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Tag: 2020 News

Rehab-Recovery Mogul Pleads Guilty in $175M Fraud Case

The the Los Angeles County District Attorney’s Office announced that the founder of Community Recovery Los Angeles, a drug and alcohol treatment facility, pleaded no contest to running a $175 million fraudulent healthcare billing scheme.

Over the years, Community Recovery grew into a veritable empire, comprising more than 20 sober-living houses and outpatient clinics in Anaheim, West Adams, Calabasas, Malibu, Woodland Hills, Hollywood and Colorado.

The owner, 58 year old Christopher Bathum, entered the plea this week to 14 felony counts: seven counts of grand theft, five counts of insurance fraud and one count each of identity theft and money laundering.

The California Department of Health previously issued a number of cease-and-desist letters against CRLA houses, accusing them of being unlicensed drug and alcohol treatment centers. At one point, a judge granted an injunction against two CRLA facilities – on Melrose and in Calabasas – which ordered them to stop providing treatment.

Around 2016, Bathum publicly stepped down as head of his own company, which then changed its name to Commonwealth Global.

Sentencing is scheduled on Feb. 14 in Department 105 of the Foltz Criminal Justice Center. Bathum faces 20 years in state prison as a result of the plea.

Co-defendant Kirsten Wallace was sentenced in 2018 to 11 years in state prison after she pleaded no contest to 46 felony counts related to the same healthcare billing scheme.

The two defendants obtained multiple health care insurance policies for their clients, using their personal identifying information and falsified the clients’ circumstances to obtain the policies. The patients were unaware that policies had been issued in their name, the prosecutor said

Bathum and Wallace also billed for former clients after their treatment ended while those clients were still working at CRLA and no longer receiving treatment.

Between June 2012 and December 2015, Bathum and Wallace fraudulently billed an estimated $175 million. In most instances, bills were sent for services never provided. About $44 million was paid out by five insurance companies, the prosecutor added.

Additionally, Bathum was convicted last year of 31 felony counts for sexually assaulting seven women at his rehab facilities in case BA451669. Sentencing in that case also is scheduled on Feb. 14.

The cases were investigated by the Los Angeles County Sheriff’s Department, the Los Angeles County District Attorney’s Bureau of Investigation and the California Department of Insurance.

Study Claims 1/3 of Healthcare Costs are Insurance Co. Overhead

U.S. insurers and providers spent more than $800 billion in 2017 on administration, or nearly $2,500 per person – more than four times the per-capita administrative costs in Canada’s single-payer system, a new study finds.

Over one third of all healthcare costs in the U.S. were due to insurance company overhead and provider time spent on billing, versus about 17% spent on administration in Canada, researchers reported in Annals of Internal Medicine, and summarized in an article by Reuters Health.

Cutting U.S. administrative costs to the $550 per capita (in 2017 U.S. dollars) level in Canada could save more than $600 billion, the researchers say.

The average American is paying more than $2,000 a year for useless bureaucracy,” said lead author Dr. David Himmelstein, a distinguished professor of public health at the City University of New York at Hunter College in New York City and a lecturer at Harvard Medical School in Boston.

To calculate the difference in administrative costs between the U.S. and Canadian systems, Himmelstein and colleagues examined Medicare filings made by hospitals and nursing homes. For physicians, the researchers used information from surveys and census data on employment and wages to estimate costs. The Canadian data came from the Canadian Institute for Health Information and an insurance trade association.

When the researchers broke down the 2017 per-capita health administration costs in both countries, they found that insurer overhead accounted for $844 in the U.S. versus $146 in Canada; hospital administration was $933 versus $196; nursing home, home care and hospice administration was $255 versus $123; and physicians’ insurance-related costs were $465 versus $87.

They also found there had been a 3.2% increase in U.S. administrative costs since 1999, most of which was ascribed to the expansion of Medicare and Medicaid managed-care plans. Overhead of private Medicare Advantage plans, which now cover about a third of Medicare enrollees, is six-fold higher than traditional Medicare (12.3% versus 2%), they report. That 2% is comparable to the overhead in the Canadian system.

Why are administrative costs so high in the U.S.?

