Category: Daily News

The Center for Investigative Reporting is a nonprofit news organization based in Emeryville, California, and has conducted investigative journalism since 1977. It is known for producing stories that reveal scandals or corruption in government agencies and corporations. In 2010, CIR launched its California Watch reporting project. Its current investigatory effort exposes fraud in California’s workers’ compensation system. An analysis of more than a million court cases details how workers have been swept into medical billing mills, prescribed unregulated medications and advised to undergo sometimes unneeded or high-risk surgery by doctors who were raking in bribes. The CIR report has now birthed follow up articles in many California leading publications.

The Sacramento Bee in a series of related articles points out that a review of thousands of criminal court records by The Center for Investigative Reporting shows a system in which pay-to-play schemes trump patient care, particularly in unregulated treatments rejected by insurers and “disputed in obscure courts throughout the state.” Prosecutors are pursuing charges against more than 80 medical professionals who’ve handled more than 100,000 injured-worker cases, most of them originating in Southern California. They allege that the cases account for $1 billion in fraud.

And the Sacramento Bee story suggests that “nobody cares about policing health care for injured workers.” Thousands of unregulated medical providers can spurn legislated checks and balances on medical care in the only-in-California network of 24 workers’ compensation courts. Anyone can demand money – a process known as filing a medical lien – for unregulated medical treatments that include the use of questionable devices, pain creams, shockwave therapies and DNA tests. And in an overburdened system that favors settlements over trials, they often succeed”.

“We know there’s a problem,” said Christine Baker, director of the state Department of Industrial Relations, which administers workers’ compensation. Baker’s agency worked with lawmakers on a 2012 law that was meant to limit the filing of medical liens. It established a $150 fee required to demand payment in workers’ compensation courts. It also gave insurers new powers to deny money to providers that aren’t approved to treat injured workers.

Yet claims for unapproved care still are cropping up, Baker said. And the number of liens filed last year is even higher than it was when one of Baker’s advisers initially concluded that the system “rewards bad behavior.” Baker said her department has begun reviewing the medical providers who currently file the largest number of liens. The result: “We do note that many are (criminally) indicted.”

“We’re talking about a patient that has become a commodity,” said Don Marshall, chairman of the state’s Fraud Assessment Commission, which distributes funds to prosecutors who fight workers’ compensation fraud. “It’s become something to trade and sell on the open market for no other reason than to generate income.”

Workers who’ve been hurt on the job often are the last to find out that they have been exploited – if they find out at all.

Artificial disk replacement is a newer surgical procedure for relieving spine pain. Similar to hip or knee joint replacements, a disk replacement substitutes a mechanical device for an intervertebral disk in the spine. The device is meant to restore motion to the spine by replacing the worn, degenerated disk. It is an alternative to the commonly performed anterior cervical discectomy and fusion (ACDF), a surgical procedure that is designed to address the pathology by eliminating motion at the diseased disc level. Artificial disk replacement initially gained FDA approval for use in the U.S. in 2004. Over the past several years, numerous other disk replacement designs have been developed and are currently being tested. Development of these procedures first appeared in the lumbar spine, and more recently cervical total disc replacements (cTDR) at one level, and now at two levels.

The natural cervical intervertebral disc is an amazing mechanical structure from an engineering perspective. It has the ability to absorb a large compressive load while still providing an impressive range of motion between the bones in the neck. Duplicating the natural disc’s form and function with a synthetic – or artificial – disc is challenging. However, several artificial cervical discs have been developed and are available as a surgical option for patients with symptomatic cervical disc problems.

One of the newer developments, Mobi-C is a cobalt chromium alloy and polyethylene mobile-bearing prosthesis specifically designed as a bone-sparing, cervical intervertebral disc replacement for both one and two-level indications. All other cervical disc prostheses are FDA approved for one-level use only. In addition to the unique mobile-bearing feature, Mobi-C offers a simplified surgical technique.

Although both ACDF and cTDR satisfactorily treat clinically symptomatic cervical pathology, fusion alters cervical mechanics by placing increased stresses on adjacent segments, which may contribute to the development of symptomatic degeneration at those adjacent levels. In comparison, at least in theory, by preserving the motion of the operated segment, cTDR places comparatively less stresses on adjacent levels, which may serve to protect those levels. Multilevel ACDF is biomechanically more demanding than single-level ACDF with concomitant greater stress distribution on adjacent levels. Additionally, reoperation rates are generally higher in multilevel versus single-level ACDF. Currently there is a paucity of medical evidence evaluating the outcome of multilevel cTDR procedures.

