WCDefenseCA

A recent article on MarketWatch covered the efforts of the California Restaurant Mutual Benefit Corporation in combating insurance fraud.

The article focused on a solid victory for the self-insured group.  CRMBC’s investigation lead to charges being filed against a former manager of Jack-in-the-Box.  Jeanette Gallo entered a plea of no contest on two counts of felony fraud linked to her workers’ compensation stress claim for a robbery in which she participated.

Fraud is a regular topic for this blog, particularly because of its permanent damage – employers will never recover the money fraudulently obtained; it is always spent long before any charges are filed.  The only remedies are deterrence, which requires the cooperation of law enforcement, and prevention, which can be achieved through the proactive efforts of employers.

Having read the MarketWatch article, I reached out to the CRMBC to find out more about their anti-fraud program.  I was lucky enough to speak with Joe Burgess, the Senior Executive Vice-President at CHSI, the program administrator for the CRMBC.

What he described came across as a practical, thorough, and clearly effective program to detect, prevent, and deter the white-collar robbery of California employers by disloyal and unscrupulous employees.

The program begins with education.  CRMBC’s members are given information on how to investigate fraud and how to properly (read: legally) respond to it.

Joe explained that the first three days following an alleged injury are key – after that, witnesses get forgetful, surveillance tapes get written over, and the physical evidence that would normally poke holes in the applicant’s story gets cleaned, put away and forgotten, as the business stops being a fraud crime scene and returns to being a business.

“The key to success in fighting fraud is immediate, documented investigation by the employer and engagement with the employee,” says Joe.

Members are kept updated by newsflash e-mails, training sessions, and a library of materials on the membership website.

The next phase is the bigger investigation, which covers the applicants using surveillance and background checks, and the providers, making sure they are actually performing the services they are billing for (unlike some providers we’ve heard of).

The final stage is the deterrence, which includes cooperation with law enforcement to see these cases prosecuted and the fraudsters convicted.  But, as any prosecutor will tell you, the best evidence on which to build a case would probably have been collected by the employer at the time of the alleged “injury.”

But the value of the program is not in the final step, says Joe: “Success in fighting fraud is not measured in arrests and convictions – those are not that common.  Success in fighting fraud is fewer serious indemnity claims – because  the employer puts processes in place such as rapid response, good initial investigation, [and] engagement with the employee.”

Fraud is a parasitic plague which saps the strength of the workers’ compensation world.  To stop these ticks in their tracks, employers must become their own guardsman – the employers are the best situated to take the lead here.

As Joe puts it, “we can control what we do, not what others do – but by creating the right structured environment we can make it less likely that fraud will flourish.”

Fortunately for those of us practicing on the defense side of California’s Workers’ Compensation system, not everyone is willing to be complacent in blatant acts of fraud.  Often enough, a co-worker or neighbor will report deception and cheating when they become aware of it.

Mia Rachel Brown of West Covina, has been arrested on charges of workers’ compensation fraud, according to this press release by Dave Jones, Insurance Commissioner.

Apparently, while she was receiving disability checks connected to her claimed injury, which (allegedly) occurred while working for Dean Foods, insured by Liberty Mutual Insurance Company, Mia Brown was working for the Department of Motor Vehicles.  At a sworn deposition, she had testified she had not worked since November of 2009.

Although it seems unlikely that the Department of Insurance or Liberty Mutual will recover their costs of benefits paid or investigation and prosecution (thanks to Ms. Brown’s fraud), a plugged leak is a plugged leak, even if the plug is late in coming and pricey at that.

Quis custodiet ipsos custodes?

Would you shoot yourself in the chest for a few days off from work?

Jeffrey Stenroos, a Los Angeles school police officer, has been convicted of several felonies and misdemeanors following his claim that he had been shot by a car burglar.  It appears that Stenroos shot himself in the chest (protected snugly by his vest), and then claimed that the armed gunman had fled.

