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Tag: 2019 News

Another SJDB Voucher Fraud Arrest

The owner of a Campbell vocational training school has been charged with a kickback scheme where he illegally diverted more than $650,000 in workers’ compensation insurance money without training injured students trying to get back into the workplace.

Officials estimate that out of about 100 cases, two students of Rashad Said’s Advanced Vocational Institute (AVi) had taken some classes – and they were online with no live interaction.

Said, 62, of San Jose, who stands charged of 11 felony counts of workman’s comp fraud and kickbacks, is a former board member of the San Jose Regional Workforce Development Board. The Board’s duties include approval of local vocational schools eligible to receive government funding for job training to assist displaced workers, including workers’ comp claimants. Said, who faces incarceration if convicted, was arraigned on October 23, 2019. His plea hearing is scheduled for November 11, 2019 in Department 38 in the Hall of Justice in San Jose.

Under state rules, some workers whose injury makes them unqualified to continue with their present job can get re-trained for another kind of job. They receive vouchers which can be as high as $10,00 which can be used for tuition, books, tools/equipment, supplies and vocational counseling.

In this case, Said is accused of giving kickbacks to counselors who referred workers to his school. The state allows disabled workers to use up to 10 percent of their voucher for vocational counseling services. Said is accused of giving unwitting workers – many of them who spoke little English and didn’t understand the arrangement – cash amounts instead of any training. In fact, when an investigator searched the AVi offices on a weekday, it was closed and the computers were covered in dust.

The investigation began in the summer of 2018 after a student complained that another Santa Clara vocational school had refused to refund the remainder of her voucher after doctors advised her computer class was aggravating her wrist injury. The state launched an inquiry that lead to that school’s owner being charged. The inquiry also revealed transgressions by other schools leading to the discovery of AVi’s criminal offenses.

Other SJDB fraud cases have been reported recently.

Between 2015 and 2017, Salvador Franco, Jr., 42, of Downey and Mirella Flores, 45, of Paramount participated in an alleged Supplemental Job Displacement Voucher Fraud scheme involving the Technical School, Inc., doing business as Technical College, Inc., and Graduates Do Succeed Institute, doing business as GDS Institute, operating in Southern California.

Those two defendants entered no contest pleas to attempting to defraud multiple insurers of approximately $120,000 by having students sign over their Supplement Job Displacement vouchers and collecting the money without providing required vocational training.

School District Recovers Interest, but not Attorney Fees from JPA

In 1987, several Los Angeles County school districts entered into the Benefit & Liability Programs of California Joint Powers Agreement creating the Authority to establish, operate and maintain the members’ workers’ compensation insurance program. In 2002, Inglewood Unified School District became a member.

In 2013 Inglewood Unified provided written notice of its withdrawal from membership. The Authority and the interim state administrator of the District, signed a resolution regarding the District’s withdrawal. According to the Resolution the Authority’s governing board permitted the District to withdraw from the Authority on certain conditions.

In 2015 Inglewood filed its complaint against the Authority alleging a variety of claims, including breach of contract based on the Authority’s failure to pay funds owed to the District under the Agreement within a reasonable period of the District’s withdrawal from, or termination of, membership.

In 2016 the Authority paid $4 million to the District pursuant to an interim agreement between the parties. Prior to that date an accounting had determined the Authority owed the District $6,351,792. The remaining balance of $2,351,792 was the subject of the litigation.

Senate Bill No. 533 brought the school district under state control. Inglewood’s state administrator Melendez de Santa Ana, in her capacity as its trustee, filed the operative third amended complaint, which alleged the same underlying breach of contract claim as the initial complaint.

The court found the District was entitled to $2,351,792 plus interest on retained funds in the amount of $192,711, but the Authority was not entitled to recovery of attorney fees and costs incurred in the litigation. The trial court judgment was affirmed in the unpublished case of Santa Ana v. Benefit & Liability Programs of California

Although the Authority had paid $4,000,000 in 2016,a balance of $2,351,792 remained outstanding. The court found, “Two years is not a reasonable time.” Thus, the trial court essentially ruled the District was therefore entitled to prejudgment interest on the withheld funds pursuant to Civil Code section 3287, subdivision (a). Substantial evidence, including the parties’ stipulated facts, supports the trial court’s finding of breach.

The court expressly found the Authority was not entitled to its attorney fees “under the [Agreement], Bylaws, Resolution or the law.” The court of appeal agreed with the trial court’s interpretation of the Resolution.

