Author: WorkCompAcademy

The California Department of Insurance announced the conclusion of an enforcement action against Parker Conrad for his alleged role in licensing compliance violations that occurred at Zenefits during his tenure as CEO.

The CDI claimed that YourPeople, Inc., doing business as Zenefits FTW Insurance Services, was formed in 2012. Zenefits has held a California resident business entity insurance producer license since October 1, 2013. Conrad was identified in licensing applications submitted by Zenefits as the only designated responsible licensed producer endorsed to transact on behalf of Zenefits.

Zenefits provided businesses with a cloud-based software platform to manage human resources, payroll, as well as benefit functions with a focus on health insurance coverage. Zenefits offered its software to users free of charge and earned revenue when customers selected Zenefits to act as their insurance broker of record. As broker of record, Zenefits assisted its customers with the purchase and administration of group health insurance policies. In return, Zenefits earned commissions from insurers.

In late 2015, the department learned of alleged violations regarding the transaction of insurance by unlicensed Zenefits’ employees as well as the creation of a software macro that enabled employees to circumvent the pre-licensing study requirements.

Following an investigation, the department concluded an enforcement action against Zenefits in November 2016.  After the filing of an Accusation, Conrad entered into a settlement with the department resulting in the surrender of his insurance license.

Zenefits agreed to pay a fine of $7 million, with half of the fine suspended if Zenefits had no future insurance code violations. This was one of the largest fines imposed for licensing violations in the history of the department.

Conrad was a co-founder of Zenefits and acted as the company’s CEO from its inception in 2012, until his resignation in February 2016. He also held a seat on the company’s board of directors and had an ownership interest in the company during the time the alleged violations occurred.

In addition to surrendering his license, Conrad agreed to pay $66,000 in reimbursement costs to the department and to not transact insurance, either directly in his name or indirectly by managing or directing the transaction of insurance through any other licensee, without first applying for and obtaining an insurance license.

“As Zenefits’ CEO, the buck stopped with Parker Conrad,” said Commissioner Jones. “Unlicensed insurance transactions occurred under Conrad’s management and employees were provided with a computer program that enabled them to skirt the pre-licensing education requirements. Conrad was ultimately responsible.”

U.S. Attorneys filed a civil complaint in the Central District of California against California Stem Cell Treatment Center Inc., of Rancho Mirage and Beverly Hills, California, Cell Surgical Network Corporation, and company owners Elliot Lander, M.D. and Mark Berman, M.D.

A companion case was filed in the Southern District of Florida, against US Stem Cell Clinic LLC, of Sunrise, Florida, US Stem Cell, Inc., and company officers Kristin Comella and Theodore Gradel.

Both complaints allege that the respective defendants manufacture “stromal vascular fraction” (SVF) products from patient adipose (fat) tissue, which the companies then market as stem cell-based treatments for a host of serious conditions and diseases, including cancer, pulmonary disease, arthritis, stroke, ALS, and multiple sclerosis, in the case of the California defendants; and Parkinson’s disease, spinal cord injuries, stroke, pulmonary disease, and traumatic brain injury, in the case of the Florida defendants.

According to the complaints, both sets of defendants manufacture their products for these conditions without FDA approval and without proof of safety and efficacy. The Justice Department filed the complaints at the request of the U.S. Food and Drug Administration (FDA).

“Marketing unproven and potentially unsafe treatments puts consumers at risk,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “The Department of Justice will continue to work with the FDA to make sure manufacturers of experimental therapies conduct their research within the safe and legal bounds for drug innovation.”

According to the complaints, the defendants and their affiliates have used their products on thousands of patients without first obtaining necessary FDA approvals.

The complaints allege that that in some cases, adverse events that harmed patients occurred after treatment with the SVF products.

In addition, the complaints allege that the defendants’ misbranded products fail to include adequate directions for use, such as dosages, warnings, and side effects.

According to the complaints, recent FDA inspections showed that the defendants’ products are not manufactured, processed, packed, or held in conformance with current good manufacturing practice (CGMP), and they are adulterated as a matter of law.

Berman responded that the FDA has long known about his clinics’ same-day treatments, which he said have shown overwhelmingly positive results. “We disagree with the mischaracterization that these treatments are dangerous,” Berman said. “All we’re doing is taking advantage of the cells in your own body. We’ve always been transparent with what we do.”

Berman and Lander control the operations of about 100 for-profit affiliate clinics, including the California Stem Cell Treatment Center and Cell Surgical, which market treatments that have not been proven safe, the DOJ alleges in the complaint.

But “Your stem cells are not a drug,” Berman said. “They’re your own property. We’re not manufacturing a drug.” Berman contends that his treatments are innovative and highly successful. For example, he said, of 2,400 patients suffering from knee osteoarthritis, 82 percent have shown positive results after stem cell therapy.

The California matter is being handled by Trial Attorney Natalie N. Sanders of the Civil Division’s Consumer Protection Branch, with the assistance of the U.S. Attorney’s Office for the Central District of California and Associate Chief Counsel for Enforcement Michael Shane of the U.S. Department of Health and Human Services’ Office of General Counsel.

Chiropractor Michael E. Barri owned and operated the Santa Ana companies Tri-Star Medical Group and Jojaso Management Company. He pleaded guilty in 2016 to a conspiracy count and admitted that he received illegal kickbacks for referrals to Pacific Hospital of Long Beach from 2009 through October 2013.

