Author: WorkCompAcademy

The former owner of a Los Angeles-based medical supply company was sentenced to seven years in prison for his role in a fraud scheme that resulted in $3.3 million in fraudulent claims to Medicare.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Stephanie Yonekura of the Central District of California, Special Agent in Charge Glenn R. Ferry of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Los Angeles Region and Assistant Director in Charge David L. Bowdich of the FBI’s Los Angeles Field Office made the announcement.

Hakop Gambaryan, 55, of East Hollywood, California, was convicted following a jury trial on March 20, 2015, of four counts of health care fraud. In addition to the prison sentence, U.S. District Court Judge Otis D. Wright II of the Central District of California ordered Gambaryan to pay $1,740,009 in restitution.

At trial, the evidence showed that Gambaryan, the former owner of a durable medical equipment supply company, fraudulently billed more than $3 million to Medicare for durable medical equipment, such as expensive power wheel chairs, that was not medically necessary. Medicare paid approximately $1.7 million on those fraudulent claims.

The evidence demonstrated that between March 2006 and December 2012, Gambaryan paid cash kickbacks to medical clinics for fraudulent prescriptions for durable medical equipment, which the patients did not need. Gambaryan then used these prescriptions to bill Medicare for the unnecessary equipment.

According to evidence presented at trial, Gambaryan personally delivered power wheelchairs to many beneficiaries who were able to walk without assistance. In one instance, Gambaryan carried a power wheelchair up a flight of stairs for a woman who lived in a second floor apartment with no elevator. In another instance, the power wheelchair would not fit inside the beneficiary’s home, so Gambaryan put it in the beneficiary’s garage.

The evidence also demonstrated that Gambaryan generated false documentation to support the fraudulent claims, including fake home assessments when no home assessments actually occurred. In addition, Gambaryan photocopied beneficiaries’ signatures hundreds of times to create the appearance that the beneficiaries consented to ongoing equipment rentals, when they did not. Indeed, at least two of the beneficiaries had passed away prior to the date they supposedly signed the rental agreements.

The case was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of 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 Fred Medick and Ritesh Srivastava of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,100 defendants who have collectively billed the Medicare program for more than $6.5 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Several consolidated case between former players and the New Your Giants were set for arbitration between the team and the New York State Insurance Fund. The Giants sought reimbursement for defense costs and indemnity expenses incurred as a result of the workers’ compensation claims filed by the former players.

In his decision the Arbitrator found that there was a contract of workers’ compensation insurance between NYSIF and employer New York Giants from September 24, 1975 to January 1, 1977, that requires NYSIF “to indemnify [the Giants] for any benefits awarded and to present a defense to the claims” that were consolidated for hearing of the coverage issue by the Arbitrator, and that NYSIF “does not have a valid claim of sovereign immunity with respect to the claims.” Based upon those findings, the Arbitrator ordered NYSIF to indemnify the Giants for all reasonable legal expenses and costs incurred in defending the claims and to indemnify the Giants against any award made in favor of its former employees.

The New York State Insurance Fund petitioned for reconsideration. The WCAB denied the petition and affirmed the arbitrators award in the panel decision of Larry Watkins, el. al. v New York State Insurance Fund.

The Giants secured workers’ compensation insurance coverage through NYSIF for a period between September 24, 1975 to January 1, 1977. However, during that time approximately one-half of the Giants’ games were away games that were played on the opponents’ home fields outside of New York. All home games from October 10, 1976 to the end of NYSIF’s period of coverage, two full seasons worth of home games, were played at the Giant’s newly built stadium located at the Meadowlands Sports Complex in East Rutherford, New Jersey, which is where the team was headquartered and the players practiced and trained.

NYSIF contends that it was created under New York law and has sovereign immunity from suit in California, and that the New York statutes preclude it from defending or paying claims for workers’ compensation filed outside of New York for injuries sustained outside of New York. NYSIF further contends that it is not authorized to write insurance in California, that the decision of the Arbitrator is not supported by the evidence, that the Arbitrator should have applied the principle of comity to determine that NYSIF is not liable, and that the limited connections between the consolidated cases at issue and the state of California does not support WCAB jurisdiction over the claims.

Coverage B of the policy provides that NYSIF will “indemnify” the Giants “against loss by reason of the liability imposed upon [it] by Law for damages on account of such injuries to such employees wherever such injuries may be sustained … ” There is no evidence of any limitation or exclusion from the Coverage B provisions. In the absence of any such limiting or exclusionary language, Coverage B supports the Arbitrator’s determination that NYSIF provided insurance coverage for injuries sustained by Giants’ employees outside of New York and for claims filed in other states.

The language of an insurance policy must be clear in describing exclusions and limitations on coverage, and the specimen policy placed into evidence does not clearly limit NYSIF to only defending and paying workers’ compensation claims filed in New York. Moreover, any such limitation would be inconsistent with the fact that during the coverage period at issue, the vast majority of employment duties performed by the covered employees were outside of New York.

