Tag: 2024 News

Taylor Capito received treatment in the emergency room of San Jose Healthcare System LP dba Regional Medical Center San Jose on two occasions. Regional is a major hospital in San Jose with an emergency room.

Regional initially billed Capito $41,016 for her two visits, including two “`Level 4′ Evaluation and Management Services Fee” charges of $3,780. Regional thereafter reduced Capito’s total bill to $8,855.38, after deducting adjustments and discounts.

Capito alleges she did not receive advance notice that Regional would charge the EMS fee in addition to each item of service and treatment provided by the hospital. Capito claims that had she been informed that she would be charged the EMS fee before incurring treatment, she would have left Regional and sought less expensive treatment elsewhere.
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Capito filed a complaint against  on behalf of herself and all others similarly situated in June 2020, under the Consumer Legal Remedies Act (CLRA), which she amended shortly thereafter, challenging Regional’s “unfair, deceptive, and unlawful practice of charging [an EMS fee] without any notification of its intention to charge a prospective emergency room patient such a Fee for the patient’s emergency room visit.”

Capito claimed that Regional charged the EMS fee simply for seeking care in the emergency room – describing it as designed to cover overhead’ type expenses of operating an emergency room without correlating the fee to the individual items of treatment and service that a patient received, and that the EMS fee “invariably comes as a complete surprise to unsuspecting emergency room patients.”

Regional demurred and moved to strike the class allegations. In doing so, it briefed the legislative history behind the Payers’ Bill of Rights (Health & Saf. Code, § 1339.50 et seq.) and other federal and state regulations governing its pricing disclosures.The trial court sustained the demurrer and dismissed the case. And the Court of Appeal affirmed the dismissal in the unpublished case of Capito v. San Jose Healthcare System, LP – H049022, – H049646 (April 2023).

In another case, Joshua Naranjo filed a class action lawsuit against the Doctors Medical Center of Modesto Inc., seeking declaratory and injunctive relief, and alleging violations of the unfair competition law (UCL) and the Consumer Legal Remedies Act (CLRA) in connection with Medical Center’s emergency room billing practices. The Medical Center charged Naranjo a total of $12,889.93 before any discounts or adjustments were applied. The gross charge included a “Level 4” EMS Fee in the amount of $8,833.35. The trial court dismissed his case, however the Court of Appeal reversed and reinstated his class action against the Medical Center.

On July 26, the California Supreme Court granted review in the two different cases in which appellate courts had addressed the same issue and come to different conclusions. The first is Naranjo v. Doctors Medical Center of Modesto (2023) 90 Cal.App.5th 1193, a published decision of the Fifth Appellate District in which the court had ruled that the hospital was required to further disclose the EMS fee prior to treating ER patients. The second case is Capito v. San Jose Healthcare System, an unpublished decision of the Sixth Appellate District holding that no additional disclosure was required.

This month the California Attorney General filed an Amicus Brief in Capito urging the California Supreme Court to reverse the Court of Appeal. He urges the Supreme Court to “ensure that lower courts have clear guidance in deciding cases alleging fraudulent practices, and to adopt a standard definition of unfairness under the Unfair Competition Law, as the current lack of clarity inhibits effective enforcement and creates confusion.”

The California Hospital Association points out that for “over a decade, at least 15 different class action lawsuits have been filed against California hospitals for failing to disclose their facility fees before patients were treated.”

“These lawsuits were brought even though each hospital had fully complied with both state and federal pricing transparency laws by disclosing the EMS fee in their chargemaster. While some of these lawsuits were settled or dismissed by the plaintiff after losing important rulings, other cases are on appeal or proceeding to trial.”  

The California Hosptial Association has filed as amicus in both Captio and Narango.

Detectives with the California Department of Insurance arrested Gina Marie Gregori of Lafayette, for allegedly underreporting payroll and ripping off insurers to the tune of $32 million. Gregori was charged with multiple counts of worker’s compensation insurance fraud and associated thefts. The complaint alleged the white-collar criminal enhancement pursuant to Penal Code section 186.11 and named as criminal defendants several of Gregori’s companies, including Apex Janitorial Solutions.

The department’s investigation revealed Gregori was keeping two sets of books, using a payroll processing service to report to Employment Development Department and pay her employees, and keeping a fraudulent set of books that she provided to insurers and insurance auditors, which showed a significantly lower payroll amount.

