Tag: 2013 News

The Wall Street Journal, in a new story published this week, claims that the U.S. attorney for the Central District of California is investigating allegations that the Pacific Hospital of Long Beach executive paid kickbacks to physicians so they would refer their patients for spine surgery at his facility. Over the past 15 years, Michael D. Drobot built a Southern California business empire centered on treating people with back problems, many of them workers’ compensation patients. At the heart of the operation is Pacific Hospital of Long Beach, a 184-bed facility that Mr. Drobot bought in 1997 and turned into a spine-surgery center.

Federal Bureau of Investigation agents raided the hospital and another company owned by Mr. Drobot earlier this month as part of what the agency termed a fraud investigation. Representatives for the FBI and the U.S. attorney’s office declined to give specifics about the probe.People familiar with it say it is focused on allegations that Mr. Drobot operated a kickback scheme, under which he allegedly paid doctors thousands of dollars for each spine surgery they referred to Pacific Hospital. Under California’s anti-kickback statute, it is illegal to pay money to induce patient referrals. The practice is also illegal under federal law if the patients referred are insured by government health programs such as Medicare or Medicaid.

“Mr. Drobot and the hospital categorically deny any accusation of impropriety concerning the hospital’s outstanding and world-class spinal treatment program,” Laura Salas Reyes, a spokeswoman for Pacific Hospital, said, adding that both Mr. Drobot and the hospital “are cooperating fully with authorities looking into the matter.”

In written responses to questions from The Wall Street Journal for a front-page article last year, Mr. Drobot denied paying kickbacks to doctors for patient referrals. The article identified Pacific Hospital as a prolific spine-surgery facility: From 2001 to 2010, according to state data, it performed 5,138 spinal fusions on workers’ compensation patients and billed $533 million for them – three times as much as any other hospital in California.

Spine surgery is among the most profitable businesses for hospitals nationwide. In California’s workers’ compensation system, it can be even more lucrative because hospitals are allowed to bill separately for spinal implants, creating room for abuse through excessively marked-up implant charges, according to fraud investigators employed by insurers.

Along with Pacific Hospital, Mr. Drobot owns a spinal-implant distributorship. Federal agents are investigating allegations he paid surgeons who agreed to use his distributorship’s implants $15,000 for each lumbar fusion and $7,500 for each cervical fusion they performed at Pacific Hospital, the people familiar with the probe said. Surgeons who didn’t use his implants were allegedly paid smaller sums, these people said.

Drobot’s distributorship resold implants made by Alphatec Holdings Inc. Documents reviewed by the Journal show that Pacific Hospital marked up the Alphatec implants supplied by Mr. Drobot’s distributorship sharply when it billed them to patients’ insurers – in excess of limits set by the California’s workers’ compensation division. Alphatec’s general counsel, Ebun Garner, said the firm let its contract with Mr. Drobot expire earlier this year after he violated it by charging excessive prices. Mr. Drobot didn’t reply to an inquiry put to him through the hospital about Mr. Garner’s version of events.

The U.S. attorney is probing allegations Mr. Drobot funneled the kickbacks to surgeons via another firm he owns that provides collection services to doctors, the people familiar with the probe said. In his answers to questions from the Wall Street Journal last year, Mr. Drobot denied any improper arrangements between the firm and surgeons operating at Pacific Hospital.

The Division of Workers’ Compensation has invited interested members of the public to a meeting May 7 to discuss the most efficient means of communication with Maximus Federal Services, the current independent medical and bill review organization. The meeting will be from 10 a.m. to noon in the auditorium of the Elihu Harris Building, 1515 Clay Street in Oakland

Principals from Maximus Federal Services will present an overview of how the requests for independent medical reviews (IMRs) and independent bill reviews (IBRs) are processed.

Workers’ compensation carriers and third party administrators are encouraged to join in this discussion regarding secure methods of transmitting documents and the best ways to handle billing and other communications issues.

Maximus Inc., trademarked as MAXIMUS, is an American for-profit privatizing company that provides business process services to government health and human services agencies in the United States, Australia, Canada, Saudi Arabia, and the United Kingdom. MAXIMUS focuses on administering government-sponsored programs, such as Medicaid, the Children’’s Health Insurance Program, health care reform, welfare-to-work, Medicare, child support enforcement, and other government programs. The company is based in Reston, Virginia, has 8,657 employees, and reported annual revenue of $1.05 billion in fiscal year 2012.

Over its nearly 40 year history it has not been without criticism. In October 2010, The Los Angeles Times reported that 146 medical workers, including doctors, nurses and pharmacists were allowed to keep working despite failing drug tests. MAXIMUS was awarded a $2.5 Million a year contract to run California’s confidential “diversion programs”. MAXIMUS contracted the work out to a subcontractor who in turn subcontracted the work to another company. The drug testing company was using the wrong standard of drug test from December 2009 to August 2010, resulting in medical workers who tested positive for drugs to continue working.

In October 2000 six state lawmakers in Wisconsin called for the termination of MAXIMUS’ W-2 contract, saying the firm has “broken faith with the state and poor people the agency serves in Milwaukee County.”

