California Meat Processing Company and Two Company Officials Plead Guilty to Selling Misbranded Beef, Pork and Poultry They Falsely Claimed Had Been Inspected

Regulatory cases can turn criminal and the resolution often takes years. A recent case began on the regulatory side in 2012 and became a criminal case which has taken six years to resolve. The case has also cost the company millions of dollars in product seizures, recall requirements, legal fees and fines. It shows the potential risk of non-compliance.

On August 1, 2018, a meat processor Golden Key Food, Inc. dba AA Meat Products Corp. was investigated in 2012 by the U.S. Department of Agriculture (USDA) for selling meat that was produced without federal inspection. The government alleged that AA Meat products had a plant in Maywood that was operating under a USDA grant of inspection where meat and poultry food products were properly federally inspected, but that they had a second facility in Commerce did not have USDA inspection grant. USDA alleged that AA Meat produced and sold meat (such as trip, duck feet, and other less expensive parts) from its Commerce plant that had not been inspected but was stamped as if it had been inspected.

In 2012, the USDA investigators came in and seized approximately 568,000 pounds of meat and poultry products. The USDA then issued a Class I recall led to the recovery of another nearly one-half million pounds of meat – all of which had to be destroyed.

Misbranded Drugs Case: Doctor Convicted By Jury Of Buying Non-FDA Approved Cancer Drugs From Foreign Countries And Using Them In His Oncology Practice

On May 8, 2009, a California physician, Vinod Chandrashekm Patwardhan, of Claremont, California was convicted by a jury in federal court in Riverside of conspiracy, two counts of introducing misbranded drugs into interstate commerce with intent to defraud or mislead, and three counts of smuggling foreign misbranded cancer drugs into the United States .

Dr. Patwardhan is an oncologist who maintained offices in Upland and Chino. The evidence presented during a seven-day trial showed that Patwardhan regularly purchased unapproved cancer drugs from foreign countries including India, Honduras, Panama and the Philippines.

From 2004 until his arrest last August, Patwardhan smuggled or caused to be smuggled more than $1.3 million worth of unapproved drugs from foreign countries. The investigation revealed that Patwardhan and his employees made at least 34 trips to foreign countries to obtain drugs that were smuggled into the United States. Most of Patwardhan’s patients were receiving the unapproved and misbranded foreign drugs, a fact Patwardhan concealed from his patients.

Dr. Patwardhan charged the patients, their insurance companies and Medicare for the unapproved drugs at the same rate that he would charge for FDA-approved drugs, even though he had paid significantly less for the unapproved foreign drugs.

For example, one invoice signed by the doctor, showed that he approved the $888,900 purchase of 100 vials of Docetax 80 mg and 300 vials of two other drugs, also illegible. Docetax is used in for the treatment of metastatic breast cancer. Other drugs included Pemnat 500 mg, Neupeg and Grafeel 1 ml, made in India and Farmorubicina manufactured in Italy. These medications are not FDA approved when purchased from other countries even if they are the same medications.
Authorities began investigating Patwardhan in March 2008 after one of his employees said the doctor was treating patients with cheaper cancer medications purchased from India and Honduras that were not approved for use in the U.S. by the Federal Drug Administration.

Two of Patwardhan’s former employees have pleaded guilty to misdemeanor charges of introducing unapproved new drugs into interstate commerce and are scheduled to be sentenced later this year.

Dr. Patwardhan treated about 35 cancer patients a week and allegedly told investigators prior to charges being filed that he had been bringing in medication for "quite some time." Employees became suspicious of the unauthorized drugs because Dr. Patwardhan would bring them in gym bags or other concealed packages. Generally, FDA approved oncology drugs are shipped by U.S. companies in refrigerated containers through Federal Express or other courier services.

One employee told investigators that Patwardhan traveled to India three or four times a year and had been purchasing cancer medication from there for six or seven years. Employees said he also had one person purchasing drugs from Honduras and asked them to purchase drugs on trips to Canada and the Philippines.

Dr. Patwardhan is scheduled to be sentenced by United States District Court Judge Virginia A. Phillips on July 20. At sentencing, Patwardhan faces a statutory maximum penalty of 71 years in federal prison.

Attorney Comments: Although the U.S. Attorney spokesman stated that this is the first such case he had seen in 12 years, we have seen numerous cases such as this one. This type of case arises by the huge difference in prices between FDA approved medications or devices in the U.S. and the price for these same medications or devices in other countries. The U.S. prices can be anywhere to 300% to more than 1,000% more than the foreign prices.

There appears to be no evidence that any patients were harmed by these medications made in other countries. Instead, it was a case about providing and billing for non-FDA approved medications (and bringing them into the U.S.) Some drugs made in other countries do not have safety controls that are required by the FDA but these drugs did not seem to have these issues.

Our office handled a number of cases where Copper T-380 IUDs made in other countries were being sold by pharmacies and suppliers to medical offices. The price differences were very large and enabled the offices to provide these IUDs to their patients. The price of the FDA approved IUDs distributed by only one company were higher than the reimbursement for Medi-Cal. The device appeared identical and there was no indication that there was any difference between the devices made outside the U.S. Nevertheless, some physicians were charged criminally where it could be shown that they knew the device was made overseas and that it was bought at a significant discount. Some of our clients were able to avoid criminal prosecutions but each case was fact specific.
It appears that Dr. Patwardhan was offering these medications made outside the U.S. to HMO patients where the HMOs refused payment or treatment. Regardless of the doctor's intentions, cases such as these are often open and shut when it is possible to prove that the physician knew that the medication or device was from another country and was not FDA approved. Insult is added to injury where the physician bills for the non-FDA approved drug or device and the Medicare and Medi-Cal manuals are clear that only FDA approved drugs or devices are reimbursable.

