Tag: 2015 News

In a lawsuit unsealed this month in federal court, five ambulance companies have entered into civil settlements with the Department of Justice requiring them to collectively pay more than $11.5 million in payments to the United States to resolve kickback allegations. The settling defendants include three Orange-County based companies – Pacific Ambulance, Inc. and Bowers Companies, Inc., (both of which were subsequently acquired by Rural/Metro Corporation after the alleged misconduct occurred) and Care Ambulance Service, Inc.; and two San Diego-based companies – Balboa Ambulance Service, Inc., and E.R. Ambulance, Inc.

In Carlisle v. Pacific Ambulance et al., Case No. 3:09-cv-02628-L-BLM (S.D. Cal.), the settlements resolve allegations that the defendants engaged in so-called “swapping” kickback schemes by providing deeply discounted – and often below cost – ambulance services to hospitals and/or skilled nursing facilities in exchange for exclusive rights to the facilities’ more lucrative Medicare patient referrals. Such swapping arrangements can lead to overutilization of medical services and inflated charges to the Medicare program. The government alleges that the arrangements in this case resulted in false claims for Medicare Part B transports which in essence subsidized the discounted trips.

The Anti-Kickback Statute prohibits payment arrangements that are intended to influence health care referrals. The statute generally prohibits anyone from offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federal health care programs, including Medicare.

“Today’s settlements resolve a thorough investigation of the practices by ambulance companies that offered significant discount services to facilities in exchange for patient referrals,” said Glenn R. Ferry, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s (OIG) Los Angeles Region. “The OIG takes this type of activity very seriously and welcomes the public’s assistance in identifying any health care businesses that engage in similar types of schemes.”

These settlements resolve a False Claims Act lawsuit filed in the Southern District of California by Kelvin Carlisle, a competitor in the San Diego, Orange and Los Angeles County ambulance marketplaces. The whistleblower or qui tam provisions of the False Claims Act permit the whistleblower to recover a portion of the proceeds obtained by the federal government. As part of the resolution of the suit, Mr. Carlisle will receive in excess of $1.7 million.

These settlements illustrate the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $24 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs. “It is a priority of this office to combat abuses that drive up the cost of health care and waste taxpayer dollars,” said Laura E. Duffy, United States Attorney for the Southern District of California. “We will continue to work closely with our investigative partners to pursue those who refuse to play by the rules and offer kickbacks to induce health care referrals.”

The case was investigated by the U.S. Department of Health and Human Services Office of the Inspector General and the Federal Bureau of Investigation.

Last April, Michael Drobot filed a 15 page third-party complaint for equitable indemnity and declaratory relief against 22 doctors, health executives, chiropractors and a lawyer. Equitable indemnity says in theory that Drobot should not have to pay the State Fund, but if it ends up that he does, then he wants others to share the blame with him and pay the damages. Thus Drobot in his indemnity lawsuit is alleging that these 22 defendants are somehow involved in what the State Fund alleges he did. The lawsuit, in essence, says that if he has to pay any money to the State Fund, they should, also. So he has in effect implicated these entities and individuals.

Following Drobot’s implication of his alleged co-conspirators, the Plaintiff in the RICO case against him, the State Compensation Insurance Fund, has now asked to file a 221 page Third Amended Complaint that asserts claims against those who were named by Drobot, and others who are similarly situated. The list of RICO defendants has now expanded to dozens of entities organized by roles such as Individual Defendants (page 21), Surgical, Pharmacy, and Administrative Defendants (page 22), Provider Defendants (page 29), Marketer Defendants (page 58), and just in case someone has been missed DOE Defendants, (page 60).

The 221 page complaint goes on to specify the “fraudulent schemes” allegedly perpetrated by each group of defendants between pages 64 and 115. If one were to write a treatise on methods to perpetrate medical fraud, these pages would be a good guide. Topics include “Lack of Licenses, Corporate Practice of Medicine, and Payment of Illegal Referral Fees” on the part of the Administrative Defendants, Individual Defendants and Provider Defendants, “Overbilling and Pricing Manipulation” on the part of the Pharmacy Defendants and some Provider Defendants, “Billing State Fund for Treatments and Services That Were the Product of Illegal Kickbacks and Referral Fees, Fraudulent Scheme to Overbill Services By Unbundling/Upcoding, Including Unbundling and Overbilling, Fraudulent Scheme re: Nurse Billing; Autologous Transfusion Billing; Duplicate Radiology Billing, Double-Billing of Prescriptions”, and more.

