Continuing the legislative endeavor to excise fraudulent medical and medical-legal services from the Workers’ Compensation System, Governor Jerry Brown signed Senate Bill 1160 and Assembly Bill 1244 on September 30, 2016, to take effect January 1, 2017. The most notable changes introduced by these bills are the procedures for suspension of medical and medical-legal service providers from the Workers’ Compensation System, and for the stay and potential dismissal of all liens owned by such providers. Providers, including individual doctors, or associations such as agencies, clinics, or corporations, may now be subjected to automatic suspension from participation in the Workers’ Compensation System upon being charged or indicted with criminal or fraudulent conduct related to their services.
The state legislature determined that employers and insurers are routinely pressured to settle liens with medical and medical-legal service providers, even after the provider is charged with fraud. This is partially attributable to a failure to document the system’s databases with information regarding the criminal charges and suspensions. As a consequence, lien claims continue to be processed during the pendency of criminal proceedings against the providers whom own those liens, and can result in additional funding to these providers for services that were connected to fraudulent activity. To bring an end to these monetary rewards for fraudulent providers, AB 1244 and SB 1160 intend to guarantee the automatic suspension of providers from the Workers’ Compensation System upon the provider being charged with any felony or misdemeanor involving abuse of a patient, or medical fraud, including fraud on the federal Medi-Cal, Medi-Care, or state Workers’ Compensation Systems. The bills additionally increase the level of scrutiny applied during processing and adjudication of all liens owned by a provider who has been charged with criminal fraud, or otherwise suspended from the Workers’ Compensation System.
AUTOMATIC SUSPENSION FROM THE WORKERS’ COMPENSATION SYSTEM FOR CRIMINAL AND FRAUDULENT CONDUCT
Existing law requires that the Secretary of the United States Department of Health and Human Services notify the California Director of Health Care Services when a medical provider is suspended from the federal Medicare or Medicaid programs, and also requires that the Director of Health Care Services must suspend that provider from the state Medi-Cal program. AB 1244 extends this notification process to the Workers’ Compensation System by requiring that the Director of Health Care Services notify the Workers’ Compensation Administrative Director of the suspensions, and also requiring the Administrative Director to thereafter suspend the providers from the Workers’ Compensation System as well.
Beginning January 1, 2017, the Workers’ Compensation Administrative Director is required to suspend any medical or medical-legal service provider from the Workers’ Compensation System if they’ve either (1) been suspended from the Medi-Cal or Medicare programs due to fraud or abuse; (2) surrendered their license, certificate, or approval to provide healthcare, or had them revoked; of (3) been convicted of a felony or misdemeanor which:
- Involves fraud or abuse of the Medi-Cal program;
- Involves fraud or abuse of the Medicare program;
- Involves fraud or abuse of the Workers’ Compensation System;
- Involves fraud or abuse of a patient;
- Relates to the conduct of the individual’s medical practice as it pertains to patient care;
- Is a financial crime that relates to the Medi-Cal program, Medicare program, or Workers’ Compensation System;
- Is otherwise substantially related to the qualifications, functions, or duties of a provider of services.
The Administrative Director will be responsible for updating the Division website regarding the names of suspended providers.
A PROVIDER’S RIGHT TO NOTICE AND HEARING PRIOR TO SUSPENSION FROM THE WORKERS’ COMPENSATION SYSTEM
The newly added language of AB 1244 requires the Administrative Director to notify the provider of the pending suspension and allow the provider 10 days to request a hearing, prior to issuing the suspension. If a hearing is not requested then the Administrative Director will suspend the provider thirty days after the notice was given. If a hearing is requested by the provider, the suspension is stayed and the Administrative Director must set a hearing and come to a final determination within 30 days of the provider’s request for hearing.
Following a suspension, the Administrative Director is responsible for updating the Workers’ Compensation qualified medical examiner and medical provider network databases by removing the suspended provider’s name. The Administrative Director will also provide notice of the suspension to the public at large via the Department’s website, as well as written notice to the Workers’ Compensation Chief Judge, and to the provider’s relevant state licensing, certifying, or registering authority.
THE FINAL DISPOSITION OF LIENS FOLLOWING SUSPENSION FOR CRIMINAL CHARGES OF FRAUD
A provider who is charged with criminal fraudulent conduct automatically has all medical or medical-legal service liens stayed, and they remain stayed until the final disposition of the criminal case is issued. The final disposition may order the dismissal of the provider’s liens with prejudice. If there is no final disposition directing dismissal, then all liens filed by the provider throughout the State will be consolidated and adjudicated by the special lien process as discussed below. The special lien process is subject to the same laws and procedures as all other matters before the Workers’ Compensation Appeals Board.
