Author: WorkCompAcademy

An indictment charged a Valencia doctor and former Workers’ Compensation toxicology expert with operating a $6.5 million scheme to defraud the Medicare program by billing Medicare for medical services that were not actually provided. Gary J. Ordog M.D., 60, was indicted by a federal grand jury for nine counts of health care fraud. Some of Ordog’s history and reputation was featured in a 2005 Forbes “Dr. Mold” article..

Ordog allegedly assisted beneficiaries with various toxicological symptoms, including those related to mold and chemical exposures. Ordog would allegedly see a beneficiary at least once in connection with the potential evaluation and management of his or her conditions. Subsequently, often several years after the last time he saw a particular beneficiary, Ordog would allegedly submit false claims to Medicare for purported additional visits with the same beneficiary, when the visits never actually occurred. In certain instances, Ordog allegedly billed Medicare for services provided to beneficiaries who were deceased as of the claimed date of service.

This is not his first brush with regulators. According to public documents posted online by the Medical Board of California, Ordog’s medical license was suspended for 90 days in 2006 and he was placed on seven years of probation following accusations of gross negligence and dishonesty. The Factual Findings in that case indicate that Ordog established a medical-legal practice, offering himself as an expert witness in a variety of legal settings, in 1980. He evaluated civil, criminal and workers’ compensation cases for attorneys representing both plaintiffs and defendants, and for insurance companies. He has testified in deposition and trial more than 100 times.

The 2006 Accusation under the topic of “Quality of Care” reviews the cases of four patients referred in 1999 by a Long Beach attorney named Eric Hoerchner for evaluations of workers’ compensation claims his clients made against their employer, ALCOA Vernon Works, in Vernon, California. Each of the patients claimed a compensable on-the-job injury due to exposure to toxic substances. After a careful review of his examination and findings, the Administrative Law Judge concluded “Taken together, respondent’s diagnoses of toxic encephalopathy and neuropathy, bacterial sepsis, multiple viral, fungal and bacterial infections, chronic fatigue syndrome and fibromyalgia were not medically indicated and represented extreme departures from the standard of practice and gross negligence. The departures are deemed extreme departures due to the lack of any colorable, documented indications for their rendering.”

The 2006 Accusation also included a section on “Allegations of Dishonesty” and this section indicated that Ordog provided expert witness services for many plaintiffs who claimed to have suffered personal injury due to exposure to toxic substances, including molds. In one of his forensic cases involving the Gelderbloom family, he authored a letter which was introduced into evidence in a jury trial over which Superior Court Judge Barbara Scheper presided. Judge Scheper was the individual who referred this case to the MBC as a result of her concerns of possible insurance fraud. Ordog later admitted in a deposition that this letter was a form letter that he signed but may not have read. He also admitted that his patients were improving by March 8, 2002, contrary to the content of the letter. The Administrative Law Judge found “Respondent committed a dishonest or corrupt act in connection with the March 8, 2002 letter he provided in the Gelderbloom matter. Taken alone, the letter might be dismissed as merely careless. But in the context of respondent’s other transgressions, all committed in furtherance of his medical-legal practice, the form letter cannot be dismissed as a mere oversight. Moreover, the letter contains misrepresentations that had significance to his patients’ health management and represented a corruption of the legal system.”

Ordog indicated at times in testimony that he was co-author of the medical school textbook, Ellenhom’s Medical Toxicology: Diagnosis and Treatment of Human Poisoning, first published in 1988. However at the hearing, “Mrs. Sylvia Ellenhorn testified credibly in this hearing that she had, indeed, typed all of the Second Edition from her husband’s handwritten text. She sent “hard copies” of her work product to the publisher and never dealt with respondent at all.” The Administrative Law Judge found “By clear and convincing evidence, respondent was guilty of dishonesty on multiple occasions regarding his claim of authorship of Ellenhom’s text.

Ordog was placed on probation in 2006 by the Medical Board. One of the terms of his probation said “Respondent shall be prohibited from engaging in a medical-legal or forensics practice of medicine during the period of probation. Unfortunately, the Medical Board filed a Petition to Revoke his probation in 2011 alleging he violated this provision by evaluating four Workers’ Compensation cases between 2006 and 2008 while on probation. Ordog stipulated to resolve this Petition to Revoke by the extension of his probation for an additional term of 18 months.

The Medical Board probation has recently been completed. Ordog now faces federal charges of nine counts of health care fraud.

Michael Drobot pleaded guilty just over a year ago to criminal charges related to paying more than $20 million in kickbacks and bribing California state Sen. Ron Calderon to preserve a loophole in state law that enabled him to charge insurers sky-high prices for spinal hardware used at the Pacific Hospital of Long Beach. The FBI has said the kickbacks-for-surgeries scam is believed to be the largest in California history. He is scheduled to be sentenced in October.