Be wary of suppliers coming to your office and offering drugs or devices at a large discount. Further, do not succumb to the temptation of saving money by buying drugs or devices from other countries (including Canada) and then billing for them. In the event of any question about whether you are purchasing FDA approved drugs or devices or have failed to do so in the past, err on the side of caution and involve your health care attorney or compliance officer at the earliest time possible.

Any questions or comments should be directed to: tgreen@greenassoc.com. 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.

Moving Or Changing Jobs? Notify Your Board Or Bureau Of New Address!

If you are a licensed professional and moving your practice or changing jobs to a different company, firm or practice, make sure you notify your Board or Bureau of your new address.

Every year, licensed professionals get fined, have licenses lapse and sometimes even lose their licenses because they moved and failed to notify their Board and Bureau.

Here is one real example from our practice. An attorney moved from a shared office space where she was not allowed to file a change of address with the post office. Attorney picked up her mail for some months after she moved. Attorney forgot to notify the State Bar of her change of address. Six months after she moved -- and after she ceased picking up mail -- the State Bar sent her license renewal form to her old office. It was returned to the State Bar as non- deliverable. Attorney forgot to renew her license. While she was in the middle of handling a civil litigation matter, opposing counsel notified the court that she was no longer licensed to practice law. Further, she had been "practicing law without a license" for over 6 months which created a disciplinary problem with the State Bar.

Here is another example from our practice. A physician did his residency at UCLA. Physician moved to Atlanta to do a fellowship. Physician failed to notify the Medical Board of his move relying on the hospital to do so. Medical Board mailed physician license renewal form and other mail which was returned as non-deliverable. The Medical Board issued an administrative citation to physician for not notifying Board of change of address.

In some cases, professionals forget to pay their fees for years. In some Boards, such as the California Board of Accountancy, after being delinquent five years, licenses are terminated automatically. For the State Bar, for example, the license must be renewed annually or it will lapse.

To check your address of record at your applicable Board or Bureau, visit its website and click on "License Lookup" or similarly titled section in the consumer's section. To ensure the privacy of your home address, you may use a P.O. box as your address of record as long as the Board has a street address on file.

Any questions or comments should be directed to: tgreen@greenassoc.com. 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.

California Hospitals Fined For Violations By Department Of Public Health

On May 20, 2009, the California Department of Public Health on Wednesday issued $25,000 penalties against 13 California hospitals -- including seven in Los Angeles and Orange counties -- for alleged serious violations. Some of these hospitals may appeal the fine. One hospital has publicly stated that it will not.

The disclosures come as a result of a state law that took effect in 2007 requiring hospitals to inform health regulators of all substantial injuries to their patients. The incidents that resulted in fines include:

■ UC Irvine Medical Center received two penalties. In one case, a UCI patient reported that she had been "inappropriately touched 'vaginally' " by a male nursing assistant in September 2008. State investigators found that it took the hospital three days to place the man on leave. "Other staff members felt he was a good employee," and he he had no history of complaints. The employee is no longer working at the hospital and the matter was turned over to the Orange County District Attorney's office for review.

In the second UCI case, a patient fell when reaching for the sink on the way to a bathroom last June. The fall caused bleeding in the brain, and the patient later died. At the time of the fall, the nurse assigned to the patient had left the area without informing colleagues. The hospital has since implemented a fall prevention program and teaching plan, provided high-risk patients with nonskid red socks and made bedside equipment available, including walkers. "

■ At St. Jude Medical Center in Fullerton, a surgeon left inside the patient a 10-by-10-inch plastic drape while performing a hysterectomy last July. The surgeon immediately realized his mistake and quickly brought the patient back in for a second surgery. The hospital performed a root-cause analysis to make sure what had happened never happens again.

■ At Whittier Hospital Medical Center, doctors began performing the wrong surgical procedure on a 63-year-old colon cancer patient last October. A nurse failed to check the woman's wristband and wheeled her into the wrong operating room. Instead of the surgery planned for her -- implantation of a device that allows frequent blood withdrawals -- doctors began a pelvic exam and scraped the vaginal cuff for biopsies. Doctors did not realize they had the wrong patient until they discovered she had no uterus and ended the procedure. The hospital has stated that they have corrected the problems that led to this unfortunate incident.

■ An inexperienced nurse at Brotman Medical Center in Culver City administered a pain medication intravenously that should have been injected. The patient suffered a brain injury because of a lack of oxygen, fell into a coma and was placed on a ventilator. State investigators found that seven weeks after the first incident last July, the hospital violated its own policy by failing to mark all syringes filled with the same painkiller, hydromorphone, with a pink high-alert sticker. The hospital has revised its protocols.

■ At Harbor-UCLA Medical Center, medical staff left a sponge in a patient's abdomen during surgery on September 15, 2007. Nearly a year later, a hospital scan revealed the sponge surrounded by a cyst. The hospital has represented that it has taken corrective action by revising its policy on counting surgical sponges.

■ At St. Francis Medical Center in Lynwood, medical staff gave a patient too much potassium to correct low electrolyte levels, triggering a fatal heart attack. After the patient was given the drug, medical staff did not measure the patient's potassium levels for about one day, when they were critically high. State officials conducting a probe of the facility two months later found that the hospital had not enacted a new policy to monitor patients receiving potassium. During that inspection, they found that a patient had received potassium but was discharged without the hospital ever checking to see if the patient's potassium level or heart rate was stable. St. Francis has stated that it will not appeal the fine.

■ At Hollywood Presbyterian Medical Center, nurses on October 28, 2008 gave a patient blood intended for another person, causing the patient to die. The hospital issued a statement expressing its deep regret.

