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San Diego Lab Pays $3M to Resolve Kickback Case

San Diego-based Phamatech, Inc. and its CEO and founder, Tuan Pham, have agreed to pay $3,043,484 to resolve allegations that they violated the False Claims Act by submitting false claims to Medicare for laboratory drug-testing services.

Phamatech is a medical technology company that manufactures diagnostic devices and provides laboratory testing including for drugs and alcohol.

The United States alleged that Phamatech improperly paid a medical clinic to induce it to refer orders for laboratory drug-testing to Phamatech and consequently received government reimbursement for those tests in violation of the federal Anti-Kickback Statute and the False Claims Act.

Specifically, the United States alleged that Phamatech paid kickbacks to Imperial Valley Wellness (“IVW”), a medical practice group, to induce IVW to order laboratory testing for its patients enrolled in Medicare. Phamatech allegedly paid IVW a per-specimen fee in exchange for IVW’s referral of urine samples from Medicare beneficiaries.

The government further alleged that many of the samples that IVW referred to Phamatech for testing under this arrangement were not medically necessary and therefore not lawfully eligible for Medicare reimbursement.

The False Claims Act allegations being resolved were originally brought in a lawsuit filed by a former employee of Phamatech, John Polanco, under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens with knowledge of fraud against the government to bring suit on behalf of the government and to share in any recovery.

Mr. Polanco will receive $517,392 from the settlement proceeds.

The investigation was conducted by the U.S. Attorney’s Office for the Southern District of California, the Department of Health and Human Services Office of Inspector General, and the Federal Bureau of Investigation.

This case is captioned United States, et al., ex rel. John Polanco v. Phamatech, Inc. and Tuan Pham, 16CV1835-L-NLS, and the matter was handled by Assistant U.S. Attorney Paul Starita of the Affirmative Civil Enforcement Unit of the U.S. Attorney’s Office.

Next Insurance Expands to 24 Additional States

Palo Alto based Next Insurance announced the availability of its Workers’ Compensation offering to 24 additional states across the nation, including Alabama, Iowa, Louisiana and Virginia.

This expansion increases the company’s overall Workers’ Compensation coverage in the US to more than 50% now equipping small business owners in 30 states with what it says is affordable, hassle-free policies.

Offering coverage that starts at just $14 per month, Next Insurance is helping to solve an often stressful and costly insurance requirement by giving business owners a seamless way to obtain an instant quote and explore their coverage options – all online. Small business owners can obtain General Liability, Professional Liability, Commercial Auto and Workers’ Compensation coverage all under one roof.

“By expanding Workers’ Compensation to more than half of the country, Next Insurance is taking another important step in our journey to become the one-stop-shop for all small businesses,” said Sofya Pogreb, COO of Next Insurance.

The Workers’ Compensation state expansion announcement includes: Alaska, Arizona, Arkansas, Connecticut, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Mexico, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, and West Virginia.

These states join previous coverage availability in: Colorado, Florida, Georgia, Illinois, Nevada and Texas.

Next Insurance said it will steadily expand Workers’ Compensation in additional states into 2021.

With Next Insurance, insureds have access to USA- based licensed insurance advisors, tools and services like 24/7 access to certificates of insurance from a mobile device or computer and in-house claims filings where a decision is typically made within 48 hours.

Founded in 2016, the company is headquartered in Palo Alto, has received a total of $631 million in venture capital funding and has been recognized by Forbes Fintech 50, JMP Securities InsurTech 50 and Forbes Best StartUp Employers.

For more information visit NextInsurance.com. Stay up to date on the latest with Next Insurance on Twitter, LinkedIn, Facebook and our blog.

Labor Unions Disappointed at Newsom Employment Law Vetoes

Last Wednesday was the deadline for Gov. Newsom to act on bills lawmakers passed this year. It capped a tumultuous legislative session that was delayed three times because of the pandemic.

In a normal year, more than 1,000 bills would have made it to Newsom’s desk for his consideration. This year, it was just a few hundred.