In November 1997, The Hartford Courant reported that MAXIMUS “gets minimal results” when it was hired by the State of Connecticut to manage a child care program for recipients of welfare. According to the Record-Journal, MAXIMUS “hired too few people, installed an inadequate phone system and fell weeks or months behind in making payments to day care providers.

Catholic Healthcare West owns and operates medical facilities in California and other states, including Mercy Medical Center Redding, a hospital and related facilities located in Redding, California. Janet Anderson started working at Mercy as a registered nurse in 1979.

In 2005, Anderson experienced medical symptoms – itching all over her arms and torso – that were consistent with an allergic reaction. Anderson went to the employee health department to undergo a “RAST” test for sensitivity to latex.

Before the results of the RAST test were known, Anderson was called to a meeting with the director of perioperative services, Jeanette Smith, and the OR manager, Kirk Williams. Smith had been hired by Mercy five months earlier to make the OR department financially more efficient and attract more physicians to perform surgeries at Mercy. As part of that effort, Smith evaluated Anderson’s position and duties and found them to be nonessential. Smith informed Anderson the position of OR data coordinator was being eliminated as part of a reorganization of the OR.At no time during the meeting was Anderson’s allergic reaction or the possibility the reaction was caused by latex exposure discussed. Anderson applied for and obtained a position as a circulating nurse in the outpatient surgery center.

Later it was determined that Anderson’s symptoms were related to latex sensitivity.

Anderson experienced another allergic reaction at work on March 11, 2005, and went to the emergency room. Anderson discussed the latex allergy with her supervisor at the outpatient surgery center who then designated one of the rooms as a latex-free area for Anderson to perform many of her duties. She continued to be reactive at work. Anderson stopped working and filed a workers’ compensation claim relating to the allergic reactions in March.

Anderson’s medical records described subsequent allergic reactions to latex in non-hospital settings and to such products as automobile tires, furniture, food products and food packaging. She was found to be sensitive to foods handled by food workers wearing latex gloves, and to latex on chairs and seats in movie theaters and restaurants. Her physician wrote on March 19, 2007, that Anderson “remains unemployable outside of her own home, which she has purposefully made latex free.” Later he released her to transitional (modified) work, full-time depending on location, with no exposure to latex products. Efforts were made by the employer to locate work but she could not be returned to outpatient surgery, or to any other clinical locations within or outside of the hospital proper due to possible latex exposure.

Anderson filed a civil action which alleged five causes of action under the California Fair Employment and Housing Act. After a court trial, judgment was entered in Mercy’s favor and Anderson appealed. The Court of Appeal in the unpublished decision of Janet Anderson v Catholic Healthcare West affirmed the judgment in favor of the employer. Anderson failed to demonstrate on appeal the trial court’s decision with respect to disability discrimination and wrongful termination based on disability was unsupported by substantial evidence.

According to a new story in the Wall Street Journal, federal agents are looking into fraud allegations at companies owned by Michael D. Drobot, a hospital executive who built a Southern California business empire centered on treating spine injuries suffered by workers’ compensation patients. Last week, FBI and IRS agents conducted searches at the companies as part of a fraud investigation by the U.S. attorney for the Central District of California, said Laura Eimiller, a spokeswoman for the FBI’s Los Angeles field office. She added that the grand jury affidavit supporting the searches was sealed, and declined to provide specifics about the investigation.

The agents served search warrants on Pacific Hospital of Long Beach, a 184-bed facility owned and run by Mr. Drobot, and on Industrial Pharmacy Management LLC, a Drobot company based in Newport Beach that dispenses medications to patients in doctors’ offices.

“We look forward to working with the authorities to resolve the misunderstandings that led to” the searches, said Laura Salas Reyes, a spokeswoman at the hospital. A person at the drug-dispensing firm said no one was available to comment. Mr. Drobot and his attorney didn’t respond to requests for comment.

Mr. Drobot, 68 years old, acquired Pacific Hospital of Long Beach in 1997 and shifted its focus to spine surgeries for workers’ compensation patients. In a front-page article last year, the Wall Street Journal identified the hospital as one of the most prolific spine-surgery facilities in California. From 2001 to 2010, according to state data, it performed 5,138 spinal fusions on workers’ compensation patients and billed $533 million for them – three times as much as any other hospital in the state.

For a time, Mr. Drobot was in business with Paul Randall, a hospital marketer who served time in federal prison in the 1990s for racketeering. Mr. Randall said he recruited spine surgeons to operate at Mr. Drobot’s hospital, and the two said they operated a magnetic-resonance-imaging business together. Documents reviewed by the Journal last year showed that Mr. Randall was under investigation by the U.S. attorney’s office for allegedly inflating the cost of spinal implants and paying kickbacks to chiropractors and spine surgeons. Mr. Randall hasn’t been charged and has denied engaging in any illegal activities. On Monday, he and his attorney both declined to comment.

