Menu Close

Category: Daily News

Three Indicted in $50 Million Orange County Surgical Fraud Scheme

Three Orange County residents allegedly defrauded insurers by submitting bills for more than $50 million for medically unnecessary procedures, federal prosecutors said Wednesday in a 15-count indictment.

Charged were Vi Nguyen, 31, of Placentia (10 counts of mail fraud); Theresa Fisher, 44, of Tustin (five counts of mail fraud); and Lindsay Hargraves, 30, of San Pedro (two counts of mail fraud). Nguyen and Fisher were “consultants,” Hargraves a marketer. All three were arrested on July 1 before the criminal complaint was unsealed. They were all released on bond. They are to be arraigned on July 28.

Prosecutors claim the defendants used marketers to lure patients to a surgery center in Orange, known at various times as Empire Surgical Center, Vista Surgical Center and Princess Cosmetic Surgery. These were different business names for the same surgery center, consisting of one consultation office and one surgical suite, located at 1310 W. Stewart Drive, Suites 309 and 310, Orange, California. “The marketers told patients that they could use their union or PPO health insurance plans to pay for cosmetic surgeries, which are generally not covered by insurance,” the US. Attorney’s Office said in a statement announcing the indictment.

At the center, prosecutors said, the patients were told they could get free or discounted cosmetic surgeries if they submitted to “multiple, medically unnecessary procedures that would be billed to their union or PPO health care benefit program.” The health care programs were funded by the International Longshore and Warehouse Union and Pacific Maritime Association Welfare Plan as well as private programs such as Anthem Blue Cross Blue Shield and Horizon Blue Cross and Blue Shield of New Jersey. The plans generally did not cover cosmetic surgery.

The unnecessary procedures typical were endoscopies, colonoscopies and/or cystoscopies. The plastic surgeries included tummy tucks, falsely billed as hernia repairs; nose jobs, falsely billed as deviated septum repairs; breast surgeries and liposuction, prosecutors said. Empire, Vista, or Princess also allegedly billed union and PPO health care benefit programs for procedures that never were performed on patients.

Private Self-Insured Claim Rate Shows Little Change

California private self-insured indemnity claim frequency increased 7.6% in 2013, but the incidence of medical-only claims declined 4.7%, so the overall claim frequency rate for private self-insured employers showed little change from the 2012 level according to a CWCI analysis of data compiled by the California Office of Self Insurance Plans (OSIP).

OSIP’s annual summary offers the first look at private, self-insured claims experience for calendar year 2013, tracking a number of variables, including medical-only and indemnity claim volume as well as total payments and total incurred losses on those claims through the end of last year. The summary of 2013 claims experience covered 2.09 million workers employed by California private self-insured employers, which was down about 2% from 2012, but down nearly 26% from the 2.81 million employees covered in the initial report for 2005 – the first year following enactment of SB 899. Private self-insured employers reported a total of 76,015 claims last year, 1,542 fewer than in the 2012 initial report, and the lowest first report tally in the last 10 years.

To control for the effect of year-to-year changes in the number of covered employees on claim counts and to determine the claim frequency trend for the past decade, CWCI used the OSIP first report data from 2004 to 2013 to calculate the number of private self-insured claims per 100 employees. The results show a sharp decline in private self-insured claim frequency in the wake of the 2002-2004 reforms, followed by an increase from 2005 to 2007 as the medical-only claims rate rose. Since 2007, overall claim frequency for private self-insured employers is down 8.8%, primarily due to reductions in the medical-only claims rate. In contrast, from 2006 until last year, indemnity claim frequency remained relatively flat, ranging between 1.32 and 1.37 claims per 100 employees; but, in 2013, it registered the biggest increase in 10 years, jumping 7.6% to 1.42 claims per 100 employees – the highest level since 2005.

The decline in the covered work force also affected the total paid losses for 2013, as private self-insured employers reported that as of the end of the year they had paid $180.9 million ($76.7 million indemnity + $104.2 million medical) on 2013 claims — 2.8% less than the $186.2 million recorded in the initial report for 2012 claims. That translates to an average payment of $2,380 for the 2013 claims at the end of the calendar year, less than 1% below the average for 2012, and only 4.2% below the 10-year high of $2,485 noted in the first reports for 2010 claims. A closer look at the first reports reveals that the private self-insureds averaged $1,009 in indemnity payments on their 2013 claims, 2.6% more than in 2012 and the highest level in the last 10 years; while medical payments on the 2013 claims averaged $1,371, 3.3% less than in 2012 and 8.6% less than 10-year high noted in 2010 — but still 38.1% more than the post-reform low of $993 from 2005.

