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Tag: 2021 News

Pharmacist Sentenced to Only 6 Months for $200M Comp Fraud

Hootan Melamed has long been accused of masterminding a kickback and fraud scheme that involved a number of accomplices in a conspiracy to refer patients to his pharmacies to fill prescriptions, resulting in close to $200 million in fraudulent workers compensation billings. He was indicted in federal district court for the Southern District of California in 2016.

He allegedly operated and was the de facto owner of New Age Pharmaceuticals Inc., a compounding pharmacy located in Beverly Hills, California. He also had business interests in other pharmacies, including RoxSan Pharmacy Inc., Concierge Compounding Pharmaceuticals, Inc , Alexso, Inc. and Portland Professional Pharmacy, These compound pharmacies supplied compound creams and other custom pharmaceuticals to patients.

Prosecutors alleged that “It was the goal of the conspiracy to fraudulently obtain money from health care benefit programs by submitting claims for prescription pharmaceuticals and DME that were generated through a secret pattern of bribes to doctors (and those acting with them and on their behalf), to induce the doctors to refer patients to particular pharmacies and DME providers, in violation of the doctors’ fiduciary duty to their patients.”

Melamed “paid doctors to recommend certain goods and services and refer workers compensation patients to specific providers for those goods and services, including to pharmacies in which Melamed had an interest for prescription pharmaceuticals.”

The scheme has already resulted in charges and convictions against several co-conspirators, including anesthesiologist Dr. Amir Friedman, medical marketer John Pangelian, Dr. Phong H. Tran, Jean Picard, and Jonathan Pena.

Phong Hung Tran was the owner of Coastline Medical Clinics in Southern California. Dr. Tran was previously a licensed physician in the State of California, but had his license suspended after his arrest and indictment by the San Diego District Attorney’s Office in January 2016.

On November 2, 2020 a plea agreement was reached between Melamed and federal prosecutors and filed with the court. However, that document as well as the Pre-sentencing Report remain sealed by the Court, and thus the terms are unavailable to the public.

Melamed was sentenced on March 29, 2021 to six months in prison, followed by three years of supervised probation.

Prior to sentencing, a document from the “Pharmacy and Worker’s Compensation Industry” was filed in the case, objecting to the “rumored” Plea Agreement recommendation of only 18 months in prison. That document points out that any “sentence less than 7 years would be a huge travesty and mockery to the industry as so many people in the same industry have been watching this case very closely.” That letter goes on to note that this was Melamed’s second felony, and that he lives in a “12 million 15,000 sqft mansion that he put under his mother’s name to shelter assets from his wife during a divorce and now the court system.”

One would speculate that the Plea Agreement offered leniency in exchange for cooperation in the prosecution of many others. This speculation would be consistent with both the sealed plea agreement and pre-sentencing report, and lenient sentence.

New Med-Legal Fee Schedule Effective April 1

The Division of Workers’ Compensation has received notification from the Office of Administrative Law that the final version of the proposed Medical-Legal Fee Schedule was forwarded on March 30, 2021 to the office of the Secretary of State for filing and printing.

This action represents official adoption of the new fee schedule, which has an effective date of April 1, 2021. All medical-legal evaluations that occur on or after April 1, 2021 will be subject to the new MLFS.

DWC has posted on its website the final rulemaking documents filed with OAL. The documents include the final text of the new MLFS.

The MLFS provides that a declaration to the physician accounting for the records that were provided is required by the proposed regulations for evaluations that occur on or after April 1, 2021.

The language states: “Any documents sent to the physician for record review must be accompanied by a declaration under penalty of perjury that the provider of the documents has complied with the provisions of Labor Code section 4062.3 before providing the documents to the physician. The declaration must also contain an attestation as to the total page count of the documents provided. A physician may not bill for review of documents that are not provided with this accompanying required declaration from the document provider. Any documents or records that are sent to the physician without the required declaration and attestation shall not be considered available to the physician or received by the physician for purposes of any regulatory or statutory duty of the physician regarding records and report writing.’

DWC realizes that there are Qualified Medical Evaluator evaluations currently scheduled for April that may not comply with the provisions of the attestation requirement for medical records under the new Medical-Legal Fee Schedule. The parties to these evaluations should communicate with each other to reach agreement on the handling of these evaluations.

New Law Requiring Additional COVID Sick Leave Now In Effect

Senate Bill 95’s supplemental COVID paid sick leave requirement goes into effect as of March 19, 2021. The new law mandates that employers provide employees with supplemental paid sick leave for COVID-related leave in addition to other paid time off obligations under existing federal, state, or local statutes.