What followed was the deployment of over 550 police officers and the lockdown of the surrounding neighborhood for over 10 hours.  The city is seeking $350,000 in restitution for the costs of the manhunt and Los Angeles Unified School District will try to recover the $58,000 paid for medical costs.

If the idea of shooting yourself and then filing a false report sounds familiar, it might be because you watched the HBO series “The Wire” and remember one particular police officer.

The damage this fraud does to the police officers actually injured in the line of duty is immeasurable.

It is often difficult to expose frauds in workers’ compensation – there are doctors that facilitate the fraud and applicant’s attorneys that turn a blind eye.  Everyone, after all, wins out except … the employer, the insurance company and California’s economy.

But fraud must be investigated and punished as often as possible.  The upfront costs seem prohibitive, and the long-term benefits are not measurable.  But the effect is there, fraud investigation and prosecution deters fraud and discourages it.  Police officers in California who had the same idea as Mr. Stenroos will hopefully think twice about cheating the system for some days off and extra money.

Source: http://latimesblogs.latimes.com/lanow/2011/09/cop-who-staged-shooting-a-digrace-schools-chief-says.html

An interesting pilot program is coming into formation for Butte County, California.  This pilot program will require those seeking to perform contract work with the county to prove they have workers’ compensation insurance for their workers.  For now, if approved, the program will apply to roofers and swimming pool builders.

There are presently criminal and civil penalties for not having workers’ compensation insurance or obtaining inadequate workers’ compensation insurance by fraud.  (Picture the agent selling insurance in the office of the employer, being told that there are a total of four employees working for the company when he can clearly see more than that working in the warehouse.)

I, for one, am always in favor of making life easier for businesses and employers.  Enough of California’s companies are being poached by the likes of Arizona, lured away with promises of New York Iced Tea and some of the lowest Workers’ Compensation costs in the country.

But while I am for making the laws easier to understand and cheaper to comply with, I can not abide the fraud some employers engage in to avoid paying Workers’ Compensation costs.  This gives them an unfair advantage when competing with employers who bite the proverbial bullet and follow the law.

Hopefully, this program will be adopted in more counties throughout the state and for more than just roofing and swimming pool work.

Insurance Commissioner Dave Jones announced that approximately $32 million in grants is to go to the various District Attorneys’ Offices in California to help combat California Workers’ Compensation fraud.  You can read the press release here.

Although I generally don’t like the state spending money, especially at times like these, I find myself applauding the efforts to finance the fight against fraud.  I’ve detailed a few instances of insurance fraud before, including cases of applicants defrauding the state and local governments and insurance companies.  It’s never pretty and there are rarely appropriate remedies for the defrauded – just money spent in benefits, investigation and prosecution that will never return to its rightful owner.

However, good does come out of these efforts, chiefly in the form of personal deterrence, preventing the convicted fraudster from collecting more benefits, and general deterrence, in the form of would-be fraudsters being deterred from stealing from insurance companies and self-insured employers.

The law enforcement community is full of brave, hard-working and diligent men and women, both investigators and prosecutors, who work with their hard-working and diligent counterparts amongst the ranks of the adjusters to limit the fraud plaguing California’s Workers’ Compensation insurance industry.

One part of the press release which ended up giving my computer the frowning of a life-time was the following:

“The grant funding is the result of assessments on California employers that are determined annually by the Fraud Assessment Commission.”

If I am the victim of a pick-pocket, or if I come home to find my house burglarized, I should have access to police protection and assistance in investigating and prosecuting the case.  After all – I paid for them with my taxes.  Otherwise, shouldn’t my taxes go down and I can spend the money on private security?  California’s employers are already taxed – again and again, from corporate to payroll to income to who-knows-what-else.

Fraud is a crime that targets an individual business, but the effects are felt everywhere through higher prices, just like with any other form of theft.  It is unfair to levy yet another tax on the employers of California, burdened as they already are.

Perhaps we should consider pay-as-you-go uniformed police and fire departments as well?

