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Tag: 2017 News

Premium Fraud Discovered After Double Death Claim

The Riverside County District Attorney’s Office has asked for an arrest warrant against Carlos Valencia, the employer of two men who were fatally electrocuted in March 2016 while pollinating palm trees in Thermal.

A report in the Desert Sun says that an investigation into the deaths of Osvaldo Ceron and Ernesto Hurtado found that Carlos Valencia, owner of Valencia Trimming in La Quinta, misclassified employees to make their jobs appear to be lower risk to his insurance provider and lied about employee pay.

Valencia deprived California’s insurance fund for workers’ compensation of $100,000 and cost the state more than $35,000 in unreported payroll taxes between 2012 and 2017, the arrest declaration says.

The district attorney filed the felony charges against Valencia, 49, on Dec. 7 with a recommended cash bond of $135,000.

Valencia Trimming employees Ceron and Hurtado were electrocuted while pollinating palm trees at 68600 Harrison Ave. in Thermal on March 12, 2016.

The two men were using a truck with a boom. Hurtado was maneuvering the boom when the bucket carrying both men made contact with a power line, according to the DA, shocking them.

Ceron fell from the bucket to the ground, where he was found dead by a third employee. Hurtado remained in the bucket, which caught fire while the group waited for the power company to shut off the power line. He was electrocuted and burned.

According to the DA, Valencia misreported both pay rate and worker classification to the State Compensation Insurance Fund.

SCIF issued Valencia Trimming an insurance policy effective in 2012. But Valencia “reported his payroll under landscaping and not tree trimming,” a classification that lowered Valencia’s insurance rate prior to the deaths of Ceron and Hurtado. Valencia later admitted to SCIF that “no landscaping operations are performed” by his business, according to the DA.

Valencia also underreported employee payroll wages to SCIF and to state tax authorities, the declaration says. For example, Valencia told SCIF investigators after the incident that Hurtado had earned $15,000 annually and that Ceron had earned $11,000 annually, but previously reported to SCIF that his business had no payroll wages during periods when one or both men were employees.

SCIF found that Valencia “never reported any payroll wages” to the Employment Development Department, California’s largest tax collection agency.

LAUSD Teacher Sentenced For Disability Fraud

A Lake Elsinore woman, who worked as a teacher in the Los Angeles Unified School District, has been ordered to pay more than $92,000 restitution after pleading guilty to insurance fraud.

Sheila Marie Green, DOB: 8-8-69, was sentenced by Riverside County Superior Court Judge Helios Hernandez on Dec. 7, 2017, to eight years in custody – two years in county jail and six years of mandatory supervision. She was also ordered to pay $92,310 in restitution to three insurance companies.

Pursuant to a plea agreement with the DA’s Office, Green pled guilty on Nov. 29, 2017, to two counts of insurance fraud, Penal Code section 550 (a) (5).

During the years 2013 through 2016, while working as a teacher in the Los Angeles Unified School District (LAUSD), Green submitted claims on several disability insurance policies she had obtained that would pay benefits should she be injured and unable to work.

For each claim, Green forged the signature of a payroll employee with the LAUSD on documents stating, fraudulently, that she was not working.

However, an investigation conducted by investigators with the LAUSD and the Riverside County DA’s Office, showed that Green was working while also receiving disability benefits.

During a search of Green’s vehicle, investigators found copies of the documents with the forged payroll employee’s signature as well as paperwork with numerous “practice” signatures of the LAUSD payroll employee.

The case, RIF1605893, was prosecuted by Deputy District Attorney Matthew Roberts of DA’s Insurance Fraud Team.

PhRMA Files Suit to Invalidate SB 17 Drug Law

The trade group representing U.S. drugmakers said it has a filed a lawsuit to stop California from implementing a law aimed at reining in prescription drug prices.The Pharmaceutical Research and Manufacturers of America (PhRMA) initiated litigation in the United States District Court for the Eastern District of California challenging SB 17, which it alleges is an unprecedented and unconstitutional California law.

SB 17, Hernandez which was signed into law this year, requires pharmaceutical companies to notify health insurers and government health plans at least 60 days before scheduled prescription drug price hikes that would exceed 16 percent over a two-year period and to explain the reasons behind those increases.

