Tuesday, June 25, 2013

One Chapter Than Never Ends

Premier Medical - those who follow history in California workers' compensation will recall the name.

Premier Medical was a medical management company in Southern California that gained notoriety when, in 2002, an investigation was instigated by the California Insurance Guarantee Association (CIGA) on allegations of billing fraud and other illegal conduct.

Then in 2008 the district attorney's office joined the party bringing charges against the company and its owners, David Wayne Fish and Birger Greg Bacino, for filing fraudulent claims for payment, tax fraud and illegal receipt of compensation for patient referrals.

Premier Medical, during its operations, had filed upwards of $70 million in liens for services by its providers, and as a collection agency for other medical and service vendors.

Insurance companies joined CIGA in fighting Premier Medical and the volume of liens that had to be dealt with caused then Division of Workers' Compensation (DWC) regional manager, Workers' Compensation Judge Mark Kahn, to consolidate for hearing all of the Premier Medical lien cases.

This consolidation resulted in Kahn's order that all of the liens for the "Premier Providers" be dismissed with prejudice (meaning they could no longer be prosecuted in any form or fashion) over the objections of Premier's collections customers.

In addition, Fish and Bacino entered into a plea agreement in 2010 with the district attorneys office, accepting a deal to pay $1.5 million in fines and serve three years of probation in exchange for their no-contest pleas to the fraud charges against them. In addition Premier agreed to withdraw the liens it had filed.

Premier's collections customers sought review up the judicial chain and on Friday the Second Appellate District ruled in an opinion not certified for publication (meaning it can not be used as binding precedence) that the Premier did not present any evidence that it had the authority to dismiss the liens of at least one of its customers, Universal Psychiatric Medical Center, Inc.

The court noted that there was a "substantial question" as to whether Judge Kahn's order dismissing all of the "Premier Provider" liens even applied to Universal since the order "refers only to the Premier and the Premier Providers and never mentions Universal by name."

Although Universal assigned a number of liens to Premier for collection, the court pointed out that Universal never engaged Premier as a business agent the way the Premier Providers had.

"The evidence that allegedly supports the finding that Premier had the authority to dismiss Universal's liens is evidence that pertains to Premier Providers," the court said, so if Universal were not a Premier Provider, then "the WCJ's opinion simply does not apply to Universal."

There are several items of interest in this development.

First, and most compelling to me, is that the perceived value of Universal's liens must be tremendous - or at least of sufficient value, even after discounting for various applicable legal arguments - to provoke the company into years of litigation with no guarantee of return on investment.

I have to assume that the company has spent hundreds of thousands of dollars in legal fees to get to this stage - from initial hearing to an appellate review is a lengthy, costly endeavor. We must be talking about well over a million dollars in face value on the liens to justify this kind of expenditure.

Second, since this fight was instigated the landscape has changed a couple of times, with the most recent being the radical changes to lien enforcement law in California, not to mention the applicability of the lien activation fee system. Since the cases were consolidated long ago by Kahn does this mean that Universal need pay only one lien activation fee to return to hearing? Or is a fee due on each, single, lien?

And what about statutes of limitations? Are those tolled because of the pendancy of the Premier litigation and Universal's appeal?

Third, we often hear of the long tail of workers' compensation claims and the effect such have on rates and premiums. Here's a classic example where carriers will have to reopen files that likely were long ago closed and reserves were released, raising havoc on claims departments balance sheets and staffing plans.

Finally, of course, is how many other of Premier's collections customers will take up the cause and seek reinstatement of lien litigation rights.

The entire situation is emblematic of the perverse lien culture that had permeated California (and in particular Souther California) workers' compensation culture.

This just seems to be one of those chapters in workers' compensation history that just doesn't conclude...


  1. Update: 2015: Greg Bacino was killed in a plane crash, along with the Pilot, who had a long, troubled history with the FAA.

    1. I commented on this a few days ago in http://daviddepaolo.blogspot.com/2015/08/professionalism-attitude.html