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Tag: 2014 News

Conviction of Doctor and Attorney Closes $154M Orange County Fraud Prosecution

A doctor and an attorney, the final two defendants in a 19 co-defendant case, have been convicted for their role in the largest medical fraud prosecution in the nation for recruiting thousands of healthy patients to undergo unnecessary and dangerous surgeries to fraudulently bill medical insurance companies. Attorney Roy Chester Dickson, 65, Yorba Linda, pleaded guilty to one felony count of money laundering and one felony count of grand theft with white collar crime sentencing enhancements. In the same case, Dickson was found guilty by a jury Nov. 26, 2012, of two felony counts of filing a false personal tax return and was sentenced Dec. 20, 2012, to two years and eight months in state prison and $41,629 restitution on the tax conviction. He is scheduled to be sentenced for the current convictions Aug. 8, 2014, in Department C-45, Central Justice Center, Santa Ana, and faces a maximum sentence of 14 years in state prison.

Doctor Mario Rosenberg, 66, pleaded nolo contendere Jan. 24, 2014, to two felony counts of insurance fraud and white collar crime sentencing enhancements. He faces a maximum sentence of 10 years in state prison at his sentencing March 28, 2014, in Department C-45.

The defendants in the Unity case participated in a $154 million medical insurance fraud scheme that recruited 2,841 healthy people from all over the country to receive unnecessary surgeries in exchange for money or low cost cosmetic surgery. Insurance companies paid out more than $20 million over a 9-month period. The Orange County Grand Jury examined 1,054 exhibits and heard testimony from 56 witnesses over 28 days, resulting in a 70-page indictment. The indicted defendants include an attorney, accountant, three doctors, and patient recruiters known as “cappers.” The recruitment of patients, or “capping,” is illegal in California.

Andrew Robert Harnen, 59, Rosemead, Unity’s accountant, pleaded guilty to the court Aug. 16, 2013, to two felony counts of conspiracy, eight felony counts of capping or paying for patient referrals, 30 felony counts of grand theft, 30 felony counts of insurance fraud, 30 felony counts of making false and fraudulent claims, one felony count of filing a false tax return, and white collar crime sentencing enhancements for taking over $2.5 million. Harnen was sentenced to five years and four months in prison. The People advocated for a sentence of 41 years and eight months in state prison. The sentence will be served concurrent to the sentence he received Dec. 20, 2012. The defendant was previously sentenced to prison and ordered $904,780 restitution for his Nov. 26, 2012, conviction by a jury of three felony counts of filing a false tax return and six counts of failing to file tax returns.

Doctor William Wilson Hampton, Jr., 58, Seal Beach, pleaded guilty May 8, 2009, to 47 felony counts including conspiracy, insurance fraud, and capping and was sentenced to 16 years in state prison. Doctor Michael Cheeluen Chan, 68, Cerritos, pleaded guilty Aug. 4, 2011, to the court to 40 felony counts including conspiracy to commit insurance fraud, insurance fraud, aiding and abetting capping with white collar crime sentencing enhancements. He faces a sentence ranging from probation up to 28 years in state prison at his sentencing March 28, 2014, at 9:00 a.m. in Department C-45.

The Unity cappers targeted employees from businesses in 39 states who were covered by PPO insurance plans, affecting more than 1,000 employers whose employees became involved in this scheme. They arranged transportation for the patients, scheduled the surgeries, and coached the healthy “patients” on what to say. In exchange for undergoing surgery, the patients received a cash payment, usually between $300 and $1,000 per surgery, or credit toward a free or discounted cosmetic surgery.

The three doctors charged in this case participated in medical insurance fraud for performing unnecessary medical procedures on healthy people with the knowledge that the patients were being recruited. Doctors Chan, Hampton, and Rosenberg performed a total of 1,037 procedures, resulting in insurance billings exceeding $30 million for the facilities fees alone. Unity received over $5.1 million in payment as a result of the surgeries performed by these doctors. The doctors performed many of the surgeries on Saturdays and Sundays and often performed the same procedures on co-workers or members of the same household on the same day. The doctors ignored basic medical protocols such as: 1) Patients receiving surgeries on consecutive days instead of under one anesthesia; 2) Doctors not meeting the patients prior to operating; 3) Doctors not following up with patients after the procedure was completed; and 4) Doctors not obtaining necessary medical information.