Any questions or comments should be directed to: tgreen@greenassoc.com. 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.

California Accountancy Board: Proposed Legislation And Regulations Affecting Accountants

2009 Proposed Legislation.

This is a busy time of the year for proposed legislation, regulations and rules relating to certified public accountants and the California Board of Accountancy (CBA). Here are recent developments:

Continuing Education. The CBA recently held a regulatory hearing on proposed amendments to the Continuing Education Regulations. Under the proposal, California CPAs are still required to complete 80 hours of continuing education every two years, but the regulations will require completion of a minimum number of hours annually. CPAs renewing an active license after December 31, 2011, must complete a minimum of 20 hours annually with at least 12 of the 20 hours in technical subject areas. The CBA will require that licensees complete two hours of ethics focused on regulatory and statutory review every six years. Additionally, four hours of ethics will be required every renewal period.

Proposed Legislation Re: Educational Requirements

Senate Bill 691 (Yee, Niello, Ma) would require all candidates entering the profession after January 1, 2014, meet to the Uniform Accountancy Act’s 150-hour educational requirement (i.e., a bachelor’s degree plus 30 units, including 24 semester hours or units in business and 24 hours in accounting). This legislation would allow current and future California CPAs to represent the needs of taxpayers and clients with interests in other states.

Inactive License Status Disclosure

Assembly Bill 117 (Niello, Ma) would require CPAs with inactive licenses to disclose that fact when using the CPA designation. The CBA currently allows CPAs employed by private business or government to use the title CPA on their business cards, résumés and in other business communications even if their license is “inactive.” CPAs in industry and government are often employed in the finance and accounting department of the business or government agency and involved in the preparation of financial statements for audit or in obtaining financing from banks or investors. AB 117 would require that CPAs with inactive licensees disclose that fact when using the CPA title by placing the word “(inactive)” immediately after CPA on business cards, stationery, résumés or other business communications. AB 117 has already passed the Assembly Business and Professions Committee.

Peer Review

Assembly Bill 138 (Hayashi) would enact a mandatory peer review requirement for California firms providing any audit, review or compilation services. The mandate would be phased in beginning in 2010. Peer review is already mandatory in most states, most recently in New York.

Taxpayer Privilege Sunset Extension

Assembly Bill 129 (Ma) introduces urgency legislation to re-enact the taxpayer confidentiality provisions for enrolled agents and CPAs that expired December 31, 2008. This privilege was enacted in 2000 and can be asserted in non-criminal tax issues that do not involve abusive tax shelters and conforms to Internal Revenue Code provisions.

Fiduciaries Bureau Exemption

Assembly Bill 276 (Hayashi) would clarify the exemption from licensing by the Professional Fiduciaries Bureau for enrolled agents and CPAs who provide ancillary fiduciary services to clients. The Fiduciaries Bureau was created recently to require registration from individuals who assume control of the financial and medical affairs of unrelated individuals. CPAs and enrolled agents are exempted from registration as long as they are acting within the scope of their practice. However, the Fiduciaries Bureau recently adopted the position that enrolled agents are required to register with it because fiduciary services are not within their scope of practice. This is presently disputed since the intent of the legislation was to provide an exemption for CPAs and enrolled agents as long as they were not holding themselves out as professional fiduciaries.

The text of the bills, as well as additional legislative information, can be found on the Internet at http://www.leginfo.ca.gov/.

Any questions or comments should be directed to: tgreen@greenassoc.com. 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 (including accountants) in civil, business, administrative and criminal proceedings.

FDA Misbranding Case: Former Manager For Medical Device Company Pleads Guilty To Felony In Boston

On April 14, 2009, Shane Doyle, who worked as a territory manager for Stryker Biotech (a publicly traded medical device company based in Hopkinton, Massachusetts), pled guilty before U.S. District Judge Woodlock in Boston, Massachusetts to one count of felony misbranding. The medical device at issue, OP-1 (Osteogenic Protein -1), is designed to promote bone growth and was approved by the FDA only pursuant to a Humanitarian Device Exemption (“HDE”), which is quite narrow and restrictive. It is approved in 28 other countries however.

At the plea hearing, the prosecutor told the Court that had the case proceeded to trial the Government’s evidence would have proven that Mr. Doyle, in his capacity as a territory manager for his employer, promoted the use of these devices in a manner that was different from its FDA approved use. Specifically, he promoted a combination of the HDE devices with a bone void filler, and in furtherance of that promotion provided mixing instructions to surgeons, medical technicians and others.

Sentencing is set for July 23, 2009, and Doyle faces up to 3 years imprisonment, to be followed by 1 year of supervised release and a $250,000 fine.

Attorney Comment: This is the third Stryker sales representative to have entered a guilty plea. On March 6, 2009, the U.S. Attorney's Office sent Stryker a letter that they are the target of a federal grand jury investigation for the alleged illegal promotion of OP-1 and Calstrux. The question will be how high up does this go? Sometimes corporations plea rather than individuals and here it looks like they're working from the bottom up.

Prior to this criminal investigation and guilty pleas from sales representatives, Stryker had received a "No" recommendation for approval from the FDA Ortho Panel and FDA warning letters for their plant in Massachusetts. For a product that had not been approved by the FDA, the sales representatives and company put a lot on the line and took a lot of risks.

For those who are working for corporations, this case is a reminder not to put short-term sales ahead of one's career or liberty. With one of these felony convictions, apart from the risk of prison time, one collateral consequence for the Stryker sales reps will be OIG exclusion from most health care related jobs for 5 years. Seek independent counsel if your 6th sense tells you that corporate policies are violating the law. For businesses and individuals, compliance is the key. Stryker is a large orthopedics company and the fact that even it can come under criminal investigation should be a sign as to how aggressive the government can and will be in health care cases -- especially where FDA non-approved devices or products are at issue.