One of the next chapters in the story involves the State Compensation Insurance Fund Rico case against Drobot and others. Its 103 page Second Amended Complaint in the RICO case was filed in federal court this February. State Fund alleges it brought this action to recoup payments made to Defendants, who concealed the system of illegal kickbacks, fee-splitting, corporate practice of medicine, and other misconduct. The Complaint alleges detail on various illegal kickback and referral fees, and other “Fraudulent Schemes” such as overbilling, unbundling/upcoding, duplicate radiology billing, and issues with pharmaceutical billing. The lawsuit in effect alleges that Drobot created sham contracts with doctors and marketers that were dubbed research, management or option agreements. In reality, the lawsuit says, they were payola accounts to reward doctors for using Drobot’s medical firms.The State Fund Second Amended Complaint makes an interesting read if not a well documented tutorial on the dark side of the practice of medicine.

Michael Drobot now adds yet another interesting chapter in the legal struggle. A few weeks ago he filed a 15 page third-party complaint for equitable indemnity and declaratory relief against 22 doctors, health executives, chiropractors and a lawyer. Equitable indemnity says in theory that Drobot should not have to pay the State Fund, but if it ends up that he does, then he wants others to share the blame with him and pay the damages. Thus Drobot in his indemnity lawsuit is alleging that these 22 defendants are somehow involved in what the State Fund alleges he did. The lawsuit, in essence, says that if he has to pay any money to the State Fund, they should, also.  So he has in effect implicated these entities and individuals.

One of Drobot’s defendants is California physician Faustino Bernadett who allegedly purchased the shares of Healthsmart through related companies, and was Chairman of the Board for several years. Healthsmart was a California corporation, with its principal place of business in Newport Beach, California, that operated and did business as Pacific Hospital of Long Beach. Bernadette claims to be board certified in anesthesiology and practices pain medicine in Long Beach. Of all the named defendants, Drobot is more specific in his allegations against Faustino Bernadett than he was against the others. Drobot alleges that Bernadett as Chairman and one of the Pacific Hospital owners was thus “knowledgeable of, and authorized, ratified and approved the acts and omissions of Healthsmart, PSPM, and FMM alleged in the SAC (Second Amended Complaint) to be unlawful.” Drobot therefore alleges that Bernadett was in effect one of the architects of the schemes.

Other physicians he implicates in the 15 page complaint are Mitchell G. Cohen, M.D., Philip A. Sobol M.D. who practices on Los Angeles as Sobol Orthopedic Medical Group, Inc., a California corporation, Alan C. Ivar a chiropractor doing business as Griffin Medical Group, Inc., a California corporation, and South Coast Rehabilitation Center, Inc., Jacob E. Tauber, M.D., as well as physicians Assad Michael Moheimani, Jeffery D. Gross, Timothy J. Hunt, Randy S. Rosen, Gerald J. Alexander, Riverside county physician Gurvinder S. Uppal, Ian I. Armstrong, Jack H. Akmakjian a physician in Riverside. Lokesh S. Tantuwaya M.D. from San Diego and Edward Komberg an Orange County Chirorpactor,

Paul Randall, Andy Navid, and Jason Bernard are named as a defendants because they were “marketers.” Michael E. Barri was a chiropractor and was a principal of, and did business as Jojaso Management, Inc., a California corporation. William Parker was a chiropractor and principal of, and did business as Union Choice Therapy Network. Samuel Vidaurreta was a principal of, Prospice Group, Inc., that referred business to Pacific Hospital.

Attorney Sean E. O’Keefe is also named in the Drobot complaint, He was an individual who allegedly referred patients to Pacific Hospital of Long Beach. He is an attorney in San Diego and a Certified Specialist in Workers Compensation. According to the Drobot allegations he also “engaged in acts and omissions alleged in the SAC to be unlawful” but these “acts” were not specified.

Without being specific, Drobot alleges that each of the above individuals and entities in some manner “engaged in acts and omissions alleged in the SAC to be unlawful” Keep in mind that these are at this point only allegations, and none of these allegations should be assumed to be true until proven in a court of law.

Thomas T. Haider M.D. was named in the case, but has now been dismissed. Dr. Haider has said that he has not taken any money of any kind from anyone for kickbacks.

Sung Hyun Kim, 57, and her sister Caroline Choi, 59, CEOs of sewing companies that were subcontracted by True Religion Brand Jeans were arrested along with their CPA, Jae Kim, 71, on 18 felony counts of workers’ compensation insurance fraud totaling more than $11 million in losses. The three allegedly conspired to underreport $78.5 million in payroll to multiple insurers including the State Compensation Insurance Fund and two insurance companies owned by Berkshire Hathaway.