However this month there is a new published study. Five-year clinical results of cervical total disc replacement (cTDR) compared with anterior discectomy and fusion for treatment of two-level symptomatic degenerative disc disease: a prospective, randomized, controlled, multicenter investigational device exemption clinical trial has just been published by the Journal of Neurosurgery: Spine.

A total of 225 patients received the Mobi-C cervical total disc replacement device and 105 patients received ACDF. Both cervical total disc replacement and ACDF significantly improved general and disease-specific measures compared with baseline. However, there was significantly greater improvement in general and disease-specific outcome measures and a lower rate of reoperation in the 2-level disc replacement patients versus ACDF control patients.

In both groups, the overall rates of patient satisfaction were high. However, there was significantly higher reported patient satisfaction in the cTDR group versus the ACDF group. At 5 years, 96.4% of cTDR patients and 89.5% of ACDF patients reported being either very satisfied or somewhat satisfied with their treatment. At 5 years, 94.8% of patients in the cTDR group and 84.2% of patients in the ACDF group reported that they would definitely or probably recommend the surgery to a friend.

In 2015, the industry observed the emergence of “captive pharmacies,” or pharmacies that enter arrangements to be owned or operated by pharmaceutical manufacturers. Captive pharmacies typically promote the manufacturer’s products instead of other lower-cost, equally effective medications. The intent is to circumvent formulary management programs designed to protect the patient and the plan sponsor from unnecessarily filling high-cost medications. The most high-profile captive pharmacy arrangements were between Valeant Pharmaceuticals International and Philidor Rx Services, and Horizon Pharma PLC and Linden Care Pharmacy.

Express Scripts Holding Co, the largest U.S. pharmacy benefit manager, is “reviewing and evaluating all similar captive pharmacy arrangements that we know of and will work to identify others,” said Brian Henry, a spokesman for Express Scripts. He defined a captive pharmacy as one that derives the vast majority of prescription volume from one manufacturer or one product. CVS Health, the second-largest pharmacy benefit manager, also said it is continuing to investigate other pharmacies to uncover inappropriate billing and dispensing activities.

The New York Times reports that Valeant has encouraged doctors to submit prescriptions for its products to Philidor Rx Services, rather than send patients to the corner drugstore. That makes it more difficult for pharmacists and insurers to substitute a less expensive alternative. Co-payments are often subsidized, making it easier for the patients to agree to get the higher-priced Valeant drug. And Philidor handles the task of fighting for reimbursement from insurers, taking that off doctors’ hands. What has raised even more suspicion is that Valeant did not disclose its relationship with Philidor until recently, when word started to get around, even though it had paid $100 million for an option to acquire the pharmacy, for no additional payment. Valeant said the transaction was too small to be material.

Phildor Rx Services was denied a license to dispense drugs in California because, the state said, it had not been truthful identifying its owners and financial officers. When Philidor failed to get the license in California, entities affiliated with it bought stakes in at least two California pharmacies. One of those, R&O Pharmacy, has presented evidence in litigation that the entity that bought the stake tried to hide that it was a front for Philidor. It also claims that Philidor used R&O’s pharmacy identification numbers to help fill its own prescriptions.

R&O Pharmacy is a small storefront community pharmacy amid rows of low-slung office buildings in Camarillo, California. According to Bloomberg News, 64-year-old pharmacist Russell Reitz agreed to sell his business there to a Delaware-registered company for $350,000. Even before the sale agreement was executed, other pharmacies began using an R&O identification number to bill for prescriptions that R&O hadn’t filled, sometimes for drugs the store didn’t stock, according to the court documents. Reitz asked why R&O’s suitor had signed an insurance-company audit for the pharmacy that Reitz still controlled. The next day, he received surprise visitors from a firm called Philidor RX Services, whose links to the buyer Reitz struggled to understand. Increasingly alarmed as millions of dollars in payments flowed in, Reitz started stashing away the checks. Then he got sued. It wasn’t pocket change. Valeant’s general counsel, in a September 4 letter to Reitz, said R&O owed Valeant in connection with gross invoices of $69.9 million. He threatened to take “any and all actions” to ensure payment.