Any questions or comments should be directed to: tgreen@greenassoc.com. 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.

Mortgage Modification And Foreclosure: FTC Filing Lawsuits And Sending Warning Letters

The Federal Trade Commission announced on April 6, 2009 a crackdown on fraud and deception by mortgage modification and home foreclosure rescue companies. The FTC is seeking to halt the proliferation of these mortgage relief offers – which target distressed and vulnerable consumers who are delinquent or facing foreclosure.

The FTC has filed numerous criminal and civil cases. In addition, the FTC sent a warning letter out to over 70 companies in the past few weeks who they suspect of engaging in deceptive marketing mortgage loan modification or foreclosure rescue services. A copy of the warning letter can be seen at: http://www.ftc.gov/os/2009/04/090406warningletter.pdf

On February 2, 2009, the California State Bar has also issued an "Ethics Alert" regarding legal services to distressed homeowners and foreclosure consultants on loan modifications.

The State Bar expresses the opinion that there is evidence that some foreclosure consultants may be attempting to avoid the statutory prohibition on collecting a fee before any services have been rendered by having a lawyer work with them in foreclosure consultations. The State Bar opines that many of the proposed relationships between these foreclosure consultants and lawyers could violate the Rules of Professional Conduct and other ethical rules and, therefore, could result in lawyer discipline. The State Bar's stated purpose of the Ethics Alert is to remind California lawyers of several ethics rules that may apply in the event a foreclosure consultant or another non-lawyer requests assistance from a lawyer and/or refers potential distressed homeowner clients to the lawyer.

A copy of this Ethics Alert can be seen at:

http://www.calbar.ca.gov/calbar/pdfs/ethics/Ethics-Alert-Foreclosure.pdf

California law specifically addresses foreclosure consultants and restricts their activities; among other things, they are prohibited from collecting upfront fees for their work. (See California Civil Code Section 2945 and following). However, because attorneys are permitted to accept advance fees, they are in demand by some loan modification businesses. (Licensed brokers also may accept advance fees under certain circumstances.)

Attorney Commentary: Companies or individuals who are engaged in this business need to be aware of the law and ensure that they are compliant with federal and state law. The FTC is not waiting for consumer complaints and sent the warning letter to companies that were discovered on the Internet by a review of their advertisements or websites. Anyone working in the area of loan modification should be especially careful to be fully compliant with the law. Attorneys working in this area with loan modification consultants should also be mindful of fee splitting issues, referral fee issues and the aiding and abetting of the unlicensed practice of law. Licensed brokers should have similar concerns about being compliant with the law.

Scott Drexel, the State Bar’s chief prosecutor, says that for the last three months, the bar has received 50 complaints each day — about 950 complaints a month — about lawyers involved in some way with the foreclosure crisis. While the complaints are varied, Drexel said the most common concerns lawyers who lend their name to a loan modification operation but non-lawyers do most of the work. The non-lawyers get fees upfront through the lawyer and either do not complete the modification or do it incompetently. As a result, he said, the client loses his or her money.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. The firm focuses its practice on the representation of individuals, licensed professionals and businesses in civil, business, administrative and criminal proceedings.

Attorney Comments: HIPAA Extended To Business Associates

The American Recovery and Reinvestment Act (Recovery Act), signed into law on February 17, 2009, broadens the scope of the Health Insurance Portability and Accountability Act (HIPAA) to impact not only covered entities—including physicians, hospitals and health plans—but also those entities that support the healthcare industry as “business associates,” which include third-party administrators, consultants, service providers and attorneys. Additionally, organizations that provide data transmissions of protected health information (PHI) to covered entities or business associates now will be required to enter into business associate agreements with covered entities.

This means that if your entity is sharing protected health information with other entities, there should be written HIPAA agreements with them. Further, if they release a patient's PHI, they will be subjected to potential civil and criminal fines and penalties.

The Recovery Act extends specific HIPAA regulatory requirements to business associates. Beginning February 17, 2010, the administrative, physical and technical safeguard requirements of the security regulations, as well as the polices, procedures and documentation requirements will apply to business associates. Traditionally, business associates were required by contract to use certain precautions regarding the use and disclosure of PHI, and if a business associate unlawfully disclosed PHI, it only faced a breach of contract claim by the covered entity. Under the Recovery Act, business associates now face civil and criminal fines and penalties for HIPAA violations.

The U.S. Department of Health and Human Services (HHS) is now required to conduct periodic audits to make sure covered entities and business associates are complying with the new privacy and security requirements. Additionally, generally effective immediately, state attorneys general have been granted expanded authority to enforce violations of HIPAA on behalf of the citizens of their respective states.

In light of the HIPAA changes contained in the Recovery Act and the impending regulations, covered entities and business associates should prepare to reevaluate current HIPAA policies, assess levels of access to PHI and prepare to incorporate the required changes into business associate agreements.


Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates. They focus their practice on the representation of professionals, particularly health care professionals including individual physicians, corporate providers and group practices.

California Dep't of Public Health Issues Administrative Penalties to 10 Hospitals

On March 3, 2009, the California Department of Public Health (CDPH) issued a press release announcing that 10 hospitals have been assessed administrative penalties of $25,000, under the authority of Health and Safety Code Section 1280.1, from the State of California after a determination that the facilities’ noncompliance with licensing requirements has caused, or was likely to cause, serious injury or death to patients.

