JUNE 27, 2002—U.S. District Court Judge Lee H. Rosenthal sentenced Houston attorney Bernardo Eureste Tuesday to three years probation for workers’ compensation fraud-related charges. Eureste, a former member of the San Antonio City Council, must also pay $108,486 in restitution to Texas Mutual Insurance Company and pay restitution to three former clients (injured workers), in amounts ranging from approximately $975 to $2,067.
The Texas State Bar had already found Eureste guilty of fee violations in December 2000. The Bar suspended his license to practice law for two years to be followed by a one-year probation. The three-year sentence will run concurrently with the three-year probation imposed by the district court.
Texas Mutual Insurance Company (then called the Texas Workers’ Compensation Insurance Fund), the Texas Workers’ Compensation Commission (TWCC), and the FBI conducted investigations that uncovered billing irregularities by Eureste. The investigations revealed that Eureste had devised a scheme to defraud his injured worker clients by submitting false claims, primarily for work that he did not personally perform.
The investigations also revealed that Eureste often billed identical hours on different clients without any variation. According to TWCC records, Eureste billed for an average of 90 hours per day, seven days per week, including weekends and holidays.
As part of the scheme, Eureste used a computer software program to generate claims on a monthly basis. Eureste regularly submitted charges for file reviews each month.
At the time in question, TWCC procedures automatically approved file reviews for 2.5 hours at $150 per hour per claimant per month. Eureste routinely submitted charges for the full amount despite the fact that his regional files were housed in their respective regional offices and were not sent to Houston, where Eureste conducted his work.
Eureste’s clients, workers suffering from on-the-job injuries, paid Eureste’s fees.
According to TWCC rules, an injured employee’s attorney may receive up to 25 percent of the injured employee’s weekly income check (known as TIBs, for temporary income benefits). The workers’ compensation insurance carrier pays the benefits, but the injured employee pays the attorney fees.
“As a carrier, we pay the same amount of TIBs regardless of whether the injured worker retains an attorney,” explained Elliott Flood, vice president of special investigations. “The difference is how much goes to the injured worker because the attorney’s fee is deducted from the injured employee’s check. When lawyers misrepresent their billable hours and services, they aren’t stealing from the insurance company, they’re stealing from the injured worker, who can least afford it.”
Sandra Garcia led the investigation for Texas Mutual Insurance Company. Assistant U.S. Attorney Cedric L. Joubert handled the prosecution.
JUNE 25, 2002—Texas Mutual Insurance Company held its first policyholder meeting today to elect four board members. Over 5,000 policyholders voted—either in person or by proxy—to elect Judy Broussard, Jose Cuevas Jr., James D. Ross, and Charles H. Whiteside to the board.
The four elected directors will serve terms as specified for each seat. Texas Mutual Insurance Company will hold periodic elections to fill the seats as the terms expire.
Previously, the Governor appointed all board members to the state-chartered company. Last year, the Legislature revised the company’s charter by passing House Bill 3458, which empowered the company’s policyholders to elect four directors of the nine-member board. The Governor, with the advice and consent of the Texas Senate, appoints the other five directors, including the chair.
In the late 1980s and early 1990s, coverage was hard to find or unaffordable for many Texas employers. In 1991, the Legislature created Texas Mutual Insurance Company (then called the Texas Workers’ Compensation Insurance Fund) to be a competitive force in the market and to provide “a safety net” for the Texas workers’ compensation market, according to President Russell Oliver. Thanks to the presence and influence of Texas Mutual Insurance Company, today’s hard market is much less volatile than the last hard market.
Today, “insurance agents can get quotes for their clients, and their clients can buy the coverage they need, even after their prior carrier has gone out of business, left the state, or just plain told them to go somewhere else for insurance,” Oliver told the audience.
“Texas Mutual is doing what it should,” concluded Chairman Martin H. Young Jr. “We are dedicated to assuring Texas businesses, large and small, that they will have a stable, competitive provider of workers’ compensation insurance working for them year after year.”