Attorney Dickson went to Unity after having previously managed and represented another surgery center involved in similar illegal activities. He was sanctioned by the federal bankruptcy court for filing a fraudulent bankruptcy claim for a doctor at that surgery center. Dickson was hired by Unity to collect payments from insurance companies and patients. He helped the surgery scheme by creating fraudulent documents to disguise illegal capping activities.

Thirteen Indicted for Comp Premium Fraud

The San Diego County District Attorney announced charges against four businesses, their owners and several employees who were indicted on various types of insurance fraud including workers compensation fraud, unemployment fraud and tax evasion

Owners of A1 Patio and Remodeling Experts in Encinitas, Christina Engineering in Escondido, Quality Way Building Maintenance in National City and Rufino’s Landscaping of Escondido were all indicted by the grand jury in December for their roles in bilking insurance companies and the state tax board out of $1.5 million. Fourteen defendants were indicted in December. Of those, four were arraigned on January 6, and the remainder is scheduled to be arraigned this week in San Diego Superior Court . They include Joshua Swarthout, James Hooper, Andrew Curtis, Billy Ray Alsbrook, George Norton, Jacob Kuhn, Pat Gee, Tim Mountney, and Tom Jarvis . If the defendants fail to appear for arraignment, warrants will be issued for their arrest.

When an employee of Russ E. Kubart of A1 Patio and Remodeling Experts.injured himself after falling from a deck at a jobsite, Kubart told the employee to tell medical staff he injured himself at home because Kubart did not have workers ’ compensation insurance. Loss to known victims is $160,000. Ten employees of Christina Engineering were indicted for their roles in receiving unemployment benefits at the same time they were being paid cash to work, which they were encouraged to do by their employer. Loss to known victims is $350,000 .  Marcos Castaneda , of Quality Way Building Maintenance was indicted on four counts of felony insurance fraud for his role in intentionally lying about his payroll in order to receive reduced workers compensation premiums. Loss to know victims is $133,921. Rufino Aguiluz and his wife, Maria Foulk of Rufino’s Landscaping , were indicted on several counts of insurance fraud, payroll tax evasion and income tax evasion for their roles in failing to report payroll to various workers’ compensation insurance carriers and tax collectors. Loss to known victims is $952,202.

“These are excellent examples of the variations found within the underground economy that continues to negatively impact the California Workers’ Compensation system” said Donald Marshal, Chair of the California Workers’ Compensation Fraud Assessment Commission . “We can see that the victims of these alleged crimes include injured workers and the citizens of the State who must absorb the costs paid for this criminal activity. Congratulations to the San Diego District Attorney’s Office and the California Department of Insurance for their hard work in disrupting the activities of these suspected criminal enterprises.”

More Fake Doctors Prosecuted in San Diego

Robert Oldham Young, 61 , and Rocio “Rosie” Placensia , 32 , of Valley Center, have been charged with conspiracy to practice medicine without a license and multiple counts of grand theft. Young is a published author of the “The pH Miracle,” a diet designed to “alkalinize the body.” The charges allege Young and his cohorts ran afoul of the law when he went beyond advocating dietary changes and used intravenous treatments on patients housed on Young’s avocado ranch in Valley Center.

Young runs the “pH Miracle Center” in Valley Center. He advertises health retreats and medical diagnostic services on his website. Although not a medical facility, Young accepted patients, including terminally ill people, and housed them in temporary quarters on his avocado ranch. Young came to prominence after appearances on Oprah, centred on his treatment of Kim Tinkham for breast cancer. Tinkham and Young both claimed that he had cured her, but she died of her disease shortly afterwards. Young received multiple degrees from Clayton College of Natural Health (formerly American College of Holistic Nutrition), a school that lacked accreditation from any accreditation agency recognized by the U.S. Department of Education. These include a Master of Science in nutrition (1993), a D.Sc. with emphasis in chemistry and biology (1995), a Ph.D. (1997) and an N.D. (Doctor of Naturopathy, 1999).

