Author: WorkCompAcademy

Federal officials’ healthcare fraud efforts recovered a record $4.3 billion in fiscal year 2013, up from $4.2 billion in 2012. Since 1997, the program has recovered nearly $26 billion to the Medicare trust funds.

Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius released the annual Health Care Fraud and Abuse Control Program report, showing that for every dollar spent on healthcare-related fraud and abuse investigations in the last three years, the government recovered $8.10, the highest three-year average return on investment in the 17-year history of the HCFAC program. “With these extraordinary recoveries, and the record-high rate of return on investment we’ve achieved on our comprehensive healthcare fraud enforcement efforts, we’re sending a strong message to those who would take advantage of their fellow citizens, target vulnerable populations, and commit fraud on federal healthcare programs,” Holder said.  “Thanks to initiatives like HEAT, our work to combat fraud has never been more cooperative or more effective. And our unprecedented commitment to holding criminals accountable, and securing remarkable results for American taxpayers, is paying dividends.”

The Justice Department and HHS have improved their coordination through HEAT and are currently operating Medicare Fraud Strike Force teams in nine areas across the country. The strike force teams use advanced data analysis techniques to identify high-billing levels in healthcare fraud hot spots, so that interagency teams can target emerging or migrating schemes as well as chronic fraud by criminals posing as health professionals.

In FY 2013, the strike force secured records in the number of cases filed (137), individuals charged (345), guilty pleas secured (234), and jury trial convictions (46). Beyond that, the defendants who were charged and sentenced are facing significant time in prison – an average of 52 months in prison for those sentenced in FY 2013, and an average of 47 months in prison for those sentenced since 2007, officials said. Justice Department officials opened 1,013 new criminal healthcare fraud investigations involving 1,910 potential defendants in FY 2013, and a total of 718 defendants were convicted of healthcare fraud-related crimes during the year. The department also opened 1,083 new civil healthcare fraud investigations.

“These impressive recoveries for the American taxpayer are just one aspect of the comprehensive anti-fraud strategy we have implemented since the passage of the Affordable Care Act,” said HHS Secretary Sebelius.  “We’ve cracked down on tens of thousands health care providers suspected of Medicare fraud. New enrollment screening techniques are proving effective in preventing high risk providers from getting into the system, and the new computer analytics system that detects and stops fraudulent billing before money ever goes out the door is accomplishing positive results – all of which are adding to savings for the Medicare Trust Fund.”

Plaintiffs Mark Tanner Construction, Inc. (Tanner), and Mt. Lincoln Construction, Inc. (Mt. Lincoln), are both general contractors located in Truckee. CAP is a self-insured workers compensation program for the construction industry. Compensation Risk Managers of California, LLC (CRM) administered a self-insured workers compensation program for contractors, Contractors Access Program of California (CAP). The Department of Industrial Relations granted CAP a Certificate of Consent to Self-Insure in 2004. CRM administers CAP and contracted with Diversified to market CAP. Diversified Risk Insurance Brokers (Diversified), later acquired by defendant HUB International Insurance Services, Inc. (HUB), marketed and sold CAP to plaintiffs Mark Tanner Construction, Inc., and Mt. Lincoln Construction, Inc.

California contractors were able to fulfill their obligation to obtain workers compensation insurance by joining CAP. Membership in CAP required an agreement to be jointly and severally liable for the workers compensation liability of all other members for that year of membership. Approximately 250 employers became members of CAP. Tanner and Mt. Lincoln became a member of CAP in 2006.

On December 31, 2009, CAP was terminated. The Director of the Department revoked CAP’s certificate to self-insure and CAP was placed into conservatorship. CAP’s estimated exposure for unfunded liabilities was over $20 million. In the spring of 2010, members were sent assessments for the anticipated exposure. Tanner was assessed $150,258 and Mt. Lincoln was assessed $42,784. Later that year, CAP defaulted on payment of benefits for its workers compensation liabilities.

