied portions of witnesses’ grand jury testimony, presented evidence that she contended contradicted grand jury evidence, and identified facts that she believed discredited grand jury witnesses.

Based on what she found, Marugg testified that her criminal defense attorney “completely failed to identify and present evidence that exonerated [her] as well as failed to challenge by way of motions false evidence that was presented to the Grand Jury and challenge the prosecutor’s failure to present exonerating evidence to the Grand Jury.”

The trial court denied the requested relief. The Court of Appeal gave her a second chance in the unpublished case of People v Marugg.

The major problem for Marugg was her failure to raise her concerns earlier, and/or to exercise due diligence on time. Much of what she argues in 2017 was know much earlier, and should have been known with a due diligence investigation, both prerequisites to granting her relief.

Nonetheless, the trial court procedurally failed to hold a hearing as statutorily requiredand timely requested by Marugg before ruling on Marugg’s section 1473.7 motion. The case was remanded for that purpose.

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Saratoga Physician Sentenced to 63 Months

WorkCompAcademy

Vilasini Ganesh M.D. a Saratoga family practitioner was just sentenced to 63 months in prison for health care fraud and making false statements related to a health care benefits program.

Ganesh, and her husband orthopedic surgeon Gregory Belcher M.D., were convicted of the charges on December 15, 2017, after an eight-week trial.

The evidence at trial demonstrated Ganesh submitted a series of false medical claims related to the family medical practice she owned, Campbell Medical Group in Saratoga.

For example, Ganesh submitted claims for days when a patient had not been seen by the provider and claims for patients who had been seen by a physician provider who no longer was affiliated with her practice.

Additionally, Ganesh billed insurers with claims that certain patients were seen twelve to fifteen times in a single month.

On July 13, 2017, a federal grand jury indicted Ganesh and Belcher, charging them with one count of conspiracy to commit health care fraud, one count of conspiracy to commit money laundering, multiple counts health care fraud, and making a false statement relating to health care matters.

The jury convicted Belcher of one count of health care fraud and convicted Ganesh of five counts of health care fraud and five counts of making false statements. The jury acquitted defendants of the remaining counts.

During Ganesh’s sentencing hearing, Judge Koh stated that Ganesh obstructed justice by misrepresenting her understanding of the legal system, the amount of money she was paid by insurers, and whether she understood that it was improper to “upcharge” when submitting claims to insurers.

In addition to the prison term, Ganesh was sentenced to a 3-year term of supervised release and ordered to pay restitution in the amount of $344,916.20. Ganesh will begin serving the prison sentence on November 1, 2018.

On April 4, 2018, Judge Koh sentenced Belcher to a year and a day in prison to be followed by three years of supervised release.

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Compound Med Costs Continue to Decline

WorkCompAcademy

Compounded medications are custom-made medications that traditionally were formulated by pharmacies for specific patients. By 2012, the practice had mushroomed, with some pharmacies selling thousands of doses of regularly used mixtures for physicians to keep for future use.

Now utilization and costs associated with compound medications fell significantly for both managed and unmanaged claims in 2017. This welcome news is attributable to payers continuing to leverage processes that identify whether a compound is necessary and only allowing those prescriptions that appear to provide medical benefit. In addition, most states have either been considering or have already implemented formularies in part to short-circuit exorbitant compound use.

Coventry reports that managed compound costs have steadily declined for three consecutive years and fell by more than half between 2016 and 2017.

The decreases were notable in California, New York, Pennsylvania, and Texas. Each of these states saw the percentage of all claims using compounds drop by more than half for the last two years.

Unmanaged compound costs have likewise posted sharp declines. Spending has now reached the lowest level in seven years.

The same large states that logged decreases in managed compound costs also registered sizable drops in unmanaged compound costs. Eight of the top 10 states experienced at least 40% reductions in the number of injured workers using compounds. These states were Arizona, California, Connecticut, Georgia, Illinois, New York, Pennsylvania, and Texas.

