Some 60 doctors, pharmacists and other licensed medical professionals in five states are being charged in connection with illegally prescribing more than 32 million pain pills, in some cases for sexual favors, federal prosecutors said Wednesday.

The people charged across 11 federal districts, include 31 doctors, seven pharmacists, eight nurse practitioners, and seven other licensed medical professionals, the Justice Department said. The cases involve more than 350,000 prescriptions for controlled substances across Ohio, Kentucky, Tennessee, Alabama, and West Virginia. The arrests were the latest effort to combat the nationwide opioid epidemic.

In one case filed in Tennessee, a nurse practitioner who branded himself the “Rock Doc,” allegedly prescribed powerful and dangerous combinations of opioids and benzodiazepines, sometimes in exchange for sexual favors; over approximately three years, the doctor allegedly prescribed approximately 500,000 hydrocodone pills, 300,000 oxycodone pills, 1,500 fentanyl patches, and more than 600,000 benzodiazepine pills.

In another case in Ohio, a doctor who is alleged to have been at one time the highest prescriber of controlled substances in the state, and several pharmacists are charged with operating an alleged “pill mill” in Dayton, Ohio. According to the indictment, between October 2015 and October 2017 alone, the pharmacy allegedly dispensed over 1.75 million pills.

A Kentucky dentist was charged for alleged conduct that included writing prescriptions for opioids that had no legitimate medical purpose and that were outside the usual course of professional practice, removing teeth unnecessarily, scheduling unnecessary follow-up appointments, and billing inappropriately for services.

In yet another case, a doctor was charged for allegedly prescribing opioids to Facebook friends who would come to his home to pick up prescriptions, and for signing prescriptions for other persons based on messenger requests to his office manager, who then allegedly delivered the signed prescriptions in exchange for cash.

In addition Attorney General Barr and U.S. Attorney Thomas T. Cullen announced that the Appalachian Regional Prescription Opioid (ARPO) Strike Force will expand into the Western District of Virginia, making it the tenth ARPO Strike Force district.

ARPO is a joint law enforcement effort that brings together the resources and expertise of the Health Care Fraud Unit in the Criminal Division’s Fraud Section (HCF Unit), the U.S. Attorney’s Offices for ten federal districts in six states, as well as law enforcement partners at the FBI, HHS Office of the Inspector General (HHS-OIG) and U.S. Drug Enforcement Administration (DEA).

In addition, HHS announced that since June 2018, it has excluded over 2,000 individuals from participation in Medicare, Medicaid and all other Federal health care programs, which includes more than 650 providers excluded for conduct related to opioid diversion and abuse.

Since July 2017, DEA has issued 31 immediate suspension orders, 129 orders to show cause, and received 1,386 surrenders for cause nationwide for violations of the Controlled Substances Act.

12 defendants taken into custody in August 2017 on federal drug trafficking charges that allege they diverted at least 2 million prescription pills – including oxycodone and other addictive and dangerous narcotics – to the black market. Two grand jury indictments claimed the activity took place through a series of sham Southern California clinics that periodically opened and closed in a “nomadic” style

Authorities have now announced that the ringleaders, two San Fernando Valley brothers have pleaded guilty to federal criminal charges, admitting that they conspired to distribute powerful narcotics such as hydrocodone and oxycodone via sham medical clinics that hired corrupt doctors who wrote fraudulent prescriptions to black market customers.

Minas Matosyan, a.k.a. “Maserati Mike,” 38, of Encino, and Hayk Matosyan, 32, of Granada Hills, each pleaded guilty on Monday to one count of conspiracy to distribute a controlled substance. United States District Judge Philip S. Gutierrez has scheduled a July 15 sentencing hearing for the brothers, each of whom faces a statutory maximum sentence of 20 years in federal prison.

The Matosyan brothers were arrested in August 2017 pursuant to a grand jury indictment that charged 12 defendants in a scheme to divert at least 2 million prescription pills for sale on the black market. A September 10 trial date has been scheduled for most of the remaining defendants.

