A San Gabriel Valley man was sentenced to 34 months in federal prison for fraudulently submitting more than $62 million in claims to the military’s TRICARE health care benefit program for bogus compounded medications prescriptions largely generated by the payment of large referral fees to marketers.

James Chen, 51, of Monterey Park, was sentenced by United States District Judge David O. Carter, who also ordered Chen to pay $28,283,844 in restitution. Chen pleaded guilty in June 2017 to one count of health care fraud.

Chen owned Clevis Management, Inc., a Commerce-based company that did business under the name Haeoyou Pharmacy (HY). HY hired marketers to obtain prescriptions for medications that were billed to TRICARE, a health care benefit program for military members and their families. HY also operated “Healtharchy.com,” a “telemedicine” website through which individuals could seek prescriptions for medications without being examined by a physician.

Under Chen’s supervision, HY paid referral fees to outside businesses, including Mission Viejo-based Trestles RX LLC and Trestles Pain Management Specialists LLC, and to his own in-house marketers to obtain compounded medications prescriptions. The referral fees constituted more than 50 percent of the net reimbursements that HY received from TRICARE.

(As an interesting sidenote, it is worthy of note that in 2015, Mesa Pharmacy – a major lien claimant for compounded medications in California workers’ compensation cases, filed a Superior Court action against Trestles Pain Specialists LLC, John Garbino, David Fish, and Raymond Riley alleging that Trestles Pain Specialists had contracted to provide marketing services of its compounded medications to doctors.)

Chen knew that none of the prescriptions arose from a bona-fide physician-patient relationship, as required by TRICARE rules. Chen also knew that a substantial number of the prescriptions were sent to HY from marketers, not physicians, though the claim forms falsely indicated otherwise. HY never attempted to collect copayments from patients, who were selected at random and denied ever seeking the compounded medications, which were of questionable medical value. All the medications were for generic pain, scarring, stretch marks, erectile dysfunction, or “metabolic general wellness” (vitamins), according to court documents.

During 2013, Chen submitted zero claims to TRICARE for reimbursement for filling compounded medication prescriptions. In Decembr 2014, his company submitted 31 such claims to TRICARE for $81,401. During the first five months of 2015, HY submitted 2,798 such claims to TRICARE seeking a total of $62,654,938.

The claims HY submitted to TRICARE for each compounded medication prescription were astronomical compared to previous claims that HY typically submitted for reimbursement. A claim to TRICARE for a single compounded medication prescription caused TRICARE to pay HY $194,707.

Chen and his co-schemers targeted TRICARE because few, if any, insurance carriers at the time would honor reimbursement claims for similar prescriptions.

This matter was investigated by the Defense Criminal Investigative Service; the FBI; Amtrak’s Office of Inspector General; IRS Criminal Investigation, the Office of Personnel Management’s Office of Inspector General; the U.S. Department of Health and Human Services – Office of Inspector General; the U.S. Department of Labor, Employee Benefits Security Administration; and the California Department of Insurance.

This case was prosecuted by Assistant United States Attorney Mark Aveis of the Major Frauds Section.

A southern California chiropractor was sentenced to 46 months in federal prison for conspiring to defraud a labor union’s health care benefit plan by offering kickbacks to patients for attending the clinic and by submitting approximately $4.8 million in sham billings.

Mahyar David Yadidi, 38, of West Los Angeles, was also ordered him to pay $1,976,832 in restitution. In November 2019, Yadidi pleaded guilty to one count of conspiracy to commit health care fraud.

Yadidi operated Philips San Pedro Chiropractic – formerly known as Synergy Healthcare and Wellness Center – in San Pedro. From July 2016 to October 2018, Yadidi operated a scheme to defraud the International Longshore and Warehouse Union – Pacific Maritime Association (ILWU-PMA) health care benefit plan. Yadidi worked with co-conspirators Ivan Semerdjiev, 41, of Irvine, a chiropractor who worked for Yadidi, and Julian Williams, 45, of San Pedro, a personal trainer who also worked for Yadidi.

ILWU-PMA health care plan members were induced by Yadidi to visit his clinic with offers of $50 in cash for each visit, according to a one-count criminal information filed in this case. Yadidi also paid plan members to allow him to bill the plan when members did not visit his clinic.

Yadidi offered monetary incentives to Williams, Semerdjiev, and other employees, as well as to patients, to recruit additional plan members to visit his clinic. Williams induced plan members to visit the clinic by falsely informing them that they could receive personal athletic training services from him that the plan would pay for.

Once plan members either visited Yadidi’s clinic or agreed to allow him to submit claims to the plan for non-existent visits, Yadidi billed and caused his employees to bill the plan for services that were not rendered, services that were not medically necessary, and chiropractic and physical therapy services that were performed by

Williams was neither licensed nor otherwise qualified to be performing those services.

At his instruction, Yadidi’s employees falsified records, including sign-in sheets that listed the dates plan members purportedly received services from Philips Chiropractic. Yadidi instructed Semerdjiev to falsify patient files to support the clinic’s fraudulent billing. Yadidi and his co-conspirators also created false entries in the name of plan members’ relatives, knowing that the union’s health care benefit plan allowed them an additional number of covered visits as well.

