Editor’s Note: This is the third article in a week long series discussing workers’ compensation fraud. The first article in the series may be read here.

There is one big problem with workers’ compensation fraud, besides the fact that, you know, well, it’s fraud. That problem is this: Assuming that we actually recognize fraud when it happens, and then we are able to convince a local, state or federal law enforcement authority to pursue the case, and then we get a successful verdict that results in an actual conviction, we are then actually able to see a reasonable punishment that suits the crime. More often than not, a punishment that people may view as appropriate is not forthcoming.

People who are convicted of white-collar fraud often are given what many believe are a slap on the wrist. The time in prison is short, if there is any at all. The fines and restitution do not approach the level of profit from their ill-gotten ways. For many people, pursuing fraud convictions may feel like a waste of time, or as recently stated from an attendee at the WCIRB Conference session on fraud, more like “whack-a-mole.” 

This means that defrauding you is a worthwhile risk, since the odds of being caught are low, and the punishment if caught is light. We have to figure out a way to change that formula.

We’ve already discussed one of the biggest challenges in addressing this issue in the first article in this series, To Fight Fraud, We Must First Recognize It. We have to be able to recognize fraud when it happens. Once we have accomplished that, we have to be able to support our case with authorities. It is only then that we run headlong into another obstacle. Many local law enforcement entities are undermanned and underfunded, and fraud of this type is simply not a priority. How can we overcome that?

For this particular issue, I would suggest the old adage that there is strength in numbers. If you are an employer or carrier who has discovered you were billed for services not performed or intentionally mispriced, we would suggest that you are not alone in your community. You need to have discussions with your counterparts in other firms. We probably need to start doing something that has traditionally been complete anathema to workers’ comp insurers; we need to start sharing certain data so that common trends and issues can be revealed for the size and scope they actually are. This does not need to be a formal arrangement. It can start off as casual discussion at your local Chamber or RIMS chapters. You don’t even need to be accusatorial in your tone; merely instead inquire about experiences with certain providers. Or, based on our last post, you could say “run this phone number in your system and let’s talk about what you find.”

If you have an aggressive, or to use a phrase that is all the rage with the young’uns recently, a “woke” District Attorney such as Ms. Shaddi Kamiabipour of Orange County, they can assemble all the moving parts for the case at hand. Sadly, however, in many legal jurisdictions the victims themselves will have to do some legwork and make the case to get their day in court. 

The other big issue regarding punishment for workers’ comp fraud is that there isn’t actually much punishment involved. Perpetrators often get light sentences, long delayed and ultimately shortened by a system that does not consider their crimes a priority. Look at a recent famous case in California for example. Michael D. Drobot, former owner of Pacific Hospital in Long Beach, CA, was sentenced to 63 months in prison for overseeing a 15-year-long health care fraud scheme that involved more than $40 million in illegal kickbacks paid to doctors and other medical professionals. This was in exchange for referring thousands of patients who received spinal surgeries. His son, Michael R. Drobot, received a 41-month sentence for his part in the scheme. He pleaded guilty to conspiracy and a kickback charge, admitting to using drug dispensing companies to facilitate kickback payments to doctors referring patients to his father’s hospital.

The Drobot case took lots of other people down, but many of us think sentences of 63 and 41 months for such a large case is rather light. When you consider the potential that some of those surgeries were unnecessary, it is safe to consider that personal lives were damaged in the process (there have been accusations that counterfeit parts were used in those surgeries; accusations the Drobot’s aggressively deny).  

Of course, people registered in a California Victim’s Registry were just notified that the younger Drobot has been scheduled for release on April 23, 2020. That date represents about 50% of his actual sentence, and less than 2 years since the time he was incarcerated for his crimes. 

And we wonder why people risk committing fraud against the workers’ compensation industry.

State legislatures and law enforcement must start taking fraud of this nature more seriously and pass legislation that would make the punishment more appropriate for the crimes involved. However, that will never happen if the insurance industry and employers continue to keep their head in the sand about what is happening out there. We started this series discussing a Senior Deputy District Attorney for Orange County, CA lamenting that too many of those entities just are not aware of the level of provider fraud that exists. They don’t know about it, and they haven’t developed effective systems for identifying and tracking it. This is really a great example of the phrase “you don’t know what you don’t know.” It is telling that in the Drobot case, prosecutors believed the actual losses to employers and insurers was over $180 million, but they could only prove $12 million. That is largely due to the ignorance gap regarding provider fraud in workers’ comp.

If the industry awakes to the broader problem, it can start making noise about the abuse that is occurring. Perhaps it’s squeaky wheel time – as long as we have gathered the data to generate the noise. Legislators will respond if enough verifiable pressure builds; but before we can get the death penalty in place for this, we’ll need our ducks in a row.

Next in our series, we will discuss “Know Thy Enemy as They Know You.”

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