Kan-Di-Ki, LLC, doing business as Diagnostic Laboratories and Radiology has agreed to pay $17.5 million to resolve allegations that it submitted false claims to Medicare and Medi-Cal that were tainted by a kickback scheme.

Diagnostic Labs, which is headquartered in Burbank, provides lab and x-ray services to patients at skilled nursing facilities (SNFs) in Southern California. SNFs, commonly known as nursing homes, are a healthcare option for senior citizens who are in need of constant medical attention.

Diagnostic Labs allegedly charged SNFs below cost rates for Medicare Part A business, in exchange for the facilities’ provision of Medicare Part B and Medi-Cal business back to Diagnostic Labs;This scheme is alleged to have violated the federal Anti-Kickback Act (42 U.S.C. § 1320a-7b(b)(2)(A)) and the federal and state False Claims Acts.

“When medical facility owners illegally offer discounts to customers to generate business, it results in inflated claims to government health care programs and increases costs for all taxpayers,” said Glenn R. Ferry, Special Agent in Charge for the Los Angeles Region of the Department of Health and Human Services’ Office of Inspector General; “This $17.5 million settlement demonstrates OIG’s ongoing commitment to safeguarding federal health care programs and taxpayer dollars against all types of fraudulent activities.”

The United States will receive $12.95 million of the settlement amount, and California will receive $4.55 million.

This settlement resolves a lawsuit filed under the qui tam, or “whistleblower,” provisions of the federal and state False Claims Acts, which allow private citizens with knowledge of fraud to bring civil actions on behalf of the federal and state governments and share in any recovery;The case was filed in 2010 in federal court in Los Angeles by two former Diagnostic Labs employees, and is titled United States and State of California ex rel. Pasqua et al. v. Kan-Di-Ki, LLC, Civil Action No. CV10-0965 JST (RZx) (C.D. Cal.); The two men who filed the lawsuit, Jon Pasqua and Jeff Hauser, will collectively receive $3,755,500 as their share of the federal recovery.  Their share of the state recovery has not yet been determined.

The United States Attorney’s Office for the Central District of California, the Justice Department’s Civil Division, and the California Attorney General’s Office handled the civil settlement.  This matter was investigated by the U.S. Department of Health and Human Services, Office of Inspector General.

The Insurance Journal reports that class action lawsuits in federal courts on both coasts have been initiated on behalf of small businesses in California, New York and New Jersey against American International Group (AIG) over workers’ compensation reporting. Plaintiff attorneys say the case could involve thousands of firms doing business from the 1970s until the early 2000s and could result in damages up to hundreds of millions of dollars, although no figure has yet been established.

AIG says the suits are an attempt to reopen charges that have already been settled.

The suit filed this week against AIG and its subsidiary companies, and former AIG CEO Maurice Greenberg, charges unfair business practices, fraud and violations of the federal racketeering statutes. The attorneys who filed the suit allege that beginning in the 1970s AIG engaged in a scheme to misreport the amount of workers’ comp premium it collected in each state, which resulted in insured employers paying more in certain workers’ comp fees. Plaintiffs claim that by making it appear that less money in workers’ comp premium was collected, AIG caused insurance regulators to assess artificially inflated fees on insured employers for certain state mandated workers’ comp programs, the attorneys argue.

In 2010 AIG agreed to pay $146.5 million in fines and additional taxes to state insurance regulators for alleged under-reporting of premiums to states more than a decade ago. AIG has also agreed to pay $450 million to resolve litigation brought by other insurance carriers over the misreporting. The deal was believed to have resolved a multi-state probe that examined whether AIG violated premium reporting rules governing workers comp insurance from 1985 to 1996. The misreporting had the effect of lowering the premium taxes and premium-based assessments AIG paid, according to regulators.

In a response to this week’s suit AIG referred to that deal. “The court filings attempt to recycle allegations of wrongdoing from decades past that AIG has already resolved via settlements with its regulators and with civil plaintiffs,” AIG said in a statement issued to Insurance Journal on Thursday. “AIG will defend the cases vigorously.”

However that deal did not give damages to the companies that were paying the higher premiums as a result of AIG’s “scheme,” an attorney on the case said on Thursday. “The wrong that we’re suing for has not been dealt with at all,” said Drew Pomerance, a partner in Roxborough, Pomerance, Nye and Adreani LLP, the firm representing the class in California. “AIG has not compensated any insured employers affected by this conduct.” With an air of confidence he added: “There’s been judgment against them before, and we expect to get a judgment against them this time.”

