California Medical Bill Reviewer Certification

California Medical Bill Reviewer Certification Unit 1: Workers’ Compensation Benefit Program Module 2: Fraud & Abuse of the Workers’ Compensation System

Part I: Fraud and Abuse of the Workers’ Compensation System The Difference Between Fraud and Abuse What is Considered Abuse? What is Considered Fraud? Overview Hi! In this module, you will learn about the difference between fraud and abuse. Then, you will learn about who can commit fraud and abuse. Let’s start by discussing the effects of fraud and abuse of workers’ compensation... Part I: • Fraud and Abuse of the Workers’ Compensation System

The total cost of workers’ compensation in California in 2002 was an estimated $32 billion. The cost of fraud alone to the workers’ compensation system is estimated between: Clearly, fraud and abuse have a significant negative impact on the cost and efficiency of the workers’ compensation system! The Cost of Fraud and Abuse $1-5 billion per year!

Both fraud and abuse have a negative impact on all of the entities in workers’ compensation. However, as you will see, fraud and abuse aren’t quite the same. Injured Workers Employers Service Providers Insurance Companies Labor Unions Attorneys Regulatory Agencies Aren’t Fraud and Abuse the Same?

What Exactly is Abuse? • Abuse: any practice that uses the workers' compensation system in a way that is contrary to either the intended purpose of the system or the law. Abuse can be considered criminal behavior, but not always. Let’s take a look...

Abuse of the Workers’ Compensation System • If temporary disability benefits continue after the injured worker returns to work, and no one ever asks the claimant if he is working, there is an ABUSE of temporary disability benefits, but there is no written lie and therefore no insurance fraud. Let’s take a look…

Abuse of the Workers’ Compensation System “I wonder why the checks are still coming…Oh well, I guess the State must know best.”

Fraud Now that you understand what abuse of the system is, let’s talk about fraud. Part I: • Fraud and Abuse of the Workers’ Compensation System • The Difference Between Fraud and Abuse • What is Considered Abuse? • What is Considered Fraud? • What is Considered Fraud?

What Constitutes Fraud? • Fraud: any practice that is done knowingly and with intent to mislead, in order to gain some benefit, or to cause a benefit to be denied. • The most significant type of criminal abuse to the workers’ compensation is insurance fraud.

Criteria for Fraud • A lie must be identified. • The lie must be material. There are two qualifying criteria for fraud. Let’s take a look…

Criteria for Fraud: Identifying a Lie • The presence or absence of a specific, provable lie distinguishes between abuse and fraud. • Identify a provable lie. In order for an act to be considered fraudulent, a material, written lie that was presented to or by an insurer must be identified.

Criteria for Fraud: A Material Lie • The lie must be material, which means the lie must make a difference in the outcome. • Identify a provable lie. • The lie must be material. This prevents prosecution on the basis of some minor error of memory or transcription which did no harm or had no cost involved.

If someone such as the adjuster or the doctor specifically asks the claimant if he is working and the claimant lies and replies “No...” ...and the lie is transcribed in a written document-- INSURANCE FRAUD has occurred. Fraud of the Workers’ Compensation System

Fraud of the Workers’ Compensation System “Hi Mr. Jones, I need to update my claim records…have you returned to work?” “Uhhh, no, the doc says my leg isn’t quite healed…”

Legal Ramifications of Fraud • If the amount or duration of temporary disability payments are determined based upon a lie, legal action can potentially be taken under the Workers' Compensation Law and Penal Law.

Who Commits Fraud and Abuse? Now that you are familiar with fraud and abuse, let’s move on to who can commit fraud and abuse, and what’s being done to prevent it. Part II: • Who Commits Fraud and Abuse? • Patient Fraud • Provider Fraud • Organized Fraud • Employer Fraud • Insurance Carrier Fraud • Government Fraud • Regulatory Agencies: What’s Being Done? Part II: • Who Commits Fraud and Abuse? • Patient Fraud • Provider Fraud • Organized Fraud • Employer Fraud • Insurance Carrier Fraud • Government Fraud • Regulatory Agencies: What’s Being Done?