The obligation to provide paid COVID related sick leave is also retroactive to January 1, 2021. Upon an oral or written request by an employee, the employer is obligated to reimburse an employee who took leave between January 1, 2021, and March 29, 2021, that would have otherwise qualified under SB 95.

Under Labor Code 248.2 all employers with 26 or more employees must allow all employees who are unable to work or telework due to COVID use of the new supplemental paid sick leave. The employee qualifies for leave if the employee:

A. Is subject to a quarantine or isolation period related to COVID.
B. Has been advised by a health care provider to self-quarantine due to concerns related to COVID.
C. Is attending an appointment to receive a vaccine for protection against contracting COVID.
D. Is experiencing symptoms related to a COVID vaccine that prevent the employee from being able to work or telework.
E. Is experiencing symptoms of COVID and seeking a medical diagnosis.
F. Is caring for a family member who is subject t ho a quarantine or isolation period related to COVID; or who has been advised to self-quarantine by a health care provider.
G. Is caring for a child whose school or place of care is closed or otherwise unavailable for reasons related to COVID on the premises.

Full-time qualified employees are eligible for up to 80 hours of supplemental paid sick leave. Non-full-time employees with normal weekly schedules receive the total number of hours they are normally scheduled to work over two weeks. Employees who work a variable number of hours, whose tenure is six months or more, receive 14 times the average number of hours they worked each day in the six months preceding their leave date.

In addition, as with all other paid sick leave requirements mandated by law in California, there are posting requirements and a requirement that the leave hours be available on paystubs or other written notices to employees received on payday.

SB 95 is nuanced and specific with regard to the qualifications, exemptions, and obligations.

The firm of Roxborough Pomerance Nye & Adreani LLP has invited employers to contact members of the firm about this new law if necessary If your company has any questions about the new paid sick leave requirements, please contact Nicholas Roxborough at (818) 992-9999, ext. 222, Drew Pomerance at ext. 212, Michael Adreani, at ext. 234, Marina Vitek, at ext. 236, or Trevor Witt, at ext. 224.

Santa Clarita Employer Pleads Guilty to $1.8M SBA COVID Fraud

A Santa Clarita Valley man pleaded guilty to perpetrating a scheme to fraudulently obtain approximately $1.8 million in COVID-19 relief guaranteed by the Small Business Administration (SBA) through the Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP).

According to court documents, Hassan Kanyike, 29, of Santa Clarita, admitted that he submitted six fraudulent PPP loan applications and two fraudulent EIDL applications.

The applications sought funds to purportedly pay the salaries of employees whom he claimed worked for two of his businesses. Kanyike successfully obtained approximately $1 million through four PPP loans, and another $300,000 through two EIDL loans.

In support of the fraudulent PPP loan applications, Kanyike submitted fake federal tax filings and payroll reports.

For example, in one loan application, Kanyike falsely claimed the business had 26 employees and an average monthly payroll of $168,000, and he submitted a fabricated IRS tax form claiming Falcon Motors had paid $2,022,300 in payroll in 2019.

But Kanyike admitted during his plea that the company had substantially fewer employees and substantially lower payroll. Kanyike further admitted that he obtained additional Employer Identification Numbers from the IRS in April and May 2020, so that he could apply for multiple loans for the same used-car business. Kanyike then used a substantial portion of the PPP loan proceeds for his own personal benefit.

Kanyike was arrested in December 2020 at Los Angeles International Airport just before he was about to board a flight to Dubai. At the time of his arrest, Kanyike had transferred approximately $762,000 to Uganda, his country of citizenship, from one of the business accounts that had received the loan proceeds, in violation of the terms of the PPP and EIDL program.

Kanyike pleaded guilty to one count of wire fraud before United States District Judge Virginia A. Phillips. He is scheduled to be sentenced on August 23 and faces a maximum penalty of 20 years in prison.

As part of his guilty plea, Kanyike is required to pay approximately $1.3 million in restitution.

Homeland Security Investigations and Treasury Inspector General for Tax Administration investigated the case.

2017 Insurance Start-up Expands Rapidly in Comp Market

Despite the softening of rates and the challenges of the coronavirus pandemic, the Insurance Journal reports that one Midwest-based workers’ compensation insurance provider that opened its doors just over three years ago reports that it not only has experienced significant growth during that time, it simultaneously has managed to maintain a loss ratio that is one of the lowest in the industry.

Since its launch in October 2017, Omaha National, based in Omaha, Nebraska, has gone from $0 to $100 million of in-force premium and grown from a six-person operation to one with more than 150 employees.

