Monday, June 29, 2009

Home Health Agencies' Owners, Operators And Employees Are Indicted By Miami Federal Grand Jury

Last week there were a number of large health care fraud indictments across the country. These indictments come at a time when the Obama administration is devoting more resources to prosecuting and preventing Medicare fraud as his administration is working with Congress on expanding government healthcare coverage for uninsured Americans.

On June 26, 2009, in the Southern District of Florida, eight residents of Miami-Dade County, Florida were indicted in connection with the operation of two home health agencies ABC Home Health Care, Inc. (ABC) and Florida Home Health Care Providers Inc. (Florida Home Health) which catered to Medicare beneficiaries. The owners and operators of the home health agencies were charged. In addition, the biller for both businesses and a medical assistant who allegedly falsified blood tests were charged. In this case, the beneficiaries were also alleged to have participated in the fraud although no beneficiaries were charged.

Gladys Zambrana, Javier Zambrana, Enrique Perez, Alejandro Hernandez Quiros (aka Alex Hernandez), Vanessa Estrada, Vicenta Tellechea, Modesto Hidalgo, and Carlos Castaneda were charged in the indictment with conspiracy to commit health care fraud (18 U.S.C. § 1349). Gladys Zambrana was also charged with four counts of health care fraud (18 U.S.C. § 1349). Gladys Zambrana and Hernandez Quiros were charged with three counts each of paying health care kickbacks, while Perez, Hidalgo, and Tellechea were charged with one count each of paying health care kickbacks (42 U.S.C. §1320a-7b(b)(2). Gladys Zambrana, Perez, Alejandro Quiros, Tellechea, and Castaneda were also charged with conspiracy to launder health care fraud proceeds (18 U.S.C. §1956(h)).

A copy of the criminal indictment has been posted by the Miami Herald:
An indictment is merely a charge and defendants are presumed innocent until proven guilty.

According to the indictment, Gladys Zambrana, Enrique Perez, and Hernandez Quiros were the “true owners” and operators of ABC, while Javier Zambrana was listed on the application and paperwork as the owner. Gladys Zambrana and Carlos Castaneda were the “true owners” and operators Florida Home Health, while Vicenta Tellechea (the mother of Carlos Castaneda) was listed on the application and paperwork as the owner.

The indictment alleges that at both agencies, cash kickbacks were paid to recruited Medicare beneficiaries in exchange for having them sign documents indicating that they had received the home health benefits when, in fact, the services were not provided and were not medically necessary. Ms. Hidalgo was charged with falsifying blood tests to make the billings for diabetic insulin injections and other services appear necessary.

The indictment alleges that ABC billed more than $17 million to the Medicare program for services provided from January 2006 through December 2008 that were allegedly medically unnecessary and were not actually provided. During that time frame, Medicare paid ABC approximately $11 million on those claims with $8.8 million of those paid claims were for alleged diabetic beneficiaries.

The indictment also alleges that from October 2007 through March 2009, Florida Home Health billed more than $5 million to the Medicare program for services that were medically unnecessary and not actually provided. During that time frame, Medicare paid approximately $4 million on those claims which were mostly for alleged diabetic beneficiaries.

The charge of conspiracy to commit health care fraud carries a potential maximum prison sentence of 10 years. Each charged count of health care fraud carries a potential maximum prison sentence of 10 years and each count of paying health care kickbacks carries a maximum prison sentence of five years. Conspiracy to launder health care fraud proceeds carries a potential maximum prison sentence of 10 years per count. However, any sentences would be imposed by the court (the assigned United States District) only after consideration of any trial or the plea agreement, the U.S. Sentencing Guidelines, and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Concurrent Civil Case

In conjunction with the criminal case, on June 24, 2009, the U.S. Attorney’s Office filed a civil complaint for injunctive relief under the fraud injunction statute and obtained a temporary restraining order freezing the assets of ABC, Florida Home Health, Gladys Zambrana, Javier Zambrana, Perez, Hernandez Quiros, Castaneda, and Tellechea. In addition, that temporary restraining order also freezes certain financial assets of four other companies the defendants owned or controlled and allegedly used to launder money allegedly fraudulently obtained from Medicare. The temporary restraining order is intended to preserve the remaining proceeds of the alleged fraud for recovery by the United States as part of the criminal case and any related civil proceedings.

Attorney Comments: This case raises several issues that tend not to be directly addressed by the U.S. Attorney’s Office or the press. First, in large cities such as Miami, Los Angeles and New York that have large low-income ethnic communities, these types of alleged health care fraud issues where the beneficiaries are participating with the providers are more common. Not only do these communities have serious health issues which allow the alleged fraud and abuse to foster but the language and ethnic commonalities between the providers and beneficiaries can create the potential for fraud and abuse. For example, this particular case involved the Cuban community where beneficiaries agreed to sell their Medicare card for a cash kickback.

Second, these fraud cases are causing serious problems for those in these communities who need medical services since some of the older beneficiaries will sell their Medicare card and ultimately may be designated as an "overutilized beneficiary" for whom services will not be paid. Further, when honest providers serve these these ethnic communities, those providers will be subject to great scrutiny and frequent audits due to the fraud and abuse issues in these communities. Honest and skilled providers who would like to serve the communities are finding the constant audits, the demands for overpayment for services provided and the treatment by the CMS contractors to be unacceptable. Thus, the honest and skilled providers are being driven out which will leave those who are either not as skilled or engaging in fraud and abuse. This is particularly true with board certified specialists.

Third, Medicare and Medicaid needs to educate these patients about the risks of taking cash kickbacks and allowing providers to bill for unnecessary services. Currently, the beneficiaries are not being penalized (except to the extent they are designated as an over-utilized beneficiary). There should be a global strategy in place for reaching out to these ethnic communities and educating them as to the problems in participating in any fraud or abuse. Namely, there will be less money in the system for those who really need it.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings.

Thursday, June 25, 2009

Los Angeles Hospital Executive Pleads Guilty To Paying Kickbacks In Skid Row Healthcare Fraud Case

On January 3, 2009, we posted an article about an indictment in the United States District Court in Los Angeles relating to alleged patient recruiting on skid row in Los Angeles and the payment of referral fees by the hospitals for these patients. See
There has been a recent development in this case.

On June 16, 2009, Robert Bourseau, the former co-owner and board chairman of City of Angels Medical Center pleaded guilty to paying illegal kickbacks for patient referrals. The charges to which Bourseau has pleaded guilty carry a statutory maximum penalty of 10 years in federal prison. However, any sentence would be imposed by the court (United States District Judge George H. King) after consideration of the plea agreement, the U.S. Sentencing Guidelines, and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Mr. Bourseau has agreed to pay over $4.1 million in restitution to Medicare and Medi-Cal. Sentencing is scheduled on September 14, 2009 before Judge King.

Mr. Bourseau and Dante Nicholson, a former senior vice-president at City of Angels, were indicted in January by a federal grand jury in Los Angeles. Also named in the indictment was Intercare Health Systems, Inc., the company through which Bourseau and Dr. Rudra Sabaratnam, operated City of Angels. The 12-count indictment alleges that Intercare, Bourseau, Nicholson and others conspired to recruit homeless people to receive unnecessary health services for the purpose of committing health care fraud.

