Chiropractic Legal                                                FRAUD ALERT
William Cockburn,D.C.

Fraud Costs us all MONEY and IMAGE.  Keep it straight, get the facts:

FRAUD VS. ABUSE

^{What is fraud? What is abuse? What is the difference between them? Because abuse is a very broad term, it is easy to confuse the two.}

^{Abuse Defined: Workers' compensation abuse is 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. This includes some behavior that is not criminal and some that is, most significantly fraud.}

^{Fraud Defined: In the simplest terms, Fraud occurs when someone knowingly lies to obtain some benefit or advantage, or to cause some benefit that is due to be denied. If there is no lie, there may be abuse but it is not fraud.}

Some Forms of Abuse

^{Merely filing a claim that is not warranted or violating the rules of the workers' compensation system, in the absence of fraud (a lie) or kickbacks, may be abuse but it is not criminal. Noncompensability per se does not constitute fraud unless the specific elements of fraud are present. Similarly, overtreatment by a physician might represent only a difference in opinion; although it could appear excessive and possibly abusive, it does not necessarily constitute fraud. Typical abuses of the system also include magnification of complaints or disability that fall short of an outright lie, or an overutilization of benefits. For example, soft tissue injuries give rise to subjective complaints that cannot be either proven or disproven.}

^{The presence or absence of a specific, provable lie is the deciding factor. To separate fraud from abuse, it is necessary to look for the lie or misrepresentation, whether written or oral.}

^{For example, returning to work while receiving temporary disability payment might be abuse, or it might be fraud, depending upon the circumstances. As the law now stands, claimants have no legal obligation to advise anyone when they return to work, nor do they have an obligation to certify their continuing disability status. If temporary disability payments continue when the claimant has returned to work--and no one ever asks the claimant "are you working?"--there is an abuse of temporary disability benefits, but there is no lie and therefore no fraud.}

^{However, using the same example, if someone, such as the adjuster or the doctor, specifically asks the claimant "are you currently working?"--and the claimant replies "no" and thus lies, and that lie is relied upon to determine the amount and payment of temporary disability--there is fraud.}

Criminal Abuse

^{Though not legally a fraud, offering or accepting kickbacks for the referral or settlement of cases is a reportable and highly prosecutable crime. Kickbacks indirectly feed the problem of fraud and, as a result, cause damage to our society and our economy. Consequently, the legislature has determined that both fraud and the kickbacks that can contribute to it are punishable criminal acts; a single fraudulent transaction can be punished by up to 5 years in prison.}

Fraud

^{In separating criminal fraud from abuse, remember these key elements:}

* There is always a false representation--the lie.

* The lie must be intentional or knowingly made.

* The lie must be made for the purpose of obtaining a benefit the claimant is not due, denying a benefit that is due, or obtaining insurance at less than the proper rate.

* The lie must be material, that is, it must make a difference: "If the truth had been told, would you have done anything differently?"

Reporting Fraud

^{Fraud is prosecuted by local district attorneys through the criminal court system. Insurers, self-insureds, and third-party administrators are expected--and legally obligated--to refer suspected fraudulent claims and premium fraud to the district attorney of the county in which the offense occurred, and either the Department of Insurance Fraud Division (for claims-related fraud) or the Department of Insurance Investigations Bureau (for premium-related fraud) for potential investigation and prosecution. As long as the insurer, self-insured employer, or third-party administrator "acts in good faith, without malice, and reasonably believes that the action taken was warranted by the then-known facts, obtained by reasonable efforts," these parties are immune from civil liability for reporting the suspected fraudulent activity.}

^{Regardless of what happens in the criminal prosecution of a fraud case, the underlying workers' compensation claim must still be administered; benefits do not stop just because there is a suspicion of fraud. While actions taken in administering the compensation claims may have an effect on the criminal case, the administrator must continue to adjust and defend the claim according to workers' compensation law.}

COMMON FORMS OF FRAUD

^{Generally, the idea of workers' compensation fraud calls to mind the employee who fakes an injury, or the medical mill and attorney who conspire to produce and submit bogus claims. However, there are others in the system who also could, and unfortunately do, commit fraud. Such fraud can take many forms, but those listed below are the most common. Included with the specific definitions are some examples and some indicators, or "red flags," that will help you identify potentially fraudulent situations. Remember the four questions:}

* What was the lie?

* Was it knowingly or intentionally made?

* Was it made for the purpose of obtaining or denying benefits, or obtaining a policy of insurance at less than the proper rate?

* How is it material to the outcome?