According to California Department of Insurance detectives, sisters Kim and Choi, CEOs of Meriko, Inc. and SF Apparel, Inc., both located in Vernon California, allegedly conspired with their CPA to hide tens of millions in payroll to avoid paying workers’ compensation insurance premiums. Their underground economy conspiracy led to multi-million dollar premium losses for several workers’ compensation insurers including State Fund.

The alleged fraud was committed by fabricating payroll records provided to insurance carrier auditors with the help of CPA Jae Kim. State Fund notified Department of Insurance detectives when they discovered payroll reports submitted to them by the companies showed significantly less total payroll than similar reports submitted to the California Employment Development Department (EDD). Evidence also revealed many employees were paid under the table through a bank account that was never disclosed to EDD or insurance carriers.

If convicted, Sung Hyun Kim faces 28 years in state prison and her bail is set at $700,000; Caroline Choi faces 15 years and her bail is set at $430,000; Jae Kim faces 22 years and his bail is set at $520,000. Syung Hyun Kim and Caroline Choi were booked into the Los Angeles County Jail and Jae Kim was booked into the Men’s Central Jail in Los Angeles. The Los Angeles County District Attorney’s Office is prosecuting this case.

“Workers’ compensation fraud affects everyone and drives up costs in the system,” said State Fund Chief of Internal Affairs Dante Robinson. “That’s why State Fund actively pursues fraud detection and prosecution. We commend the Department of Insurance and the other agencies and carriers involved for their diligence in pursuing this significant alleged fraud case.”

After over a dozen acts of Congress and innumerable reams of debate and conjecture about its fate, it’s time to say goodbye to the Medicare Sustainable Growth Rate (SGR) formula.

From 1980-1990, Medicare payments to doctors were based on charges. During that period, spending under the program on physician services inflated rapidly, growing at an annual rate of 13.4 percent. Congress took note and reformed the system in two key ways: (1) rates paid for services would be determined by the resources, or inputs, necessary to perform them; and (2) annual increases for services would be restricted based on the total volume of services delivered.

The heralded budget deal struck in 1997 by then-President Clinton and the Republican-controlled Congress included a refinement to the aspect of Medicare physician payment rates linked to volume growth, newly labeled the Sustainable Growth Rate (SGR) formula. In very short terms, the SGR boosted payments when the growth rate of spending on physician services fell short of growth in the gross domestic product (GDP). Likewise, it cut payments when physician spending grew more rapidly than GDP. Prices, the number of Medicare beneficiaries, and changes in law were all accounted for, essentially leaving utilization rate as the only key factor driving the SGR algorithm.

The SGR seemed a nice little incentive for docs to rein in their prescribing pens and be more efficient, except that the incentive was spread across over a million physicians and related professionals, creating a classic collective action problem. No one much seemed to care, though, until 2002, when Medicare’s base payment rate for these services was cut by 4.8 percent. Suddenly, the flaws in the formula got everyone’s attention, including Congress’s. For 2003 (and ever since), Congress passed a law to block the cuts generated by the SGR formula.

Doctors were set to receive a 21% cut in payments on April 1 if Congress did not act (again). The current funding formula expired on April 1. However, the Centers for Medicare and Medicaid Services said that it takes a minimum of 14 days to pay claims from doctors, giving senators until midnight Tuesday to act before checks went out. Just in the nick of time, a bipartisan bill passed the Senate by 92-8. The House overwhelmingly passed the “doc fix” bill by a vote of 392-37 on March 26 before leaving town for a two-week recess. President Obama is expected to quickly sign the bill into law.

The bill would repeal the current Medicare payment formula for doctors and replace it with one that would increase payments to doctors by one-half of 1% every year through 2019. After that, doctors would receive bonuses or penalties depending on performance scores from the government. Their scores would be based on the value of the care they provide rather than on the volume of patients they see. This in effect becomes a “pay per performance” model of reimbursement.  Medicare recipients with incomes of more than $85,000 a year would be required to pay higher Medicare Part B premiums starting in 2018. The legislation would end the annual scramble by lawmakers to pass a temporary patch to keep the payments from plummeting. Congress has been struggling with what both sides call a “flawed formula” since lawmakers enacted it in 1997.

The non-partisan Congressional Budget Office estimated that the bill would increase the deficit by $141 billion over 11 years. But the CBO also said the bill spends $900 million less than if Congress simply froze Medicare payment rates for doctors over that same period.