You might think that dishonest injured workers and greedy providers are the only parties guilty of committing fraud. But, in fact, this is not the case. There are several parties that can be guilty of committing fraud. Who Commits Fraud and Abuse? Let’s take a look…

So, Who Exactly are the Guilty Parties? Government Employers Insurers Patients Providers

Let’s start by discussing the types of fraud that can be committed by injured workers, or patients. Patient Fraud & Abuse Workers may: • Fake an injury. • Lie about the extent of their injury. • Lie by denying that they filed previous claims. • Fail to disclose a prior injury to the same body part. • Claim a non-work injury is work related. • Illegally work while obtaining benefits.

The injury may have been caused by horseplay at work. The injury may have occurred outside the workplace. The injury may be a “slip and fall” incident. The worker may have avoided the incident, such as slipping in a puddle of water, but instead allowed themselves to fall in order to claim injury. Staged Injuries • The injury may be what is termed a staged event, which means the injury never took place.

Occasionally workers may extend their recovery time off work. The patient may exceed the stated normal limitations for a specific injury, and then claim lack of improvement or onset of new symptoms. Extended Recovery Time

Patient Fraud in the Real World Illegal Work: A former food worker in Hawthorne, CA collected $128,000.00 in benefits for a shoulder injury while taking similar jobs at other school districts around the state during the time he was on leave.

Provider Fraud and Abuse • Medical providers can also commit fraud and abuse of the workers’ compensation system. Let’s take a look…

Medical provider schemes include: Provider Fraud and Abuse Upcoding Upcoding: Providers may bill for a more expensive treatment than the procedure performed. Creative Billing Creative billing: Providers may bill for services not performed. Self-Referrals Self-referrals: Providers who inappropriately refer a patient to a clinic or laboratory in which the provider has an interest.

…Even More Provider Schemes Unbundling Unbundling: Providers may perform a single service but bill it as a series of separate procedures. “Hmm, 1 fracture or 2, that is the question…” Product Switching Product switching: A pharmacy or other provider may bill for one type of product but dispense a cheaper version, such as a generic drug.

Newer forms of fraud and abuse that occur under managed care arrangements include: New and Improved… Underutilization Underutilization: Doctors who receive a fixed fee per patient may not provide a sufficient level of treatment. Overutilization Overutilization: Doctors may provide unnecessary treatments or tests to justify higher patient fees in a new contract year. Providers may also shift from the less expensive, all-inclusive patient report to supplemental reports, which add evaluations and incur separate charges. Kickbacks Kickbacks: Doctors may receive incentives for patient referrals.

In some instances, providers and lawyers work to commit fraud together. This is known as organized fraud. Organized workers’ compensation fraud that involves doctors and lawyers has been an ongoing problem, especially in Southern California. Organized Fraud

Organized Fraud • Fraud rings have made a practice of recruiting people to file phony work injury claims.

Organized Fraud • The workers are sent to medical clinics or legal referral centers commonly known as "claim mills," which in turn refer them to a doctor or lawyer who is in on the scheme.

Organized Fraud in the Real World • Although the campaign against California claim mills wiped out a substantial part of medical provider abuse, new cases continue to emerge. Let’s take a look…

More Fraud in the Real World In October of 1997, a pharmacist pled guilty to 21 counts of fraudulent workers' compensation insurance billing. The pharmacist increased his revenues by up to 500% per prescription on more than $600,000 of drugs sold over a four-year period.