He was sentenced in federal court on May 4. He was committed on Count One of the Information to the custody of the Bureau of Prisons to be imprisoned for a term of twelve months and one day. He was ordered to surrender himself to the institution designated by the Bureau of Prisons on or before 12 noon, on July 9, 2018.

Upon release from imprisonment, he will be placed on supervised release for a term of three years.

He pleaded guilty on March 11, 2016 to a conspiracy count and admitted that he received illegal kickbacks for referrals to Pacific Hospital of Long Beach. During a nine-month period that ended in 2013, Barri admitted receiving $158,555 in illegal kickbacks after referring a dozen patients to Pacific Hospital, where they had back surgeries. As a result of his referrals, Pacific Hospital billed insurance carriers approximately $3.9 million for spinal surgeries.

Barri has also been indicted by an Orange County Grand Jury in 2014 with charges of kickbacks and related offenses involving compounded medications, along with Kareem Ahmed the owner of Landmark Medical, and 13 other named providers. Much of that case was dismissed by the Court of Appeal in 2016. However some of the charges have been re-filed by the Orange County District Attorney, and it is not clear how much of the original indictment will proceed, and what defendants will be involved.

Despite his conviction, Barri filed case A150549 with the California First District Court of Appeal seeking to have the new lien fraud law, SB 1160 and AB 1244, declared to be unconstitutional, so that he and his companies could continue to collect workers’ compensation liens. Among other theories, Barri alleged “The Lien Stay Provision Violates Petitioners’ Right to Due Process Under the California and United States Constitutions.”

He did not get very far,, as the Court of Appeal rejected his request. The petition for a peremptory and/or alternative writs of mandate, prohibition, or other appropriate relief was denied as premature.

And there is some irony. As of today, Barri continues to hold a California license as a chiropractor with no record of any disciplinary action taken against him.

Within the next 60 days, Walmart and Sam’s Club will restrict initial acute opioid prescriptions to no more than a seven-day supply, with up to a 50 morphine milligram equivalent maximum per day.

This policy is in alignment with the Centers for Disease Control and Prevention’s (CDC) guidelines for opioid use.

Where state law for fills on new acute opioid prescriptions is less than seven days, Walmart and Sam’s Club will follow state law.

Additionally, as of Jan. 1, 2020, Walmart and Sam’s Club will require e-prescriptions for controlled substances. E-prescriptions are proven to be less prone to errors, they cannot be altered or copied and are electronically trackable.

Further, by the end of August 2018:

– In states that allow access, the company’s pharmacists will have access to and use the controlled substance tracking tool, NarxCare. NarxCare is a tool that helps pharmacists make dispensing decisions and provides pharmacists with the real-time interstate visibility that currently exists.
– Walmart and Sam’s Club are committed to having the opioid reversal medication naloxone behind the pharmacy counters of its stores and clubs and dispensing naloxone upon request, where allowed by state law. As an additional step, the company is reinforcing that its pharmacists provide naloxone recommendations for patients who might be at risk for overdose in alignment with CDC guidelines.
– The company will conduct additional training and education on opioid stewardship for its pharmacists, including a pain management curriculum.

These steps are in addition to actions the company has taken as part of the Walmart Opioid Stewardship Initiative in an effort to be part of the solution to our nation’s opioid epidemic. Among others, these actions include:

– Walmart and Sam’s Club pharmacy patients filling any new Class II opioid prescription receive a free DisposeRx packet and opioid safety information brochure when picking up their prescription. DisposeRx provides a virtually effortless way for patients to destroy leftover opioids without ever leaving home. Patients with chronic Class II opioid prescriptions are offered a free DisposeRx packet every six months. Existing pharmacy patients can request a free DisposeRx packet at any time.
–The company’s pharmacists counsel patients using the CDC’s guidelines on pain management, focusing on using the lowest effective dose for pain management for the shortest time possible.
– The company believes education on prescription drug abuse is a key part of the solution. Walmart U.S. helps sponsor youth-based curriculums on the risks associated with prescription drug abuse, including Prescription for Life with EverFi. These programs are educational tools that empower students with information and skills to address the opioid epidemic, should they face it in their community.

The Division of Workers’ Compensation (DWC) has posted proposed amendments to the Medical-Legal Fee Schedule to its online forum where members of the public may review and comment on the proposals. The draft regulations show additions to the regulatory language in red type, and include:

– Objective standards for the application of complexity factors in the fee schedule;
– Provisions that align the Medical-Legal Fee Schedule with the statutory scheme for reimbursement of medical-legal expenses;
– Elimination of provisions that refer to medical-legal evaluations no longer being performed; and
– Clarification of when billing under the Official Medical Fee Schedule can be accomplished in conjunction with billing under the Medical-Legal Fee Schedule.

There are no changes to the amount of fee schedule payments.

The proposals clarify the use of the complexity factors relating to causation, medical research, record review and apportionment. The factors that indicate the presence of extraordinary circumstances in a medical-legal evaluation are more clearly defined. The language required in a report to define extraordinary circumstances is explained.

For example, medical legal physicians often quote, and bill for “medical research” they claim to have performed as part of the evaluation. They charge by the hour.  But, sometimes they bill for boilerplate “research” and language used over and over in subsequent reports.

This will be limited in the new regulations should they be adopted.  The proposed language does not allow for billing for medical research, “using sources that have not been cited in any prior medical report authored by the physician in the preceding 12 months in support of a claim citing or relying upon this complexity factor.”

Realistic limits on certain areas of billing are implemented.

The forum can be found on the DWC forums webpage under “current forums.” Comments will be accepted on the forum until 5 p.m. on Friday, May 18, 2018.