More payers, prescribers and injured workers have begun to question the need for a compound over a commercially available formulation. The workers’ compensation industry has for several years highlighted the limited clinical appropriateness of compounds, their high cost and the continued instances of civil and criminal investigations into compounding.

And the Food and Drug Administration is poised to limit large scale compounding.

In 2012 there was a fungal meningitis outbreak caused by tainted steroids made by a compounding pharmacy. That prompted Congress in 2013 to pass a law aimed at bringing more compounding pharmacies, traditionally overseen by states, under FDA oversight. The law, the Drug Quality and Security Act, created a category of “outsourcing facilities” that could register with the FDA and sell products in bulk while following federal manufacturing standards.

Under this new law, the FDA on Monday proposed excluding  three substances from a list of ingredients that could be used to manufacture compounded medications in bulk for use by hospitals and doctors’ offices. The action was the first time the regulator has moved to exclude any substance from a list of ingredients that may be used to produce in bulk compounded medications that do not need to go through the agency’s safety approval process.

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Congress Again Attempts MSA Reform Bill

WorkCompAcademy

For numerous years, a slightly varied version of essentially the same proposed legislation regarding Workers’ Compensation Medicare Set-Asides continues to be re-introduced in Congress. This year the MSA Bill was again introduced in the Senate. It is titled “Medicare Secondary Payer and Workers’ Compensation Settlement Agreements Act of 2018.”  The Bill has generally failed to gain traction and support year after year.

The MSA Bill seeks to formally legislate guidelines around the WCMSA process. Currently, the MSA and CMS review process have never been formalized in statute or legislation. All CMS guidance around protection of Medicare’s interest has been issued via administrative guidance (i.e., the WCMSA Reference Guide, CMS memoranda, etc.).

While the Medicare Secondary Payer Act (MSP) does clearly indicate that Medicare should not pay where a beneficiary has received primary payment and MSAs in settlements with Medicare beneficiaries have become a de facto Best Practice in the industry, the MSP and its corresponding regulations have never explicitly addressed the MSA and CMS approval process.

Essentially, the MSA Bill would provide formal regulatory teeth to the WCMSA approval process that never previously existed. As such, the industry has been hesitant to provide CMS extra teeth into its currently voluntary MSA review program.

When the MSA Bill was initially formulated close to ten years ago, the industry was experiencing many difficulties with CMS’ current contractor regarding inconsistencies in approvals, high/unreasonable Part D allocations in the WCMSA, and long turnaround times.

However, the current and last contractor have become more consistent in their review policies, and turnaround times are reasonable. With all necessary documentation, CMS reviews WCMSAs within 3-4 weeks. As such, there is not currently a strong desire for WCMSA reform.

That’s not to say that the CMS review process is without flaw. Overallocation of prescription drugs, particularly opioids, continues to be an issue that such over-use potentially could cause long-term health issues for the beneficiary. Further, outside of a limited Re-Review/Amended Review process, no appeal process providing full due process in our court system exists; a CMS determination is final.

Changes from the last version of the MSA Bill include: Removal of the threshold for settlements under $25k where the plan wouldn’t be considered primary (the Bill now seems to indicate there is no threshold to make a plan primary) and removal of all the Qualified MSA language (this was proposed in the prior Bill to make an MSA considered final and adequate without CMS review).

The MSA Bill provides that the MSA shall include payment for “items and services” covered by the workers’ compensation law or plan. “Items and services” are technically not prescription drugs as defined under the MSP. Does this MSA Bill seek to exclude Part D prescription drugs from the MSA? That is not clear, and this point is ambiguous in the text proposed.

Overall, the MSA Bill is vague and missing out on a number of components more pressing and needed in WCMSA Reform.

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August 27, 2018 Edition

WorkCompAcademy

Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: CompPartners Prevails in California Supreme Court, 100% Awards Increasing with VR Experts, Lack of “Animus” Evidence Defeats FEHA Claim, Operators of So. Cal. Staffing Companies Face Fraud Charges, Jury Convicts Lancaster Physician in Kickback Case, Woman to Serve 30 Months for EDD Fraud, Fresno Orthopedist Practicing with Suspended License, Are You Ready For a Facebook MRI, HHS to Eliminate PBM Rebates to Lower Drug Costs, CWCI Studies Polypharmacy Claims.

