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Medical Equipment Supply Company Owner Sent to Prison

The former owner of Ezcor Medical Supply was sentenced to serve 97 months in prison for her role in a fraud scheme that resulted in $3.5 million in fraudulent claims to Medicare and Medi-Cal.

Sylvia Ogbenyeanu Walter-Eze, 48, of Stevenson Ranch, California, was found guilty by a federal jury on March 20, 2015, of conspiracy to commit health care fraud, four counts of health care fraud, and one count of conspiracy to pay illegal health care kickbacks. In addition to imposing the term of imprisonment, U.S District Judge R. Gary Klausner ordered Walter-Eze to pay restitution in the amounts of $1,866,260 to Medicare and $73,268 to Medi-Cal.

The evidence presented at trial showed that Walter-Eze, the former owner of Ezcor, a durable medical equipment supply company located in Valencia, California, fraudulently billed more than $3.5 million to Medicare and Medi-Cal for DME that was not medically necessary. The trial evidence also demonstrated that Walter-Eze paid illegal kickbacks to patient recruiters in exchange for patient referrals. The evidence further showed that Walter-Eze paid kickbacks to physicians for fraudulent prescriptions for medically unnecessary, and expensive, power wheelchairs, which prescriptions Walter-Eze then used to support her fraudulent claims to Medicare and Medi-Cal. The evidence showed that, between 2007 and 2012, Walter-Eze submitted $3,521,786 in fraudulent claims to Medicare and Medi-Cal, and that she received $1,939,529 in reimbursement for those claims.

The case was investigated by the FBI, HHS-OIG’s Los Angeles Regional Office and the California Department of Justice, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Central District of California.The case was prosecuted by Trial Attorneys Blanca Quintero and Alexander F. Porter of the Criminal Division’s Fraud Section.

9th Circuit Rejects Constitutional Challenge to Lien Activation Fees

In 2012, California enacted Senate Bill 863 in part to combat an acute “lien crisis” in its workers’ compensation system. In an effort to clear an enormous and rapidly growing backlog of these liens, SB 863 imposed a $100 “activation fee” on entities like plaintiffs for each workers’ compensation lien filed prior to January 1, 2013. Plaintiffs sued in federal court, claiming that SB 863 violates the Takings Clause, the Due Process Clause, and the Equal Protection Clause of the United States Constitution.

The trial court issued a preliminary injunction in plaintiffs’ favor as to the Equal Protection claim, but not as to the other claims. Defendants appealed the district court’s issuance of the preliminary injunction and its denial of the motion to dismiss the Equal Protection claim. The 9th Circuit Court of Appeal reversed and vacated the injunction in the published case of Angelotti Chiropractic Inc. v Christine Baker.

The panel held that the district court properly dismissed the Takings Clause claim because the economic impact of SB 863 and its interference with plaintiffs’ expectations was not sufficiently severe to constitute a taking. The panel further concluded that the lien activation fee did not burden any substantive due process right to court access and also rejected plaintiffs’ claim that the retroactive nature of the lien activation fee violated the Due Process Clause.

Vacating the district court’s preliminary injunction, the panel held that the district court abused its discretion in finding that a “serious question” existed as to the merits of plaintiffs’ Equal Protection claim. Applying rational basis review, the panel held that Labor Code § 4903.06(b), which exempts certain entities other than plaintiffs from having to pay the lien activation fee, was rationally related to the goal of clearing the lien backlog. The panel also reversed the district court’s denial of defendants’ motion to dismiss the Equal Protection Clause claim because the panel’s ruling on the preliminary injunction necessarily resolved the motion to dismiss.

Here, one “plausible policy” goal, for the imposition of the lien activation fee is to help clear the lien backlog by forcing lienholders to consider whether a lien claim is sufficiently meritorious to justify spending $100 to save it from dismissal. In turn, the California Legislature’s decision to impose the activation fee on entities like plaintiffs, while exempting other entities, is rationally related to the goal of clearing the backlog because the Legislature might have rationally concluded that the nonexempt entities are primarily responsible for the backlog. In this regard, the Commission Report states that ten of the eleven top electronic lien filers are independent providers. Thus, the Legislature could have rationally found that independent service providers bore primary responsibility for the lien backlog, and therefore elected to focus on those entities in imposing the activation fee.

