Fraud Cleanup Starts Moving; Other Bills Heading to Governor's Desk

"if the goal of the comp system is to provide medically necessary treatment, there needs to be an “objective arbiter” who makes the decision of what is appropriate. And he said he doesn’t believe UR and IMR physicians fall into that category."   Alan Gurvey

A key legislative committee passed a measure intended to close possible loopholes in last year’s fraud-fighting bills while California lawmakers sent to the governor bills addressing apportionment discrimination and the makeup of State Compensation Insurance Fund’s board of directors.

At the same time, an assemblywoman from San Bernardino made further amendments to the bill she introduced in response to complaints from survivors of the Dec. 2, 2015, terrorist attack for lawmakers to debate over the final five days of the 2017 legislative session.

The Senate Committee on Labor and Industrial Relations made short work of AB 1422 and unanimously passed the bill after a six-minute hearing Thursday.

Assemblyman Tom Daly, D-Anaheim, recently amended the bill he introduced in February to close a possible loophole between the mandatory lien stay created by SB 1160 and the lien-consolidation process created by AB 1244.

The stay is in effect from the time charges are filed until a criminal case is resolved. Consolidation kicks in after a provider has been suspended from participating in California’s workers’ compensation system.

Because providers are allowed to appeal a suspension notice, convicted providers have a window during which they can pursue payment on liens that were unfrozen because the case resolved with a conviction, but haven’t been consolidated.

Daly preserved the language intended to close the loophole, saying liens stayed upon the filing of criminal charges shall remain stayed until the lien consolidation process is completed, unless the provider is acquitted or charges are dropped.

But he also added new language to the bill expressly authorizing the DWC to suspend an entity controlled by an individual convicted of fraud. That appears to be in response to a lawsuit filed by Pacific Hospital of Long Beach and its former owner, Michael D. Drobot, arguing that they aren’t covered by the provisions in last year’s bills.

Drobot is asking the Los Angeles County Superior Court to order the DWC to vacate his suspension order on the grounds that the 2016 bills applied to service providers, not hospital executives. Drobot pleaded guilty in February 2014 to one count of conspiracy to defraud a federal health care program, and one count of paying kickbacks to doctors who referred work comp patients to Pacific Hospital.

The hospital, meanwhile, is asking the county court to vacate the DWC order consolidating its liens for the same reason given by Drobot, which is that he was an executive, not a service provider.

For the purposes of the statute authorizing suspensions, as well as the statute requiring the DWC to stay liens filed by accused providers, the bill would declare that an entity is controlled by a person who is an officer or director, or is a shareholder with at least 10% ownership in the entity.

Another point of clarification in the bill would say a person is convicted when a court enters a judgement or issues a guilty verdict or accepts a guilty plea. The definition of conviction in the amended bill would apply "regardless of whether there is an appeal pending or whether the judgment of conviction or other record relating to criminal conduct has been expunged."

Yet another change in the bill would allow employers to ignore medical bills submitted by a provider whose liens have been stayed pending the resolution of criminal charges. And the bill also added language saying the automatic stay doesn’t prevent the Workers’ Compensation Appeals Board from inquiring into, and determining if, a lien was properly stayed.

Daly said during Thursday’s hearing that the amended bill clarifies the intent of the measures passed last year.

Lobbyists for the Association of California Insurance Companies, American Insurance Association and California Association of Joint Powers Authorities said they support the bill.

A lobbyist for the California Medical Association said she reviewed the amendments and had no position on the bill.

Lobbyist Matt Gray, representing the Armenta Law Firm, was the only person to speak in opposition to the bill.

Gray apologized for bringing opposition to the measure so late in the process and acknowledged that it’s “a little late to have substantive changes.” But he said he doesn’t share the author’s opinion that the measure clears up anything from last year’s bills.

“We see the bill as more of a codification of current practice, not necessarily clarifying existing law,” Gray said.

Gray said he believes there are some liens that were improperly stayed and need to be reviewed. He added he hopes to return to the Legislature next year with “more fix-it legislation.”

On Friday, Gray said he has three concerns relating to last year’s bills that he doesn’t think are addressed by Daly’s measure.

First, he said the lien stays and suspensions can hit every doctor in a practice if a single provider is charged or convicted of a crime. And he said the amendments to AB 1422 proposing to set an ownership threshold of 10% doesn’t do anything to address the problem of “guilt by association” with the current practice.

He also said the DWC doesn’t differentiate between what could be called “tainted” and “untainted” liens when deciding which claims to stay. For example, Gray said, if a doctor is accused of improper prescribing practices, there is no reason to assume liens for other services not relating to prescriptions are related to fraudulent activity, but the DWC makes that assumption anyway.

