Tag: 2017 News

Patriot National Inc., provides technology, outsourcing and underwriting services to the workers’ compensation insurance industry with several offices in California.

According to a report in the Insurance Journal, it has announced a plan of reorganization as part of a restructuring support agreement (RSA) with its lenders, Cerberus Business Finance, LLC and its affiliates, and TCW Asset Management Co. LLC., which have agreed to acquire the financially troubled firm.

Under the transaction, announced Nov. 28, Patriot National will be acquired by certain funds and accounts managed by the investment management firms, and its direct and indirect U.S.-based subsidiaries will file voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code.

Cerberus and TCW will convert a portion of their claims under the financing agreement in consideration for 100 percent of the new equity to be issued in Patriot National and the subsidiaries under the plan. All existing equity interests in Patriot National and its subsidiaries will be extinguished, and Patriot National will no longer have any affiliation with its founder and former CEO Steven Mariano, who resigned earlier this year.

The company, headquartered in Fort Lauderdale, Fla., expects the reorganization, which is subject to regulatory approval, will be completed early in the second quarter of 2018.

Patriot National said in a statement that it will “continue to operate its business in the ordinary course and the Chapter 11 filing is not expected to have a meaningful impact on its day-to-day operations.”

Patriot National provides general agency services, technology outsourcing, software, specialty underwriting and policyholder services, claims administration services and self-funded health plans to insurance carriers, employers and other clients. While it does not bear underwriting risk, it works with insurance carriers to design workers’ compensation and other multi-line programs that are marketed through more than 4,000 independent retail agencies.

In its announcement, Patriot National said it intends to continue to provide service to all of its carrier customers in accordance with the terms of current agreements. Furthermore, it anticipates all commissions due to brokers who commit to continue their business relationships with Patriot National will be paid “in the ordinary course of business or in full under the [reorganization] Plan,” the statement says.

The move is not unexpected after a tumultuous year for the company that came to a head in mid-November with the announcement that its largest workers’ compensation customer, Guaranteed Insurance Co. (GIC), would be placed in receivership by Florida regulators. The companies were mutually owned by Mariano, who resigned from Patriot National last summer. GIC held an estimated 10 percent of Patriot National’s stock and accounted for 60 to 70 percent of its business.

GIC provided alternative market workers’ compensation insurance in 31 states, with 8,600 active polices in force as of Nov. 13, including 1,250 in Florida. Its liquidation was approved by Florida regulators on Monday. Under the liquidation order, all GIC policies are canceled effective Dec. 27, unless otherwise terminated prior to that date.

Another subsidiary, Patriot Underwriters Inc., is a national program administrator that underwrites and services workers’ compensation insurance for insurance companies. Shortly after Florida regulators took over GIC, Patriot National filed a forbearance agreement with the Securities and Exchange Commission that said it would be laying off 250 employees, representing approximately one-third of its workforce.

Another affiliate of Patriot National, Ashmere Insurance Co., announced last week it would be acquired by New York-based Bedrock Insurance Group Holdings. Ashmere is a workers’ compensation insurance carrier licensed in 15 states.

Reserving a claim for lifetime workers’ compensation benefits can be tricky business. How do you “guess” a good number for life expectancy? For most of the last several decades, life expectancy has been increasing as a result of new medical discoveries. But now, antibiotic resistance has caused a fall in life expectancy for the first time.

The U.K. Office for National Statistics said that life expectancy in future years has been revised down after the statistics authority said that “less optimistic views” about the future had to be taken into account.

Opinions on “improvements in medical science” had declined, it said, and fears of the “re-emergence of existing diseases and increases in anti-microbial resistance” meant people would not live as long as was previously expected.

The ONS uses predictions about how medicine and science will improve to model how life expectancy will change. Under the projection made in 2010, a baby girl born in 2016 could expect to live 83.7 years. This has now been revised down to 82.9.

Life expectancy for babies born in 2060, the latest year which appears in both models, is now two years shorter than it was in the 2010 data. Baby girls born in that year were previously expected to live to 90.1 – this has now fallen to 88.3.

Baby boys are also set to live less long, with children born in 2016 expected to live to 79.2, instead of 79.9, and those born in 2060 expected to live to 85.7 instead of 86.8.

The expectancies have been revised down before but this is the first time the ONS has said it believes antibiotic resistance plays a part. Experts have repeatedly warned of the dangers of antibiotic resistance, which could cause hundreds of diseases which are currently easily curable to become killers.

Anti-microbial resistance also includes the issue of viruses and funguses becoming resistance to antiviral and antifungal medication. An increasing number of people with HIV have a version of the condition which is resistant to antiretroviral medication.

