Author: WorkCompAcademy

The owners of Pacific Alliance Medical Center, an acute care hospital located in the Chinatown District of Los Angeles, have agreed to pay $42 million to settle allegations that they were involved in improper financial relationships with referring physicians, the Justice Department announced today.

PAMC, Ltd. and Pacific Alliance Medical Center Inc., the owners of the hospital, agreed to pay the settlement to resolve a lawsuit that alleged they had violated the False Claims Act by submitting false claims to the Medicare and MediCal programs.

The settlement, which was finalized this week, calls for PAMC Ltd. and Pacific Alliance Medical Center Inc. to pay $31.9 million to the United States and $10 million to the State of California.

The settlement resolves allegations brought in a “whistleblower” lawsuit that the defendants submitted or caused to be submitted false claims to Medicare and MediCal for services rendered to patients who had been referred by physicians with whom the defendants had improper financial relationships.

These improper relationships took the form of (1) arrangements under which the defendants allegedly paid above-market rates to rent office space in physicians’ offices, and (2) marketing arrangements that allegedly provided undue benefit to physicians’ practices.

The lawsuit alleged that these relationships violated the Anti-Kickback Statute and the Stark Law, both of which restrict the financial relationships that hospitals may have with doctors who refer patients to them.

The whistleblower lawsuit was filed by Paul Chan, who was employed as a manager by one of the defendants, under the qui tam provisions of the False Claims Act. Under the False Claims Act, private citizens can bring suit on behalf of the United States and share in any recovery. The United States may intervene in the lawsuit, or, as in this case, the whistleblower may pursue the action. Mr. Chan will receive over $9.2 million as his share of the federal recovery.

“This settlement is a warning to health care companies that think they can boost their profits by entering into improper financial arrangements with referring physicians,” said Special Agent in Charge Christian J. Schrank of the Department of Health and Human Services, Office of Inspector General (HHS-OIG). “Working with our law enforcement partners, we will continue to crack down on such deals, which work to undermine impartial medical judgement, drive up health care costs, and corrode the public’s trust in the health care system.”

The case, United States ex rel. Chan v. PAMC, Ltd., et al., CV13-4273 (C.D. Cal.), was monitored by the United States Attorney’s Office, the Civil Division’s Commercial Litigation Branch, and HHS-OIG.

A Report in the National Review claims Medicare and Medicaid together account for about $1 trillion in federal spending annually, and estimates suggest that $1 out of ever $10 of that spending is fraud. Some estimates go much higher.

According to Malcolm Sparrow, a Harvard professor of public management who studies medical fraud, the government’s approach long has been backward: “Basically, the audits they’re using on a random sample are nothing like fraud audits,” he told The Nation. “The difference between a fraud audit and a medical review audit – a medical review audit, you’re taking all the information as if it’s true and testing whether the medical judgment seems appropriate. You can use these techniques to see where judgments are unorthodox or payment rules have not been followed, but almost nothing in these methods tests whether the information you have is true.”

Which is to say, investigators are asking whether a certain treatment was in fact appropriate for what ails Mrs. Jones, not whether Mrs. Jones exists. Entitlement fraud is what security experts describe as an “adaptive threat,” meaning that it is a problem without a solution, because the problem mutates in response to every solution developed.

Fraud tends to cluster in certain areas and in certain treatment categories. The reason for that is that this fraud is not random, not just the result of some general practitioner padding his bills. It’s the work of organized crime. As Sparrow points out, when there is a criminal case filed against one of these fraud artists, then billing in a particular category – some years ago, it was HIV fusion treatments – falls off steeply, by as much as 90 percent. The implication here is that fraudulent billing may make up the majority of Medicaid and Medicare spending in some categories.

This is a major criminal enterprise, one involving transnational crime syndicates looking for a better return than that provided by drug smuggling and the other familiar rackets. According to The Economist: Some criminals are switching from cocaine trafficking to prescription-drug fraud because the risk-adjusted rewards are higher: the money is still good, the work safer and the penalties lighter. Medicare investigators in Florida regularly find stockpiles of weapons when making arrests. The gangs are often bound by ethnic ties to international venues.

On a dollar-per-dollar basis, the Department of Health and Human Services fraud-recovery units by most accounts do relatively effective work – but do not do very much of it, having recovered less than $2 billion in fraud losses in fiscal 2016. And there were only 1,160 convictions in fraud cases in 2016, or barely one fraud conviction a year for every two staffers in the anti-fraud division.