Labor unions were disappointed to see him veto two of their biggest issues: A bill that would that sought to guarantee laid-off hospitality workers would be first in line to get their jobs back once those industries start rehiring and another that would have extended health and safety protections to domestic workers.

In a victory for business groups, Newsom vetoed Assembly Bill 3216, a proposed law that would have required that employers in certain industries – hotels, private clubs, airports or who provide building services to commercial buildings – would have rehire laid-off workers when they decided it was time to increase their workforces once again.

Newsom said in his veto message “I recognize the real problem this bill is trying to fix-to ensure that workers who have been laid off due to the COVID 19 pandemic have certainty about their rehiring and job security.”

“But, as drafted, its prescriptive provisions would take effect during any state of emergency for all layoffs, including those that may be unrelated to such emergency. Tying the bill’s provisions to a state of emergency will create a confusing patchwork of requirements in different counties at different times.The bill also risks the sharing of too much personal information of hired employees.”

Nonetheless, many of California’s largest cities – including Los Angeles, Long Beach, San Francisco and Oakland – have enacted their own rehiring ordinances in response to the pandemic. And California law already had worker retention laws for the janitorial industry and the grocery industry.

Newsom also vetoed SB 1257, a bill that would have included about 11 million California homes and apartments under Cal/OSHA’s jurisdiction.

His veto message proclaimed that “New laws in this area must recognize that the places where people live cannot be treated in the exact same manner as a traditional workplace or worksite from a regulatory perspective.

He went on to say that “SB 1257 would extend many employer obligations to private homeowners and renters, including the duty to create an injury prevention plan and requirement to conduct outdoor heat trainings. Many individuals to whom this law would apply to lack the expertise to comply with these regulations. The bill would also put into statute a potentially onerous and protracted “investigation by letter” procedure between Cal-OSHA and private tenants and homeowners. In short, a blanket extension of all employer obligations to private homeowners and renters is unworkable and raises significant policy concerns.

Uber and Lyft Face $392M Annual Payroll Taxes if Prop 22 Fails

Uber Technologies and Lyft together are spending nearly $100 million on Proposition 22, a November California ballot initiative to overturn a state law, AB-5, that would compel them to classify drivers as employees.

The two ride-hailing companies would each face more than $392 million in annual payroll taxes and workers’ compensation costs even if they drastically cut the number of drivers on their platforms, a Reuters calculation showed.

Using a recently published Cornell University driver pay study in Seattle as a basis, Reuters calculated that each full-time driver would cost the company, on average, an additional $7,700. That includes roughly $4,560 in annual employer-based California and federal payroll taxes and some $3,140 in annual workers’ compensation insurance, which is mandated in California.

The companies say they would need to significantly hike prices to offset at least some of those additional costs, which in turn would likely cause a decrease in consumer demand, but cushion the blow of the added costs to the bottom line.

Yahoo News reports that Uber and Lyft have also said they could abandon the California market – an economy that would rank fifth in the world if the state were a sovereign nation. Other U.S. states have said they plan to follow California’s lead and pass similar laws.

A “yes” vote on California’s Proposition 22 gives Uber and Lyft what they seek, which is to overturn the state’s gig worker law, known as AB5, which took effect in January. Uber and Lyft have insisted the law does not apply to them, sparking a legal battle.

Under the company-sponsored ballot measure, gig workers would receive some benefits, including minimum pay, healthcare subsidies and accident insurance, but remain independent contractors not entitled to more substantial employee benefits.

The question of whether so-called gig workers should be treated as employees has become a national issue in U.S. politics.

U.S. Democratic presidential candidate Joe Biden and his running mate, Senator Kamala Harris, have both voiced their strong support for California’s labor law and directly called on voters to reject the companies’ ballot proposal that would weaken it.

President Trump has not directly weighed in on the ballot measure, but the administration’s Labor Department in September published proposed rules that would standardize legal definitions across the country and provide more room for companies to maintain independent contractors. U.S. Labor Secretary Eugene Scalia criticized AB5 in an opinion piece published on Sept. 22.

California represents 9% – or roughly $1.63 billion in all of 2019 – of Uber’s global rides and food delivery gross bookings. However, California generates a negligible amount of adjusted earnings before interest, taxes, depreciation and amortization, Uber said in November.

