Accused Chiropractor Leading Constitutional Challenge to Fraud Reforms

Friday, February 17, 2017 | 1

As California regulators are vowing to move swiftly to kick out of the workers’ compensation system providers convicted of fraud, a chiropractor who pleaded guilty to fraud charges, and other plaintiffs, have filed a lawsuit asking a state appellate court to declare the suspensions unconstitutional.

George Parisotto

The Department of Industrial Relations on Thursday announced it suspended seven providers who have been convicted of comp fraud or bounced from Medicare or Medi-Cal from participating in the state’s comp system. The department also stayed more than 8,500 liens with a total claimed value of $59 million filed by the suspended providers.

The DIR said three additional providers are appealing suspension notices that were mailed out Jan. 17.

“We are moving quickly to use new anti-fraud tools at our disposal to suspend those proven to game the workers’ comp system at the expense of injured workers and employers,” George Parisotto, acting administrative director of the Division of Workers’ Compensation, said in a statement.

But a lawsuit filed Wednesday asks the California 1st District Court of Appeals to take away some of the administration’s new fraud-fighting tools.

Santa Ana chiropractor Michael E. Barri, his medical company Tristar Medical Group, and a recently-created nonprofit in Los Angeles called the Coalition for Sensible Workers’ Compensation Reform — described in the petition as a group of comp providers seeking to eliminate fraud and abuse while protecting legal rights of doctors — on Wednesday petitioned the 1st DCA for an order prohibiting the Workers’ Compensation Appeals Board from enforcing three provisions in Senate Bill 1160 and Assembly Bill 1244.

The petition claims the automatic lien stay provision in SB 1160, along with the mandatory suspension and special lien proceeding provisions in AB 1244, are unconstitutional.

“While the elimination of fraud and abuse is an important objective shared by all participants in the workers’ compensation system, it must be accomplished in a way that does not diminish or destroy legitimate liens or unconstitutionally impact the rights of lien holders,” a memorandum attached to the petition says. “SB 1160 and AB 1244 instead impose draconian and unconstitutional penalties on providers who serve injured workers under the lien system, which as a practical matter will put out of business virtually any lien claimant who is charged with, or has previously been convicted of, even a minor offense involving unrelated medical billing issues.”

Requiring a stay on all liens filed by a provider who is accused of fraud or other crimes, without any evidence or probable cause suggesting the lien was related to the same conduct underlying the criminal charges, is a due process violation, the petition claims.

Furthermore, the only way to stay liens filed by a provider who is employed by a medical company is to stay the liens of that company, which has the potential to injure other providers who have not engaged in any misconduct, the suit asserts.

The mandatory suspension provision retroactively increases the punishment of lien claimants who were convicted before the law was enacted.

“The provision is essentially criminal because it is punitive in purpose and effect: It is triggered by a criminal conviction, it destroys the provider’s existing business and it permanently bars the provider from serving injured workers,” the petition says.

The special lien proceeding created by AB 1244 is also a retroactive punishment, the petition alleges.

The bill requires a special administrative process to review all liens filed by a doctor following a conviction to determine whether those liens are related to the conviction. The burden of proof is on the provider to demonstrate that the liens were not the result of criminal activity.

“In other words, the special lien proceeding forces upon liens claimants the burden of proving a broadly worded negative — that all their liens are unconnected to any ‘criminal, fraudulent or abusive conduct or activity’ — when the state has not even established probably cause that such a connection exists,” the complaint says.

Barri in March 2016 pleaded guilty in federal court to a single count of conspiracy to commit mail fraud and honest services fraud. In the plea agreement, he admitted to referring Tristar workers’ compensation patients to Pacific Hospital of Long Beach for a kickback of 15% of any amount an insurance company paid to the hospital.

Barri is scheduled to be sentenced on July 14, according to court documents.

Because Barri's guilty plea was entered six months before AB 1244 was enacted, there was no way Barri could have known that his actions would subject him to additional penalties that didn’t exist at the time, according to the filing.