According to his plea agreement, Minas Matosyan admitted to controlling the sham clinics and hiring corrupt doctors who allowed their names to be used on fraudulent prescriptions in exchange for kickbacks. Minas Matosyan also admitted to stealing the identities of other doctors and then issuing prescriptions in those doctors’ names, either by personally acquiring prescription pads in the doctors’ names or by arranging for other co-conspirators to do so. The elder Matosyan also admitted to staffing receptionists at the clinics who would falsely verify the phony prescriptions when pharmacists called to verify them.

Minas Matosyan sold narcotic prescriptions to black market customers – either directly or through couriers – and also sold bulk quantities of hydrocodone and oxycodone he had acquired from phony prescriptions filled at pharmacies by other customers.

In May 2016, Minas Matosyan spoke with a doctor and offered him a “very lucrative position” where the doctor would “sit home making $20,000 a month doing nothing,” according to the plea agreement. After the doctor declined the offer, Matosyan stole the doctor’s identity, sending a co-conspirator a text message containing the doctor’s full name, medical license number and national provider identifier number that the co-conspirator used to order prescription pads in the doctor’s name. Over the next two months, Matosyan and his co-conspirators sold fraudulent prescriptions purportedly issued by the victim doctor for at least 9,450 pills of oxycodone and 990 pills of hydrocodone, the plea agreement states.

Hayk Matosyan admitted in his plea agreement that he aided the conspiracy by serving as a courier of oxycodone or related proceeds from the sale of oxycodone.

The investigation in this case is being conducted by the Drug Enforcement Administration; Internal Revenue Service Criminal Investigation; the U.S. Department of Health and Human Services – Office of Inspector General; the Ventura County Sheriff’s Office, Pharmaceutical Crimes Unit; and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

The primary investigative agencies received substantial assistance from the Los Angeles County Sheriff’s Department, the Los Angeles Police Department, the California Department of Justice, and the Orange Police Department.

This matter is being prosecuted by Assistant United States Attorney Benjamin Barron of the Organized Crime Drug Enforcement Task Force.

State Compensation Insurance Fund’s 2018 Annual Report is now available. Important financial highlights include:

— Net income of $187 million, up from $40 million the previous year.
— Earned net premiums of $1.3 billion.
— Combined ratio of 134.7 percent – about 15 points lower than the previous year of 149.4 percent.

A combined ratio of more than 100% means that an insurance company had more losses plus expenses than earned premiums and lost money on its operations. The combined ratio is essentially calculated by adding the loss ratio and expense ratio. The loss ratio is calculated by dividing the total incurred losses by the total collected insurance premiums. The lower the ratio, the more profitable the insurance company and vice versa.

By comparison, in 2015 the WCIRB reported a state wide combined ratio of below 100%, the first report below that level since 2007. By 2017 it reported a state wide combined ratio of 91%. Thus, by comparison the SCIF ratio of $134.7 percent is an expensive outlier.

State Fund’s premium slightly increased in 2018. The increase of premium was due to the net effect of the increase of premium audits, and the decreases in premium rates and policy counts.

State Fund had a $460 million underwriting loss in 2018 compared to a $658 million underwriting loss in prior year. The 2018 underwriting loss decreased due to an additional $217 million LAE reserves strengthening for prior accident years in 2017.

In 2018, net investment income and realized gain on sale of equity decreased by $46 million mainly due to the abnormally higher capital gains realized in 2017 as a result of the termination and portfolio liquidation of an equity portfolio manager.

The board of directors did not declare dividends for 2018 and 2017. State Fund realized a net income of $187 million and $40 million for years ended December 31, 2018 and 2017.

“State Fund’s financial position remained strong in 2018, allowing us to continue to deliver on our purpose – providing fairly priced workers’ compensation insurance, helping keep workplaces safe, and restoring injured workers,” said Vern Steiner, President and CEO.

In his president’s letter accompanying the financial report, Steiner also discusses how State Fund is driving improvements in a number of business areas including a new Innovation Design Center, an expanded workplace safety website, and enhanced online policy services.

Sutter Health LLC, a California-based healthcare services provider, and several affiliated entities, Sutter East Bay Medical Foundation, Sutter Pacific Medical Foundation, Sutter Gould Medical Foundation, and Sutter Medical Foundation, have agreed to pay $30 million to resolve allegations that the affiliated entities submitted inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage Plans, which resulted in the plans and providers being overpaid.