In its federal complaint, filed last week, PhRMA argues that SB 17 attempts to dictate national health care policy related to drug prices in violation of the United States Constitution, singles out drug manufacturers as the sole determinant of drug costs despite the significant role many other entities play in the costs patients pay, and will cause market distortions such as drug stockpiling and reduced competition.

PhRMA seeks a declaration from the Court that certain provisions of SB 17 violate the United States Constitution and requests that the Court permanently enjoin the State from implementing or enforcing those provisions of the law. Specifically, the complaint alleges that SB 17 violates:

– the Commerce Clause, which prohibits California from regulating drug pricing beyond the State’s borders;
– the First Amendment, by compelling speech by manufacturers justifying their price changes; and
– the Fourteenth Amendment’s due process clause because the law is unconstitutionally vague.

SB 17 provides that if a manufacturer has increased certain products’ federally defined nationwide list price (wholesale acquisition cost, or WAC) by 16 percent or more cumulatively over the prior two to three calendar years, then that company may not increase the WAC in the current calendar year unless the company first provides registered purchasers and State purchasers with 60 days’ advance notice of the price increase. The WAC is a publicly available national price, not a price specific to California.

PhRMA claims that this law, therefore, expressly saddles the entire country with California’s “misguided drug pricing policy” by imposing restrictions on the national list price of manufacturers’ medicines.

It also alleges that the law also does not address the large rebates and discounts insurance companies and pharmacy benefit managers (PBMs) are receiving and that are not always passed on to patients. Further, the advance notice requirement could incentivize prescription-drug arbitrage by effectively creating a “buying window” for selected entities to stockpile products before price increases go into effect, which in turn could create substantial market distortions.

PhRMA says it recognizes that people have important questions about their medicine costs. That is why PhRMA says it has been convening a conversation called Let’s Talk About Cost that takes a broad look at this complex issue, exploring the slowdown in medicine cost growth, the rising cost of chronic disease, insurance coverage of medicine, the role of middlemen, and what our industry can do to make medicine more affordable for patients.

“In this time of great innovation and advancement in therapies, we understand how important it is for patients to have affordable access to the medicines they need, but SB 17 is not only poorly conceived, it also misses the mark with its myopic focus on manufacturers and provisions that are in clear violation of the Constitution,” said James C. Stansel, PhRMA Executive Vice President and General Counsel. “The law creates bureaucracy, thwarts private market competition, and ignores the role of insurers, pharmacy benefit managers and hospitals in what patients pay for their medicines.”

Jurors Sometimes Sleep During Complex Trials

The right to a jury trial is a pillar of America’s justice system, enshrined in the Constitution from a tradition dating back more than 1,000 years. But according to a report in the Wall Street Journal, the problem these days is making sure jurors stay awake.

Last week, federal judges in two New York trials – one involving charges of sanctions evasion, the other concerning allegations of corruption in international soccer – dismissed jurors who were dozing off.

In a typical criminal trial, 12 jurors in a boxed area listen for hours at a time to testimony, with a few breaks and a lunch hour. Some trials last several months.

During jury selection, the judge and lawyers interview prospective jurors to find biases, including questions about hobbies, news sources and other topics. Lawyers say they watch for prospects already napping during jury selection. When lawyers see a slumbering juror, “it is a total blow to the ego,” says Sarah Coyne, a former federal prosecutor and now a partner at Weil Gotshal & Manges LLP.

There are no concrete rules for when a judge should dismiss a juror for sleeping. Lawyers say it depends how long they were napping and whether they snoozed through crucial testimony.

In one current trial, Manhattan federal prosecutors are seeking to convince a jury that a Turkish banker is guilty of helping Iran evade U.S. sanctions. The testimony has focused on emails, spreadsheets and wiretapped calls – mostly in Turkish and translated by a live interpreter. The alleged scheme is so complex prosecutors asked one witness to draw the banks and front companies involved on a large sheet of paper. By the end, the witness had drawn a maze of boxes connected by multicolored lines and arrows to indicate the money flow.