Based on previous litigation and analysis, Pomerance estimates AIG underreported premiums by $2 billion, which could lead to a large figure for any damages that may be sought. “It looks like there was more than $2 billion of underreporting and probably substantially more over the years,” he said. “It could be tens to hundreds of millions of dollars in damages.”

The first court of appearance in California is a case management conference set for Jan. 17 in the U.S. District Court for the Northern District of California in San Francisco. Similar appearances are expected in New York and New Jersey, according to Pomerance.

Senate Bill (SB) 863 includes a program to provide supplemental payments to injured workers for whose permanent disability benefits are “disproportionately low” in comparison to their earnings loss. This program is to be funded by a $120 million per year surcharge. However, the language in the statute does not expressly define what is “disproportionately low.” The bill provided the Director of the Department of Industrial Relations (DIR) with wide leeway in the design and implementation of the program. In addition, the bill required the Director in consultation with the California Commission on Health and Safety and Workers’ Compensation (CHSWC) to determine eligibility and the amount of payments to be made based on a study.

CHSWC has released on its website for public comment and feedback the Working Paper, “Identifying Permanently Disabled Workers with Disproportionate Earnings Losses for Supplemental Payments. The paper was repared by RAND, and conducted by the Office of the Director, Department of Industrial Relations in consultation with CHSWC. The Working Paper presents one definition of how this program could be defined and implemented. The Director’s office will be using RAND’s findings in the development of the return-to-work program. The tentative working title of the program is the Special Earning Loss Supplement (SELS).

One of the topics of the RAND study included the issue of the period over which to observe the post injury loss experience of injured workers. In this regard, the study claims “a person’s actual losses can only be measured after they have been realized. That is, we can only compare pre-injury and post-injury earnings after an individual has actually accumulated their post-injury earnings.” ….”This implies that eligibility criteria based on actual earnings needs to focus on the earnings in the post-injury period for a sufficient period of time after the date of injury to allow for the effects of the injury to be realized. Past RAND work suggests it takes 3-5 years after the date of injury for earnings losses to stabilize (Reville et al. 2005). Given this time frame, this suggests that an eligibility determination based on actual earnings losses would likely need to focus on earnings that occur several years after the date of injury (or the date at which the injury is determined to have become permanent). An obvious consequence of this requirement is that if eligibility can only be determined several years after an injury, then compensation can only be paid out several years after an injury.”

The California Applicant Attorneys Association has voiced its objection to such a delay in making the SELS payment. In addition to other issues raised by the CAAA objection, the letter states “we strongly object to the suggestion in the RAND Paper that a worker’s eligibility for this program can be determined only several years after the injury. That suggestion essentially dismisses the findings of this study. As noted above, this study found that virtually all workers who do not return to their at-injury employer – regardless of their assigned disability rating – experience an almost total loss of earnings. When it is already known that certain workers will experience a total loss of earnings, requiring those workers to wait several years to prove that earnings loss would be unconscionable.”

The SELS benefit will not be administered or paid by California employers. Thus, employers theoretically would have no particular interest in this controversy.

Gov. Jerry Brown has signed into law a bill that will prevent many professional athletes from filing workers’ compensation claims in California.

The bill, AB 1309, applies to athletes who played for teams outside of California or had limited experience playing on California teams. According to the story in the Los Angeles Times, they will no longer be allowed to make claims in the Golden State for cumulative trauma, a category of injury incurred over time that includes arthritis as well as certain brain injuries like chronic traumatic encepalopathy.

In recent years, thousands of athletes who played for teams elsewhere in the country have filed such claims in California because its workers’ compensation system – unlike many others – recognizes cumulative trauma. In addition, the state’s statute of limitations had a provision allowing some workers to file years or even decades after retirement. Some players made filings having played only a handful of games in California over the course of their careers.

Backers of the bill, including the National Football League, Major League Baseball and the other major sports leagues, argued that such filings were overly costly and that the athletes should be filing in their home states. “This new law sets reasonable standards to close an expensive loophole unique to California and to professional sports,” Dennis Kuhl, chairman of the Los Angeles Angels of Anaheim baseball team, said in a statement.

