Premium Fraud and AA Buffet

Fraud in the workers’ compensation system comes in many forms. It can come from employees, medical providers, and even employers. All types of fraud have a detrimental impact not only on those directly impacted by the case but also on the entire system at large. Fraud costs tax payers millions of dollars and can drive insurance premiums for workers’ compensation even higher. As a result, California takes steps to crack down on fraud, including from employers. Workers’ compensation fraud involving employers can mean that the employer is lying about the nature or number of its workers or about the nature of the work performed. In a March 2017 case, an employer pled guilty to charges arising out of workers’ compensation fraud.

The defendant, Chang Tai Lin, was the owner of AA Buffet. In May 2015, the fraud unit began an investigation into the defendant’s business after receiving a tip from the district attorney. The fraud unit began conducting surveillance, obtaining documents from the police department, health department, insurance companies, and other state agencies. In March 2016, a search warrant was executed not only on the AA Buffet but also at the defendant’s home. As a result of the investigation, it was discovered that from April 2010 through April 2016, the defendant had been underreporting the number of employees working at AA Buffet as well as falsely reporting payroll wages, as he actually paid many of his employees in cash. It was also discovered that the defendant had been committing tax evasion from October 2010 through April 2016 because he failed to accurately report employee wages or payroll taxes to the Employment Development Department. After the investigation, the defendant pled guilty to two counts of making a material misrepresentation in order to obtain a workers’ compensation insurance premium as well as one count of willfully failing to file payroll tax returns with intent to evade tax. Employers are required to accurately report the number of employees to their workers’ compensation insurance company. Failure to accurately disclose the workers or the type of work performed by the company can clearly result in harsh penalties, including both fines and jail time, for offending business owners. It is essential that employers understand and live up to their disclosure obligations to their insurance carriers.

Understanding your insurance obligations is essential to making sure you and your business are not running afoul of the law. Call me today at (714) 516-8188 if you wish to  discuss your business’s obligations.

Fraud and People v. Snow

The State of California has taken many steps in recent years and legislative sessions to lessen the amount of fraud perpetrated in the workers’ compensation system. During the fiscal year of 2015-2016, the California Fraud Division reported over 5,300 cases of suspected workers’ compensation fraud and made 249 arrests. Although the vast majority of employees who sustain a work-related injury have valid claims, there are some unfortunate cases when the employee is defrauding his or her employee. When this happens, employees may face criminal prosecution under a variety of legal theories.

In People v. Snow, the employee faced a number of repercussions for her fraudulent behavior. In that case, the defendant worked at Trader Joe’s stocking shelves, gathering shopping carts from the parking lot, customer service, and other similar tasks. The defendant made a claim for workers’ compensation claiming that her wrist hurt and she had sustained injury from repetitive action required in performing her job duties. The defendant’s claim was approved for three months of disability benefits. After the defendant returned to work, she claimed on her first day back to have injured her back while bringing three shopping carts in from the parking lot. Although she was later cleared to return to work, she did not do so, and instead sought treatment from a new doctor, claiming she had pain while doing household tasks such as laundry, dishes, and driving – claims she repeated during a deposition. The supervisory claims adjustor determined the second claim required further investigation and hired a private investigator. The investigator observed her at the beach, lifting a paddleboard from the roof of her SUV and carrying it and the paddle approximately 150 feet to the beach. After paddleboarding for approximately 45 minutes, the defendant returned to shore and carried the paddleboard and paddle back to the SUV and strapped the on the roof herself. Nevertheless, the defendant persisted in telling her doctors she could not lift things over her shoulder or stand for prolonged periods of time, which she repeated during depositions. Ultimately, the defendant was charged with perjury after the video of the defendant at the beach completely undermined her claim of disability. Thereafter, the defendant was charged not only with insurance fraud but also with perjury based on statements made at depositions concerning her second workers’ compensation claim. She was ultimately convicted of two counts of perjury as well as three counts of making false or fraudulent statements to obtain workers’ compensation benefits. Although the defendant then appealed her conviction claiming that this violated her right against double jeopardy as the convictions were based on the same incidents, the court disagreed and affirmed her convictions.