One juror was visibly asleep throughout the first week, his head propped in his hand or rolled into his chest. Occasionally, he awoke to sip water or jot notes before resuming his nap. His eyes were closed during much of the government’s most important witness testimony. Late last week, U.S. District Judge Richard Berman dismissed the juror, telling the court he was “really sound asleep – not just dozing.” Judge Berman said when the juror was asked during jury selection what he did in his spare time, the juror said sleep. “He seemed like a very nice fellow,” Judge Berman added.

In Brooklyn federal court last week, U.S. District Judge Pamela Chen addressed a somnolent juror in the trial of three former South American soccer officials accused of corruption. “And as I am speaking to you, you are yawning,” Judge Chen said, telling the juror that he seemed to be asleep and struggling to stay alert. The juror collected his backpack, beanie and glasses and was excused.

Veteran attorneys have strategies to combat lethargy: Ask the judge to take a break before an important witness; place less-exciting testimony in the morning, not during the post-lunch food coma; walk close to the jury box and speak loudly. Judges may make eye contact with a juror next to a sleeper and motion to elbow that person awake. The government and defense are generally careful not to call out a sleeper in open court, to avoid embarrassment and turning the juror against one side.

Former prosecutors say jurors may suffer shock when sitting through a trial for the first time and realizing it is much slower paced than trials on shows such as “Law & Order.” “If you’re a criminal-defense lawyer,” says Joshua Dubin, a New York jury consultant and defense lawyer, “you pray the jurors fall asleep during the government’s case and wake up during the cross-examination.”

DWC to Implement Final Drug Formulary

The Division of Workers’ Compensation will implement the new evidence based drug formulary for medical providers treating injured workers beginning January 1, 2018, following final approval by the Office of Administrative Law.

The division will also host two informational webinars for interested parties on the formulary implementation on December 13 and 14.

The drug formulary establishes a list of medications to guide appropriate care for injured workers, emphasizing their health outcomes and helping them return to work while reducing administrative burdens and costs. Its guidelines include measures to prevent the overuse of opioids, powerful painkillers that must be carefully monitored when used to treat work-related injuries and illnesses.

The formulary will be part of the Medical Treatment Utilization Schedule (MTUS), which contains guidelines on treatments for injured workers, and is based on medical treatment guidelines created by the American College of Occupational and Environmental Medicine (ACOEM), published by ReedGroup. The formulary adopts a drug list compiled by DWC, with assistance from ReedGroup/ACOEM, and takes into consideration medications frequently prescribed for occupational injuries and the evidence-based drug recommendations in ACOEM’s guidelines.

The final regulations approved by the Office of Administrative Law implement the adoption of an evidence-based drug formulary as mandated by Assembly Bill 1124 and include:

– Provisions for phased-implementation of the formulary in conjunction with the recently updated evidence-based MTUS treatment guidelines.
– A list of drugs classified as either “exempt” or “non-exempt” with respect to the requirement to obtain prospective utilization review before dispensing.
– Ancillary formulary rules, including rules regarding physician dispensing, generic versus brand name drugs, off-label use, special-fill, peri-operative fill, compounded drugs and access to unlisted drugs.
– Provisions relating to the Pharmacy & Therapeutics Committee.

To inform and educate the public about the adoption and implementation of the MTUS drug formulary, DIR will host an informative online webinar next week. The webinar will focus on the formulary’s regulatory framework and explain the rules that apply to the drug list designations, and how the formulary relates to recent updates of the MTUS guidelines. A demonstration by ReedGroup of the online access to the ACOEM materials and information on how workers’ compensation system participants can obtain a license will also be provided during the webinar.

Please register to attend one of the available sessions of the live webinar: Wednesday, December 13, 10 a.m. PST or Thursday, December 14, 2 p.m. PST. Questions and comments can be emailed to for consideration during the webinar. For those unable to attend one of the listed sessions, the recorded webinar will be posted online for later viewing.

DWC’s website will contain resources related to the implementation of the MTUS Drug Formulary, including sign-ups for upcoming webinars, recorded sessions of prior webinars, guidance updates and information on how to apply to become a member of the Pharmacy & Therapeutics Committee. Please check the website on a regular basis for updates.