THE SPECIAL LIEN PROCESS FOLLOWING SUSPENSION OF A LIEN CLAIMANT WITHOUT A FINAL DISPOSITION FROM A CRIMINAL CASE
There are two circumstances in which the liens of a suspended provider are handled by the special lien process: (1) the suspension was for a reason other than criminal charges, or (2) the final determination of a criminal case did not direct the Appeals Board to dismiss the provider’s liens. For both, the Chief Judge for the Workers’ Compensation System must appoint an attorney to identify all outstanding liens owned by the provider and appoint them to an appropriate district to be handled by the special lien process. Under the special liens process, the burden of proof shifts to the suspended provider-lien-claimant to overcome a rebuttable presumption by a preponderance of the evidence. The provider must prove that each of the liens, and underlying bills, are not connected to any criminal, fraudulent, or abusive conduct by the provider. If the provider-lien-claimant fails to overcome the presumption, they will not have a right to payment. However, if the provider-lien-claimant is successful in rebutting the presumption, then the liens will be adjudicated by the special lien proceedings, or will be transferred back to the originating venue for adjudication, as determined by the presiding Workers’ Compensation Judge.
DECLARATIONS UNDER PENALTY OF PERJURY FOR THE FILING OF LIEN CLAIMS
The Workers’ Compensation System functions under existing law, which requires all lien claimants to file their lien with the Appeals Board for adjudication. In light of SB 1160, the legislature has expanded liability for perjury in order to avoid payments for fraudulent services. Now, all lien claimants who file a lien after January 1, 2017, must also file a declaration under penalty of perjury that the lien is not subject to independent medical review or independent bill review, and that the lien claimant:
- Is the employee’s treating physician providing care through a medical provider network;
- Is the agreed medical evaluator or qualified medical evaluator;
- Has provided treatment authorized by the employer or claims administrator under Section 4610;
- Has made a diligent search and determined that the employer does not have a medical provider network in place;
- Has documentation that medical treatment has been neglected or unreasonably refused to the employee as provided by Section 4600;
- Can show that the expense was incurred for an emergency medical condition, as defined by subdivision (b) of Section 1317.1 of the Health and Safety Code; or
- Is a certified interpreter rendering services during a medical-legal examination, a copy service providing medical-legal services, or has an expense allowed as a lien under rules adopted by the administrative director.
Any lien filed after January 1, 2017, without this declaration may be dismissed with prejudice. Furthermore, liens filed prior to January 1, 2017, are retroactively required to have this declaration on file no later than July 1, 2017, or they too will be subject to dismissal with prejudice.
INCREASED REGULATION ON THE ABILITY TO ASSIGN LIENS
Language of Section 4903.8 of the Labor Code has been amended to declare that only a lien owner will be entitled to any payment for lien services identified by subdivision (b) of Section 4903. This includes liens for medical-legal expenses except for those subject to independent medical review or independent bill review. New language adds that payment for the liens defined by subdivision (b) of Section 4903 will only be made to the lien claimant who provides evidence that they are the owner of the lien.
Furthermore, the new language provides that any lien filed after January 1, 2017, may not be assigned for any reason aside from the one exception: where the person who performed the lien services no longer performs such services and has assigned all right, title, and interest in the remaining accounts to another. In this very limited circumstance the assignee may recover the lien payments. Otherwise, any assignment after January 1, 2017, will be invalid.
The increased cooperation between state and federal agencies is expected to efficiently end funding of fraudulent medical and medical-legal services in the Workers’ Compensation System. By automatically suspending providers who have engaged in fraud or abuse, and subjecting lien payments to the special lien process the Workers’ Compensation System endeavors to eliminate any reward of fraudulent conduct, and deter future fraud in the system by this lack of reward. Finally, to avoid future circumvention of this new legislation through assignment of liens, increased regulation of the ability to assign has been included. Beginning January 1, 2017, the legislature has added additional defenses to fortify the Workers’ Compensation System from fraud.
 Labor Code §§ 139.21(a)(1)(A), (C); 4615(a).
 Labor Code §4615(b).
 Labor Code 139.21(b)(2).
 Labor Code § 139.21(c)-(d).
 Labor Code §4615(a).
 Labor Code §139.21(e)(1).
 Labor Code §139.21(e)(2), (h).
 Labor Code §139.21(f).
 Labor Code §139.21(g).
 Labor Code §139.21(g).
 Labor Code §139.21(i).
 Labor Code § 4903.05(c)(1)-(2).
 Labor Code § 4903.05(d).
 Labor Code § 4903.05(c)(1)-(2).
 Labor Code § 4309(a)(2).
 Labor Code § 4309(a)(4).