BILL ANALYSIS Ó
AB 1244
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB
1244 (Gray and Daly)
As Amended August 19, 2016
Majority vote
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|ASSEMBLY: | |(January 28, |SENATE: |39-0 |(August 23, |
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(vote not relevant)
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|COMMITTEE VOTE: |12-0 |(August 25, |RECOMMENDATION: |concur |
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(INS.)
Original Committee Reference: W., P. & W.
SUMMARY: Requires the Administrative Director (AD) of the
Division of Workers' Compensation (DWC) to suspend a medical
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service provider if he or she is convicted of workers'
compensation fraud.
The Senate amendments delete the contents of the bill as passed
by the Assembly, and instead:
1)Require the administrative director AD to suspend medical
service providers from participating in any capacity in the
workers' compensation system if any of the following applies
to the provider:
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;
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)Require 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)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.
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4)Provide that if 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)Prohibit a suspended 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)Require that the director of Department of Health Care
Services (DHCS) notify the AD if a medical provider is added
to the Suspended or Ineligible Provider List.
7)Limit reimbursement for legal fees unless an attorney has
filed the appropriate disclosures prior to representing an
injured worker.
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.
2)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.
3)Provides that medical, surgical, chiropractic, acupuncture,
and hospital treatment, including nursing, medicines, medical
and surgical supplies, crutches, and apparatuses, including
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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.
4)Requires that all employers create a utilization review
process, which is the only method to prospectively,
retrospectively, or concurrently review and modify, delay, or
deny, based in whole or in part on medical necessity to cure
and relieve, treatment recommendations by physicians.
5)Requires the director of 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.
6)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.
7)FISCAL EFFECT: DIR estimates the annual costs of this bill to
be $1.5 million (special funds). The provisions relating to
suspending doctors from the workers compensation system would
require additional staff to a) review whether providers should
be removed from the system, and b) handle any due process
issues, at a cost of $373,000 annually. The provisions
requiring filing for attorney disclosure forms at each local
office would require additional staffing in each office to
handle the filing, at a cost of $1.1 million annually.
COMMENTS:
1)Purpose. This bill seeks to combat workers' compensation
fraud by changing the incentives facing medical providers in
the California workers' compensation system. Specifically,
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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, this bill 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.
This bill 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, this bill 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. This bill 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, this bill 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.
2)Examples of fraud addressed by the bill. Recent enforcement
activities include:
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a) 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.
b) 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.
c) Ronald Grusd and George Reese
In November of last year, eight defendants were indicted
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
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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.
Analysis Prepared by:
Mark Rakich / INS. / (916) 319-2086 FN: 0004952