Author: WorkCompAcademy

A federal judge reaffirmed the disqualification of the State Fund attorneys, Hueston Hennigan, from the $160 million medical fraud case it brought three years ago on behalf of its now-former client in the massive racketeering case.

The 75-page ruling filed last week details how the concurrent representation of the State Fund and at the same time defends Paul Randall in his criminal case betrayed both parties, created “incestuous” twists (Pg. 37) and was anathema to the adversarial legal system.

The defendants in the SCIF civil litigation that started in 2013 stand accused of conspiring to defraud the State Compensation Insurance Fund by submitting fraudulent insurance bills and providing or receiving illegal kickbacks. The litigation arising out of this purported scheme involves dozens of defendants, two civil suits and a criminal suit, and well over a thousand filings spanning three years and three dockets. SCIF was at first represented by law the firm of Irell & Manella LLP. In January 2015, John Hueston and Brian Hennigan, along with thirty or so other lawyers, left Irell & Manella to form Hueston Hennigan. There Hueston and other lawyers continued to represent SCIF.

The U.S. Department of Justice filed criminal charges against some of these defendants for the same kickback scheme. One of them, Paul Richard Randall, 56, of Orange, California, a health care marketer previously affiliated with Pacific Hospital and Tri-City Regional Medical Center in Hawaiian Gardens, pleaded guilty on April 16, 2012 to conspiracy to commit mail fraud. Randall has not been sentenced yet.

The most recent round of motions in the SCIF RICO case focused on the question about whether a law firm could represent a criminal and his victim. One of the civil defendants, Dr. Lokesh Tantuwaya, M.D., discovered that Hueston Hennigan had represented Randall in one of the criminal cases and possibly a related civil case. Tantuwaya filed the most recent motion for disqualification of the firm.

After considering about a thousand pages of documents and more than four hours of oral argument on this disqualification issue, “the Court confirmed that disqualification was appropriate and necessary here.” The ruling pointed out the following rationale.

“Being a defendant – particularly a criminal one – can be lonely. As a society, we don’t require a defendant’s friends to stand by the defendant. We don’t require a defendant’s parents to stand by the defendant. We don’t require a defendant’s children to stand by the defendant. We don’t even require a defendant’s spouse to stand by the defendant, though that spouse is often someone who took an oath to do so.”

“But a lawyer is different. Representing a client creates an unshakable loyalty that can still persist when bonds of friendship and family fail. There’s a practical reason for this. A lawyer needs to know the worst facts to give clients the best advice. Clients can’t feel comfortable providing such candor unless they know their lawyer is absolutely committed to advancing the clients’ interests and advocating against the conflicting interests of others. Though the rest of the world may be united against them, clients need to know that at least their lawyer will reliably remain in their corner, even in the face of great temptation.”

“The importance and impact of loyalty in the attorney-client relationship extends beyond the client and counsel, to courts too. Judges are often confronted with important issues and difficult disputes. Under our system of law, judges rely on adversarial advocates to help ensure that courts reach the right results in these situations. Adversarial advocacy assumes that lawyers are fiercely loyal in representing their clients. If that loyalty doesn’t exist, the engine of our legal system can’t run. Justice can’t be administered.”

And finally the court made note of the fact that this “disqualification likely caused and will continue to cause grief to lots of people. Of course there’s SCIF and Hueston Hennigan. SCIF is left trying to get its new counsel up to speed on about three years of litigation involving dozens of defendants and opposing attorneys, while Hueston Hennigan must drop a likely lucrative matter from its billing. But there are others too. Randall is left with uncertainty about his legal representation while he has to prepare for a life-altering sentencing hearing. And the Hueston Hennigan attorneys – in particular those in the trenches, who worked passionately on this case for years and who had nothing to do with the representation decisions – have had the rug pulled out from under them, and have had to drop a case they likely lived with for years. Even the civil defendants and their lawyers will have to do some shuffling to deal with the new folks on the other side of the courtroom.”

Hueston Hennigan spokeswoman Lisa Richardson said in a statement quoted by the Los Angeles Business Journal that outside experts have consistently validated the firm’s actions in dealing with the conflict. “After the court’s tentative ruling, State Fund obtained the guidance and opinions of two nationally recognized experts and a former state bar official; each has opined that conflicts were handled well within the ethical rules,” Richardson said. “No experts in this case have opined otherwise.”

