Convicted Provider Trying to Collect on Presumptively Fraudulent Lien

Thursday, April 27, 2017 | 2

A doctor is trying to take advantage of an apparent loophole in new laws that allow the California Division of Workers' Compensation to stay any liens filed by persons charged with fraud and suspend them from the system after they are convicted.

The issue is a result of the way lawmakers drafted a pair of fraud-fighting bills last year.

Senate Bill 1160 automatically stays liens filed by a provider who is accused of insurance fraud and related crimes. The stay remains in place until the criminal case is resolved.

Assembly Bill 1244 requires the Division of Workers’ Compensation to suspend providers who have been convicted of fraud. The bill also requires all liens filed by convicted providers go through a consolidation hearing. In order to be paid, the provider must rebut the statutory presumption that the liens were related to the criminal conduct that led to the conviction.

While the lien stay in SB 1160 is automatic, the suspension in AB 1244 is not. The DWC must issue a notice of intent to suspend providers and allow them 10 days to request a hearing to contest the pending suspension. The hearing must be held within 30 days, after which the administrative director can issue a final suspension order.

As a result, there is roughly a month-long period — longer in some cases — during which providers convicted of defrauding California’s workers’ compensation system or another health care program are free to seek payment on liens.

Assemblyman Tom Daly, D-Anaheim, introduced a bill this year to address the problem. AB 1422 would provide that in cases where a doctor is convicted, the lien stay shall remain in effect until the completion of suspension and lien consolidation proceedings. But the measure would not take effect until the start of 2018.

In the meantime, at least one convicted provider who appealed his proposed suspension is trying to collect on some of the liens he has filed.

Dr. Philip Sobol, an orthopedic surgeon, admitted in 2015 to accepting kickbacks for referring patients to Pacific Hospital of Long Beach and pleaded guilty to single federal conspiracy charge. Nevertheless, Sobol is trying to collect on a $5,000 lien, according to an email shared with WorkCompCentral by Bill Warner, manager of Intercare Holdings Insurance Services Inc.

Sobol is appealing his suspension and is currently free to treat injured workers and pursue payments for liens. The DWC held a suspension hearing on April 4 but had not released a decision as of Wednesday.

The email from Warner notes that the lien Sobol is trying to collect is for services including medical visits, X-rays and therapeutic exercises provided between 2013 and 2015.

Warner said he wasn’t sure what payers need to do with liens that were stayed but are currently active. He said his assumption was that if the stay has been lifted, payers need to negotiate any outstanding liens.

Suzanne Honor-Vangerov, managing attorney in the lien unit of Floyd, Skeren & Kelly and owner of Honor System Consulting, said payers do have to negotiate with convicted providers trying to collect on liens, but that doesn’t mean they have to agree to a settlement or make any payments.

“There is a misperception out there that negotiation means I have to give someone money,” she said. “My negotiation stance can be I owe you nothing. It just means I can’t ignore you.”

Honor-Vangerov said she had a case that went to a hearing earlier in April in which a provider facing suspension — she would not identify the provider — was attempting to collect on a lien. She said the judge presiding over the case granted a continuance on the lien until June to allow time for the suspension and lien consolidation proceedings to play out.

She also said that while a stay on liens may be lifted at the end of criminal proceedings, when a provider is convicted the presumption that liens filed, and medical companies owned or controlled by that provider, are for services relating to the conviction. Providers have the burden to rebut the presumption by a preponderance of the evidence.

John Cumming, an attorney for the DIR, also referred to the presumption in responding to WorkCompCentral’s questions about what payers should do when convicted providers try to collect on a lien.

“Currently, liens are not subject to the automatic stay (under Labor Code Section 4615) in the interim time period between a disposition/conviction in the criminal case and the start of lien consolidation (following a suspension) under section 139.21,” he said in an emailed statement. “The expiration of the automatic stay removes any legal prohibition on attempts to negotiate or litigate the liens. At the same time, however, the liens (and all underlying bills and claims) of a convicted provider are legally presumed to have been associated with the criminal conduct and subject to dismissal with prejudice in the special lien (i.e., lien consolidation) proceeding unless the provider can prove that the liens were not connected to the criminal, fraudulent or abusive conduct.”

WorkCompCentral asked whether payers are required to negotiate in good faith with providers who have pleaded guilty or been convicted, but whose liens are still active pending suspension proceedings.

“This question might be restated as — Are payers required to negotiate in good faith with providers who are seeking to collect on liens and claims that are presumptively fraudulent?” Cumming responded. “The purpose of the special lien proceeding is to formally determine whether or not the liens (or some of them) were associated with the criminal conduct and therefore subject to dismissal with prejudice, or were not associated with that conduct, in which case the lien can then be litigated and negotiated on their merits.”

Cumming also said the division is ready to suspend two more providers. Ten additional providers — including Michael D. Drobot and his son — could be barred by the middle of May.

Dr. Neil Van Dyck did not file by April 14 an appeal to the notice of suspension issued March 15. Dr. Quynam Nguyen did not file an appeal by April 21 to a notice issued March 22.

Cumming said both will be moving to the list of suspended providers when final orders are ready to be posted.

Van Dyck, a podiatrist in Sheridan, pleaded guilty in October 2015 to federal charges of health care fraud. The plea agreement says he billed Medicare, Medi-Cal, Tricare or other private insurance carriers for surgical procedures when he actually provided routine foot care.

The agreement also says Van Dyck purchased single-use patches that facilitate the closure of foot wounds that he cut into pieces to use on multiple patients, but submitted to Medicare bills indicating a new patch was used for each patient.

Nguyen, a physician in Orange, pleaded guilty in January to five counts of making false statements relating to workers’ compensation claims. The Riverside County grand jury in 2016 indicted him for allegedly creating medical-legal reports used to bill work comp carriers as part of an alleged scheme masterminded by chiropractor Peyman Heidary.

Heidary is facing 59 counts of insurance fraud for allegedly operating a medical mill that generated $98 million in bills for unnecessary treatment at Riverside Health Clinic, Corona Health Clinic, Montebello Health Clinic, Bellflower Health Clinic, Santa Ana Health Clinic and Anaheim Health Clinic.

Michael D. Drobot, who pleaded guilty in 2014 to one count of conspiracy to defraud a federal health care program and paying illegal fees to doctors who referred patients to Pacific Hospital of Long Beach, has until today to appeal his pending suspension.

His son, Michael R. Drobot, has until May 14 to appeal his suspension. The younger Drobot pleaded guilty to federal kickback and conspiracy charges in March 2016.

DIR attorney Cumming said he doesn’t have information on the number of liens filed by providers who are facing suspension and he couldn’t say whether liens filed by Pacific Hospital would be eligible for consolidation until the suspensions are finalized.

“At that point, DIR would run a detailed search to identify all liens associated with the suspended provider, including any entity in which the provider has an ownership interest,” he said.

The DIR webpage identifying providers who received a notice of suspension is here.

A list of suspended providers is here.