In 1995, Young allegedly drew blood from two women, told them they were ill, and then sold them herbal products to treat these illnesses. He was charged with two third-degree felony counts of practicing medicine without a license, but pled guilty to a reduced misdemeanor charge. Young argued that he had never claimed to be a medical doctor, that the women had entrapped him by asking to be part of his research, and that he “looked at the women’s blood and simply gave them some nutritional advice.” In 2001, Young was again charged with a felony in Utah, after a cancer patient alleged that Young told her to stop chemotherapy and to substitute one of his products to treat her cancer. Subsequently, when an undercover agent visited Young, he allegedly analyzed her blood and prescribed a liquid diet. The case was taken to preliminary trial, but charges were dropped after the prosecutor stated that he could not find enough people who felt cheated by Young. Young dismissed the arrests as “harassment” and stated that he moved to California because the legal climate there was more tolerant.

Young was arrested this month in San Diego and received 18 felony charges relating to practising medicine without a license, and of theft. According to the Medical Board of California’s press release chronically ill patients were paying Young up to $50,000 for his treatments.

In a similar criminal case prosecuted by the District Attorney earlier this year, Keith Barton, a La Mesa man was convicted of multiple counts of practicing medicine without a license and grand theft for offering a bogus cure for HIV and cancer. Barton is awaiting sentencing on February 10 . Barton called himself “Dr. Barton” and promised to cure a woman and her children of HIV. One of the children subsequently died as a result of not receiving effective treatment. The victim paid Barton $18,000 for the treatment. He also advised a woman wi th autoimmune disease to surgically extract all of her teeth and to take an ineffective treatment called “Dendritic Cellular Therapy.” This victim paid Barton more than $32,000 for his remedies. Barton is not a licensed medical doctor, osteopath or naturopath but shares his name with a real medical doctor who is licensed in California. Barton used the fact that only his middle name differed from the real Dr. Barton to create the impression that he was a licensed professional.

Previous prosecutions by the Consumer Unit include Kathleen Helms, a San Diego woman who posed as a doctor and offered patients non – FDA – approved DMSO infusions as alternative remedies for autoimmune disorders, and Kurt Walter Donsbach, 75, who pleaded guilty to 13 felony charges, including practicing medicine without a license and selling misbranded drugs.

Court of Appeal Applies Earnings Presumption to Volunteer Police Only

John Larkin, a police officer for the City of Marysville, sustained injuries to his neck, right shoulder, left upper thigh, face, right biceps, and nose. He had less than maximum earnings.

At an expedited hearing on the issue of his appropriate earnings rate and his claim for temporary disability, he claimed that he should be entitled to the benefit of the earnings rates established by Labor Code sections 4458.2 and 3362 which specify maximum earning for volunteer police officers. He claimed that the “plain language” of these statutes supported this conclusion. As relevant to this case, section 4458.2 provides: “If an active peace officer of any department as described in Section 3362 suffers injury or death while in the performance of his or her duties as a peace officer, . . . then, irrespective of his or her remuneration from this or other employment or from both, his or her average weekly earnings for the purposes of determining temporary disability indemnity and permanent disability indemnity shall be taken at the maximum fixed for each, respectively, in Section 4453.” Section 3362 provides: “Each male or female member registered as an active policeman or policewoman of any regularly organized police department having official recognition and full or partial support of the government of the county, city, town or district in which such police department is located, shall, upon the adoption of a resolution by the governing body of the county, city, town or district so declaring, be deemed an employee of such county, city, town or district for the purpose of this division and shall be entitled to receive compensation from such county, city, town or district in accordance with the provisions thereof.”