Workers’ compensation fraud is a serious problem and you should take all steps to protect your business. Contact me today at (714) 516-8188 if you wish to discuss fraud and protect your  business.

IMR in 2016

When an employee is injured on the job, he or she will need to get medical treatment to proceed with a workers’ compensation claim. The physician will make an assessment of the injury and decide what type of course of treatment will be best to treat and hopefully cure the injured employee. In some situations, an employer can request an Independent Medical Review of the physician’s diagnosis and treatment plan. When a claim is made for workers’ compensation, the claim must go through a “utilization review” process in order to confirm the treatment is medically necessary before the claim is paid out. If the claim is denied, the employee may request an IMR. If an employer believes the claim should not have been approved, the employer may request an IMR. The purpose of instituting the IMR system was done with an eye toward reducing workers’ compensation disputes and speeding settlement, in order to help ease the congestion in the court. A recent analysis done of IMR volume shows that the process is perhaps not meeting its intended purpose.

The California Workers’ Compensation Institute conducted an analysis of almost half a million IMR decision letters from 2014, 2015, and 2016. These letters were from applications submitted to the state after a utilization review physician’s medical service was modified or denied. In 2016, IMR was at record high levels, with 10,477 more cases in 2016 than in 2015. The IMR analysis showed that in over 90% of cases, the IMR upheld the decision to modify or deny a requested medical service. The types of services did not change much, with prescription drug requests comprising over half of all IMRs, 28.5% of which were for opioids. The rate at which the IMRs upheld the decision made by the utilization review varied from 78.9% for evaluation services to 93.6% for acupuncture. The analysis also found that IMR requests varied widely by geographic region, with Los Angeles County and the Bay area representing a disproportionately large amount of IMR requests vis a vis their percentage of involvement in workers’ compensation medical services across the state. Similarly, areas with low population typically had a disproportionately small amount of IMRs, as did Orange County and San Diego.

If you own your own business, you need an experienced attorney to help you navigate the system. Call us today at (714) 516-8188. I can help you understand your business’s obligations and the claims process.

Psychiatrist Fraud in Workers’ Compensation Cases

The workers’ compensation system is designed to cover a large variety of work-related injuries. These injuries could range in type from a broken finger to repetitive stress injury to psychiatric injury. Unfortunately, some types of injuries are more likely to be a source of a fraudulent claim or unnecessary treatment, such as soft tissue injuries. Psychiatric injuries can also be a source of fraud, both in the case of the injured worker and the psychiatrist.

One red flag for fraud on the part of the psychiatrist is a very short amount of time spent with the patient. A real psychiatric assessment should take no less than a couple of hours. A quick “in and out” could be a red flag that the psychiatrist is simply trying to move the patients through without providing actual care or careful diagnoses

Another red flag could be a lack of using common and accepted diagnostic tools. For example, there are widely used and accepted tests to look for malingering. A psychiatrist in a workers’ compensation case should be on the look-out for malingering, and a failure to attempt or recognize this type of fraudulent behavior on the part of the patient could be a sign of fraudulent behavior on the part of the psychiatrist.

Finally, employers should be on the look-out for the type of assessments and also that a differential diagnosis actually demonstrates a disability. Although a diagnosis of psychiatric injury absolutely can result in temporary or permanent disability, this is not always the case. Employers need to be vigilant for a situation wherein a worker has a psychiatric injury diagnosis that may be long term but still is very high functioning.

California has been cracking down on fraud and taking steps to end fraud both on the part of workers and medical providers. In a recent case, a psychiatrist named Jason Hui-Tek Yang was suspended from participating in the workers’ compensation system after he was convicted for involvement in an insurance fraud conspiracy. The conspiracy involved referring patients for unnecessary treatment in order to bill the workers’ compensation system. It was determined that Yang had over 2,000 active liens worth over $13,000,000.