Opponents, among them the players’ unions and organized labor, argued that it unfairly excludes one class of workers from the state’s system. Flight attendants and truck drivers – who also spend time in California, though they may not be employed in the state – will still be allowed to file such claims. In addition, they argued that the players were filing in California because they were prevented from making such claims in the states where they played, either due to a more restrictive statute of limitations or because the state doesn’t recognize cumulative trauma.

Although some high-profile athletes, including NFL Hall-of-Famer Deion Sanders and MLB most valuable player Juan Gonzalez, have made such claims, claims data show that most claims by athletes were filed by lesser-known professionals, including many who played only in the minor leagues.

The new law applies only to football, baseball, basketball, ice hockey and soccer players. Under a provision adopted shortly prior to its passage in the Senate in late August, it is effective as of Sept. 15, meaning any claims filed after that date by out-of-state athletes will not be valid.

AB 1309 passed overwhelmingly in both houses of the state legislature, garnering only five “no” votes in its final version.

The legislative victory follows news last month that the NFL had reached a tentative $765-million settlement with more than 4,500 former players who had sued the league over allegations that it did not properly warn them about the risks associated with concussions.

Jorge Mora was working as a carpenter for CLP Resources Inc. in 2009 when he was directed to use a table saw unsecured to a base and lacking a protective guard. He stepped on debris, lost his balance, and placed his hand on the unguarded table saw blade. Mora sustained serious cuts to his left hand. Mora filed an application for an award under Labor Code section 4553, which grants additional benefits to a worker who is injured by the “serious and willful misconduct” of his employer. Mora’s first theory alleged the injury was due to the willful failure of the employer to provide a safe place of work. His second theory alleged that the employer had knowingly violated a safety order in directing this work.

Mora testified he had 13 to 15 years’ work experience as a carpenter. He began work for CLP, a temporary placement agency, in April 2008, and had been assigned to several different jobsites prior to his accident. Mora was supervised by Lieb, who provided his tools and told him what to do. CLP had instructed Mora to contact Marlo Vasquez, a CLP employee, if “here was a problem, or if anything was not right,” On direct examination, Mora testified he told Vasquez “here were a lot of things that were not right on the job site where he was working”and Vasquez “should check it out.” As Mora was about to list the specific safety problems, however, Vasquez told him “there was no work, and he should just be careful.” After that, Vasquez turned back to his computer and gave Mora no opportunity to provide more information. No one from CLP came to inspect the site. Mora acknowledged he had not told anyone at CLP specifically about the unsecured, unguarded table saw, although he said it was one of the safety problems he intended to discuss with Vasquez.

The only CLP employee to testify was a company safety official. He said CLP inspects the work sites of the contractors to whom its employees are assigned and had inspected the Lieb jobsite in October 2008, about two months prior to Mora’s injury. In the inspection, CLP had found no safety violations. If the unguarded table saw was present, it was not located by the inspector, although it had been “mentioned by the individuals who previously worked on the job site.” The employee speculated the inspector might have missed the table saw because Lieb removed his tools from the site each day to prevent theft.

CLP was cited by Cal-OSHA for having an inadequate injury and illness prevention program and for the hazardous state of the table saw. Cal-OSHA ultimately reduced the proposed penalty against CLP, possibly after concluding that CLP was unaware of the hazardous nature of the saw.

The WCJ found that Mora’s injury was proximately caused by the willful and serious misconduct of CLP and awarded appropriate damages under Labor Code section 4553. In explaining her decision, the WCJ found the use of an unguarded table saw to be “an inherently dangerous proposition” likely to cause serious injury and noted Cal-OSHA had cited both CLP and Lieb for use of the unsafe saw. Although she found “no clear evidence that management representatives at CLP . . . knowingly violated the safety order” and “no[] evidence that a CLP managing representative ‘turned his mind’ to the dangerous situation here.”

Reconsideration was denied. The Court of Appeal annulled the serious and willful award in the unpublished case of CLP Resources v. WCAB (Mora).

The mere failure to perform a statutory duty is not, alone, willful misconduct. It amounts only to simple negligence. To constitute ‘willful misconduct’ there must be actual knowledge, or that which in the law is esteemed to be the equivalent of actual knowledge, of the peril to be apprehended from the failure to act, coupled with a conscious failure to act to the end of averting injury. “The inadequate inspection cited by the WCJ and the Appeals Board as misconduct could not have constituted the type of intentional conduct required for liability under Labor Code section 4553.”