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Category: Daily News

Fraudulent Drug Treatment Program Owners Plead Guilty

An Inglewood woman and her mother-in-law, who both ran a South Los Angeles drug and alcohol abuse treatment program, each pleaded guilty to a health care fraud charge for fraudulently submitting more than $500,000 in claims for services that did not qualify for reimbursement or were never provided.

Mesbel Mohamoud, 47, and her mother-in-law, Erlinda Abella, 66, also of Inglewood, pleaded guilty to one count of health care fraud in separate hearings before United States District Judge Philip S. Gutierrez.

Mohamoud was the owner and executive director of The New You Center Inc. (TNYC), located in the Vermont Knolls neighborhood of South Los Angeles. Abella, who co-founded TNYC with Mohamoud in 2005, was the company’s program director. TNYC had contracts to provide medically necessary substance abuse treatment services through the Drug Medi-Cal program to adults and teenagers in Los Angeles County.

According to Mohamoud’s and Abella’s plea agreements, from January 2009 to December 2015, TNYC submitted false and fraudulent bills for counseling sessions that were not conducted at all, were not conducted at authorized locations, or did not comply with Drug Medi-Cal regulations regarding the length of sessions or the number of clients.

Mohamoud and Abella also allegedly caused TNYC to bill for clients who did not have a substance abuse problem, to falsify documents related to services supposedly provided to clients, and to forge client signatures on documents such as sign-in sheets.

For example, in September 2013, TNYC submitted a fraudulent claim for Medi-Cal reimbursement in the amount of $62.15 for a three-hour counseling session for a client on August 17, 2013 – the same day when the client was hospitalized and did not receive any counseling from TNYC.

In court documents, Mohamoud further admitted she knew that among the acts Abella directed TNYC counselors to engage in included enrolling clients in TNYC’s substance abuse treatment program even if the clients had used drugs or alcohol only occasionally or even just once.

Mohamoud and Abella admitted that TNYC submitted approximately $527,313 in false and fraudulent claims for group and individual substance abuse counseling services and was paid $260,101 on those claims.

Judge Gutierrez scheduled a January 25, 2021 sentencing hearing for Abella and a February 8, 2021 sentencing hearing for Mohamoud, at which time each of them will face a statutory maximum sentence of 10 years in prison.

The FBI, the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse, and the U.S. Department of Health and Human Services, Office of Inspector General investigated this matter.  Assistant United States Attorney Cathy J. Ostiller of the Major Frauds Section is prosecuting this case.

DME Company Resolves Fraud Claims for $566K

A Canoga Park-based company that sells home medical equipment has paid $565,873 to resolve allegations that it knowingly submitted false claims to federal health care programs for medically unnecessary medical supplies and supplies never delivered to patients.

Valley Home Medical Supply, Inc., which provides medical supplies and durable medical equipment, paid the settlement as part of an agreement that resolves a “whistleblower” lawsuit that alleged the company defrauded the Medicare and TRICARE programs from July 2006 until May 2013. With the payment of the settlement, United States District Judge Dale S. Fischer today dismissed the lawsuit.

Valley Home Medical Supply’s former president and chief executive officer, Kenneth Greenlinger, 75, of Oxnard, pleaded guilty in May 2017 to two counts of health care fraud and served an eight-month federal prison sentence. In the criminal case, Greenlinger was ordered to pay restitution of $1,072,618.

Kari Kitamura, a former employee of Valley Home Medical Supply, filed the civil lawsuit, United States ex rel. Kitamura v. Valley Home Medical Supply, CV12-11036 DSF(AGRx), in 2012 in United States District Court in Los Angeles. The United States elected to intervene in the lawsuit in 2017.

Ms. Kitamura filed the lawsuit under the qui tam – or whistleblower – provisions of the False Claims Act, which permit private parties to sue on behalf of the United States and to receive a share of any recovery. As a result of the settlement, Ms. Kitamura will receive $124,492, which equals 22 percent of the settlement proceeds. Valley Home Medical Supply will also pay Ms. Kitamura $80,000 for attorney’s fees.