It’s because the insurance companies and health care providers are engaged in a tug of war, each trying in its own way to game the system, Himmelstein said. How a patient’s treatment is coded can make a huge difference in the amount insurance companies pay. For example, Hammerstein said, if a patient comes in because of heart failure and the visit is coded as an acute exacerbation of the condition, the payment is significantly higher than if the visit is simply coded as heart failure.

This upcoding of patient visits has led insurance companies to require more and more paperwork backing up each diagnosis, Himmelstein said. The result is more hours that healthcare providers need to put in to deal with billing.

Some folks estimate that the U.S. would save $628 billion if administrative costs were as low as they are in Canada,” said Jamie Daw, an assistant professor of health policy and management at Columbia University’s Mailman School of Public Health in New York City.

“That’s a staggering amount,” Daw said in an email. “It’s more than enough to pay for all of Medicaid spending or nearly enough to cover all out-of-pocket and prescription drug spending by Americans.”

Santa Monica Reports 23% Increase in Comp Claim Costs

The Risk Management Division of the City of Santa Monica compiles its Workers’ Compensation Annual Report every year in an effort to provide local stakeholders with information and statistics related to the city’s medical and indemnity payments, claim settlements as well as general claim and cost trends.

As it has every year since 2009, the city’s Workers’ Compensation Program once again saw an increase to its total program liabilities, according to a report recently presented to City Council.

“In summary, in FY 2018-19, medical and indemnity payments increased 23% from the prior year, claim settlements were up 53% over the prior year and total program liabilities – the total value of all open claims from 1979 forward – grew to $32.6 million by June 30, 2019,” Risk Manager Oles Gordeev said in the report. This was an 8.3 percent or $2.4 million increase from the prior year.

The lion’s share of this increase was attributable to the Police Department and reflects the impact of an aging workforce,” Gordeev said. “Fortunately, first-quarter data from (this fiscal year) shows that total liabilities are again on the decline,” and staff is hopeful this trend will continue.

The city settled 150 claims with a total value of about $4 million during the 2018-2019 fiscal year, which was up from the 98 claim settlements that were worth a total value of $2.3 million the year before. City staff said the increased number of settlements in FY 2018-19 represented an improvement over the past year and reflects the city’s commitment to resolving claims in a timely manner.

“Further, there were two significant and positive trends that emerged in FY 2018-19,” the report states, before addressing the “impressive results” of the Big Blue Bus’ Third-Party Administrator pilot program.

“In short, the TPA’s efforts have resulted in a significant reduction in BBB’s total program liabilities – the single most important financial performance measure for a workers’ compensation program,” Gordeev said in the report, describing how the three-year pilot program came to fruition back in 2017. Despite a 28% increase in claim frequency since its inception, the pilot has resulted in a reduction of total program liabilities from $7.44 million to $6 million.

The key challenges the City faces are steep increases in pension costs over the next seven years as the effects of the California Public Employees’ Retirement System (CalPERS) discount rate decrease from 7.5% to 7.0% impact pension contribution rates starting in FY 2018-19, and continued increases in workers’ compensation costs and healthcare costs, all of which are outpacing revenue growth.

Even without an economic downturn in the next two years, the report warns that the “City will face increasingly hard choices in the next budget cycle.”

Palmdale Internist Sentenced to Two Years in Kickback Case

Kain Kumar, 56, of Encino, a former doctor was sentenced to 24 months in federal prison for engaging in a multi-faceted Medicare fraud scheme, and also for illegal prescribing thousands of opioid painkillers and muscle relaxants.

Kumar pleaded guilty in April 2019 to one count of health care fraud and one count of distribution of hydrocodone. He practiced internal medicine, maintained medical offices in Palmdale, Rosamond, and Ridgecrest and surrendered his medical license last year.

Kumar was also ordered to pay financial penalties totaling more than $1 million, consisting of $509,365 in restitution, $494,900 in asset forfeiture, and a $72,000 fine.

Kumar defrauded the Medicare health care benefit program by prescribing unnecessary home health services in exchange for the payment of illegal kickbacks to him from a La Verne-based home health agency called Star Home Health Resources, Inc. According to the indictment in this case, Medicare paid $4,398,599 to Star based on the illegal kickback-tainted referrals from Kumar.