As a result of publicity following the R&O lawsuit Valeant finally revealed that it had a secret network of pharmacies pushing its products around the country. In March, 2016 Valeant announced the litigation between the parties has been resolved by a “confidential settlement agreement that resolves all claims between them.” Reuters reported that Philidor Rx Services also has had questionable transactions with West Wilshire Pharmacy in Los Angeles.

One of the products dispensed by Philidor is Solodyn, a Valeant acne drug that costs more than $1,000 a month and is a formulation of an old generic antibiotic, minocycline. Another product is Jublia, an ointment for toenail fungus that costs more than $500 a bottle and is one of Valeant’s fastest-growing treatments. Philidor handled 44 percent of Valeant’s Jublia business in the third quarter.

The California Supreme Court ruled that employers cannot deny a worker a place to sit just because they prefer the person stand, and they must consider the employee’s work station, not their overall duties, when determining whether to provide a seat. The court’s opinion stemmed from lawsuits brought by cashiers at the CVS drugstore chain and tellers at Chase Bank who said they were wrongly denied a place to sit while working. Experts called the opinion a victory for the cashiers and tellers.

Nykeya Kilby worked for eight months as a customer service representative for CVS Pharmacy, Inc. During both the interview and training process, CVS told Kilby it expected her to stand while performing her various duties. Although actual duties varied by both store and shift, Kilby’s duties included operating a cash register, straightening and stocking shelves, organizing products in front of and behind the sales counter, cleaning the register, vacuuming, gathering shopping baskets, and removing trash. CVS did not provide Kilby a seat for these tasks. Kilby filed a federal class action lawsuit alleging CVS violated Wage Order No. 7-2001, applicable to the mercantile industry. The district court ruled that an employee’s “entire range of assigned duties” must be considered to determine whether the work permits the use of a seat or requires standing. It noted “there is no dispute that many of the duties performed by Clerk/Cashiers at CVS require the employee to stand while performing them . . . .” Accordingly, it granted summary judgment in favor of CVS and Kilby appealed.

Kemah Henderson and three other bank tellers worked at JPMorgan Chase Bank branches. They filed a class action suit against Chase for violating the suitable seating provision of Wage Order No. 4-2001, section 14, subdivision (A) (section 14(A)), applicable to “professional, technical, clerical, mechanical, and similar occupations.” The district court noted that the job duties varied depending on the shift or branch location and whether the employee was a lead or regular teller. Based on these differences, the district court denied class certification and Henderson appealed.

The Ninth Circuit Court of Appeal certified three questions that needed clarification to the California Supreme Court involving California wage order requirements that an employer provide suitable seating for employees under certain circumstances which were answered in the case of Kilby v CVS Pharmacy.

Over a century ago, the Legislature responded to the problem of inadequate wages and poor working conditions by establishing the Industrial Welfare Commission (IWC), giving it authority to investigate various industries and promulgate wage orders establishing minimum wages, maximum work hours, and conditions of labor. Wage and hour claims are today governed by two complementary and occasionally overlapping sources of authority: the provisions of the Labor Code, enacted by the Legislature, and a series of 18 wage orders.The wage orders at issue here state that “[a]ll working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.” (Cal. Code Regs., tit. 8, §§ 11040, subd. 14(A) (Wage Order No. 4-2001), 11070, subd. 14(A) (Wage Order No. 7-2001).)

The California Supreme Court answered the Questions posed by the federal Ninth Circuit Court of Appeals as follows:

(1) The “nature of the work” refers to an employee’s tasks performed at a given location for which a right to a suitable seat is claimed, rather than a “holistic” consideration of the entire range of an employee’s duties anywhere on the jobsite during a complete shift. If the tasks being performed at a given location reasonably permit sitting, and provision of a seat would not interfere with performance of any other tasks that may require standing, a seat is called for.
(2) Whether the nature of the work reasonably permits sitting is a question to be determined objectively based on the totality of the circumstances. An employer’s business judgment and the physical layout of the workplace are relevant but not dispositive factors. The inquiry focuses on the nature of the work, not an individual employee’s characteristics.
(3) The nature of the work aside, if an employer argues there is no suitable seat available, the burden is on the employer to prove unavailability.