JUNE 13, 2002—A federal bankruptcy court has ruled that Dallas businessman Aharon Chen and his now-bankrupt company, A.C. Painting Inc., defrauded Texas Mutual Insurance Company for over $3 million.
The court ordered Chen to pay approximately $1.3 million, plus attorney’s fees, to Texas Mutual Insurance Company. The court also upheld a Texas MutualSM claim against the bankruptcy estate for Chen’s business for approximately $2.5 million, plus attorney’s fees, plus interest.
Chen had classified over 100 workers on A.C. Painting’s payroll as “independent contractors,” but they were actually employees. Texas MutualSM investigators got suspicious when A.C. Painting started to file claims for laborers whom they did not report at audit. A.C. Painting paid the unreported employees out of a hidden account called the “blue account.” Texas MutualSM attorneys were able to access the company’s computer hard drive and reconstruct its payroll to uncover the hidden blue account and prove fraud.
Since workers’ comp premiums are based in part on a company’s total number of employees, A.C. Painting was able to pay lower premiums by reporting a smaller staff to Texas Mutual Insurance Company.
During the bankruptcy proceedings, Texas Mutual Insurance Company presented evidence of more unreported “independent contractors” who actually qualified as A.C. Painting employees. Judge Steven A. Felsenthal, U. S. Bankruptcy Judge for the Northern District of Texas, Dallas Division, found that the “independent contractor” designation was not appropriate for workers’ compensation purposes. He cited the Texas Insurance Code, which requires a policyholder to “make full disclosure to its insurance company of information concerning its true ownership, change of ownership, operations, or payroll and any of its records pertaining to workers' compensation insurance.”
JUNE 11, 2002—Although health care providers rarely recommend traction for patients with back pain these days, a few have turned to vertebral axial decompression (VAX-D) therapy. Traction costs about $20 per session; a VAX-D session costs up to $235.
Twice before, Dr. Daniel A. Boudreau, D.O. had successfully challenged an insurance company’s reimbursement of VAX-D therapy. Each time, the State Office of Administrative Hearings (SOAH) judges ruled in Boudreau’s favor.
But when Boudreau billed $7,700 to Texas Mutual Insurance Company for VAX-D therapy to treat two workers’ compensation patients, Texas MutualSM medical experts—an orthopedist, a chiropractor, and a physician specializing in physical medicine and rehabilitation—reviewed the treatment and determined that VAX-D was a type of traction. Boudreau received $300 reimbursement, the maximum amount allowed for 15 traction sessions, under the Texas Workers’ Compensation Commission Medical Fee Guideline.
Boudreau appealed his case to SOAH, where he testified that he believes VAX-D therapy actually decompresses vertebrae, something that traction cannot do. He also said that the VAX-D therapeutic table costs between $100,000 and $125,000, compared to the $3,000 cost of a traction table. Given the difference in price, VAX-D could not possibly be a subset of traction devices, according to Boudreau.
In rebuttal, Texas Mutual Insurance Company called on expert witnesses who testified that the American Medical Association (AMA), the U.S. Food and Drug Administration (FDA), and Medicare all view VAX-D therapy as a form of traction. Richard Ball, a Texas MutualSM senior medical dispute specialist, added that Medicare does not cover VAX-D therapy due to insufficient scientific data to support its alleged benefits. The judge ruled that SOAH’s previous two decisions on VAX-D cases appeared to be based on incorrect information. The judge also agreed with Texas Mutual Insurance Company that the AMA, FDA, and Medicare view VAX-D as a form of traction, and that $20 is the correct payment for a VAX-D session.
MAY 31, 2002—The State Office of Administrative Hearings (SOAH) has overturned a Texas Workers’ Compensation Commission (TWCC) ruling regarding payment for chiropractic services. SOAH ruled that chiropractors are not entitled to an additional payment for joint mobilization when the mobilization is immediately followed by a chiropractic manipulation to the same body area.