Cal/OSHA Sets “Uncertain” Footwear Standard for Home Depot

Two Home Depot warehouse workers had an accident while driving vehicles called electric pallet jacks at Home Depot’s Mira Loma distribution warehouse.

After a workplace accident and inspection, the Division of Occupational Safety and Health cited Home Depot for several violations of workplace safety standards. The investigator found that the industrial truck operators wore tennis-type shoes while they were operating industrial trucks.

The Division determined Home Depot had violated regulations which requires “appropriate foot protection” for employees exposed to foot injuries, and which sets standards for the safe operation of industrial trucks and requires employers to make sure their employees comply. The Division said that in this case “appropriate” would be steel toed shoes.

Home Depot challenged the citations. Ultimately, the respondent, California Occupational Safety and Health Appeals Board, affirmed the footwear citation because Home Depot employees were exposed to foot injuries when they manually lift heavy loads and when they worked on foot or walked in close proximity to industrial trucks. They found Home Depot’s safety policies and prohibition on open-toed or open-heeled shoes didn’t adequately protect those employees.

The Board affirmed the truck-operation citation because Home Depot did not establish the employee caused the infraction despite knowing her conduct was contrary to the employer’s safety requirements.

Home Depot filed a petition for writ of mandate, asking the trial court to relieve them of the footwear citation on the ground the findings weren’t supported. The trial court declined, and Home Depot asked the court of appeal to make the same determination. However, the court of appeal affirmed in the unpublished case of Home Depot USA v California Occupational Safety and Health Appeals Board.

Home Depot did not require their employees to wear protective shoes when they worked in the warehouse. Their policy required only that they wear “closed-toed and closed-heeled shoes.” Home Depot’s policy said “Flip-Flops, sandals, open-toed shoes, or open heeled shoes” are unacceptable.

Home Depot says they don’t require their warehouse employees to wear steel-toed boots or similar footwear because such footwear can cause ergonomic problems, tripping hazards, and fatigue, and they can be “cumbersome,” “uncomfortable” and “bulky.”

Amicus curiae, Retail Litigation Center, Inc. and National Federation of Independent Business, who support Home Depot, object that the Board’s opinion articulates an “uncertain standard [that] will have far-reaching consequences for employees in a wide range of businesses, including large retailers and small independent businesses that may have industrial trucks or pallet jacks in the facility even though the majority of employees encounter them only rarely.

However, the court of appeal concluded that there was substantial evidence supporting the Board’s determination that Home Depot employees were both actually exposed and realistically likely to be exposed to foot injuries. A violation of the safety order is not based on previous history of accidents or injuries resulting from the exposure but rather on the existence of the danger which may cause injury.

The court did however “agree the language in the Board’s opinion can be read to sweep too broadly, so we emphasize our holding is limited to the facts and evidence of the case.”

FAA Approves CVS to Deliver Pharmaceuticals by Drone

United Parcel Service Inc’s  new Flight Forward drone unit will soon start home prescription delivery from CVS Health Corp.

The service, which will debut in one or two U.S. cities in the coming weeks, shows how the parcel delivery company plans to expand its upstart drone business beyond hospital campuses.

“Flight Forward will work with new customers in other industries to design additional solutions for a wide array of last-mile and urgent delivery challenges,” UPS Chief Strategy and Transformation Officer Scott Price said.

The Atlanta-based company this month won the U.S. government’s first approval to operate a drone airline, leapfrogging rivals like Inc and Alphabet Inc’s Wing and clearing the way for the expansion of Flight Forward.

UPS, which owns 251 jet aircraft and charters nearly 300 more, is building its Flight Forward business at a time when U.S. drone delivery is in its infancy. Regulations for operating those unmanned vehicles in U.S. airspace are not expected until 2021.

On Monday, Flight Forward and partner Matternet also announced a deal to deliver biological samples and other cargo on University of Utah Health hospital campuses. That will be similar to the service at North Carolina’s WakeMed Hospital, where Flight Forward operates about 10 flights per day, said Bala Ganesh, vice president of the advanced technology group at UPS.

Flight Forward has also signed a hospital campus deal with healthcare provider Kaiser Permanente, UPS said.

In addition, the company said pharmaceutical distributor AmerisourceBergen Corp will use Flight Forward drones to move pharmaceuticals, supplies and records to select U.S. medical campuses it serves.

