The Palm Drive Health Care District is seeking bids for the purchase of its Sebastopol hospital, a move brought on by ongoing financial struggles and debt, district officials said Tuesday afternoon.

A request for proposals, which was released Tuesday, seeks a buyer who will operate Sonoma West Medical Center as an acute care hospital or “other health care” facility, said Alanna Brogan, executive director of the district.

Brogan said the need to sell the hospital became clear after the hospital’s lucrative but controversial lab services were suspended. Those services were called off earlier this year after insurance giant Anthem Blue Cross accused the hospital and health care district of participating in a business fraud scheme with a Florida-based medical laboratory company.

Anthem said the scheme resulted in more than $13.5 million in improper payments to the medical center. Hospital and district officials deny the allegation.

According to hospital financial data released Tuesday, the hospital took in $1.5 million in revenue in April with operating expenses of $2.3 million, an operating loss of $800,000.

Officials said district and hospital staff have taken a number of steps to improve operations and revenue collections at the hospital, but old debt continues to cripple the hospital. “We’ve done a lot to improve revenue, we just need to know what our options are going forward,” Brogan said.

Closure of Sonoma West Medical Center would leave West County without a full-service hospital and emergency room services.

Dennis Colthurst, president of the district board, said he had hoped the district would not be forced to sell the hospital under the current circumstances. The financial difficulties facing Sonoma West Medical, formerly called Palm Drive Hospital, are not uncommon for rural hospitals across the country. Many of them struggle to compete against larger health care providers such as Kaiser Permanente and Sutter Health.

Colthurst said he wanted the facility to remain as a full-service hospital with an emergency room and insisted it would succeed with the right health care provider at the helm. He said district voters have repeatedly made that clear.

“At the end of the day, the West County needs a hospital with an emergency room with full services for the community,” he said. “To me, having the emergency room is vital.”

But district board member Jim Horn, a strong critic of the hospital’s current management organization, Sonoma West Medical Center, Inc., said he thought it was unlikely a large health care organization would be willing to operate the facility as a hospital.

He said district and hospital supporters have had informal talks with health care providers in the area for the last year to no avail. He said that when the Petaluma Avenue hospital first closed in April 2014, district board members sought to get someone to operate it as an urgent care center with radiology services, but received no response.

Horn said the district may ultimately be forced to issue another request for proposals allowing the buyer to operate the hospital as something other than a medical facility.

Proposed legislation that would tighten regulation of California’s addiction recovery industry is a few steps closer to becoming law.

Senate Bill 1228, introduced by California Senator Ricardo Lara, unanimously passed the Senate Healthcare Committee last month .This bill proposes to establish the Substance Use Disorder Patient Protection Act.

This bill makes findings and declarations about the opioid epidemic and its toll on overdoses in the state, the growing need for treatment services and the surge in patient brokering and trafficking because of the need for services; and the state’s interest in increasing the availability of quality recovery services to encourage patients’ recovery and stability.

The bill would ban patient brokering and require “licensed recovery programs to refer patients only to certified facilities that meet high standards of patient care and protect patients from physical, sexual or financial abuse,” according to a statement by Senator Lara.

Patient brokering is the practice of recruiting people in need of treatment for substance use disorder in exchange for kickbacks. This predatory practice – which may involve prowling recovery meetings, homeless camps, and drug courts- is, at its worst, associated with patient deaths and insurance fraud.

Senator Lara says that desperation is fueling a surge in patient brokering or patient trafficking, where patients are referred to recovery services that do not meet their needs and put them at risk of relapse.

Numerous news articles have shown the dreadful cost of brokering to patients and their families. Patients have been recruited with the offer of cash payments or drugs. Patients with acute medical needs have even died after being referred to facilities that did not meet their needs. Insurance fraud and overbilling for medical services can result from patient brokering.

After clients’ insurance coverage is exhausted, facility operators have allegedly been dumping them in the streets. The issue is largely attributed to facilities that do not require state licensure or oversight, including sober living homes.

A recent CDI investigation highlights the growing concern surrounding sober living homes. In November 2016, the CDI issued a press release about an investigation that resulted in the arrest of the operators of some Southern California sober living homes, Community Recovery of Los Angeles (CRLA).

Florida, New York, and more have banned patient brokering.

SB 1228 goes before the Senate Appropriation Committee on May 22.

The U.S. Department of Justice and five U.S. states, including California, have stepped into a previously secret lawsuit against Insys Therapeutics, Inc., revealing for the first time the central role played by whistleblower Maria Guzman in the government’s years-long pursuit of Insys for illegally marketing a dangerous opioid spray named SUBSYS.

The resulting probe has led to a series of convictions, guilty pleas, and indictments of doctors and former Insys executives – including the company’s billionaire founder, John Kapoor, who was indicted in 2017 on federal racketeering charges. The drugmaker is accused of trying to generate more profit by paying kickbacks to doctors to prescribe powerful opioid medications.

The government’s involvement was disclosed in a filing made public on Monday when the case filed in 2013 was unsealed. The move adds firepower to the civil litigation as Insys tries to resolve a federal probe into its marketing of Subsys, a spray form of fentanyl. Six U.S. states – California, Colorado, Indiana, New York, North Carolina and Virginia – also joined whistleblower litigation against Insys, according to the filing in U.S. District Court in Los Angeles.

Ms. Guzman alleged a nationwide scheme by Insys to defraud Medicare and Medicaid by inducing doctors, via kickbacks that ranged from cash to favors to sex, to prescribe large doses of the drug SUBSYS for federally insured patients who never should have received the drug, a form of fentanyl that’s designed to be sprayed beneath the tongue of people who suffer from extreme pain due to cancer.