In pleading guilty, Mr. Bourseau admitted to participating in a scheme to pay Estill Mitts and others to refer homeless Medicare and Medi-Cal beneficiaries whom they recruited, primarily from Skid Row, to City of Angels for in-patient hospital stays. He also admitted that City of Angels entered into sham contracts intended to conceal the illegal kickbacks paid to Mitts, and billed Medicare and Medi-Cal for in-patient services to the recruited homeless beneficiaries, including those for whom in-patient hospitalization was not medically necessary.

This was the second indictment related to this investigation. Three other individuals have already plead guilty. In December 2008, Dr. Sabaratnam pleaded guilty to paying illegal kickbacks for patient referrals. In September 2008, Mr. Mitts, who operated a center that recruited homeless people to receive alleged unnecessary health services, pleaded guilty to conspiracy to commit health care fraud, money laundering, and tax evasion. In March 2009, Mr. Nicholson pleaded guilty to paying kickbacks for patient referrals. Messrs. Sabaratnum, Mitts, and Nicholson are all scheduled to be sentenced by Judge King.


  • Dr. Sabaratnum was sentenced on September 2, 2010 to 24 months on Counts 3 and 6 of the Indictment for payment of kickbacks for patient referrals in violation of 42 USC Section 13207b(b)(2)(A) to be served concurrently. Restitution will be jointly and severally liable among the defendants. Dr. Sabaratnum could have decided to surrender his medical license when he entered custody but he decided to contest the Accusation filed by the Medical Board. He represented himself at a hearing which was held at Taft Correction Institute where a decision was issued revoking his medical license. 
  • Defendant Intercare Health Care Systems dba City of Angels Medical Center plead guilty to Counts 6 and 7 with restitution to be addressed in the company's bankruptcy case since the U.S. Government filed a claim of $10 million and this is restitution that is jointly and severally liable among the defendants.
  • Mr. Bourseau was sentenced on February 22, 2010 to 37 months on Counts 3 and 6 of the Indictment for payment of kickbacks for patient referrals in violation of 42 USC Section 13207b(b)(2)(A) to be served concurrently.
  • Mr. Nicholson was sentenced on July 12, 2012 to 12 months and 1 day (there is a benefit to having the extra day added). This was on Counts 6 and 7 of the Indictment for payment of kickbacks for patient referrals in violation of 42 USC Section 13207b(b)(2)(A) to be served concurrently.
  • On March 18, 2013, Richard Massey was sentenced. However, the terms of his plea and sentence are completely sealed. It is doubtful that he received any time in custody. His case was initially filed on March 18, 2008 -- 5 years to the day before he was sentenced. 
  • Mr. Mitts still has not been sentenced and is scheduled for sentencing on July 29, 2013.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates, Attorneys at Law, Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in Medicare fraud, Medi-Cal fraud, kickback cases and health care fraud. 

Monday, June 22, 2009

FAQ: Can Health Care Professionals In California Form Limited Liability Companies?

One question we receive from newly licensed health care professionals is whether under California law, they can form a limited liability company (LLC).

In general, the answer is that if their business provides services requiring a license, certification or registration pursuant to the Business and Professions Code the answer is: "No."

If the business provides services that require only a nonprofessional occupational license, then the answer is "yes." Here is a link to an Attorney General Decision on limited liability companies that addresses this issue:

Before you form a corporation, make sure you consult an experienced accountant and regulatory attorney. In this day of do-it-yourself corporations, a consultation may save you time, money and limit your professional exposure.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates, Attorneys at Law, in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Saturday, June 20, 2009

Medical Biller Sentenced For Fraud Committed With Stolen Patient Information

On June 15, 2009, in the Los Angeles County Superior Court, James Allen Wilson, a former Cedars-Sinai Medical Center employee was sentenced by Judge Samuel Mayerson to four years and eight months in prison after pleading guilty to stealing patient information to defraud insurance firms of $354,000. Mr. Wilson had worked as a billing clerk in Cedars' workers' compensation accounts department from 2003 to 2007. The case was prosecuted by the Health Fraud Division of the Los Angeles District Attorney's Office.

The fraud alleged here was more complicated than simple identity theft. Mr. Wilson's job authorized him to access to the hospital's electronic medical record system, and gave him access to patients who had workers' compensation claims. Then Mr. Wilson allegedly set up a fake laboratory company and used the information from patient files to bill workers' compensation insurers.

Wilson was charged with using the information of 12 patients, all of them L.A. Unified School District employees who had filed workers' compensation claims, to bill insurance firms more than $1.3 million for treatment that was never provided. This netted Wilson $354,000 according to the L.A. District Attorney's Office. The affected companies include: Sedgwick CMS, Specialty Risk Services, Continental Casualty Co., Liberty Mutual, Southern California Regional Management, Travelers and Zurich Insurance

When a search warrant was conducted on Mr. Wilson's home, information from more than 1,000 patients was found. In December 2008, Cedars sent letters to these patients, warning them that their information had been found during the search of his home.

At the sentencing, Superior Court Judge Samuel Mayerson also ordered Wilson to pay $354,000 in restitution to the school district, which paid for treatment employees never received, and $62,000 in back taxes and penalties to the state Franchise Tax Board, authorities said.

Attorney Commentary: These type of thefts of patient information by employees are more common than one realizes. We have seen numerous cases where low-paid medical clerks have taken copies of Medi-Cal and Medicare cards and drivers' licenses or other I.D. from medical offices and sold them. There is a market for this patient information. With Medi-Cal, for example, patients do not receive explanation of benefits (EOBs) and thus would have no idea that their card is being used to bill for services not provided.

On January 1, 2009, the state passed laws (resulting in amendments to Civil Code Section 56.36 and adding Health & Safety Code Section 130200) that significantly increased the fines not only for the illegal use of medical records but also for unauthorized access of records. The law also opened the door for patients to sue physicians and medical facilities for not adequately protecting medical records. Any violation of Civil Code Section 56.36 is also punishable as a misdemeanor.

It is therefore important for health care providers to protect patient information and have a privacy and compliance plan to address the access to patient records and information. The potential financial penalties and other remedies are significant and should encourage providers to take reasonable steps to safeguard patient records and their confidentiality.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates, Attorneys at Law, in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers. 

Sunday, June 14, 2009

FAQ On Physician Peer Review: Why You Should Take It Seriously & Burden of Proof

A decision from the California Court of Appeal, Bode v. Los Angeles Metropolitan Medical Center, (2d Dist. Cal. App., filed June 11, 2009, B207183), addressed the issue of the burden of proof placed upon a physician in a peer review hearing.

The appellate court in Bode found that LA Metro's peer review body improperly placed the burden of proof on a physician (anesthesiologist) with respect to charges of mishandling drugs. The misplaced burden of proof made the difference in whether the physician would be subject to an adverse report to the Medical Board of California.

This recent case gives us the chance to address some of the basics relating to peer review and allow physicians to understand the process. The case is addressed in detail below.

