The Division of Workers’ Compensation has posted the 2019 DWC Audit Unit annual report on its website.

The Audit Unit annual report provides information on how claims administrators audited by the DWC performed and includes the Administrative Director’s ranking report for audits conducted in calendar year 2019. Out of the 40 companies ranked in this audit, congratulations to the following for ranking in the top 5 companies.

1. Sierra Pacific Industries/Anderson.
2. Northern California Special District Authority/Elk Grove.
3. Association of California Water Agencies/Joint Powers Ins. Authority/Roseville.
4. Applied Risk Services, Inc./Omaha, NE.
5. Acclamation Insurance Management Services/Fresno.

The Audit Unit annual report details the results of audits conducted in 2019 and provides the name and location of each insurer, self-insured employer, and third-party administrator audited during that time.

This report to the Legislature summarizes audits conducted in accordance with Labor Code sections 129 and 129.5 to assure that injured workers, and their dependents in the event of their death, are provided with all benefits due them in an expeditious manner. The audit findings, by law, must detail the number of files audited, the number and type of violations cited, and the amount of an undisputed compensation found due and unpaid to the injured worker.

The DWC Audit & Enforcement Unit completed 48 audits, of which 38 were routinely selected for PAR. In addition, another 10 audits were selected, of which 2 were target audits based on the failure of a prior audit, and 8 audits were based on credible referrals and/or complaints filed with the Audit Unit. The PAR audit subjects consisted of 16 insurance companies, 9 self-administered/self-insured employers, 22 third-party administrators (TPA), and 2 insurance companies/third-party administrators that combined claims-adjusting locations.

Performance of insurers, self-insured employers, and third party administrators subject to profile audit review and full compliance audit is rated in accordance with the performance standards set annually by the Administrative Director.

The DWC Administrative Director’s 2019 Audit Ranking Report lists, in ascending order by performance rating, the administrators audited in calendar year 2019.

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.

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.

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.

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.