Progressive Medical and PMSI to Rebrand as Helios

Progressive Medical Inc. and PMSI Inc., two workers compensation pharmacy benefit managers that merged in October, will begin operating under the name Helios in August, according to a statement issued Tuesday. Helios is based in Memphis, Tennessee, and employs more than 1,400 workers nationwide, including at Progressive Medical’s Westerville, Ohio, location, PMSI’s Tampa, Florida, office and offices in Salt Lake City and Price, Utah, according to the Helios website. The rebranding will be fully effective Aug. 18.

“Our new name is the outcome of a thorough and deliberate process that involved a great deal of research,” the company said in a statement posted online. “We considered a large number of concepts and in the end, selected Helios for its strong representation of our brand, the vigor in which we operate, and overall positive disposition.”

“While our name and look are changing, our commitment to doing what’s right is unchanged,” said Tommy Young, Co-CEO. “We will continue to provide exceptional service, proactively share intelligence with our clients to ensure they have the best information to manage their businesses, and deliver innovative solutions to effectively drive down costs and improve both clinical and financial outcomes.”

The name was chosen because it embodies the vision, values, and personality of the organization and captures the legacies of the two companies, according to H. Barry Jarnigan, Chief Marketing Officer. “Helios captures the energy, strength, reliability, and consistency of our company as well as our passion and dedication for providing exceptional, accountable service.”

Helios will be a new name in the workers’ compensation and auto no-fault markets; however, it will be built upon Progressive Medical and PMSI’s legacy of innovative products and exceptional service. Along with the name, the company will unveil a new logomark at the Workers’ Compensation Institute’s annual conference beginning August 18.

Another Federal Agency – ICE – Botches Workers Compensation Claims

Last week, Veterans Affairs released a report about its Workers Compensation program, which documented mismanagement of the Workers’ Compensation program similar to other programs administered by the VA. Oversight revealed that over 60% of all claims evaluated were not monitored properly. VA lacked a fraud detection process, which is surprising in light of VA’s perpetual focus on veterans potentially defrauding the disability compensation program. Apparently its own workers get a pass for fraud. OIG concluded VA could save over $92 million if it improves management of the program

This week it is learned that the agency responsible for investigating and enforcing immigration laws has not done a very good job of investigating its own employees’ claims of on-the-job injuries or enforcing the law that governs workers’ compensation, according to a new report summarized in Government Executive.

Immigration and Customs Enforcement paid five of its employees $1 million in workers’ comp after the employees were medically cleared to work, an audit by the Homeland Security Department’s inspector general found. One of those individuals has received more than $233,000 in compensation since medical personnel deemed the employee fit for work “several years ago,” the IG wrote. That was just one of many problems the IG found. In addition, agency supervisors did not document events accurately or completely; neglected to probe questionable claims; and failed to identify responsible third parties. “ICE has neither ensured effective claims processing oversight and case management nor returned employees to work at the earliest opportunity,” the IG reported.

The Federal Employees Compensation Act provides lost earnings, medical care and survivors’ benefits to civilian employees who have suffered work-related traumatic injuries or diseases. The Labor Department administers the program and adjudicates claims, but agencies must administer the programs internally, process claims and manage the compensation. Agencies are responsible for paying employees while claims are pending; if Labor denies a claim, the agency is to recover the payments by adjusting the employee’s leave balance or collecting the overpayment.

“ICE workers’ compensation specialists did not monitor the medical and return-to-work status of claimants, retain documentation associated with cases, return employees to work, or recover salaries for denied claims,” the IG wrote.

In a review of 132 case files tested for accuracy, auditors found that 19 percent did not include basic information, such as whether injuries were work-related. For example, one employee was injured eating lunch while away from work premises; another was in an accident three hours prior to the start of the work day — in neither case was there documentation showing any relationship to work. Nor did the files contain information about whether a third party could be financially liable for injuries, for example in cases where another driver struck an employee’s vehicle.

To address the problems, the IG recommended that Homeland Security develop and implement effective policies and procedures, and that ICE develop and implement a policy for returning employees to light work when they have medical restrictions. ICE and DHS concurred with the recommendations.

DWC Now Accepting QMEApplications

The Division of Workers’ Compensation is now accepting applications for the Qualified Medical Evaluator examination set for October 18.

