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Tag: 2014 News

Two Dozen Civil Suits Filed Against Drobot Related Local Hospitals

More than two dozen lawsuits were filed in Los Angeles Superior Court against a former hospital executive and a collection of his business partners that allege the group was behind counterfeit screws and hardware used in spinal surgeries at various Southern California hospitals.The lawsuits claim that unknowing patients underwent spinal surgeries with doctors who benefited financially for using certain hardware – allegedly made at an auto shop in Temecula – and for performing surgery at certain hospitals. The former hospital executive, Michael Drobot, was indicted in February for his role in bribing a state senator to protect the $500 million insurance fraud scheme he was using to bilk the state’s workers compensation fund. Drobot agreed to a plea deal and is cooperating with federal law enforcement.

Also named in the lawsuit are Pacific Hospital of Long Beach, Riverside Community Hospital, Spinal Solutions, Orthopedic Alliance, Crowder Machine and Tool Shop and doctors Jack Akmakjian, Sunny Uppal and Khalid Ahmed. Attorneys told KPCC they have received hundreds of calls from people concerned they may have the fake parts, adding that they are going through each case to figure out if those former patients may have been impacted by the scheme. Drobot’s operation included bribes for doctors and others who referred patients to Drobot’s hospital, used hardware distributed by his partners, and inflated prices for medical hardware. The lawsuits say the victims are “among thousands of spinal fusion surgery patients in Southern California and elsewhere who [have] such counterfeit, non-FDA approved medical devices implanted into their bodies as a consequence of the systematic pattern of fraud and deceit.” According to the lawsuits, Spinal Solutions, a distributor out of Murrieta, was behind the manufacture of the fake screws provided to hospitals and doctors who were also part of the scheme.

Drobot’s attorney, Terree Bowers, said the lawsuits are “scare tactics” and that they are “reprehensible.” He further denies any counterfeit parts were used at Drobot’s hospital. “There is absolutely no indication or evidence that Spinal Solutions … screws were ever used at Pacific Hospital,” he said. “It is false and patients who went to that facility do not have to be alarmed.” Bowers said the federal indictment does not include any accusations regarding fake screws, and he said his own investigation into hospital records do not indicate counterfeit screws were used there. “They are creating fear in patients that have absolutely no reason to afraid,” he said.

Last summer, the State Insurance Commission Fund filed a lawsuit against Drobot and his son under the state’s racketeering laws. It alleges the Drobots created shell companies that supposedly made spinal hardware and billed for it at much higher rates than what it costs.

“Prehabilitation” Saves $1,215 Per Patient

Physical therapy after total hip (THR) or total knee replacement (TKR) surgery is standard care for all patients. Now, a new study, appearing in the Journal of Bone and Joint Surgery (JBJS), also found that physical therapy before joint replacement surgery, or “prehabilitation,” can diminish the need for postoperative care by nearly 30 percent, saving an average of $1,215 per patient in skilled nursing facility, home health agency or other postoperative care.

Approximately 50 million U.S. adults have physician-diagnosed arthritis. As the condition progresses, arthritis patients often require THR and/or TKR to maintain mobility and life quality. The number of THRs is expected to grow by 174 percent (572,000 patients) between 2005 and 2030, and TKRs by 673 percent (3.48 million). In recent years, the length of hospital stay following surgeries has decreased from an average of 9.1 days in 1990 to 3.7 days in 2008, while the cost of post-acute care, primarily in skilled nursing facilities and home health agencies, has “skyrocketed.”

Health-care costs following acute hospital care have been identified as a major contributor to regional variation in Medicare spending. This study investigated the associations of preoperative physical therapy and post-acute care resource use and its effect on the total cost of care during primary hip or knee arthroplasty. Utilizing Medicare claims data, researchers were able to identify both preoperative physical therapy and postoperative care usage patterns for 4,733 THR and TKR patients. Postoperative, or “post-acute” care, was defined as the use of a skilled nursing facility, home health agency or inpatient rehabilitation center within 90 days after hospital discharge. Home health agency services included skilled nursing care, home health aides, physical therapy, speech therapy, occupational therapy and medical social services.

Approximately 77 percent of patients utilized care services following surgery. After adjusting for demographic characteristics and comorbidities (other conditions), patients receiving preoperative physical therapy showed a 29 percent reduction in postoperative care use. In addition:

1) 54.2 percent of the preoperative physical therapy group required postoperative care services, compared to 79.7 percent of the patients who did not have preoperative therapy.
2) The decline in postoperative care services resulted in an adjusted cost reduction of $1,215 per patient, due largely to lower costs for skilled nursing facility and home health agency care.
3) Preoperative physical therapy cost an average of $100 per patient, and was generally limited to one or two sessions.