In furtherance of this scheme, Kumar caused false and fraudulent claims for reimbursement to be submitted to Medicare for Medicare beneficiaries that he did not personally examine or for patients he only briefly examined. Kumar also prescribed drugs that were not medically necessary and which were paid for by the Medicare Part D program.

Kumar admitted in his plea agreement that he illegally prescribed 23,826 pills of the opioid drug hydrocodone (commonly sold under the brand name Vicodin or Norco) and 38,459 pills of the muscle-relaxer carisoprodol (sold under the brand name Soma). Kumar directed his office staff – who were not medical professionals – to issue prescriptions for these drugs to patients even though Kumar had not examined the patients.

Kumar directed his office staff to sign his name on prescriptions for opioid drugs and also provided his staff with pre-signed prescriptions. In one instance, although Kumar examined a patient only once on the patient’s very first visit, and thereafter he caused prescriptions to be issued to the patient for hydrocodone and carisoprodol on a monthly basis for approximately a year and a half even though Kumar did not actually see the patient for any subsequent physician examination.

Kumar is the fifth and final defendant sentenced in this case. Elaine C. Lat, 50, of Fontana, was Star’s chief operating officer and the case’s lead defendant. She is serving a 30-month prison sentence in this matter after pleading guilty in May 2017 to one count of conspiracy and four counts of paying illegal kickbacks. Three other defendants, including Lat’s parents, each pleaded guilty to criminal charges and were sentenced in this matter.

This conviction was a violation of the terms of his probation with the California Medical Board arising out of a 2014 finding of gross negligence in the care of a 16 year old patient. He surrendered his medical license in September 2019 following a Medical Board disciplinary action seeking to revoke his probation.

SCIF Salaries – Including $732K Annual CEO Pay – Under Scrutiny

The State Compensation Insurance Fund has recruited a high-priced team of former executives from the private sector to turn it around after years of scandal and financial problems.

But MSN reports that the hires are earning six-figure salaries that dwarf others in state government, drawing concerns from some in the state Capitol who question the cost as the agency rebuilds following investigations in years past that led to the removal of top managers and mass layoffs forced by loss of business.

The State Fund, has also been criticized for hiring the spouses and adult children of agency managers. Its 11-member board of directors, which is appointed by the governor and legislative leaders, has become a soft landing spot for former lawmakers and other political insiders.

Bonuses and incentives awarded by State Fund’s board have boosted compensation to more than $500,000 each for its seven top managers including its CEO, whose annual pay is some $732,000 – more than three times the $210,000 salary of the governor. The salaries have prompted some lawmakers to call for an oversight hearing to determine whether the compensation is justified.

Agency officials including Board Chairman David M. Lanier say the compensation is warranted because of the unique mission of State Fund, which was created by the Legislature in 1914 to provide workers’ compensation insurance to businesses in the state, including those who can’t afford coverage from the private sector.

“The challenge we have is it’s a billion-dollar insurance company,” Lanier said. “There’s not another one of those in state government, so we need and value talent and expertise from the insurance industry.”

The agency’s biggest troubles began in 2007, when State Fund’s board fired its president and vice president after an audit found questionable financial practices involving the sale of discounted policies through outside associations linked to some board members. The scandal also resulted in the resignation of two board members whose private companies collected at least $265 million over 10 years from State Fund for administering group policy programs.

In 2011, State Fund laid off 25% of its 6,800 workers in response to its loss of market share. And its workforce has continued to drop, sitting now at 4,270 employees.

In the years after the scandal, the board of directors sought to expand its powers by persuading the Legislature to increase from one to 16 the number of executive positions exempt from civil service rules and pay scales.

In 2014, the board appointed Vernon Steiner as president and CEO of State Fund, who touted his 30 years of experience in the insurance industry. He received a base salary of $450,000 as well as various performance-linked bonuses.

In November, the State Fund board approved raises in base salary, bonuses and incentive payments for 17 managers, including Steiner, whose base pay this year has been increased by $36,000, or 7%, to $544,450. By comparison, State Fund’s then-CEO was paid $273,000 in 2007.