The Application for Appointment as QME and all required documentation must be reviewed and approved by the DWC before a physician can be registered for the exam, (Title 8, California Code of Regulations §§10, 11). The application must be postmarked by September 11, 2014, in order to qualify for this exam. Qualified registrants will receive by e-mail/mail, a confirmation letter along with a Candidate Information Booklet.

Physicians who wish to take the exam on October 18, 2014, must submit a completed original Application for Appointment as Qualified Medical Evaluator (QME Form 100, Rev.10/2013)  Physicians who submitted an Application for Appointment as a QME form 100, (rev 10/2013), for the last exam April 12, 2014, are not required to submit another application, but must send all other documentation/fee required and Registration for the QME Competency Examination (QME Form 102, Rev. 2/09).

All physicians are required to pay a non-refundable/non-rollover $125.00 fee to sit for any upcoming QME examination. (Title 8, California Code of Regulations § 11(f)(2)). Before appointment as QME, the physician shall complete a 12 hour course in disability evaluation report writing, approved by the Administrative Director. (Labor Code § 139.2)

Surveillance Evidence Convicts Santa Barbara Roofer

Santa Barbara County District Attorney Joyce E. Dudley announced the conviction of Francisco Javier Carranza, 44 years old, of Lompoc, California. Carranza pied guilty to two felony counts of Workers’ Compensation Fraud and was sentenced to 100 days in jail, was placed on three years of felony probation and ordered to pay more than $68,000 in restitution.

Carranza filed a workers’ compensation claim for an injury sustained while working for Action Roofing Company, a local Santa Barbara business. Suspicions arose when Carranza claimed he was not getting better despite years of medical treatment and benefit payments. Carranza complained of ongoing pain and claimed he was incapable of working or walking without the use of a device. Surveillance video proved Carranza’s claims were fraudulent.

Carranza’s fraudulent claims resulted in losses to the State Compensation Insurance Fund totaling $36,519.66 and to Action Roofing in the sum of$31,710.21. District Attorney Joyce Dudley noted that, “Engaging in workers compensation fraud negatively impacts our entire community, as well as individuals and their families who rely upon this system when they become and remain injured on the job. For these reasons, our office will continue to rigorously prosecute these crimes.”

DWC Publishes Corrected Spanish Time of Hire Pamphlet

The Division of Workers’ Compensation (DWC) has posted a corrected Spanish language time of hire pamphlet on its website. The previously posted Spanish language version of the pamphlet contained outdated predesignation of personal physician and notice of personal chiropractor forms.

The Division apologizes for any inconvenience this error may have caused.

The optional time of hire pamphlet is presented in a graphic format that can be customized to meet individual needs and is also offered in “text only” format, which gives claims administrators the option to more fully customize the presentation.

Title 8, California Code of Regulations section 9883 allows insurers, employers or private enterprises prepare and publish the pamphlet upon prior approval of the form and content of the pamphlet by the DWC Administrative Director. An entity should no longer use an approved pamphlet with the old predesignation forms and a revised pamphlet should be re-submitted with the new forms. Due to the short notice provided, the parties will be provided a grace period until September 1, 2014 to send their updated pamphlet.

Civil Lawsuits Claim Comp Doctors Used Fake Spine Surgery Hardware

A story in the Desert Sun claims that doctors in Southern California have implanted counterfeit screws and rods, ginned up in a small machine shop, into the backs of thousands of injured workers, according to lawsuits filed throughout the state. Some doctors who used the bogus hardware allegedly took kickbacks including cash and private plane rides, while middlemen and hospitals profited by wildly inflating the cost of the screws, according to one suit filed in Sacramento. The allegations deepen the scandal surrounding a Corona del Mar hospital executive who pleaded guilty in April to paying doctors to bring in patients as part of a $500 million insurance scam. The executive, Michael Drobot, also admitted to bribing former state Sen. Ronald Calderon to keep huge insurance payments flowing.

The cases revolve around spinal fusion surgeries, in which rods and screws are implanted in the back to relieve pain. The state’s workers’ compensation system long paid a premium for hardware used in the surgeries until a loophole was closed by recent legislation. The latest lawsuit, filed in mid-June in Los Angeles, alleges that the knockoff spinal implants could harm patients because they could get an infection or react to metal that is not surgical grade. The screws also might loosen or fail. Some of the bogus screws cost $300 to make but were billed at as much as $12,500 each, records say.