Court Orders Medical Marijuana in New Mexico Comp Case

The New Mexico Court of Appeals has again ruled that medical marijuana should be classified as “reasonable and necessary medical care” for an injured worker. This case is one more step in the process of involving workers’ compensation in providing “medical” marijuana nationwide.

According to the report in Business Insurance, Sandra Lewis injured her lower back on the job in December 1998. She underwent several surgical procedures and took “numerous” drugs, but continued to suffer from chronic pain.

American General Media and third-party administrator Gallagher Bassett Services Inc. requested an independent medical examination in April 2012, as Ms. Lewis had been using medical marijuana and taking prescription pain medication, according to records. The psychologist appointed by the workers compensation judge said medical marijuana was a “reasonable and appropriate” treatment for Ms. Lewis. Ms. Lewis’ authorized health care provider also said the “benefits of medical marijuana outweigh the risk of hyper doses of narcotic medications.”

In August 2013, the workers comp judge concluded that Ms. Lewis’ use of medical marijuana constituted “reasonable and necessary medical care” and American General Media and Gallagher Bassett were ordered to reimburse her for the receipts she submitted, leading them to appeal.

A three-judge panel of the New Mexico Court of Appeals on Friday unanimously affirmed the decision of the workers comp judge, ruling that Ms. Lewis’ medical marijuana should be classified as “reasonable and necessary medical care that required reimbursement.” According to the ruling, there is no regulatory connection between the state’s Workers’ Compensation Act and the Lynn and Erin Compassionate Use Act, which allows patients with debilitating medical conditions to use medical marijuana.

Similarly, in Miguel Maez v. Riley Industrial and Chartis, a three-judge panel of the New Mexico Court of Appeals unanimously ruled on Jan. 13 that the Compassionate Use Act allows Mr. Maez’s medical marijuana authorization to be treated as a prescription for workers comp.

And in Vialpando v. Ben’s Automotive Services, a three-judge panel of the New Mexico Court of Appeals unanimously ruled, in May 2014 that an employer and insurer must reimburse an injured worker for medical marijuana pursuant to the Compassionate Use Act.

Privette Doctrine Precludes Injured Worker Tort Claim

Janice Williams-Foreman broke her ankle when she slipped and fell at an oil refinery owned by ConocoPhillips Company. She was an employee of TIMEC Company, Inc. (TIMEC), which was hired by ConocoPhillips as an independent contractor, and was injured in the course and scope of her employment with TIMEC. Williams recovered workers’ compensation for her injury from TIMEC and sued ConocoPhillips on claims of negligence and premises liability.

She was employed by TIMEC as a general helper and safety attendant. Her duties included watching for fire. She never dealt directly with ConocoPhillips personnel, receiving all job assignments, instructions and tools from TIMEC. On May 13, 2012, Williams-Sample was walking from a ConocoPhillips administrative office trailer to a nearby permit shack to drop off paperwork when she slipped and fell near the trailer, breaking her ankle.The trial court granted summary judgment in favor of ConocoPhillips and Williams appealed. The Court of Appeal sustained the dismissal in the unpublshed case of Foreman v ConocoPhillips.

Employees of independent contractors injured in the workplace cannot sue the party that hired the contractor to do the work absent exceptional circumstances defined in the “Privette” doctrine. (Privette v. Superior Court (1993) 5 Cal.4th 689 (Privette).) The trial court found no exceptions to the Privette rule applicable on the evidence presented.

There remains a limited basis for a contractor’s employee to seek recovery of tort damages from the contractor’s hirer. An employee of a contractor may recover from the hirer of the contractor where the hirer retains control over the work performed by the contractor and “exercised the control that was retained in a manner that affirmatively contributed to the injury of the contractor’s employee.”

Mere retention of the ability to control safety conditions is not enough. A general contractor owes no duty of care to an employee of a subcontractor to prevent or correct unsafe procedures or practices to which the contractor did not contribute by direction, induced reliance, or other affirmative conduct.