In January, the Wall Street Journal reported that Randall was a consultant paid millions of dollars by Tri-City Regional Medical Center, that It built up this business rapidly. Tri-City is a 107-bed facility just south of Los Angeles near Long Beach. The small hospital billed workers’ compensation insurers $65 million in 2010 for spinal fusions, up from less than $3 million three years earlier. Randall’s role for Tri-City was twofold: bringing surgery cases to the hospital by recruiting surgeons to operate there, and supplying metal implants for the surgeries through distributorships he owned. An official of Tri-City said the hospital ended its relationship with Mr. Randall in the middle of last year, a few months after it ousted the executive who had hired him.

Mr. Randall, 52 years old, an entrepreneur with a collection of sports memorabilia and a yen for gambling, began his career as a hospital marketer in the mid-1990s after serving a stint in federal prison for racketeering. He was convicted of the felony in 1993 for deals that involved buying wooden shipping pallets on credit and reselling them without paying the original vendors, and was sentenced to a 21-month term. After serving time in the Terminal Island federal correctional facility in Long Beach harbor, Mr. Randall went into business with Michael D. Drobot, the owner of Pacific Hospital of Long Beach.

A Naval officer in the Vietnam era, Mr. Drobot bought Pacific in 1997 and shifted its focus to spine care for workers’ compensation patients. For a decade, Messrs. Randall and Drobot operated a business that arranged for magnetic resonance imaging, or MRI, services. Randall was reportedly paid $25,000 a month to run the MRI business plus a share of profits. Mr. Drobot created several businesses focused on workers’ compensation patients: a van service to shuttle patients, a provider of Spanish interpretation and a distributorship of metal implants used in back surgery. His hospital became one of the most prolific spine-surgery facilities in California.

After a business dispute between the two men, Mr. Randall in 2008 moved to Tri-City, a hospital eight miles away that then focused on bariatric surgery. Tri-City, which is a nonprofit institution, paid Mr. Randall more than $3.2 million between 2008 and July 2011 as a business-development consultant. Mr. Randall recruited some of the same spine surgeons to Tri-City that he earlier introduced to Mr. Drobot at Pacific. By August 2011, Mr. Randall said, he was back to doing spine-surgery marketing work for Mr. Drobot at Pacific Hospital of Long Beach. . Mr. Randall said he signed a $100,000-a-month marketing agreement with Mr. Drobot – technically between Mr. Drobot’s spinal-implant distributorship and a Randall marketing firm – under which Mr. Randall is to provide services such as “recruiting surgeons to the medical staff of hospitals that use” implants Mr. Drobot distributes. Mr. Drobot said through a spokesman that he didn’t recall entering into any such contract and that he didn’t believe the signature on the document was his.

Each year the California Chamber of Commerce releases a list of “job killer” bills to identify legislation that it claims will decimate economic and job growth in California. The CalChamber will track the bills throughout the rest of the legislative session and work to educate legislators about the serious consequences these bills will have on the state. The List for 2013 now shows several proposed legislative changes that pertain to workers’ compensation and other workplace issues.

SB 626 (Beall; D-San Jose) Massive Workers’ Compensation Cost Increase – Unravels many of the employer cost-saving provisions in last year’s workers’ compensation reform package and results in employers paying nearly $1 billion in benefit increases to injured workers without an expectation that the increases will be fully offset by system savings.

AB 1138 (Chau; D-Alhambra) Massive Exposure to Civil Penalties and Liability – Inappropriately increases civil cases and civil penalties on employers by permitting civil action against those employers who fail to conspicuously post a list of every employee covered under an employer’s workers’ compensation insurance policy and to retain this list for five years.

SB 761 (DeSaulnier; D-Concord) Paid Family Leave Protection – Creates a new burden on small businesses and additional opportunities for frivolous litigation by transforming the paid family leave program, which is used as a wage replacement for an employee who is taking a separate leave of absence, into an additional paid protected leave.

AB 5 (Ammiano; D-San Francisco) Increased Exposure to Frivolous Litigation – Imposes costly and unreasonable mandates on employers that could jeopardize the health and safety of others by creating a new protected classification of employees and customers who are or are perceived to be homeless, low income, suffering from a mental disability, or physical disability, and establishing a private right of action for such individuals that includes statutory damages, punitive damages, and attorney’s fees.

AB 10 (Alejo; D-Salinas) Automatic Minimum Wage Increase – Unfairly increases California employers’ cost of doing business by raising the minimum wage $1.25 over the next three years and thereafter indexing the minimum wage based on inflation, which fails to take into account the current economic status of the state or other fees and costs employers are required to pay.

SB 404 (Jackson; D-Santa Barbara) Expansion of Discrimination Litigation – Makes it virtually impossible for employers to manage their employees and exposes them to a higher risk of litigation by expanding the Fair Employment and Housing Act to include a protected classification for any person who is, perceived, or associated with a family caregiver.

AB 1164 (Lowenthal; D-Long Beach) Inappropriate Wage Liens – Creates a dangerous and unfair precedent in the wage and hour arena by allowing employees to file liens on an employer’s personal property or real property where the work was performed, based on an alleged but unproven wage claim, that will take priority over other existing liens.

The CalChamber will continue to add legislation to the “job killer” list throughout the year as bills are amended or new language is introduced.