Fraud Prevention

Fraud Prevention - Department of Industrial Relations

 

 

 

DIR works to identify and prevent fraud in the workers’ compensation system, as well as wage theft and other types of fraud that affect California’s workers and law-abiding employers.

Topics covered in this Fraud Prevention page include:

What is workers’ compensation insurance fraud?
How does DIR combat workers’ compensation fraud?
How does DIR combat other types of fraud?
Related resources
Report fraud

What is workers’ compensation insurance fraud?

Workers’ compensation insurance fraud system takes many forms, including the following:

  • Medical providers
    • bill for inappropriate or unnecessary treatment
    • submit bills with improper medical codes
    • bribe indigent individuals to be “injured worker” patients
  • Insurers / claims administrators / third-party administrators (for self-insured employers)  
    • cause payments to be made to nonexistent claimants or medical providers
    • refer patients or clients to medical providers or attorneys for compensation
    • issue excessive payments to an attorney or medical provider in return for a kick-back
    • backdate documents in an attempt to avoid penalties for delays in benefit payments or alter documents to support an unjustified denial of a claim
  • Employers
    • misclassify workers to lower premium rates (high-risk jobs classified as low-risk)
    • report inaccurate payroll to lower premium rates (either under-report payroll to imply fewer employees, or over-report payroll as if workers were experienced journeymen with lower risk of injury).
    • misreport claims history (omit work injuries) to lower premium rates. 
  • Workers submit fraudulent claims for fabricated or exaggerated work-related injuries or illnesses.

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How does DIR combat workers’ compensation fraud?

Senate Bill 1160 and Assembly Bill 1244, both of which became effective on January 1, 2017, added important new tools to combat workers’ compensation fraud in the State of California.  These tools included a new automatic lien stay provision as well as a process for suspending (i.e. excluding) providers from the workers’ compensation system, and in some cases, consolidating and disposing of their liens.

Lien Stays During Criminal Prosecution

To assist participants in the workers’ compensation system and the public, DIR tries to identify all liens filed by or on behalf of these physicians and providers and mark those liens as “4615” in the Electronic Adjudication Management System (EAMS). The “4615” marking in EAMS does not mean that there has been any administrative or judicial finding or determination as to whether the Labor Code section 4615 stay applies to any particular lien. The WCJs have jurisdiction and authority to determine whether the stay applies to any particular lien. If you have additional information about liens that may be subject to the automatic stay that are not marked with “4615,” please notify DIR’s Antifraud Unit.

Provider Suspensions

Pursuant to Labor Code section 139.21, DIR suspends physicians, practitioners, and other providers from participating in the workers’ compensation system if they have been convicted of certain kinds of crimes, have been excluded from the Medicare system, or have lost their professional license. The Administrative Director of the Division of Workers Compensation issues a Notice of Suspension that becomes effective 30 days later unless appealed.

Suspension from participating in the workers’ compensation system means that they may no longer provide or obtain payment for any treatment, evaluation, or other service related to a claim for workers’ compensation.  A physician, practitioner, or provider who has been suspended due to conviction of a covered crime is also subject to having all pending lien claims consolidated and dismissed in a special lien proceeding, unless they can prove the liens did not arise from the conduct or activity that led to their suspension. For information about pending lien consolidations please visit the Special Adjudication Unit Calendar webpage.

Lien Dismissals by Operation of Law

Labor Code section 4903.05(c), as amended by SB 1160, requires lien claimants to file a declaration verifying the legitimacy of liens for medical treatment or medical-legal expenses. Claimants who had filed liens between January 1, 2013 and December 31, 2016, were required to file the declarations by July 1, 2017, to avoid having those liens dismissed.

Claimants failed to file the required declaration for approximately 292,000 liens, resulting in the automatic dismissal of those liens by operation of law.

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How does DIR combat other forms of fraud (i.e., wage theft, payroll tax fraud, and misclassification of employees as independent contractors)?