Carriers Plan to “Ramp Up” Comp Business

The Golden State’s $16.5 billion workers’ compensation marketplace is stubbornly showing signs of recovery as a result of reform measures introduced through the enactment of Senate Bill 863 two years ago. The controversial legislation overhauled the state’s huge workers’ compensation system by creating a $120 million return-to-work fund, establishing an independent medical review board, revising the permanent disability rules and adding a controversial provision barring temporary staffing agencies from self-insuring for workers’ compensation.

This last provision was in the news again this month, when Irvine-based Kimco Staffing Services, one of California’s largest temporary staffing agencies, ended its costly legal battle to overturn a Court of Appeals ruling in May over its right to self-insure for workers’ compensation.

A report in PropertyCasualty 360 says the company is ” not going to appeal it to the state Supreme Court.” the Kimco Chief Executive Officer, said. Kimco had spent about $700,000 in legal fees in a bid to overturn a portion of SB 863 that prohibits staffing companies to self-insure.

The state Appeals Court sided with the state legislators in passing SB 863 because of the nature of the staffing industry in which workers can be inadequately covered for workers’ compensation claims. The court noted self-insurance deposits would not be quickly adjusted until the following year.

Kimco, for its part, has already moved on, placing its workers’ compensation coverage with Zurich Insurance Co.

In addition to Zurich Insurance, a number of other workers’ compensation insurers such as the State Compensation Insurance Fund, Berkshire Hathaway Insurance Co., American International Group, CNA Insurance Co., and CompWest Insurance Co. have all said they plan to ramp up their California workers’ compensation businesses in 2015.

This is in part due rising employer payrolls in the state, triggered by the recovering economy, and in part to SB 863 itself, which went into effect Jan. 1, 2013. In fact, a Workers’ Compensation Research Institute (WCRI) study released in April found that the reform legislation reduced California medical payments per claim by 5% in 2013 for claims with 12 months of experience.

The State Compensation Insurance Fund needs to increase rates if it wants to lower its 143.2% combined loss ratio in 2014, which was an increase from the 127.5% combined ratio in 2013. An injection of $250 million to bolster reserves served as a key factor in the fund’s operating expenses in 2014.

But that said, the verdict is still out whether SB 863 is improving or worsening the state’s workers’ compensation marketplace. “It’s too early to tell if SB 863 has made any positive improvements to the state’s workers’ compensation environment,” said Bryan Bogardus, president of California-based CompWest Insurance Co., a growing workers’ compensation carrier. He predicts that, by 2017, CompWest and other insurers will know if the workers’ compensation reform legislation improved the marketplace for insurers and insureds. If that happens, Bogardus said, CompWest plans to boost premium volume by hiring four business development consultants to assist producers submit more business in the carrier’s four target areas: healthcare, hospitality, professional services and manufacturing.

While California’s huge workers’ compensation market shows signs of eroding the 105% combined ratio that the 238 carriers collectively compiled in 2014, it will be a tough road to reach underwriting profitability anytime soon. The combined ratio marked the seventh consecutive year that the state’s workers’ compensation market had a combined ratio above 100%.

Flight Attendants Allege “Dirty Little Secret” Makes Them Sick

Boeing knows that its airplane cabins can become filled with toxic air, but refuses to do anything about it, four flight attendants claim in court. Vanessa Woods, Faye Oskardottir, Darlene Ramirez and Karen Neben, along with her husband Nathan, sued Boeing in Cook County after becoming sick while working a flight on one of its planes, leaving them with lifelong medical problems.

In 2013 the plaintiffs were working on a Boeing 737, manufactured in 2012, over several flights with Alaska Airlines, the last of which was from Boston to San Diego. Shortly after takeoff, the plaintiffs say the crew noticed a funny smell in the cabin and the four flight attendants started to fill ill, including dizziness and vomiting. Oskardottir fainted and needed assistance from medical professionals who were passengers on the plane. After landing in Chicago the plaintiffs were treated at Resurrection Medical Center for “symptoms…consistent with hydrocarbon exposure,” the lawsuit states. The plaintiffs claim they still experience symptoms ranging from numbness and tingling, vertigo, extreme fatigue and blurred vision to memory loss, anxiety and depression.” The lawsuit cites numerous examples of similar incidents involving pilots, crew members and passengers.