Why Should I Be Concerned With Peer Review - Isn't That Only For Physicians Who Have Medical Staff Privileges?

It is true that peer review disciplinary proceedings are triggered at medical facilities such as hospitals. Peer review discipline can arise from the initial applications, reappointment applications, patient complaints, staff complaints, standard of care issues, and other grounds.

However, many physicians have contracts with health insurance companies, HMOs, managed care entities, government health programs and related health payers. A physician can have peer review or discipline issues with these entities.

Why Should I Take Peer Review Proceedings Seriously From The Beginning?

Sometimes the peer review complaint may appear minor. However, a negative peer review decision can have collateral consequences that will extend past the hospital or health care payer. For example, the hospital or insurance company will be required to report to the Medical Report an adverse physician decision. This can then result in discipline from the Board, the loss of other insurance contracts, delisting by carriers, and other limitations that can interfere with one's right to practice and one's earning capacity.

Hospital Peer Review

Acute care hospitals must have an organized medical staff that is responsible to the hospital’s governing body for the adequacy and quality of medical care. (Cal. Code Regs., tit. 22, § 70703, subd. (b).) The medical staff must adopt written bylaws setting the procedures and criteria for evaluating applicants for staff appointments, credentials, privileges, reappointments, and other related matters. The bylaws must also contain an enforcement mechanism.

Peer Review Body Is Required To Report Discipline To Medical Board

Pursuant to Business and Professions Code ("BPC") section 805, a peer review body must submit a report to the Medical Board of California when it takes any of the following actions due to a medical disciplinary cause or reason: (1) denies or rejects a medical licensee’s application for staff membership; (2) terminates or revokes a licensee’s membership, staff privileges, or employment; or (3) imposes restrictions (or restrictions are voluntarily accepted), on staff privileges, membership, or employment for a cumulative total of 30 days or more for any 12-month period.

Burden Of Proof At Peer Review Hearing

BPC section 809.3 allocates the burden of producing evidence and of proof at hearings that fall under the reporting requirements of section 805. The peer review body always has the initial duty to present evidence which supports the charge or recommended action. Thereafter, the issue as to who bears the burden of proof as to the physician's qualifications or competence to serve on staff depends on whether or not the physician is an initial applicant. If so, the burden of proof lies with the physician. If not, the burden of proof lies with the peer review board.

Burden Of Proof For Initial Applicants Versus Established Staff Members

Thus, “initial applicants” for staff privileges have the burden of proof “by a preponderance of the evidence of their qualifications by producing information which allows for adequate evaluation and resolution of reasonable doubts concerning their current qualifications for staff privileges, membership, or employment. In cases not involving initial applicants for staff privileges ("established staff members"), the peer review body has the burden of proving its action or recommendation is reasonable and warranted by a preponderance of the evidence.

The difference in the burden of proof between initial applicants and established staff members is illustrated by the case of Bode v. Los Angeles Metropolitan Medical Center, (2d Dist. Cal. App., filed Jun. 11, 2009, B207183). As mentioned above, the Court of Appeals in Bode found that LA Metro's peer review body improperly placed the burden of proof on a physician with respect to charges of mishandling drugs. The misplaced burden of proof made the difference in whether the physician would be subject to an adverse report to the Medical Board of California.


1. LA Metro's Bylaws

LA Metro's bylaws permit an applicant for staff privileges to be granted temporary privileges for 90 days, with subsequent renewals not to exceed the period in time until appointment to the Medical Staff. Temporary privileges are granted “only when the information available reasonably supports a favorable determination regarding the requesting practitioner’s qualifications, ability, judgment and current competence to exercise the privileges requested.”

They may be terminated “[u]pon the discovery of any information or the occurrence of any event of a nature which raises questions about the practitioner’s professional qualifications or ability to exercise any or all of the temporary privileges granted.” A practitioner whose temporary privileges are denied or terminated is entitled to the procedural rights set forth elsewhere in the bylaws. The peer review is conducted by LA Metro's Judicial Review Committee. A party may challenge a Judicial Review Committee decision through an appeal to LA Metro's Appellate Review Committee.

2. The Alleged Misconduct

On January 2, 2003, Dr. Georgia Bode began work as an anesthesiologist at LA Metro with temporary privileges pending action on her application for membership on the hospital’s medical staff. The hospital had recently replaced its entire anesthesiology staff after incidents involving the mishandling of controlled narcotic substances caused an accreditation agency to award the hospital only a conditional accreditation. Dr. Bode had an unblemished record since she began practicing in 1987.

In response to the mishandled drug problem, the hospital instituted the Sure-Med computer-operated drug dispensary system. In order to return unused drugs, a physician must enter information into Sure-Med specifying whether drugs were used, disposed by an authorized method, or returned after not being used. Drug returns had to be witnessed and signed off by an authorized hospital staff member. The hospital’s pharmacy staff would confirm the return, and would also review patient records to be sure physicians properly documented the use or wastage of unreturned drugs.

Within Dr. Bode’s first three weeks at the hospital, she had problems properly documenting her use of various medications. The hospital’s surgical chief sent Dr. Bode a letter setting forth six incidents of improper documentation. The letter ended by warning that any further occurrences “may result in disciplinary action including suspension of privileges.” The hospital’s records show that Dr. Bode received training and counseling about these issues and seemed to have resolved them satisfactorily.

Thereafter, Dr. Bode withdrew medication to administer to a patient undergoing spinal surgery. Sure-Med records showed that Dr. Bode obtained one ampule of Demerol. The patient’s chart showed that the Demerol was not administered. Sure-Med records also showed that Dr. Bode entered the return of the Demerol. However, when pharmacy staff checked the machines the next day, they could not find the Demerol ampule.

3. The Peer Review Proceedings After Summary Suspension And Burden Of Proof Issues

The hospital’s surgery department held an emergency peer review meeting, where the hospital’s chief of staff summarily suspended Bode’s temporary privileges. L.A. Metro gave Dr. Bode official notice that her temporary privileges would not be renewed “because of issues surrounding the return of controlled substances,” i.e., the missing Demerol.

Dr. Bode was entitled to, and demanded, a hearing to rebut the charges. In demanding a hearing, Dr. Bode stated that she was no longer interested in applying for permanent membership on the hospital's staff, effectively withdrawing that application.

In connection with the hearing, the hospital sent Dr. Bode a notice of charges stating that its decision was based not only on the missing Demerol incident but also on the six drug documentation incidents. According to the hospital’s notice, “[T]he totality of these incidents, occurring in such a short period of time, raised questions about your professional qualifications and/or your ability to exercise the temporary privileges you had been granted.”

Regardless of who bore the burden of proof, the Judicial Review Committee found that the six drug documentation incidents were established only in part, and, although the hospital properly warned Dr. Bode that further incidents might result in discipline, the Judicial Review Committee made no finding that Dr. Bode’s care "was deficient or inappropriate.” Also without regard to the burden of proof, the Judicial Review Committee was unable to determine what happened to the missing Demerol ampule.

