BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1244| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1244 Author: Gray (D) and Daly (D), et al. Amended: 8/19/16 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 SOURCE: Author DIGEST: This bill requires the administrative director of the Division of Workers Compensation to suspend a physician, practitioner, or provider from providing care or services in the workers' compensation system if he or she is convicted of workers' compensation fraud. This bill also provides a process for the dismissal of the convicted physician, practitioner, or provider's liens. Senate Floor Amendments of 8/19/16 clarify lien suspension process for physicians, practitioners, and providers convicted of fraud and add coauthors. ANALYSIS: AB 1244 Page 2 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 (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 a physician, AB 1244 Page 3 practitioner, or provider from participating in a professional capacity in the workers' compensation system if any of the following is applicable: a) Convicted of a felony or a misdemeanor a felony or misdemeanor and that crime comes within any of the following descriptions: (i) It involves fraud or abuse of the Medi-Cal program, Medicare program, or workers' compensation system, or fraud or abuse of any patient, or patient. (ii) It relates to the conduct of the individual's medical practice as it pertains to patient care. (iii) It is a financial crime that relates to the Medi-Cal program, Medicare program, or workers' compensation system. (iv) It is otherwise substantially related to the qualifications, functions, or duties of a provider of services. b) Suspended from the federal Medicare or Medicaid programs due to fraud or abuse; or c) 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)Creates a process for the consolidation and dismissal of liens for specified convicted physicians, practitioners and AB 1244 Page 4 providers. 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 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, AB 1244 Page 5 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 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 AB 1244 Page 6 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 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: (Verified8/19/16) American Insurance Association Association of California Insurance Companies California Association of Highway Patrolmen California Chamber of Commerce AB 1244 Page 7 California Coalition on Workers' Compensation 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 San Luis Obispo County Employees Association Service Employees International Union State Building and Construction Trades Council UNITE-HERE, AFL-CIO Utility Workers Union of America, AFL-CIO OPPOSITION: (Verified8/19/16) 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 AB 1244 Page 8 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 excessively 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 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 8/22/16 22:58:08 **** END ****