BILL ANALYSIS Ó
SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
Senator Tony Mendoza, Chair
2015 - 2016 Regular
Bill No: AB 1244 Hearing Date: June 29,
2016
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|Author: |Gray |
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|Version: |June 22, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Gideon L. Baum |
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Subject: Workers' compensation: providers: suspension
KEY ISSUE
Should the Legislature require the administrative director of
the Division of Workers' Compensation to suspend a medical
service provider if he or she is convicted of workers'
compensation fraud?
ANALYSIS
Existing law :
1) Establishes a workers' compensation system that provides
benefits to an employee who suffers from an injury or
illness that arises out of and in the course of employment,
irrespective of fault. This system requires all employers
to secure payment of benefits by either securing the
consent of the Department of Industrial Relations to
self-insure or by securing insurance against liability from
an insurance company authorized by the state.
2) Provides that medical, surgical, chiropractic,
acupuncture, and hospital treatment, including nursing,
medicines, medical and surgical supplies, crutches, and
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apparatuses, including orthotic and prosthetic devices and
services, that is reasonably required to cure or relieve
the injured worker from the effects of his or her injury
shall be provided by the employer. (Labor Code §4600)
3) Requires that all employers create a utilization review
process, which is a process that prospectively,
retrospectively, or concurrently review and approve,
modify, delay, or deny, based in whole or in part on
medical necessity to cure and relieve, treatment
recommendations by physicians, prior to, retrospectively,
or concurrent with the provision of medical treatment
services. (Labor Code §4610)
4) Requires the director of the Department of Health Care
Services (DHCS) to suspend any or all payments to a medical
service provider if there is a credible allegation of fraud
against the Medi-Cal system. (Welfare and Institutions Code
§14107.11)
5) Requires the director of DHCS to suspend a provider of
medical services for conviction of any felony or any
misdemeanor involving fraud, abuse of the Medi-Cal program
or any patient, or otherwise substantially related to the
qualifications, functions, or duties of a provider of
medical services.
(Welfare and Institutions Code §14123)
This bill would :
1) Requires the administrative director (AD) of the
Division of Workers' Compensation (DWC) to suspend medical
service providers from participating in any capacity in the
workers' compensation system if any of the following is
applicable:
a) Convicted of a felony;
b) Convicted of a misdemeanor involving fraud or abuse
of the Medi-Cal program, Medicare program, or workers'
compensation system
c) Convicted of a misdemeanor involving fraud or abuse
of any patient, or otherwise substantially related to the
qualifications, functions, or duties of a provider of
service;
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d) Suspended from the federal Medicare or Medicaid
programs due to fraud or abuse; or
e) Lost or surrendered a license, certificate, or
approval to provide health care.
1) Requires the AD to provide written notice to the medical
provider who has been identified as eligible for
suspension. The notice shall give information on how the
medical provider can request a hearing to contest his or
her eligibility for suspension. If the medical provider
does not respond to the notice within 30 days, he or she is
automatically suspended.
2) Require the DWC to hold a hearing on the suspension of a
medical provider within 30 days of a request. Such a
request would stay any suspension of a medical provider.
3) If, during the hearing, the AD finds that the medical
provider is eligible for suspension due to the reasons
listed above, the AD must suspend the medical provider
immediately. Upon suspension, the AD must notify the
relevant licensing, certification, or registration board.
4) Prohibits a provider of medical services, whether an
individual, clinic, group, corporation, or other
association from submitting or pursuing a claim for payment
from a payor, unless the claim for payment has been reduced
to final judgment or the services or supplies are unrelated
to a violation of the laws governing workers' compensation.
5) Require that the director of DHCS notify the
Administrative Director of the DWC if a medical provider is
added to the Suspended or Ineligible Provider List.
COMMENTS
1. A Specter Haunting California: Fraud in the Workers'
Compensation System
In a recent letter to the Commission on Health and Safety and
Workers' Compensation, the Chair of this Committee identified
fraud as a specter haunting the workers' compensation system
and presenting a fundamental challenge to the operation of
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system for all stakeholders. Specifically, the letter cited
the recent press coverage by the Center of Investigative
Reporting which detailed more than $1 billion in fraudulent
activity by a variety of medical providers. Recent enforcement
activities include:
Pacific Hospital and Spinal Implants
According to recent plea agreements, the owners of Pacific
Hospital illegally kicked back money to doctors,
chiropractors, marketers, and others for referring workers'
compensation patients for surgery and other services. In the
case of spinal surgeries, surgeons received $10,000 to $15,000
for each surgery. Between 2008 and 2013, this fraudulent
activity led to $500 million in illegal services being billed
to employers and insurers, as well as $20 to $50 million in
kickbacks resulting from those billed services.
Peyman Heidary and Cary Abramowitz
Seven defendants were indicted at the beginning of this month
for allegedly fraudulently billing nearly $100 million through
a complex running and capping system. Specifically, the
allegation is that a chiropractor effectively took control of
a law firm, illegally paid a firm for referrals of injured
workers, and then referred those injured workers to a series
of medical clinics for unnecessary treatment. Peyman Heidary,
the alleged "Godfather" of the plot, is facing up to 97 years
in prison.