The SCIF alleges that it has entered into settlement agreements with some of these defendants at the WCAB which it now seeks to rescind. In this regard it pleads “State Fund’s investigation also led it to review certain settlement agreements State Fund entered with Defendants related to liens Defendants brought before the WCAB based on their billings to State Fund. State Fund was unaware of Defendants’ pattern of racketeering activity and other misconduct when it entered into the settlement agreements with the Defendants named therein.” Thus the SCIF seeks to unravel global settlement agreements it has made in the past with certain of these defendants, and recover sums that have already been paid in lien resolution agreements.

State Fund’s proposed Third Amended Complaint asserts claims directly against, among others, Dr. Faustino Bernadett, Jeffrey Catanzarite, Dr. Gerald Alexander, Dr. Jack Akmakjian, Dr. Ian Armstrong, Michael Barri, Dr. Mitchell Cohen, Alan Ivar, Edward Komberg, Dr. Randy Rosen, Dr. Lokesh Tantuwaya, Dr. Jacob Tauber, Dr. Assad Moheimani, and Jason Bernard, as well as entities associated with these individuals.

It is difficult for the SCIF to add up what all of the above cost in damages. Essentially it pleads in paragraph 398 that “Defendants have fraudulently received up to hundreds of millions of dollars from State Fund as a direct and proximate result of their unfair and unlawful practices.” RICO statutes allow treble damages and attorney fees in addition to the hundreds of millions of dollars.

If State Fund’s motion for leave to amend its complaint is denied, State Fund says it intends to file a separate complaint against the parties named in its amended complaint. It says this “request has been made with diligence – State Fund moved quickly after being served with the Third-Party Complaint to perform due diligence on the new parties, research, draft, and file its proposed Third Amended Complaint.” The motion is scheduled to be heard on June 15 in Courtroom 10D before federal judge Andrew Guilford.

Daniel Ramirez filed a workers’ compensation claim against the State of California, Department of Health Care Services, that resolved in 2011 by way of stipulations with a future medical care.
http://appellatecases.courtinfo.ca.gov/search/case/dockets.cfm?dist=1&doc_id=2088080&doc_no=A143043
In July 2014 the State Fund, received a request for authorization from his primary treating doctor, Natalya Shtutman M.D., for 12 sessions of acupuncture. U.R timely denied the treatment, and Ramirez requested an IMR which upheld the denial of treatment. Ramirez alleges that the IMR reviewer found that the primary treater documented functional improvement following prior · acupuncture. However, the IMR reviewer denied treatment by opining that the primary treater’ continued reporting of functional improvement was not credible,

Applicant filed an appeal of the IMR determination with the WCAB challenging the IMR on substantive grounds, and also for an order of the WCAB disclosing the identity of the IMR doctor, so that he could conduct discovery on whether the IMR doctor was biased. The WCJ declined jurisdiction over these issues. Petitioner filed a Petition for Reconsideration and/or Removal of the order taking applicant’s appeal off calendar. He argued that reconsideration was proper because the order taking the matter off calendar was an effective dismissal of the appeal.

The WCAB issued its opinion and orders which denied reconsideration, but granted removal so as to amend the WCJ’s order to an actual dismissal of applicant’s appeal. The WCAB did not substantively address the issues raised. Instead, the WCAB was primarily concerned with providing a final order from which a petition for writ of review could follow.

The petition for writ of review was filed in the 3rd District Court of Appeal in February, and indeed the Court issued a writ on May 7, 2015. Ultimately the case of Ramirez v The State of California Department of Health Care Services will be argued and heard by the 3rd District.

The applicant argues there was lack of merit of the UR/IMR determination. He argues that the “acupuncture MTUS is found in 8 Cal.Code.Regs. section 9792.24.1, which provides for the continuation of acupuncture if functional improvement is documented. Petitioner clearly documented functional improvement with acupuncture. Instead of referring to the acupuncture MTUS, State Fund improperly applied the American College of Occupational and Environmental Medicine (“ACOEM”) Guidelines 2nd edition, which is not adopted or incorporated for purposes of approving acupuncture. State Fund quoted sections of the ACOEM, which state that “invasive techniques (e.g. needle acupuncture) … have no proven value.” Id. That position is completely inapposite to the actual MTUS guidelines for acupuncture. Compare with 8 Cal.Code.Regs. section 9792.24.1. State Fund was required to use the MTUS. Section 4610(c). State Fund did not use the MTUS.”