Big Pharma is Having a Big Tobacco Moment

Big Pharma is having a Big Tobacco moment. The article in the Claims Journal reports that much like the tobacco litigation over the past 50 years, there is no precedent for the current opioid lawsuits.

But the growing opioid litigation seems to be following in the footsteps of the infamous tobacco litigation. In the 1950s, individual plaintiffs sued tobacco companies alleging negligence in the manufacture of and advertising for cigarettes. Tobacco fought back and prevailed in all of those early lawsuits. A second wave of lawsuits emerged in the 1980s, and plaintiffs found their first victory in the landmark case of Cipollone v. Liggett, although the $400,000 verdict was reversed on appeal. Tobacco successfully argued that smokers knew and knowingly assumed the risks and that federal law governing advertising preempted state laws.

Like the tobacco litigation, suits are now being filed by municipalities, counties, and states, claiming that the dangerous products have cost the government substantial sums of public funds to deal with the consequences of an opioid epidemic that was fueled by the defendants’ acts of placing these highly addictive prescription medications into the stream of commerce and “fraudulent” marketing regarding the safety of these analgesics.

Even insurance companies are waking up to the fact that they have had to pay billions in claim dollars as a direct result of this preventable epidemic. They too are lining up to seek compensation and reimbursement for increased workers’ compensation and health insurance claims costs that could amount to more than $25 billion. Lawyers working the opioid litigation against those responsible for the prescription opioid crisis recognize that billions have been spent unnecessarily by the insurance industry and are looking for insurance companies to join the litigation.

Last months’ issue of Medical Care magazine estimated that the societal cost of the U.S. prescription opioid epidemic tops $80 billion and is growing. Health insurers and workers’ compensation carriers shoulder about one-third of this cost, while only one-fourth of it is borne by the public sector. For employers and workers’ compensation carriers, this means that even employees who don’t fit the stereotype of drug users will struggle with this potentially deadly addiction.

The crisis has led directly to increased workers’ compensation costs. A 2012 report by Lockton Companies concluded that “prescription opioids are presently the number one workers’ compensation problem in terms of controlling the ultimate cost of indemnity losses.” The report says that there has never been a more damaging impact on the cost of workers’ compensation claims from a single issue than the abuse of opioid prescriptions for the management of chronic pain. It says that an estimated 55 to 86 percent of all claimants are receiving opioids for chronic pain relief.

A 2012 Hopkins-Accident Research Fund Study determined that employees prescribed even one opioid had average total claims costs four to eight times greater than employees with similar claims who didn’t take opioids. The reasons include increased emergency room visits from overdose, death, addiction treatment, related illness, and abuse and misuse of prescribed drugs. It is estimated that 35 percent of employees receiving long-term opioid pain treatment are addicted.

The increased claims costs of prescription opioids are astronomical. An annual workers’ compensation report from pharmacy benefit managing giant Express Scripts recently noted: “The issue of opioid prescribing becomes even more important in workers’ compensation settings as prolonged opioid use has been shown to be associated with poorer outcomes, longer disability, and higher medical costs for injured workers.” In 2002, less than 1 percent of injured California employees were prescribed opioids. By 2011, it was 5 percent and payments for these prescriptions rose from 4 to 18 percent – an astonishing 321 percent increase in payments.

Jury Convicts So. Cal. Doctor of Drug Trafficking

A doctor who operated a medical clinic in Lynwood has been found guilty of drug-trafficking charges after a federal jury found that he issued prescriptions for powerful narcotics and sedatives without a medical purpose for mostly young “patients” who sometimes traveled more than 100 miles to get prescriptions.

Dr. Edward Ridgill, 65, who has residences in Whittier and Newbury Park, was found guilty of 26 felony counts of illegally distributing controlled substances.

The evidence presented during a one-week trial showed that Ridgill illegally prescribed the opioid painkiller hydrocodone, which is often sold under the brand name Norco; alprazolam, best known by the brand name Xanax; and carisoprodol, a muscle relaxer often sold under the brand name Soma.

Prosecutors presented evidence at trial from a California database that tracks prescriptions and “confirms [Ridgill]’s predatory prescribing,” according to court documents that describe young “patients” traveling from Victorville, Palmdale and Desert Hot Springs to obtain prescriptions.