The World Health Organisation has said that the phenomenon is “one of the biggest threats to global health”. Earlier this month it told farmers and the food industry to stop giving the medicines to healthy animals. It is also asking farmers to avoid using the varieties which are seen as the “last line of defence” because they are among the few medicines which treat certain diseases in humans.

According to a paper published earlier this month by the European Consumer Organisation, antibiotic resistance is set to become a bigger killer than cancer by 2050, and routine infections could become deadly in as little as 20 years.

A former employee of a Southern California ambulance company and a former employee of a Los Angeles dialysis treatment center both pleaded guilty today to fraud charges for their roles in a fraud scheme that resulted in more than $6.6 million in fraudulent claims to Medicare.  Three other individuals charged in the case previously pleaded guilty.

Aharon Aron Krkasharyan, 53, of Los Angeles, California, pleaded guilty in federal court in Los Angeles to one count of conspiracy to commit health care fraud.  Maria Espinoza, 47, also of Los Angeles, pleaded guilty to one count of conspiracy to pay and receive kickbacks for health care referrals.  U.S. District Judge George H. Wu of the Central District of California accepted the guilty pleas.  Krkasharyan is scheduled to be sentenced on March 29, 2018, and Espinoza is scheduled to be sentenced on April 2, 2018.

Krkasharyan was employed as the Quality Improvement Coordinator for Mauran Ambulance Inc., an ambulance transportation company operating in the greater Los Angeles area that provided non-emergency services to Medicare beneficiaries, many of whom were dialysis patients.  According to admissions made in connection with his plea, between June 2011 and April 2012, Krkasharyan conspired with other Mauran employees to submit claims to Medicare for ambulance transportation services for individuals who did not need such services.  Krkasharyan also admitted that he and his co-conspirators instructed Mauran emergency medical technicians to conceal the patients’ true medical conditions by altering paperwork and creating fraudulent reasons to justify the ambulance services.

Espinoza was an administrative assistant at DaVita Doctors Dialysis of East Los Angeles.  As part of her guilty plea, Espinoza admitted that she conspired with an employee of Mauran to receive cash kickbacks in return for referrals of dialysis patients to Mauran for whom Mauran submitted claims to Medicare for non-emergency ambulance transportation services.

Earlier this month, Toros Onik Yeranosian, 55, the former owner of Mauran, and Oxana Loutseiko 57, the former general manager of Mauran, each pleaded guilty before Judge Wu to one count of conspiracy to commit health care fraud for their roles in the fraud scheme.  The former Dispatch Supervisor at Mauran, Christian Hernandez, 36, pleaded guilty to one count of conspiracy to commit health care fraud in December 2015.

In connection with his guilty plea, Yeranosian admitted that during the course of the conspiracy, Mauran submitted to Medicare at least $6.6 million in false and fraudulent claims for medically unnecessary transportation services, of which Medicare paid at least $3.1 million.  As part of their plea agreements, all five defendants agreed to pay restitution to Medicare.

The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.  Trial Attorneys Alexis D. Gregorian and Jeremy R. Sanders of the Fraud Section are prosecuting the case.

The Fraud Section leads the Medicare Fraud Strike Force.  Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 3,500 defendants who have collectively billed the Medicare program for more than $12.5 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

The case of Saul Zuniga v. Interactive Trucking, Inc.; SCIF involves another challenge to the constitutionality of certain provisions of the IMR process, asserting that the anonymity of the IMR reviewers violates due process and the IMR statute violates the guarantee of right to appellate review.

After successfully appealing an IMR determination and obtaining an order remanding the matter back to IMR for review by a different physician reviewer, Zuniga filed a discovery motion seeking the disclosure of the IMR reviewers’ identities. While the discovery motion was pending, the second IMR decision was issued authorizing additional, but not all, of the prescribed medications. Thereafter, over defendant’s objections, a trial was set on the issue of the disclosure of the IMR physicians’ identities. The Workers’ Compensation Judge issued a decision finding that he could not release the names of the IMR physicians pursuant to Labor Code section 4610.6(f).

Zuniga filed a petition for reconsideration, which was denied. He then filed a petition for writ of review in October 2014 arguing that the anonymity of the IMR reviewers violates due process and that the IMR statutes violate the guaranteed right to appellate review.

SCIF filed its answer arguing: (1) The petitioner lacks standing since he did not exhaust his administrative remedies by filing an appeal of the second determination and therefore the petition for review was premature; (2) the petition failed to name the DWC, which is an indispensable party; (3) the WCJ was correct in finding that he lacked the authority to order the disclosure of the reviewing doctors; and (4) not revealing the reviewers’ identities did not deprive the petitioner of his due process rights.