However the argument on the merits of the determination is not good cause for an appeal to the WCAB. Thus, Ramirez challenges the law on constitutional grounds. “The constitutional question here is whether the legislature had plenary power to remove jurisdiction over medical treatment disputes from the WCAB and assign that jurisdiction to an independent agency contracted through the Administrative Director.”

Ramirez claims it does. “Section 4610.6(i) violates California Constitution, article XIV, section 4, which expressly forbids the Legislature from using its plenary power to “impair or render ineffectual in any measure the creation and existence of the industrial accident commission[.]” This is a separation of powers violation. As stated by the Supreme Court: The standard for assessing whether the Legislature has overstepped its authority and thereby violated the separation of powers principle has been summarized as follows. “[The] legislature may put reasonable restrictions upon constitutional functions of the courts . provided they do not defeat or materially impair the exercise of those functions.” Hustedt v. Workers’ Comp. Appeals Bd., 30 Cal. 3d 329, 338.”

Ramirez alerts the Court that this constitutional issue is pending elsewhere. “Petitioner would note that the constitutional issues raised in this petition are on review in the 1st Appellate District, Stevens v. W. C.A.B., Case No. A143043. Given the scope and effect that the ruling would have on the workers’ compensation system, it may be prudent for multiple courts to address the subject.”

Thus, the constitutionality of IMR is now called into question in two districts of the Court of Appeal and will be decided in the coming months. Stevens is more favorable to applicants since the 1st District Court of Appeal is the most liberal, and the Stevens case has the most passionate facts. The 3rd District is located in Sacramento and Its jurisdiction consists of twenty three counties many of which are conservative. Four of the sitting associate justices were appointed by Governor Schwartzenegger. Should the 3rd District in Ramirez rule differently than the 1st District in Stevens, a quagmire would be created that would trigger the intervention by the Supreme Court. Thus, for the defense, the Ramirez appeal is strategically a gift that gives it a foot in the door of a more conservative court.

The parties stipulated that Norberto Arredondo sustained industrial injury to his back and psyche with a need for future medical treatment. Applicant’s primary treating physician, Daniel Capen, M.D., submitted requests for authorization to defendant for medications, a back brace, and eight sessions of physical therapy. The State Fund timely conducted UR and notified applicant and his physician that UR denied certification for the requested medications. The UR notice further advised that the requested back brace and physical therapy were “conditionally non-certified” because the UR reviewer did not receive information requested from Dr. Capen.

Applicant appealed the UR determination by requesting IMR. Before the IMR determination issued, applicant filed a Declaration of Readiness to Proceed to Expedited Hearing requesting an award of the medication prescribed by Dr. Capen. Later, the IMR determination issued, upholding the UR non-certification of the requested medications. Applicant contended that the IMR determination was invalid because it did not issue within the time described in section 4610.6(d), and for that reason the treatment request was subject to determination by the WCAB.

The issue framed at the hearing was “Does the WCAB have jurisdiction to determine a medical treatment dispute where the IMR/administrative director has failed to issue a determination within the statutory 30 days where the Applicant filed a DOR but not a verified appeal per Labor Code Section 5 4610.6?”

Following the trial, the WCJ concluded that the IMR determination was valid and the WCAB had no authority to determine the medical treatment dispute. The applicant filed a Petition for Reconsideration. The WCAB upheld the decision in the split panel decision of Arredondo v Tri-Modal Distribution Services, SCIF.

Although the WCJ misconstrued section 4610.6( d), he correctly concluded that the IMR determination in this case is valid. IMR is governmental action and the timeframes set forth in section 4610.6(d) are directory and not mandatory. Under that section the 30 day period does not begin to run until “receipt of the … supporting documentation.” Thus, the time allowed from the date a request for regular IMR review is received to the date an IMR determination issues under the AD Rules is 45 days because 15 days are allowed for submission and receipt of supporting documentation.

The WCAB also did not agree with the WCJ’s statement in the Report that an employee may appeal an IMR determination that has not yet issued pursuant to section 4610.6(h)(l).3 This is because section 4610.6(h) plainly provides for review of an IMR determination after it has issued. It does not describe any grounds for appeal before an IMR determination issues.