This case was handled by Assistant United States Attorney Lisa A. Palombo of the Civil Fraud Section, who worked closely with the Federal Bureau of Investigation and the U.S. Department of Health and Human Services – Office of Inspector General.

App-based Ridshare Companies Win Exemption from AB5

California voters Tuesday embraced a first of its kind ballot measure that allows app-based transportation and delivery drivers to remain classified as independent contractors, despite a state law known as AB5 that went into effect in January and says otherwise.

Companies Uber and Lyft, as well as DoorDash, Uber’s Postmates, and Instacart, all at the center of a $200 million plus push for an exemption to the law, can celebrate a victory that’s expected to save the gig economy firms from major costs of doing business in the state.

The ballot measure was among the last-ditch scenarios under which the companies would be allowed to keep their workers classified as independent contractors. A California appellate court affirmed a lower court’s ruling last month mandating that the workers be reclassified as employees based on AB5.

As written the new law applies to all app-based transportation (rideshare) and delivery companies. Drivers will remain classified as “independent contractors,” not “employees,” unless the company sets drivers’ hours, requires acceptance of specific ride or delivery requests, or restricts working for other companies.

The new law does not however apply to any other business or trade within what is generically known as the gig economy.

Proposition 22 does have some benefits for workers: The ballot measure entitles the gig-based transportation workers to some benefits typically not available to independent contractors.

Though the workers remain independent contractors in name, allowing the companies to avoid paying payroll taxes and providing full legal protections typically available to employees, workers will become eligible for limited employee-style benefits including a minimum wage for certain working hours equal to 120% of the state’s $13 per hour minimum (going up to $14 in 2021).

Workers will also be given health care stipends to spend toward private employer-provided healthcare insurance, in addition to $1 million in insurance coverage to cover on the job accidents and illness, as well as lost wages.

Prop 22 would be difficult to undo. A change to the law would require a seven-eighths majority in the California legislature.

Results of California’s initiative have been billed as likely to have a ripple effect beyond the gig economy, and across state lines. Rebecca Henderson, CEO, Global Businesses and Executive Board Member at talent solutions company Randstad, says she is working closely with companies, who are reassessing the health benefits or sick leave they provide to independent contractors, as they look to maintain workers in a rapidly changing environment.

Comp Policy Rates Cannot be Altered by Oral Prior Assurances

Zurich American Insurance Company of Illinois issued a workers’ compensation policy to the former parent of Accuire, LLC.

Accuire separated from its parent company and sought a short-term workers’ compensation policy from Zurich based on the experience modification rating it shared with its former parent. As payment under that agreement, Zurich charged Accuire an initial amount, which the parties agree constituted an estimate, subject to adjustment based on a payroll audit to be completed at the conclusion of the policy period.

Shortly after, the California Workers’ Compensation Insurance Rating Bureau increased Accuire’s experience modification rating and Zurich issued an endorsement reflecting this change to Accuire.

Zurich conducted its payroll audit and provided the results to Accuire. Based on the audit, Zurich demanded payment of an additional premium totaling $491,614. Accuire refused to pay because, notwithstanding any endorsements or rate changes, it claimed that Zurich had orally assured Accuire that its rates and costs would remain the same as they had been under the policy covering its former parent.

Zurich then sued Accuire for breach of contract and moved for summary judgment. Accuire failed to timely oppose the summary judgment motion under the district court’s local rules. A week after the local rule deadline passed, Accuire filed an ex parte application for leave to file a late opposition and attached its proposed response to the motion. The district court denied the application in a minute order and then granted Zurich’s motion for summary judgment.

Accuire appealed the summary judgment. The 9th Circuit Court of Appeals affirmed the summary judgment in the unpublished case of Zurich American Insurance Company of Illinois v Accuire LLC.

The district court’s order granting summary judgment analyzed and correctly rejected on the merits the defenses raised to enforcement of the contract.

Specifically, it held that under California law, Accuire’s parol evidence of prior assurances about rates and costs is inadmissible to contradict the terms of a fully integrated agreement like the one between Accuire and Zurich.