Like many before it, this year has been one to watch in government health care fraud enforcement efforts. In September 2015, the Department of Justice (DOJ) released the “Yates Memo,” which reaffirmed the government’s commitment to investigating and prosecuting culpable individuals in cases involving suspected corporate fraud.

While the Yates Memo was not specific to health care companies, the health care industry was anxious to see how the government’s strong re-commitment to holding individuals accountable for corporate wrongdoing would play out given its aggressive pursuit of health care fraudsters. Perhaps the best known test case came when the government announced in October 2015 that it had arrested W. Carl Reichel, the former president of Warner Chilcott, a subsidiary of a pharmaceutical manufacturer. Reichel was indicted and charged with a single count of conspiring to pay kickbacks to physicians in violation of the Anti-Kickback Statute (AKS).

According to the story in the National Law Review, the DOJ announced the Reichel indictment on the same day that it released a statement reporting that the company had agreed to plead guilty to a felony charge of health care fraud. This plea agreement was part of a global settlement under which Warner Chilcott would pay $125 million to resolve criminal and civil liability arising from certain marketing activities. The government held up Reichel’s personal indictment as an example of its commitment to not only holding companies accountable, but also “identif[ying] and charg[ing] corporate officials responsible for the fraud.”

The government’s case did not go as anticipated and last week, given that a federal jury acquitted Reichel.

On October 28, 2015, a grand jury in the U.S. District Court for the District of Massachusetts returned an indictment charging Reichel with a single count of conspiring to pay kickbacks to physicians to induce them to order Warner Chilcott drugs.The alleged kickbacks were in the form of free dinners, “speaker fees” paid for speeches never given, and free food and drinks for physicians’ staff members who filled out prior authorizations for the company’s drugs. The indictment further alleged that Reichel, as the President of Warner Chilcott’s pharmaceuticals division, along with other senior executives, gave sales representatives nearly unlimited expense accounts to take physicians and their spouses out for bi-weekly “medical education programs,” which were in fact just free, expensive dinners with no educational component. Physicians who were especially high orderers were paid speaker fees of $600-$1,200 to speak at these medical educational programs, but, in reality, did not give any clinical lectures.

In return for these dinners and speaking fees, Reichel was alleged to have instructed sales representatives to follow up with the physicians who attended the dinners and ensure that they ordered a sufficient number of Warner Chilcott drugs. Physicians who did not do so were no longer invited to dinners or were terminated as “speakers” until their prescribing habits changed.

For months, the health care industry watched as Reichel battled with DOJ attorneys to gain additional information regarding the facts on which his indictment was based (e.g., the names of his alleged co-conspirators), requested information about plea agreements with potential witnesses against him, attempted to limit the evidence that would be used against him, and challenged the government’s proposed jury instructions as being too vague on the scienter required to prove an AKS violation. On May 23, 2016, the case went to trial and on June 17, 2016 – after two days of deliberations – the jury acquitted Reichel.

During the trial, the government presented evidence that under Reichel’s oversight, Warner Chilcott paid for 200,000 dinner tabs, provided clients with $100 steaks and sailing trips to Rhode Island, and paid $25 million in speaker fees. To make its case, the government relied upon testimony from members of Warner Chilcott’s sales staff, some of whom had entered into plea agreements with the government, expecting lesser sentences in exchange for their testimony against Reichel. Reichel, in turn, argued that the only quid pro quo at issue was the government’s deals with these witnesses, whom his lawyers characterized as admitted felons who ignored company policies.

Based on its verdict, it seems that the jurors may not have been convinced that the dinners and other payments to physicians and their staff were sufficiently tied to past or future prescriptions to constitute an AKS violation. Clearly the government did not meet its burden to prove that Reichel knew that his conduct was illegal. Whatever the reason, the Reichel acquittal may be an early sign that despite the government’s renewed commitment to prosecuting individuals, juries may be setting a higher bar for holding individuals responsible for corporate wrongdoing.

As questions mount over whether health insurer Anthem Inc’s proposed $48 billion purchase of Cigna Corp will win U.S. antitrust approval, an exclusive analysis produced for Reuters suggests the merger could lead to higher costs for large companies offering workplace medical benefits.

More than 154 million people receive health benefits through employers, many of them large national corporations. The large employer market is a top concern for U.S. Department of Justice regulators reviewing the Anthem deal, company officials say. The government could block a deal if it finds evidence it would drive up the cost of such coverage.

Anthem and Cigna, the nation’s No. 2 and No. 5 health insurers, are among a handful of carriers selling national coverage plans to employers with thousands of workers across many states.