^{Important: The presence of one or more "red flags" does not necessarily mean that fraud has actually occurred. The "red flags" are simply clues or leads to be further investigated for potential fraud.}

Applicant Fraud

^{The False Representation: When an employee knowingly lies about a material fact for the purpose of obtaining workers' compensation benefits to which he or she is not entitled. The lie can be either verbal or written; however, to establish fraud, a specific lie must be identified and proven a lie.}

^{Knowingly Made: The lie must be knowingly made. An inadvertent or unintentional misstatement is not fraud. The circumstances will generally demonstrate intent. A claimant who states he has not been out of bed for 3 months--but was taped on the ski slopes 3 days earlier--obviously intends to lie.}

^{Intent to Obtain or Deny Benefits: The lie must be made for the purpose of obtaining or denying benefits. Examples that might not qualify--even if intentional--are lying about weight, height, or even age, if they do not affect benefits.}

^{Materiality: In addition, the lie must be important enough to impact the benefits. People lie about all types of things, such as their age, weight, and height. The test to apply to the lie is: If the truth were known, would the payment or amount of benefits be altered?}

^Examples:

* Applicant is a professional claimant, has had eight auto accidents in the past two years; each part of the body claimed for injury at work has been treated for injury in a prior case; and the applicant denies any prior injury, accident, claims, or treatment when asked directly.

* Applicant files a claim for an injury that did not occur, or is known to have no relation to the job.

* Applicant knowingly provides an inaccurate medical history to a medical provider.

* Applicant, while receiving temporary disability, lies about work status when asked directly, such as in a deposition: When asked if he worked in any capacity, at any time, over the past six months, the applicant replied he had not; and there is proof that he worked.

* Applicant files a claim after being terminated from employment; the employer has no notice of an injury until receipt of the claim from the applicant.

^{"Red Flags":}

^{Indicators of potential applicant fraud can fall into four general categories:}

* Employment Background: when an injured worker reports an alleged injury immediately following disciplinary action or notice of probation, demotion, or being passed over for promotion;

* Personal Background: the injured worker recently purchased private disability policies;

* Facts Relating to the Accident: the accident allegedly occurs early on a Monday morning or was unreported the previous Friday;

* Interactions with the Claimant: when speaking with the claimant by phone, the background noises are inconsistent with a residence, or the phone is answered by someone announcing the name of a business. An answering machine is used to screen all calls. Claimant uses a post office box as a residential address.

Billing Fraud or Provider Fraud

^{This type of fraud includes any verbal or written lie that forms the basis of any billing for services or benefits in the workers' compensation system, and can be perpetrated by any providers in the system, such as doctors, rehab counselors, pharmacists, interpreters, or chiropractors, to name a few.}

^Examples:

* Billing for exams of patients who were never examined, or for treatment never provided.

* Regularly billing for more time than was actually spent.

* Duplicate billing and/or receiving payment from different carriers for the same treatment--and not making restitution.

* Not refunding duplicate payments received from the same carrier for the same date of service.

* Having lay people conduct tests, then billing for those services and representing that such lay people were licensed.

* Having the patient sign in on the patient log multiple times at the same visit, and then billing for treatments that were not provided.

* Making a specialty referral that is unrelated to the injury.

^{If a doctor does a medical-legal evaluation and report, and submits a bill for $4,000, is that a fraud? Maybe yes, maybe no.}

^{When is it a fraud? If all that was submitted was a bill for $4,000, with no lies to support it, this would not be fraud--just an outrageous/abusive bill. But, if the doctor justifies the $4,000 bill by stating that 15 hours were spent with the patient, when this is not true, that would be fraud.}

^{Be aware also that there are other "fraud feeding" criminal acts by providers, such as requesting or offering kickbacks for the referral of an evaluation or the settlement of a lien.}

^{"Red Flags":}

^{Indicators of potential provider fraud can include:}

* Medical treatment that is inconsistent with the injuries originally alleged by the employee;

* Employee reports that nonmedical personnel took medical history or rendered medical treatment;

* Diagnostic testing performed by a mobile diagnostic service;

* Various reports by a doctor on different employee cases read either identically or similarly;

* Medical bills that appear to be second- or third-generation photocopies.

Attorney Fraud

^{Such fraud arises when attorneys knowingly participate in the misrepresentation of the truth in order to either secure or deny compensation for their clients and/or themselves.}

^Examples:

* Knowingly assisting a client in pursuing a false claim;

* Soliciting a person to file a false claim;

* Knowingly pursuing collection of a lien the attorney knows to be fraudulent;

* Related criminal acts that feed fraud, such as accepting consideration from or paying consideration to doctors, vendors, cappers, or others for referral of clients or settlement of cases.

^{"Red Flags":}

* The majority of claims in which a law firm is involved are of a highly questionable nature;

* A letter of representation is received, but the applicant denies representation or meeting with the attorney;

* In what is referred to as solicitation fraud, several employees from the same employer have reported similar injuries and are represented by the same law firm.

Adjuster Fraud

^{This occurs when a claims person purposely misrepresents the truth in order to either deny or support a claim; or offers or accepts any form of consideration for the referral or settlement of a claim.}

^Examples:

* Accepting a gift, such as a television or a trip to Hawaii, from a doctor's office in exchange for an implied promise of patient referrals;

* Knowingly referring cases for rehabilitation services that are not needed, in exchange for a rebate or other form of consideration;

* Altering the evidence in a claim in order to support a denial.