Moreover, it found similarly meritless Accuire’s claims that it cannot be bound because its representative failed to read the contract before agreeing to it, or that Zurich improperly modified rates by endorsement.

In sum, none of the purported disputes of material fact offered by Accuire on appeal precluded the district court from granting summary judgment.

Memorial Health Services Resolves $31.5M Overbilling Dispute

Memorial Health Services, a Fountain Valley-based non-profit health care organization, has agreed to pay more than $31.5 million to resolve allegations that it overbilled Medicaid for prescription medication purchased and reimbursed under a federal drug pricing program.

The settlement agreement is the result of a voluntary disclosure made in October 2019 by Memorial Health, which under the name MemorialCare Health System operates Long Beach Memorial Medical Center, Miller Children’s and Women’s Hospital, and Orange Coast Memorial Medical Center.

After an internal audit, Memorial Health determined that its hospitals and pharmacies overbilled the United States and California, which jointly fund Medicaid – known in California as Medi-Cal – a program that helps lower-income people with their medical costs.

According to the settlement agreement, from December 2016 to October 2019, Memorial Health improperly charged higher “usual and customary” costs, rather than lower “actual acquisition costs,” as required under the 340B Drug Pricing Program. This federal program requires drug manufacturers to provide outpatient medication to eligible health care organizations at significantly reduced prices.

The overbilling allegedly resulted from Memorial Health billing for its usual costs following a federal court’s temporary stay of the implementation of the California law requiring 340B providers to bill Medi-Cal at actual acquisition cost rates. But once a court lifted the temporary ban, Memorial Health failed to implement actual acquisition cost pricing.

Memorial Health ultimately overbilled the United States and California $21,021,786 and the $31.5 million settlement represents 1.5 times the alleged overbilling, the agreement states. Memorial Health has agreed to pay the United States $12,613,071.60 and California $18,919,607.40 to resolve the allegations, bringing the total settlement amount to $31,532,679.

After making its voluntary disclosure, Memorial Health cooperated with the federal and state authorities’ investigation.

Benefit Rates Set to Increase in 2021

The Division of Workers’ Compensation announces that the 2021 minimum and maximum temporary total disability rates will increase on January 1, 2021. The minimum TTD rate will increase from $194.91 to $203.44 and the maximum TTD rate will increase from $1,299.43 to $1,356.31 per week.

Labor Code Section 4453(a) (10) requires the maximum and minimum weekly earnings upon which TTD is based be increased by an amount equal to percentage increase in the State Average Weekly Wage (SAWW) as compared to the prior year. The SAWW is defined as the average weekly wage paid to employees covered by unemployment insurance as reported by the U.S. Department of Labor for California for the 12 months ending March 31 in the year preceding the injury. In the 12 months ending March 31, 2020, the SAWW increased from $1,325 to $1,383—an increase of 4.3774 percent.

The calculation of the 2021 SAWW increase is as follows:
2021 SAWW – 2020 SAWW/2020 SAWW
$1,383-$1,325 = 58/1325 = 4.3774%

The calculation of 2021 minimum TTD rate for 2021 is as follows:
Minimum earnings for 2020 x SAWW increase x 2/3 = minimum TTD rate for 2021
292.36 x 1.043774 = $305.16 minimum TTD earnings x 2/3 =$203.44 minimum rate for 2021

The calculation of maximum TTD rate for 2021 is as follows:
Maximum earnings for 2020 x SAWW increase x 2/3 = maximum TTD rate for 2021
1949.15 x 1.043774 = $2,034.47 maximum TTD earnings x 2/3 = $1356.31 maximum rate

Under Labor Code Section 4659(c), workers with a date of injury on or after January 1, 2003 who receiving life pension (LP) or permanent total disability (PTD) benefits are also entitled to have their weekly LP or PTD rate adjusted based on the SAWW.

SAWW figures may be verified using the U.S. Department of Labor’s Unemployment Insurance Database.

