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Workers’ compensation fraud and patient protection

Despite California’s strict penalties for workers’ compensation fraud, there are still plenty of attempts to beat the system in many industries, including medical services. This is evident in a recent legal case that is returning to court this month and that involves not only workers’ compensation but also serious threats to patients’ health.

According to US News and World Report, prosecutors in Los Angeles County took steps this month to reorganize an ongoing workers’ compensation insurance fraud case involving funds up to $150 million. There were 12 defendants in total who were originally indicted in 2015. Those charges have been dismissed, allowing prosecutors to refile allegations with the aim to revisit previously dismissed counts and simplify the litigation process. Defendants include a physician’s assistant who performed surgeries without attending medical school and two fugitives—an orthopedic surgeon and an office manager—who remain subject to the original indictment.

The defendants were accused of capping, a practice that involves offering money for patient or client referrals. In this case, marketers and lawyers received monthly payments of up to $10,000 for patient referrals.

Capping is considered unlawful under California’s labor code, which explicitly forbids any party from seeking or accepting payment for referring or soliciting clients. In a medical setting, this means that payments for patient referrals are also forbidden. Likewise, knowing participation in any service that makes recommendations to patients in regard to seeking “medical or medical-legal services or benefits” for profit is also considered abuse of the workers’ compensation system.

The code specifies that anyone who takes or offers unlawful payments for patient referrals (or anyone who violates any other provisions of this labor code section) may be subject to an assessment of up to three times the patient’s medical expenses as well as a civil penalty of at least $4,000 but not more than $10,000. 

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