Category: Daily News

Detectives from the California Department of Insurance arrested Dr. Edward Albert G. Balbas, M.D., Chiropractor Jon Brunelle, D.C., and Alejandra Brunelle on felony insurance fraud charges for allegedly conspiring to submit more than 165 fraudulent bills to several health insurers totaling at least $380,000 over a three-year period.

According to department detectives, the three co-conspirators and owners of Corona Physical Medicine allegedly developed a scheme to mark up insurance reimbursement claims for laboratory tests in order to generate greater profits for themselves.

Evidence revealed the suspects paid Cell Science Systems, an out-of-state lab between $312 and $625 for the lab tests, but billed insurers $4,256 for the tests. The suspects were able to hide their alleged crime by claiming they processed and analyzed the blood tests through an in-house lab, so the insurers were unaware that the actual cost to process the lab tests was substantially lower.

Edward Albert G. Balbas is listed by the DWC as a QME in two specialities, Pain Medicine, and Physical Medicine and Rehabilitation. He is listed to perform QME evaluations in Corona, Irvine, Rancho Cucamonga, Colton and Indio. Board of Medicine records say he is a graduate of the University of Santo Tomas Faculty of Medicine in Sampaloc, Manila, Philippines. He has no prior disciplinary record on file with that agency.

“Patients should be able to trust that medical professionals are making medical decisions based on patient needs and conducting their practice ethically,” said Insurance Commissioner Dave Jones. “These defendants took extraordinary steps to hide their alleged crime and violate the trust of their patients and the medical profession.”

The suspects self-surrendered at the Riverside County Court and arranged for bail, which was set at $382,000 for each suspect. The department filed a 1275 PC bail hold, which places conditions on bail by requiring the defendants to prove funds used to secure bail does not come from their alleged illegal activity. The defendants were able to demonstrate bail funds were not from illegal activity. The defendants are scheduled to appear in court again on October 24, 2016.

Despite a decline since 2013, pharmaceutical costs for California workers’ compensation indemnity claims at six months post injury increased by 217% over a ten-year period from 2005 through 2014. For claims lasting ten years or more, drugs account for 37% of all medical costs, contributing to California’s rank as the state with the longest durations for workers’ compensation claims in the nation.2

Although many factors have contributed to the long-term escalation of workers’ compensation drug costs, there are concerns in California as well as in other states about the possible impact of physician drug dispensing. This concern stems from a potential incentive for physicians, some of whom have purchased drugs wholesale, to dispense drugs to injured workers and then charge for those drugs on a retail basis.

A 2006 study by the Commission on Health and Safety and Workers’ Compensation revealed that 50% of all drug payments were made to physicians dispensing repackaged drugs resulting in $223 million in additional costs to workers’ compensation payers. This practice involved prescribing repackaged drugs at higher costs than the same drugs available at pharmacies.

Given that a 2002 Appellate Court Case in San Diego upheld physicians’ right to dispense drugs, the California Division of Workers’ Compensation addressed this issue in March 2007 through an administrative regulation which equalized payment levels for repackaged physician-dispensed drugs and drugs dispensed by pharmacies. This change appeared to reduce physician dispensing for some drugs while opening the door for dispensing of compounds not covered by the California Medi-Cal-based pharmacy fee schedule applicable to pharmaceuticals in the California system.

To update the situation, the WCIRB has released a new report entitled Patterns of Drug Dispensing in California Workers Compensation, which analyzed $500 million in workers’ compensation pharmaceutical payments from July 2012 through December 2015. WCIRB researchers used reported medical payment data representing more than 90% of the California workers’ compensation insurance market.

This study shows that the share of pharmacy payments directly to dispensing physicians dropped by 20% over the 42-month period. Given that the unit amounts paid to physicians remained at consistent levels during this period, the reduction in providers’ share of overall drug payments was driven by a lower number of prescriptions or utilization.

This decline in payments made to dispensing physicians occurred across all major types of drugs and was especially apparent for opiate analgesics, the most prominent type of workers’ compensation drug. For base substances used for compound drugs, the share paid directly to physician dispensers decreased by approximately 50%.

Despite the overall drop in payment shares, physicians received higher per transaction reimbursements for specific drugs, including some opiate analgesics and stomach discomfort medications. In addition, provider physicians generally dispensed the most expensive drugs within these categories, although lower cost therapeutic equivalents were often available in pharmacies.