The plaintiffs say in the complaint that they are exposing “a previously hidden and ‘dirty little secret’ of the commercial airline industry.” The air on all but one of Boeing’s airplanes is pumped through the engines into the cabin, known as a bleed air system, allowing the possibility for it to “become contaminated with heated jet engine oil and its toxic by-products” if there is a leak.

The lawsuit, filed Monday, points to a 1955 study done by the Aero Medical Laboratory showing that inhaling heated oil can damage the brain, liver, kidneys and cause death.It is now known that the chemical by-products from engine oil include “neurotoxins such as organophosphates” that are used in pesticides and nerve gases and were banned for residential use in 2001 by the Environmental Protection Agency, the complaint states. Inhaling them “can cause short-term or transient symptoms as well as permanent and serious personal injury.”

According to the lawsuit, Boeing has been “put on notice more than 40 times” over the past 60 years “that its aircraft was unreasonably dangerous but failed to rectify the flawed design.” In 1953 the company first recognized that heated engine oil could contaminate the air with dangerous chemicals but “alarmingly, to this day, Boeing has never met its…objective to fully identify the contaminants present in cabin air after a fume event,” the complaint states. That same year Boeing was working on a filter system to clean the air but it was never implemented, the plaintiffs say, and air quality sensors are still not used either.

The plaintiffs seek damages for strict liability, negligence and fraud. The plaintiffs are represented by Power Rogers and Smith PC in Chicago, LittlepageBooth in Houston, TX and Friedman Rubin and Brodkowitz Law in Washington.

Tree Trimming Company Faces Six Felony Counts

The Palm Desert Patch reports that the owner of a Thousand Palms landscaping company cheated insurance companies out of hundreds of thousands of dollars in a fraud scheme rooted in the misclassification of workers, a prosecutor said Thursday, but the defendant’s attorney argued his client was a gardener, not a bookkeeper, and had no hand in manipulating figures.

“This defendant had office managers and brokers signing off on paperwork so that if he got caught, he could say, ‘It was an accident, a mistake,”’ Riverside County Deputy District Attorney Frank Donzanti said in his opening statement in the trial of Jesse Garcia Contreras. “All the while, he was continuing this scam and not playing by the rules.”

Contreras, 59, of Indio is charged with six felony counts of workers’ compensation insurance fraud that carries a maximum penalty of 20 years behind bars. Prosecutors allege he ripped off five companies to the tune of $611,960. Donzanti outlined a case pointing to willful deception, perpetrated year after year. According to the prosecutor, Contreras became the co-proprietor of Sunshine Landscape in 2001, handling all administrative functions. Donzanti alleged that Contreras was trying to find ways early on to save on payroll, eventually finding the means by lying about his employees’ functions.

“The key to success was, don’t tell the insurance companies you have tree trimmers on the job,” the prosecutor said. “The workers comp premiums for tree trimmers are triple what they are for general landscapers. Tree trimmers work at altitude They can fall, crack their head open or break their neck.”

According to Donzanti, from 2008 to 2013, Contreras “hid the fact” that he had tree trimmers in the field by changing the human resources codes assigned to employees and ultimately reported to the state, as well as the insurance companies. “There was no disclosure of tree trimmers,” he said. “And when there were red flags raised and year-end audits coming, guess what — the defendant switched to a different insurance carrier.”

Donzanti said holding down overhead by intentionally misclassifying his workforce afforded Contreras the opportunity to “outbid other landscapers playing by the rules,” assuring Sunshine Landscape would get lucrative contracts from Coachella Valley homeowners’ associations.

Defense attorney Jeff Moore characterized the government’s case as based on misplaced “assumptions” and confusion over business practices. Moore took jurors through a lengthy explanation of Sunshine Landscape’s history and his client’s duties, noting that Contreras was “in charge of field operations,” not accounting.

“He was not the insurance procurer,” Moore said. “He was the guy who went out and got the contracts.” According to the attorney, Contreras had worked for Sunshine nearly three decades as a gardener before he got together with two other men — Santos Alvarado and Richard Calhoun — to buy the company in 2001 from desert businessman Robert Lee Sandifer. The trio did business as Sunshine Landscape but were incorporated as CAC.