The formulaic approach to setting base payment rates is gone, replaced with automatic increases for all doctors from 2015 through 2019. For six years after that, no automatic increases will be provided and doctors’ respective rates will be altered based on their performance under a Merit-Based Payment Incentive System (MIPS). The MIPS is basically a consolidation of three pay-for-performance programs already underway and the addition of another. It is a process that combines existing Medicaid incentive programs and creates a composite performance score that will inform a provider’s reimbursement rates based on four performance categories: Quality, Resource use, Meaningful use, and Clinical practice improvement activities. A provider’s performance in these categories will be reflected in the Composite Performance Score, a 0-100 scale that informs the level of reimbursement. A threshold would be established annually that providers would have to meet or exceed in order to be eligible for enhanced rates. Those who fail to meet the threshold would be at risk of reduced rates. It is a zero sum game, and physicians who make more will be offset by physicians who make less.

This long awaited transformation of physician payment is expected to stimulate payment reform throughout the healthcare industry, including Workers’ Compensation. It will of course take years for this to take place.

Michael D. Drobot and his company Healthsmart Pacific, Inc. owner and operator of the Pacific Hospital of Long Beach has now filed a lawsuit against the 30 individuals who sued him, and their attorneys allegedly for falsely and maliciously claiming that Drobot and Healthsmart’s former hospital, Pacific Hospital of Long Beach, harmed them by what it claims was a non-existent “counterfeit screw” conspiracy. This new lawsuit is filed by attorney Keith Fink in Los Angeles County Superior Court,, case BC578484. The lawsuit seeks at least $30 million in damages.

The lawsuit names three prominent law firms and the individuals they represented when they filed about 30 lawsuits last year. According to the near-identical complaints, each of these individuals alleged that Drobot and Healthsmart “conspired” with doctors to insert “counterfeit screws” into these persons’ spines. Drobot’s new lawsuit names law firms Kabateck, Brown Kellner, LLP, Cotchett, Pitre and McCarthy, LLP, and Knox Ricksen, LLP, the individual attorneys at each firm who prepared and litigated these claims, and the 30 “non-patients” who sued Drobot and Healthsmart for treatment they allegedly received elsewhere. The 30 plaintiffs, now defendants, are Golia, Bravo, Moses, Arroyo, Averhart, Cahill, Cichy, Coslett, Dail, Dixon, Duron, Epps, Espinoza, Fabila, Gonzales, Gutkowski, Heath, Lorton, Marciel, Mashtalier-Scott, McAlonan, Mejia, Perry, Philips, Plescia,Toppel, Vargas, Ventimiglia, Williams, Wilson, Kabateck, KBK, Hutchinson, CPM, KR, Pitre,Hamilton, LiCalsi, Danowitz, Sokolove, Barrett, Melidonian, DiCorrado, and Hakimfar.

Drobot alleges that these 30 plaintiffs were from his point of view “non-patients” because the surgeries during which each alleged to have received counterfeit hardware did not take place at the Pacific Hospital of Long Beach. Thus, as “non-patients” he in essence alleges that whatever happened to them was not of his making. Instead he lists the facilities were each of the surgeries took place, These other facilities are identified as a “non-party” since these facilities are not defendants in the new suit. The non-party facilities include Parkview Community Hospital, Riverside Community Hospital, Rancho Specialty Hospital all in Riverside and Tri-City Regional Medical Center in Hawaiian Gardens. The suit alleges that “None of the aforementioned Non-Patient Defendants received any form of medical treatment whatsoever from Plaintiffs PHLB” and that “Drobot had no financial interest, no participation in, nor any involvement whatsoever in the aforementioned medical treatment received by the Non-Patient Defendants listed above.”

Last February, Los Angeles Superior Court Judge Elihu M. Berle dismissed the cases filed by Golia, Bravo, and Moses against Drobot, Pacific Hospital of Long Beach and the other hospitals and physicians accused of using the alleged “counterfeit” surgical screws. One of the difficulties in these cases was the inability of the plaintiffs to prove what hardware had been implanted since it had not been surgically removed and examined. In this regard Drobot alleges that the “Non-Patient Defendants (and implicitly Attorney Defendants who drafted their underlying complaints) themselves did not and could not know nor reasonably conclude that the medical parts surgically inserted into their bodies were deficient because these parts had not been removed from the Non-Patient Defendants’ bodies for examination and testing.” Following dismissal of three of the cases most of the remaining 27 cases were voluntarily dismissed by the plaintiffs.

Drobot’s new lawsuit alleges in the aftermath that “no reasonable person” would have believed that Drobot and Healthsmart Pacific could be held liable for surgeries that occurred at other hospitals on the facts alleged. As his new lawsuit further alleges, the individuals’ lawyers repeatedly disregarded multiple attempts to have these claims voluntarily dismissed from the outset.

Drobot’s new lawsuit is the second filed by the former hospital executive against the trio of law firms that alleged the counterfeit screw conspiracy. In October 2014, Drobot and Healthsmart Pacific filed a $50 million defamation lawsuit, alleging that the attorneys defamed him and his company on television and radio. The prior action remains pending.