It should be understood that data mining isn’t a substitute for intelligent analysis – it isn’t a black box that can be switched on and start spitting out the home addresses of fraudsters. It is a tool, but one that can be used effectively only by an intelligent and creative team of human analysts.

But even problems that cannot be solved can be managed. The private sector may provide illustrative examples.

Peter Thiel is a Silicon Valley entrepreneur who cofounded PayPal. As a payment system, PayPal was a natural target for fraud artists, and it developed sophisticated anti-fraud protocols, some of which were incorporated into a subsequent Thiel business called Palantir, a powerful data-mining platform that is used by everybody from U.S. intelligence agents to police detectives, for tasks ranging from mapping out where IEDs are likely to be planted to – more relevant to our immediate concern here – identifying fraud.

The point here is that workers’ compensation administrators need to adapt quickly to new tools and technologies – more quickly than perpetrators adapt to new methods of perpetrating medical fraud.

The Department of Justice announced that Daniel J. Rush pleaded guilty in federal court this month to three felony counts: receiving an illegal payment as a union employee; honest services fraud; and conspiracy to commit structuring and money laundering.

In pleading guilty, Rush, 56, of Crescent City, Calif. (formerly of Oakland, Calif.), admitted that between 2011 and 2015 he was employed by the United Food and Commercial Workers International (UFCW International) as the Organizing Coordinator for the unofficial medical cannabis and hemp division. Rush admitted he violated the Taft-Hartley Act when he accepted compensation from employees in, or potentially in, a labor organization.

Rush also admitted he committed honest services wire fraud with the intent to deprive the UFCW of its right to his honest services and he conspired with workers’ compensation attorney Marc Terbeek, 55, of Berkeley, Calif., to launder money and to evade reporting requirements in an effort to conceal the source of the money.

Terbeek, was allegedly involved in a massive corruption case filed by the FBI’s Public Corruption and Civil Rights Squad. The FBI and IRS raided Terbeek’s office in January 2015 and since then he has been cooperating with investigators. The sworn Affidavit signed by FBI Special Agent Roahn Wynar attached to the criminal complaint against Daniel Rush claims the following scenario occurred.

Daniel Rush was an official with the United Food and Commercial Workers Union that had established a “Cannabis Division” to organize dispensary employees. He was also closely involved in Measure D, the process to regulate medical marijuana dispensaries in Los Angeles, and also connected to legalization’s most prominent pitchman: Lt. Gov. Gavin Newsom.

According to the allegations of paragraph 31 of the Affidavit , Tarbeek admitted to the FBI that he had been paying “kickbacks” to Rush for sending Terbeek legal work since 2004. Rush “encouraged” Terbeek to acquire a workers compensation law practice to litigate cases referred by the Insitutio Laboral de la Raza. In exchange Tarbeek gave Rush a credit card associated with Terbeek’s law firm and Terbeek paid it off routinely. Text messages confirmed this practice continued as late as February 2015. From 2010 to 2015, Rush spent $110,000 on Terbeek’s card, about $2,000 per month, for mostly personal expenses.

Also, Terbeek allegedly agreed to share legal fees with Rush derived from Terbeek’s clients seeking permits to operate dispensaries in California, Nevada, and beyond (Affidavit paragraph 34). After creation of this arrangement, Terbeek paid Rush $5000 as his “share” of the medical marijuana legal fees.

For his part in the scheme, on February 15, 2017, TerBeek was charged by information with one count of making a payment to a union employee, in violation of 29 U.S.C. § 186(a), and one count of willful violation of anti-structuring regulations, in violation of 12 U.S.C. § 1956.He pleaded guilty to both counts on February 16, 2017

Terbeek is scheduled to be sentenced by Judge Gilliam on August 21, 2017, and Rush will be sentenced on October 2. . Rush is looking at the possibility of 30 years in prison as well as a $565,000 fine but is currently free on a $100,000 bond

State Bar records reflect that Terbeek remains an active unrestricted member at this time.

A new opioid interstate study reports decreases in the amount and frequency of the drug prescribed to injured employees covered by workers’ compensation in several states. However, the Workers Compensation Research Institute’s (WCRI’s) study, Interstate Variations in Use of Opioids, 4th Edition, also found higher opioid use and other patterns of high-risk drug use in other states during the same time period.