“This study demonstrated an important opportunity to pre-empt postoperative outcome variances by implementing preoperative physical therapy along with management of comorbidities before and during surgery,” said orthopaedic surgeon Ray Wasielewski, MD, co-author of the study.

Bowling Scores Convict Janitor With Shoulder Injury

A longtime Travis Unified School District employee pleaded guilty to workers’ compensation fraud last week, according to officials with the Solano County District Attorney’s Office.

Damon Fraticelli, a 27-year employee of Travis Unified School District, pleaded guilty to one felony count of workers’ compensation fraud last Friday, officials said. Fraticelli had alleged an on the job injury which prevented him from doing any of his duties as a janitor or participating in physical activities. According to officials at the Solano County District Attorney’s Office, Fraticelli told an occupational health physician in April 2013 that pain in his right shoulder was so severe he could only wipe and clean tables with his left hand.

The following day, Fraticelli was filmed bowling with his right arm for approximately 40 minutes. Also, at about this time, Fraticelli’s name appeared in newspapers as achieving top bowling scores, officials said. An investigation by the North Bay Schools Insurance Authority and the Solano County District Attorney’s Office Fraud Unit revealed several examples of misrepresentations, according to officials.

Fraticelli was sentenced to five years of probation and a required to perform community service in addition to being ordered to pay $10,000 in restitution.

Fraud Investigations Now Include Medical Coding Companies

A national medical billing company has agreed to pay $1.95 million for allegedly defrauding the Medicare and Medicaid systems. Thus it seems that culpability can now be placed on non-medical administrative perpetrators that are involved in nothing more than the paperwork end of a medical practice.

The United States Attorney’s Office announced that it has reached a settlement with Medical Business Service, Inc. (MBS), which agreed to pay $1.95 million to settle claims that it violated the False Claims Act by fraudulently changing diagnosis codes on claims to Medicare and Medicaid, in order to get the rejected claims paid on behalf of radiologists. MBS was located in Florida, with an office in Duluth, Ga.

The civil settlement resolves the United States’ investigation into MBS’s billing practices. The United States alleges that MBS improperly coded and billed claims by radiologists that were submitted to the Medicare and Medicaid programs. Medicare and Medicaid issue guidance stating that they will not pay for certain procedures given to patients with specific diagnoses. Medicare and Medicaid will reject claims for payment that combine those procedures and diagnoses. MBS allegedly changed the diagnosis codes on previously rejected claims to avoid those restrictions in order to have the claims paid. The settlement covers a three year period, 2008-2010, during which the conduct allegedly occurred.

“Billing companies provide a key check-point to combat medical billing fraud. Consequently, they will be examined with the same scrutiny as healthcare providers,” said United States Attorney Sally Quillian Yates.

“The health care providers who contracted with MBS placed their trust in the company to correctly process claims and not submit fraudulent information to the Medicare and Medicaid programs,” said Derrick L. Jackson, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General in Atlanta. “The lack of compliance and oversight by MBS placed all these providers at risk. Billing services such as MBS have no less of a duty to ensure truthful information on claims than do the providers who use these services.”

This civil settlement resolves a lawsuit filed by Katlisa N. Vaughn under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery obtained. The case, pending in the Northern District of Georgia, is filed under United States of America, State of Florida, State of Georgia, State of New York, State of Tennessee, and State of Texas ex rel. Katlisa N. Vaughn v. Medical Business Service, Inc., Civ. No. 1:10-CV-2953. The Federal government will receive $1.917 million from the settlement, while Florida, Georgia, New York, and Texas will split the remainder of the settlement. Ms. Vaughn will receive a share of the settlement payment that resolves the qui tam suit that she filed. The claims settled in the civil settlement are allegations only, and there has been no determination of liability.

This resolution is part of the government’s emphasis on combating health care fraud under the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services, in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $14 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $20 billion.

RAND Study Sees No Savings From Medical Malpractice “Reform”

For decades, it’s been the conventional wisdom that U.S. healthcare costs are high because doctors order expensive tests to protect themselves from malpractice lawsuits, but new evidence says that assumption is wrong. The study from the RAND Corporation found that in three states where the laws were rewritten to make it virtually impossible to sue a doctor for mistakes, the cost of care did not go down in hospital emergency departments.

“If your goal is cost savings, if you believe there is a lot of pure waste going on, then malpractice reform is a blind alley,” Dr. Daniel Waxman, chief author of the study, told Reuters Health by phone.