Anthem has said the added heft will work for employers, not against them. A bigger Anthem, it emphasizes, could drive better deals from doctors and hospitals and pass savings onto these customers. In addition, Anthem has argued that there still will be plenty of competition: large employers pit smaller, local insurers’ bids against those of large national carriers in regional markets. Anthem officials told an investor conference last month that many employers include health plans from several smaller insurers to cover far-flung employees.

But an Aon Hewitt analysis of benefits data for Reuters found that a majority of large employers buy worker health benefits from just one or two insurers.Among 75 companies representing a cross-section of industries, 54 percent used a single insurer and 26 percent used two. Aon Hewitt, a unit of Aon Plc which helps employers select their benefit plans, based its analysis on data from over 400 customers that participate in healthcare cost research.

Spokeswoman Maurissa Kanter said Aon Hewitt did not conclude “whether or not carrier consolidation would be a competitive issue that could lead to higher prices for employers.” She also said that the data did not “support an argument for or against market consolidation.”

Several human resources directors from large corporations also told Reuters they review potential benefits contracts from only the biggest insurers, rather than regional players. UnitedHealth Group, Anthem, Aetna Inc and Cigna are the only national players in the employer health insurance market.

It is less efficient for companies to hire multiple regional insurers, and the merger could allow the few remaining national insurers to raise their rates, said Peter Carstensen, an antitrust expert and professor emeritus at the University of Wisconsin Law School. “The Aon Hewitt data on its face is bad for the deal and hurts their chances of getting approval,” Carstensen said.

A Justice Department official declined to comment on its review of the deal. It is also considering Aetna’s proposed $34 billion purchase of Humana Inc. If both acquisitions were approved, it would result in an unprecedented consolidation of the top insurers, from five to three.

Anthem has said that buying Cigna would help it drive deeper discounts from hospitals and doctors, holding down the price of medical coverage. “What the Department of Justice will see is that we are going to bring a better focus on managing the cost of care,” Anthem Chief Executive Joseph Swedish told an investor conference last month.

But at least some large U.S. employers fear they will face higher prices if the deal goes through, according to Wall Street analysts. Concerned employers include Detroit automakers, according to a person familiar with the industry’s position.

Other employers found merit in Anthem’s assertion that the deal could benefit customers by eliminating overhead. “There is some chance that consolidation could lower some of those costs,” said Michael D’Ambrose, chief human resources officer for Archer Daniels Midland Co (ADM.N), which buys coverage from Anthem and other Blue Cross Blue Shield plans.

The deal has raised opposition from leading medical groups, California’s insurance commissioner and Democratic lawmakers.

Hospitals are pretty hygienic places — except when it comes to passwords.

That’s the conclusion of a recent study by researchers at Dartmouth College, the University of Pennsylvania and USC, which found that efforts to circumvent password protections are “endemic” in healthcare environments and mostly go unnoticed by hospital IT staff.

The researchers interviewed medical personnel in their workplace settings–nurses, doctors, chief medical officers, chief medical information officers, cybersecurity experts, CIOs, IT workers, everyday users, and managers–to obtain their perceptions of computer security rules. They collected reports from medical discussion lists and other literature. In addition, they shadowed many clinicians as they conducted their work.

The report describes what can only be described as wholesale abandonment of security best practices at hospitals and other clinical environments — with the bad behavior being driven by necessity rather than malice.

And this is certainly not good news for payers of health care services such as workers’ compensation claim administrators. Identity theft is a centerpiece of health care fraud schemes. The health/medical sector has accounted for the highest percent (42.5% in 2014) of total hackings of any industry, according to the Identity Theft Resource Center.

“Cyber security efforts in healthcare settings increasingly confront workarounds and evasions by clinicians and employees who are just trying to do their work in the face of often onerous and irrational computer security rules. These are not terrorists or black hat hackers, but rather clinicians trying to use the computer system for conventional healthcare activities. These “evaders” acknowledge that effective security controls are, at some level, important – especially the case of an essential service, such as healthcare. As we observed, earlier, without such tools, the enterprise cannot protect against adversarial cyber action. Unfortunately, all too often, with these tools, clinicians cannot do their job – and the medical mission trumps the security mission.”

“In hospital after hospital and clinic after clinic, we find users write down passwords everywhere,” the report reads. “Sticky notes form sticky stalagmites on medical devices and in medication preparation rooms. We’ve observed entire hospital units share a password to a medical device, where the password is taped onto the device.”