Tanner, Mt. Lincoln, and two other companies sued HUB and others for professional negligence and constructive fraud. The first amended complaint (FAC) alleged that CAP was marketed through insurance brokers, including Diversified, as a less expensive and more effective means of handling workers compensation insurance claims. Diversified did not disclose to Tanner or Mt. Lincoln its exclusive broker relationship with CRM. Diversified allegedly did not inform plaintiffs of the following facts concerning the financial stability of CAP: (1) beginning in 2006, CAP incurred losses of over $28 million and then over $60 million; (2) CRM was involved in a multimillion-dollar lawsuit in New York over similar self-insured insurance programs; (3) CAP’s security bond was not renewed after 2008 and plaintiffs were unprotected if claims exceeded reserves; and (4) at least five other self-insured insurance programs administered by CRM in California had failed. The FAC alleged “[t]his information provided sufficient notice that agent brokers should investigate the proverbial health” of the self-insured workers compensation programs.

While a defense motion for summary judgment was pending, plaintiffs obtained a copy of a Regional Field Consultant Agreement (Agreement) between CRM and Diversified that had not been provided to plaintiffs in discovery. Plaintiffs believed the Agreement “significantly alter[ed] the legal landscape in this action.” They argued the Agreement established that rather than acting as broker for them, Diversified instead was acting as the broker for CAP. Further, Plaintiffs argued that the Agreement revealed Diversified was part of a joint venture with CRM. These relationships had not been disclosed to plaintiffs. Plaintiffs moved for leave to file a second amended complaint to add new allegations and new causes of action arising from legal relationships revealed by the Agreement. They also moved to continue the hearing on the summary judgment motion to permit additional discovery pursuant to Code of Civil Procedure section 437c, subdivision (h). The trial court denied both motions, finding the Agreement was not the “silver bullet” that plaintiffs claimed. The trial court granted HUB’s motion for summary judgment. Plaintiffs appeal from the ensuing judgment. Plaintiffs contend the trial court abused its discretion in denying both the motion to amend the complaint and the motion to continue the summary judgment hearing.

The Court of Appeal sustained the dismissal in the partially published opinion of Mark Tanner Construction v. HUB International Insurance Services.

The trial court found that HUB was entitled to summary judgment on the professional negligence claim because insurance brokers had no duty to investigate the financial condition of the insurer, and “no facts were presented demonstrating that Defendants knew or should have known of the financial condition of CAP.” As to the claim for constructive fraud, the trial court found a duty to disclose arose in an arm’s length business transaction only if there was a fiduciary relationship, and “Plaintiffs have failed to demonstrate a triable issue of material fact demonstrating that Defendants have a fiduciary relationship.” “Apparently distracted by what they perceive to be an egregious discovery violation, plaintiffs fail [on appeal] to adequately challenge either the legal bases or the factual findings of the trial court’s rulings.” The trial court denied plaintiffs’ request for a continuance. It found plaintiffs were dilatory in initiating discovery and that because the Agreement added little to the case, additional discovery based on this agreement was not necessary.

California’s sweeping SB 863 workers’ compensation reform is working for the most part, but some of the savings may not materialize thanks to pressure on the system, according to Dave Bellusci, executive vice president, chief operating officer and chief actuary at the Workers’ Compensation Rating Bureau.

According to the report in the Insurance Journal, Bellusci was speaking recently on the state’s workers’ comp system at the Golden Gate Chapter of the Chartered Property Casualty Underwriters Society during the group’s “All Industry Day.” The group held their daylong conference at the Delancey Street Conference Center. Also addressing the large group of insurance professionals at the conference was Alex Swedlow, president and chief executive officer of the California Workers’ Compensation Institute. Both men talked about the state’s workers’ comp reform law, Senate Bill 863, passed at the end of 2012 and implemented last year.