Ronald Grusd and George Reese
In November of last year, eight defendants were indited for a
kickback scheme involving chiropractors and radiology for $25
million in allegedly fraudulent treatment. In this case, the
allegation was that a group of radiology companies paid
kickbacks to chiropractors for referrals of injured workers.
At the time, U.S. Attorney Laura Duffy said "Today's
indictments are only the first wave of charges in what we
believe is rampant corruption on the part of some physicians
and chiropractors in their dealings with the health care
system in general, and California's Workers' Compensation
System in particular."
Despite the charges, medical bills and workers' compensation
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liens from doctors convicted of medical fraud are still being
pursued. For example, Dr. Philip Sobol, who pled guilty in
connection with his involvement with the Pacific Hospital
kickback scheme and is facing up to 10 years in prison, is
still filing workers' compensation liens and seeking payment
for treatment that is likely fraudulent. In theory, these
workers' compensation liens could go towards paying his $5.2
million in restitution due to his fraudulent activities.
Additionally, Dr. Sobol's medical license remains active - the
Medical Board has yet to take adverse action.
2. AB 1244 and Workers' Compensation Fraud:
AB 1244 seeks to combat workers' compensation fraud by
changing the incentives facing medical providers in the
California workers' compensation system. Specifically, AB 1244
seeks to create a suspension process for medical providers who
commit serious crimes or are involved in fraudulent activity
that is modeled after the suspension process for Medi-Cal.
Currently, there is no suspension process for medical
providers in the workers' compensation system beyond removal
from the Qualified Medical Examiner (QME) list.
In a nutshell, AB 1244 would follow the lead of Medi-Cal and
require the suspension of a medical provider if the medical
provider is convicted of a felony, a misdemeanor connected to
fraud, a misdemeanor connected to patient or privilege abuse,
or the medical provider's license is suspended or revoked. AB
1244 then provides a hearing process where the medical
provider can contest the applicability of suspension - such
mistaken identity or a later plea deal that reduces a felony
to a non-eligible misdemeanor. If the medical provider does
not request a hearing, the suspension would take effect within
30 days of notice.
Similar to Medi-Cal, AB 1244 requires that a suspended medical
provider be excluded from the system and denies further
payment for services. In the case of Medi-Cal, however,
existing law allows for a suspension of any and all payments
in the case of a medical provider being charged with
fraudulent activity. AB 1244 instead suspends the provider and
denies further payment after conviction and the completion of
the suspension process, unless the suspension is for non-fraud
related reasons or payment was already provided.
Finally, AB 1244 requires DHCS to communicate with DIR when a
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medical provider is added to the Medi-Cal Suspended or
Ineligible Provider List. Depending on the reasons for a
medical provider being added to the Medi-Cal list, this may
trigger a suspension process by the DWC as well.
3. Staff Comments:
AB 1244 and Notice Requirements
Under AB 1244, the notice for the suspension hearing is sent
by the AD, but then requires the Department of Industrial
Relations to hold the suspension hearing, rather than the
Division of Workers' Compensation, which is under the AD's
authority. The author may wish to strike the references to
"department" and replace them with "division" in Section
139.21(b)(2).
Suspension of Payment
As was noted above, Medi-Cal allows for the suspension of
payment if a medical provider is charged with committing
fraud. The author may want to consider a similar provision,
with the requirement that the DWC consolidate and suspend all
liens from the indicted medical provider. If the medical
provider is eventually cleared of all charges, he or she could
continue to pursue his or her claims. If he or she is
eventually convicted of fraud, such a consolidation would
lower barriers and reduce frictional costs in the dismissal of
the liens.
4. Proponent Arguments :
Proponents cite the recent Center for Investigative Reporting
articles which detailed significant fraud throughout the
system amounting to at least $1 billion in potentially
fraudulent charges. Proponents argue that the outrageous
billing and treatment practices endanger injured workers and
lead to significant costs on the part of employers. Moreover,
proponents note that many of these medical providers would
have been removed or suspended by other medical treatment
systems similar to the workers' compensation system.
Proponents argue that, in order to protect injured workers and
ensure that employers are only billed for appropriate medical
services, it is necessary to adopt similar medical provider
suspension policies as are found in Medi-Cal.
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5. Opponent Arguments :
None on file.
6. Prior Legislation :
SB 863 (DeLeon), Chapter 363, Statutes of 2012, eliminates the
"spinal pass-through", or the double payment of spinal
hardware for spine surgery.
SUPPORT
Association of California Insurance Companies
California Chamber of Commerce
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Professional Firefighters
California State Association of Counties
California Teamsters Public Affairs Council
Engineers & scientists of CA, IFPTE Local 20, AFL-CIO
International Longshore & Warehouse Union
Professional & Technical Engineers, IFPTE Local 21, AFL-CIO
UNITE-HERE, AFL-CIO
Utility Workers Union of America, AFL-CIO
OPPOSITION
None received.
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