“We found emergency room supply rooms with locked doors where the lock code was written on the door — no one wanted to prevent a clinician from obtaining emergency supplies because they didn’t remember the code.”

“We find, in fact, that workarounds to cyber security are the norm, rather than the exception. They not only go unpunished, they go unnoticed in most settings – and often are taught as correct practice. In rare exceptions, when the workarounds become obvious to leaders – such as a security breach involving a patient’s record – there may be repercussions. These common forms of ignorance, or willful blindness, or incomprehension allow organizations to continue to deploy security that doesn’t work.”

Competing priorities of clinical staff and information technology staff bear much of the blame. Specifically: IT staff and management are often focused on regulatory compliance and securing healthcare environments. They are excoriated for lapses in security that result in the theft or loss of data.

Clinical staff, on the other hand, are focused on patient care and ensuring good health outcomes, said Ross Koppel, one of the authors of the report, who told The Security Ledger. Those two competing goals often clash. “IT want to be good guys. They’re not out to make life miserable for the clinical staff, but they often do,” he said.

The WCAB has issued a number of panel level decisions eroding the jurisdiction of the UR and IMR process for technical mistakes that were claimed to have “invalidated” the process and the UR/IMR finding.  These cases  favored handing the issue of appropriate medical treatment over to the WCJ to decide. As a result UR/IMR seemed to be subjected to a slow death by a thousand such cuts. However, the trend of erosion of UR/IMR jurisdiction may have suffered a setback at the hands of a new Court of Appeal published decision.

Dorothy Margaris suffered a work-related injury to her left foot and lumbar spine while employed by the California Highway Patrol. The State Compensation Insurance Fund is the adjusting agent for this claim.

On October 16, 2014, her treating physician submitted a request for authorization of medical treatment to SCIF proposing to treat applicant with a lumbar epidural injection. On October 21, 2014, SCIF denied the request.

Applicant timely requested independent medical review. On November 26, 2014, SCIF sent the necessary medical records to Maximus Federal Services, Inc. On January 8, 2015, Maximus issued its IMR determination, upholding SCIF’s denial of the proposed medical treatment. The IMR determination became the final determination of the director as a matter of law. (§ 4610.6, subd. (g).)

Margaris appealed the IMR determination to the appeals board (§ 5300), which directed the matter to an administrative law judge for a hearing (§ 5310). She argued argued that the IMR determination was invalid because Maximus failed to issue it within the 30-day time period provided by section 4610.6, subdivision (d), and the applicable regulation (Cal. Code Regs., tit. 8, § 9792.10.6, subd. (g)). The judge agreed the IMR determination was issued 13 days late, but nevertheless found the determination was valid and binding on the parties, concluding that an untimely IMR determination “does not confer jurisdiction on the [workers’ compensation judge] to decide any medical treatment issues.”

In response to her petition for reconsideration, a majority of the three-member panel agreed with applicant and went on to find, contrary to the IMR determination, that the proposed treatment was supported by substantial medical evidence and was consistent with the treatment schedule promulgated by the director. One member of the panel dissented, and would have found that the IMR determination, though untimely, was valid and binding on the parties.

The Court of Appeal disagreed with the WCAB and reversed in the published case of California Highway Patrol and SCIF v WCAB (Margaris).

The 30-day time limit in section 4610.6, subdivision (d), is directory and, accordingly, an untimely IMR determination is valid and binding upon the parties as the final determination of the director. The Court of Appeal interpretation of the statute in this manner is consistent with long-standing case law regarding the mandatory-directory dichotomy, and implements the Legislature’s stated policy that decisions regarding the necessity and appropriateness of medical treatment should be made by doctors, not judges.

Generally, time limits applicable to government action are deemed to be directory unless the Legislature clearly expresses a contrary intent. By creating IMR, a system in which “medical professionals ultimately determine the necessity of requested treatment,” the Legislature intended to “further[] the social policy of this state in reference to using evidence-based medicine to provide injured workers with the highest quality of medical care.” Further, the Legislature observed that the prior system of dispute resolution, i.e., the “process of appointing qualified medical evaluators to examine patients and resolve treatment disputes,” was not only costly and time-consuming, but “it prolong[ed] disputes and cause[d] delays in medical treatment for injured workers.” (Stats. 2012, ch. 363, § 1(f).)

“The Legislature intended to remove the authority to make decisions about medical necessity of proposed treatment for injured workers from the appeals board and place it in the hands of independent, unbiased medical professionals. Construing section 4610.6, subdivision (d), as directory best furthers the Legislature’s intent in this regard.”