New York Considers Passing AB-5 Gig Employment Law

Last year, California enacted AB-5, legislation that could force app-based companies to make anyone who finds work on their platforms employees. The law has already created confusion and unintended consequences for dozens of industries.

California’s broad-based, blunt-instrument law, has resulted in independent musicians being warned they’ll no longer be able to record in many studios and truck drivers learning that their pay could fall significantly. A few weeks ago, Vox announced it would lay off 200 freelance journalists in an effort to comply with the law.

Despite the issues California’s legislation has already created, the New York Daily News reports that many New York legislators seem interested in passing a similar law.

New York is already a national leader in providing non-traditional workers access to traditional benefits. Almost 25 years ago, New York created a first-of-its-kind fund, the Black Car Fund, to provide protections to drivers. For decades the fund was limited in the kinds of services it could provide. However, thanks to a groundbreaking piece of legislation signed by Gov. Cuomo in December, it can now offer a broad range of protections and benefits, including health care.

Today, rideshare and for-hire vehicle riders in New York pay a small fee on all their trips that is allocated to the Black Car Fund. In exchange, the fund provides benefits including workers compensation, vision care, telemedicine, mental health care, wellness services and more.

Experts have talked about a portable benefits fund for gig economy workers for years. In many ways, the Black Car Fund was, and remains, the closest thing in the country to a true portable benefits fund. And it works, covering more than 130,000 drivers across more than 400 bases.

Federal Judge Signs AB-5 Restraining Order for Truckers

A federal judge in California has temporarily halted the start date of AB-5, a law that would potentially change how independent truck drivers are classified. The TRO will remain in effect until Jan. 13, the date of a hearing on a plaintiff’s motion to seek a preliminary injunction against the law.

Judge Roger Benitez from the Southern District Court of California on Dec. 31 issued a temporary restraining order against the implementation of California’s Assembly Bill 5. The legislation, which was set to take effect Jan. 1, potentially would reclassify tens of thousands of independent contractors as employees. Trucking industry officials fear that the law would remove opportunities for drivers to own their own businesses and work as independent owner-operators in California.

The Temporary Restraining Order – which pertains exclusively to the trucking industry – was issued in response to a Dec. 24 request from the California Trucking Association seeking a delay in the law’s implementation.

In November, CTA filed a lawsuit challenging AB 5 in which the group argued that many of the drivers it represents want to remain independent contractors, as this permits them the ability to set their own schedules and otherwise profit from owning their own vehicle. The association said enforcing AB 5 would force these drivers to be treated as employees and forfeit those benefits.

CTA argued that the “B” prong of the ABC test is pre-empted by the Federal Aviation Administration Authorization Act of 1994, which prohibits any state from “enact[ing] or enforc[ing] a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier – with respect to the transportation of property.”

Judge Benitez said that CTA’s contention warranted further consideration. “Plaintiffs have shown that AB 5’s Prong B is likely pre-empted by the FAAAA because AB 5 effectively mandates that motor carriers treat owner-operators as employees, rather than as the independent contractors that they are,” he wrote.

In his order, Benitez wrote, “The court finds that a temporary restraining order is warranted. At this early stage of the proceedings and within the brief amount of time available, plaintiffs have carried their burden for purposes of emergency relief to show (1) that they are likely to succeed on the merits, (2) likely to suffer irreparable harm in the absence of relief, (3) that the balance of equities tips in their favor and (4) that their requested relief is in the public interest.”

California Attorney General Xavier Becerra and the International Brotherhood of Teamsters are the defendants in the case.

Drugmakers Start New Year by Jacking Up Prices on 330 Drugs

The ever increasing public outcry over the high price of medicines did little to stop drugmakers from raising prices again for 2020.

Drugmakers including Bristol-Myers Squibb, Gilead Sciences, and Biogen hiked U.S. list prices on more than 50 drugs on Wednesday, bringing total New Year’s Day drug price increases to more than 330 drugs, according to data analyzed by healthcare research firm 3 Axis Advisors.

Companies may be delaying some of those increases to later this month to escape early January scrutiny.

The drug price increases include some blockbuster drugs: the price of Humira, which treats arthritis and other conditions, rose 7.4 percent, and the price of Revlimid, which treats multiple myeloma, rose 6 percent, according to the data.