Yadidi continued to operate his scheme after he was terminated as an authorized provider by the ILWU-PMA plan in August 2017, six months after it conducted an audit of his clinic.

To continue the conspiracy, Yadidi changed the name of his clinic – which previously was called “Synergy” and falsely held out another person as the clinic’s primary owner and operator, when in fact, Yadidi continued to own, operate, and financially benefit from the clinic. Yadidi continued to submit claims to the plan in the sham owner’s name.

During the conspiracy’s duration, Yadidi’s clinic submitted $4,756,284 in fraudulent claims to the ILWU-PMA plan, for which the plan paid $1,976,832.

Williams and Semerdjiev each pleaded guilty to one count of conspiracy to commit health care fraud and were sentenced to six months and one year in federal prison, respectively.

On July 31, 2020, the California Department of Insurance revised Special Investigative Unit (SIU) Regulations were filed with the California Secretary of State. They will be effective October 1, 2020.

Next month, CDI Fraud Division will be conducting training presentations on these new regulations. The format and training dates will be announced in the near future.

The definition of contracted entity was revised by section 2698.30 to specify which entities that work with an insurance company are subject to the requirements within these regulations. This definition includes subcontractors and sub-subcontractors, This definition excludes affiliates and subsidiaries. It also excludes various contractors who provide expert opinions or contractors who perform a discrete/specific investigative task (provided the contractor does not participate in the claims handling function or make decisions on behalf of the insurer).

Section 2698.30 specifies the specific contract language required to be included in insurance company contracts with contractors, subcontractors, and sub-subcontractors that provide SIU or IAF services.

These changes were driven by CDI concerns that loose SIU oversight of decentralized, multi levels of contractors was leading to significant noncompliance and less effective SIU operations. Insurance companies have until April 1, 2021 to update their contracts to comply with this section.

The definition of timely release of documentation to the Fraud Division was clarified in section 2698.34 by insurance line (no later than 30 days, except Workers’ Compensation which is 60 days), the ways in which information can be provided to CDI was specified, and language to address password protected files was added.

Redundant language was removed and language was added in section 2698.35 to specify the insurer’s IAF procedures must include red flags that address each line of insurance or each insurance product transacted by the insurer.

Language was added to section 2698.35 that requires the SIU’s thorough analysis of the claim must take into consideration factors indicating insurance fraud, identifying which industry recognized databases are used by the SIU, the summary of the investigation is a stand-alone entry, and the SIU investigation summary must answer specific questions related to the alleged existence of insurance fraud.

Language was also added that requires if an SIU investigation is not opened due to the referral not being credible, the reason for that conclusion must be documented.

A number of these changes were driven by CDI’s concern that SIU effectiveness may suffer as the industry moves away from field investigators to a desk investigation structure. CDI is seriously concerned the industry may short change or understaff its SIU function as a cost cutting measure. These changes give CDI the ability to initiate an enforcement action should an insurance company decide to make this type of short sighted decision.

These and other important changes can be read in the full text of the new SIU Regulations.

If workers’ comp professionals weren’t already hopping on the tech-train, a report in Risk and Insurance claims they certainly are now as much of the workforce transitioned to telecommuting when COVID-19 collided with our realities back in March.

Digitization has been well on its way for decades, but the suddenly urgent need for remote work changed what it means to utilize technology.

A July 23 survey of 400 American workers’ compensation professionals, conducted by Lightico and Sapiens, highlighted the challenges and burdens of an amplified technology surge.

According to the report, technology is most easily and efficiently leveraged by companies with 500 to 1000 insureds. Forty-two percent of professionals within companies of that size said their organization is leveraging technology to its maximum ability. Forty-four percent of companies of the same size said that their processes have already been completely automated. Quick Improvements in New Environments

In the survey, 87% of respondents claim that they are currently leveraging data to improve underwriting and product development to drive revenues and profitability.

In addition to increased investment in technology, here’s what insurance companies are considering as they prepare for a new normal:

— 76% of respondents are rethinking injury prevention training and education due to the new threat of COVID-19;
— 86% of workers’ comp professionals are considering incorporating telemedicine into their overall medical cost containment strategy;
— 89% are actively exploring better ways to communicate with employers and injured workers through multi-channel communication alternatives, such as texting;
— 79% are looking at incorporating additional services or programs to insureds to offset premium impacts; and
— 93% have seen a greater need for offering more flexible payment options to policyholders and injured workers (i.e. pre-paid debit card, ACH, virtual card, etc.).

A majority of respondents cited processes such as paperwork, compliance signatures, document collection, claims management and payments as the most burdensome during this transition to digitization.

Preparing for the new normal requires rethinking not just how technology can apply to these administrative processes, but every aspect of a program. Nearly all respondents, for example, are utilizing digitization to attract the next generation of claims handlers.

While the coronavirus has upended virtually every industry and aspect of life, it has also created a window for growth. For workers’ comp, it’s looking like that window will most likely be a computer screen.