See: http://www.cdph.ca.gov/HealthInfo/news/Pages/NR2009-13-HospitalAdministrativePenalties.aspx

Facilities can appeal an administrative penalty by requesting a hearing within 10 calendar days of notification. If a hearing is requested, the penalties are to be paid if upheld following appeal. These facilities will be required to implement a plan of correction to prevent future incidents.
The following hospitals received penalties (which can be appealed):

1. Anaheim General Hospital, Anaheim, Orange County. The hospital allegedly failed to ensure comprehensive oversight and management of the dietary department resulting in potentially hazardous food handling practices. The facility has received two previous penalties; this is the facility’s third administrative penalty.

2. Bakersfield Memorial Hospital, Bakersfield, Kern County. The hospital allegedly jeopardized the health and safety of patients by not having properly functioning anesthesia equipment. This is the facility’s first administrative penalty.

3. Fountain Valley Regional Hospital and Medical Center, Fountain Valley, Orange County. The hospital allegedly did not protect the health and safety of a patient when it did not follow its policies and procedures for the safe and accurate administration of medications. The facility has received one previous penalty; this is the facility’s second administrative penalty.

4. Mad River Community Hospital, Arcata, Humboldt County. The hospital allegedly failed to follow its policies and procedures regarding radiation safety. This is the facility’s first administrative penalty.

5. Marin General Hospital, Greenbrae, Marin County. The hospital allegedly failed to ensure the health and safety of a patient when the hospital did not follow its surgical policies and procedures. This resulted in a patient having to undergo a second surgery to remove a retained foreign object. This is the facility’s first administrative penalty.

6. Northbay Vacavalley Hospital, Vacaville, Solano County. The hospital allegedly did not ensure the safety of a patient at risk for falls by failing to follow its policies and procedures. This is the facility’s first administrative penalty.

7. Scripps Mercy Hospital Chula Vista, Chula Vista, San Diego County. The hospital allegedly failed to have a safe, effective and timely system for dispensing and administering medications. This is the facility’s first administrative penalty.

8. Thousand Oaks Surgical Hospital, Thousand Oaks, Ventura County. The hospital allegedly failed to ensure the health and safety of a patient when the hospital did not follow its surgical policies and procedures. This resulted in a patient having to undergo a second surgery to remove a retained foreign object. This is the facility’s first administrative penalty.

9. Ventura County Medical Center, Santa Paula Hospital, Santa Paula, Ventura County. The hospital allegedly failed to ensure the health and safety of a patient when the hospital did not follow its surgical policies and procedures. This resulted in a patient having to undergo a second surgery to remove a retained foreign object. This is the facility’s first administrative penalty.

10. Western Medical Center, Santa Ana, Orange County. The hospital allegedly compromised the safety of a patient when an allegation of physical assault was not investigated in a timely manner and the right to considerate and respectful care was not ensured. This is the facility’s first administrative penalty.

Last year, a new law was enacted that more than doubles administrative penalties for violations or deficiencies constituting an immediate jeopardy to the health and safety of patients. The new law, which took effect Jan. 1, 2009, increases fines to $50,000 for the first violation, $75,000 for the second, and $100,000 for the third violation at the same facility. After new regulations are written, the amounts will grow to $75,000, $100,000 and $125,000. Incidents which are referenced above occurred in 2007 and 2008, before the new law took effect.

For a comprehensive list of all hospitals which have received administrative penalties, go to the CDPH Web site: http://www.cdph.ca.gov/certlic/facilities/Pages/Counties.aspx.

Commentary: Physicians and other health care providers may feel under attack in the health care system. This press release demonstrates that hospitals are also under great pressure from the State. As acute care hospitals are facing financial difficulties, the regulations have become more stringent and the penalties have increased. There is also a concern that the State is seeking increased revenue from health care providers by means of fines.

Any questions or comments should be directed to: tgreen@greenassoc.com.  Tracy Green is a principal at Green and Associates. They focus a significant part of their practice on the representation of health care providers in compliance, litigation, administrative and criminal matters.   

DEA: Los Angeles Attorney Comments On Physician’s DEA Settlement For Improper Recordkeeping For Controlled Substances

On March 4, 2009, the U.S. Attorney’s Office reached a civil settlement with Warren L. Moody III, M.D., an internist practicing in Phoenix. The United States contended that between June 2006 and April 2007, Dr. Moody ordered almost 3000 dosage units of Suboxone (buprenorphine) , an opiod pain relief medication. Suboxone is a prescription medication specifically designed to ease detox from opiates like heroin, OxyContin, Vicodin and Percocet.

According to the settlement agreement, Dr. Moody ordered the medication without proper documentation, failed to maintain accurate inventory records for the receipt and dispensation of the Suboxone, and failed to maintain physical security of the controlled substances, in violation of the Controlled Substances Act. Dr. Moody agreed to pay $80,000 in penalties to settle the matter. The investigation leading to the settlement was conducted by the Diversion Investigation Unit of the Drug Enforcement Administration. See

http://www.usdoj.gov/usao/az/press_releases/2009/2009-074(Moody).pdf

Commentary: The DEA has gotten quite aggressive in conducting periodic site inspections of its registrants which are authorized under 21 U.S.C. 822(f). This case is somewhat different in that it was not about the usual prescription medications but a narcotic that is used to treat those addicted to OxyContin, Vicodin and Percocet. Dr. Moody appears to have been a physician who was providing addicted patients Suboxone treatment in an outpatient setting. Suboxone is used as part of a complete treatment plan that can include behavioral therapy, support groups, and individual counseling.

As a review, here is a brief summary of the recordkeeping rules. A registered practitioner is not required to keep records of controlled substances that are prescribed in the lawful course of professional practice, unless such substances are prescribed in the course of maintenance or detoxification treatment. Thus, most practitioners will not be required to keep these records separately from the patient file. If your practice is involved in pain management or detox treatment, a compliance plan and periodic review are necessary to ensure your office is complying with the rules and regulations.

