Tag: 2016 News

California Department of Insurance detectives, assisted by multiple law enforcement agencies, arrested Chris Bathum and Kirsten Wallace on multiple felony counts of grand theft, and identity theft for allegedly conspiring to defraud patients and insurers out of more than $176 million through an elaborate conspiracy. Simultaneously, search warrants were also executed at 15 locations throughout Los Angeles and Orange County.

“Bathum and Wallace’s alleged conspiracy victimized hundreds of people addicted to drugs and alcohol by keeping them in a never-ending cycle of treatment, addiction, and fraud – all the while lining their pockets with millions of dollars from allegedly fraudulent insurance claims,” said Insurance Commissioner Dave Jones.

According to investigators, Bathum, the owner and CEO of Community Recovery of Los Angeles (CRLA) and Wallace, the CFO, are accused of luring vulnerable people addicted to drugs and alcohol to CRLA with a variety of treatment marketing schemes.

The Department of Insurance’s investigation revealed Bathum and Wallace conspired to steal patient identities and buy health insurance policies for patients without their knowledge. After completing treatment, Bathum continued to bill insurance companies for treatment services.

Bathum and Wallace billed health insurance companies more than $176 million in fraudulent claims. The insurers, including Anthem Blue Cross, Blue Shield, Cigna, Health Net and Humana paid approximately $44 million in total before discovering the suspected fraud and stopping claim payments to CRLA.

Additional charges include enhancements for losses greater than $500,000 and for losses greater than $3.2 million.

“This is likely the first wave of indictments and charges in an ongoing investigation into one of the largest health insurance fraud cases in California,” added Jones.

If convicted on all counts, Bathum and Wallace face more than 35 years in prison. Bail was requested at $2 million. Both are likely to be arraigned on November 14, 2016.

This case was investigated by the Department of Insurance and is being prosecuted by Los Angeles District Attorney Jackie Lacey. The Department of Insurance was assisted in the arrests and search warrants by the Los Angeles County District Attorney’s Bureau of Investigations; the Los Angeles County Sheriff’s Department; the Orange County District Attorney’s Bureau of Investigation; and the Department of Health Care Services accompanied detectives to ensure any patients in CRLA facilities are transferred to licensed treatment locations.

The Los Angeles Times reports that In 1998, Tigran Svadjian M.D. purchased the Southwest Medical Group from a man ensnared in a federal medical fraud investigation, according to court records. The man also had suspected ties to Armenian and Russian organized crime.

The man and dozens of other doctors were believed at the time to have overbilled the government at least $13 million for medical tests and procedures at its offices in Burbank, Ventura and San Francisco, news clippings from the time show.

Facing charges of healthcare fraud, Svadjian, a Newport Beach doctor, agreed to go undercover for federal prosecutors. But before he would wear a wire, he told them, he needed to visit his ailing mother in Russia.

He never returned. The day he was to appear in court in 2002, prosecutors received paperwork from a Russian morgue stating that, just a few days before on a Moscow street, Svadjian died of pneumonia. His remains were cremated and given to his mother, Margarita Petrosova.

More than 10 years passed before prosecutors asked a judge to dismiss the charges against Svadjian. In 2013, they discarded the evidence collected against him.The criminal case against Svadjian was over. His estate was divided up among creditors. His wife and children moved on with efforts to rebuild their lives.

But unbeknownst at the time, he actually ended up in the Egyptian town of Hurghada that had blossomed from a once-quiet fishing village stretching along the Red Sea to a beach resort that drew tourists with immaculate hotels and charming night life.

It was there, in late 2002, that Vasily Petrosov found a home and began earning a living as a part-time scuba instructor. He fell in love with a woman from Sochi, Russia, a resort city on the coast of the Black Sea. In 2012, the couple had their first child, a son. Things were looking up for Petrosov and by the end of last year, he expected a second child.

But this would be a difficult pregnancy, and would require a caesarean procedure. Petrosov’s girlfriend flew back to her hometown, where the medical care would be better. There she would wait for him.

Petrosov did not have a passport. The one he had was fake, and authorities seized it when he tried to renew it in Russia years before. Petrosov contacted a Lithuanian friend in Hurghada and purchased another fake passport. Petrosov became Viktoras Cajevkis. A Lithuanian. Armed with his passport and other documents, Cajevkis left Egypt for Russia – with a stop in the Ukraine.

But authorities in Kiev soon realized his passport was fraudulent and sent him back to Hurghada, where Egyptian police arrested him on July 31. Determined to find out who he really was, they searched his apartment, which yielded a canceled American passport with another name. Tigran Svadjian.

Svadjian now sits in a federal holding cell in downtown L.A, where he faces only a single charge of unlawful flight to avoid prosecution, which carries a maximum five-year sentence – half what he faced before he vanished. Prosecutors said they expect to reach a plea agreement with Svadjian by mid-November and won’t prosecute him on the old, and much more serious, Medi-Cal fraud charges.