Following an expedited hearing, the workers’ compensation judge (WCJ) found that sections 4458.2 and 3362 applied only to active volunteer peace officers, not regularly sworn, salaried peace officers, and therefore did not apply to Larkin. Larkin petitioned the Board for reconsideration of the decision, contending the plain language of the statutes entitled industrially injured peace officers to temporary disability payments at the maximum rate. The Board agreed with the reasoning of the WCJ and denied the petition for reconsideration.

The Court of Appeal affirmed the WCAB in the published case of John Larkin v WCAB and the City of Marysville. In doing so, the Court stated that the outcome of Larkin’s interpretation “would be an absurd result..”

The policy underlying these statutes is to encourage public service to these agencies by providing maximum benefits to volunteers injured in providing such service. With respect to volunteer firefighters, the Supreme Court recognized these fictitious earnings were created by the Legislature as it was ” ‘[c]ognizant of the public service provided by the volunteer civilian firefighter and the potential loss of his earnings from other employment [and] determined that the usual benefit schedules should not apply but that a fictitious earnings component should be used. The liberal disability compensation program not only serves to counterbalance any sacrifice of earning power made to engage in firefighting activity, but also provides an incentive to engage in an important public service.’ ” The same policy considerations apply to providing these fictitious earnings for volunteer peace officers.

The Court of Appeal concluded “to give effect to the statutory policy underlying these statutes, we find that sections 4458.2 and 3362 apply to volunteer peace officers only.”

KKR Announces $2.4 Billion Sedgwick Acquisition

Insurance claims services provider Sedgwick Claims Management Services, Inc. said Monday that private equity giant Kohlberg Kravis Roberts and Co. L.P. (KKR), together with Sedgwick’s management, have agreed to acquire a majority stake in the company for about $2.4 billion.The majority stake will be acquired by KKR and Sedgwick’s management from the company’s current group of investors that includes private equity firms Hellman and Friedman LLC and Stone Point Capital LLC. The transaction is expected to close during the first quarter of 2014.

David North, president and CEO of Sedgwick said, “We couldn’t ask for a better partner in the next stage of Sedgwick’s evolution. KKR has an exceptional record of investing in financial services companies and will be a valuable strategic resource for our organization. We share a commitment to continued innovation in the claims and productivity management industry.”

Last Friday, media reports had indicated that KKR was close to buying Sedgwick for more than $2 billion. Sedgwick will be KKR’s second acquisition of a claims service provider in a span of four months. In September 2013, KKR agreed to buy privately-held automotive claims services provider Mitchell International Inc. from private equity firm Aurora Capital Group in a deal reportedly valued at more than $1 billion.

Sedgwick specializes in workers’ compensation, disability, FMLA, and other employee absence; managed care, general, automobile, and professional liability, warranty and credit card claims services; fraud and investigation, structured settlements, and Medicare compliance solutions. On an annual basis, Sedgwick handles more than 2.1 million claims and has fiduciary responsibility for claim payments totaling more than $11 billion.

In 2010, buyout firms Stone Point Capital LLC and Hellman and Friedman LLC acquired Sedgwick from Fidelity National Financial Inc. (FNF) as well as private equity firms Thomas Lee Partners L.P. and Evercore Capital Partners for about $1.1 billion. Prior to that, the business was owned by insurance brokerage and risk-management company Marsh and McLennan Companies Inc. (MMC). Hellman and Friedman is a private equity investment firm with offices in San Francisco, New York and London. Since its founding in 1984, it as raised and, through its affiliated funds, managed over $25 billion of committed capital. Stone Point Capital is a private equity firm based in Greenwich, Connecticut. Stone Point serves as the manager of the Trident Funds, which have raised more than $10 billion in committed capital to make investments in the insurance, employee benefits and financial services industries.

