For years, there have been companies who approach physicians and offer ways they can add to their revenue stream. This has been more common with physicians who treat workers’ compensation patients.
Some of the common revenue enhancements are:
(1) dispensing oral prescription medications in-office to patients;
(2) dispensing a 3-day supply of compound medications in-office to patients; and
(3) performing point of care urine toxicology testing on patients in-office.
Under California workers’ compensation law, there are ways for these medically necessary services and goods to be legally provided and billed. However, if the laws and regulations are not followed, the claims can be denied or the basis for insurance fraud charges.
A recent criminal prosecution in Orange County Superior Court shows what happens when workers' compensation insurance fraud and illegal referral fees are alleged in providing these types of goods and services (prescription medications, compounded medications and toxicology laboratory testing) to patients.
The Orange County District Attorney’s (OCDA) Office filed 26 felony criminal complaints in April 2017 against 25 physicians, a physician assistant, two pharmacists and the two owners of the billing and medical management companies King Medical King Medical Management, Inc., Monarch Medical Group, Inc. and/or One Source Laboratories, Inc. for services and goods provided and/or billed from 2011 to 2015.
Links to the Orange County DA criminal complaints are on the Department of Insurance press release issued on this investigation. All physician defendants are presumed innocent and a felony complaint is not evidence.
It appears the OCDA decided to file a criminal case against each provider separately in order to not have a single multi-defendant case that would progress slowly and for other tactical reasons. However, there is a conspiracy count in each criminal complaint filed against the physicians or pharmacists in which the owner(s) of the medical management and billing companies are named as uncharged co-conspirators. The OCDA views the management billing companies as the hub in these cases.
Under California workers’ compensation law, there are ways for these medically necessary services and goods to be legally provided and billed. These can even make sense from a patient care perspective in that the physician can immediately provide the injured worker patient with medications, explain how to use the medications and ensure that the patient is not abusing illegal or narcotic medications prior to prescribing pain medications. In years past, in office dispensing also gave workers greater access to medications when their workers' compensation cases were disputed and pharmacy access was limited.
However, these arrangements can pose significant compliance issues especially when third party medical management or billing companies are involved with the physician at multiple levels. For example, when the same medical management or billing company is involved in selling the medications or point of care testing kits to the physicians, billing for the physicians, referring the physicians’ patients to other providers (such as pharmacies or laboratories), and/or buying the physicians’ receivables or making payments to the physicians – red flags on the compliance side arise. The Labor Code imposes disclosure rules about financial relationships. In addition, there are very specific representations regarding wholesale prices and National Drug Codes when medications (compounded or oral prescribed) are being billed in workers' compensation.
The physician defendants are charged with a variety of state criminal offenses:
Penal Code Section 549 – conspiracy in submitting a false or fraudulent claim with knowledge or reckless disregard that the medical management or billing companies or toxicology laboratory or pharmacy intended to violate Penal Code Section 550 or Insurance Code Section 1871.4;
Penal Code Section 550(a)(6) – submitting a false or fraudulent insurance claim;
Business and Profession Code Section 650 - accepting payments for referrals to pharmacies and/or toxicology laboratories; and
Penal Code Section 550(b)(3) – insurance fraud in failing to disclose to the insurance companies that the physician had a financial incentive to prescribe toxicology testing or prescribe compounded medications to patients.
Given that the physicians are charged separately from the medical management and billing company, their defense may be in large part that they relied on these entities which structured the arrangements and prepared and/or submitted the billing. There will be issues on whether disclosures were needed on the billing arrangements with Monarch or King and whether the payments were referral fees or simply payments on purchased receivables.
There are many laws and regulations that apply to billing for workers' compensation patients and the defense of these cases will involve their nuances and whether failure to follow some of these laws and rules amounted to fraud or whether payments constituted referral fees.
Posted by Tracy Green, Esq.
Green and Associates, Attorneys at Law