A registered practitioner is required to keep records of controlled substances that are dispensed to the patient, other than by prescribing or administering, in the lawful course of professional practice. In such cases, each practitioner must maintain inventories and records of controlled substances listed in schedule II separately from all other records maintained by the registrant. This must be done by retrievable by individual registrant. Likewise, inventories and records of controlled substances in schedules III, IV, and V must be maintained separately or in such a form that they are readily retrievable from the ordinary business records of the practitioner. All records related to controlled substances must be maintained and be available for inspection for a minimum of two years.

The fines and penalties can be significant if you do not comply with these rules. If there is an inspection seek legal counsel to assist in the audit and if you receive a letter requesting a response to proposed administrative action or assessing fines. The fines and administrative action can be negotiated with the U.S. Attorney's Office. 

Any questions or comments should be directed to: tgreen@greenassoc.com. 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, administrative and criminal proceedings, with a specialty in health care providers. 

Diagnostic Testing: Attorney Comments On NYT Article About Quality Control And Changing IDTF Laws

When it comes to medical imaging like CT scans and MRIs, the insurance industry and Medicare have been trying to reduce unnecessary tests. According to a New York Times article, the problem with scans is not just quantity: but it’s also quality. See: http://www.nytimes.com/2009/03/02/health/02scans.html

The article states that insurers pay the same for scans done in old machines and newer models, even though the differences of the images can be significant. The article discusses how insurers fail to distinguish between scans done well or poorly or interpreted by more- or less-qualified physicians.

Differences in scan quality have a real impact on patients and the cost of their care. Linking pay to quality may be difficult in medical imaging. Insurers don’t receive the images and reports, making it impossible for them to know whether the scans are high quality.
This article raises additional issues when it is considered in conjunction with OIG’s 2008 report that from 2000 through 2006 Medicare spending for imaging services more than doubled, increasing to about $14 billion. One reason for the increase was the growth in in-office diagnostic services.

For practitioners, this article should also be read in conjunction with an understanding of the key provisions of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Under MIPPA, there will be numerous changes which most profoundly affect Independent Diagnostic Testing Facilities (IDTFs) which can be owned by non-medical professionals. Under this law, the changes which include:

■ By 2012, providers of the technical component of advanced diagnostic imaging services must be accredited, at which time CMS may refuse payment to unaccredited suppliers. This includes physician offices. Medicare has not yet developed a list of approved accreditation organizations.
■ By 2010, the Department of Health and Human Services (HHS) Secretary must designate accreditation organizations for suppliers of the diagnostic imaging technical component. CMS will also be conducting a voluntary two-year demonstration project to collect data to determine if advanced diagnostic services are provided appropriately to Medicare beneficiaries.
■ By March 2014, the Government Accountability Office (GAO) must complete a study on accreditation requirements for advanced diagnostic imaging services; specifically, GAO will investigate how required accreditation affects the amount, type, and quality of imaging services provided to Medicare beneficiaries.

■ IDTF facilities and in-office services will continue to be subject to very different standards for staff training and certification. In-office services will remain exempt from the rule requiring IDTFs to use registered radiologic technologists with subspecialty certification for the high-tech scanners they operate.

■ The supervision requirements are also different between IDTFs and in-office settings. The supervising physician for an IDTF must be supervised by a physician deemed proficient in the interpretation of imaging performed with that technology (which is being interpreted as being a board-certified radiologist). In contrast, the supervising physician for an IDTF High-tech equipment in an in-office setting need not be supervised by a physician deemed proficient in the interpretation of imaging performed with that technology. As we understand it, a group practice may designate any of its physicians, regardless of qualifications, to the role.

This new law is in addition to the 2009 Medicare Physician Fee Schedule (MPFS) changes affecting diagnostic studies and IDTFs:

■ Generally, the anti-markup rule prohibits ordering physicians from charging Medicare more for the technical services performed on scanners outside their offices than they paid to rent or lease the equipment. Federal law also prohibits them from billing Medicare for the use of equipment that they own offsite. Under the 2009 rule, claims for the technical component of services are exempted from the anti-markup rule when the physician who supervises the test also performs more than at least 75% of all his or her medical services for the billing physician's practice. Exemption from the anti-markup rule can also be secured by qualifying for the "same building" requirement. This stipulates that equipment is exempted if it's located in the office (or same building) where the billing physician practices.

■ The anti-markup rules still broadly apply to the professional billing component, however. In these instances, the billing physician is prohibited from charging Medicare more than the radiologist is paid to read the imaging study if the study is interpreted at a remote site. Teleradiology and IDTFs will be significantly impacted by this rule. If the radiologist providing interpretation does not bill Medicare separately, then the reassignment of the right to the ordering physician group will be subject to the anti-markup rule.

■ New MPFS rules also require high-tech mobile imaging services to register with CMS as IDTFs. This potentially costly requirement means that mobile services must bill Medicare separately from the healthcare facilities where their mobile equipment visits. The rule even applies to a mobile equipment trailer anchored at a specific site. Until now, mobile services have often billed Medicare through the providers who contract for their services. They have not generally signed on with Medicare as participating providers, much less registered as IDTF. The resulting confusion may require Medicare to clarify, if not modify, its position.

Conclusion: The rules affecting diagnostic studies performed in-office and IDTFs are complex and constantly changing. In addition, the state Medi-Cal laws are different. If your office or IDTF is providing these services, research the new laws, plan for those coming into effect in coming years and make sure you are compliant. Failure to be compliant can result in loss of a provider number, an audit resulting in a significant overpayment or other adverse consequences that can be avoided.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates. They focus their practice on the representation of individuals, businesses licensed professionals, including health care professionals, including IDTFs, radiologists, individual physicians, corporate providers and group practices.