That brisk pace of growth is expected to continue, says Reagan Pufall, president and CEO of the managing general agent (MGA) / insurance carrier. The company will move into a new office building this summer “because we’ve run out of room where we are,” he said. “Five years from now, we expect to be well over $400 million in-force premium.”

Omaha National launched as an MGA with California as its initial target market. It is now offering coverage in 14 states and will continue to expand into other states, including New York this year, Pufall said. It also established Omaha National Insurance Co., which currently “acts as a reinsurer for a portion of the risk that we write. So even as an MGA, we are already on the risk, which is what we like.”

However, “the intention has always been to become a direct writer. And we’re now approaching the time when it looks like we will be able to initiate that transition to becoming a carrier,” he said.

A complementary division of the company is its payroll service. “It’s an optional part of what we offer. Any company that is insured by us, if they choose, they can also make use of us as their payroll service,” Pufall said.

Small- to mid-size companies operating in industries where employees work with their hands are Omaha National’s core customers – landscapers, framers, electricians, plumbers, parcel delivery services, for example. “We like to say that we insure the companies that build America,” Pufall said.

The falling rates in the workers’ compensation line are a challenge as they are for any insurer, Pufall said. “But we designed this company to prosper throughout the market cycle, in hard markets and soft markets. None of what we’re encountering or anything we see in the future causes us substantial concern. Of course, we will look forward to the day when the market cycle changes, and the rates are rising again. But until then, we’re doing just fine, even during this soft market.”

California Unemployment Rate Drops to 8.5%

Driven by the reopening of restaurants and the tourism industry, California unemployment dropped to 8.5% in February, the Golden State’s lowest mark of the pandemic.

With the state loosening business restrictions incrementally since the holiday spike of Covid-19 cases dwindled, the hospitality and leisure industry added over 100,000 jobs last month. In total, California employers hired 141,000 new employees, nearly erasing the deficit accrued in December and January under Governor Gavin Newsom’s most recent lockdown order.

California registered the third largest jobless rate decrease in February of any state, but its estimated 8.5% mark remains well above the nationwide figure of 6.2%.

State officials celebrated Friday’s U.S. Department of Labor release, calling it a “milestone” in what has thus far been a slow economic recovery for the nation’s most populous and richest state.

The state’s improvement was led by the hospitality and leisure industry, which resumed offering indoor dining in some parts of the state last month and combined to add 102,000 jobs. The hiring surge was a positive sign for the hard-hit industry that is still down nearly 700,000 jobs compared to February 2020.  

Overall, seven of California’s 11 industries added jobs including other services (14,100), education and health services (13,000), manufacturing (8,900), trade, transportation and utilities (8,200) and professional and business services (5,400). Meanwhile, the agriculture industry added nearly 3,000 jobs, tallying gains for the seventh straight month.

February’s performance will likely be repeated or enhanced in March and April, assuming Covid-19 cases continue to drop, says Jeffrey Clemens, economics professor at University of California, San Diego.

The hospitality industry’s February hiring-spree was certainly encouraging, but Clemens emphasized the enormity of the job losses suffered in California over the last year.

The jobs market is climbing out of a deep hole,” Clemens added, referencing the fact California is still down 1.6 million total jobs.  

Statewide unemployment may have sunk a half-point in February, but nearly a dozen of the state’s 58 counties still have double-digit unemployment.

Los Angeles County’s rate fell to 10.9% from 12.7% the previous month, but it remains the only urban county in the double digits. The rest of the list consists of mostly rural, agricultural-producing counties like Kern (10.8%), Imperial (15.9%) and Monterey (10.9%).  

CWCI Says COVID Comp Claims Subsiding to Lowest Level

The wave of COVID-19 claims that hit the California workers’ compensation system at the end of 2020 has subsided for the time being as the number of claims reported to the state Division of Workers’ Compensation for February fell to the lowest level in a year, an analysis by the California Workers’ Compensation Institute Shows.

The CWCI report shows the projected ultimate claim count for February came in at 4,533 cases, down nearly 90% from the record 43,158 claims projected for December.

The figures from CWCI’s COVID-19/Non-COVID-19 Interactive Application show that after surging to an all-time high in December, the monthly COVID-19 claim count fell by more than 50% in January, a decrease that coincided with the steep drop in new coronavirus cases in the state.

“Claim counts from December through February are still incomplete as additional claims for those months are still being reported, but the COVID-19 claim totals reported as of March 8 show that the DWC has recorded 40,188 claims with December injury dates and 19,493 claims with January injury dates, but just 2,747 COVID-19 claims with February injury dates,” the CWCI report states.