Using a mantra of “pain is pain,” Insys illegally pushed the prescription of SUBSYS for lesser “off-label” conditions such as back pain and migraines, according to the complaint. Ms. Guzman was fired in 2013 after objecting to the potentially deadly scheme.

In federal court filings unsealed on May 11, the U.S. government and five U.S. states said they would take over litigation of the major part of Ms. Guzman’s action, specifically including her claims against Insys for kickbacks.

The original complaint was filed in Los Angeles federal court in 2013. The 139 page Second Amended Complaint in the case provides an account of Ms. Guzman’s experience at Insys. In addition to outlining a fraudulent scheme against taxpayers, it also alleges that Insys was a discriminatory workplace for women.

Indeed, much of the Second Amended Complaint can serve as a training manual for designing illegal kickback schemes. The first third of the document describes in detail how it was done under these topical categories.

– The INSYS Business Model and Kickbacks to Doctors (Page 12)
– Kickbacks and Speaker Programs (Page 14)
– Strip Clubs, Shooting Ranges, Meals, and Referrals (Page 17)
– Hiring a Doctor’s Significant Other Family Member, or Friend (Page 22)
– Burlakoff Offered Physicians Lucrative Business Deals and Partnerships (Page 24)
– Instructions for Avoiding Anti-Kickback Standards (Page 24)

With regard to the topic of avoiding anti-kickback standards, the Complaint claims that during the April 2013 INSYS conference in Arizona, management and specialty sales professionals shared methods with one another on how to avoid anti-kickback standards. At the conclusion of the meeting on of the presenters said “I don’t want to know what you do,” but stated they should do what they need to do, but “It’s not on me.”

The President of a health care company based In Fresno and Visalia pleaded guilty to illegal use of client funds

According to an announcement by U.S. Attorney McGregor W. Scottj, Mark Merrill Reynolds, 62, of Fresno, pleaded guilty to unlawfully converting to his own use client funds held by his company, Ben-E-Lect.

According to court documents, Reynolds was the president and sole shareholder of Ben-E-Lect and Ben-E-Lect of Visalia. These companies operated in Fresno and Tulare Counties.

Ben-E-Lect’s clients were small to medium sized businesses that purchased high-deductible, fully insured group medical plans from independent insurance carriers, and then self-insured beneficiaries for amounts up to the amount of the high deductible.

The company was first incorporated in 1987, and was purchased by Reynolds in 1996.

Ben-E-Lect processed the claims using funds that its clients paid into an account known as the Ben-E-Lect Employer Elect account. Ben-E-Lect was required to hold these funds in a fiduciary capacity and to withdraw clients’ funds only for specific purposes, none of which included Ben-E-Lect’s own operational expenses or Reynold’s personal gain.

According to the plea agreement, Reynolds converted funds from the Employer Elect account to his own use by withdrawing funds from the account and then using these funds for business operational expenses of Ben-E-Lect, and to pay his own personal expenses.

Reynolds faces a maximum statutory penalty of 5 years in prison and a $250,000 fine. He is scheduled to be sentenced by U.S. District Judge Lawrence J. O’Neill on August 20, 2018, at 10:45 a.m.

On May 9, Employer Driven Insurance Services, Inc. (E.D.I.S.), a provider of third party administration that focuses on helping employers of all sizes improve benefits and lower cost, announced that it reached an agreement to acquire the block of business and assets of Ben-E-Lect.

This case is the product of an investigation by the Federal Bureau of Investigation and the California Department of Insurance. Assistant U.S. Attorneys Mark J. McKeon and Henry Z. Carbajal III are prosecuting the case.

The California Department of Insurance announced the conclusion of an enforcement action against Parker Conrad for his alleged role in licensing compliance violations that occurred at Zenefits during his tenure as CEO.

The CDI claimed that YourPeople, Inc., doing business as Zenefits FTW Insurance Services, was formed in 2012. Zenefits has held a California resident business entity insurance producer license since October 1, 2013. Conrad was identified in licensing applications submitted by Zenefits as the only designated responsible licensed producer endorsed to transact on behalf of Zenefits.

Zenefits provided businesses with a cloud-based software platform to manage human resources, payroll, as well as benefit functions with a focus on health insurance coverage. Zenefits offered its software to users free of charge and earned revenue when customers selected Zenefits to act as their insurance broker of record. As broker of record, Zenefits assisted its customers with the purchase and administration of group health insurance policies. In return, Zenefits earned commissions from insurers.

In late 2015, the department learned of alleged violations regarding the transaction of insurance by unlicensed Zenefits’ employees as well as the creation of a software macro that enabled employees to circumvent the pre-licensing study requirements.

Following an investigation, the department concluded an enforcement action against Zenefits in November 2016.  After the filing of an Accusation, Conrad entered into a settlement with the department resulting in the surrender of his insurance license.

Zenefits agreed to pay a fine of $7 million, with half of the fine suspended if Zenefits had no future insurance code violations. This was one of the largest fines imposed for licensing violations in the history of the department.

Conrad was a co-founder of Zenefits and acted as the company’s CEO from its inception in 2012, until his resignation in February 2016. He also held a seat on the company’s board of directors and had an ownership interest in the company during the time the alleged violations occurred.

In addition to surrendering his license, Conrad agreed to pay $66,000 in reimbursement costs to the department and to not transact insurance, either directly in his name or indirectly by managing or directing the transaction of insurance through any other licensee, without first applying for and obtaining an insurance license.

“As Zenefits’ CEO, the buck stopped with Parker Conrad,” said Commissioner Jones. “Unlicensed insurance transactions occurred under Conrad’s management and employees were provided with a computer program that enabled them to skirt the pre-licensing education requirements. Conrad was ultimately responsible.”