Alternative Heath Care Device Case -- Sale Of Unapproved Medical Device (Rife Machine) -- Attorney Commentary

On February 17, 2009, James Folsom was found guilty by a federal jury in United States District Court in San Diego of twenty-six felony counts relating to his sale of an unapproved medical device known as a Rife-type biofrequency device. For an article on the trial:
http://www3.signonsandiego.com/stories/2009/feb/18/bn18convict-medical-scam/?zIndex=55119

According to evidence presented at trial, from 1997 through 2008, James Folsom conspired with others to ship adulterated and misbranded Rife-type biofrequency devices in interstate commerce. The device, sold under names "NatureTronics," the “AstroPulse,” “BioSolutions,” “Energy Wellness,” and “Global Wellness,” consisted of a micro-current frequency generator with a digital readout, two stainless steel cylinders, two personal application plates with connectors and lead wires connecting the device to the cylinders and the plates. Users were provided with an operating manual that set forth hundreds of digital settings for the device, directed to specific conditions from AIDS, diabetes, stroke, and ulcers to worms. Users were advised to connect the cylinders or plates to the machine and touch them to the body for a recommended run time to treat each condition.

According to testimony at trial, the defendant purchased over 9,000 units, which he sold to distributors for approximately $1000-1200 and to retail customers for $1995, with sales of over $8 million. The devices were manufactured by the defendant and others in a San Diego location, which he failed to register with the Food and Drug Administration (FDA) as a device manufacturing establishment. There were other facts in this case that suggested fraud in that Folsom used the false name “Jim Anderson” when selling the device and used post office boxes, self-storage units, and bank accounts opened in the names of others to conduct his business, all in an alleged effort to avoid detection by the FDA. The defendant also marketed his device “for investigational purposes,” which the government alleged was to deceive consumers into the false belief that he possessed a valid investigational device exemption from the FDA.

The government’s theory at trial was that the devices were adulterated in that they were marketed without a valid investigational device exemption, without pre-market approval, and in violation of an electrical performance standard set by the FDA prohibiting lead wires that come into contact with patients from being able to come in contact with potentially hazardous voltages. The devices were also misbranded in that they were marketed without valid clearance from the FDA, did not bear the name and address of the manufacturer on the labeling, and were produced in an unregistered manufacturing establishment.

Related court documents and information may be found on the website of the District Court for the Southern District of California at http://www.casd.uscourts.gov/ or on http://pacer.psc.uscourts.gov/

Commentary: As attorneys who tried a case in November 2008 in Los Angeles involving a rife machine, other alternative health care issues and the alleged unlicensed practice of medicine, we have the following comments about the case.

First, if you are selling or using any type of "device" as part of alternative health care you need to be very careful about FDA regulation. Seek the advice of an attorney if you use, sell or market any device which could be under FDA regulation.

Second, if you are in alternative or complementary health care that you need to be careful about making any claims that a non-FDA approved device (or vitamins and supplements for that matter) can cure or treat any disease. One of the driving facts in Folsom's case was that marketing material found on several internet sites and promotional material said the device uses electrical frequencies to destroy diseased cells in the body. It also said the device was inspired by the work of San Diego inventor Royal Raymond Rife, who in the 1930s theorized that cells could be destroyed by directing precise radio frequencies at them. Rife believed cancers, viruses and other illnesses could be treated with the technology. Rife type machines have been used by alternative health care providers as an alternative method of promoting wellness for people with AIDS, cancer and other conditions . Seek the advice of an attorney if you are an alternative health care provider especially where you see persons with cancer and other diagnosed diseases.

Third, if you are engaged in alternative health care have all promotional material, including websites, reviewed by an attorney to ensure that there are no false claims and no claims to cure or treat any disease or condition.

Fourth, if you are investigated by the government assess the exposure you have at an early stage by a thorough analysis through counsel. Address the issues early and if the government contends that you are doing something illegal it is important to get an attorney involved immediately. In this case, we were informed that the government investigation went on for years and that early resolution of the case was rejected. Currently, Folsom is facing 15 years in prison.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles. They focus their practice on the representation of individuals, businesses, licensed professionals, including health care professionals and providers.

Prescription Drug Fraud, Insurance Fraud, Forgery & Identity Theft -- Physician Charged In Riverside County

On February 2, 2009, the Riverside District Attorney’s Office filed 276 felony counts against Dr. Lisa Barden of Rancho Cucumonga, who allegedly stole the identities of patients to obtain highly addictive pain killers. The investigation of Dr. Barden by the California Department of Justice’s Bureau of Narcotic Enforcement began in November 2007.

As attorneys who protect peoples' rights under the Constitution, please remember that an indictment or felony complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent unless proven guilty in court.

The felony complaint alleges that Dr. Barden illegally obtained prescription drugs on 131 separate occasions from more than 43 different pharmacies. It is alleged that Dr. Barden obtained more than 30,000 tablets of prescription painkillers, including hydrocodone (Vicodin) and oxycodone (Oxycotin). The 276 felony counts included: commercial burglary, forgery, obtaining a controlled substance by fraud, possession of a controlled substance, insurance fraud and identity theft. Agents recovered from her home multiple prescription pads for 12 different doctors, as well as the personal information of 93 people who are alleged victims of identity theft.

