There has never really been a cogent assessment of why. Some have speculated that there's more diversity in the Southland, some have pointed out a larger demographic of unskilled, uneducated workers doing manual labor, and others think it may be a combination of complex factors.
Or it could be that Southern California is just home to more criminals.
But it's not the claimants perpetrating crime. Rather, the real money is in the vending of benefits, particularly medical benefits, and even more so diagnostic and medical-legal services.
We don't learn very well.
|Holy Trinity, San Pedro, CA|
This criminal pattern has been repeated throughout my 32 years of experience in the work comp industry many times. There are various techniques used to perpetrate the crime, and all of those various techniques have, at some point in various reforms, been the subject of new laws declaring an activity felonious.
And each time the vast majority of vendors who have legitimate practices get punished, and the constituents whom are to be served by the system lose out, only to find that the targeted criminal activity has taken life in yet another scheme.
The basic scheme works on referrals. So long as referrals are kept "within network" it's very difficult to crack the secret code. There's usually a mastermind who controls the network with cash, or violent, incentives. Someone is tasked with finding "patients" who are promised free money and free medical care for whatever ails them. That "patient" is then referred in a big circle generating diagnostic services and medical reports (all of which, upon loose inspection, will reveal surprisingly similar content, sometimes embarrassingly so). Sometimes treatment is even provided, but more often than not treatment takes on a phantom quality. Billings for those services are then submitted and liens are filed, with the sole intent of settling for pennies on the dollar because, what the heck, it's free money since no real services or goods were provided.
In the most recently publicized scheme, the providers and others indicted as part the FBI's "Operation Backlash" have collectively filed more than 33,000 liens, with a total claimed face value of at least $233.5 million, according to a WorkCompCentral analysis of data available from the Division of Workers' Compensation's Electronic Adjudication Management System, or EAMS.
That analysis doesn't include all of the fraudulent billings that were not contested and were paid either at face value, discounted to fee schedule, or negotiated without filing for lien protection.
We frankly don't have a very good system for understanding when an illegal referral/work comp fraud scheme is incubating. By the time suspicions arise, the conspiracies have mushroomed and have provided nice profits, and the only thing that trips up the criminals is plain old basic greed; easy money for too long.
Which is why these schemes will continue, and why, no matter how many laws are passed making this or that illegal, fraud will continue to take money away from injured workers and the services they need, and will continue to batter the black eye that workers' compensation perpetually experiences, at least in Southern California.
Why do workers' compensation criminals congregate in Southern California? I think it's a simple matter of the weather. Criminals are, essentially, lazy - why work for money if you can get it easier. Likewise, why shovel snow, or deal with seasons, if you can live nearly 365 days a year in mild, forgiving climate with a vast array of recreational opportunities?
I've long believed that Southern California's climate was the primary driving force for its robust economy. It takes smart people to start and grow business. Smart people want the same thing everyone wants: comfort. So smart people go where the weather's good and they figure everything else out after that.
So do criminals.
I know, the basic medical fraud scheme isn't the only game in town. Various cheats against work comp take on different permutations depending upon the level and origination. Sometimes it's within the system, sometimes it's external. Sometimes it's penny ante, sometimes it's a huge scale. Sometimes it's white collar within otherwise respected institutions, and other times it's low scale.
At all times it's contemptuous. Sure, the fraud "costs" insurance companies millions of dollars a year - but that's a false conclusion because those costs are simply passed down to the policy payers. When a fraud recovery is made, though, that money doesn't find its way back to those payers...hmmm...
The real damage is to the institution of workers' compensation and everyone in the system that believes in the mission and who try to execute within the constrictions of the law; ergo those are the same people that are punished with fees, procedures, reviews and other sorts of nonsense intended to capture a very small percentage of anti-socials.
It sort of feels like Catholic School to me. I went to Holy Trinity in San Pedro, CA, from kindergarten through sixth grade. There were one or two kids every year who just couldn't tow the line, and for their transgressions the entire class would suffer some punishment. I guess the theory was that if everyone was punished then us do-gooders would blow the whistle and take on vigilante roles against the jerks that were making our days bad.
That never happened though, because the jerks just didn't care and would do whatever they wanted to do regardless of the consequences.
So, big deal - a fraud bust results in the discovery of hundreds of millions of dollars in illegal activity. When those folks are taken out of the system, there's plenty of others ready to fill the gap.
Fraud is, unfortunately, a cost of doing business in workers' compensation. There's no easy answer. There's no easy remedy.
Like Catholic school, we just live with it and say our afternoon prayers in hopes that the punishment for the rest of us isn't so bad.