Removing Fraudulent Providers from the System – SB 1160 and AB 1244

No two words within the Workers’ Compensation system create more of a universal repugnance than lien claimant.  The stench of the fraudulent medical providers has been exacerbated by their apparent ability to impose upon the employers of this state responsibility for satisfying their liens. 

The Legislature has forcefully addressed these issues in enacting SB 1160 and AB 1244 effective 1/1/17.  Recognizing that there are roughly 8.000 lien holders in the Workers’ Compensation system, which account for more than 1.2 million liens with a total value of $11 billion, the Legislature has provided us with tools necessary to alleviate our clients’ frustration as well as to save them substantial amounts of money, time and grief.

Whenever criminal charges are filed against a medical provider (treatment or med-legal) based on Workers’ Compensation fraud, Medicare fraud, Medi-Cal fraud, Insurance fraud or medical billing fraud, Labor Code Section 4615 mandates that any liens asserted by the dirty doc, as well as the accrual of interest, will be stayed until such time that a disposition is achieved in the criminal case.  The Administrative Director will adopt rules to implement this statute, including the posting on the DWC web site of all such medical providers who have criminal charges pending based on these grounds.

Labor Code Section 139.31 pertains to the consequences of a conviction.  This statute mandates that a medical provider will be suspended from participating in the Workers’ Compensation system whenever he/she is convicted of a felony or misdemeanor based on fraud or abuse of the Medicare or Medi-Cal programs, fraud or abuse of any patient, of conduct of the individual’s medical practice as it pertains to patient care, of a financial crime pertaining to Medicare, Medi-Cal or the Workers’ Compensation system, or is otherwise substantially related to the qualifications, functions or duties of a provider of services.  Subsection (a)(2) requires the AD to post on the DWC website a list of those suspended providers. 

Now that we have a dirty doc convicted of fraud, what happens to his/her liens?  During the past 15 months, many of our clients were outraged over the fact that Dr. Sobol pled guilty but that they were potentially liable to satisfy his liens given the inability to prove that the fraudulent conduct to which he pleaded guilty was connected to the services underlying each of his liens.  The Legislature has formulated an unprecedented remedy to this scenario. 

Where the final disposition in the criminal case contains a provision for all outstanding liens to be dismissed and all sums forfeited, all such liens will be dismissed by operation of law, with such orders to be issued by the Workers’ Compensation Judges.

What happens where the final disposition in the criminal case is silent regarding all liens in which the dirty doc has any ownership interest?  Labor Code Section 139.31 (e)(2) and (f) provide that all liens of the provider will be consolidated in a special lien proceeding, the venue of which will be determined by the Chief Judge.  Labor Code Section 139.31(g) is the kicker:  at this proceeding, it will be presumed that the services underlying the liens were connected to the conduct for which the dirty doc was convicted and that the lien claimant will not be entitled to any right to payment unless that presumption is rebutted by a preponderance of the evidence.  This will require the Dr. Sobols of the world to prove, with respect to each lien, that the services were not related to the conduct giving rise to the criminal charges resulting in the conviction.  Subsection (i) provides that, even assuming that the burden is overcome, the employer will retain all other statutory defenses to the lien, such as statute of limitations, that the services were not reasonably designed to effectuate cure or relief from the effects of the industrial injury, that the services were not reasonably calculated to offer proof in connection with a contested issue or that the charges exceed the Official Medical Fee Schedule or the Medical Legal Fee Schedule.

It’s anticipated that there will be several constitutional challenges to this aspect of the new legislation.  Anticipating same, the Legislature set forth its rationale for enacting these new laws in uncodified section 16, which essentially details the extent of the crisis created by the fraudulent practice of some providers and the need to formulate extraordinary measures to remedy the situation in order that the Constitutional mandate that workers’ compensation cases be resolved inexpensively, expeditiously and without encumbrance of any character can be achieved.

In order to weed out the large amount of bogus liens in the system, the Legislature substantially amended Labor Code Section 4903.5.  For liens filed after 1/1/17, the lien claimant must not only electronically assert the lien, including the original bill, the itemized statement and the $150 filing fee in a timely fashion (Labor Code Section 4903.5(a) requires that the lien be filed no more than 18 months after the last date that continuous services were provided) but must also declare, under penalty of perjury, that the filing of the lien is justified based on satisfaction of one of seven separate conditions, such as the doc was the employee’s treating physician who furnished care through the MPN, that the doc was the AME or QME, that the treatment was authorized by the employer, that the doc determined that the employer did not have an MPN, that the doc has documentation supporting the conclusion that the medical treatment was unreasonably refused or neglected or that the services were furnished in an emergency situation.

What about liens filed before 1/1/17?  For liens filed between 1/1/13 and 12/31/16, Labor Code Section 4903.05(c)(2) provides that the declaration must be electronically filed before 7/1/17.  For liens filed prior to 1/1/13, the DWC has stated that no declaration will be required. 

The filing of a false declaration will be grounds to dismiss the lien with prejudice.  Thus, we need to carefully scrutinize whether the condition for filing the lien has been satisfied.  Additionally, the failure to file the signed declaration under penalty of perjury will result in dismissal of the lien with prejudice by operation of law.  Accordingly, we always need to advise our clients of the option of delaying the occurrence of any lien proceeding to a date subsequent to 7/1/17.

Finally, in order to put a bullet in the practice of lien assignments, Labor Code Section 4903.8 has been substantially amended to reflect that liens must be filed in the name of the owner and that no lien asserted after 1/1/17 will be assigned unless the person originally entitled to payment has ceased doing business in the capacity formerly held and has assigned all rights to the assignee, which would essentially pertain to fully retired or deceased medical providers.

The new legislation has provided us with an excellent opportunity to successfully advocate on behalf of our clients and achieve excellent results.