Fraud in the workers’ compensation system can come in many forms. If you have questions about how to protect your business, call me today at (714) 516-8188. We can discuss your business and what we need to do to make sure you are protected.

Communication versus Information – Maxham vs. Department of Corrections

 

In an overwhelming majority of court cases, the parties settle before ever having to see the inside of a court room. The field of workers’ compensation is no exception. Attorneys for both sides are typically experienced and are skilled in obtaining reasonable settlement agreements. There is a lot of paperwork and material exchanged by the attorneys in an effort to get to a settlement or prepare for trial. In some cases, the parties may agree to use an “Agreed Medical Evaluator” in order to help get to a proper settlement. The AME will examine and evaluate the injured worker and determine the level of disability or impairment. In preparation for this evaluation, the attorneys may also send certain letters to the AME. California Labor Code 4062.3 contains rules about what can and cannot be sent to the AME before the evaluation, including medical records from current and previous treating physicians. The attorney may also provide a letter “outlining the medical determination of the primary treating physician,” and a copy of that letter must also be served on the opposing party at least twenty days before the evaluation. Subsection (d) states that if the opposing party objects within ten days to any non-medical records or “information” that is proposed to be sent to the AME, the information shall not be sent unless a judge approves it. An attorney may communicate with the AME without the approval of the other attorney for purposes such as furnishing records and reports or other “nonsubstantive matters.” The difference between “communication” and “information” is therefore crucial, as communication without the “go ahead” from the opposing side is permissible, whereas passing information is not.

In Maxham v. California Department of Corrections and Rehabilitation, the WCAB was faced with the task of clarifying the difference between communication and information. In that case, the applicant’s attorney provided the employer’s attorney with a copy of the proposed “communication” to the AME, which included factual assertions, citation to case law, and summaries of legal principles. The defendant’s attorney timely objected to the letter and asked for portions to be redacted. The attorney for the employee sent the unredacted letter. The WCAB determined that “information” in these cases constitutes records prepared or maintained by a physician and/or medical and nonmedical relevant records. A communication can become information if it contains, references, or encloses medical or non-medical records that are otherwise “information.”

If you have questions about workers’ compensation, call us today at (714) 516-8188. We will discuss your business and what you can do to make sure you are facing workers’ compensation issues head on.

Teachers and Workers’ Compensation

The workers’ compensation system is designed such that an employee may receive proper compensation for injuries that “aris[e] out of and in the course of employment.”  The whole system is designed around the idea that if an employee is injured because of actions taken on behalf of an employer, the employer should assist in taking care of the cost of the employee’s health care and compensate him or her for temporary or permanent disability arising from such an injury. The real issue can come into play, however, when deciding whether an injury really did arise out of and in the course of employment, as happened for one teacher.

This was precisely the central issue in an unpublished case styled Grawe v. Culver City Unified School District. There, the applicant was a school teacher. She sought a determination that she had sustained an 82% permanent disability due to hypertension and psoriatic arthritis. The AME found that “it was medically probable that applicant developed viral cardiomyopathy as a result of contracting respiratory tract infections because of being exposed to communicable viruses from her students.”  As a result of the repeated virus illnesses, the applicant’s hypertension was triggered and exacerbated. In other words, the applicant claimed because she got so many colds from her students as a teacher, she sustained a permanent disability. Her claim was that but for this repeated exposure, she would not have become permanently disabled, thereby making this a work-related injury entitling her to workers’ compensation benefits for her permanent disability. The court looked to the reasoning from a case called LaTourette v. Workers’ Compensation Appeals Board and Long Beach Community College District. The court there held “When an employee engages in a special activity that is within the course of employment, an injury suffered during the activity . . . also arises out of the employment.”  It was essential that the employee was at an increased risk compared to the general public of that danger. The court in Grawe determined that the teacher was, indeed, at increased personal risk for repeated viral infections because of being exposed to her students. Her claim was, accordingly, upheld.

If you have questions about these new regulations, contact me today at (714) 516-8188. We can review your business and make sure that you are in compliance with the reporting requirements.