Lyft, which operates only in the United States and does not have a food delivery business, in August said California makes up some 16% of the company’s total rides. Lyft does not break out ride-hailing revenue, but California contributed $576 million as a share of total 2019 revenue.

WCJ Dismisses Michael Barri Liens Worth $18M

An administrative law judge has dismissed liens valued at $18 million filed by convicted medical provider Michael E. Barri, bringing to a close one of the earliest cases aimed at combatting fraud in California’s workers’ compensation system.

“The anti-fraud statutes that took effect in January 2017 were designed to prevent convicted medical providers from continuing to file lien claims and profiting from fraud,” said Division of Workers’ Compensation (DWC) Administrative Director George Parisotto. “The dismissal of millions of dollars’ worth of liens shows the strategy to fight those schemes works.”

DWC suspended Barri from participating in California’s workers’ compensation system after he pled guilty in 2016 to federal conspiracy charges and admitted receiving $206,506 in illegal kickbacks for referring dozens of patients for spinal surgeries and other medical services to Pacific Hospital of Long Beach and related entities.

The San Clemente chiropractor challenged his suspension in court and pursued collection of $18,161,362 in liens he had filed in 944 individual workers’ compensation cases through the entities he controlled.

An Appeals Court denied Barri’s writ in 2018 and upheld the anti-fraud legislation that led to his suspension, sending the matter of the liens back to the Workers’ Compensation Appeals Board (WCAB).

Administrative Law Judge Alan Skelly held several hearings in Anaheim in which the lien claimants, insurance carriers and members of the Department of Industrial Relations’ Anti-Fraud Unit were represented by counsel. Barri contested discovery related to his 944 liens, then filed a Notice of Withdrawal with Prejudice of liens of Tristar Medical Group, Jojaso Management, Inc., Michael E. Barri Chiropractic Corporation and Michael E. Barri, D.C. Judge Skelly accepted the notice and issued the order dismissing the liens.

Barri was one of many chiropractors, physicians and others who received lucrative kickbacks for each lumbar surgery and cervical fusion surgery referred to Pacific Hospital. During the last eight years of the scheme, the hospital submitted more than $580 million in fraudulent bills. Because of his referrals, Pacific Hospital billed insurance carriers approximately $3.9 million for spinal surgeries and other medical services.

Worker’s compensation reforms that went into effect in January 2017 required DWC to suspend certain medical providers from participating in the workers’ compensation system, including those who are convicted of a felony or misdemeanor involving fraud or abuse of any patient, the Medi-Cal or Medicare programs, or the workers’ compensation system itself. Labor Code section 139.21 provides for a hearing process regarding the suspension and a special lien adjudication procedure to address pending liens of those providers suspended based upon a criminal conviction.  

The Department of Industrial Relation’s (DIR’s) fraud prevention efforts are posted online, including information on lien consolidations and the Special Adjudication Unit, frequently updated lists for physicians, practitioners, and providers who have been issued notices of suspension and those who have been suspended pursuant to Labor Code §139.21(a)(1).

Updated Formulary Indicates New Exempt Anti-Depressants

The Division of Workers’ Compensation has issued an order updating the Medical Treatment Utilization Schedule Drug List effective November 1, 2020.

The update order adopts changes to the MTUS Drug List, based on the American College of Occupational and Environmental Medicine (ACOEM) Practice Guidelines, which provide new drug recommendations addressed in the Depressive Disorders Guideline. The updated MTUS Drug List v.7 and the Administrative Director Order can be accessed on the DWC MTUS drug formulary webpage.
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A drug listed as “Exempt” indicates the drug may be prescribed/dispensed without seeking authorization through Prospective Review if in accordance with MTUS. Examples of depressive disorder medications that are now exempt include the following brand names.