While Svadjian was abroad, the state Department of Health and Human Services sought a judge’s order to allow them to take his family’s home in a gated Newport Beach neighborhood. The state gave up its fight in 2005 and a year later, Emilya Svadjian divided her ex-husband’s $63,000 in assets among the family. Her claim on his life insurance was rejected.

But the FBI said she managed to empty out a Swiss bank account Svadjian maintained with $3 million.

Robert Gaona claimed industrial injury. He was evaluated by Dr. Sherry Mendelson, the agreed medical evaluator, who opined that he should be evaluated by a chronic pain specialist and recommended Dr. Lawrence R. Miller. Dr. Miller recommended “24 hours 7-day a week home care assistance.” His report was sent to Dr. Mendelson, who accepted his opinion and recommended that 24/7 care be provided.

Capital Builders later objected to the admissibility of Dr. Miller’s report. It then filed a petition to strike Dr. Mendelson’s reports and remove her as the AME in psychiatry pursuant to section 4062.3, subdivision (g). The petition alleged that there was no agreement to provide Dr. Miller’s report to the AME and that sending Dr. Miller’s report to Dr. Mendelson was an improper ex parte communication.

The WCJ denied Capital Builders’s petition to strike “without prejudice.”

Capital Builders petitioned for removal or in the alternative for reconsideration. The appeals board found the WCJ’s decision to be an interlocutory procedural order that was not a final order and was therefore not the proper subject of a petition for reconsideration. The appeals board thus dismissed the petition for reconsideration. The appeals board also found that Capital Builders did not show substantial prejudice or irreparable harm and therefore denied the removal petition.

The Court of Appeal issued a writ of review on July 18, 2016. Simultaneously, it requested briefing on whether the appeals board’s decision was a final order, whether the appeals board’s decision is reviewable by way of a writ of review, and whether the Alvarez decision’s implied conclusion regarding reviewability was correct.

The appeals board responded by underscoring that the WCJ’s order was “‘without prejudice,’” supporting the conclusion that it was an interim procedural decision. Gaona replied by agreeing that the WCJ’s order was an “interim procedural discovery order that ha[d] no impact on the rights and liabilities of either party . . . .”

Capital Builders filed a reply contending that all decisions of the appeals board are subject to review by the appellate courts.

The Court of Appeal agreed that the ruling was not a final order and not subject to appeal,and dismissed the petition for writ of review in the published case of Capitol Builders Hardware v WCAB (Gaona).

Principally, because workers’ compensation proceedings are to be expeditious, inexpensive, and “‘without encumbrance of any character,’” certain threshold issues, if finally determined, qualify as final orders. (Safeway, supra, 104 Cal.App.3d at p. 533.) Examples of threshold issues are whether the injury arises out of and in the course of employment, the territorial jurisdiction of the appeals board, the existence of an employment relationship or statute of limitations issues. (Safeway, supra, at p. 533 & fn. 4.) Such issues, if finally determined, “may avoid the necessity of further litigation” (Id. at p. 534) and hence render workers’ compensation litigation more expeditious and inexpensive.

The appeals board dismissed the petition for reconsideration and denied the petition for removal. Because these orders leave issues for future consideration (Lyon v. Goss (1942) 19 Cal.2d 659, 670), under the usual understanding of the concept of a final judgment or order, they are not final. (Maranian, supra, 81 Cal.App.4th at p. 1075.)

These orders also do not qualify as orders finally disposing of threshold issues in workers’ compensation practice. The underlying issue, i.e., whether the communication was or was not ex parte and therefore prohibited by subdivision (g) of section 4062.3, will not avoid the necessity of further litigation.

The Department of Industrial Relations (DIR) and its Division of Workers’ Compensation (DWC) posted a progress report today on the department’s continuing implementation of Independent Medical Review (IMR). IMR is the medical dispute resolution process that uses medical expertise to obtain consistent, evidence-based decisions and is one of the most important components of Senate Bill 863, Governor Brown’s landmark 2012 workers’ compensation reform.

“Independent Medical Review replaced a broken system where injured workers had to wait months for medical treatment while disputes over their care were litigated in court,” said California Labor and Workforce Development Agency Secretary David M. Lanier. “It’s encouraging to see the marked improvements in the timeliness of IMR decisions as a result of the state’s ongoing efforts to improve the system.”

The 2016 Independent Medical Review (IMR) Report charts the progress of IMR following its successful implementation in July 2013. In the second and third year of IMR, DIR and DWC took steps to reduce the average number of days to complete IMRs (from 56 days in late 2014 to 10 days by mid-2015), made enhancements to the program, and began to collect and analyze data to improve evidence-based medical decisions and outcomes for injured workers.

