California Saw $600M in Workers’ Comp Liens Filed by Convicted Providers

The California Department of Industrial Relations announced in late August that $600 million in liens were filed against injured employees’ claims for workers’ compensation benefits by convicted or criminally indicted parties from 2011 through 2015.

California’s workers’ comp law allows certain claims for payment of services or benefits provided to or on behalf of injured workers to be filed as a lien against an employer in an employee’s workers’ comp claim. The lien generates collateral litigation between the lien filer and defendant over the validity of the claim and the necessity, extent and value of any services provided. The parties may then settle on an amount due or adjudicate the dispute in a lien trial before the Workers’ Compensation Appeals Board.

Senate Bill 863, the state’s sweeping workers’ comp law that took effect in 2013, included a number of provisions to reduce costs by reducing the volume of lien claims and lien claim litigation in the workers’ comp system, including the reestablishment of lien filing fees to preclude frivolous lien filings, creation of an independent bill review and restrictions on the ability of third parties to collect on assigned lien claims.

Despite these efforts, the 68 businesses comprising the top one percent of lien filers filed more than 273,000 liens totaling $2.5 billion in accounts receivable on adjudicated cases between 2013 and 2015, according to DIR.

Two of the business owners are indicted and three others have pled guilty. Legislation is underway to stay liens of physicians or providers who are criminally charged with workers’ compensation fraud, medical billing fraud, insurance fraud, and Medicare or Medi-Cal fraud, according to DIR.

The assignment of liens by service providers to those who file and collect on liens are essentially buying and selling injured workers’ treatments. DIR’s review of filing dates indicates that lien claimants tend to wait until after the primary case is settled rather than seeking early resolution of medical necessity. Even if lien claimants only make pennies on the dollar, returns can still be high, according to DIR.

DIR said it is leading an effort to identify and address strategies for improved anti-fraud efforts in the workers’ compensation system. DIR and the California Department of Insurance convened working groups in June to gather stakeholder input and evidence of fraudulent activity in the system. At the direction of the Secretary of the California Labor and Workforce Development Agency, DIR will be preparing a report on further recommendations to the Governor and the Legislature by no later than Fall of 2016.

“While California has made great strides in increasing benefits to injured workers, improving appropriate care and reducing employers’ costs, we are pursuing legislation to prohibit criminal and indicted providers from lining their pockets through liens and to address the assignment of liens,” Christine Baker, DIR director, said in a statement.