The People moved for appointment of a receiver to manage and preserve Gregori’s assets pursuant to Penal Code section 186.11. The court granted the motion and issued an order appointing the Receiver, identifying the assets subject to the receivership, and specifying the Receiver’s powers.

Among other things, the Receiver was authorized to take possession of, collect income from, and otherwise operate, manage, preserve, and control Gregori’s properties. The order also authorized the Receiver to request court approval and confirmation of all fees and expenses incurred by the receivership in executing its duties. The court “reserve[d] jurisdiction to allocate the receivership costs of administration as between the parties.”

One of the real properties in the receivership estate was located on Dolores Street in San Francisco and owned by Gregori’s former romantic partner, Richard Bertero,with whom Gregori had commingled funds. Bertero used the Dolores Street property as collateral for a loan from Avalon Funding Corporation.

Later, Bertero filed for Chapter 11 bankruptcy; the Dolores Street property became part of the bankruptcy estate. The bankruptcy court released the Dolores Street property from the automatic bankruptcy stay to allow foreclosing lenders to sell it. When both Avalon and the Receiver made claims to the surplus proceeds from that sale, the trial court ordered the surplus turned over to it to resolve the priority of their claims. Relying on section 186.11, the court ordered that the bulk of the surplus be used to pay the Receiver’s fees and expenses incurred in administering the receivership estate which was roughly $148,000.

The Court of Appeal Affirmed in the unpublished case of People v. Gregori -A164081 (February 2024)

On appeal, Avalon argues that the Receiver had no valid claim to the surplus; that the court erred by applying section 186.11 rather than the nonjudicial foreclosure statute, Civil Code section 2924k; that the court lacked jurisdiction over the surplus; and that the court misapplied section 186.11. The Receiver argues that the trial court had jurisdiction over the surplus as part of the receivership estate and that the court properly exercised its discretion by finding that section 186.11 authorized it to pay the Receiver before paying Avalon.

Penal Code section 186.11, the “Freeze and Seize’ statute, authorizes a trial court to appoint a receiver to preserve the assets of a criminal defendant subject to an “aggravated white collar crime enhancement’ because the defendant was “charged with having committed two or more related felonies involving fraud . . ., a pattern of related felony conduct, and the taking of more than $100,000.”

The court’s goal in the pendent receivership proceedings is to prevent defendants from “dissipat[ing] or secreting [their] assets or property” while the criminal proceedings are pending, and then to use “those assets to pay restitution to victims if the People secure a conviction.”

Subdivision (b) of Civil Code section 2924j specifies that “[n]othing in this section shall preclude any person from pursuing other remedies or claims as to surplus proceeds.” Thus the trial court did not abuse its discretion in declining to adhere to the claim priorities in Civil Code section 2924k.

The trial court’s interpretation of section 186.11 to permit compensation to the Receiver was not an abuse of discretion or contrary to law. The court reviewed the plain language of section 186.11, harmonized the language of the statute to give force and effect to its distinct provisions, and interpreted it to further the policy interests embodied therein.

The nation’s toughest rules for on-the-job lead exposure has just been passed by California workplace safety regulators.The Cal/OSHA Standards Board passed the sweeping update to California’s lead regulation despite heavy concerns of feasibility and inaccurate cost estimates from the construction and battery industries.

In a 5-2 vote, the Standards Board expressed concerns over the timeline for implementation, despite supporting the regulation’s substantive goals and ultimately approving the regulation.

In addition to training and blood lead monitoring of exposed employees, California’s present regulation regarding workplace lead exposure (Title 8, Section 5198) requires employers to ensure that no employees have lead exposure over a Permissible Exposure Limit (PEL) of 50 micrograms in a cubic meter of air.

The California Chamber of Commerce reports that this new update would, among other changes, drastically lower the threshold for testing (from 30 micrograms of exposure to 2 micrograms) and the PEL (from 50 micrograms to 10 micrograms).  Importantly, the new update covers both construction and non-construction worksites.

Because of the extreme lowering of the relevant thresholds, even industries that do not consider themselves to be lead-based should be aware of this regulation. For example, any workplaces working with brass (of which lead is a component) or containing brass fixtures may want to examine whether their activities (such as polishing brass) would now be covered by the regulation.