Otherwise, the Judicial Review Committee was unsure whether to place the burden of proof on Dr. Bode. When the burden of proof was placed on the hospital, the Judicial Review Committee found that the hospital’s decision to not renew Dr. Bode’s temporary privileges was not reasonable or warranted. When the burden of proof was placed on Dr. Bode, however, the Judicial Review Committee found that Bode had failed to produce sufficient evidence of “her qualifications for medical staff privileges” at L.A. Metro.

The Judicial Review Committee found that Dr. Bode “was involved in seven cases which raised concerns during the period of her temporary privileges . . . and did not present adequate evidence of her proficiency as an anesthesiologist.”

4. Review By The Appellate Review Committee

On review, the Appellate Review Committee found that there was substantial evidence to uphold that portion of the Judicial Review Committee’s decision which found cause to not renew Bode’s privilege when she bore the burden of proof. The Appellate Review Committee adopted the Judicial Review Committee’s findings in this regard, and concluded that Dr. Bode’s failure to “resolve all doubts” about what happened to the missing Demerol ampule meant she had failed to prove she was not responsible for its loss. The Appellate Review Committee also found that the six drug documentation incidents were, by themselves, sufficient reason to not renew Dr. Bode’s temporary privileges.

5. The Civil Action

Dr. Bode then filed a civil petition for writ of mandate is superior court, contending the Appellate Review Committee mistakenly placed the burden of proof on her and exceeded its authority by reweighing the evidence introduced before the Judicial Review Committee.

This civil lawsuit (which is essentially an appeal) can be filed only when a physician has exhausted his or her administrative remedies. in the corrective action, judicial review, and appeal processes, can he/she invoke the powers of the court. In order to win, the physician must prove there was a violation of procedural due process, substantive law, or that the decision was arbitrary and capricious.

The trial court ruled that, as a holder of temporary staff privileges, Dr. Bode was not an initial applicant and that the Appellate Review Committee therefore erred to the extent its decision was based on Bode bearing the burden of proof. The trial court also found that the Appellate Review Committee erred to the extent it alternatively relied on the six drug documentation incidents to support the hospital’s actions. This was so, the trial court found, because the only reason given to Bode at the time of her nonrenewal was an issue concerning the return of controlled substances, and none of the six documentation incidents involved the actual return of such items. The court issued a writ directing the hospital to vacate the Appellate Review Committee’s decision.

6. The Appeal

The hospital filed an appeal from the superior court's decision. The appellate court upheld the decision of the trial court. The appellate court rejected LA Metro's argument that, because Dr. Bode's temporary privileges were granted in conjunction with Dr. Bode's application for staff privileges, she was an "initial applicant" who bore the burden of proof. The appellate court found that, once LA Metro granted Dr. Bode staff privileges, it assumed the burden of proof at any hearing to justify taking action against those privileges for a medical disciplinary cause or reason.
The reason for the differing burdens of proof were explained:

In the case of a first time applicant (such as Dr. Bode), a decision to reject an application due to a medical disciplinary cause or reason must rely on reports of misconduct or other negative incidents that occurred in the past at some other health facility. The hospital cannot reasonably be expected to prove those incidents, and it therefore makes sense to place the burden on the initial applicant to produce sufficient information to disprove them.

In other situations, when a licensee is working at a health facility under some arrangement, a decision to terminate that arrangement for a medical disciplinary cause or reason in all likelihood is based on recent conduct occurring while the licensee was at that hospital pursuant to that arrangement. In such cases, the hospital can bear the burden of proof because it will have control over and access to all the relevant witnesses and information.

Considering the evidence with the proper burden of proof, the appellate court concluded that the Judicial Review Committee was justified in concluding that there was no way to apportion blame for the disappearance of the Demerol to Dr. Bode. Because Dr. Bode appeared to have corrected the behavior that led to the warnings regarding drug documentation, and because there was a failure to prove Dr. Bode was responsible for the missing Demerol, there was substantial evidence to support the Judicial Review Committee’s decision that, when the burden of proof was placed on the hospital, there was no good cause for the actions taken against Dr. Bode’s privileges. As a result, the Appellate Review Committee erred by concluding otherwise.

Can I Have Legal Counsel At Peer Review Proceedings?

In these peer review proceedings, under California law, the physician does not have the right to legal counsel at the hearing. Nevertheless, many hospitals and entities have bylaws which give this right to the physician. Other than legal counsel, bylaws must allow the physician to be assisted at the hearing by a personal representative who is a licensed physician and preferably a member of the medical staff.

Where there are bylaws that to do not grant the right to the physician to have legal counsel, the physician can request representation by counsel at the hearing. Even if that request is denied, the advantage of having the advice of legal counsel can assist the physician in preparing for the hearing and understanding the negative and potential long-lasting consequences of an adverse outcome at the hearing. The attorney can also be available outside the hearing for consultation.

The Bode case illustrates the benefit of retaining the services of an attorney experienced in administrative procedures for a peer review hearing. The proper placement of the burden of proof may make the difference whether a physician prevails at the hearing, and, ultimately, whether the physician is reported to the Medical Board.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers. Their website can be found at

Friday, June 12, 2009

Real Estate Agents And Attorney Arrested For Fraud In San Bernardino

On June 4, 2009, the San Bernardino County District Attorney’s Office filed grand theft charges against Richard Nazabal (a Rancho Cucamonga real estate agent), Garabed Kamarian (Glendale attorney), and others (where charges were later dropped) related to an alleged real estate investment fraud scheme. The case is assigned to the San Bernardino County Real Estate Fraud Prosecution Unit. The felony complaint charges seemed to have been overstated since the case ultimately was plead out with two defendants dismissed and multiple counts dismissed

A criminal complaint contains only allegations against an individual and all four of these people must must be presumed innocent unless and until proven guilty.

The felony complaint alleges that beginning in 2006 and continuing through 2008, Richard Nazabal solicited funds from victims to invest in several inland empire homes with the stated intention of renovating and reselling the properties at a profit. It was alleged that more than twenty-five people invested more than $2.5 million dollars with the Nazabals. It is alleged that instead of investing the victims' funds, the Nazabals used the money for personal gain and never purchased homes for the victims.

Attorney Garabed Kamarian allegedly applied for loans the Nazabals could not qualify for in order to purchase the luxury home in the extreme north end of Alta Loma in which the Nazabal family was living. Kamarian allegedly falsified the loan applications, showing he was the owner and primary occupant of the home in order to make the purchase of the residence on behalf of Richard Nazabal.

Attorney Commentary: In the past, real estate fraud was not aggressively prosecuted. It was often treated as a civil matter. In today's economy and with increased real estate and mortgage fraud, county district attorney offices are making real estate fraud prosecutions a priority. For example, in Shasta County the district attorney recently sought to create a real estate fraud prosecution unit by having the county add $3 filing fees to any real estate documents so the units can be self-funded.

If real estate agents or other professionals are faced with civil fraud allegations, they need to be very careful so that the civil lawsuit is not used to build a criminal case or administrative case with the Department of Real Estate. Cases that would not have been treated as criminal years ago, may be treated so now.

Post-Script/Follow-Up: This case settled relatively quickly. In September 2009, Richard Nazabal pleaded guilty to four counts of grand theft and none counts of tax fraud, and was sentenced to 9 years in state prison (which would mean he would serve half his time) and pay approximately $2.5 million in restitution.  The charges against two other family members were dismissed.

