Criminal Medical Providers and Their Liens

In 2012, the Legislature enacted SB 863 in order to thwart the longstanding lien crisis and achieve the Constitutional goals of the workers’ compensation system. Although the quest to eradicate ancient liens by establishing time limits and the requirements for payment of activation and filing fees, the beneficial results were short-lived. Recognizing this fact, the Legislature, in 2016, redoubled its efforts. AB 1244 resulted in the generation of Labor Code Section 139.21 which mandates suspension of a physician or provider who is convicted of certain felonies or misdemeanors  and creates a presumption that the services underlying the liens were connected to the criminal conduct. SB 1160 produced Labor Code Section 4615 (automatically mandating the stay of all liens of a physician or provider whenever criminal charges are filed) as well as Labor Code Section 4903.05 (delineating the required declarations what must accompany a lien). 

The precise mechanism employed by the Legislature to drain the swamp involves a two-pronged approach: whenever a provider is the subject of criminal charges based on workers’ compensation, billing, insurance or Medicare fraud, the current Labor Code Section 4615 provides that the stay will remain in effect until the disposition of the criminal proceedings. When there has been a criminal conviction, the second prong is activated, which will result in the initiation of proceedings to suspend the provider or physician from participating in the workers’ compensation system, and all of the liens filed by or on behalf of that provider will be infected with the presumption that the services were related to the criminal activity, which will result in dismissal of the liens, absent a preponderance of evidence produced at the lien consolidation proceeding demonstrating that the services were not related to the criminal conduct.

Given the revolutionary nature of these changes, the Legislature went to great lengths in uncodified Section 16 of SB 1160 to express its intent to rectify this deplorable situation in order to withstand a Constitutional challenge. 

Dr. Anguizola, the owner of several billing companies and providers, recently asserted such a Constitutional challenge, alleging that the Federal Court should issue an injunction prohibiting the stay of his liens. His theory is that the staying of liens violates the Sixth Amendment because it limits his choice of counsel due to his inability to utilize the funds contained in the many lien claims to retain a “qualified attorney.” The California Attorney General has vigorously opposed Dr. Anguizola’s request for relief on multiple grounds. Oral argument regarding the propriety of issuing an injunction is scheduled to occur on 6/29/17 before Judge Wu. Ironically, Judge Wu is the same jurist who initially declared the activation fee provision unconstitutional 3 ½ years ago. (The Federal District Court of Appeals subsequently slapped Judge Wu’s hand by holding that the activation fee statute was constitutional.)

Additionally, the Legislature realized that it created a loophole in Labor Code Section 4615 by stating that the stay would remain in effect until the date of the criminal conviction. This resulted in the lifting of the stay on a convicted provider’s liens between the date of the conviction and the date of the conclusion of the lien consolidation proceedings, a result that certainly was not intended by the Legislature. Accordingly, AB 1422, which was passed by the Assembly on 6/1/17, provides that the stay will remain in effect until the conclusion of the lien consolidation proceedings. The Senate must approve this provision by 9/15/17 and it must be signed by Governor Brown by 10/15/17 in order to be effective 1/1/18. 

The Federal Court’s renunciation of Dr. Anguizola’s claim and the approval of AB 1422 by the Senate and Governor Brown will assist in achieving the Constitutional objective of eliminating the lien crisis.