KKR said that equity for the investment was provided principally by KKR’s North American XI private equity fund. UBS Securities LLC, Deutsche Bank Securities, Morgan Stanley, Mizuho, KKR Capital Markets LLC and MCS Capital Markets LLC provided financing for the transaction. KKR has announced several other billion-dollar acquisitions in recent times. In mid-December 2013, the company agreed to acquire specialty finance company KKR Financial Holdings LLC (KFN) in an all-stock transaction valued at about $2.6 billion. In November, KKR agreed to acquire commercial landscaper Brickman Group Ltd. LLC from Leonard Green and Partners L.P. in a deal valued at $1.6 billion. KKR also said in late September that it agreed to acquire the healthcare unit of Japanese consumer electronics giant Panasonic Corp. (PC) for an equity value of about 165 billion yen, or about $1.67 billion.

DWC Announces 2014 Carrie Nevans Community Service Award Recipients

The Division of Workers’ Compensation (DWC) has announced the winners of the 2014 Carrie Nevans Community Service Award. This year’s award recipient in Southern California is Pamela Foust, Zenith Vice President of Claims. Tom Rankin, State Compensation Insurance Fund Board of Directors and president emeritus of the California Labor Federation, AFL-CIO, is the Northern California recipient. The awards will be presented at the upcoming 21st annual DWC educational conference luncheons.

Pamela Foust has been involved in workers’ compensation since 1978. She was a workers’ compensation judge from 1985 to 2010 before joining Zenith. In 2010 she was awarded a Lifetime Achievement Award from the Executive Committee of the State Bar’s Workers’ Compensation Section for her body of work as an attorney and judge. Her seminal treatise California Lien Claims in Workers’ Compensation Cases transformed how liens claims were litigated.

Tom Rankin is regarded as an authority on workers’ compensation law and unemployment insurance and has been a key participant in every legislative effort to improve the workers’ compensation system since 1983. He has served on the boards of many labor, academic, and research organizations and was the President of the California Labor Federation, AFL-CIO, from 1996 to 2004.

The awards, which began in 2010, were renamed in memory and honor of Carrie Nevans, the acting administrative director who passed away in 2011.

The DWC’s 21st annual educational conference 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 about the most recent developments in the system as well as ongoing DWC programs. The Los Angeles conference (February 3-4) is nearly sold out: registration is still open for the Oakland training, February 10-11 at the Oakland Marriott City Center Hotel.

Missing Unattached Safety Device Cannot Be Used for Power Press Exception

Lucia Gonzalez was working for Seal Methods, Inc. (SMI) when she was severely injured while loading material onto a die in a power press. She sought damages from SMI in a lawsuit filed under Labor Code section 4558, known as the “power press exception” which allows an employee to “bring an action at law for damages against the employer where the employee’s injury or death is proximately caused by the employer’s knowing removal of, or knowing failure to install, a point of operation guard on a power press, and this removal or failure to install is specifically authorized by the employer under conditions known by the employer to create a probability of serious injury or death.” (§ 4558, subd. (b).) The trial court granted SMI’s motion for summary judgment, finding that section 4558 did not apply under the undisputed facts of this case.

The accident occurred while Gonzalez was operating a power press, referred to as Preco Punch Press No. 4. At the time of the accident, Gonzalez was operating the Press in “manual” mode because the material being shaped had to be moved onto and off of the die by hand. The Press was equipped with a two-hand activator system for operation in manual mode; the die would not strike unless the operator used both hands to press buttons located outside the strike zone (the “point of operation”). The purpose of this two-hand activator system was to ensure that the operator’s hands were outside the point of operation during the machine stroke. There was no evidence that SMI bypassed, removed, or tampered with the two-hand activator system on the Press used by Gonzalez. Nevertheless, on March 17, 2011, the Press activated while Gonzalez was loading material onto the die, crushing her hand.

Gonzalez subsequently filed the instant lawsuit for general, special, and punitive damages, alleging that SMI knowingly removed or failed to install a point of operation guard on the Press. SMI moved for summary judgment on the ground that the point of operation guard specified by the manufacturer of the Press – the two-hand activator system – was properly installed and activated, and the manufacturer did not specify or require any other point of operation guard. Gonzalez opposed the motion, contending that the operation manual for the Press requires the use of safety blocks (which are small wooden or metal blocks that are placed in the point of operation to physically prevent the machine from striking) whenever the operator’s hands are in the point of operation, and that those safety blocks constitute a point of operation guard. The trial court found there was no evidence that SMI received any communication from the manufacturer that safety blocks needed to be installed or otherwise attached to the Press, and granted SMI’s summary judgment motion. Gonzalez timely filed a notice of appeal from the resulting judgment.