Employer Fraud & Abuse • Employer fraud is one of the fastest growing areas of workers’ compensation insurance and can take many forms. Let’s take a look…

Employer Fraud and Abuse Underreporting Payroll Underreporting payroll: Employers reduce their premiums by not reporting parts of the work force, paying workers off the books, or creating a companion corporation to hide a portion of the employees. Declaring Independent Contractors Declaring independent contractors: Employers avoid premium payments for employees by classifying them as independent contractors or leased employees even though they are legally employees. No Workers’ Compensation Insurance No workers’ compensation insurance: Some businesses are part of the "underground economy" and carry no workers’ compensation insurance at all.

Employer Fraud and Abuse Misclassifying Workers Misclassifying workers: Employers intentionally misrepresent the work employees do to put them in less hazardous occupational categories and reduce their premiums. Underestimating Employment Projections Underestimate of employment projections: Employers deliberately underestimate employment projections at the beginning of the premium year and essentially receive an interest-free loan from the insurance company for the amount that would have been required to insure new employees. For example, an employer may save money on premiums by reporting a roofer as an office worker.

Insurer Fraud and Abuse • Unscrupulous insurers may also commit fraud in workers’ compensation claims. Let’s take a look…

Insurer Fraud and Abuse Employers or employees of an insurance carrier may make false statements regarding a worker’s entitlement to benefits to discourage the worker from pursuing a legitimate claim. Insurance companies could theoretically mislead prospective clients, collect premiums for insurance coverage not provided, inflate premiums, or fraudulently fail to pay an appropriate claim.

…More Unscrupulous Insurers Insurance companies could use delaying tactics to hold onto legitimate claim payments longer than necessary to maximize their own accounts. Insurance companies could alter codes provider services routinely in order to pay out less. Although, the law indicates, an entity reviewing an itemization of service submitted by a physician or medical provider shall not alter the procedure codes, there is an exception when supporting documentation does not match level of service. At which point, an Explanation of Review (EOR) shall provide an explanation of the alteration to provider of service.

Government Fraud and Abuse • Even the government can commit acts of fraud and abuse. Let’s take a look…

Government Fraud and Abuse Bribes Bribes: Offering or accepting kickbacks for the referral or settlement of cases can contribute to fraud and therefore is a reportable and highly prosecutable crime. Bias Bias: It is considered abusive for a workers’ compensation judge to preside over a hearing for any claimant to whom the judge could not be impartial. Conflict of Interest Conflict of interest: Any workers’ compensation judge is disallowed from sitting on a case in which he has an interest or is employed by any of the litigating parties.

In 2004, the Sacramento Bee published an article noting that “California’s 150 workers’ compensation judges are six times more likely to file on-the-job injury cases than their judicial counterparts in state government.” Government Abuse in the Real World Injuries included: • Rearranging artwork • Slipping on a lunchroom puddle • Loading a crate in a trunk • Tripping over a phone cord • Writer’s cramp

More Government Abuse… Judge Bernardine Baldwin of Santa Monica filed a claim in August of 2004 for injuries to her “heart and psyche from ‘inadequate staffing and security, deadlines, attorneys’ and parties’ harassment & conflicts with angry, hostile litigants.’”

Department of Insurance FRAUD Fraud Assessment Commission District Attorneys Offices Insurance Companies Crime Fighters… The FAC prosecuted an employer who reduced the premiums for workers by classifying them as clerical workers, hiding payroll, and using shell corporations to evade surcharges. The Department of Insurance has its own Fraud Division investigating accusations of fraud. In 2004, local DA’s in LA County prosecuted 263 fraud cases, which represented more than $54 million in chargeable fraud. Some insurance companies have their own fraud and abuse departments that track suspicious billing practices in their systems.

Abuse of the workers’ compensation system. Who commits fraud and how it’s done. • Identify a provable lie. • The lie must be material. FRAUD What constitutes fraud and abuse. Who investigates and prevents fraud. Summary

Module 2 Quiz Click on the link to go directly to the quiz. Feel free to review any of the material before you move on. Good Luck! Quiz: U1M2: Fraud and Abuse

California Medical Bill Reviewer Certification