— Elavil.
— Wellbutrin, WellbutrinXL, WellbutrinSR.
— Anafranil.
— Pristiq.
— Sinequan.
— Cymbalta.
— Lexapro.
— Luvox.
— Tofranil.
— Marplan.
— Fetzima.
— Latuda.
— Ludiomil.
— Savella.
— Pamelor.
— Zyprexa.
— Symbyax.
— Paxil.
— Pexeva.
— Seroquel.
— Risperdal.
— Emsam.
— Parnate.
— Desyrel, Oleptro.
— Trintellix.
— Geodon.

DWC welcomes comment on the formulary drug list at Formulary@dir.ca.gov.

New Law Allows Workers’ Compensation Remote Depositions

Some of the sweeping changes just made to the California Superior Court system will apply to depositions in worker’s compensation litigation, and will permanently allow remote depositions without consent of all parties.

The superior court system and the Appeals Board have distinct and separate rules of practice and procedures. Most of the new law will therefore not apply to worker’s compensation litigation.

But, both systems share the discovery statutes. Depositions in workers’ compensation are allowed by Labor Code section 5710 provides that “the deposition of witnesses residing within or without the state to be taken in the manner prescribed by law for like depositions in civil actions in the superior courts of this state under Title 4 (commencing with Section 2016.010) of Part 4 of the Code of Civil Procedure.”

Governor Newsom just signed Senate Bill No. 1146, a new law that makes substantial changes to litigation in superior courts. However, since some of these changes pertain to how depositions are taken in superior courts, Labor Code 5710 would make those changes applicable to discovery in worker’s compensation as well.

The new law amends Section 2025.310 of the Code of Civil Procedure, which is also specifically applicable to workers’ compensation depositions. The following are the key new provisions of the deposition process.

A deponent is not required to be physically present with the deposition officer when being sworn in at the time of the deposition.”

“Subject to Section 2025.420, any party or attorney of record may, but is not required to, be physically present at the deposition at the location of the deponent.”

In essence, these provisions eliminate the requirement that consent is required to conduct a deposition by remote methods. Although workers’ compensation depositions have been conducted remotely since the beginning of the pandemic as a result of temporary workers’ compensation rules, the remote deposition process is now a permanent part of the litigation landscape in both civil and workers’ compensation proceedings.

Senate Bill 1146 was declared an “urgency statute” and thus takes effect immediately.

Cal/OSHA Cites So. Cal. Groceries for COVID-19 Violations

Cal/OSHA has cited five grocery stores in Southern California for failing to protect their employees from COVID-19. The retailers were cited for various health and safety violations including some classified as serious, with proposed penalties ranging from $13,500 to $25,560.

The grocery stores owned and operated by Cincinnati-based Kroger Company, were cited for failing to protect workers from exposure to COVID-19 because they did not update their workplace safety plans to properly address hazards related to the virus.

The Food 4 Less in Los Angeles and Ralphs grocery stores in Studio City, Sherman Oaks and West Hollywood put their workers at risk for serious illness by allowing too many customers in the store, which prevented workers from maintaining at least 6 feet of physical distance.

The Studio City location exposed workers in the cheese department to hazards related to COVID-19 as they did not install physical barriers between employees and customers. Plexiglas or other required barriers were not installed at registers 1-8 at the West Hollywood location.

Cal/OSHA inspectors determined that both the Culver City and West Hollywood locations failed to provide effective training for their employees, including instruction on how the virus is spread, measures to avoid infection, signs and symptoms of infection, and how to safely use cleaners and disinfectants.

The Culver City and Sherman Oaks grocery stores failed to report a worker’s fatal COVID-19 illness at each location. Cal/OSHA learned of the fatality seven days after the worker’s death in Culver City, and six days after the fatality in Sherman Oaks.

“Grocery retail workers are on the front lines and face a higher risk of exposure to COVID-19,” said Cal/OSHA Chief Doug Parker. “Employers in this industry must investigate possible causes of employee illness and put in place the necessary measures to protect their staff.”

Cal/OSHA has created guidance for many industries in multiple languages including videos, daily checklists and detailed guidelines on how to protect workers from the virus. This guidance provides a roadmap for employers on their existing obligations to protect workers from COVID-19.