The Court of Appeal affirmed in the published opinion of Gonzalez v Seal Methods Inc.

Labor Code section 4558 authorizes an injured worker to bring a civil action for tort damages against his or her employer where the injuries were “proximately caused by the employer’s knowing removal of, or knowing failure to install, a point of operation guard on a power press,” where the ‘manufacturer [had] designed, installed, required or otherwise provided by specification for the attachment of the guards and conveyed knowledge of the same to the employer.” Whether the section 4558 exception applies in this case hinges upon whether a safety block is a “point of operation guard” within the meaning of section 4558. If it is, the determination whether the manufacturer communicated to SMI that safety blocks must be used whenever a worker must manually position material on the die is a question of fact, and the facts are disputed in this case. But if a safety block is not a point of operation guard, section 4558 does not apply and the judgment must be affirmed.

Section 4558 does not define “point of operation guard,” but the language of the statute lead the Court of Appeals to conclude that a point of operation guard does not include an unattached device, such as a safety block, that the worker moves into and out of the point of operation. The Court concluded “Although we are sympathetic to Gonzalez, who suffered a horrible injury that might have been prevented had a safety block been used, we are bound by the Supreme Court’s directive to construe the section 4558 exception to the workers’ compensation exclusivity rule narrowly. Read in its entirety, section 4558 applies when an employer fails to attach or removes only those guards or devices, designed to protect workers, that are capable of being permanently installed by the manufacturer or the employer. The kind of safety block at issue in this case, which is not attached to the Press and is moved into and out of the point of operation by the worker, is not such a guard or device.”

Federal Case Accuses California Hospitals of $50 Million Fraud

An employee whistle-blower alleges Prime Healthcare Services, Inc., which boasts its flagship Desert Valley Hospital in Victorville, systematically misdiagnosed and extended stays of patients to collect on lucrative Medicare billings. In an amended False Claims Act lawsuit filed in California federal court June 11 and unsealed last week, the Ontario-based hospital company is accused of overcharging Medicare and Medicaid more than $50 million over three years – a claim which Prime denied this week. While the lawsuit is centered around activities at Alvarado Hospital in San Diego – acquired by Prime in November 2010 – the complaint also names Desert Valley Hospital, several other Prime hospitals and Prime founder and chairman Dr. Prem Reddy.

Prime issued a news release on Tuesday denying that Alvarado Hospital or any of the company’s 24 other hospitals submitted false claims with the Medicare program.

Karin Berntsen – former director of Quality and Risk Management, then Case Management at Alvarado Hospital – contends in the complaint that top Prime executives routinely encouraged hospital staff to admit patients for short stays in favor of outpatient/observation status, regardless of whether the patient’s medical condition warranted it. Berntsen said it was a dubious effort to increase the hospital’s Medicare reimbursement, which is a violation of government rules.Berntsen was employed by PHS in various director roles related to quality and risk management, case management, and performance improvement for Alvarado Hospital, which it acquired in November 2010. She alleges that PHS purchases floundering hospitals and boosts their finances by implementing false claims practices.

Medicare reimbursement is greater for inpatient services than it is for observation services, and roughly 70 percent of patients at Alvarado are covered by Medicare and other federal healthcare programs, according to the complaint.

The complaint alleges that Prime executives also instructed staff to exaggerate patient diagnoses and remove references to observation status on hospital admission forms while eliminating internal oversight into decisions regarding inpatient admissions. Additionally, Reddy is alleged to have altered patient records during a Sept. 6, 2011 instructional exercise and appealed to staff four months earlier to find a reason to make an outpatient an inpatient, according to the complaint. “If the patient is elderly,” he allegedly said during a meeting on May 3, 2011, “you should add encephalopathy for a higher payment. You are missing some of these elderly patients. But, be careful … I don’t want to go to jail, ha, ha, ha.”