UPS rival FedEx Corp  last week delivered a residential package to a home in Christiansburg, Virginia, as part of a trial service with Alphabet’s Wing Aviation.

Dan Gagnon, vice president of global healthcare strategy at UPS, said Flight Forward “is not a one and done business model. We’re looking for scale and repetition.”

Employers Use Proactive Approach to Musculoskeletal Distorders

According to the Occupational Safety and Health Administration, musculoskeletal conditions are among the top expenses for employee healthcare benefits, accounting for about a third of all worker injury and illness cases.

With healthcare costs projected to rise 4.9% in 2020, many large companies are ready to try something new. They plan to spend more upfront to try to prevent higher costs later on. For conditions like chronic back pain, that means trying to prevent injuries or treat them with innovative physical therapy to avoid surgery and potentially, opioid additions.

Some companies take a traditional proactive approach, like Rosen Hotels & Resorts, an Orlando-based chain, which has morning stretches for hotel staff, a free gym, plus a full-scale primary care health clinic with a physical therapist and chiropractor.

Other companies are trying to “appify” their care delivery. Brakebush Brothers Inc, a chicken processor headquartered in Wisconsin, turned to a third-party provider, Solveglobal, to crunch frequent worker surveys about their pains down to a line level on a specific shift, according to Matt VanderKooi, chief operating officer at Solveglobal.

One time they solved a rash of low back pain problems by figuring out that workers were reaching too much at a specific spot. Another time they could find no common source for random physical complaints from workers on a shift, but were able to identify that the problems were caused by work stress from a new supervisor.  Savings: $1 million this past year, said VanderKooi.

Post Holdings Inc. is using the service Hinge Health, which gives participants a tablet pre-loaded with exercises specific to their condition. So far 15% of the 1,200 employees eligible for the pilot are participating, out of about 8,000 on the U.S. medical plan, said Karen Little, vice president of payroll and benefits for Post.

Cost savings are not apparent yet, but Little said musculoskeletal disorders were running about 15% of Post’s total healthcare costs.

Typically, people in pain go to a doctor.  Physera clients receive email and postcards about medical services. The company also hosts pop-up clinics, said Dan Rubinstein, chief executive officer. Since launching fully in 2019, the free version of the Physera app has 25,000-plus users, along with 1,000 participants in the full corporate program.

Physera measures success based on actions and improvement. Users are asked what steps they are likely to take – like getting an MRI. Out of 100 patients, a handful consider surgery and ultimately decide they do not need it.

For Jenna Kreitinger, a 27-year-old veterinary technician from Mesa, Arizona, the difference has been nothing short of life-changing. After she used Hinge Health consistently, her chronic spinal pain dissipated after years of trying many other solutions.

“Physical therapy was costly, and it was hard to find the time,” said Kreitinger, who now has a baby and is back to work full-time. “Just those small changes I made, it has helped me so much.”

South Bay Physician to Serve 2 Years in Prison

Dr. Venkat Aachi is a physiatrist in San Jose, California and is affiliated with multiple hospitals in the area, including El Camino Hospital and Good Samaritan Hospital-San Jose.

Aachi was just sentenced to 24 months in prison for health care fraud and for distributing hydrocodone outside the scope of his professional practice. Aachi, 52, of Saratoga, pleaded guilty to the charges on March 25, 2019.

Over the course of just one year, Aachi wrote 5,992 prescriptions for controlled substances, the majority of which were for narcotics. Further, from September 2017, to July 2018, four undercover law enforcement agents posed as new patients. They visited Aachi about four times each, and after each visit, they received a prescription for a schedule II controlled substance with little to no physical examination.

A federal grand jury indicted Aachi on October 9, 2018, charging him with six counts of distributing drugs outside the scope of professional practice, in violation of 21 U.S.C. § 841(a)(1) and (b)(1)(C), and one count of health care fraud, in violation of 18 U.S.C. § 1347. Aachi pleaded guilty to one count under each statute.

According to the plea agreement, Aachi was a licensed physician who operated a pain clinic in San Jose and maintained a DEA registration number authorizing him to prescribe controlled substances. Aachi admitted that from September 18, 2017, through July 2, 2018, he wrote hydrocodone-acetaminophen prescriptions that were outside the scope of his professional practice and not for a legitimate medical purpose.