Combatting wage theft and the underground economy

The Labor Enforcement Task Force (LETF) under the direction of DIR, is a coalition of California state government agencies, including partners with the Contractors State License Board, the Employment Development Department, and other agencies. The LETF partners work together to combat many forms of fraud associated with the underground economy, in particular, wage theft, licensing and payroll tax fraud.

Combatting misclassification of employees as independent contractors

The Bureau of Field Enforcement (BOFE) investigates labor law violations affecting groups of employees. Violations BOFE investigates include misclassification of workers. Employees who feel they have been misclassified may also file an individual wage claim with their local Labor Commissioner’s Office.

Funding district attorney offices in efforts to combat fraud  

The California Department of Insurance provides grant funding to local district attorneys to combat workers' compensation insurance fraud. Funding is providing through assessments from California insurers and self-insured employers. The Insurance Commissioner's Fraud Assessment Panel (on which the DIR holds one of five seats) reviews the grant applications and makes funding recommendations that the Insurance Commissioner either approves or amends.

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Related resources

Reports

Workers’ compensation fraud

Reporting other types of fraud

  • Report Medi-Cal fraud and elder abuse
  • Employment Development Department
  • Report a scam or rip-off, including someone posing as a federal government agency
  • Report a complaint against a professional or a business, including medical providers and general contractors
  • Report Social Security Insurance fraud: call the Social Security Administration at 1-800-269-0271.
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    What's New

    December 2017

    December 4, 2017 DWC Suspends 21 Medical Providers for Fraud

    November 2017

    November 21, 2017 DWC Suspends Nine Medical Providers for Fraud
    November 14, 2017 Division of Workers’ Compensation Suspends 12 Medical Providers

    October 2017

    October 27, 2017 DWC Issues Notice of Public Hearing for Proposed Regulations for AB 1244’s Medical Provider Suspension Process to Combat Fraud
    October 26, 2017 DWC Suspends Three Medical Providers for Fraud
    October 12, 2017 Division of Workers’ Compensation Suspends Three Medical Providers for Fraud
    October 5, 2017 Division of Workers’ Compensation Suspends Eight Medical Providers for Fraud
    October 3, 2017 DWC to Lift Dismissal Notice on Lien Declarations Filed on July 2-3

    August 2017

    August 29, 2017 DWC Posts Database of Dismissed Liens
    August 15, 2017 Division of Workers’ Compensation Suspends Five Medical Providers for Fraud
    August 14, 2017 DWC to Dismiss More Than 292,000 Unresolved Liens
    August 8, 2017 DIR and Division of Workers’ Compensation Suspend Fermin Iglesias, Steven Rigler for Fraud

    July 2017

    July 17, 2017 DWC Reports More Than 441,000 Lien Declarations Filed

    June 2017

    June 28, 2017 DWC Posts RAND Report on Recommendations for Fraud Prevention in the Workers’ Compensation System
    June 26, 2017 Deadline for Lien Claimants to File Labor Code Section 4903.05(c) Declaration
    June 7, 2017 DIR and Division of Workers’ Compensation Suspend Pasadena Psychiatrist for Fraud

    May 2017

    May 17, 2017 DIR and Division of Workers’ Compensation Suspend Michael R. Drobot, Steven Howser for Fraud
    May 9, 2017 DIR and Division of Workers’ Compensation Suspend Sobol, Heric and Two Other Medical Providers

    February 2017

    February 16, 2017 DIR and Division of Workers’ Compensation Suspend Seven Providers for Fraud
    Liens associated with the suspended providers total $59 million

    El DIR y la División de Compensación de Trabajadores suspenden a siete proveedores por fraude

    January 2017

    January 18, 2017 DIR Combats Workers’ Compensation Fraud, Stays 200,000 Liens with Claim Value of Over $1 Billion
    Issues report on efforts to reduce medical provider and premium fraud

    August 2017