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On Friday, September 30^th 2016, California Governor Jerry Brown signed SB 1160 (Mendoza) and AB 1244 (Gray and Daly) into law which address two critical issues in workers’ compensation.   One is the issue of treatment delays for injured workers, and the other is provider fraud and illegitimate liens filed by criminally indicted or accused defendants filed against by prosecutors or already convicted. 

The California Department of Industrial Relations (DIR) and its Division of Workers’ Compensation (DWC) announced recently that between 2011 and 2015, 600 million dollars in liens were filed for treatment of injured workers by providers who had been convicted of crimes or were under criminal prosecution. 

For example, on June 19^th 2014, Landmark Medical Management, its CEO Kareem Ahmed and other defendants that included medical doctors and chiropractors, were indicted for an alleged 200 million dollars in workers’ compensation fraud.  The Orange County District Attorney in a filed felony complaint dated May 20^th 2016, asserted that between June 27, 2015 and December 31, 2015, Kareem Ahmed paid $800,000 in lien activation or filing fees. 

The filing fees were paid by Ahmed in order to engage in collection of over fifty-eight million dollars in false workers’ compensation claims generated based on kick-backs to medical providers.

Kareem Ahmed in the court room of the Honorable Thomas Goethals in Orange County Superior Court on September 12th 2014.  photo by Lonce LaMon, all rights reserved

Now with SB 1160, provider liens will be stayed upon the filing of criminal charges.   These stays will be automatic.  If the medical provider is cleared of all charges, the liens will be adjudicated in the same way as other liens, without prejudice.

SB 1160 also explicitly prohibits any assigning or factoring of a lien on or after January 1, 2017, unless the medical provider is no longer in business in the capacity in which they filed the lien.  For liens assigned between 2013 and 2016, SB 1160 codifies the recent appellate court decision, Chorn vs. Workers’ Compensation Appeals Board (2016) 245 Cal. Appl 4^th 1370, which found that restrictions on lien assignments were constitutional and that the effect of Labor Code Section 4903.8 (I.E., SB 863) is to prohibit the Workers’ Compensation Appeals Board from ordering or awarding lien payments to anyone other than the medical provider who incurred the expense.  Proponents argue that the bill effectively combats scenarios by which lien assignments are used to drive fraud.   Opponents of the bill argue that the automatic stay provisions would be subject to legal challenge based on due process issues and would unfairly punish providers who are fighting criminal charges for otherwise valid liens.

AB 1244 requires the Division of Workers’ Compensation Administrative Director to suspend any medical provider, physician, or practitioner from participating in the workers’ compensation system when convicted of fraud. 

“These new laws will protect injured workers and employers from continued abuse by suspending providers convicted of fraud from participating in the workers’ compensation system and by staying liens filed by indicted parties,” said the division’s Acting Administrative Director George Parisotto.

Christine Baker, Director of the California Department of Industrial Relations, is shown above getting some Mickey Mouse ears put on her head by Disney workers' compensation manager, John Riggs, at a Disney theater in Anaheim in May of 2012.  photo by Lonce LaMon, all rights reserved 

Beginning January 1, 2017 lien filers will be required to file a declaration affirming eligibility under penalty of perjury.  Liens filed without the declaration will be dismissed.  The Division of Workers’ Compensation will modify the EAMS system—which requires lien filers to pay a fee—to disallow any liens not meeting requirements. 

SB 1160 reduces most utilization review in the first 30 days following a work-related injury.  It also mandates electronic reporting of utilization review data by claims administrators to the Division of Workers’ Compensation, which will enable the division to monitor claim processes and address problems.

“Expedited and appropriate treatment in the critical first month of injury encourages the best outcome for injured workers and employers,” said Christine Baker, Director of the Department of Industrial Relations (DIR).  “In reforming the utilization review process used to contest care to injured workers and tightening controls on fraud, these new laws further the treatment and savings goals initiated by the Governor and the Legislature in 2012.”

By journalist Lonce LaMon, lonce@adjustercom.com, in conjunction with contributing information from the news release dated Friday, September 30^th 2016 by the California Department of Industrial Relations.