For example, in November of 2017, he wrote a prescription enabling a patient to receive 90 hydrocodone-acetaminophen pills. Aachi did not conduct a physical examination of the patient nor discuss the patient’s pain or response to prior medication. Aachi acknowledged that he knew the prescriptions were not for a legitimate medical purpose and that he did not write the prescriptions in the usual course of his professional practice.

Aachi also admitted that on July 2, 2018, he falsely submitted to an insurance company a false and fraudulent claim for payment for healthcare benefits, items, and services. Aachi admitted he acted with the intend to defraud the insurance company.

In addition to the prison term, Aachi was ordered to serve 3 years of supervised release and ordered him to pay $82,616.85 in restitution. Aachi will begin serving his sentence on January 22, 2020.

Workers’ Compensation to Be Transformed by Technology

Brink News gathers timely perspectives from experts on risk and resilience around the world to inform business and policy decisions on critical challenges. It is the digital news service of Marsh & McLennan Insights, managed by Atlantic 57, the digital consultancy of The Atlantic.

This month, Brink News published a story about how “Workers’ Compensation Is About to Be Transformed.

Workers’ compensation is the largest premium segment in the U.S. commercial insurance market. While some progress has been made in addressing expenses, the costs of administering the system are stubbornly high. Take California as an example, where it costs the system $0.54 to deliver $1 worth of benefits. In Medicare, the overhead costs to deliver the same benefits are $0.02.

A number of factors are now converging that will enable the insurance industry to reduce risk and transfer it more effectively. These factors will enable insurers to lessen earnings volatility and build deeper and more meaningful relationships with customers. Businesses will have a clearer picture of risks facing workers and the tools and capabilities to proactively take mitigating actions.

Several developments are driving these changes, which will impact how workers’ compensation is bought, sold and delivered.

Investments in technology and operational efficiency improvements have largely focused on treatment and back-to-work programs after an injury has occurred. The industry has been stymied in its desire to prevent worker injuries by a lack of data and technology that would enable preemptive action.

The market for workplace wearable technology is undergoing rapid growth, and startups are targeting high-loss areas, such as the more than 30% of injuries that are due to musculoskeletal disorders.

Traditionally, workers’ compensation insurance premiums are determined based on historical loss data. Emerging data sources will provide much deeper insight into predictors of risk and enable companies to proactively reduce risks with pinpoint accuracy.

The result will be better alignment of risk and price, rewarding companies that leverage these technologies to sustain and improve safety culture. We expect policies that provide premium credits to emerge first, similar to personal auto, where telematics-based information on driving behavior is most developed.

Moving toward a data-rich future is not without peril. A proliferation of vendors and standards, a vast number of new data sources, new artificial intelligence techniques and connectivity options begin to describe the technical complexities.

CDI Rejects Berkshire Sale of Applied Underwriters.

California regulators are objecting to Berkshire Hathaway’s sale of one of its smaller insurance companies, but they may not have much of an argument.

The California Department of Insurance said Thursday that it was “disturbed to learn that the parties to this transaction purportedly acquired California Insurance Company without obtaining the statutorily-required approval of the California Department,” the statement reads. “In light of this development, we are currently exploring all available options.”

Berkshire and Applied Underwriters said last week that the $920 million sale to company founder Steve Menzies was completed earlier this month after Texas regulators approved it.

The California Department of Insurance denied an application for approval of the sale of California Insurance Co., a subsidiary of Applied Underwriters that was sold in a massive deal that has been under scrutiny over ties to campaign contributions executives reportedly made to the state’s insurance commissioner. The CDI sent out a denial letter to CIC executives and then made their denial public on Monday morning.

The California Department of Insurance says it must sign off on the deal because one of Applied’s subsidiaries, California Insurance Co., is domiciled in the state.

However, The Associated Press reported that Applied Underwriters said that the California Insurance Co. is now domiciled in New Mexico, which did sign off on the deal.

The CDI is seeking to block the move based on a section of California Insurance Code. “Pursuant to CIC 709.5(b), any attempt to transfer the domicile of a California domestic insurer to another state in which it is admitted may only be effected upon the prior approval of the California Insurance Commissioner,” the Oct. 18 letter, addressed to Jeffrey A. Silver, an executive at Applied and CIC, states. “An insurer seeking to transfer its domicile is required to provide the California Commissioner with information and documentation reasonably necessary to determine whether the proposed transfer of domicile is in the best interest of the policyholders of this state.”

