BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1244


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          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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          |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