BILL ANALYSIS Ó AB 1244 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1244 (Gray and Daly) As Amended August 19, 2016 Majority vote -------------------------------------------------------------------- |ASSEMBLY: | |(January 28, |SENATE: |39-0 |(August 23, | | | |2016) | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- (vote not relevant) ---------------------------------------------------------------------- | | | | | | | | | | | | |COMMITTEE VOTE: |12-0 |(August 25, |RECOMMENDATION: |concur | | | |2016) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ---------------------------------------------------------------------- (INS.) Original Committee Reference: W., P. & W. SUMMARY: Requires the Administrative Director (AD) of the Division of Workers' Compensation (DWC) to suspend a medical AB 1244 Page 2 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. AB 1244 Page 3 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 AB 1244 Page 4 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, AB 1244 Page 5 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: AB 1244 Page 6 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 AB 1244 Page 7 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