The attorney Garabed Kamarian plead guilty to being an accessory to a felony after the fact (a misdemeanor). He admitted that he applied for a loan to buy a home for a "friend" who could not qualify because of unpaid child support. The friend said he would live in the house, give Kamarian money every month to pay for the mortgage and eventually Kamarian would sign a quit claim deed transferring his interest to the friend, who would apply for a loan in his name. In his loan application, Kamarian said he was the "real buyer" and would live in the house, knowing both statements were false. he believed his friend had adequate income to pay the mortgage. Of course, the reason the case was filed is because the friend made one payment before the house was transferred by Kamarian and then the friend did not apply for the loan, defaulted on the mortgage payments and the house went into foreclosure. The loan was in Kamarian's name.

 Any questions or comments should be directed to:  Tracy Green is a principal at Green and  Associates, Attorneys at Law, in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in real estate agents, brokers and other licensed professionals. 

Thursday, June 11, 2009

New Federal Health Care Task Force Formed By HHS And DOJ

The Washington Post reported that on May 20, 2009, two federal government agencies (Department of Justice and Health and Human Services) launched a high-level task force to use technology to help detect and prevent health-care fraud. This task force will be called the Health Care Fraud Prevention and Enforcement Action Team and will be composed of senior-level officials at the Justice Department and HHS. The group will use electronic claims data, as well as the threat of federal prosecution, to look for unusual billing problems.

HHS Secretary Kathleen Sebelius also directed federal investigators and prosecutors to expand special strike forces to Detroit and Houston, where "erratic" billing data suggest high levels of fraud, waste and abuse in Medicare and Medicaid programs.

The announcement comes a week after the trustees who monitor Medicare's finances predicted that the trust fund that pays hospital bills for elderly patients will be depleted by 2017, a year earlier than previously expected. The federal budget deficit and Medicare's eroding financial stability increases the pressure on authorities to crack down on fraud -- civil and criminal.

The largest sums by far recovered by the federal government in recent years have come not through criminal cases but through Justice Department intervention in civil qui tam (whistleblower) lawsuits. Many of these qui tam cases were filed under the False Claims Act against pharmaceutical companies.

For the Washington Post article, go to:

Attorney Comment: The electronic monitoring of billing and increased federal pressure makes proper billing and compliance plans more important than ever. There will be increased audits for recovery and more aggressive stances by the federal government.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates, Attorneys at Law, Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Wednesday, June 10, 2009

Federal Los Angeles Jury Convicts Real Estate Agent In Flipping Case With Straw Buyers

On June 1, 2009, a federal jury in Los Angeles convicted real estate agent Maria Sanchez on 14 counts contained in an indictment, including conspiracy, money laundering, wire fraud and aggravated identity theft. This was a "flipping" case with "straw buyers."

According to a press release from the U.S. Attorney's Office, the evidence presented during a week long trial showed that Maria Sanchez was a real estate agent and loan officer for both Locke Realty and Lending of Sante Fe Springs and Online Financial Services of Lawndale, where she was responsible for completing and verifying information in mortgage applications. It was alleged that Maria Sanchez submitted home loan financing packages to purchase residential real estate in the names of family members. Those mortgage applications contained false statements and forged signatures.

When the loans were funded, Maria Sanchez fraudulently obtained more than $1 million in loan proceeds from financial institutions and mortgage lenders for four properties in El Monte, Norwalk, Paramount and Los Angeles. It was then alleged that Maria Sanchez financially benefited from this scheme by flipping one of the properties, as well as collecting points, fees and commissions from the loan transactions. The alleged wrongdoing took place from 2003 to 2006.

In three of the transactions, Maria Sanchez's sister, Beatriz Sanchez, was identified as the buyer of the property. In the loan applications for those three properties, Maria Sanchez falsified her sister’s income, claiming that Beatriz Sanchez earned up to $8,900 per month. In the loan applications, Maria Sanchez submitted documents she obtained from friends who worked at legitimate businesses that supported the claims of her sister’s inflated income. Some of the applications were also in the name of a sister-in-law who was not accused of being part of the loan scheme but was convicted of a drug charge and was accused of wire transferring illegal drug proceeds to an escrow account to be used as a down payment.

Maria Sanchez is scheduled to be sentenced by United States District Judge George H. Wu on September 10, 2009. At that time, Maria Sanchez faces a maximum statutory penalty of 239 years in federal prison. As a result of the aggravated identity theft conviction, Maria Sanchez faces a mandatory sentence of two years in prison.

Previously in this case, Beatriz Sanchez pleaded guilty to charges that she filed false documents with the Internal Revenue Service. Beatriz Sanchez is scheduled to be sentenced by Judge Wu on August 17, 2009 at which time she faces a sentence of up to one year in prison.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates, Attorneys at Law, in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in real estate agents, brokers and other licensed professionals. Cases handled have included real estate fraud investigations and charges. 

Tuesday, June 9, 2009

Vehicle Insurance Fraud Cases Increase - What To Do If You Are Under Investigation

In April of 2009, we wrote about the increase in vehicle insurance fraud due to the economic downturn.

This week's Los Angeles Times has an article on this same issue entitled "Vehicle Fraud Cases Heat Up Amid Economic Downturn." See:,0,1869536.story

Here is a recent criminal case that illustrates the type of mistakes that desperate people are making when they are under financial stress and want to cut down on their automotive costs.

On May 28, 2009, San Bernardino County District Attorney investigators arrested Ted Chavez Jr., of Fontana, for perjury, insurance fraud and disposing of insured property. The criminal complaint alleges that in October 2007, Chavez claimed that he drove his 2007 Chevy Avalanche to a swap meet in Fontana. He alleged that he parked and locked his vehicle before going shopping. Chavez claimed that when he came back to his vehicle a couple hours later, the Chevy was gone. He filed an auto theft report with the Fontana Police Department and a theft claim with Infinity insurance company.

During a check of vehicles passing through the border, it was discovered that Chavez' Avalanche crossed into Mexico at the San Ysidro crossing about 12 hours before he claimed to have driven it to the swap meet. The District Attorney's Office filed several felony charges against Chavez. Chavez's bail was set at $105,000. A criminal complaint contains only allegations against an individual and Chavez must be presumed innocent unless and until proven guilty.

Attorney Commentary: First, as noted in our prior post, the special units at the county district attorney's office are funded by a surcharge on vehicle insurance premiums which was created by legislation. Thus, there is funding to prosecute these cases and even relatively "small" cases will often result in charges.

Second, the insurance companies have their own special investigation units (SIU) with investigators and attorneys which conduct their own investigations. They conduct their own investigation and put together a package which is then referred for criminal prosecution. If an insured vehicle owner has made some bad decisions, the time to turn around the investigation if possible is while the case is still at the insurance company or its SIU unit.

Third, if you are dealing with interviews with the insurance company and it is a suspicious claim, it is time to hire an attorney. For example, if you submit an insurance claim and the company suspects fraud, you will receive a letter or request for an “Examination Under Oath” or EUO under the penalty of perjury. An EUO is similar to a deposition since there is a court reporter present taking down your statements. This can be used for future criminal prosecution.