The jury heard that, in 2014 alone, Ridgill wrote nearly 9,000 prescriptions, and 95 percent of those prescriptions were for hydrocodone, alprazolam and carisoprodol, typically for the maximum strength. “The combination of these three drugs is the most sought-after drug cocktail on the black market, and one for which there is no legitimate medical purpose,” prosecutors said in a court filing.

Jurors in the case heard testimony about undercover DEA operatives who received prescriptions from Ridgill in exchange for cash. According to court documents, the testimony showed that Ridgill’s “initial physical exams were cursory, and far from the type of exam required to justify prescribing high doses of controlled substances.”

Law enforcement authorities executed federal search warrants on Ridgill’s residences and medical office in March 2015. At that time, authorities recovered multiple pre-written prescriptions for controlled substances, as well as cash found lining patient files and stuffed in the drawers containing those files, which prosecutors argued demonstrated that Ridgill operated a cash-for-drugs business.

The jury deliberated for about 30 minutes before finding Ridgill guilty of 26 counts of distributing controlled substances outside the course of professional practice and without a legitimate medical purpose. Specifically, Ridgill was convicted of 13 counts of distributing hydrocodone, nine counts of distributing alprazolam, and four counts of distributing carisoprodol.

Ridgill is scheduled to be sentenced on March 19 by United States District Judge S. James Otero. Ridgill faces decades in federal prison, including up to 20 years in prison for six of the counts related to distributing hydrocodone.

This was not his first run-in with the law. He was convicted by a jury in 1998 of the federal crime of mail fraud. State records reflect that “respondent devised a scheme to defraud the Employment Development Department (“EDD”) in which he would falsely certify that various individuals were disabled, and hat he had medically examined them prior to reaching such determination,when in fact respondent knew full well those individuals were not disabled.”

As a result of the 1998 conviction, his license was revoked, but the revocation was stayed and he was placed on probation for five years. In 2004 the Medical Board granted early relief from his probation. He is currently still licensed to practice.

The current investigation into Ridgill was conducted by the Drug Enforcement Administration’s Tactical Diversion Squad, HIDTA (the Los Angeles High Intensity Drug Trafficking Area), the Los Angeles Police Department, the Torrance Police Department and IRS-Criminal Investigation.

City of L.A. Carve Out Agreement Approved by DWC

The Division of Workers’ Compensation announced the approval of a labor-management “carve-out” agreement between the City of Los Angeles and the Los Angeles Police Protective League.

The agreement covers an estimated 10,000 union members.

Provisions of workers’ compensation reform legislation, implemented through Labor Code Sections 3201.5 and 3201.7, allow employers and unions to form a labor-management alternative workers’ compensation program also known as a carve-out. A key feature of most carve-outs is an alternative dispute resolution process.

Senate Bill (SB) 983, first provided for carve-outs in the construction industry and closely related industries. Later legislation, Assembly Bill (AB) 749, provided for carve-outs in the aerospace and timber industries, and then SB 228 repealed AB 749 and provided for carve-outs in all other industries in addition to construction, which is still covered by the initial legislation. SB 899, provided that the employer and union may negotiate any aspect of benefit delivery under certain conditions.

There are 57 active labor-management carve-out agreements in California, including 27 that cover public safety unions, 21 in the construction industry, and nine in other industries.

The requirements to participate and the elements required to be in carve-out programs are contained in Labor Code section 3201.5 for the construction industry and Labor Code section 3201.7 for all other industries, as well as California Code of Regulations, title 8, sections 10200-10204.

A carve-out establishes an alternative dispute resolution process that is negotiated by labor and management. Employers and/or unions usually employ and compensate ombudsmen, mediators, and arbitrators in the dispute resolution process. In some cases, employers and/or union members act as ombudsmen and mediators.

Legislative statute requires that an appeals process be maintained in a carve-out. Therefore, the arbitrator’s decision may be appealed to the reconsideration unit of the Workers’ Compensation Appeals Board and, ultimately, to the state courts of appeal.

Reports covering prior years of the program, which has been in force for construction trades since 1993 and for non-construction workforces since 2004, are available on DWC’s website.