Drugmakers have traditionally raised prices at the start of a new year, and the data shows that the price increases are continuing, even as outcry over high drug prices rises in Washington. Nearly all of the price increases are below 10%, with the median price increase around 5%, according to 3 Axis.

Under pressure from politicians and patients, many makers of branded drugs have pledged to keep their U.S. list price increases below 10% a year.

Double-digit increases largely appear to be a thing of the past,” Bloomberg Intelligence analyst Brian Rye said. Many drugmakers have vowed not to increase drug prices by more than 10%. People with insurance generally pay much less than the list price of a drug.

Soaring healthcare costs for U.S. consumers, and prescription drug prices in particular, are expected to again be a central issue in the 2020 presidential campaign for both parties.

The United States, which leaves drug pricing to market competition, has higher prices than in other developed countries where governments directly or indirectly control the costs, making it the world’s most lucrative market for manufacturers.

Reserving Lifetime Medical Award is Getting More Difficult

The mandatory reserve estimate for a lifetime medical award requires an estimate of the remaining life expectancy of the worker. There are many actuarial tables and other information that can be used to justify an estimate.

But, as modern medicine continues to improve and advance at an increasingly rapid rate, people all over the world are enjoying longer lifespans, on average, than ever before. Consequently, age-related dementia and Alzheimer’s disease are becoming common diagnoses in older adults. For example, in the United States alone Alzheimer’s is estimated to affect 5.7 million people.

Now, it appears help may soon be on the way in the form of a potential new vaccine that has shown success in mice testing.

Researchers from the University of California, Irvine believe that this immunotherapy combination vaccine should be ready for human trials within the next few years. The initial version of the vaccine was created by Flinders University professor Nikolai Petrovsky in South Australia, and it works by removing “brain plaque” and tau protein aggregates, both of which have been extensively linked to the development of Alzheimer’s disease.

The study is published in the scientific journal Alzheimer’s Research & Therapy.

Success in 2019 with mice models has opened the door towards more extensive research and development in 2020, researchers say.

If the vaccine can in fact remove accumulated beta-amyloid plaques and tau protein aggregates from human subjects brains, just as it was able to in mice that had already shown signs pathologies, that should, in theory, stop the development of Alzheimer’s disease.

“Taken together, these findings warrant further development of this dual vaccination strategy – for ultimate testing in human Alzheimer’s disease,” the study reads.

According to professor Petrovsky, researchers are hopeful they can proceed with human clinical trials in about two years.

This isn’t the first time a possible preventative drug for Alzheimer’s has shown promise, but every one of these drugs has ultimately faltered when it came time for human trials. With this in mind, the research team say they are determined and motivated to establish a successful vaccine that can, at the very least, delay and slow down the progression of Alzheimer’s.

Mileage Rates Drop to 57.5 Cents in 2020

Better late than never:

On December 31 the Internal Revenue Service issued the 2020 standard mileage rates. Beginning on January 1, 2020, the standard mileage rates for the use of a car, van, pickup or panel truck will be 57.5 cents per mile for business miles driven (down from 58 cents in 2019)

The standard mileage rate is based on an annual study of the fixed and variable costs of operating an automobile.

California Labor Code §4600 (e)(2), working in conjunction with Government Code §19820 and Department of Personnel Administration regulations, requires claims administrators to reimburse injured workers for such expenses at the rate adopted by the Director of the Department of Personnel Administration for non-represented (excluded) state employees, which is tied to the IRS published mileage rate.

As a result, effective for travel on or after January 1, 2020, the rate that California workers’ compensation claims administrators pay injured workers for travel related to medical care or evaluation of their injuries will also decrease to 57.5 cents per mile.

Our sister publication, has updated it’s FREE mileage calculator which you can use from your desktop, tablet or smart-phone by going to and selecting “Tables/Calculators” and then select “Calculate Mileage” from the drop down menu.

Also, the Division of Workers Compensation has posted an order adjusting the Ambulance Services section of the Official Medical Fee Schedule (OMFS) to conform to changes in the Medicare payment system as required by Labor Code section 5307.1.

The update order is effective for services rendered on or after January 1, 2020, and can be found at the DWC website’s OMFS page.