“The report shows IMR is working as intended,” said Christine Baker, Director of the Department of Industrial Relations (DIR). “There is an effective process to support appropriate care and stop inappropriate care. The data is showing where further improvements are needed, particularly regarding medical treatment guidelines and education, and we will continue to make adjustments.” Highlights of the report include the following:

System improvements: Working with IMR vendor Maximus, DIR has prioritized electronic filing of medical records, which led to faster resolutions of cases being reviewed and decided. Refinements in the data reporting also helped track disputed issues. DWC created a searchable database where it posts IMR decisions on its website. IMR application fees were reduced for cases that contain only pharmacy-related issues.

Who files for IMR: More than a quarter of IMR cases are filed in Los Angeles, with the Bay Area second with about 20 percent of the state total. Most injured workers with an IMR case are represented by an attorney. Ratios of case outcomes were almost identical for represented and unrepresented injured workers, with more than 80 percent of items and services deemed medically unnecessary by utilization review decision being upheld by IMR reviewers. The rate of treatment disputes overturned is between 9 and 11 percent.

What is in dispute: Pharmaceuticals were the most common treatment category in dispute (49 percent in 2015), with requests for rehabilitation services a distant second. The most requested drugs were opioids.

Further refinements: DWC is revising the IMR regulations to require electronic filing of applications and medical records, which will ensure the timeliness of decisions. The division has also launched an online physician continuing education course to improve understanding of the medical treatment utilization schedule (MTUS) and the IMR and utilization review (UR) processes.

“We continue to evaluate IMR decisions to ensure optimal care for patients, particularly with opioids,” said DWC Executive Medical Director Dr. Raymond Meister. “Helping physicians understand and follow the MTUS will improve results for injured workers.”

The Wall Street Journal reports that workplace injury is one of the main reasons doctors prescribe opioids, and dependence has become an expensive problem for those paying workers’ comp claims. Workers’ compensation payers spent $1.54 billion on opioids in 2015, or 13% of total U.S. spending on opioids, according to an analysis by CompPharma LLC.

Companies that handle claims for those injuries are trying new programs that push workers toward alternative pain treatments and that make it harder to get prescriptions for potentially addictive drugs – all intended to get people back to work without getting hooked, companies say.

Workers compensation brokers, insurers and administrators, such as Lockton Companies LLC., Liberty Mutual Group Inc. and Broadspire Services Inc. are using predictive algorithms and behavioral health screens to assess an individual’s risk for dependency, and steering some injured workers to alternate treatments such as over-the-counter drugs and mental-health counseling in lieu of prescription opioids. Such programs are aimed at preventing abuse, rather than treating it after the fact.

“We were not capturing opioids early enough. We were catching them once they were already at a high dosage,” said Jacob Lazarovic, chief medical officer of Broadspire, which administers workers comp claims for self-insured employers and insurers.

When an injured worker is first prescribed a drug like Fentanyl, Broadspire mails an opioid education packet to both patient and doctor, and tracks refills. Claims are reviewed after 10 weeks to check whether the patient is still taking opioids. Broadspire then works with the physician to make plans for weaning the patient off the drugs, he says.

In a test of the program, opioid prescriptions fell by 14% compared with a control group, the company says.

Insurer Travelers Cos. has developed an algorithm that analyzes thousands of claims and identifies the likelihood that an injured employee will develop chronic pain. Certain conditions, such as a prior case history of anxiety or depression, increase the chance that a patient will experience chronic pain, said Adam Seidner, Travelers’ medical director.

Those deemed at risk for chronic pain and addiction receive recommendations for alternate therapies, such as physical therapy and mental-health counseling, Dr. Seidner said.

Travelers says it cannot prevent a physician from prescribing opioids for at-risk patients, but it does urge care providers to follow a plan for alternate therapies and can refuse to authorize payment for a painkiller prescription, depending on state law.

Travelers says its algorithm, used in 20,000 cases in the past year, has helped reduce individual claim costs by as much as 50%. The predictive model and other efforts have helped reduce opioid prescriptions by 23% in the past 12 months among covered workers, according to the company.

To some extent, the industry is trying to solve a problem it helped create. Researchers found that about 65% to 85% of injured workers received narcotic painkillers under workers comp, according to an analysis of 264,000 claims by the Workers Compensation Research Institute.

Insurance broker Lockton has piloted a program in which injured workers undergo behavioral health and other screenings to assess risk of developing long-term pain or addiction. Workers with telltale traits – such as a tendency to view situations in catastrophic terms – may be steered toward less-powerful drugs to treat pain or referred to therapists able to treat the underlying sources of pain, said Keith Rosenblum, a senior workers’ compensation strategist at Lockton.

“You are creating zombies when you give [injured workers] opioids and sedatives,” Mr. Rosenblum said. “This is preventable.”