NBA Player Pleads Guilty in Comp Kickback Case

A former NBA player known for an infamous on-court punch that nearly killed another player has pleaded guilty to fraudulently taking money meant for an African charity he ran. The Kansas City Star reports that Kermit Washington, who was scheduled to go to trial Monday in U.S. District Court in Kansas City, instead pleaded guilty to two counts of making a false statement in a tax return and one count of aggravated identity theft.

Washington, 66, of Las Vegas, referred professional athletes to San Diego attorney Ronald Jack Mix so that Mix could file workers’ compensation claims in California on behalf of the athletes, according to federal prosecutors. Washington used his position as a regional representative for the National Basketball Players Association to refer clients to Mix.

Mix then agreed to make donations to Washington’s charity, The Sixth Man Foundation, which did business as Project Contact Africa. Washington accepted about $155,000 in donations to his charity, which were actually illegal referral payments from Mix and his law firm, prosecutors said.

Washington then diverted money from the charity’s bank account to pay himself or for personal spending. Washington admitted that he failed to account for this income to the charity on Project Contact Africa’s IRS filings during those years.

Mix, 78, a member of the NFL Hall of Fame, pleaded guilty last year to filing a false tax return. The California State Bar suspended Mix from the practice of law in September 2016 pending the outcome of disciplinary proceeding it filed against him.

Mix made donations ranging ranging from $5,000 to $25,000 for referrals of athletes, some of whom lived in the Western District of Missouri. Mix then claimed those payments as charitable contributions on his individual tax returns from 2010 to 2013.

The case against Washington also involved a Maryland man, Reza Davachi, who was once prosecuted in a separate case in one of the largest software piracy crimes ever handled by U.S. authorities. Washington accepted about $82,000 in contributions to his charity from Davachi, and also diverted those funds from the charity’s bank account to pay himself or for personal spending.

In 1977, Washington was involved in one of the ugliest on-court incidents in NBA history. During a game between the Los Angeles Lakers and Houston Rockets, Washington punched Rudy Tomjanovich, shattering bones in a his face and nearly killing Tomjanovich.

A sentencing date for Washington has not been set.

Chubb Rolls out “ESIS Care” Solution

ESIS®, Inc., Chubb’s risk management division, announced a new workers’ compensation solution that it says is designed to help streamline the claims process, enabling employers to reduce associated legal costs and helping employees return to work quickly after a work-related incident.

The new advocacy model, ESIS Care(SM), is designed to keep the employee at the center of the claim process, fostering more confidence for employees going through the workers compensation claims process while helping to establish a transparent relationship with the employer.

As part of the ESIS Care solution, both employers and employees have access to a dedicated network of intake, clinical, and claims representatives, alongside specialists known as Care Champions, who are responsible for helping to support both parties throughout the duration of a claim. The company lists the expected outcomes as follows:

– Eliminate perceived barriers within the workers compensation claims process
– Improved return-to-work rate due to ESIS’ continual care and concern for employees, and constant communication and consultative care from day one
– Decrease in litigation rates as a result of fewer instances of employee dissatisfaction or confusion
– Reduced length of treatment and subsequent medical costs on claims
– Partnership and consultation for injured workers resulting in a simplified claims process
– Maximized claim outcomes
– ESIS’ integrated design keeps employees at the center of the claim process, from start to finish
– Promoting additional collaboration and trust helps increase productivity and employee satisfaction

Veronica Cressman, Senior Vice President, ESIS Medical Programs says that “On the employer side, ESIS Care encourages trust on behalf of the employers, ultimately reducing legal involvement and high medical costs often associated with workers compensation issues. For employees, our new advocacy model helps eliminate perceived barriers, increases communication, and provides a customized level of care, while providing more transparency about the process so employees can quickly return to work.”

“Increased employee absence, higher loss costs, and gaps in communication can easily occur during the workers compensation claims process and lead to higher litigation rates and employee dissatisfaction, resulting in workforce turnover,” said Cressman.

“ESIS Care enables Care Champions to operate as consultative partners for employers and trusted advisors for their employees.

ESIS Care is designed to help clients with their unique program needs, from helping employees understand their treatment and recovery plans, to ensuring employers are aware of the next steps for returning the employee back to work.”