According to the story in Reuters Health, the idea that defensive medicine is responsible for higher health costs “has come up over and over and over again,” said Waxman, of Rand HEALTH in Santa Monica, California. “It distracts people from looking for other avenues” that might bring costs down more effectively. A 2010 study even pegged the cost of needless care motivated by fear of malpractice lawsuits at $210 billion a year.

The new study in the New England Journal of Medicine looked at costs before and after Georgia, Texas and South Carolina changed their laws to only allow emergency department doctors to be sued for gross negligence, in which the doctor knows that a treatment will likely cause serious injury, yet does it anyway. “People say the letter of that law is an almost-impossible threshold to meet,” although such decisions are ultimately left up to the courts, said Waxman, who is an emergency department physician.

The team’s analysis of more than 3.8 million Medicare records from 1,166 hospitals also included neighboring states where the standard of malpractice remained ordinary negligence, which is a failure to exercise reasonable care. “If you ask physicians, ‘Do you practice defensively?’ They overwhelmingly say, ‘Yes we do.’ They say they order more CT scans and MRIs. They admit people to the hospital. That certainly is a long-standing belief among physicians and lay people at this point,” said Dr. Waxman.

But when the team examined emergency room bills and the likelihood that the patients would be admitted to the hospital or receive a CT or MRI scan, Waxman and his colleagues found no difference in nearly every measure before and after the three states changed their laws. Only in Georgia did they see any shift – a 3.6 percent drop in the average emergency room charge compared to neighboring states after the Peach State revised its law in 2005.

“Although there was a small reduction in charges in one of the three states (Georgia), our results in aggregate suggest that these strongly protective laws caused little (if any) change in practice intensity among physicians caring for Medicare patients in emergency departments,” the researchers conclude in the report. The new laws may not have changed how doctors practice, but in Texas the 2003 reforms cut the number of malpractice lawsuits by 60 percent and the total of malpractice payments by 70 percent.

“This certainly runs counter to most people’s expectation,” Waxman said. “Basically, there are a whole bunch of things going on. No doctor wants to be sued. But doctors also don’t want to make mistakes. They don’t want to cause harm. They don’t want to say no to patients. So everything favors doing more. There are reasons to be faulted for not doing more, and very little pushback if you don’t.”

“It’s easy to blame something that’s out of your control,” he said, “and the legal system is a convenient scapegoat.”

DWC Sets Hearing on More OMFS Regulatory Changes

The Division of Workers’ Compensation (DWC) has issued a notice of public hearing to revise various provisions of the Official Medical Fee Schedule (OMFS). The public hearing has been scheduled for 10 a.m., November 14, 2014, in the Auditorium of the Elihu Harris Building, 1515 Clay Street, Oakland, CA 94612. Members of the public may also submit written comment on the regulations until 5 p.m. that day. The proposed amendments are as follows:

1) Amend the fee schedules provisions in Article 5.3 and section 9790 in Article 5.5, to reiterate the applicable dates of fee schedule provisions. The Division has become aware of the misapplication of the effective dates of various fee schedule provisions.
2) Amend the inpatient hospital fee schedule provisions that address the operating disproportionate share hospital (DSH) adjustments. The proposed amendments are necessary as a result of changes made by Medicare to their operating DSH adjustment methodology.
3) Amend the inpatient hospital fee schedule provisions that address the outlier payments for eligible transfer cases. The Division has become aware of the need to clarify that hospitals transferring an inpatient to another hospital or post-acute care provider are eligible to receive an outlier payment for qualifying cases. The proposed amendments provide the methodology for determining whether a case is eligible for an outlier payment, and if so, how the payment amount would be calculated. The proposed methodology conforms to Medicare’s payment methodology.
4) Minor amendments that are required to conform to the proposed changes, to update, or to clarify various sections of the Official Medical Fee Schedule.

The notice, initial statement of reasons, and text of the regulations can be found on the proposed regulations webpage.

Former Adjuster Shot by Claimant at Nevada Comp Board

A shooting at the State of Nevada Department of Administrative Hearings Division building in Las Vegas on Monday stemmed from a workers’ compensation claim 11 years earlier, an arrest report reveals. Michael Kogler, who was shot, previously worked with the accused shooter, 73-year-old Leonard Sullivan, at MGM Resorts. Kogler worked as a claims adjuster for MGM at the time.

According to the arrest report, Sullivan, who was dressed in a suit, wore a hat, and carried a cane, was seen by multiple people before the shooting, including a maintenance employee who asked if he needed help finding his way. He reportedly told the man, “no.” “The male walked slowly across the landing outside the office as if waiting for someone,” the arrest report said.