These results help explain WCIRB findings showing a 28% reduction in drug spending per claim from the second half of 2012 through the second half of 2015. This trend may be attributed to many factors, including the introduction of Independent Medical Review and the greater attention across the country as to the potential overuse of opiates. This study suggests that the reduction in drug payments to physician dispensers may be another underlying factor in the overall decline in drug costs per claim over the last several years.

The connection between opiate pain pills and heroin addiction is now reached epidemic proportions according to state and federal health regulators. Yet it is uncommon for anyone in the workers’ compensation claim industry to be aware of even a single case where an injured worker is involved in heroin or concurrent use of illegal substances. What what are the odds that workers’ compensation claimants are free of illegal drug use?

A new study published in Spine, concludes that the odds are fairly high that people living with chronic low back pain (cLBP) are more likely to use illicit drugs — including marijuana, cocaine, heroin, and methamphetamine — compared to those without back pain.

In addition, cLBP patients with a history of illicit drug use are more likely to have a current prescription for opioid analgesic (pain-relieving) drugs, according to the new research by Dr. Anna Shmagel of University of Minnesota, Minneapolis, and colleagues. While it’s not clear which direction the association runs, the patterns of illicit drug use may have implications for decisions about prescribing opioids for patients with back pain.

The researchers analyzed survey responses from more than 5,000 US adults (aged 20 to 69) from a nationally representative health study (the 2009-2010 National Health and Nutrition Examination Survey, or NHANES).

About 13 percent of respondents met the study definition of cLBP — back pain present for three months or longer. The confidential survey also asked participants about their use of illicit drugs — marijuana, cocaine, heroin, and methamphetamine.

The results suggested that back pain was linked to higher rates of illicit drug use. About 49 percent of adults with cLBP said they had ever used illicit drugs, compared to 43 percent of those without cLBP. Rates of current illicit drug use (within the past 30 days) were also higher in the cLBP group: 14 percent versus nine percent.

All four specific drugs in the survey were more commonly used by respondents with cLBP. Rates of lifetime use were about 46.5 versus 42 percent for marijuana, 22 versus 14 percent for cocaine, nine versus five percent for methamphetamine, and five versus two percent for heroin. After adjustment for other factors, participants with cLBP were more than twice as likely to report methamphetamine and heroin use.

The results also suggested a link between illicit drugs and prescription opioids among patients with cLBP. Subjects who had ever used illicit drugs were more likely to have an active prescription for opioid analgesics: 22.5 percent versus 15 percent. Current illicit drug users were also more likely to have an opioid prescription, although that difference was not statistically significant.

Prescription opioids are widely used by patients with cLBP, raising concerns about addiction, misuse, and accidental overdose. Previous studies have found that people with a history of illicit drug use are more likely to misuse prescription opioids. The new study is one of the first to focus on rates of illicit drug use among Americans with cLBP.

The nationwide data show that people with cLBP have higher rates of illicit drug use, and those with a past history of illicit drug use are more likely to be current users of opioid analgesics. The researchers note some important limitations of their study–including a lack of data on whether illicit drug use occurred before or after cLBP. They also suggest that the true scope of the problem may be even greater, since NHANES excludes some groups at high risk of illicit drug use.

Pending further research, doctors may want to consider theses associations when evaluating pain relief options for patients with cLBP, Dr. Shmagel and coauthors believe. They write, “As we face a prescription opioid addiction epidemic, careful assessment of illicit drug use history may aid prescribing decisions.”

Thomas M. Calderon, a former member of the California State Assembly who became a political consultant, was sentenced this week to one year and one day of incarceration after he pleaded guilty to money laundering for allowing bribe money to be funneled through his firm.

Tom Calderon was sentenced by United States District Judge Christina A. Snyder, who ordered that the sentence be served half in federal prison and half in home detention. In addition to the period of incarceration, Judge Snyder ordered Tom Calderon to serve 100 hours of community service.

Tom Calderon, 62, of Montebello, pleaded guilty on June 6 to one count of money laundering and admitted that he agreed to conceal bribe payments coming from two undercover FBI agents by having the money go through his political consulting company, the Calderon Group.