If you receive a letter for an EUO, it is time to hire an attorney experienced in insurance fraud to represent you. The earlier you seek to engage in damage control, the better. These cases are not usually going to get better, but will get worse especially if you are making inconsistent statements or providing information that is inconsistent with the actual physical evidence.
The best time to prevent a case from being filed is early on. If you can save being charged with insurance fraud, it will be a worthwhile investment. Once a case is filed, it is much more difficult to obtain dismissals or acquittals -- especially if you have given already given a damaging EUO to the insurance company.

Any questions or comments should be directed to: 
Tracy Green is a principal at Green and Associates, Attorneys at Law, in Los Angeles, California. They focus their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. The firm's attorneys have represented numerous individuals and businesses in insurance fraud investigations and criminal filings.

Monday, June 8, 2009

Legal Issues Regarding Sales Of Dietary And Vitamin Supplements To Patients

As physician and health care provider income has decreased, we have seen increased questions regarding the sale of dietary and vitamin supplements in health care provider offices. This includes physicians such as dermatologists and plastic surgeons, chiropractors, acupuncturists, and other alternative health care practitioners.

Despite the mutual benefits for both the patient and physician, office dispensing continues to be controversial. For example, the American Medical Association is concerned that selling health-related goods in the office may compromise the patient-physician relationship.

In general, we believe that health care providers -- whether physicians or alternative health care practitioners -- should work on preserving the right to dispense dietary and vitamin supplements by conducting themselves in a highly professional and ethical manner with their patients.

As the Internet has become an increased means of doing business, there are also sales via the Internet from providers or companies that providers recommend. This can raise different issues, especially where the health care provider refers the patient to an Internet company and receives a percentage of the purchase price.

Here is one question that was posed to the California State Attorney General's Office in 2001 and helps provide a guideline on the rules.

Question: We are advised that an Internet distributor of naturopathic products proposes to enter into agreements with chiropractors in this state whereby the chiropractors would receive fees of 20 percent of the price of the products purchased by their patients from the company’s website. We are asked whether the proposed program would be prohibited under the provisions of section 650 of the Business and Professions Code.

Answer: The State Attorney General's Office issued a written opinion concluding that the program would violate the statute. Thus, this arrangement would violate the law. In our opinion, the same analysis would apply to any licensed health care provider.

For the opinion in full, see:

In analyzing whether the sale of vitamin supplements to patients would constitute unprofessional conduct or subject our clients to increased liability, we analyze the following facts among others (remembering that each case is different):

■ How does the product relate to the practitioner's specialty?

■ Does the recommended product relate to the diagnosis and/or promoting the patient's wellness?

■ What is the markup and how does it compare to a general retail outlet?

■ Does the patient understand that he or she can buy the product elsewhere?

■ Is there pressure by the staff to sell the patient these products?

■ Does the practitioner provide anything in writing to let the patient know that there is no obligation to buy the product and the quality of care will not be affected by the patient's decision to purchase or not purchase products?

Before embarking on selling vitamin and dietary supplements to patients, consider seeking experienced legal advice on how to structure the sales, how to train your staff and the information to be provided to patients.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates, Attorneys at Law, in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers including alternative practitioners.

Sunday, June 7, 2009

Must Read "New Yorker" Article On McAllen, Texas As Case Study For Health Care Costs And Treatments

As long as we're writing about interesting articles, a must read is Atula Gawande's article entitled "Annals of Medicine: The Cost Conundrum - What A Texas Town Can Teach Us About Health Care."

The article focuses on McAllen, Texas which is one of the most expensive health-care markets in the country. Only Miami—which has much higher labor and living costs—spends more per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee in McAllen, almost twice the national average. The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns. At the same time, the treatments and technologies available at McAllen are no better than those found elsewhere in the country.

The focus of the article is to use McAllen as a microcosm to address our nation's budget issues in the context of the ever increasing cost of health care. There does not appear to be a correlation between the amount spent and the results. McAllen is contrasted with the Mayo Clinic -- which is a very different model and produces better results for much less cost.

For the article, see

NYT Article On Direct Patient Care And Cutting Administrative Costs

The New York Times has an interesting article entitled "If All Doctors Had More Time." The article is about physicians who are redefining health care and becoming more patient centered. They are stepping off the treadmill of seeing 25 to 30 patients per day and focusing on half the patients with longer visit times. This is translating into better health care for patients. In order to do so, however, physicians are relying more on technology, cutting administrative costs and running more cash practices.

For the article, see

Friday, June 5, 2009

California Medical Board Withdraws Complaint Against Transplant Physician After Acquittal In Criminal Case

In late May or early June, 2009, the Medical Board of California withdrew its complaint (known as an "Accusation") seeking to revoke or suspend the medical license of Dr. Hootan Roozrokh, a well-trained San Francisco transplant surgeon, who had been accused of trying to speed a potential organ donor’s death. Dr. Roozrokh had faced criminal, civil and administrative actions arising from this unusual case.

The Medical Board's action helps wind up one of the first cases in the nation where a transplant surgeon was charged criminally, which involved a failed attempt to acquire organs from a comatose 25-year-old patient, Ruben Navarro, who suffered from a wasting neurological condition. In December 2008, after a jury trial, Dr. Roozrokh was found not guilty of dependent adult abuse.

The Medical Board said that additional information had come to the attention of the deputy attorney general who filed the accusation and determined she could not meet the burden of proof. This is quite an unusual step for an accusation to be withdrawn.

The incident that prompted the Medical Board's complaint took place on February 3, 2006, when Navarro was close to death at Sierra Vista Regional Medical Center in San Luis Obispo. He had suffered a heart attack at a nearby care home. His mother had given permission for organ donation, and a team that included Dr. Roozrokh flew in from San Francisco on behalf of a regional transplant network.

The Medical Board accusation, filed last year, accused Dr. Roozrokh of being in the operating room before Navarro’s death and of “actively monitoring the patient’s vital signs for a determination of death.” Under state law, transplant doctors cannot direct the care of organ donors before they are declared dead.

This case arose in part due to the differences between brain-death donations and cardiac-death donations. In brain-death donations, the donor is legally dead, but machines keep the organs viable by machines. In cardiac-death donations, after the patient’s ventilator is removed, the heart slows. Once it stops, brain function ceases. Most donor protocols call for a five-minute delay before the patient is declared dead. Generally, transplant teams are not allowed in the room of the potential donor before that.

There were 670 cardiac-death donations through the first nine months of 2007, the most in any year this decade, according to the United Network for Organ Sharing, which oversees organ allocation. Over the same period, there were 12,553 brain-dead donations. Transplanting organs from cardiac-death donations decreased significantly after medical advances like life support and subsequent changes in the legal definition of death made donations from those declared brain dead more efficient. But health officials have encouraged cardiac-death donations in recent years.

Cardiac-death donations are much more rare and the hospital staff in this case was seemingly unclear about how to proceed. Dr. Roozrokh had arrived to supervise a donation after cardiac death, a procedure that had never been performed at the 165-bed hospital.

