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The California Department of Industrial Relations (DIR) announced on Wednesday, January 18^th 2017, that it has stayed 200,000 liens within the workers’ compensation system before the Workers’ Compensation Appeals Board.  The total face value of these liens exceeds one billion dollars.  They are associated with 75 medical providers facing criminal fraud charges.

This stay of liens to the tune of one billion U.S. dollars has happened as a consequence of a new law that became effective January 1, 2017.  Now SB 1160 (Mendoza) requires the Department of Industrial Relations to automatically stay liens owned by providers who have been indicted or charged with crimes until the disposition of their criminal proceedings. And only if they are exonerated will their liens be reactivated.  

The DIR also filed Wednesday a report on its full past year anti-fraud efforts, which include employer premium fraud as well as medical provider fraud.  Now with a second bill that came into effect January 1^st 2017, AB 1244, the Division of Workers’ Compensation (DWC) Administrative Director is required to suspend any medical provider, physician or practitioner from participating in the workers’ compensation system when convicted of fraud.  DWC has adopted provider suspension regulations and is now issuing notice of suspension to convicted providers.

“Over the past year, we have worked to prohibit criminal and indicted providers from lining their pockets through liens,” said California Department of Industrial Relations Director, Christine Baker.  “Removing fraudulent providers and their lien claims from the workers’ compensation system will further improve services to injured workers and ultimately reduce costs in the system.”

Mentioned in the DIR report, is the issue of non-medical executive business owners owning and operating medical businesses, and then misrepresenting services through “upcoding” to maximize payments.  One example is of Regional Medical Services in Anaheim, whose owners were charged with 56 counts of insurance fraud by the Orange County District Attorney’s office in July of 2016. 

Jeffrey Campau and Landon Mirallegro, owners of Regional Medical Services, as non-medical professionals, provided MRI services as simply a technical service with no medical personnel on site at the facility.  They then took the images and vended them out to radiologists as outside independent contractors, and had the vendor radiologists read the images and write reports.   In billing for the services, the bills had the complete appearance of a professional medical corporation with reporting radiologists on staff supervising and directing the work.  In this manner, Campau and Mirallegro were able to “upcode” the work, charging for the supervision and services of a radiologist directing MRIs rather than coding for simply a technical service.  The code value for just the technical part is significantly less. 

Deputy District Attorney Shaddi Kamiabipour, right, leaves the Orange County Superior Court after court proceedings against Jeffrey Campau and Landon Mirallegro on December 2, 2016.  She is prosecuting this case with her court partner, Deputy District Attorney Debbie Jackson, left.  photo copyright Lonce LaMon, all rights reserved 

Deputy District Attorney Shaddi Kamiabipour, the prosecutor from the Orange County DA’s office on this case, had a real challenge in court arguments in early December of 2016 convincing defense attorney, Paul Meyer, for Jeffrey Campau, that his client’s “receivables” had no value.   Paul kept insisting that the receivables had to eventually be dealt with and that they factored into the assets of the company.  But Shaddi kept explaining in open court that their zero value factor had to do with two things:  first, MRIs billed by a non-medical-professional corporation cannot be globally billed and if they are, they are fraudulent and don’t have to be paid, and two, all the liens (what Paul Meyer was referring to as the receivables) were going to be stayed come January 1^st 2017.  Thus, they would have a zero value pending the outcome of the case. 

Shaddi had a frustrating time trying to convince defense attorney Paul Meyer that the “receivables” were completely worthless and could not in any way be used as credit towards restitution.  Meyer never got it and remains in denial.  Shaddi agonized to explain but the defense attorneys’ minds were brick walls.  

Jeffrey Campau and Landon Mirallegro, who are not only the owners of Regional but of Aspen Medical Resources along with another owner, Abraham Khorshad (represented by Benjamin Gluck), are working ostensibly arduously to reimburse with appropriate restitution all of the workers’ compensation claims payer victims.  What their defense counsel are running up against is the confusing reality (to them) that withdrawing their “receivables” as restitution to the claims payer victims is not going to work as even a penny of restitution.  It would be like paying back on one theft with a theft from another.

The amount of liens owned by Campau and Mirallegro in the workers’ compensation system as of last early December 2016, on Regional Medical Services, was seventeen million dollars.

The California Department of Industrial Relations and Department of Insurance convened working groups last June to gather stakeholder input and evidence of fraudulent activity.  At the direction of the Secretary of the California Labor and Workforce Development Agency, DIR prepared a report on further recommendations to the Governor and the Legislature.

DIR’s ongoing work to combat workers’ compensation fraud includes the creation of an Anti-Fraud Support Unit to share and track data from system participants.  The department contracted with the RAND Corporation for an independent evaluation and recommendations, including a review of fraud detection in other federal and state health care programs.  The study, currently in peer review, is slated for release this spring. 

lonce@adjustercom.com; copyright by Lonce Lamonte and adjustercom.  All rights reserved.  For permission to republish in part or whole contact lonce@adjustercom.com for associated fees, terms and conditions.