“It’s probably the worst example where fraud has progressed from being a financial crime to hurting people for profit,” said Thomas Fraysse, an Oakland attorney on the case. “It’s beyond unethical.” Law firms in the Bay Area and Los Angeles plan to continue to file cases on behalf of people with counterfeit implants studding their backs. A contractor for Spinal Solutions, the firm accused of distributing the implants, and an attorney for the machine shop’s owner deny the allegations, saying it is impossible that the elderly machinist mass-produced the hardware.

The latest lawsuit accuses defendants of fraud and battery, saying the hardware has put the life of the patient, Arthur Golia of Riverside, at risk. Golia had seven counterfeit devices implanted in his spine, according to the suit. It follows a similar January case, which alleges that a Los Angeles man had medical implants from the mom-and-pop machine shop in Temecula put in his back in 2011. One of the screws broke, requiring David Solomon to undergo a second surgery in 2013. He has ongoing pain and loss of movement, the lawsuit says. Golia trusted his doctor to use medical implants approved by the Food and Drug Administration, his lawsuit states. Instead, the case alleges, Dr. Jack Akmakjian used counterfeit implants in Golia’s back because he was being paid a kickback to do so. Separately, the Medical Board of California accused Akmakjian in April of injecting unsafe amounts of steroids in patients and overprescribing drugs.

A separate whistleblower lawsuit alleges that many of the patients with fake implants may not have needed the surgery at all. According to that May 2012 suit, they were the collateral damage of a massive scheme to defraud insurers, involving Drobot, former owner of Pacific Hospital of Long Beach. Drobot admitted to paying doctors kickbacks of up to $15,000 to operate in his hospital. He also admitted to paying bribes to Calderon to protect a law allowing hospitals to bill insurance providers for the full cost of spinal implants. Calderon, a Montebello Democrat, has pleaded not guilty to corruption charges. Drobot’s sentencing is scheduled for December, according to news reports.

Spinal Solutions LLC, a now-shuttered Murrieta company, is accused of distributing and inflating the cost of the hardware in the Golia lawsuit and the whistleblower claim. The firm’s owner, Roger K. Williams, is accused of passing off the counterfeit rods and screws as FDA-approved even though they were made at the local tool shop. The case says Williams, his wife at the time and a key staffer hid or destroyed records that revealed the true origin of the hardware. According to the lawsuits, Spinal Solutions asked William Crowder, owner of Crowder Machine and Tool of Temecula, to make the rods and screws.

Thomas Mansor, an independent contractor who worked for Spinal Solutions and attended surgeries with their products, said the allegations sound “bogus.” Mansor said he went to Crowder’s machine shop for repairs on tools like screwdrivers. But he said Crowder didn’t have the equipment or capacity to churn out the spinal implants. Crowder sued Spinal Solutions last July, saying the firm owed him $29,900 “to machine, repair and prototype” tools for doctors. Crowder attached a one-year, $50,000 contract with the implant firm to his suit. Crowder won a judgment against Spinal Solutions because it did not respond to the suit.

The FDA cited Spinal Solutions in 2012 for a variety of quality control violations. Last year, the agency announced that the company was recalling spinal implants because problems with the products “could cause patient harm due to implant breakage, movement, or inadequate sterilization.”

Veterans Administration Botches 60% Of Its Own Work Comp Claims

This week, Veterans Affairs released a report about its Workers Compensation program, which documented mismanagement of the Workers’ Compensation program similar to other programs administered by the VA. The VA’s Workers’ Compensation Program (WCP) provides compensation and medical rehabilitation for injured VA employees.

The Department of Labor (DOL) Office of Workers’ Compensation Programs (OWCP) administers the WCP for all Federal agencies. After claims adjudication, OWCP uses its Employees’ Compensation Fund to pay the claimants’ medical expenses and compensation benefits. Then it bills each agency annually through a chargeback report. Employing agencies manage all cases listed on the chargeback report.

Within VA, the Assistant Secretary for Human Resources and Administration has broad responsibility for WCP policy development and oversight. VHA workers’ compensation specialists execute the policy by initiating claims and managing cases from the time of employee injury up to the point of claims adjudication by OWCP. Upon claims adjudication, the specialists maintain WCP case files, assess medical evidence, and make job offers to return employees to work when possible.

Oversight summarized in this most current report revealed that over 60% of all claims evaluated were not monitored properly. VA lacked a fraud detection process, which is surprising in light of VA’s perpetual focus on veterans potentially defrauding the disability compensation program. Apparently its own workers get a pass for fraud. OIG concluded VA could save over $92 million if it improves management of the program.