The firms allegedly victimized were the State Compensation Insurance Fund, CastlePoint Insurance, Liberty Insurance, Lumberman’s Insurance and Zenith Insurance.

Former San Diego Physician Convicted of Forging Doctors Signatures

The owner of multiple marijuana clinics admitted Wednesday to forging a doctor’s signature and fraudulently using the doctor’s name and license number to write fake medical marijuana prescriptions. The 72-year-old man, Nelson Leone, will be sentenced September 14, 2015. He faces up to a $250,000 fine and five years in prison.

Prosecutors stated that Leone operated six clinics under the name Green Cross Evaluations throughout San Diego, including locations on Park Boulevard, Mission Valley, Sports Arena, and Pacific Beach. The former doctor purchased advertising touting the clinic’s customer service and amenities such as on-site ATMs, walk-in services, and discounted rates for first-time patients. In the ads he made it clear that his clinics were “consumer friendly.” He also advertised the his clinics offered access to a “licensed physician.”

According to prosecutors, five of the six clinics did not have a licensed doctor on staff. He employed Dr. Arnold Kaplan, a licensed physician, at one of his clinics to meet with customers and issue medical marijuana recommendations. Without Kaplan’s knowledge, Leone also issued medical marijuana recommendations at his five other clinics using Kaplan’s signature and physician license number. Those recommendations falsely stated that the patient was evaluated and suffered from a condition that “may benefit from the use of medical marijuana.”

Leone agreed to shut down all six of his clinics as part of his plea.

Leone was once licensed as a physician in California in 1973. He practiced as a psychiatrist in San Diego for 20 years when misconduct charges were filed against him by four of his former patients. After 38 days of administrative hearings, the Administrative Law Judge recommended that his license be revoked in 1995 for gross negligence, dishonesty, excessive prescribing practices, and aiding and abetting another in the unlicensed practice of psychology. In 2008 he filed a Petition for Penalty Relief claiming he had rehabilitated himself.  The Office of the Attorney General recommended against granting the petition arguing that Leone’s testimony was full of distortion, misrepresentation, and outright fabrication. After a hearing, the Administrative Law Judge denied his Petition in February 2012.

Prescription Costs Per Claim Increased 7.4% in 2014

While the average cost per workers compensation claim increased in 2014, the number of prescriptions per injured worker and the average morphine equivalent dose per script declined, Coventry Workers’ Comp Services said Tuesday.

In 2014 the significant increase in generic AWP was the primary driver of increased prescription cost per claim. The most heavily impacted drug classes include narcotics, NSAIDs, and muscle relaxants.

Meanwhile, the number of prescriptions per injured worker decreased 5%, narcotic utilization decreased 7.4% and the average morphine equivalent dose per script decreased 4.5%, according to the analysis. Medications with the most significant decreases were hydrocdone-acetaminophen (Vicodin®) and oxycodoneacetaminophen (Percocet®), both narcotics. The rescheduling of hydrocodone combination products from a Schedule III drug to a Schedule II drug in 2014 contributed to the decline in utilization. Vicodin®, the #1 prescribed medication had the largest decrease in utilization over the last three years with a 7.8% decrease.

The number of prescriptions increases as the claim ages, typically driven by adjuvant therapies such as anticonvulsants and antidepressants that support pain management and lessen narcotic burden.

Generic utilization increased 5.9% to 82% last year, according to the analysis. But the inflated AWP drove up costs of frequently prescribed generic medications, resulting in an increased prescription cost per claim. The impact of this year’s inflated AWP has been noted throughout the report. The release of generic Cymbalta® in 2013 drove the significant reduction in spend for antidepressants

According to Coventry, compound drugs accounted for 7.7% of all managed drug spending and 28.1% of all unmanaged drug spending in 2014, up from 4.5% and 20.1%, respectively, in 2013. “The rising use of compound medications in workers compensation has created greater risks to injured worker safety and has become a cost burden on the system,” the analysis states. Despite direction from medical guidelines, compound utilization as a primary line of therapy continued to grow. In addition,new formulations were being used to target gaps in medical guidelines and formularies. In California the percentage of workers receiving compounded drugs in unmanaged cases was around 10%, and in managed cases 2%.