Apportionment and Genetic Causation

Despite all of the careful precautions and preparations, work-related injuries are an inevitable part of owning a business. Employers always reduce risks to their employees when possible, but accidents happen. After an employee suffers a work-related injury and files a claim for workers’ compensation, it is possible that the medical documents will reveal the employee has a pre-existing injury or condition that was aggravated by the work-related injury. When this happens, the portion of the disability attributable to the pre-existing condition must be apportioned. Apportionment means that a medical professional will make a determination on how much of the worker’s injury and disability is attributable to the work-related injury and how much is attributable to the pre-existing condition. A recent case before the Workers’ Compensation Appeals Board dealt with the issue of apportionment and genetic conditions.

In City of Jackson v. WCAB (Christopher Rice), a police officer who had served on the force for five years filed a claim, stating that repetitive bending and twisting of his neck while on the job had resulted in an injury, and was the cause of pain to his neck, shoulder, arm, and hand. Medical examinations and x-rays revealed the officer had a degenerative disc disease, cervical radiculopathy, and cervical disc disease. The QME report indicated that genetic issues were a causative factor for this injury, and apportionment was appropriate. The trial judge apportioned 49% of the injury to the officer’s genetic condition, but the WCAB reversed that decision. The court ruled that “finding causation on applicant’s ‘genetics’ opens the door to apportionment of disability to impermissible immutable factors.”  The court found that relying on the QME report for apportionment was inappropriate in this case without specific, identifiable factors. The WCAB’s decision was appealed by the employer and was heard by the Court of Appeals. The Court of Appeals determined there was “no relevant distinction” between allowing apportionment due to non-industrial pathological changes and allowing apportionment due to a degenerative genetic condition. The court accordingly held that apportionment was appropriate in this case, even though it was based on a genetic condition. The court did not address whether certain anti-discrimination statutes prohibited apportionment due to genetic condition, as the issue was not raised in the lower court.

Apportionment is just one of many complicated issues in workers’ compensation Contact us today at (714) 516-8188 to talk about claims facing your business.

Timeliness of IMR

When an employee sustains a work-related injury, a complicated set of procedures is set into motion. An employee must receive treatment, an employer must complete paperwork, take witness statements, and submit a claim to its workers’ compensation insurance provider. While an employee receives medical treatment, his or her expenses for medical appointments, continuing treatment, and prescription medication will be submitted to the workers’ compensation insurance company. The claim will then go through a process called “utilization review,” wherein the insurance company will decide if the course of treatment is medically necessary. If the insurance company decides that the treatment is not necessary, it may modify or even outright deny the request for treatment. In such a case, the employee may then request an Independent Medical Review, or “IMR.”  During an IMR, the employee’s medical file is submitted to an independent medical professional who will then review the file and make a determination whether the utilization review made the right decision as to whether the treatment should be modified or denied.

California Labor Code 4610.6 provides several different time requirements for IMRs. Subdivision (d) provides that for any medical dispute not involving the drug formulary, the IMR must be conducted within thirty days of receipt of the request for review and the supporting documentation. A recent case styled Baker v. Workers’ Compensation Appeals Board, Sierra Pacific Fleet Services, et al. took on the issue of timeliness of IMRs and the impact that the failure to conduct the IMR in accordance with the statute’s timelines could have. In that case, the worker was injured after falling over some tools at work. He injured his knee, neck, and shoulder. His physician prescribed certain medication, but a utilization review recommended they be denied. On March 19, 2014, the worker requested an IMR. The administrative director failed to uphold the denial until July 21, 2014. The worker appealed this determination and the workers’ compensation judge ordered a new IMR. The new IMR again upheld the utilization review. The worker again appealed. The WCJ determined that the IMR determination was untimely under 4610.6, but that did not mean that the IMR was de facto invalid. The higher court agreed, and held that “an untimely IMR determination is valid and binding on the parties.”

The workers’ compensation process can be complicated. If you have a question about your case and the IMR process contact me today at (714) 516-8188.