Moments later, Kogler passed Sullivan on the walkway, when the 73-year-old yelled out Kogler’s name. “Kogler turned around and said, ‘yes’ and the suspect shot him,” according to the arrest report. Sullivan reportedly uttered Kogler had been “missing over him for 10 years” after he shot him. Kogler was shot in the upper chest. He was taken to University Medical Center and is expected to be OK.

Police said Sullivan was subdued by security officers and arrested when police arrived at the office building on Rancho Drive near Sahara Avenue. A security guard reported that after being detained, Sullivan told him he planned to put the gun into his mouth, according to the report. Sullivan faces one charge of attempted murder with weapon. Police received a call the day before the shooting from from an acquaintance who said Sullivan had made suicidal remarks, the report said.

Kogler said he worked with Sullivan 10 years ago for MGM Mirage, where Kogler was a claims adjuster, according to the police report.. At the time, Sullivan said he tripped over a luggage cart at a Las Vegas hotel. Sullivan has filed numerous claims and had been to the hearing office on “several occasions” before Monday’s shooting, police said.

DWC Takes Umbrage With California Comp Cost Report

The Insurance Journal reports that California’s Department of Industrial Relations Director is taking a bit of umbrage with a study released last week that showed the state was ranked as the most expensive in the nation for workers’ compensation. Despite major workers’ comp reforms signed into law in 2012 California topped the 2014 Oregon Workers’ Compensation Premium Rate Ranking Summary, a list of average premiums paid by employers that the Oregon Department of Consumer and Business Services puts out every two years. Premium rates in the report ranged from a low of 88 cents in North Dakota to $3.48 in California. Premiums paid were 61 cents lower in Connecticut, the next state with a wide margin behind California. Oregon ranked 43rd, reportedly its best performance since the report was first put out in 1988.

The report was seized on by the Workers’ Compensation Action Network as an example of how tough it is to be an employer in California. “Try as we might to reform California’s workers’ compensation system, employers here continue to bear the heaviest cost burden in the nation – by a wide margin,” WCAN spokesman Jerry Azevedo said the day the report was issued.

But on Monday DIR Director Christine Baker called out some issues she had with the study. “It’s good for Oregon, but it isn’t fair to California,” Baker said. A detailed reply to the study put out by DIR notes the Oregon study has “inconsistencies and methodologies that skew the ranking.” Baker said the report compares different occupational classes, and it fails to include adjustments resulting from the application of deductible plans or the return of policyholder dividends. “It is such a completely different distribution,” she said, adding that the industrial mix and the size of California’s employment ranks are not comparable to other states in the study. “It’s a good study for Oregon,” Baker added. “It makes Oregon look really good, but it’s apples-to-oranges for California. It’s just not comparable.”

According to Jay Dotter, who put together the Oregon study, anyway you slice it the report doesn’t bode well for California’s workers’ comp system. The report takes 50 business classes and compares losses over a three-year period. “That’s going to vary a little bit state by state,” Dotter acknowledged. “But you can look at top 10 by payroll and you’re going to see the same top 10 (in terms of premium ranking) probably in every state.” He added: “What that’s saying is the industry mix really doesn’t have that big of an effect on it.”

Also not taken into account in the report are the reforms to California’s workers’ comp system ushered in by Senate Bill 863 in 2012, many of which have yet to take effect, Baker said. Projections indicate that without SB 863, workers’ compensation costs would have spiked more sharply in 2013 and 2014, and that insurance prices had already begun to rise in 2012. SB 863, which initiated an independent medical review and a utilization review process, has already had a positive impact on workers’ comp, according to DIR. Medical expenses appear to be under better control, according to preliminary data from the Workers’ Compensation Insurance Rating Bureau of California. The data indicates that the estimated ultimate medical loss per lost-time claim is down 1.3 percent from accident year 2012 to 2013.

SB 863 also reduced ambulatory surgery center facility fees from 120 percent to 80 percent of Medicare’s hospital outpatient fee schedule, according to DIR, which stated the average amount paid per ASC episode in the first six months after the change in fee schedules was 26 percent lower than in the year before the change took effect.

Yet another aspect of SB 863 repealed the separate reimbursement for spinal hardware, after which the average amount paid per episode of the spinal surgery involving implantable hardware fell by 56 percent, according to DIR.