The addition of the February figure pushed the number of virus claims reported to the DWC since the pandemic began to 135,566, including 751 death claims, and COVID-19 clams have accounted for just 9% of all claims reported thus far for February, though they have accounted for 18.8% of all claims since the first claims were reported in January of 2020, according to the CWCI.

The latest results are from the March 11 update to CWCI’s COVID-19/Non-COVID-19 Interactive Claim App, which integrates data from CWCI, DWC, and the Bureau of Labor and Statistics to provide current and historical data on California work injury claims.

The app includes COVID-19 data dating back to January 2020, as well as from the most recent 12 months, and is available to the public.

DWC Adjusts Hospital Outpatient and ASC OMFS Fees

The Division of Workers’ Compensation (DWC) has posted an order adjusting the Hospital Outpatient Departments and Ambulatory Surgical Centers 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 Hospital Outpatient Departments and Ambulatory Surgical Centers fee schedule update order adopts the following Centers for Medicare & Medicaid Services (CMS) Medicare changes:

April 2021 Quarterly Update

– – The CMS Medicare Hospital Outpatient Prospective Payment System (OPPS) April 2021 Addendum A quarterly update
– – The CMS Medicare OPPS April 2021 Addendum B quarterly update
– – The CMS Ambulatory Surgical Center Payment System, April 2021 ASC Approved HCPCS Code and Payment Rates – Column A entitled “HCPCS Code” of “Apr 2021 ASC AA” and Column A entitled “HCPCS Code” of “Apr 2021 ASC EE”
– – Certain sections of the CMS Medicare OPPS April 2021 Integrated Outpatient Code Editor (I/OCE), IOCE Quarterly Data Files V212.R0

The order adopting the OMFS adjustments is effective for services rendered on or after April 1, 2021 and is posted on the DWC website.

Amended DEU Regs Include 5% Commutation Increase

The Division of Workers’ Compensation has posted proposed changes to Disability Evaluation Unit (DEU) regulations to the online forum where members of the public may review and comment on the proposal. Comments will be accepted on the forum until 5 p.m. on April 7, 2021.

The proposed changes update commutation tables and delete references to services no longer provided by the DEU. Other proposed changes include updating two forms used for requesting consultative ratings and reconsideration of summary ratings.

The Labor Code provides for the determination and payment of permanent disability benefits and mandates life pensions for certain cases. Injured workers are allowed to petition the Workers’ Compensation Appeals Board (WCAB) for a commutation of future weekly permanent disability and life pension benefits in order to receive a lump sum amount.

The proposed changes update the commutation tables to reflect updated life tables which offer a more accurate present value of lifetime benefits. As life expectancy has increased, it is estimated that this update will provide a general 5% increase of commutations for life pensions and permanent total disability.

The Commutation Instructions provide examples to illustrate various methods of commuting permanent disability and life pension benefits. The most common commutation is for attorney fees when settling cases at the WCAB.

The DEU will continue to provide formal rating determinations, summary rating determinations and consultative rating determinations, but will no longer provide informal rating determinations.

The new proposed forms are:

– – Summary Rating by the Administrative Director – DWC-AD Form 103.
– – Request for Consultative Rating – DWC-AD Form 104 (DEU).

The forum can be found online on the DWC forums page under “current forums.”

Landscaper Faces Fraud Charges for Faked Symptoms

23 year old Angel Maces, who lives in San Jacinto, was arraigned for felony insurance fraud after allegedly misrepresenting symptoms following a work-related injury, in order to receive over $42,000 in fraudulently obtained workers’ compensation benefits.

On September 7, 2018, Maces, while working for a Temecula landscaping company, was laying artificial turf at a private residence in the City of Duarte, when a piece of turf slipped and struck his knee.

Maces filed a workers’ compensation claim with his employer’s insurance company that same day and immediately began receiving benefits.

On April 28, 2020, the California Department of Insurance began an investigation after his employer’s insurance company suspected fraud.

The investigation found Maces misrepresented the seriousness of his knee injury and his physical limitations in order to not return to work and collect $42,888 in workers’ compensation benefits.

Surveillance during the investigation showed Maces conducting activities that contradicted the physical limitations he described to his doctor and his employer.

On multiple occasions Maces was seen not using a cane or crutches, even though he claimed he had to use them 100 percent of the time because of the injury.

Maces self-surrendered and was arraigned on February 26, 2021.

The Riverside County District Attorney’s Office is prosecuting this case.