Although no opposition groups debated the hazards of lead, extensive testimony from opposition groups criticized the cost estimates in the Standardized Regulatory Impact Assessment (SRIA) as grossly inaccurate. In addition, strong opposition from battery manufacturers focused on the unrealistic nature of Cal/OSHA’s implementation timeline, noting that their facilities would need years to come into compliance given the time required to obtain permits and complete construction.

Notably, the Standards Board and staff did acknowledge these implementation timing concerns, and the rulemaking took the rare step of asking the Office of Administrative Law to delay its approval by six months, which will functionally delay enforcement until January 2025.

The Board adopted amendments to title 8, California Code of Regulations (CCR), section 1532.1 of the Construction Safety Orders (CSO) and sections 5155 and 5198 of the General Industry Safety Orders (GISO).

Quest Diagnostics is an American clinical laboratory and Fortune 500 company. It operates in the United States, Puerto Rico, Mexico, and Brazil.Quest also maintains collaborative agreements with various hospitals and clinics across the globe. As of 2020 the company had approximately 48,000 employees, and it generated more than $7.7 billion in revenue in 2019.

The California Attorney General announced a settlement with Quest Diagnostics, Inc., resolving allegations that the diagnostic laboratory company unlawfully disposed of hazardous waste, medical waste, and protected health information at its facilities statewide.

As part of the settlement, Quest Diagnostics will be required to pay nearly $5 million for penalties, costs, and supplemental environmental projects and make significant changes to its operations and practices at its California facilities. The Attorney General was joined by the district attorneys of Alameda, Los Angeles, Monterey, Orange, Sacramento, San Bernardino, San Joaquin, San Mateo, Ventura, and Yolo Counties in the settlement.

The settlement is the result of over 30 inspections conducted by the district attorneys’ offices at Quest Diagnostics laboratories and Patient Service Centers (PSCs) statewide. During those inspections, the district attorneys’ offices reviewed the contents of Quest Diagnostics’ compactors and dumpsters and found hundreds of containers of chemicals, as well as bleach, reagents, batteries, and electronic waste; unredacted medical information; medical waste such as used specimen containers for blood and urine; and hazardous waste such as used batteries, solvents, and flammable liquids. The unlawful disposals are alleged to violate the Hazardous Waste Control Law, Medical Waste Management Act, Unfair Competition Law, and civil laws prohibiting the unauthorized disclosure of personal health information.

After being notified of the investigations, Quest Diagnostics implemented numerous changes to bring its facilities into compliance with California law, including hiring an independent environmental auditor to review the disposal of waste at its facilities and modifying its operating and training procedures to improve its handling, storage, and disposal of hazardous waste, medical waste, and personal health information at all four laboratories and over 600 PSCs in California.

The settlement resolves the allegations above and requires Quest Diagnostics to pay $3,999,500 in civil penalties, $700,000 in costs, and $300,000 for a Supplemental Environmental Project to support environmental training and enforcement in California. The settlement also imposes injunctive terms, including requirements that Quest Diagnostics maintain an environmental compliance program, including hiring a third-party waste auditor, and report annually on its progress.

Quest Diagnostics set a record in April 2009 when it paid $302 million to the government to settle a Medicare fraud case alleging the company sold faulty medical testing kits. It was the largest qui tam (whistleblower) settlement paid by a medical lab for manufacturing and distributing a faulty product.

In May 2011, Quest paid $241 million to the state of California to settle a False Claims Act case that alleged the company had overcharged Medi-Cal, the state’s Medicaid program, and provided illegal kickbacks as incentives for healthcare providers to use Quest labs.

It is also worthy of note that in 2017 Quest Diagnostics Inc. agreed to pay $6 million to resolve a lawsuit by the United States alleging that Berkeley HeartLab Inc., of Alameda, California, violated the False Claims Act by paying kickbacks to physicians and patients to induce the use of Berkeley for blood testing services and by charging for medically unnecessary tests. Quest, which is headquartered in Madison, New Jersey, acquired Berkeley in 2011, and ended the conduct that gave rise to the settlement.

And in 2019 Quest Diagnostics confirmed a third-party billing company has been hit by a data breach affecting 11.9 million patients. The laboratory testing company revealed the data breach in a filing with the Securities and Exchange Commission.