The report goes on to say that “In five prior audits, we reported enhanced case management could reduce VA’s WCP costs and risks for fraud and abuse. In our two most recent reports, Follow-Up Audit of Department of Veterans Affairs Workers’ Compensation Program Costs (Report No. 02-03056-182, August 13, 2004) and Audit of Workers’ Compensation Case Management (Report No. 10-03850-298, September 30, 2011), VA inaccurately initiated claims and missed opportunities to make job offers. VA lacked the medical evidence necessary to support continuation of benefits to employees. We also identified instances of potential fraud. We recommended VA increase its oversight processes, dedicate resources, and take actions to reduce fraud risk.”

In this report “We determined whether VHA improved Workers’ Compensation Program (WCP) case management to better control costs in chargeback year 2012, which represented the most current audit data available at the time we began work. We identified issues with claims initiation and monitoring similar to those disclosed in our 2004 and 2011 audit reports. Specifically, WCP case files lacked initial or sufficient medical evidence to support connections between claimed injuries and medical diagnoses. We estimated VHA inaccurately initiated about 56 (7 percent) of 793 WCP claims. WCP claims also were not consistently monitored to timely return employees to work. VHA WCP specialists did not make job offers or take actions to detect fraud. We projected 489 (61.7 percent) of 793 active claims were inadequately monitored.”

“These issues occurred because VHA still lacked standard guidance and a clear chain of command to ensure compliance with WCP statutory requirements and VA policy. VHA also lacked a fraud detection process. Overall, we estimated VHA can reduce WCP costs over the next 5 chargeback years by $11.9 million through improved claims initiation and $83.3 million by increasing efforts to return medically able staff to work. In total, opportunities exist for VHA to reduce WCP costs by about $95.2 million with improved claims management. We also identified $2.3 million in unrecoverable payments due to VHA’s lack of oversight to return medically able employees to work”

Former Visalia Physician Pleads Guilty, Faces 20 Years in Drug Case

In June 2013, a federal grand jury returned a 27-count indictment against Terrill Eugene Brown, 61, of Visalia, charging him with conspiracy to dispense oxycodone, dispensing of oxycodone and hydrocodone, and structuring currency transactions to avoid bank reporting requirements, According to the indictment, Brown, a medical doctor formerly licensed in California, sold prescriptions for large quantities of highly addictive, frequently diverted prescription drugs, including oxycodone and hydrocodone, without medical necessity. Brown sold prescriptions to customers that did not have a legitimate medical purpose and were not in the usual course of his professional practice. Brown deposited the cash earned from this into different personal bank accounts in a manner designed to avoid currency transaction reporting requirements.

Brown pleaded guilty on July 7, 2014. He will remain out of custody until his sentencing date. He is scheduled to be sentenced by Judge Lawrence J. O’Neill on September 22, 2014. Brown faces a maximum statutory penalty of 20 years in prison and a $1 million fine for illegally causing the dispensing of a controlled substance, and a maximum sentence of 10 years and a $500,000 fine for structuring currency transactions to avoid a reporting requirement. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. Brown agreed to forfeit more than $182,000 and three BMW sedans that were involved in or obtained as a result of his criminal activity.

This case is being brought as part of Operation Footprint, a nationwide law enforcement initiative led by the U.S. Attorney’s Offices, the IRS-Criminal Investigation, the DEA, and the U.S. Postal Inspection Service. Operation Footprint targets large drug trafficking organizations by identifying the transfer of drug proceeds through financial institutions, bulk cash smuggling and other forms of money transfers. Operation Footprint is focused on bringing criminal charges based on Bank Secrecy Act violations in addition to violations of the Controlled Substances Act and the Money Laundering Control Act.

This case is also the product of the Organized Crime Drug Enforcement Task Force (OCDETF), a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state and local law enforcement agencies.

Prior to the 2013 indictment, Brown was the subject of Board of Medicine investigations that ultimately led to the surrender of his medical license. On September 22, 2011, the Medical Board of California conducted an undercover operation at his office located at 5756 N. Marks Ave. #161 in Fresno California. The undercover operative was a female Medical Board Investigator, who utilized an undercover identity of a patient. During this undercover operation, Brown personally collected $200 cash and issued a medical marijuana recommendation, together with a prescription for 180 10-325 Norco tablets. Brown did not review any medical records and did not conduct any physical examination whatsoever.