Barri is also a defendant in the ongoing Landmark Medical Management case before the Orange County Superior Court. He is accused of accepting $1 million in kickbacks from Kareem Ahmed, chief executive officer of Landmark, in exchange for prescribing compound creams to injured workers.

The petition alleges the state stayed all liens filed by Barri, as well as those filed under Tristar’s name, in January, but says liens filed by Tristar are not connected to the charges filed against Barri.

“None of Tristar’s lien claims — covering services provided to Tristar’s patients by various providers over the course of many years — have any connection to the surgery referrals,” the petition says. “Nonetheless, all of Tristar’s liens are likely to be subjected to a special lien proceeding, and the state can compel such proceedings without any initial showing of probable cause that the liens are related to Dr. Barri’s guilty plea — or any illegal activity at all.”

Glen Summers, an attorney with Bartlit Beck Heran Palenchar & Scott in Denver who filed the petition, said he has no comment on the filing. Summers also represented the providers in the Angelotti Chiropractic case that unsuccessfully challenged the constitutionality of the lien activation fee provisions in SB 863.

Jerry Azevedo, a spokesman for the Workers’ Compensation Action Network, said Thursday he wasn’t surprised that a lawsuit has been filed challenging some of the provisions in AB 1244 and SB 1160. But he also thinks that the measures will stand up to judicial scrutiny.

The Legislature had a valid reason to enact harsher penalties for providers accused or convicted of fraud, he said. And courts have generally recognized the authority of the Legislature to make changes to the workers’ compensation system.

“Even if the court were to rule in favor, or partial favor, of the plaintiff, we would immediately go back to the Legislature and look for ways to work through that,” he said. “It’s bad for injured workers and it’s bad for employers to have these people providing inappropriate, harmful care and then bogging the system down by trying to get paid for their fraudulent services.”

Erika Monterroza, a spokeswoman for the Department of Industrial Relations, on Thursday said the agency’s attorneys are still reviewing the complaint and that she had no comment on the petition itself. She also said the department intends to keep enforcing the law as it is written, including the challenged provisions from AB 1244 and SB 1160.

Also on Thursday, the DIR announced that it suspended seven providers and initiated proceedings to suspend three others. Although he’s not mentioned in the department’s statement, Barri’s petition says he is one of the providers who is fighting suspension.

The suspended providers include:

• Dr. Philip Sobol, an orthopedic surgeon in Los Angeles and owner of Sobol Orthopedic Medical Group who pleaded guilty in November 2015 to accepting kickbacks for patients referred to Pacific Hospital of Long Beach. Sobol has about 6,000 liens with claimed value of more than $42.7 million, the department said.
• Dr. Jason Hui-Tek Yang, a psychiatrist in Pasadena who the DIR says was convicted in Riverside County Superior Court for his involvement in an insurance fraud conspiracy that included referring patients for unnecessary care to churn bills. Yang has more than 2,000 liens with claimed value of more than $13.7 million.
• Alan Ivar, a chiropractor in Costa Mesa who agreed to plead guilty to federal mail fraud charges in November 2015 and admitted he was paid $15,000 a month to refer patients to Pacific Hospital. Ivar has more than 400 liens with an estimated value of more than $2.5 million.
• Dr. Thomas M. Heric, a physician in Los Angeles who was convicted in 2001 and 2008 of making false statements to Medicare and Medi-Cal.
• Carlos Arguello, a Chula Vista businessman who pleaded guilty in August to a single count of conspiracy to commit mail and wire fraud for accepting kickbacks to refer patients to specific chiropractors for medical care, regardless of their injuries.
• Daniel Dahan, a former chiropractor in Long Beach the DIR said was suspended from the Medicare and Medicaid programs, and who surrendered his license to practice in August 2015.
• Boniface Okwudili Onubah, a former neurologist in Marina Del Rey who the department said was suspended from the Medicare and Medicaid programs. The Medical Board of California revoked his license in November 2014.