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Gabapentin (AKA “Gabbies”) Addiction Abuse Rising

WorkCompAcademy

Doctors who are cutting back on prescribing opioids increasingly are opting for gabapentin, believed to be a safer, non-narcotic drug. The anticonvulsant is available in generic form and sold under the brand names Neurotonin and Gralise, among others. However, recreational use and abuse of the prescription drug is on the rise, and the increase has raised concern among officials in several states.

The Food and Drug Administration has approved gabapentinoids for the treatment of postherpetic neuralgia (gabapentin and pregabalin), fibromyalgia (pregabalin), and neuropathic pain associated with diabetes or spinal cord injuries (pregabalin).

Past marketing practices also help explain the growing use of gabapentinoids for various types of pain. The manufacturer (Parke-Davis, a subsidiary of Warner-Lambert, which was later acquired by Pfizer) engaged in an extensive marketing campaign to increase off-label prescribing of Neurontin for pain.

On the street gabapentin pills, known as “johnnys” or “gabbies,” which often sell for less than a dollar each, enhance the euphoric effects of heroin and when taken alone in high doses can produce a marijuana-like high.

Gabapentin is currently not a controlled substance in the United States, so federal authorities do not consider it a drug with a high potential for abuse. But recent data indicate that the drug promoted as an alternative to opioids is one to watch as gabapentin-related complications and overdose deaths are increasing.

Gabapentin is now one of the most popular prescription drugs in the United States, according to the New England Journal of Medicine. It was the 10th-most-prescribed medication in 2016. Its more expensive cousin, pregabalin, sold as Lyrica and also made by Pfizer, was the eighth best-selling.

Some states have taken note of the increase in use and are pursuing stricter measures for access to the drug.

Gabapentin was the No. 1 drug dispensed in Ohio in December 2016, according to the Ohio Board of Pharmacy. In that same year, the medication was dispensed at a greater rate than any other controlled substance. This information promoted the Ohio Substance Abuse Monitoring Network to issue an alert about the illicit use of gabapentin across the state.

Kentucky designated gabapentin as a Schedule 5 controlled substance in July 2017. The regulation requires authorized practitioners to be properly licensed and registered with the DEA before they can dispense the medication.

West Virginia is also tracking gabapentin abuse and may introduce legislation in January 2018 that would aim to classify it as a controlled substance in the state. Gabapentin has market value on the streets and it is being abused according to the definition of a scheduled drug, Dr. Brad Henry, president of the West Virginia State Medical Association, told the newspaper.

According to the Charleston Gazette-Mail, “In a recent month, West Virginia pharmacies filled prescriptions for 5.8 million gabapentin tablets – more than the combined number of doses of two popular painkillers, hydrocodone, and oxycodone.”

Ohio also has been monitoring gabapentin prescriptions for more than a year.

People who have abused gabapentin and now find themselves addicted to the drug are advised to avoid going cold turkey. Instead, a professional addiction recovery treatment program is well advised..

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Employers Favor Kavanaugh for Supreme Court

WorkCompAcademy

Judge Brett M. Kavanaugh, of the United States Court of Appeals for the District of Columbia Circuit, has been nominated to fill the vacancy on the United States Supreme Court left by retiring Justice Anthony Kennedy. Judge Kavanuagh’s nomination must be confirmed by a simple majority of the Senate. Senate Republicans hold a narrow majority (51-49) and, therefore, need every vote to push through the confirmation.

While Justice Kennedy has the reputation of being the High Court’s “swing vote,” particularly with regard to social concerns, his employment decisions have been, for the most part, pro-employer.

This term alone, Justice Kennedy joined the decision in Janus v. AFSCME Council 31, which held that government workers who choose not to join unions may not be forced to help pay for collective bargaining, because it violates their free speech rights.

Kennedy also agreed with the Epic Systems Corp. v. Lewis decision upholding the enforceability of arbitration agreements containing class and collective action waivers of wage and hour disputes.