The Legislature charged the AD with the responsibility of conducting IMR. In this way, IMR is distinctly different than UR, which a defendant is obligated to perform within the statutory and regulatory framework. As designed by the Legislature, IMR is governmental action that occurs under the auspices and control of the AD. The AD contracts with the IMR organization to “conduct reviews” and to “assist the division [of workers’ compensation] in carrying out its responsibilities.” The IMR organization and medical professionals who are “retained to conduct reviews shall be deemed to be consultants” who assist the AD in performing IMR. Services provided by the IMR organization are specifically declared by the Legislature to be a “state function” as described in Government Code section 19130(b)(2). The fact that IMR is governmental action is significant in considering the effect of the time provisions for completion of IMR that are contained in section 4610.6(d). This is because it has long been recognized that statutory provisions that guide governmental action in the conduct of business, and which do not limit its power or render its exercise ineffectual if the requirements are not met, are intended to provide “order, system, and dispatch in proceedings” and as such, “are not usually regarded as mandatory unless accompanied by negative words importing that the acts required shall not be done in any other manner or time than that designated.” However, the Legislature implemented no provision for invalidating IMR if a determination does not issue within the section 4610.6( d) timeframes.

Commissioner Sweeney dissented from the opinion. In her view the “time requirements of section 4610.6(d) must be construed as mandatory in order to uphold the basic constitutional and statutory provisions of workers’ compensation law that require prompt provision of medical care.” As with an untimely UR, the issue of timeliness of an IMR determination is a legal dispute that is within the jurisdiction of the WCAB.

The workers’ compensation industry had a pretty good 2014 in which its combined ratio improved for the third consecutive year, premium grew for the fourth consecutive year, and claim frequency declined about two percent. But the results in 2014 were not enough to relax officials at the industry’s rating and statistical organization, the National Council on Compensation Insurance. NCCI, which is the official rating and statistical organization for more than 30 states, this week released its annual State of the Line workers compensation market analysis in which the group describes the current state of the industry as “calm now – but turbulence ahead.”

This year’s State of the Line report indicates that the workers compensation calendar year combined ratio for private carriers was 98 in 2014, a four-point decrease from 2013 and a 17-point decline since 2011. Total market net written premium increased by approximately 6% to $44.2 billion, driven primarily by an increase in payroll.

“The most recent results show that 2014 was a good year for the industry—and that follows solid results in 2013,” said NCCI President and CEO Steve Klingel. “It would be great if these results marked the beginnings of a new trend line, but ours is a business that runs in cycles. And despite the current calm conditions, we are anticipating turbulence ahead.”

“From ongoing threats to exclusive remedy, to the risk of benefit increases without appropriate rate adjustments, to the rapidly changing nature of our workforce and workplaces, our industry is being tried on all sides today. While I am confident that we will work our way through these challenges, it is important to be realistic about current conditions and to recognize that the current positive results may not last.”

“Results for the workers compensation line improved again in 2014,” said NCCI Chief Actuary Kathy Antonello. “Among the more positive signals were a combined ratio that fell below 100 for the first time since 2006, a second year of above average operating gains, and a continued decline in claim frequency.”

“On the other hand, indemnity and medical severity increases have begun to outpace increases in the average weekly wage and medical consumer price index, low interest rates continue to make investing a challenge, and employment in some sectors of the economy – particularly construction and manufacturing – remains well below pre-recession levels.”

The workers compensation calendar year combined ratio for private carriers was 98 for 2014, which was driven primarily by a decrease in the loss ratio. The accident year results also showed improvement in 2014, falling four points to a combined ratio of 95. The calendar year 2014 underwriting results combined with investment gains on insurance transactions produced a workers compensation pretax operating gain of 14% for 2014. The overall reserve position for private carriers further improved in 2014. NCCI estimates the year-end 2014 reserve position to be a $10 billion deficiency for private carriers – down from $11 billion in 2013. Lost-time claim frequency maintained a path of decline in 2014 – down 2%, on average, in NCCI states.

Even so, the workers compensation industry faces some ongoing challenges: Claim severity increased slightly more than inflation measures for indemnity and medical costs. While workers compensation premium volume continues to increase, construction and manufacturing employment totals remain well below pre-recession levels – restraining even higher premium growth rates. A continuing low-interest-rate environment threatens investment results over the long term.