The study examined 26 states’ workers’ compensation (WC) systems, which covered more than 430,000 nonsurgical WC claims and about 2.3 million prescriptions connected with those claims. The study also found that New York, Michigan, Kentucky and Maryland had the highest reduction in opioid use among the states with lower average uses by workers injured in 2010 and 2013.

The 26 states included in this study are Arkansas, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin. These states represent over two-thirds of the workers’ compensation benefits paid in the United States.

The WCRI study shows decreases in opioid prescriptions in most of the 26 states it observed. But opioid addiction from pain-killers reportedly has reached epidemic heights.

Between 65% to 75% of injured workers on pain killers had at least one opioid prescription between 2013 to 2015, with the highest incidents in Arkansas (85%), South Carolina (80%) and Louisiana (80%). New York, Pennsylvania and Louisiana had the highest number of opioid claims among the 26 states – though, again, New York did see substantial decreases.

This report serves as a tool to monitor changes in opioid utilization as states implement reforms addressing opioid prescribing and dispensing. Moreover, by comparing variations in the use of opioids across the states, this study can help policymakers and stakeholders be better informed about the level of opioid use in their states and better target future efforts to address issues related to prescription opioids in their states.

But at the same time, more U.S. workers are testing positive for drug use, according to a May 2017 Quest Diagnostics ​study. In fact, addiction to cocaine, marijuana and methamphetamines is at a 12-year high, the study shows. Increases in drug addiction could present more misconduct issues for employers and raise treatment costs.

“This year’s findings are remarkable because they show increased rates of drug positivity for the most common illicit drugs across virtually all drug test specimen types and in all testing populations,” said Barry Sample, PhD, senior director, science and technology, Quest Diagnostics Employer Solutions.

The positivity rate in urine testing for cocaine increased for the fourth consecutive year in the general U.S. workforce and for the second consecutive year in the federally-mandated, safety-sensitive workforce. Cocaine positivity increased 12 percent in 2016, reaching a seven-year high of 0.28 percent, compared to 0.25 percent in 2015 in the general U.S. workforce, and seven percent among federally-mandated, safety-sensitive workers to 0.28 percent, compared to 0.26 percent in 2015.

A new report just published by RAND focuses on one particular form of workers’ compensation fraud: the intentional manipulation of rules and procedures by providers, particularly those delivering health care services and supplies.

The report conceptualizes the sources of and remedies for workers’ compensation fraud in California, discusses various data-driven fraud-detection efforts that other governmental programs use, examines specific aspects of the California approach that might need addressing, and offers some high-level recommendations in that light for the consideration of regulators and legislators.

The Report finds that advanced analytics techniques that social welfare programs use for detecting fraud have had generally favorable results. These techniques offer California workers’ compensation similar promise. Shortcomings in how data are currently collected and accessed should not prevent the Department of Industrial Relations from utilizing these tools.

Employers must furnish up to $10,000 in medical treatment after a claim is filed and can limit the employee’s discretion as to the provider; if the employer rejects the claim, the employee can then receive treatment on a lien basis. Postemployment claims have a strong likelihood of denial, and liens that follow are concentrated in certain locations and providers, routinely settling for a fraction of claimed value, which suggests that they remain a significant source of profit.

Lien volume and claimed value in denied postemployment claims would be reduced if medical care were subjected to the cost controls available in nondenied cases.

Many liens are filed by providers who are under indictment or have been convicted. Existing law offers means to stay liens or suspend providers but either require a formal prosecution or affect only a narrow set of liens.

A Medicaid policy that suspends payments when there is an investigation of a credible fraud allegation would apply to providers who are only under suspicion and would cover all of their liens.

RAND recommends that the DIR implement a centralized and permanent workers’ compensation fraud data unit to enhance opportunities for detecting and addressing fraud.

The Report recommends that the California Department of Industrial Relations take immediate steps to incorporate the use of data analytics into its routine fraud-detection work. To target certain employee-selected providers who repeatedly generate liens large in volume and claimed value, give employers the option of denying a questionable postemployment claim while continuing to offer medical care under their control. And use the payment suspension policy adopted by Medicaid as a tool in addition to those already available under Labor Code §§ 4615 and 139.21 to take active fraudsters out of the workers’ compensation system.