And finally, he said he has some concerns with the declarations required by last year’s bill that were due July 1 for any lien filed between 2013 and the end of 2016. Because July 1 was a Saturday, the division said providers had to file their declarations by 5 p.m. on June 30.

Gray said providers should have had until July 3 to file the declarations. And he said the division has not notified claimants that their liens were dismissed or that their declarations were faulty.

Gray’s client, the Armenta Law Firm, is representing Dr. Eduardo Anguizola, his medical companies and a medical collection firm, in a constitutional challenge to the lien stay provisions that is pending before the U.S. District Court for Central California. U.S. District Court Judge George Wu could issue a decision on whether to grant a temporary injunction while the due process argument is hashed out at the next court hearing on Sept. 28.

In other action last week, lawmakers gave their final approval to an apportionment measure and a pair of bills addressing State Fund’s board of directors.

The Senate voted 25-11 to pass AB 570, by Assemblywoman Lorena Gonzalez Fletcher, D-San Diego, which would prohibit apportionment to pregnancy, childbirth or related conditions.

Gonzalez Fletcher has not amended the bill since the Assembly passed it 31-15 on May 31, and it is now going to the governor’s desk.

Diane Worley, director of policy implementation for the California Applicants' Attorneys Association, said the bill covers "the one issue that is clearly and undeniably related to gender: pregnancy."

Despite the bill being focused only on issues relating to childbirth, the Department of Finance said it is opposed to the measure because it could cost "tens of millions" of dollars each year, as 47% of injured workers are women.

Worley said that analysis doesn't make sense and CAAA hopes the governor sees "these numbers are not supported and signs the bill."

Gonzalez Fletcher introduced measures over the past two years that would have also prohibited apportionment to conditions including osteoporosis and menopause.

The Assembly, meanwhile, gave its final approval to AB 61, by Assemblyman Chris Holden, D-Pasadena. The bill would requires the governor to appoint a small-business owner to the State Fund board of directors.

Holden on Aug. 23 amended the bill to say the appointee must have either five years of experience running a small business or be a State Fund policyholder, as opposed to meeting both qualifications, as proposed in earlier versions of the bill.

The Senate unanimously passed the amended bill Tuesday. The Assembly, which passed the bill 77-0 on May 11, voted 79-0 to concur in the amendments on Thursday.

Finally, Assemblywoman Eloise Reyes, D-San Bernardino, on Thursday amended AB 44 to modify the requirements that would be imposed on employers in the case of a terrorist attack.

Reyes introduced the bill in December as survivors of the Dec. 2, 2015, attack at the Inland Regional Center in San Bernardino were complaining about unfair denial of treatment requests.

As introduced, the measure would have exempted from utilization review and independent medical review treatment requests for victims of a terrorist attack. And the bill would have allowed survivors to collect up to 240 weeks of temporary disability benefits, rather than the 104 weeks that most injured workers receive.

Reyes has since amended the bill to instead require employers to provide advocacy services to help injured workers and treating doctors get treatment requests approved.

On Thursday, Reyes amended the bill to require that employers provide nurse case managers to help terrorist victims “whose injuries arise out of and in the course of employment” to get authorization for “medically necessary treatment, as defined by the Medical Treatment Utilization Schedule.”

Reyes also amended the statement of intent to clarify that survivors of terrorist attacks should be eligible for all treatment that complies with the MTUS and is for an “accepted, diagnosed” physical or mental injury.

Worley, with CAAA, said the amended bill appears to be a restatement of the current laws that give rise to the need for the bill in the first place. She said she knows how important the issue is to Reyes but lamented that "the tight grip on limiting treatment for injured workers can't even seem to be loosened for the most horrific acts."

Alan Gurvey, managing partner of applicants’ firm Rowen, Gurvey & Win, said he was surprised to see how much effort is being put into the wording of a statute that, “if passed, would be seldomly applied.”

He said employer-provided nurse case managers are problematic because in practice, “it simply means that the employer has an ability to dictate what happens in an injured worker’s case.” He said the information nurse case managers can acquire by communicating with injured workers can be used against the interest of the worker.

Gurvey said that if the goal of the comp system is to provide medically necessary treatment, there needs to be an “objective arbiter” who makes the decision of what is appropriate. And he said he doesn’t believe UR and IMR physicians fall into that category.

“In my view, this is all just more of the same,” he said. “It is putting all of the power in the hands of the employer/defendant who can dictate who it is that reviews medical necessity, whether it be through utilization review appointed by the employer/defendant or buy an employer-provided nurse case manager. While the goal may be stated to be to help the victims get reasonable treatment, in reality the bill doesn't seem to address that.”

Lawmakers have until midnight on Friday to finish pass bills, or the measures will be carried over to 2018.

The governor has until Oct. 15 to sign or veto bills, or allow them to become law without his signature.

Published 9/11/2017 on WorkComp Central, Authored by Greg Jones