More states are adopting closed formularies in an effort to control pharmacy cost and utilization. Three states have already taken steps to introduce workers’ compensation closed formularies in 2015: Arkansas, Tennessee, and California. If adopted, the total number of states with implemented closed formularies and/or “preferred drug lists” will be eight.

It’s no secret that workers’ compensation patients are frequently being prescribed narcotics and other medications that can create risk for dependence and misuse. Urine Drug Monitoring (UDM) is a clinical decision-support tool that can help reduce these risks, ensure compliance with the prescribed drug regimen, and promote patient safety. However, incorporating UDM into the narcotic management of injured workers has not been an easy task for payors. Many of the medical treatment guidelines commonly referenced in workers’ compensation do not provide enough detail or have conflicting recommendations concerning the frequency or type of testing.

JAMA Publishes a Review of Cannabinoids for Medical Use

Injured workers are now a step closer to obtaining marijuana for their injuries after the Journal of the American Medical Association published an article that says moderate – or high-quality scientific medical evidence supports the use of marijuana for some medical conditions, but not for others, according to a fresh review of past research. After reviewing 80 randomized trials that included nearly 6,500 people, researchers found moderate support for using marijuana to treat chronic pain and muscle spasms and involuntary movements. The evidence wasn’t as strong to support marijuana’s use for nausea and vomiting due to chemotherapy, sleep disorders, HIV-related weight loss and Tourette syndrome.

The summary in Reuters Health continues to say that any benefits of marijuana or cannabis use must be weighed against the risk of side effects, which include dizziness, dry mouth, nausea, sleepiness and euphoria, according to the study’s lead author. “Individuals considering cannabinoids as a possible treatment for their symptoms should discuss the potential benefits and harms with their doctor,” said Penny Whiting of University Hospitals Bristol NHS Foundation Trust in the UK. She also told Reuters Health by email that other reviews of medical marijuana suggest prolonged use may be tied to an increased risk of psychosis.

The new review, which is published in the Journal of the American Medical Association (JAMA), was commissioned by the Swiss Federal Office of Public Health. The researchers searched medical databases for past randomized controlled trials, which are considered the “gold standard” of medical research. While the researchers found that most trials suggested some improvements in symptoms for the various conditions, not all could suggest the improvement wasn’t just due to chance.

“As systematic reviewers, we have provided a summary of the available evidence which doctors can now use to make decisions regarding whether to prescribe cannabinoids for their patients,” Whiting said.

A second review published in the same journal by Dr. Kevin Hill of McLean Hospital in Belmont, Massachusetts, found similar results. In that review, Hill found high-quality evidence to support the use of marijuana in people with chronic or neuropathic (nerve) pain, and muscle problems related to multiple sclerosis.

“The two reviews have reached similar conclusions, that while there is some evidence to support the use of marijuana for certain conditions . . . for many of the other conditions that various U.S. states have approved medical marijuana, the evidence is of low quality,” said Dr. Deepak Cyril D’Souza of Yale University School of Medicine in New Haven, Connecticut.

“If the primary process by which medications are approved for ‘medical’ use in the U.S. is the (Food and Drug Administration) approval process, then the evidence for many conditions does not meet the existing threshold of evidence,” said D’Souza, who co-authored an editorial accompanying the new reviews.

In another study in the same journal, researchers found poor labeling on medical marijuana. Of 75 edible marijuana products purchased in three metropolitan U.S. areas, less than one in five were labeled correctly, according to Ryan Vandrey of Johns Hopkins University in Baltimore and colleagues. They found the vast majority of products contained more or less of the active ingredients than the label indicated.

Despite some scientific evidence that might get an injured worker’s foot in the door of the UR/IMR process, there remains formidable obstacles before the floodgates are opened in workers’ compensation claim departments. Cannabinoids remain illegal under federal law. Additionally, California Health and Safety code 11362.785(d) says that “nothing in this article (Medical Marijuana Program) shall require… any .. health insurance provider to be liable… for the medical use of marijuana. The WCAB used this provision to support a denial of medical marijuana in the case of Cockrell v Farmers Insurance (March 2013). With that being said, claimants are just a legislative pen stroke away from claiming this as a benefit.