Finally, perhaps the biggest SB 863 change was a lien filing fee. During the first year the filing fee was in effect, 213,092 liens were filed, down from 469,190 in 2011, a greater than 50 percent reduction, according to DIR, which estimates the lien filing fee is saving California employers and insurers $270 million per year in litigation and settlement costs. “I think there are a lot of things happening at the same time,” Baker said of the ongoing SB 863 reforms. “We’re hearing from the judges that cases are settling a lot quicker. It will take time to balance all of this out. It will take another two to three years I think.”

Dotter acknowledged that the report, which looks at data up to Jan. 1, 2014, does not reflect SB 863 reforms. But, he added, “We’ll have some idea of that when we do the 2016 study.”

DWC Opens Registration for 22nd Educational Conference

The California Division of Workers’ Compensation announced that registration for its 22nd annual educational conference is now open. This is the largest workers’ compensation educational event in the state. It is held in February in both Northern and Southern California. Speakers from the Division of Workers’ Compensation and the private sector will address the most current topics and issues confronting claims administrators, medical providers, attorneys, rehabilitation counselors and others involved in workers’ compensation.The conference will take place February 9-10, 2015 at the Los Angeles Airport Marriott and February 19-20, 2015 at the Oakland Marriott City Center Hotel.

Attendee, exhibitor, and sponsor registration forms may be downloaded from the conference website.

Conference registration flyers were recently mailed to the more than 8,000 names on our mailing list. Registration forms are also available at the conference website and the front counters of the DWC district offices in the state.

This annual event is the largest workers’ compensation training in the state and allows claims administrators, attorneys, medical providers, return to work specialists, employers and others to learn firsthand about the most recent developments in the system. Attendees will be interested in how DWC continues to implement the provisions of SB 863 with new regulations, forms, and procedures.

DWC has applied for continuing educational credits by attorney, claims adjuster, rehabilitation counselor, case manager, disability management, and qualified medical examiner certifying organizations. Organizations who would like to become sponsors of the DWC conference can do so by going to the website.

In 2014 more than 1,800 attendees and 135 exhibitors signed up, so DWC encourages early registration.

Business Insurance Workers’ Comp Conference Free Online

Workers compensation experts explained how to control workers comp costs related to opioid management and the aging workforce during Business Insurance’s fifth annual Workers Comp and Safety Virtual Conference.

In his keynote speech, William Zachry, vice president of risk management for Safeway Inc., talked about the top 10 cost drivers for workers comp claims. Mr. Zachry’s recommendations included connecting utilization review and bill review processes for comp claims, using pre-employment screenings to avoid placing workers in jobs that they are physically unfit to perform, and reducing litigation in comp cases by showing an interest in injured workers. “Calls from the supervisor or owner of the company asking if the injured worker understands his or her benefits, if the benefit notices were confusing or if the medical care is good, and if there is anything that the employer can do the for the employee (can have) a massive effect on reducing litigation,” Mr. Zachry said.

In another presentation, Kimberly George, senior vice president and senior health care advisor for Sedgwick Claims Management Services Inc., talked about the challenges and opportunities that go hand-in-hand with the Patient Protection Affordable Care Act.

In a presentation on controlling the use of opioids in workers comp, speakers discussed guidelines for prescribing such medications and the use of prescription formularies to prevent overprescribing. Dr. Steven Feinberg, chief medical officer for Feinberg Medical Group in Palo Alto, California, said the use of opioids may be appropriate for some patients, but it’s best to avoid long-term use of such drugs.

Alex Swedlow, president of the Oakland, California-based California Workers’ Compensation Institute, and Vennela Thumula, policy analyst with the Cambridge, Massachusetts-based Workers Compensation Research Institute, presented evidence that closed prescription drug formularies, which have been successful in reducing workers comp medical costs in Texas and Washington state, could help reduce workers comp medical costs in other states.

While older workers are less likely to be injured on the job, those who are hurt often take longer to return to work at full capacity, presenters said in another session. David Barry, senior vice president and national technical director for casualty risk control for Willis North America Inc., said older workers made up 26% of all fatal accidents in 2005, yet they represented only 16% of the workforce at the time. During the session, Debbie Villegas, human resources manager for Jordan Foster Construction L.L.C., said it’s difficult to replace knowledgeable older workers, so some employees who have retired from the company have actually returned to manage projects as consultants.

Lance Perry, senior ergonomist and professional engineer for Zurich Services Corp., said ergonomics is key to keeping older workers safe and healthy. He added that safety managers, productivity managers and quality managers have to work together to identify solutions that will accommodate the physical, physiological and psychosocial changes of an aging workforce.

Nearly 900 risk managers, safety managers, human resources and benefit managers, brokers and third-party administrators, among other attendees, registered for the free online event. You can view the event on demand online at