The Medical Board accusation also accused Dr. Roozrokh of ordering staff to give Navarro pain and anxiety medication even though he did not have staff privileges at the San Luis Obispo hospital. At the criminal trial, Dr. Roozrokh said that the operating room staff was so confused that he had just one ethical choice: step in to ease what pain and terror Navarro might have been silently experiencing. Navarro survived eight hours after he was removed from life support and given the drugs. By that time, his organs were no longer viable and could not be recovered. Navarro's death was found to have been from natural causes.

There was also a civil lawsuit against Dr. Roozrokh by Navarro's family but the status of that case is not known.

Attorney Comment: This was an aggressively prosecuted case from the beginning. The criminal case was unprecedented. It also shows that even if a licensed professional wins an acquittal at a criminal case, there can still be a prosecution by the Board which has a lower burden of proof. We salute the deputy attorney general and her supervisors who made a politically tough and sometimes unpopular decision to dismiss an ongoing accusation.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Thursday, June 4, 2009

Accupuncture, Chiropractic, Podiatric, Dental, Optometric, And Psychological Benefits Could Be Eliminated From Medi-Cal On July 1, 2009

In February 2009, Gov. Schwarzenegger and the state Legislature enacted a budget that eliminated the provision of nine Medi-Cal “optional benefits,” including adult dental, psychology, chiropractic, acupuncture, speech therapy, incontinence creams and washes, audiology, optometry and podiatry services. The defunding of optional Medi-Cal benefits is scheduled to take effect on July 1, 2009.

However, these cuts would not be enacted if California receives sufficient funds from the recently signed federal economic stimulus package. The final state budget package assumes that California will receive a conservatively projected $7.8 billion of federal revenue as part of the recently enacted federal stimulus package. The California budget bill contains a "federal revenue trigger" that could restore funding for optional Medi-Cal benefits. If the total revenue ultimately received from the federal government by April 1, 2009, exceeds $10 billion, cuts to these Medi-Cal services would be avoided.

There are some legal challenges to these proposed Medi-Cal cuts. For example, the California Primary Care Association and two of its member health centers, Clinicas Del Camino Real, Inc. in Ventura and Southern Trinity Health Services in Trinity, jointly sued the state of California last month to prevent the elimination of certain Medi-Cal benefits currently being provided by California’s Federally Qualified Health Centers (FQHCs) and Rural Health Centers (RHCs).

The lawsuit filed in Sacramento Superior Court seeks a writ of mandate preventing the state from eliminating Medi-Cal adult dental, chiropractic, optometry, podiatry, and psychology services when provided by an FQHC or RHC. Because these services are included in the definition of FQHC and RHC services under state and federal law, FQHC and RHC services are mandatory and not “optional” Medicaid benefits, the suit said. The plaintiffs in this lawsuit seek to have the matter heard and resolved prior to July 1.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates, Attorneys at Law, in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Wednesday, June 3, 2009

Telemedicine Internet Prescribing Case - Colorado Doctor Sentenced To 9 Months Jail Sentence In California

In a case that could have ramifications for online prescribing and telemedicine, on April 19, 2009, a Colorado physician, Christian Hageseth, was sentenced to nine months in jail for prescribing the antidepressant fluoxetine (generic Prozac) over the Internet to a California teenager and Stanford student who later committed suicide two months later. There was no evidence that the Prozac caused the death of the student in 2005.

The case is one of the first criminal prosecutions of a practitioner for using telehealth without having a license in the patient's state. In other words, Dr. Hageseth was never present in California at any time during the alleged commission of the unlawful practice of medicine but the California court nevertheless asserted jurisdiction over him.

The physician has already surrendered his medical license. The sentence followed a no contest guilty plea after the California Court of Appeals issued an opinion in May 2007 which held that authorities could cross state lines to pursue criminal charges against Dr. Hageseth. Hageseth v. Superior Court, 150 Cal. App.4th 1399, 59 Cal. Rptr.3d 385.

After sentencing, Hagaseth made a statement that he pled guilty because he was financially and emotionally drained. Hageseth was allowed to serve the sentence in Colorado. He also was ordered to pay $4,200 to reimburse the Medical Board of California for investigation costs.

History Of Case

The case was prosecuted by the San Mateo County District Attorney's Office which followed up on an investigation of Dr. Hageseth's conduct by the Medical Board of California, which referred the case to county authorities for criminal prosecution.

The Medical Board's position was that Dr. Hageseth was not legally practicing telemedicine because he was not licensed in California when he prescribed fluoxetine to 19-year-old John McKay through an Internet pharmacy. Further, the Board indicated it did not meet its telemedicine criteria since there was no face-to-face evaluation nor an established patient-physician relationship. In our opinion, it may have been referred criminally because the California Medical Board did not have any jurisdiction over a Colorado physician.

This case took 3 years to go through the courts and there was a civil lawsuit which was ultimately dismissed. The history is as follows. In 2006, the San Mateo District Attorney's Office filed a felony charge against Dr. Hageseth for practicing medicine without a license under § 2052 of the California Business and Professions Code. Section 2052 provides that any person who "practices . . . any mode of treating the sick . . . in this state, or who diagnoses, treats or prescribes for any . . . physical or mental condition of any person, without having at the time a valid . . . certificate as provided in this chapter or without being authorized to perform the act pursuant to a certificate obtained in accordance with some other provision of law is guilty of a public offense, punishable by a fine not exceeding ten thousand dollars, by imprisonment in the state prison, by imprisonment in a county jail not exceeding one year, or by both”.

The criminal complaint was based on the California Medical Board's investigative report. The report states that, on or about June 11, 2005, John McKay, a resident of San Mateo County, initiated an online purchase of fluoxetine (generic Prozac) on "www. usanetrx. com," an interactive Web site located outside of the United States. The questionnaire McKay received and returned online, which identified him as a resident of this state, was forwarded by operators of the Web site to JRB Health Solutions for processing. JRB, which has its headquarters in Florida and operates a server in Texas, forwarded McKay's purchase request and questionnaire to Dr. Hageseth, its "physician subcontractor," who resided in Fort Collins, Colorado, and was licensed to practice medicine in that state.

After reviewing McKay's answers to the questionnaire, Dr. Hageseth issued an online prescription of the requested medication and returned it to JRB's server in Texas. JRB forwarded the prescription to the Gruich Pharmacy Shoppe in Biloxi, Mississippi, which filled the prescription and mailed the requested amount of fluoxetine to McKay at his California address. Several weeks later, intoxicated on alcohol and with a detectable amount of fluoxetine in his blood, McKay committed suicide by means of carbon monoxide poisoning.

Hageseth moved to dismiss the charge on the grounds that the court lacked jurisdiction to hear the case because “all the alleged criminal acts occurred outside the state” of California. The trial court denied his motion and he appealed.

Court Of Appeals Decision

The Court of Appeals began its analysis of the jurisdiction issue by noting that § 27 of the California Penal Code says “persons are liable under the laws of this state . . . who commit, in whole or in part, any crime within this state.” It noted that because the issue of jurisdiction goes to the court’s power to hear a case, it is a legal issue that must be decided by the court, not by a jury.