The briefing in this case was completed in December 2014 and the case remained idle for over a year.

In February 2016, the petition for writ of review was granted in case Saul Zuniga v. Interactive Trucking, Inc.; SCIF California Court of Appeal, First Appellate District, Div. 2, Case No. A143290.

The threshold issue is whether the Board correctly concluded that Labor Code 4610.6(f), which provides in part that “the independent medical review organization shall keep the names of the reviewers confidential in all communications with entities or individuals outside the independent medical review organization,” does not deny due process to an injured employee who seeks to obtain medical treatment under Labor Code 4600.

The Court of Appeal has now set the case for oral argument on December 19, 2017 at 1:30 pm. The court made the following request of the parties:

“At oral argument, in addition to any other issues the parties wish to address, the parties should be prepared to address the following: 1. The extent to which the following two cases apply to the facts of this case: Stevens v. Workers’ Compensation Appeals Board (2015) 241 Cal.App.4th 1074 and Ramirez v. Workers’ Compensation Appeals Board (2017) 10 Cal.App.5th 205. 2. Whether the conflict-of-interest and reporting requirements in Labor Code section 139.5, especially subdivisions (c) through (e) affect the issues in this case.”

In effect the Zuniga case challenges the confidentiality provisions of the IMR process so that the identity of the medical reviewer is not known by the litigants. Zuniga claims that this provision limits his ability to investigate the reviewer for bias or other ethical misconduct in support of an IMR appeal. The outcome of this case is not expected to markedly change the IMR system as a whole. Nonetheless, it will no doubt be some time next year before there is a result.

Christine Mendiola worked with mentally ill residents in a locked facility at defendant Crestwood Behavioral Health, Inc. When hired, she understood she would be working with clients who were chronically mentally ill but stable. She alleged however that Crestwood concealed that a large portion of the residents had pending felony charges or significant criminal histories.

On July 11, 2011, Mendiola was working the night shift and monitoring three clients on the patio during a smoke break. One of the clients required “line of sight” observation and Mendiola was the only staff member on the patio (a line of sight observation requires a staff member to be assigned to that particular client and only that client in order to keep an eye on him at all times). Another client (Resident G) became agitated, pacing and yelling in Spanish. When she tried to calm him, he turned his agitation towards her. She tried to call for help on a walkie-talkie, but Resident G knocked it out of her hand. He assaulted her, bashing her head against the cinder blocks and throwing her to the ground. For seven minutes she yelled for help. Finally, she directed another client to call for help on her walkie-talkie. That client pulled Resident G off Mendiola before help came.

Resident G had been admitted to Crestwood under a Murphy conservatorship with pending assault and battery charges. He had been found incompetent to stand trial. Crestwood also knew that Resident G had a history of attacking women. Crestwood allegedly kept this information from staff. Mendiola has been unable to work since the attack.

She brought suit against Crestwood for assault, battery, fraudulent inducement and misrepresentation, unlawful business practices (Bus. & Prof. Code, § 17200), and other claims.

Crestwood moved for summary adjudication as to all claims. It asserted workers’ compensation was the exclusive remedy as to the assault and battery, and there was no triable issue of material fact as to the remaining claims. Crestwood provided documentation that Mendiola had acknowledged in writing that the job required the management of assaultive, disruptive, or suicidal clients.

The trial court found workers’ compensation was the exclusive remedy for the claims of assault and battery. The court denied the motion as to the fraud claim. Focusing on the allegations of Mendiola’s declaration concerning her move to the Dream House, the court found triable issues of fact as to fraudulent inducement. For the same reasons, the court denied summary adjudication of the unfair business practices claim. But later during a motion in limine, the fraud claims were dismissed for lack of subject matter jurisdiction, and Mendiola appealed. The court of appeal affirmed the dismissal in the unpublished case of Mendiola v. Crestwood Behavioral Health.

Whether the exclusive remedy of the workers’ compensation system in California applies to intentional torts, including fraud, is a “complicated” question. Mendiola’s fraud claims are nearly identical to those in Spratley v. Winchell Donut House, Inc. (1987) 188 Cal.App.3d 1408 and are similar to the first claim that was barred in Johns-Manville Products Corp. v. Superior Court (1980) 27 Cal.3d 465, 475-476.

These claims, whether misrepresentation or concealment, all relate to workplace safety, “an issue contemplated by the workers’ compensation statutory scheme” and “a risk reasonably encompassed within the compensation bargain.”