Berntsen estimates that more than $4 million in billings to government healthcare programs since 2010 were the result of fraudulent patient stays. She further estimated that the alleged fraud likely extended to the company’s 24 other hospitals nationwide, exceeding an estimated windfall of $50 million.

Troy Schell, Prime Healthcare’s general counsel, called the $50-million estimate “speculative nonsense because Ms. Berntsen’s specific allegations are only about Alvarado Hospital, and she clearly had no knowledge about whether other Prime hospitals supposedly operated in a similar manner.” Schell said in a written statement that Prime hospitals have been under tight scrutiny ever since a workers union accused them in 2010 of submitting claims for unnecessary admissions. “Prime hospitals have been the subject of numerous government agency audits and investigations,” he said, “but none of them have found any significant issues regarding such admissions or the lengths of stay.” He also said oversight and quality control programs and reporting at Alvarado Hospital have always been “robust.” “It defies common sense that Alvarado Hospital has been engaged in a false claims scheme,” he said, “when the entire Prime Healthcare system has been under … heightened and aggressive regulatory scrutiny for years.”

The case is U.S. ex rel. Karin Berntsen v. Prime Healthcare Services Inc. et al., case number 2:11-cv-08214, in the U.S. District Court for the Central Division of California.

Orthopedic Surgeons Clueless As to Medical Device Costs

People wondering how much their new artificial hip will cost probably won’t find the answer with their surgeon, according to a new study. According to the article in Reuters, researchers who surveyed 503 orthopedic surgeons found the doctors could only accurately estimate the price of implantable medical devices between 17 and 21 percent of the time. “My suspicion was that knowledge would be low, but I think we were all surprised by how little we knew about the price of the devices we were implanting,” Dr. Kanu Okike told Reuters Health. Okike, the study’s lead author, worked on the research while at the University of Maryland School of Medicine in Baltimore. He is now an orthopedic surgeon at the Kaiser Permanente Moanalua Medical Center in Honolulu.

Over $150 billion is spent every year on medical devices in the U.S., Okike and his colleagues write in the journal Health Affairs. The devices themselves are often the most expensive part of surgery, according to the researchers. And prices of comparable devices can vary even if they are equally effective. Orthopedic surgeons have been asked to help conserve resources by considering the price of devices, they write. But there are several barriers to that information. For example, some hospitals sign agreements with vendors not to disclose the price they pay for devices and the prices may vary between hospitals and change over time. Also, surgeons don’t usually have a need to know the prices.

For the new study, the researchers surveyed 217 senior orthopedic surgeons, known as attendings, and 286 orthopedic surgeons-in-training, known as residents, at seven U.S. academic medical centers. The doctors were asked to estimate the costs of 13 common orthopedic implantable devices, such as a hip implant. They were also asked to estimate the price of three pairs of devices which are considered to be equal in quality but differ in price, like plates used to treat broken bones.

The researchers found that over a third of attendings and three quarters of residents said their knowledge of device prices was “below average” or “poor.” Attending surgeons were able to estimate the correct price of the devices – within a 20 percent margin of error – 21 percent of the time. Residents could only estimate the correct price 17 percent of the time. In general, the participants underestimated the cost of the more expensive devices and overestimated the cost of the less expensive devices for the three pairs they were shown. “You systematically don’t appreciate the amount that could be saved by choosing the lower cost item,” Okike said.

Despite the high rate of inaccurate estimates, more than 80 percent of participants said price should play an important part in the process of selecting devices.

Okike cautioned that the results of the new study may not apply to all surgeons. Those in private practice may know more or less about pricing than the surgeons surveyed. “The results are not surprising that you would have so small a percentage of attendings and residents guess the right price,” Jeffrey Lerner, president and CEO of the ECRI Institute in Plymouth Meeting, Pennsylvania, told Reuters Health. Lerner was not involved with the new study but has researched transparency of device prices. “I think there should be price transparency so people can compare costs and quality just as they can when they buy a tomato, house or car,” he said. “Comparison is an integral part of non-healthcare and healthcare shopping.”