Cal/OSHA reminds all employers and workers that any suspected cases of COVID-19 must be promptly reported to the local public health department. California employers must also report to Cal/OSHA any serious illness, serious injury or death of an employee that occurred at work or in connection with work within eight hours of when they knew or should have known of the illness.

Gallagher Bassett “Restarting” Systems After Ransomware Attack

Arthur J. Gallagher disclosed that it was hit with a ransomware attack, prompting the world’s fourth-largest insurance broker by revenue to take its computer systems offline.

The Rolling Meadows, Illinois-based broker said in a securities filing late Monday that it is in “the process of restarting most of our business systems” after discovering the threat a few days ago. The incident affected Gallagher and Gallagher Bassett Services units.

“We promptly took all of our global systems offline as a precautionary measure, initiated response protocols, launched an investigation, engaged the services of external cybersecurity and forensics professionals, and implemented our business continuity plans to minimize disruption to our customers,” the broker said in the disclosure.

Gallagher said it is still in the early stages of assessing the incident, which it does not expect to have “a material impact on our business, operations or financial conditions.” Gallagher Bassett’s website remained offline and inaccessible amid a “system outage” as of Tuesday afternoon.

According to the report by FastInform.com, the attack highlights increasing risk financial firms face from hackers. Ransomware, a malicious software used to export payment by blocking a company or individual’s access to their data, is one of the most common types of cyberattacks and has grown in both size and scope in recent years.

While the frequency of new attacks have slowed by 18% in the first half of 2020, more hackers are finding success with their attacks and are making larger demands, according to a recent report by cyber insurance and security firm Coalition.

The company found that the average demand among its policyholders has doubled from 2019 through the first quarter of 2020 and increased 47% in the second quarter to more than $338,000, resulting in higher cyber losses for insurers.

Worsening the trend is the emergence of dangerous new strains of ransomware such as DoppelPaymer. The average size of ransom demands also vary sharply by malware strain.

Financial firms such as insurance carriers and brokers face a double threat, experts say. Not only do they write or sell cyber insurance, but they themselves are a popular target of hackers due to the large volume of personal information they handle.

Chubb, one of the largest carriers of cyber insurance as part of a policy package, was hit with a Maze ransomware attack in late March. Unlike other malware, Maze infects every computer in its path and not just an organization’s network, TechCrunch reported. A year earlier, Target sued Chubb for $74 million, alleging that the carrier did not properly compensate the retailer after a massive data breach in 2013.

At least 29 financial institutions worldwide including were targeted in ransomware attacks this year, according to the Carnegie Endowment for International Peace.

Nursery Worker Arraigned for Insurance Fraud

Fernando Torres Garcia, 46, self-surrendered and was arraigned at the Kern County Superior Court on nearly a dozen felony counts of insurance fraud after allegedly misrepresenting an injury in order to receive undeserved workers’ compensation insurance benefits.

On July 16, 2018, Garcia reported to his employer that he injured his lower back and hip after he slipped while working in a trench to repair a water line. Garcia was diagnosed with a lumbar strain and was placed on modified duty, to which his employer accommodated.

Garcia continued to see his doctor as he claimed he was not improving and continued to suffer from pain. Garcia then amended his original workers’ compensation claim to include his entire back, right hip, right thigh, right leg, right elbow, both knees and cumulative trauma.

An investigation by the California Department of Insurance revealed Garcia had numerous doctor visits between August 2018 and March 2019. During this time, surveillance was conducted on Garcia, and revealed he was able to lift heavy objects multiple times. However, since Garcia continuously claimed he was not improving he was referred for an orthopedic evaluation and given a rating of five percent impairment for his lumbar spine.

On June 21, 2019, Garcia underwent a Panel Qualified Medical Evaluation. After the evaluator reviewed Garcia’s medical reports, the surveillance footage, and Garcia’s physical examination and abilities, he determined Garcia did not meet the requirements for any permanent disability or ratable impairment. It was his opinion that Garcia misrepresented his complaints during his examination.

Garcia’s material misrepresentations caused deposition and surveillance expenses totaling $5,873.50.

The Kern County District Attorney’s Office is prosecuting this case. Garcia is scheduled to return to court on November 20, 2020.