Labor Code section 3701.9, was added in 2012 as part of SB 863. This provision prohibits temporary services employers (TSE’s) and leasing employers (LE’s) from self-insuring their workers’ compensation liability. These entities that were self-insured in 2012 when SB 863 was passed had to become insured by January 1, 2015. The concern addressed by section 3701.9 is that a self-insured staffing company may grow rapidly during a calendar year without a concomitant increase in its workers’ compensation self-insurance deposit. Self-insured employers do not pay insurance premiums; instead, they post a security deposit each year. A self-insured employer would not have to increase the security deposit for its increased payroll until the following year, unlike a typical employer with workers’ compensation insurance, which is required to pay an increased premium on newly hired employees as soon as they are hired. When a self-insured employer’s security deposit is insufficient, the obligation for the loss falls on the Self-Insurers’ Security Fund (Fund) (§§ 3742, 3743) and other self-insured employers may be charged a pro rata share of the funding necessary to meet the obligations of an insolvent self-insurer.

Section 3701.9 was challenged on constitutional grounds by Kimco Staffing Services soon after the law was passed. But this month the Court of Appeal found the law to comply with constitutional standards in the published case of Kimco Staffing Services v State of California Many staffing companies have met the new requirements by purchasing workers compensation insurance with a large deductible.

But now, Lumbermen’s Underwriting Alliance, which issued large deductible workers’ compensation plans for professional employer organizations among other insurance lines, has been put into rehabilitation according to a Missouri Department of Insurance announcement.

LUA specializes in providing property and casualty insurance to the forest products industry, generally consisting of lumber and sawmill operations. Over time, LUA expanded its offerings, and therefore its membership, to a broader range of industries and insurance coverage’s. By 2014, LUA was providing property allied lines, inland marine, earthquake, and workers’ compensation coverage to assisted living facilities and the food processing industry, as well as the forest products industry. LUA also issued large deductible workers’ compensation plans for professional employer organizations (“PEOs”).

Lumbermen’s faced financial difficulty when one of its largest PEO insureds, TS Employment, failed to fully fund collateral obligations and filed Chapter 11 bankruptcy. The Chapter 11 bankruptcy filing for New York-based TS Employment listed the IRS as a creditor with $95.2 million in taxes owed, according to court records. Corporate Resource Services is TS Employment’s only client. New York-based Corporate Resource Service ranks as the 22nd-largest US staffing firm based on 2013 revenue. TS has up to 30,000 employees for which it processes payroll, according to court filings.

“Throughout LU A’s more than 110-year history, we have worked hard to build a reputation of integrity, trust and reliability, ” stated Jan Carlsson, President and Chief Executive Officer. “I want to assure the market that we are committed to remaining accessible and responsive to our policyholders during this voluntary supervision period and beyond.” LUA has taken the necessary step of entering into a voluntary supervision period due to a sudden and unanticipated Chapter 11 Bankruptcy filing by T.S. Employment Services, Inc., a Tri-State affiliated company with whom LUA has had a customer relationship for more than eight years. LUA provided workers compensation coverage for Tri-State, which offers payroll processing and revenue billing services as a Professional Employer Organization (PEO). T.S. Employment Services was forced into bankruptcy when it was unveiled that the company had “material., unpaid federal payroll tax liability.” Mr. Carlsson noted that as a result of T.S. Employment’s filing, “Tri-State’s ability to continue to meet its financial obligations to LUA has been placed in question .”

Rehabilitation is a legal step taken by the court to protect policyholders by preserving the company’s assets. John Huff, director of the Missouri Department of Insurance, was named receiver by the court. The move allows him to take over operations of the company. Huff will now attempt to correct existing problems, continue operations of Lumberman’s, maintain policyholder accounting and develop a plan of rehabilitation or petition the court for liquidation, according to the department. Policies will continue pursuant to their terms and conditions, and policyholders must continue making premium payments to keep insurance coverage intact, according to the department.. “Putting Lumbermen’s into rehabilitation allows us to ensure the company’s assets are handled properly so that claims are paid as fully as possible,” Huff said.

Lumbermen’s, based in Florida, had approximately 3,000 policyholders and 6,080 open workers’ compensation claims with the largest number of claims in California.

Fresno County is trying to shield itself from high-cost lawsuits from inmates who worked at the Fresno Sheriff’s Foundation shooting range the day a Pacific Gas and Electric pipeline exploded by saying the inmates fall under the state Workers’ Compensation program. If the county succeeds, the medical bills of 10 injured inmates will be paid through the state program, greatly reducing the county’s financial burden. In addition, the inmates wouldn’t be able to sue the county for general damages. It would not preclude the inmates from suing Pacific Gas which owns and maintains the pipeline.