“Surgeons face a number of barriers in learning these prices because of the non-disclosure agreements and lack of transparency,” Okike said. “I think the net result of that is just higher costs to the healthcare system.” He added, however, that surgeons may become more knowledgeable about prices as accountable care organizations, or ACOs, become more popular and doctors are incentivized to keep costs down. ACOs bring together doctors, hospitals and other players in the healthcare system to care for patients in an effort to bring down costs.

NICB Outlines Fraud Trends for 2014

Medical, auto and workers’ compensation fraud are expected to be at the forefront of the National Insurance Crime Bureau focus on insurance fraud trends in 2014, according to Chief Communications Officer Roger Morris. The article in the Claims Journal says that the medical and workers’ comp business is where most of the fraud occurs today, Morris said. “The scheme is the same. It’s always been — continuing treatment, malingering as we call it, without really needing it. That’s why there’s been quite a bit of analysis of provider bills lately,” said Morris.

Medical fraud is such a huge business that the NICB established major medical fraud task forces around the country starting in 2002. There will be eight by the end of the year – with the latest one in Chicago. “We focus on strictly the medical component of the auto and the workers’ comp side, and we look at some of the fraud schemes that are being perpetrated particularly in states where there’s no-fault or PIP coverage, personal injury protection coverage, states like Florida, New York, Michigan. We’re seeing some of that move into other states like Minnesota and Kentucky,” Morris said.

He said that staged accidents are a big component in PIP states where there is typically a huge industry of organized crime involving cappers, runners, doctors, chiropractors, physical therapists and lawyers. According to Morris, it’s “all in the name of generating claims.” Medical fraud in Florida became so pervasive the state began a major crackdown initiative in 2012.

“These states are ripe for fraud, and the criminals that have been doing this in Florida have seen a lot of pressure on them now because of the medical fraud task forces and the law enforcement action that we have had in Florida and recent changes, the tightening of the fraud laws there, the PIP laws. A lot of them are moving their operations or expanding them into states like Minnesota and Kentucky,” he said. NICB has held fraud summits in Florida the past two years, as well as in Minnesota last year and in Kentucky last October.

Morris described two common auto insurance fraud scams. “One of the common, pervasive auto scams we see is the crash-and-buy scenario. A person has an accident but doesn’t have the insurance or the right coverage, so they purchase insurance and then wait a day or two and submit a claim saying the accident happened after they bought the policy,” he said. “This started very heavily during the recession and continues today, very similar to the hit-while-parked claim — the insured has an accident, they don’t have the right coverage, or circumstances exist that they don’t want the insurer to know about. They park their car somewhere and they say that when they came back, they found someone had hit it and left, and then they filed a claim,” the NICB chief communications officer explained.

Though auto theft is down, according to Morris, law enforcement is seeing an uptick in organized criminal rings that are sophisticated enough to switch vehicle identification numbers (VINs) or export cars illegally. One such ring was recently uncovered in Los Anegles.

“We monitor exports of vehicles. We check the VINs and so forth for Customs and Border Control. We had a ring that was stealing cars from local dealerships, rental agencies or from parking lots, high-end luxury cars, and they were loading them up on ships to be shipped out of the country overseas and labeling them as scrap metal,” Morris said. “When we had those containers turned around, every one of those containers — more than 25 of them — contained two high-end vehicles that had been stolen and were being shipped out of the country to be sold overseas for a much higher price. I think they sometimes get two or three times the price overseas that they get here.” There was also a recent case in New York involving 46 high-end vehicles. The vehicles, worth $2.4 million, were stolen from dealerships and other places and were being VIN-switched and resold to supposedly unsuspecting buyers.

Listen to the podcast with Roger Morris: Fraud Trends in 2014 for more information.

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