BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1244|
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THIRD READING
Bill No: AB 1244
Author: Gray (D) and Daly (D)
Amended: 8/15/16 in Senate
Vote: 21
SENATE LABOR & IND. REL. COMMITTEE: 5-0, 6/29/16
AYES: Mendoza, Stone, Jackson, Leno, Mitchell
SENATE APPROPRIATIONS COMMITTEE: 5-0, 8/11/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NO VOTE RECORDED: Bates, Nielsen
ASSEMBLY FLOOR: 78-0, 1/28/16 - See last page for vote
SUBJECT: Workers compensation: providers: suspension: fees
and expenses
SOURCE: Author
DIGEST: This bill requires 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
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secure payment of benefits by either securing the consent of
the Department of Industrial Relations (DIR) 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 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:
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'
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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;
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.
2)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.
3)Requires 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.
4)Provides that 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.
5)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.
6)Requires that the director of DHCS notify the AD of the DWC if
a medical provider is added to the Suspended or Ineligible
Provider List.
7)Limits reimbursement for legal fees unless an attorney has
filed the appropriate disclosures prior to representing an
injured worker.
Comments
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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 the Senate Labor and
Industrial Relations Committee identified fraud as a specter
haunting the workers' compensation system and presenting a
fundamental challenge to the operation of 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
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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
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.
1)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, this
bill 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
list.
In a nutshell, AB 1244 follows the lead of Medi-Cal and
requires 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
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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
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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Senate Appropriations Committee, DIR estimates
the annual costs of this bill to be $1.5 million (special
funds).
SUPPORT: (Verified8/12/16)
American Insurance Association
Association of California Insurance Companies
California Association of Highway Patrolmen
California Chamber of Commerce
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Labor Federation
California Professional Firefighters
California State Association of Counties
California Teamsters Public Affairs Council
Engineers & Scientists of California, IFPTE Local 20, AFL-CIO
International Longshore & Warehouse Union
Los Angeles County Professional Peace Officers Association
Medical Board of California
Organization of SMUD Employees
Professional & Technical Engineers, IFPTE Local 21, AFL-CIO
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San Luis Obispo County Employees Association
UNITE-HERE, AFL-CIO
Utility Workers Union of America, AFL-CIO
OPPOSITION: (Verified8/12/16)
California Neurological Society
California Society for Industrial Medicine and Surgery
California Society of Physical Medicine and Rehabilitation
ARGUMENTS IN SUPPORT: 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.
ARGUMENTS IN OPPOSITION: The opponents, while noting their
opposition to provider fraud, argue that AB 1244 is overly
broad. Specifically, the opponents note that the prohibition on
providers being paid after conviction of fraud is excessive
broad. Opponents argue that it is possible that someone could be
convicted of fraudulent activity and still have legitimate liens
or medical bills in the system. Therefore, the opponents request
amendments to narrow the scope and prohibition of this bill to
allow providers convicted of fraud to continue to be able to
collect on their liens and medical bills.
ASSEMBLY FLOOR: 78-0, 1/28/16
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
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Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez,
Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Mathis
Prepared by:Gideon L. Baum / L. & I.R. / (916) 651-1556
8/15/16 20:10:03
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