The bribes were made to Tom Calderon’s brother, Ronald S. Calderon, who at the time was a California State Senator. Ron Calderon pleaded guilty on June 21 and admitted accepting bribes from the undercover agents and a businessman in exchange for performing official acts as a legislator. Ron Calderon, 59, also of Montebello, is scheduled to be sentenced by Judge Snyder next Monday, although he has asked to continue his sentencing date.

When he pleaded guilty, Tom Calderon specifically admitted that in 2013 he deposited a $30,000 bribe payment from an undercover agent into the Calderon Group’s bank account and then wrote a $9,000 check to Ron Calderon’s daughter.

“Tom Calderon was all too aware of the bribe payments to his brother and that his brother had agreed to a quid pro quo with the undercover agents,” said United States Attorney Eileen M. Decker. “Tom Calderon facilitated these bribe payments by helping to conceal his brother’s corrupt activities from the public.”

“Today’s sentencing sends a message to those interested in using access to public office in order to reap personal benefits that they will be held responsible for their actions,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “Mr. Calderon used his family ties to benefit personally at the expense of the constituents represented by his brother’s office.”

Tom Calderon and his brother were both indicted by a federal grand jury in 2014. Tom Calderon was charged with conspiring with his brother to commit money laundering and seven substantive counts of money laundering. The money laundering charge that Tom Calderon pleaded guilty to was count 22 in the indictment.

“IRS Criminal Investigation tirelessly untangled the web of illicit transactions that lead to Thomas Calderon being held accountable for his role in this scheme,” stated IRS Criminal Investigation’s Acting Special Agent in Charge, Anthony J. Orlando. “IRS CI remains committed to investigating those who engage in political corruption and tarnish our democratic system.”

Three days after Berkshire Hathaway Inc. subsidiaries Applied Underwriters and its California Insurance Co affiliate agreed to stop selling disputed workers’ compensation policies in California, the company has again been has been sued now by a New York bicycle courier company over another alleged illegal scheme to cheat employers buying workers’ compensation policies.

California’s insurance commissioner ruled against Berkshire in June over workers’ compensation policies after determining that the company duped a small business, Shasta Linen Supply, and circumvented a review of rates. Earlier this month, the company agreed to stop selling the policies in dispute in California. The regulator said the Berkshire businesses charged customers’ rates which hadn’t been approved by the regulator.

According to a Reuters report, the new civil complaint, filed late Friday by Breakaway Courier Systems, came as Berkshire’s Applied Underwriters unit faces scrutiny over its workers’ compensation policies, including some that have been banned by California, Vermont and Wisconsin.

Breakaway, with about 300 employees, accused Berkshire and Applied of “siphoning” premiums through a web of illegal shell companies, with diverted premiums going to unlicensed out-of-state insurers.

The plan amounted to a “reverse Ponzi scheme” where unsuspecting employers expecting to buy affordable policies instead bought costly “reinsurance” requiring them to cover each other’s losses, leaving taxpayers on the hook for shortfalls when too many workers are injured on the job, Breakaway said.

“Breakaway thought it was purchasing a workers’ comp policy with a profit-sharing component if its losses were low,” Raymond Dowd, its lawyer, said in an interview. “Instead it purchased a complex derivative swap labeled misleadingly as a ‘reinsurance participation agreement’ that put all the risk on Breakaway.

“Berkshire’s schemes break multiple laws, including that you cannot collect insurance premiums if you are not licensed,” Dowd added.

Neither Berkshire nor Applied immediately responded to requests by Reuters for comment.

The lawsuit, filed in the state supreme court in Manhattan, seeks at least $18 million of damages, plus a declaration that the reinsurance participation agreements (RPAs) are void and against public policy.

It shines a spotlight on a lesser-known part of Berkshire’s insurance operations, which also include Geico car insurance and General Re reinsurance.

In the recently settled California case, both insurers denied wrongdoing. California Insurance Commissioner Dave Jones said their sale of a policy to Shasta Linen Supply Inc of Sacramento subjected the employer of 63 to hundreds of thousands of dollars of extra costs.

Similarly, Breakaway’s RPA put that company at “imminent financial risk,” and was “not understandable” by ordinary purchasers, Martin Schwartzman, former first deputy superintendent of New York’s insurance department, said in a filing accompanying the complaint.

The case is Breakaway Courier Corp d/b/a Breakaway Courier Systems v. Berkshire Hathaway Inc et al, New York State Supreme Court, New York County, No. 654806/2016.