1 in 5 California Comp Spine Surgeries Require Readmission

A new study from the Workers Compensation Research Institute (WCRI) quantifies the 30-day and 90-day reoperation and readmission rates for workers’ compensation patients undergoing lumbar spine surgeries, and compares these rates with those for non-workers’ compensation patients reported by other studies.

The study, Reoperation & Readmission Rates for Workers’ Compensation Patients Undergoing Lumbar Surgery, also discusses the major types of reoperations and the main reasons for readmissions, examines medical payments per claim, and describes interstate variation in the prevalence of reoperation and readmission.

The following is a sample of the study’s major findings:

Seven and eight percent of workers’ compensation patients undergoing lumbar spine surgery had a reoperation and/or readmission within 30 and 90 days after their operation, respectively. These percentages are higher than reported in the literature for non-workers’ compensation patients.
Seventeen percent of patients were readmitted within 30 days of a fusion, largely for nonoperative reasons. This readmission rate was two to seven times higher than the rate for non-workers’ compensation patients reported in other studies. This was the primary driver of the higher 30-day all-cause readmission rate for discectomy/decompression and fusion groups combined in workers’ compensation patients compared with other patients.
— There was considerable variation in the prevalence of reoperation and readmission across the study states. The percentages of lumbar spine surgery cases with reoperations and/or readmissions within two years ranged from about 1 in 10 workers’ compensation patients in North Carolina and Minnesota to more than 1 in 5 in California.

The study analyzes workers with low back pain who underwent either lumbar discectomy/decompression or lumbar fusion surgery in 18 states for injuries that arose between October 1, 2015, and September 30, 2016, and follows the postoperative experience for each case through March 31, 2018.

The 18 study states, which represent 61 percent of all workers’ compensation benefits paid nationwide, are Arkansas, California, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Tennessee, Texas, Virginia, and Wisconsin.

“Post-surgery readmissions and reoperations are the primary quality indicators being used by commercial, governmental, and a limited number of workers’ compensation payors in their value-based purchasing programs,” said John Ruser, President and CEO of WCRI. “The study can help policymakers and other stakeholders shed light on the areas where quality improvement is most needed. It can also prove to be useful to patients as they consider treatment options.”

For more information about this study or to download a copy, visit www.wcrinet.org.

Owner of Janitorial Service Faces $2.5M Fraud Charges

Almirante Perez, 43, of Highland, was arraigned on multiple felony counts of insurance fraud and tax evasion after allegedly underreporting employees and wages in an attempt to reduce his businesses’ insurance premiums and payroll taxes by over $2.5 million.

Perez was the owner of Capital Janitorial Services, Cal Best Service Group Inc., Southern Pacific Janitorial Group and United Pacific Contractors Inc., from March 2013 to November 2018.

An investigation by the Department of Insurance revealed Perez failed to report employees and wages to his workers’ compensation insurance carrier and to the Employment Development Department (EDD). The investigation discovered $1,982,597 in underreported premium fraud and $609,430 in payroll taxes owed to the EDD.

It is further alleged, as to some of the counts, that the offenses alleged are related felonies, a material element of which is fraud and embezzlement, which involved a pattern of related felony conduct, and the pattern of related felony conduct involved the taking of, and resulted in the loss by Republic Underwriters Insurance Company, NorGuard Insurance Company, dba Atlas General Insurance Company, and Ohio Security Insurance Company of more than five hundred thousand dollars ($500,000).

These allegations subject Almirante Perez to the additional punishment provided for in Penal Code sections 186.11(a)(2), which is the aggravated white collar crime enhancement. White collar crime generally refers to non-violent crime, often involving professionals, for financial gain. White collar crime may involve small amounts of money or millions of dollars. The penalties for white collar crimes in California depend, in part, on the extent of the alleged crime.

The Insurance Commissioner said that “Legitimate businesses and California consumers pay the price when business owners cheat the system by illegally underreporting employees and wages.”

Perez was arraigned on October 22, 2020, at San Bernardino County Superior Court and pleaded not guilty to all charges. The San Bernardino County District Attorney’s Office is prosecuting this case.