Under Medicare Advantage, also known as the Medicare Part C program, Medicare beneficiaries have the option of enrolling in managed healthcare insurance plans called Medicare Advantage Plans (“MA Plans”) that are owned and operated by private Medicare Advantage Organizations (“MAOs”). MA Plans are paid a capitated, or per-person, amount to provide Medicare-covered benefits to beneficiaries who enroll in one of their plans.

The Centers for Medicare and Medicaid Services which oversees the Medicare program, adjusts the payments to MA Plans based on demographic information and the health status of each plan beneficiary. The adjustments are commonly referred to as “risk scores.” In general, a beneficiary with more severe diagnoses will have a higher risk score, and CMS will make a larger risk-adjusted payment to the MA Plan for that beneficiary.

Sutter Health, a non-profit public benefit corporation that provides healthcare services through its affiliates, including hospitals and medical foundations, contracted with certain MAOs to provide healthcare services to California beneficiaries enrolled in the MAOs’ MA Plans. In exchange, Sutter received a share of the payments that the MAOs received from CMS for the beneficiaries under Sutter’s care.

Sutter submitted diagnoses to the MAOs for the MA Plan enrollees that they treated. The MAOs, in turn, submitted the diagnosis codes to CMS from the beneficiaries’ medical encounters, such as office visits and hospital stays. The diagnosis codes were used in CMS’ calculation of a risk score for each beneficiary.

The settlement announced today resolves allegations that Sutter and its affiliates submitted unsupported diagnosis codes for certain patient encounters of beneficiaries under their care. These unsupported diagnosis scores inflated the risk scores of these beneficiaries, resulting in the MAO plans being overpaid.

In March 2019, the government filed a separate complaint against Sutter and its affiliated entity, Palo Alto Medical Foundation, alleging that they violated the False Claims Act by knowingly submitting unsupported diagnosis scores. That case is captioned United States ex rel. Ormsby v. Sutter Health, et al., Case No. 15-CV-01062-JD (N.D. Cal.), and is still ongoing.

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the United States Attorney’s Office for the Northern District of California, and HHS-OIG.

The claims resolved by the settlement are allegations only, and there has been no determination of liability.

This matter is being handled by Assistant United States Attorney Kimberly Friday and U.S. Department of Justice Trial Attorney Olga Yevtukhova, with assistance from Jonathan Birch and Tina Louie.

The Workers’ Compensation Insurance Rating Bureau of California has released its Quarterly Experience Report based on statewide workers’ compensation insurer loss and premium experience through December 31, 2018. The major findings of the report include:

— California written premium for 2018 is 4 percent below that for 2017 and 6 percent below that for 2016 as recent declining premium rates have more than offset payroll growth.
— The industry average charged rate per $100 of payroll for policies incepting in 2018 of $2.25 is 11 percent below that for 2017 and 24 percent below the peak in 2014.
— The projected combined ratio for 2018 of 91 percent represents the sixth consecutive year of combined ratios below 100 percent. However, the 2018 combined ratio is 6 points above that for 2017, driven by higher severities for 2018 and lower premium rates.
— Indemnity claims continue to settle quicker, and the ratio of claim closure for 2018 represents a 19-year high.
— Indemnity claim frequency increased by 11 percent from 2009 to 2014 but decreased by 7 percent from 2014 through 2018.
— Cumulative trauma (CT) claim rates continued to be at high levels in 2017, and the ratio of CT claims to all indemnity claims increased by more than 89 percent since 2005.
— The estimated accident year 2018 loss and allocated loss adjustment expense severity on indemnity claims is 6 percent higher than for 2017. This represents the second year of increases following five years of modest declines.
— Pharmaceutical costs per claim decreased by 69 percent from 2012 to 2017 and continued to decrease through the first six months of 2018, when the new drug formulary became effective.
— Lien filings since 2016 have declined significantly, with the number of liens filed in the last two quarters of 2018 dropping 60 percent below pre-Senate Bill 1160 and Assembly Bill 1244 levels.

The full report is available in the Research section of the WCIRB website.