Jeffrey Mazik is the former “Senior Practice Leader for Kaiser’s National Compliance Office” and has over 25 years of experience in fraud control, auditing, and compliance. He was “employed by Kaiser” from 2008 to 2017, joining as an “Information Technology Audit Specialist” in May 2008 and transitioning to the role of “Senior Practice Leader in the Fraud Control Program” in March 2012.

His duties included working with regional compliance leadership to implement compliance and fraud control initiatives, using data analytics to improve compliance and fraud-mitigation initiatives, investigating potential fraud, and developing corrective action plans to address fraud risks.

He has filed federal lawsuit in the United States District Court tor the Eastern District of California against Kaiser Foundation Health Plan, Inc. (“KFHP”), Kaiser Foundation Hospitals (“KF Hospitals”), The Permanente Medical Group, Inc., Southern California Permanente Medical Group, and Colorado Permanente Medical Group, P.C. (“the PMG defendants”). The PMG defendants are groups of physicians that “contract with the other Kaiser entities” to provide medical services Each PMG defendant operates within its individual territory and is funded primarily by reimbursements from its respective regional Kaiser Foundation Health Plan entity.

Defendant KF Hospitals is a nonprofit corporation headquartered in California that operates hospitals and provides facilities for the benefit of the PMG defendants. (Id.) It also receives its funding from defendant KFHP. (Id.) Defendant KFHP is a nonprofit corporation headquartered in California that enrolls members in health plans and provides medical services for its members through contracts with defendant KF Hospitals and the PMG defendants.

On April 2, 2021 Mazik filed his operative first amended complaint under seal on behalf of the United States of America and the states of California, Colorado, Georgia, Hawaiʻi, Maryland, Virginia,, and Washington pursuant to the federal False Claims Act,

He alleges defendants have schemed to defraud the federal government by allowing external, i.e., “non-Kaiser,” healthcare providers to submit false diagnosis codes, which defendants in turn submit to CMS in order to inflate their capitation rates. In particular, defendants intentionally fail to properly use fraud-detection tools to monitor claims errors. Defendants contract with data analytics vendors to review their external provider claims for each region. The vendors provide software applications that perform various types of reviews. For instance, some programs”detect claims that are incorrectly billed . . . [while] other programs identify intentionally manipulated claims that technically fall within plan rules . . . .”

However, he alleges defendants intentionally misused these programs and used them at minimum capacity, such as by disabling key features, in order to reduce the chances of detecting claims errors. In this way, defendants were actively working to avoid detecting and correcting fraudulent claims.

In late 2015, Mazik was tasked with comparing the functionalities offered by two claims analytics vendors, McKesson and Verisk, with which defendants routinely contracted. McKesson offers auditing software called ClaimsXten that detects fraudulent billing practices using “a robust set of rules.” However, defendants chose to deactivate 25 of the 54 rules used by ClaimsXten – “the principal software program that they were supposedly relying on [to] detect such billing fraud.” When a group of employees including Mazik used a Verisk program to double-check data from “the Georgia region” produced by ClaimsXten, the group found $5.3 million in overpayments stemming from defendants’ decision to deactivate nearly half the rules in ClaimsXten. Defendants neither reactivated the disabled rules nor rectified the $5.3 million in overpayments.

When Mizak audited regional office claims from August 2010 through July 2016, he discovered that inflated diagnosis codes caused $209 million in Medicare Advantage overpayments, $181 million in Medi-Cal overpayments and $181 million in other Medicaid programs.Additional allegations similar to the above were made in the lawsuit, and Mazik claims that ultimately he was “stripped of his duties and responsibilities” On January 5, 2017, Mazik was fired.

On July 13, 2022, defendants filed their motion to dismiss Mazik’s First Amended Complaint. In their pending motion, defendants argued that Mazik’s federal FCA claim is barred by the first-to-file rule and the first amended complaint filed by the relator, Dr. James Taylor, in United States ex rel. Taylor v. Kaiser Permanente, No. 21-cv-03894-EMC (N.D. Cal.) (“the Taylor Complaint”). The Court compared the allegations in both cases and concluded that Mazik’s FCA claim was barred by the first-to-file rule except to the extent relator alleges that defendants deliberately tampered with compliance software to ensure that it did not identify erroneous diagnosis codes.

And on February 13, 2024 the Court issued its ruling granting in part and denying in part the Motion to Dismiss. Thus parts of the Mazik case will proceed, and there is additionally the Taylor case proceeding in another California Federal District Court based upon similar allegations.