Among the host of changes the bill made was to establish an independent medical review process. IMR takes the process of reviewing cases that were elevated from utilization review away from a process that included judges and other members of the workers’ comp community and puts it in the hands of doctors. The IMR process was projected to produce a savings of $400 million related to administrative costs. However, that was assuming that between 50,000 and 60,000 disputes would make it to IMR each year. But many more cases have been going to IMR, according to Bellusci.  By WCIRB’s estimates more than 14,000 IMR cases are being brought each month, putting the system on pace for more than 170,000 cases for the year. “We think the administrative costs are probably not going to materialize if they stay at this level,” Bellusci said.

According to Swedlow, other than that, the new system seems to be working as intended. Based on the medical treatment utilization schedule or other guidelines, 75 percent of all treatment requests are being approved at the initial level without further review, according to Swedlow. Out of the one-fourth of cases that get elevated for further review, slightly more than 23 percent of the time that treatment is either modified or denied, he said. When it’s all added up, that means less than 5 percent of requests are either modified or denied, Swedlow said.

One trouble spot for Swedlow in both the new and the old systems is that pharmacy costs continue to dominate. According to Swedlow, 43 percent of utilization reviews are over pharmacy spending and more the one-third of IMRs are for pharmacy. Much of the pharmacy spending in workers’ comp comes from physicians prescribing opioids, Swedlow said. According to him, 30 percent of the pharmacy spending goes to Schedule II and Schedule II opioids. Nearly half the Schedule II opioids, like morphine and oxycodone, are being prescribed for minor injuries, Swedlow said, adding that the opioid problem has become worse across the U.S. each year. “This is truly an national epidemic,” he said.

Another epidemic that continues to impact workers’ comp is obesity, which may become a bigger problem for the system he said. Swedlow fears that a decision in June 2012 by the American Medical Association House of Delegates reclassifying obesity as “a disease state” may elevate the cases of injured workers who are obese. With obesity reclassified as a disease, medical providers may feel a greater responsibility to counsel obese patients about their weight, or if treatment for a compensable injury causes significant weight gain, Swedlow said. “We feel thanks to AMA obesity may move from being treated as a comorbidity to a compensable injury,” Swedlow said.

Each year the California Chamber of Commerce releases a list of “job killer” bills to identify legislation that will decimate economic and job growth in California. The CalChamber will track the bills throughout the rest of the legislative session and work to educate legislators about the serious consequences these bills will have on the state.

A number of California Chamber of Commerce-opposed “job killer” bills first identified in 2013 on labor law topics appear to be dead for this year after missing legislative deadlines or being amended.

SB 626 (Beall; D-San Jose) would have resulted in dramatic workers’ compensation cost increases for employers. The bill was pulled from the January 15 hearing agenda for the Senate Labor and Industrial Relations Committee at the author’s request, therefore missing the January 17 legislative deadline for a 2013 bill to pass from policy committee to fiscal committee in the house in which it was introduced. SB 626 would have resulted in employers paying nearly $1 billion in benefit increases to injured workers without an expectation that the increases will be fully offset by system savings.The bill would have distorted the entire balance of the 2012 workers’ compensation reform deal, SB 863 (De León; D-Los Angeles; Chapter 363), that provides injured workers with needed benefit increases, but offsets these increased costs by closing certain loopholes and making California’s workers’ compensation system operate more efficiently with fewer disputes and litigation.

AB 1164 (Lowenthal; D-Long Beach) would have created a dangerous and unfair precedent in the wage-and-hour arena by allowing an employee who claims a wage violation to assert a lien on an employer’s real or personal property, or even a third party’s real or personal property, before any trial or administrative hearing has been held to determine if any wages are actually owed by the employer. AB 1164 was placed on the Assembly Inactive File on January 30, thereby missing the January 31 deadline to pass the house in which it was introduced in 2013.