The investigation was led by the Riverside Regional Pharmaceutical Narcotic Enforcement Team, which is a cooperative effort with the California Department of Insurance, Fraud Division and the U.S. Drug Enforcement Administration. The State Attorney General has created a plan to address prescription drug abuse in the state and make it easier for doctors to keep track of prescription drug records. Prescription drug abuse can have serious public safety consequences, as many abusers hold down critical jobs including truck drivers, transit operators and medical practitioners.

This prosecution is part of a bigger plan by the Attorney General's office. Last year, the Attorney General's office unveiled a plan to provide doctors and pharmacies with real-time Internet access to patient prescription drug histories. Under that proposal, health professionals will have computer access to the drug histories of patients, replacing the current outdated system that required mailing or faxing written requests for information. Each year, more than 60,000 such requests are made to the California Department of Justice. The state’s database, known as the Controlled Substance Utilization Review and Evaluation System (CURES), contains 86 million entries for prescription drugs dispensed in California, giving health care professionals the technology they need to fight the prescription drug abuse currently burdening California’s health care system.

According to the latest Department of Justice “Drug Trends” report, Valium, Vicodin, and Oxycontin are the most prevalent pharmaceutical drugs obtained fraudulently. Vicodin and Oxycontin are the two most abused pharmaceutical drugs in the United States.

Commentary For Those Physicians And Practitioners Who Abuse Prescription Drugs Or Illegally Prescribe Them: If you are a doctor who is facing your own prescription drug problem or are illegally writing prescriptions for others for payment or otherwise, the best time to address your problems is as early as you can. Obtaining legal advice under attorney-client confidentiality and seeking your own professional help can assist you in preventing the complete loss of your license and criminal prosecution. There is significant stress on health care providers and the easy access to prescription drugs can be tempting.

Most of the physicians or health care providers who come to us that have substance abuse problems or financial issues that caused them to write prescriptions for money wait until they find themselves in a hole too deep to get out of on their own. We make referrals to treatment centers, work with the professional boards and create a strategy to prevent our clients’ lives from unravelling.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California.  They focus their practice on the representation of individuals, businesses, licensed professionals, particularly health care professionals and businesses including pharmacies, pharmacists, pain management clinics, weight loss clinics, individual physicians, corporate providers and group practices, in civil, administrative and criminal cases.

Pharmacist Sentenced To 5 Years For Illegally Distributing Drugs

On February 5, 2009, U.S. District Judge Stephen Robinson in the Southern District of New York sentenced a pharmacist, Ivan Romero, to a term of imprisonment of 5 years and ordered him to pay restitution in the amount of $36,158.49. The sentence followed Romer’s entry of a guilty plea to illegally distributing and dispensing Oxycodone, a Schedule II controlled substance, without a valid written or oral prescription.

According to the documents filed in the case, Romero worked as a supervising pharmacist at the Broadway Pharmacy in White Plains, New York. Romero was responsible for running the pharmacy operation, filling prescriptions, and ordering and dispensing medication, including controlled substances, from the pharmacy’s suppliers. During that time Romero took Oxycodone and Hydrocodone, both of which are controlled substances, from the pharmacy’s stocks and distributed it for unlawful, non-medical, purposes. Pharmacy records show that Romero unlawfully diverted 348 grams of Oxycodone and 295.86 grams of Hydrocodone in this manner. There are approximately 453 grams in a pound so over 1/2 pound of each drug was dispensed illegally.

COMMENTARY. THIS CASE IS A REMINDER AS TO THE DEA REQUIREMENTS FOR PHARMACIES AND PRACTITIONERS WHO DISPENSE SCHEDULE II CONTROLLED SUBSTANCES.

Pharmacies, physicians and other practitioners who dispense and store Schedule II controlled substances must be vigilant in complying with DEA requirements. In this case, given that the pharmacist stole the controlled substances – the pharmacy should have been able to tell there was a theft or significant loss. In this case, the pharmacy would have been required to report the theft or loss of any controlled substances within one business day of discovery of such loss or theft. The practitioner would have also had to complete and submit DEA Form 106 which may be found at http://www.deadiversion.usdoj.gov/.

The DEA’s rules are strict and violation can result in significant fines and potential loss of DEA number. Each practitioner must maintain inventories and records of controlled substances listed in schedule II separately from all other records maintained by the registrant. Likewise, inventories and records of controlled substances in schedules III, IV, and V must be maintained separately or in such a form that they are readily retrievable from the ordinary business records of the practitioner. All records related to controlled substances must be maintained and be available for inspection for a minimum of two years.

A registered practitioner is required to keep records of controlled substances that are dispensed to the patient, other than by prescribing or administering, in the lawful course of professional practice. A registered practitioner is not required to keep records of controlled substances that are prescribed in the lawful course of professional practice, unless such substances are prescribed in the course of maintenance or detoxification treatment.

Pharmacies and practitioners should conduct regular audits of the records and have someone in charge of the records who is not involved in dispensing so the risk of diversion is minimized. As part of the audit, check the records of the suppliers to ensure that it all matches up. We have seen pain management clinics who have been subjected to over $1 million in fines for not having the proper record keeping required by the DEA. Even though the clinics were not diverting the Schedule II substances, unknown employees had done so. When the DEA got involved the lack of record keeping caused significant DEA issues even though there were no criminal charges against the clinics.

Be well-prepared for DEA audits in advance and make sure that you have proper legal advice and follow-up so that your staff is strictly following the rules. It is too easy to get lax or forget how important these issues are for the business health of your pharmacy or medical clinic.

Any questions or comments should be directed to: tgreen@greenassoc.com.  Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of individuals, businesses, and licensed professionals, particularly health care professionals and businesses including pharmacies, pharmacists, pain management clinics, weight loss clinics, individual physicians, corporate providers and group practices, in civil, administrative and criminal cases.