When I started working in workers’ compensation I was a hearing representative traveling throughout the state to every board as a lien claimant. There were far fewer liens in Northern California. It was not uncommon to see just one or two liens associated with a claim.

David F. Mahjoubi

At the same time, in Southern California there were to be a ridiculous number of liens associated with every claim. It seemed the more frivolous the claim (e.g., post-term denied with a $5,000 consent and release), the more liens there were.

In an attempt to bring Southern California more in line with Northern California, the Legislature has increasingly made it more difficult for suspect liens to be paid. This started with SB 899 in 2004, which repealed the primary treating physician's presumption.

“Reasonable treatment” based on guidelines adopted by the administrative director and the American College of Occupational and Environmental Medicine resulted in the 24-visit cap rule, and the establishment of medical provider networks and lien filing fee.

However, SB 899 didn’t go far enough. Providers continued to game the system, resulting in more creative treatments such as positional magnetic resonance images; compound medications; “by report (BR)” charges for reports generated in boilerplate analytics; and studies and treatment for sexual dysfunction and sleep deprivation. The list goes on.

The Legislature took another major step. SB 863, effective Jan. 1, 2013, tried to cut costs by reducing the volume of lien claims and lien claim litigation. This included the re-establishment of lien filing fees to reduce frivolous filings and restricting the ability of third parties to collect on assigned lien claims.

SB 863 definitely had more bite. Nonetheless, many experts said it did not go far enough. Some of the notable problems: (1) failure to provide the MPN notice is not an adequate basis for workers to seek non-MPN care unless it led to a denial of care; (2) employers are not liable for the cost of non-MPN treatment if the employee was not entitled to out-of-network care; (3) prohibits chiropractors from serving as PTPs beyond the 24-visit treatment cap; (4) implementation of the independent bill review process, and requires a $150 lien filing fee for new liens and $100 activation fee for existing liens; (5) liens for services provided after Jan. 1, 2013, must be filed within three years of the service date; and (6) within 18 months of the service date for a service provided on or after July 1, 2013.

While SB 863 did take some bite out of zombie liens and resulted in more employer medical control, it did not go far enough. Thus, the Legislature enacted AB 1244 and SB 1160.

Recognizing that there are roughly 8,000 lien holders in the workers’ compensation system, accounting for more than 1.2 million liens with a total value of $11 billion, the Legislature provided tools necessary to save substantial amounts of money.

AB 1244 follows the lead of Medi-Cal and requires suspension of a medical provider if the provider is convicted of a felony, a misdemeanor connected to fraud, a misdemeanor connected to patient or privilege abuse, or the medical provider’s license is suspended or revoked.

A medical provider can contest the applicability of suspension. If not, the suspension takes effect within 30 days. Similar to Medi-Cal, AB 1244 requires that a suspended medical provider be excluded from the system and denies further payments. In the case of Medi-Cal, however, the law allows for a suspension of any and all payments when a medical provider is charged with fraudulent activity.

AB 1244 instead suspends the provider and denies further payment after conviction, and the completion of the suspension process, unless the suspension is for non-fraud related reasons or payment was already provided.

Finally, AB 1244 requires that the Department of Health Care Services communicate with Department of Industrial Relations when a medical provider is added to the Medi-Cal suspended or ineligible provider list. Depending on the reason a provider is added, this may also trigger a suspension process by the Division of Workers' Compensation.

Opponents of the bill argue that prohibiting providers from being paid after conviction of fraud is excessively broad and ignores a scenario in which a provider convicted of fraudulent activity possesses legitimate liens or medical bills in the system. Thus far, the legislation hasn’t been impressed by these arguments.

SB 1160 stays provider liens upon filing of criminal charges.

Labor Code Section 4615 provides that whenever criminal charges are filed against a medical provider (treatment or med-legal) based on alleged workers’ compensation fraud, Medicare fraud, Medi-Cal fraud, insurance fraud or medical billing fraud, any of the indicted doctor’s liens are stayed until a disposition is achieved in the criminal case. The administrative director will adopt rules to implement this statute, including the posting on the DWC website of all medical providers who have relevant criminal charges pending.

Labor Code Section 139.31 mandates that a medical provider be suspended from participating in the workers’ compensation system whenever convicted of a felony or misdemeanor involving fraud or abuse of the Medicare or Medi-Cal programs; fraud or abuse of any patient; financial crime pertaining to Medicare, Medi-Cal or the Workers’ Compensation system; or is otherwise substantially related to the qualifications, functions or duties of a provider of services.

Subsection (a)(2) requires the AD to post a list of suspended providers on the DWC website.

Where the final disposition in the criminal case results in outstanding liens being dismissed and all sums forfeited, the liens are dismissed by operation of law.

Where the final disposition in the criminal case is silent regarding liens in which the provider has an ownership interest, Labor Code Section 139.31 (e)(2) and (f) provide that the liens be consolidated in a special proceeding, the venue of which will be determined by the chief judge.

Labor Code Section 139.31(g) provides that at this proceeding, it is presumed that the services underlying the liens were connected to the conduct for which the indicted doctor was convicted and that the lien claimant is not entitled to any payment. This presumption must be rebutted by a preponderance of the evidence.

SB 1160 also prohibits assigning or factoring of a lien on or after Jan. 1, 2017, unless the medical provider is no longer in business in the capacity when he filed a lien.

For liens assigned between 2013 and 2016, SB 1160 codifies the recent appellate court decision, Chorn v. Workers' Compensation Appeals Board (2016) 245 Cal. App. 4th 1370, which found that restrictions on lien assignments were constitutional and that the effect of Labor Code Section 4903.8 (i.e., SB 863) is to prohibit the WCAB from ordering or awarding lien payments to anyone other than the medical provider who incurred the expense.

Given the foregoing, I foresee increasingly excellent opportunities to combat lien claimants.

David F. Mahjoubi is a workers’ compensation defense attorney based out of Bradford & Barthel’s Anaheim office. This entry from Bradford & Barthel's blog appears with permission.