In any case, for all your would-be and currently Workers’ Compensation fraudsters out there… Justice is Coming!

Quis custodiet ipsos custodes?

It is an unfortunate fact that insurance companies and self-insured employers often have to lose money to fraud: so-called injured workers who claim more disability than they have sustained.

Because of this fact, the cost of this fraud is passed on to the average consumer, who pays a higher price for goods and services, the higher revenues from which are used to pay for higher insurance premiums.

Private companies are not the only victims, and sometimes the government, sleepy eyed from collecting taxes from private companies (although, not all private companies) and citizens, has its own pockets picked.

It’s not Robin Hood that does this – there are no merry men in green tights involved.

In one recent case, an Oxnard police officer stands accused of workers’ compensation fraud.  Edward Idukas, the law man in question, allegedly claimed he was too injured to work, but then an investigation revealed he was regularly playing baseball while collecting benefits.

In a similar story, Oscar Fuentes III, of Willits, was arrested for alleged insurance fraud after an investigation allegedly revealed that, while receiving workers compensation benefits, he was coaching baseball, performing yard work and other physical activities.  It appears that an investigation was launched after Mr. Fuentes filed a petition to reopen, seeking to raise an in-place award for 45% permanent disability to 100% permanent disability.

Coincidentally, Mr. Fuentes was a manager of the Department of Corrections and Rehabilitation, San Quentin State Prison.

Private employers, public employers and insurance companies do well to hire veteran investigators with a nose for funny business.  The seed money sown in an investigation unit that develops a cooperative relationship with law enforcement reaps not only the small amounts of funds recovered through restitution orders, but also the deterrence effect of prison time.

To the deputy district attorneys, to the private investigators, and to the determined adjusters that won’t have their companies robbed, I say in all sincerity:  good hunting!

Who could have thought that a medical office could possibly defraud insurers in a California Workers’ Compensation scam?  Fortunately, the insurance company and the Orange County District Attorney did.  Recently, several sources confirmed that Dr. Sim Carlisle Hoffman of Newport Beach, and three others from his office, were engaged in a $17 million Workers’ Compensation insurance fraud scheme.

Ibtimes.com, Patch.com and Adjuster.com confirm that Hoffman has been accused of over-billing, hoping that insurance companies, or self-insured entities, would let the unnecessary charges go unnoticed.  These involved both unnecessary procedures and procedures never performed.

The facilities involved?  Advanced Professional Imaging, Advanced Management Services and Better Sleeping Medical Center (all in Buena Park).  Amongst those indicted is a neurologist, a radiologist and a hearing representative who would press for these bills to be paid in lien trials.

I, for one, extend a heartfelt thanks to Orange County District Attorney Tony Rackauckas and the deputy district attorneys that, under his leadership, are seeing this matter through.  Although I practice in San Francisco, I salute these efforts to curb the fraud that, sooner or later, unnecessarily brings up costs for consumers.  Far too often self-insured employers and insurance companies are defrauded by false billing practices and over-treating physicians.

In such cases, it seems unlikely that prosecutors or the insurance company will find $17 million worth of goods to recover for their loss, although I would check under the mattresses just to be safe.  Nor will the D.A.’s office or the insurance company recover the costs of investigation, reporting and prosecution, which in such cases is a lengthy, difficult and therefore expensive process.

The only hope insurers and self-insurers have of curbing their losses is through vigilance, bill review, and cooperation with law enforcement to catch the frauds and (hopefully) put them out of business.

Other ways to defend against this are the use of Utilization Review procedures and a Medical Provider Network.  But these have their own limitations.

If a fraudster becomes familiar with the allowable treatments under UR, he need only bill for procedures that would be allowed, even without performing them.  Similarly, an MPN can eliminate a doctor who commits fraud, but only after the fraud has been committed.  The very nature of fraud is that, for the longest time, it is not detected.

In the meantime, we can all enjoy the bite of increased premiums and costs due to fraud.  Cheers!