Applied is a national provider of workers’ compensation insurance, other commercial insurance, and risk transfer and financing plans. The company is headquartered in Omaha, Neb. Applied’s subsidiaries include California Insurance Co., Continental Indemnity Co., Pennsylvania Insurance Co., Illinois insurance Co. and Texas Insurance Co. that are collectively known as North American Casualty Co.

Owner of Roofing Company Faces Fraud Charges

Herbert Allen Kelly III, 65, of Rancho Murieta, owner of Kelly Roofing Company, was arrested Friday on six felony counts of workers’ compensation fraud after allegedly underreporting his business’ payroll and number of employees resulting in a loss to his insurer of $50,000.

On January 12, 2015, while employed with Kelly Roofing Company, a worker slipped and fell from a roof at a jobsite, falling approximately 25 feet. As a result of the employee’s injuries, a workers’ compensation claim was opened with Kelly’s insurer, State Compensation Insurance Fund (SCIF), and to date SCIF has paid approximately $730,175 in medical and disability payments. Following the incident, Cal/OSHA conducted an inspection of the jobsite with Kelly who advised he had three employees.

SCIF conducted audits of Kelly Roofing Company on a yearly basis to verify premium and payroll. Kelly reported approximately $31,685 in payroll for the December 2012 to December 2013 policy period, yet reported $0 in payroll and no employees for the remainder of the policy period, 2014 through 2018.

During the SCIF audit for policy period 2015, when the accident occurred, Kelly reported he had no employees. However, SCIF noted Kelly Roofing Company had a workers’ compensation claim in January 2015. Kelly alleged he only paid the injured worker $500 for a single day of work and did not have any payroll records for him.

Department of Insurance detectives served search warrants on both Kelly and Kelly Roofing Company’s bank accounts and conducted an audit of bank records. Detectives discovered approximately $89,781 in total audited payroll with up to 15 possible employees. The department confirmed Kelly Roofing Company had employees during the period when Kelly claimed he had no employees and no payroll. The audited payroll was ultimately forwarded to SCIF who determined Kelly Roofing Company owed approximately $50,000 in unpaid past premiums.

This case is being prosecuted by the Sacramento County District Attorney’s Office.

Orthopedist, Timothy Hunt M.D. Sentenced to Two Years

In June 2018, federal officials charged 601 people in the largest bust of health care fraud in U.S. history. The national takedown was across 58 federal districts.

Southern California criminal cases named a total of 33 defendants. Nine new defendants being charged as part of Operation “Spinal Cap.” The scheme that was spearheaded by Michael Drobot, the former owner of Pacific Hospital in Long Beach.

One of the high profile defendants in that Operation, Daniel Capen, of Manhattan Beach, an orthopedic surgeon, has agreed to plead guilty to conspiracy and illegal kickback charges. Capen accounted for approximately $142 million of Pacific Hospital’s claims to insurers, on which the hospital was paid approximately $56 million.

Another was Timothy J. Hunt, of Palos Verdes Estates, also an orthopedic surgeon, who referred spinal surgery patients to Capen and other doctors. He has agreed to plead guilty to a conspiracy charge involving his receipt of illegal kickbacks stemming from various financial relationships with Pacific Hospital and related entities.

In a sentencing memo filed by his attorneys this September, Hunt in his letter to the Court, said he was persuaded to accept what appeared to be an option contract to buy his practice at a time when he had no other option to hold onto his medical practice due to financial extortion by his late father’s 4th wife.

He claims “he was induced to participate in this arrangement by sophisticated parties, Tino Bernadett and Michael Drobot, the owners of Pacific Hospital, and their counsel, who assured Dr. Hunt that the arrangement was legal.”

“Bernadett and Drobot even gave Dr. Hunt a legal contract memorializing the option agreement that he took to his lawyer, who approved it (although the lawyer was not privy to all the details of the actual arrangement.)”

His attorneys conclude by saying that because “of these facts and circumstances, it is understandable – though not excusable – that Dr. Hunt got involved in something he should have realized was clearly illegal and deliberately turned a blind eye to the obvious problems with Bernadett’s and Drobot’s proposal.”

Subsequently, the court entered the following order: “it is the judgment of the Court that the defendant, Timothy James Hunt, is hereby committed on Count 1 of the 16-Count Indictment to the custody of the Bureau of Prisons for a term of twenty four (24) months.” Upon release he is to have supervised release for the term of three years. He is to report to the designated institution by November 12, 2019.

A deferred restitution hearing is set for December 20, 2019 at 11:30 a.m.

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