SB 761 (DeSaulnier; D-Concord) Expansion of Paid Family Leave Program – Would have transformed the paid family leave program from a wage replacement program into a new protected leave of absence that will burden small and large businesses by allowing an employee to file litigation for any alleged retaliation or discrimination as a result of their intent, request, or use of the paid family leave program. The bill has been amended to deal with a different subject.

And now the Chamber has started the “job killer” bills list for 2014. Thus far there is nothing on the horizon of concern for California employers.  The stagnation or removal of the holdover legislation from last year has cleared the deck for this years fight.

A federal investigation into kickbacks allegedly paid by Tenet Healthcare Corp. marks the latest fraud inquiry involving the Dallas-based hospital giant over the last decade. Although not directly related to the current investigation, the company has a number of hospitals in California including many in Southern California. The report in the Dallas News comes as Tenet has tried to reshape its image and operations since 2006, when it reached a $900 million settlement, one of the largest ever, with the U.S. Justice Department to resolve fraud accusations.

The new investigation alleges that four Tenet hospitals in Georgia and South Carolina made improper payments in return for patient referrals. Both investigations also were triggered by whistle-blower lawsuits filed under the U.S. False Claims Act, leading federal authorities to intervene as plaintiffs. The FBI said in its release that the hospitals paid kickbacks to obstetric clinics serving “undocumented Hispanic women.” The money was in exchange for providing labor and delivery services to the patients. The hospitals then falsely billed Medicaid for reimbursements tied to the procedures, the statement said. Anti-kickback laws are designed to prevent financial incentives from interfering with caregivers’ medical judgment.

Tenet officials said in their own statement that transactions with the clinics were proper. They would “vigorously defend against the allegations,” the statement said. The agreements with the clinics provided “substantial benefits to women in under served Hispanic communities,” Tenet said. “By ensuring that pregnant women received prenatal care and appropriate treatment during birth, these programs increased the likelihood of a safe birth and a healthy baby while reducing the overall cost to state Medicaid programs.”

Federal authorities, however, used sharp language to stress the seriousness of the allegations. “Schemes such as this one corrupt the health care system and take advantage of vulnerable patients,” Stuart F. Delery, assistant attorney general for the Justice Department’s civil division, said in the news release. “My office has made the investigation of health care fraud a priority,” said Michael J. Moore, the U.S. attorney for the Middle District of Georgia. “In a time when too many people were struggling to get health care for themselves and their children, Tenet and these hospitals plundered a system set up for those truly in need.”

Tenet operates in 12 states including several hospitals in California such as Los Alamitos Medical Center, Placentia-Linda Hospital, San Ramon Regional Medical Center, Sierra Vista Regional Medical Center in San Luis Obispo, Twin Cities Community Hospital inTempleton and others.Tenet owned Memorial Medical Center of New Orleans in 2005, when 45 bodies were found after the Hurricane Katrina floods. The corporation paid $25 million to settle a suit that accused it of being ill-prepared for the disaster. Tenet denied wrongdoing, saying poor levees and government rescue efforts were to blame. Other Tenet facilities were investigated in the early 2000s on improper billing. Tenet struck its 2006 deal with the government to settle some of the improper billing allegations as well as kickback accusations.

Tenet Healthcare Corporation agreed in August 2013 to pay $54 million to resolve government accusations that doctors at Redding Medical center in Northern California conducted unnecessary heart procedures and operations on hundreds of patients. The settlement was the largest in a case involving what is known as medical necessity fraud, or billing government health programs for tests and treatments that the patient’s condition did not require. The settlement preempts any civil and criminal charges by the Justice Department against Tenet, its hospital division and the hospital itself, which did not admit wrongdoing. Nevertheless, in settling, Tenet signaled it would rather pay a record fine than argue in court that there was a medical reason for the patients to undergo the procedures or operations. The scandal and subsequent federal investigation are described in the book Coronary: A True Story of Medicine Gone Awry by author Stephen Klaidman..