DWC Sets Zoom Hearing on Changes to Med-Legal Fees

The Division of Workers’ Compensation has issued a notice of public hearing for the amendment of the Medical-Legal Fee Schedule, which can be found at California Code of Regulations, title 8, sections 9793-9795.

The public hearing will be held via Zoom on Monday, December 14, 2020 at 10 a.m. Options for participation are at the bottom of this notice.

The proposed amendments to the medical-legal fee schedule include, but are not limited to, the following:

— A 25% increase in the multiplier used for setting fees for evaluations.
— Standardization of the fee that can be charged for a missed appointment.
Flat fees for comprehensive, follow-up, and supplemental medical-legal evaluations.
A single rate for review of medical records based upon the amount of pages reviewed.
— A meet and confer requirement for records sent to the physician.
Elimination of complexity factors from the Medical-Legal Fee Schedule.
An increased modifier for reports dealing with psychiatric issues.
— An increase in the hourly fee for medical-legal testimony.

The implementation of a predominantly fixed fee for all procedure billing codes is anticipated to reduce frictional costs. Moving to a flat-fee-based schedule and removing complexity factors is contemplated to reduce the incidence of disputes over billing.

The fee schedule was formulated after multiple stakeholder meetings where carriers, employers, physicians, and medical management companies were able to provide input. In addition, the proposed regulations were revised after review of the results of a 15-day comment period from a prior forum posting of the proposed regulations. The notice and text of regulations can be found at the proposed regulations page.

The proposed amendment to revise the Medical-Legal Fee Schedule is exempt from the rulemaking provisions of the Administrative Procedure Act. However, DWC is required under Labor Code sections 5307.3 and 5307.4 to have a 30-day public comment period, hold a public hearing, respond to all the comments received during the public comment period and publish the order adopting the new regulations online.

Members of the public may attend the public meeting as follows:

— Computer: Join from PC, Mac, Linux, iOS or Android: https://dir-ca-gov.zoom.us/j/92474087436
— Or Telephone Dial options: +1 253 215 8782 +1 301 715 8592 +1 312 626 6799 +1 346 248 7799 +1 669 900 6833 +1 929 205 6099 USA 1 (866) 434-5269 (US Toll Free) – Conference code: 956474
— Find local AT&T Numbers: https://www.teleconference.att.com/servlet/glbAccess?process=1&accessNumber=2532158782&accessCode=956474

Members of the public may review and comment on the proposed regulations no later than December 15, 2020.

Technical Training School Owner Sentenced for $30M Fraud

Nimesh Shah, owner of Blue Star Learning, a technical training school in San Diego, was sentenced to 45 months in custody as a result of a multi-year scheme that defrauded the Department of Veterans Affairs out of almost $30 million in education benefits.

Shah was ordered to forfeit about $3 million and pay the VA more than $29 million in restitution. Shah’s wife Nidhi Shah, who was the vice president and director of education at the school, was sentenced to two years of probation as a result of lying to investigators in the course of the investigation into the school.

Shah took extraordinary efforts to deceive regulators from the Department of Veterans Affairs to ensure the school continued to receive VA funds.

Shah provided the VA with false documents, invented fake students and created fake student files. He provided spreadsheets with false employment information and fraudulent contact information for purported graduates of the school and their made up employers.

Eligible schools must be accredited yearly and as part of the process must show that graduates are successfully finding work in their field. To comply, Shah created fictional graduates and hired people overseas to pose as satisfied alumni with fake emails and phone numbers.

He purchased cellular telephones so that he and his employees could field VA regulator calls to purported employers of school graduates, and hired individuals overseas to pretend to be satisfied Blue Star Learning students in response to VA regulator emails.

In reality, the vast majority of actual graduates of the program were working in jobs not related to the training, prosecutors said.

As laid out in court records, Shah’s scheme appears to be one of the largest Post-9/11 G.I. Bill fraud cases that has been prosecuted around the country.

As a result of Shah’s fraud, the VA issued over $11 million in tuition payments to Blue Star Learning, and over $18 million in housing allowances and stipends. In total, as a result of Shah’s fraud, the VA lost $29,350,999.

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