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Provider fraud cases continue to generate big headlines in California workers’ comp.

Last week the Orange County DA refiled charges against Dr. Kareem Ahmed and a number of other prominent Southern California physicians regarding an alleged fraudulent billing and kickback scheme.

Today on Workcompcentral.com is a featured article noting a Riverside County indictment of Peyman Heidary, D.C. and a group of doctors and chiropractors as well as an attorney.

Here are some phrases lifted from the article’s report on the Heidary indictment:

– “a web of health clinics, law firms and joint bank accounts”…..

– “medical mill”

– “funneled patients to clinics”

– “unnecessary treatment”

– “patients bought for $100, shuffled from law firm to health clinic, and subjected to a standardized litany of tests, regardless of their ailment”

– “underwent similar tests regardless of their injuries”

– “bundled all outstanding bills and sold them to third party collection agencies or medical factoring firms”

This sort of abuse has become an increasing concern within the industry.

It’s not only the money. It’s the sense that workers are being harmed. And that the system has been hijacked by profiteers.

Public interest journalists now see it that way too.

Provider profiteering been lamented and noted with concern by some of the more ethical attorneys at CAAA planning meetings. In a panel presentation earlier this year at the CWCI conference, I noted some practical steps that might be looked at to tighten things up to make it more difficult for rogue providers to game the system. San Diego applicant attorney John Don has been a prominent voice noting abuses.

And the legislature is paying attention.

First came a May 2, 2016 letter to the Joint Legislative Audit Committee by Tom Daly, Chair of the Assembly Insurance Committee (see link to the letter at end of this post). Daly requested an audit of the system of preventing, detecting and prosecuting fraud in California’s workers’ comp system. His request focused on evaluating how the various anti-fraud efforts (including the Department of Insurance, the DWC and the Fraud Assessment Commission) were performing individually and collectively and how other health care systems prevent, detect and prosecute fraud. He also requested the study to “identify practices that, while not fraudulent, result in the wasteful or abusive provision of services to injured workers”.

But Daly withdrew the audit request before a vote of the Legislative Audit Committee was taken. Workcompcentral noted that sources told it that the Governor’s office opposed the audit.

Less than a week later State Senator Tony Mendoza jumped into the fray. On May 31, Mendoza issued a letter requesting CHSWC (the Commission on Health and Safety and Workers’ Compensation) “conduct a joint review with the Department of Industrial Relations of existing anti-fraud efforts in the California workers’ compensation system”.

The questions raised in Mendoza’s letter (see link below) was similar in many respects to the questions outlined by Daly. A large focus of the questions is on how effective the DIR and California DOI are in combating fraud, and what steps can improve performance. “Stakeholder fraud” was the focus, so it was not limited to medical provider fraud.

But also on May 31 came a letter from David Lanier, Secretary of California’s Labor & Workforce Development Agency, addressed to Christine Baker at the DIR (see link to the letter below). Lanier requests a working group be established “to chart the next steps in fraud prevention” and to propose a set of policy recommendations. Lanier outlined an extensive list of what he termed “potential fraud and abuse”. Lanier’s letter did not specifically request study of the effectiveness of the current DIR and DOI anti-fraud efforts.

The working group is to prepare a report to the Governor and Legislature by spring 2017.

Invitations to stakeholders then followed.

I’ve had a chance to chat with a number of prominent stakeholder folks about all of this. While most recognize that there are problems with rogue providers in the system, there seem to be varying levels of concern about how the working group will be formed and managed. Some received invitations to a June 17 meeting but others to a meeting on a different day, so it was not clear to some groups whether there would be different sets of meetings.

Information has not been posted yet as to who was invited. So, for instance, it is not clear if multiple insurance carrier representatives were invited but only one or two injured worker groups. If a stakeholder group feels underrepresented can they bring in another rep such as a staff consultant? This is an issue that has come up before at RAND study focus group meetings.

Some feel that the focus should not be solely on provider fraud, but should also look at fraud or abuse by employers, claims administrators, and UR providers. While those are important issues, they do not seem to be the focus of the Lanier request, though would be in the Daly and Mendoza requests. But it should be pointed out that in addition to medical provider, supplier, interpreter and capper/steering fraud, the DIR invitation letter lists “fraud by employers who are either uninsured or underinsured” and also lists “other”.

Some wonder whether the DIR or CHSWC should or will contract with an outside research group to do the report in collaboration with stakeholder input. Will DIR staff working on this be accessible?

How much input will be sought from county prosecutors who are actually assessing the intricacies of fraud networks and the difficulties of bringing the cases to trial?

Others wonder how CHSWC will respond to the request by Senator Mendoza. Will the working group look at the anti-fraud performance of the DIR and DOI as requested by Assemblyman Daly and Senator Mendoza? If not, what becomes of Mendoza’s request?

Some wondered whether this working group is sort of like the 2012 “listening tour” undertaken by the DIR, which took place while the real action was by a small stakeholder groups holding some secret meetings to formulate a round of legislative action.

Transparency is a comment that keeps coming up among the stakeholders I talk to.

And on a micro level, a few have already noted that there are problems with some of the specific areas of potential fraud or abuse outlined by Lanier. For example, Lanier lists “treating physicians writing medical-legal reports to challenge utilization review denials (no longer a medical-legal expense)”, whereas Labor Code 4610.5(f)(3)(A)-(C) arguably may allow such reports.

Some of these questions about the scope and structure of the working group will be quickly answered after the first meeting.

The working group could be a real opportunity for a wide group of stakeholders to work together to solve problems which hurt injured workers. That’s my hope, at least.

Here is the audit request from Tom Daly:

WorkersCompTomDalyLetter(5.2.16)

Here is the Tony Mendoza request for a CHSWC study:

WorkersCompTonyMendozaLetter(5.31.16)

The letter by David Lanier calling for a fraud working group is here:

WorkersCompDavidLanierLetter(5.31.16)

Stay tuned.

Julius Young