A One-Two Punch: WCAB Enables Carriers to Pause Collection Efforts for Fraudulent Bills and to Investigate Fraudulent Billing Practices

Published Jul 26, 2021

A recent decision by the Workers Compensation Appeals Board makes it easier for carriers to combat fraud by consolidating a suspected fraudulent providers’ lien, halting their efforts to collect on suspect bills, and investigating the suspected wrongdoing. The opinion holds that lien consolidation orders are not “final” and allows carriers to take discovery to uncover fraud. (Doreen Erhahon v. Kaiser Foundation Hospital, 2021 Cal. Wrk. Comp. P.D. LEXIS 150).

In Erhahon, Defendant Kaiser Foundation Hospital asked the WCAB to consolidate discovery in 57 cases into 42 lien claims held by copyservice vendor Med-Legal, LLC. Over Med-Legal’s objection, the WCAB granted Kaiser’s request and stayed Med-Legal’s collection efforts on the liens at issue so that Kaiser could conduct discovery on the propriety of Med-Legal’s bills. Med-Legal sought reconsideration on due process grounds. It also sought removal, arguing that staying its collection attempts would irreparably harm its business.

The WCAB denied reconsideration, which is only proper as to a final order, decision, or award, i.e. one that determines a party’s substantive rights or liabilities. The Board noted that Med-Legal’s substantive rights and Kaiser’s potential liabilities were “undisturbed” since the consolidation order did not address the lien’s merits. The WCAB thus affirmed consolidation noting that such orders are generally “interlocutory procedural orders i.e., not final orders.”

As for Med-Legal’s requested “extraordinary remedy” of removal, the WCAB did not find substantial prejudice or irreparable harm. Removal would only be appropriate if the consolidation order caused a business stoppage and dispensed with Med-Legal’s right to recovery. However, Med-Legal’s allegations were not only untrue, but “border[ed] on misrepresentation.” According to the WCAB, Med-Legal had ample opportunity to be heard after Kaiser petitioned for consolidation but had not presented any evidence to support its assertion that a stay on 42 liens would sufficiently interfere with its business interests.

This decision gives carriers an effective tool to expose and thus deter service providers’ fraudulent billing. A lien-consolidation order can deliver a potent one-two punch by simultaneously staying providers’ efforts to collect on fraudulent bills and allowing discovery into their underlying practices.

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