One of Rand's Fraud-Fighting Ideas Already in the Works

Thursday, June 29, 2017 | 0

Two of the three main fraud-fight recommendations made by Rand Institute for Civil Justice will likely have to wait until next year, but California regulators are already working on one of its recommendations.

Christine Baker

The report Rand published Tuesday makes three key recommendations for fighting fraud:

• Using advanced data analytics to detect fraudulent providers.
• Allowing employers to maintain control of medical care after denying post-termination cumulative trauma claims.
• Suspending providers suspected of engaging in fraudulent acts, even if they have not been formally charged or indicted.

Using data analytics to identify suspicious providers is already in the pipeline.

The annual state budget Gov. Jerry Brown signed on Tuesday included $14.7 million for 73 new staffers, primarily to implement anti-fraud measures that were passed last year.

Senate Bill 1160 requires the DWC to stay liens filed by providers who are charged with criminal fraud. Assembly Bill 1244 requires the DWC to suspend providers who are convicted of fraud. The bill also mandates a lien consolidation hearing to give convicted lien holders a chance to rebut a statutory presumption that their liens are invalid because they were for services relating to fraud.

The budget for the fiscal year that starts July 1 includes money for 21 positions in the Department of Industrial Relations' anti-fraud unit, which will serve as the department’s investigative and prosecutorial arm for provider suspensions, lien stays and lien-consolidation hearings. The anti-fraud unit will also work with a data analytics team to identify liens that need to be stayed.

The DIR also said in a fraud-prevention paper published in January that it is reviewing data to identify physicians who regularly overbill for certain services. The department said it is using data to try to detect providers who are using incorrect billing codes, inflating the amount of time spent with a patient or billing for individual services that should be bundled to pad their invoices.

And Assembly Bill 1697, by the Assembly Insurance Committee, would direct the DWC to create an anti-fraud support unit that would be responsible for researching fraud and serving as the repository and clearinghouse for data on fraud-fighting activities.

DIR Director Christine Baker said in an emailed statement Wednesday that she is still reviewing the recommendations in the Rand report and determining how they can be implemented. But any major system changes would require a signoff from other system users, she said.

“If there are changes to the system, they would need to be agreed upon primarily by labor, management and the administration, as well as the other stakeholders,” Baker said.

Even if labor and management agreed that Rand's report is right on the mark about how to treat cumulative trauma claims, another effort already in the works probably will forestall any quick legislative action. The state auditor is now reviewing best practices to fight work comp fraud for a report that is expected to be completed by the end of the year. New policy proposals may have to wait until that report is completed.

The review the Joint Legislative Audit Committee ordered in March will investigate:

• How state agencies, including DIR and the Department of Insurance, coordinate with district attorneys to prosecute fraud.
• How employer assessments to fight fraud are distributed to prosecutors, and how prosecutors spend that money.
• What other states do to fight fraud and whether any best practices could be brought to California.
• A summary of fraud discovered by category, such as employer, provider, claimant and attorney fraud.

Jeremy Merz, western region vice president for the American Insurance Association, said he was still reviewing the report and the solutions proposed on Wednesday. In general, he said, the report highlights the need to carry on the mission of fighting fraud.

“It continues that conversation and dialogue, and is a valuable tool underscoring the major problem that still exists in the system,” he said. “Anything that highlights this like the Rand report did is a positive thing and a positive public policy tool as we look for more solutions.”

Other system observers on Wednesday said they hadn’t read the report and were not prepared to comment about the recommendations.

Steve Cattolica, director of government relations for the California Society of Industrial Medicine and Surgery, said earlier in June that his biggest concern with the proposal was that it is based on an expanded definition of fraud. He said he doesn’t condone abuse, but to do as Rand did and treat abuse the same as criminal fraud is a mistake.

Nicholas Pace, who authored the report, told WorkCompCentral on Tuesday that he used a broader definition of fraud that also includes abusive behavior because there is no single, precise definition of fraud. What fraud means in the context of a civil lawsuit is different from what it means in a criminal case, he said, so it’s a word with a “squishy” definition to being with.

He said in his discussions with system users while preparing the report, including applicants’ attorneys, labor groups, employers, insurers, claims adjusters and law enforcement — pretty much everyone was using an broad definition of fraud.

“It was clear they were using it in an expansive way, using fraud to mean any time someone is trying to get one over on the system, gaming the system for their own use,” he said.

He also said that when most agencies undertake a review of activities to combat fraud, they also look at eliminating waste and abuse.

“You could argue in actual practice, you might want to get more precise when talking about taking rights away,” Pace said. “But for the purpose of general discussion about what fraud is or abuse is — gaming the system and doing things you shouldn’t be doing — you need a more expansive definition.”