^{"Red Flags":}

* Inconsistent application of cost-containment measures or agreement to pay above the fee schedule;

* Sloppy observance of procedure for referrals to outside vendors, or increase in the use of a particular vendor, to the exclusion of others;

* Use of vendors outside the preapproved vendor panel;

* Assignments made to vendors where the need for the assignment is questionable;

* Adjuster has social relationship with an applicant's attorney or doctor;

* Adjuster is overheard soliciting, or is observed receiving, tickets or other gifts from vendors;

* Adjuster's lifestyle grossly exceeds apparent income.

Employer Fraud

^{There are two types of employer fraud in workers' compensation: that which is claims-related and that which involves insurance policy premiums. This is an area where others outside the claims function--premium auditors, for example--also need to be vigilant for suspicious activity.}

* Employer-claims fraud occurs when an employer knowingly misrepresents the truth in order to avoid, deny, or obtain compensation on behalf of employees; or knowingly lies about entitlement to benefits to discourage an injured employee from pursuing a claim.

* Employer-premium fraud occurs when an employer knowingly lies in order to obtain a workers' compensation insurance policy at less than the proper rate.

^Examples:

* Misrepresenting the risk or exposure for a given insured by: underreporting payroll; misclassifying payroll; reporting an injury under insured company "A," when in fact the injured was an employee of uninsured company "B"; lying about the company ownership to avoid a high experience modification.

* Employer tells the employee that he is entitled to workers' compensation only if he is off six months or more following an injury.

^{"Red Flags":}

* Occupations in claims file don't match the type of business being insured;

* Addition of many DBAs ("doing business as") on a small policy;

* Policyholder claiming "independent contractor" status of employees;

* Employees reporting wages paid in cash or by personal check;

* Policyholder appears to be "hiding" injuries: paying medical bills, not reporting;

* Employee has difficulty getting claim form from employer;

* Employer denies all claims.

^{Pursuing "Red Flags":}

^{"Red flags" do not automatically translate into guilt, but they are indicators of potential fraud. They need to be followed up and, when appropriate, the SIU personnel in your organization should be consulted. Remember what it takes to prove criminal fraud, and always ask yourself these questions when you suspect fraud:}

* What was the lie?

* Was it knowingly or intentionally made?

* Was it made for the purpose of either obtaining or denying benefits, or (in the case of suspected premium fraud) for obtaining a policy of insurance at less than the proper rate?

* How is it material to the outcome?

THE MOST COMMON WORKERS' COMPENSATION "RED FLAGS"

^{Please note that these "red flags" serve only to alert to the possibility of fraud. The presence of any one by itself is not necessarily indicative of fraud, but is a clue or lead to be further investigated for potential fraud.}

The alleged injury occurs prior to or just after a strike, layoff, plant closure, job termination, completion of seasonal or temporary work, or notice of employer relocation, and so on.

Applicant reports an alleged injury immediately following disciplinary action, notice of probation, demotion, or being passed over for promotion.

Applicant has a history of personal injury, workers' compensation claims, and/or of reporting "subjective" injuries.

The alleged injury relates to a preexisting injury or health problem.

Applicant uses addresses of friends, family, or post office boxes; has no known permanent address and moves frequently.

Applicant's family members know nothing about claim.

Applicant has a high-risk activity, such as skydiving, as a hobby.

The applicant's version of the accident has inconsistencies.

There are no witnesses to the accident, or witnesses to the accident conflict with the applicant's version or with one another.

Applicant fails to report the injury in a timely manner.

Accident or type of injury is unusual for the applicant's line of work.

Facts regarding accident are related differently in various medical reports, statements, and employer's first report of injury.

Applicant refuses to or cannot produce solid or correct identification.

Applicant avoids use of U.S. mail; hand-delivers documents.

Applicant cannot be reached at home during working hours although claims to be disabled from working; or message taker is vague and noncommittal. Applicant is otherwise unavailable and elusive.

Applicant refuses diagnostic procedures to confirm injury, or refuses to attend a scheduled defense medical exam.

Applicant changes version of accident after learning of inconsistencies.

Applicant frequently changes physicians, or does so after being released to return to work.

Medical treatment is inconsistent with injuries originally alleged by employee.

Applicant undergoes excessive treatment for soft tissue injuries.

Applicant's description of treatment indicates nonmedical personnel rendering medical treatment.

Applicant cannot describe either diagnostic tests or treatment for which employer was billed.

Various reports by a doctor on different applicants' cases read identically or similarly.

Medical reports contain inaccurate terminology, spelling errors, variations in physician's signature or are rubber-stamped with the doctor's name.

Medical facility uses multiple names or changes name often.

RVS/CPT (Relative Value Scale/Current Procedural Terminology) codes show evidence of upgrading level of services.

Applicant is unable to define medical ailments as listed on claim form.