With the answers to this questions, the matter will now be decided by the Ninth Circuit in due course. But Michael Rubin, an attorney for the plaintiffs, said the decision was a victory for all workers who have been denied a place to sit while they perform repetitive tasks in fixed locations. “For the millions of California worker in the retail industry, this is going to mean that in the next few weeks, their employers will start giving them seats, which will promote health and comfort,” he said.

In Medicare, medical professionals may be banned from seeking money to see patients if they’ve been convicted of defrauding a health care program or fraud-related offenses. But according to a report by the Center for Investigative Reporting, those banned providers have no problem starting a second career in California’s workers’ compensation system.

Medicare banned Dr. Thomas Heric in 2006 after he pleaded guilty to charges related to writing reports based on diagnostic tests that turned out to be fraudulent. In his letter to the judge who sentenced him, Heric pledged that going forward, he would use “whatever talents I may have in service to the community.” Heric then found a new line of work in the workers’ compensation medical system. His job was to review data on injured workers’ sleep patterns and issue reports needed to bill insurers.

Five years later, prosecutors accused Heric of fraud again. They say he was writing virtually identical reports that gave rise to sham billing. One expert testified in court that Heric’s sleep-study reports were so bad that they failed to address one worker’s serious breathing problems for months, a lapse that he said could harm “the general public.”

That case is pending in Orange County Superior Court. Heric’s attorney, Robert Moest, said Heric stands by the reports and is fighting the charges. “There are different opinions in the scientific community,” Moest said. “It shouldn’t be the matter of a criminal charge.”

A Center for Investigative Reporting analysis of public records found that several other chiropractors and doctors banned by Medicare moved their career to workers’ compensation.

Among them: chiropractor David C. Nguyen. Medicare banned him in 2005 over an insurance fraud conviction. Earlier this year, San Diego prosecutors indicted him for insurance fraud again, this time for passing along bribes from a chiropractor to a therapy center – both workers’ compensation medical providers.

And Medicare doesn’t bar just doctors, pharmacists and chiropractors with histories of fraud. It also takes a look at who’s in charge. Officials with the Department of Health and Human Services’ inspector general’s office will investigate clinic operators’ ownership and ban those with a 5 percent or greater stake who have a history of certain fraud convictions, according to Jason Weinstock. The rule covers direct and indirect ownership.

No such rule exists in workers’ comp. State labor department officials said they do not have the authority to review the practices of medical professionals. Instead, they said in a statement, the boards that issue licenses to medical providers are the “appropriate authority for regulation and review.” Yet no board or commission checks who’s running workers’ compensation clinics.

The state’s chiropractic board stripped Fred Khalili of his license and denied his attempt to get it back in 2013. But he still signs physicians’ paychecks at two Los Angeles County workers’ compensation clinics. Khalili’s legal problems started in 1995, when an FBI agent informed him that he was under investigation for paying $135,000 in kickbacks to auto-injury lawyers. Khalili was seeing a steady flow of patients who’d been hurt in car crashes, court records say.

Facing an indictment, he began to work undercover for the FBI. He recorded phone conversations with lawyers who demanded a cut of his medical treatment income in exchange for a parade of patients. He even went to the office of one lawyer who was believed to be a member of a Russian gang and kept a gun in his desk drawer, according to court records.

Khalili ultimately pleaded guilty to wire fraud and tax evasion and lost his chiropractic license in 2000. Twelve years later, he returned to the chiropractic board, hoping to get his license reinstated. The board refused, citing subsequent arrests for vandalism, a hit-and-run collision, driving without a license and making harassing phone calls. He appealed the decision to a higher court but lost.

Khalili remains heavily involved in workers’ compensation clinics, something that would draw scrutiny under Medicare’s rules as a fraud prevention measure. In the vacuum of such oversight in workers’ compensation, prosecutors now are pursuing charges against Khalili.

He was accused in February of insurance fraud for accepting kickbacks on behalf of First Choice Healthcare Medical Group clinics in Los Angeles and Panorama City. In exchange for the kickbacks, he directed staff at the clinics to dispense expensive pain creams to injured workers, the case alleges.

The charges against Khalili say he directed an attorney in 2009 to put the clinic ownership in the name of a physician, but Khalili controls the bank accounts. Attorney Malcolm McNeil, who advises First Choice, said Khalili does not own the clinics.

Khalili has not entered a plea in the case, and his criminal attorney did not return calls for comment.