And, in 2011, Justice Kennedy sided with the majority of the court in Walmart Stores Inc. v. Dukes, a decision that narrowed the definition of the commonality requirement of class actions.

Judge Kavanaugh’s decisions have similarly favored-employers. Thus, his confirmation is expected to maintain the Court’s current pro-employer leanings.

In Midwest Division-MMC, LLC v. National Labor Relations Board (2017), the D.C. Circuit refused to enforce a National Labor Relations Board (NLRB) decision sustaining the right of union employees to have a representative present during noncompulsory job performance peer-reviews.

In a separate concurrence, Judge Kavanaugh emphasized that members have no right to representation in peer reviews because such reviews are neither investigatory nor likely to result in discipline. Judge Kavanaugh also stated that the confidentiality of the peer-review process was of essential importance.

Judge Kavanaugh’s decisions in discrimination cases under Title VII, however, have been somewhat mixed.

For instance, in Adeyemi v. District of Columbia (2008), Judge Kavanaugh dismissed the plaintiff’s claim that he was not hired because he was blind, in violation of the American’s with Disabilities Act (ADA).

Judge Kavanaugh explained that the central inquiry in a discrimination case is whether the employer’s stated nondiscriminatory reason for its employment decision is false. Where the plaintiff fails to demonstrate the falsehood of the stated reason, the employment decision must stand.

However, Judge Kavanaugh’s concurrence in Ayissi-Etoh v. Fannie Mae (2013) can be read as advocating for a lower burden to be placed on plaintiffs in asserting hostile workplace claims.

In Ayissi-Etoh, the plaintiff alleged he was subjected to a racially hostile work environment when his manager called him a repugnant racial slur. In concurring with the majority decision dismissing the plaintiff’s claim,

Judge Kavanaugh, nevertheless, contended that in some cases the utterance of a single racial slur, “might well have been sufficient to establish a hostile work environment.”

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Operators of So. Cal. Staffing Companies Face Fraud Charges

WorkCompAcademy

Orange County prosecutors charged three defendants with defrauding a workers’ compensation insurance company by misrepresenting uninsured injured workers as employees of a different company.

They are also charged with failing to report wages, withhold payroll taxes, and pay employment taxes for wages earned to California Employment Development Department (EDD).

The three defendants are Veronica G. Lake, 47, of Mission Viejo, Luis Enrique Perez, 49, of Yorba Linda and Scott Wesley Smith, 36, who lives in Orange.

In 2013, Luis Perez owned and operated several temporary employee staffing companies including BaronHR, LLC.

Lake worked for Perez as his Controller, while Smith worked as the Director of Safety.

In September 2013, Smith formed Titan Personnel, Inc. and acted as its CEO, CFO, Secretary and sole Director.

Despite losing its workers’ compensation insurance on July 1, 2013, Perez is accused of unlawfully continuing to operate BaronHR and contract with outside companies to provide temporary employees.

Between December 2013 and September 2014, the defendants are accused of conspiring to fraudulently report 47 injured employees of BaronHR as employees of Titan to American International Group, Inc. (AIG) to avoid liability for its employees who were injured at work, and to hide BaronHR’s failure to obtain workers’ compensation insurance as mandated by law.

As a result, AIG became liable for approximately $393,000 worth of expenses for claims of individuals not covered by their insurance policy.

The defendants are further accused of conspiring to commit tax fraud by failing to report, withhold, and pay employment and personal income tax for 36 BaronHR employees, including individuals they attempted to report to AIG as Titan Personnel employees, to the EDD.

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Jury Convicts Lancaster Physician in Kickback Case

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A federal jury convicted a Lancaster doctor of conspiracy for his role in a Medicare kickback scheme involving a Los Angeles-area home health agency.

Dr. Kanagasabai Kanakeswaran, 65, was found guilty of one count of conspiracy to pay and/or receive kickbacks for Medicare referrals and four counts of receiving kickbacks for Medicare referrals. The jury rendered its verdicts following a six-day trial.