According to the report in the Fresno Bee, the cause of the April 17 pipeline explosion at the northwest Fresno shooting range is under investigation by the state Public Utilities Commission. It occurred while a county front loader was driving on a road atop a berm that was being maintained. The loader driver was not digging, according to Sheriff Margaret Mims, but flattening dirt on the berm. The inmates were on the shooting ranges doing property maintenance. One inmate died in the hospital, while the loader driver, two deputies and nine inmates were injured.

Fresno County Counsel Dan Cederborg said that “jail inmates who are performing work on sheriff’s work crews are subject to workers’ compensation coverage in most circumstances” under state law. The inmates don’t have to be declared employees, he said. But Butch Wagner, a lawyer who represents five of the injured inmates, said the county is attempting a legal maneuver to save money if it’s found at fault. “They are not employees,” Wagner said. “It doesn’t surprise me, but what they have is an incredibly weak defense that isn’t going to stick.” Workers’ compensation claims have been paid to inmates in California state prisons, but the distinction is that those inmates report to the same jobs every day, Wagner said.

Warren Paboojian, who represents a sixth inmate, said the county’s effort is a way to pay lower damages and the arrangement wasn’t for pay. “There needs to be some form of (pay to inmates) for them to be employees,” Paboojian said. The jail inmates only occasionally work, making their status as employees much more subject to question, he said.

Even a county filing adds uncertainty to the issue. In a workers’ compensation claim filed by the county on behalf of one of the inmates, claims examiner Kay Gonzalez said, “We are unable to determine if you are eligible for workers’ compensation benefits from the information we have.”

Lawyer Tom Tusan, a Fresno workers’ compensation specialist, said the county wants the inmates to be employees to limit its financial exposure. Workers’ compensation prohibits a suit for general damages, he said. But workers’ compensation is only suitable under certain conditions and it’s not entirely clear whether those conditions exist for the county inmates at the range. It may exist for one inmate, he said, and not for another.

In state prisons, Tusan said, there are automatic work details, which will qualify an inmate for workers’ compensation in case of an injury.

Fresno County’s rules depend on its ordinances. If an inmate volunteered to work, he isn’t covered. The employee is covered “if he’s part of a designated work crew where he is offered the job and accepts it,” Tusan said. “It becomes an employment contract between himself and the county.

In a lawsuit unsealed this month in federal court, five ambulance companies have entered into civil settlements with the Department of Justice requiring them to collectively pay more than $11.5 million in payments to the United States to resolve kickback allegations. The settling defendants include three Orange-County based companies – Pacific Ambulance, Inc. and Bowers Companies, Inc., (both of which were subsequently acquired by Rural/Metro Corporation after the alleged misconduct occurred) and Care Ambulance Service, Inc.; and two San Diego-based companies – Balboa Ambulance Service, Inc., and E.R. Ambulance, Inc.

In Carlisle v. Pacific Ambulance et al., Case No. 3:09-cv-02628-L-BLM (S.D. Cal.), the settlements resolve allegations that the defendants engaged in so-called “swapping” kickback schemes by providing deeply discounted – and often below cost – ambulance services to hospitals and/or skilled nursing facilities in exchange for exclusive rights to the facilities’ more lucrative Medicare patient referrals. Such swapping arrangements can lead to overutilization of medical services and inflated charges to the Medicare program. The government alleges that the arrangements in this case resulted in false claims for Medicare Part B transports which in essence subsidized the discounted trips.

The Anti-Kickback Statute prohibits payment arrangements that are intended to influence health care referrals. The statute generally prohibits anyone from offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federal health care programs, including Medicare.

“Today’s settlements resolve a thorough investigation of the practices by ambulance companies that offered significant discount services to facilities in exchange for patient referrals,” said Glenn R. Ferry, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s (OIG) Los Angeles Region. “The OIG takes this type of activity very seriously and welcomes the public’s assistance in identifying any health care businesses that engage in similar types of schemes.”

These settlements resolve a False Claims Act lawsuit filed in the Southern District of California by Kelvin Carlisle, a competitor in the San Diego, Orange and Los Angeles County ambulance marketplaces. The whistleblower or qui tam provisions of the False Claims Act permit the whistleblower to recover a portion of the proceeds obtained by the federal government. As part of the resolution of the suit, Mr. Carlisle will receive in excess of $1.7 million.

These settlements illustrate the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $24 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs. “It is a priority of this office to combat abuses that drive up the cost of health care and waste taxpayer dollars,” said Laura E. Duffy, United States Attorney for the Southern District of California. “We will continue to work closely with our investigative partners to pursue those who refuse to play by the rules and offer kickbacks to induce health care referrals.”

The case was investigated by the U.S. Department of Health and Human Services Office of the Inspector General and the Federal Bureau of Investigation.