Hageseth argued on appeal that his act of practicing medicine began and ended with the writing of the prescription in Colorado, and the filling of the prescription, which occurred in Mississippi, was an entirely separate act, requiring a separate license’ for which he cannot be held criminally accountable. Hageseth argued that it is irrelevant whether he knew the medication he prescribed would be sent to California because his act ended with the writing of the prescription.

The Court of Appeals responded by noting that under the “detrimental effects" theory of extraterritorial criminal jurisdiction, acts “done outside a jurisdiction, but intended to produce and producing detrimental effects within it, justify a State in punishing the cause of the harm as if he had been present at the effect”.

The Court of Appeals then found that the facts in this case supported the application of the “detrimental effects” theory of jurisdiction. The Court of Appeals opined:

"A preponderance of the evidence shows that, without having at the time a valid California medical license, [Hageseth] prescribed fluoxetine for a person he knew to be a California resident knowing that act would cause the prescribed medication to be sent to that person at the California address he provided. If the necessary facts can be proved at trial beyond a reasonable doubt, the People will have satisfactorily shown a violation of Business and Professions Code section 2052. It is enough for our purposes that a preponderance of the evidence now shows that [he] intended to produce or could reasonably foresee that his act would produce, and he did produce, the detrimental effect section 2052 was designed to prevent[, i.e., practicing medicine without a license.]"

The Court of Appeals then considered and rejected Hageseth's other arguments including whether it should make a difference that the offense took place in cyberspace rather than in the real space for which the jurisdictional statutes were designed.

Attorney Comments: AMA policy requires that physicians who prescribe via the Internet have a valid relationship with the patient -- including having taken a medical history, performed a physical exam and being available for follow-up -- and appropriate licensure. The AMA also supports creation of uniform state and federal rules for online prescribing. The AMA's policy may go further than most telemedicine practitioners would deem reasonable -- especially where there are consult referrals for radiology or opthamology.

When physicians consider telemedicine practices which may or may not include Internet prescribing, these "worst case" scenarios need to be considered. Every attempt must be made to comply with various state rules and abiding by AMA policy can be a valid defense. Legal opinions regarding the telemedicine practice are critical to avoid facing exposure by various state medical boards or other types of prosecution.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Tuesday, June 2, 2009

Medicare Enrollment Rules - Important Changes On Retroactive Billing And Maintaining Documentation

Health care providers (physicians, providers and suppliers) should be aware that new Medicare enrollment rules that recently took effect limit physicians’ ability to retroactively collect from Medicare. There are also new rules regarding maintaining ordering and referring documentations.

The new rules, which took effect on April 1, 2009, shorten the time frame during which these providers can bill retroactively for Medicare services after enrolling or otherwise changing their enrollment status. Under the new rules, enrollment will be retroactive to 30 days prior to the receipt date of a complete application, or for new physicians joining Medicare, the date the physician saw his first Medicare patient, whichever is latest.

This change could result in providers not being paid for services to Medicare beneficiaries if they do not submit applications or other status changes (such as change of ownership, change in location or a final adverse action) within 30 days. For example, if a medical supplier changes location on January 1 but does not submit an address change to Medicare until June 1, the supplier could lose 4 months worth of Medicare payments. The supplier can bill retroactively to May 1 (30 days prior to submitting the address change), but he cannot bill for any supplies provided to beneficiaries seen during the 4 month period after the move, but before the change of address was filed.

The new rules also require providers to alert Medicare of a change in practice location within 30 days, or risk expulsion from Medicare for up to two years. It is imperative that providers submit new applications and reportable changes accurately and immediately in order to avoid such payment gaps. To avoid unnecessary delays, it is recommended that providers use Medicare’s web-based PECOS enrollment system.

Requirements for maintaining ordering and referring documentation

Under these rules, carriers may revoke the billing privileges of any provider or supplier that fails to comply with Medicare’s ordering and referring documentation requirements as specified in 42 CFR 424.5216 (f). Such revocation is also possible in cases where the physician or non-physician practitioner fails to maintain written ordering and referring documentation for seven (7) years from the date of service. Off site or electronic storage are acceptable as long as the records are readily retrievable.

For more information, see this notice from Palmetto:$FIle/cr6310_pim_physicianfees_revised.pdf

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Monday, June 1, 2009

In-Home Healthcare Workers Charged With Medi-Cal Fraud In Los Angeles County

On May 21, 2009, the California State Attorney General's Office filed separate criminal cases and charges against two dozen in-home healthcare workers who allegedly defrauded the program by seeking payment for services to clients who were allegedly dead, hospitalized or incarcerated. These cases were filed in Los Angeles County Superior Court.

These named defendants were sent a letter ordering them to surrender to the court in June. If they fail to appear, an arrest warrant will be issued. If convicted, the defendants could face one year in county jail to five years in state prison, depending on whether misdemeanor or felony charges were filed.

Under Medi-Cal's In-Home Supportive Services program, workers perform non-medical services for qualified Medi-Cal recipients. This includes housekeeping, grocery shopping and meal preparation. In-home healthcare workers are required to submit timesheets signed and certified by their clients to receive payment. In 2008, more than 400,000 Californians received in-home healthcare services, twice as many as in 1999. State costs for operating the program are approximately $2 billion per year.

After a 2008 audit revealed that hundreds of payment requests had been submitted for in-home services never performed, the Attorney General's Office and the California Department of Health Care Services launched an investigation into the program, leading to the charges filed and an ongoing investigation into physicians who allegedly facilitate this type of fraud.

It appears that most of the defendants were charged with one count of grand theft and one count of presenting false Medi-Cal claims. Some defendants were charged with misdemeanors and others were charged with felonies. In many of these cases, the alleged fraud was under $5,000.

For example:

■ One Compton man alleged submitted false claims totaling $3,394 for services to his mother who, in fact, was hospitalized and later died.

■ A Los Angeles woman allegedly submitted false claims totaling $1,488 for services to her client who, in fact, had died.

■ A Long Beach woman allegedly submitted false claims totaling $2,953 for services to her mother who, in fact, had died.

■ A Los Angeles man allegedly submitted false claims totaling $6,506 for services to his client who, in fact, had died.

Attorney Comments: There are a couple of notable things about these cases. First, the Attorney General's Office is prosecuting smaller Medi-Cal fraud cases, including misdemeanors, and there does not appear to be a threshold amount for prosecution. The Office is apparently taking the position that it wants to be aggressive and tag those individuals with Medi-Cal fraud convictions. The charges filed are alternative theories for grand theft in violation of Penal Code Section 487(a) and Medi-Cal fraud in violation of Welfare and Institution Code Section 14107(b)(1). 

Second, the Office has filed those cases where it appears to be straight out fraud, such as billing for a deceased patient. There are no cases where it is alleged that the services were not necessary. The allegation is that false time sheets for In-Home Supportive Services were presented and that therefore these were false and fraudulent claims.

Third, the real goal here may be to seek the individual defendants' cooperation against physicians who are required to authorize the in-home health supportive services.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers. Specifically, the firm has been the attorney defending claims of In-Home Supportive Services fraud.


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