Kanakeswaran owned and operated a medical clinic located at 1601 West Avenue J , Suite 202, in Lancaster California.

According to evidence presented at trial, from 2008 to 2016, Kanakeswaran and others engaged in a conspiracy to refer Medicare patients to Star Home Health Resources (Star), a home health agency located in La Verne, in exchange for illegal kickback payments.

Kanakeswaran received kickback payments in cash, as well as through checks payable to a company Kanakeswaran owned, Digital Perfection Corporation. According to the grand jury indictment, he would be paid between $100 and $700 per patient that he referred to Star.

As a result of the conspiracy, the owners and operators of Star submitted claims to Medicare based on the Medicare beneficiaries that Kanakeswaran referred to Star, and Medicare paid approximately $4.1 million based on those claims, the evidence showed.

Kanakeswaran is scheduled to be sentenced by United States District Judge Philip S. Gutierrez on January 7. At that time, Kanakeswaran will face a statutory maximum penalty of 25 years in federal prison.

The Medical Board of California records reflect that he is currently still licensed to practice medicine, and there are no disciplinary actions pending against him. He is reported to be a graduate of the University of Colombo Faculty of Medicine, and was admitted to practice in 1979.

This case was investigated by the U.S. Department of Health and Human Services’ Office of Inspector General and the Federal Bureau of Investigation. Assistant United States Attorney Alexander F. Porter of the Major Frauds Section and DOJ Trial Attorney Claire Yan of the Criminal Division’s Fraud Section are prosecuting the case.

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CompPartners Prevails in California Supreme Court

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Two years ago the Court of Appeal opened the Pandora’s box of potential litigation against utilization review physicians in a published decision. The California Supreme Court agreed to review the case, and just reversed the Court of Appeal in Kirk King v Comppartners, Inc..

Kirk King suffered anxiety and depression due to chronic back pain resulting from the back injury at work in 2008. In 2011, he was prescribed an anti-anxiety medication known as Klonopin to be provided through Workers’ Compensation. The request for this medication was sent to Utilization Review.

Naresh Sharma, M.D, an anesthesiologist who conducted the utilization review determined the drug was unnecessary and decertified it. As a result, Kirk was required to immediately cease taking the Klonopin. Typically, a person withdraws from Klonopin gradually by slowly reducing the dosage. Due to the sudden cessation of Klonopin, King suffered four seizures, resulting in additional physical injuries.

In September 2013 another request for Klonopin was made by the PTP. Ali, a psychiatrist, conducted a second utilization review and also determined Klonopin was medically unnecessary. Neither Sharma nor Ali examined Kirk in-person, and neither warned Kirk of the dangers of an abrupt withdrawal from Klonopin. Sharma and Ali were employees of CompPartners a Workers’ Compensation utilization review company.

King then sued CompPartners, Inc. and Sharma for (1) professional negligence; (2) negligence; (3) intentional infliction of emotional distress; and (4) negligent infliction of emotional distress. Kirk’s wife, Sara King, sued for loss of consortium. The trial court sustained defendants’ demurrer without leave to amend. The Court of Appeal sustained the demurrer but reversed the denial of leave to amend.

The Court of Appeal decision concluded that the trial court “should have granted the Kings leave to amend because it is possible… that, when more details are provided they could support a conclusion that, under the circumstances, the scope of Sharma’s duty included some form of warning Kirk of or protecting Kirk from the risk of seizures.”

However, the California Supreme Court viewed the case differently. It concluded that the workers’ compensation law provides the exclusive remedy for the employee’s injuries and thus preempts the employee’s tort claims.

The Supreme Court said it is by now well established that the exclusivity provisions preempt not only those causes of action premised on a compensable workplace injury, but also those causes of action premised on injuries collateral to or derivative of’ such an injury. Such collateral or derivative injuries include injuries stemming from conduct occurring in the workers’ compensation claims process.

In performing their statutory functions, utilization reviewers, much like independent claims administrators, effectively stand in the shoes of employers. Thus, the Court concluded that “the exclusive remedy for the Kings’ injuries lies within the workers’ compensation system.”

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