Rescinding a Workers’ Compensation Policy

Employers in California are required by statute to carry workers’ compensation insurance for all of their employees, with only a few, limited exceptions. Failure to carry insurance can result in severe penalties for an employer, and can easily climb into tens of thousands of dollars. Premiums for this insurance are also costly, however, and some employers attempt to keep that cost down by not being completely honest with the insurance company. Employers have been found to lie about the number of employees, the nature of the business, or the location of the work performed, all in an effort to cut the cost of the insurance premium. If the insurance company then discovers the fraud, it can cancel the insurance policy. In Southern Insurance Co. vs. Workers’ Compensation Appeals Board, EJ Distribution Corp. et al., the issue of rescinding an insurance policy for a trucking company was at issue.

In that case, the workers’ compensation insurance company issued a policy to EJ Distribution Corp. The application for insurance incorrectly indicated that the employees would not travel outside the state of California or  farther than 200 miles from the business. Later that same year, a worker injured his back while in Tennessee and performing work for the employer. The next month, the worker filed for workers’ compensation and the employer filed a claim with the insurance company. In June, the insurance company notified the employer that they would be rescinding the insurance policy based on the material misrepresentation made by the employer in that it failed to state that its employees were actually long-haul truckers. The insurer applied this rescission retroactively, returned the policy premiums paid to that date, and cancelled the policy going forward. The employer and insurer submitted to mandatory arbitration. The arbitrator determined the insurer could not retroactively rescind the policy, based on some ambiguities in the state statutes. The WCAB disagreed. It determined that California’s insurance code does provide for rescission of policies and the law makes no exception for workers’ compensation policies. The court determined that there was evidence that the employer made knowing misrepresentations to the insurer, but there was not a decision about whether the misrepresentations were material, which is required for rescission to be the appropriate remedy. The WCAB sent the matter back to arbitration to make the determination

The workers’ compensation system has many important requirements for employers. Call us today at (714) 516-8188 and let us talk with you about your business and what you need to do to make sure you are in compliance.

Frances Stevens v. Outspoken Enterprises and Home Health Care

Workers’ compensation is designed to and does cover a wide variety of treatment and types of care for workers who have sustained a work-related injury. Workers and providers can apply for payment for treatment associated with the care, and in some cases this will include home health care. Home health care may be required where an employee sustains an especially severe injury. In Frances Stevens vs. Outspoken Enterprises, Inc. (State Compensation Insurance Fund), the issue was whether it was proper for the Administrative Director to deny the plaintiff’s request for home health care based on an Independent Medical Review.

In this case, the plaintiff employee sustained a work-related injury. After being examined by her own physician, the physician recommended and requested home health care services. The employer requested an Independent Medical Review of this determination. The IMR applied the 2009 Medical Treatment Utilization Schedule Chronic Pain Medical Treatment Guideline and denied the plaintiff’s request to have the cost of her home health care covered under worker’s compensation. The court in a May 2017 opinion noted that there was extensive evidence that her need for home health care was “compelling,” and included extensive expert testimony to that effect. The court determined that the Administrative Director was wrong in applying the guideline and sent the case back to the lower court for further determination. The court stated that if the lower court decided the Administrative Director was wrong in denying the home health care after reviewing the available evidence, it may be appropriate to have a new IMR conducted.

The court ultimate determined that the 2009 Medical Treatment Utilization Schedule Chronic Pain Medical Treatment Guideline was not a “medical treatment necessity standard,” but rather was a standard for Medicaid reimbursement, and the decision was outside the Administrative Director’s authority, pursuant to labor code section 5307.27. The court went on to point out that it was contrary to labor code section 4600(h) and California case law. The court held that the guideline should not have been “summarily applied.”  Instead, the request should have been evaluated within the requirements of 4610.5(c)(2) and the MTUS.

 

If you have questions about the workers’ compensation system and whether your business is obligated to cover certain types of care, you should discuss this with an experienced attorney. Call us today at (714) 516-8188 for an appointment to talk about your business.

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