Based on information from chiropractic experts, Texas Mutual Insurance Company denied a bill from Curtis Adams, D.C. for joint mobilization because he had billed for manipulations to the same body area on the same date of service. Dr. Adams filed for medical dispute resolution through TWCC, which ruled in his favor. Texas Mutual Insurance Company appealed the ruling to SOAH.
Texas Mutual Insurance Company called on an expert witness, another chiropractor, to explain to the SOAH judge that when a chiropractor manipulates a body part, the manipulation includes a preliminary joint mobilization. Texas Mutual Insurance Company also provided a fifteen-minute videotape demonstration of a mobilization and manipulation performed to the same body area. The expert went on to say that chiropractors view the joint mobilization as part of the manipulation for billing purposes.
Dr. Adams chose not to attend the hearing.
SOAH found that the joint mobilizations in the context provided were not separately reimbursable as provided by law, and that Texas Mutual Insurance Company had correctly reimbursed Dr. Adams. SOAH also ruled that a chiropractor cannot manipulate a body area without first mobilizing the body area, and could not bill for both services because it would be double-billing for the same service.
MAY 31, 2002—The State Office of Administrative Hearings (SOAH) has ruled against a chiropractor who misrepresented group physical medicine as individual treatment. The case began when David Olson, D.C. billed Texas Mutual Insurance Company for one-on-one sessions because the injured worker was frequently the only patient in his physical medicine facility at the end of the day.
For true one-on-one physical medicine sessions, health care providers may charge for each 15 minutes of treatment. Physical medicine sessions rendered in a group setting have a flat fee and are generally much less expensive.
“This is a common billing error, one that we look for when we review physical medicine charges,” said Lisa Corless, vice president of Claim Operations. “Both code descriptions require supervised treatment, but individual physical medicine requires the health care provider to supervise the session exclusively and on a one-on-one basis.”
According to expert testimony from another chiropractor, one-on-one physical medicine would be appropriate for severely injured patients, such as stroke patients, those with significant gait problems, or those with profound neurological deficits. The chiropractor also testified that Dr. Olson’s physical medicine session was no different than what is available at a health club for far less expense or in a home setting if the patient had the right equipment.
For Texas workers’ compensation cases, health care providers bill for their services using Current Procedural Terminology (CPT) codes from the Texas Workers’ Compensation Commission Medical Fee Guideline. The guideline also includes ground rules that govern the use of the CPT codes.
SOAH agreed with Texas Mutual Insurance Company that Dr. Olson did not perform one-on-one physical medicine and that CPT code 97110 (one-on-one physical medicine) is not a “default code” just because the claimant is the only patient in the clinic at the end of the day. SOAH also agreed that Texas Mutual Insurance Company had correctly reimbursed Dr. Olson.
MAY 6, 2002—Dallas County has reached its first plea agreement with a corporation accused of health care insurance fraud. Recovery Analysis Inc. entered into a plea agreement to the second-degree felony charge of Aggravated Theft Over $100,000. Recovery Analysis will pay a $10,000 fine and $168,346 in restitution to Texas Mutual Insurance Company and 16 other participants in the federal and state workers’ comp systems.
A 1998 Texas MutualSM investigation led to a March 1999 audit of Recovery Analysis by the Texas Workers’ Compensation Commission (TWCC). The audit uncovered deceptive business practices by the company. Afterwards, Texas Mutual Insurance Company, TWCC, the FBI, the U.S. Postal Service Office of the Inspector General, and the U.S. Department of Labor Office of the Inspector General began investigating Recovery Analysis in a joint-operation.
The investigation revealed that between September 1, 1994 and May 31, 1998, Recovery Analysis billed for 60 minutes of treatment for state and federal workers’ compensation cases when, in fact, the patients were eating lunch at various restaurants. Recovery Analysis paid for lunches, provided transportation, and billed $64 per hour, per patient for treatment and/or training it never rendered. Additionally, Recovery Analysis provided group aquatic therapy for patients, but billed for the more expensive individual aquatic therapy.
A federal judge issued four federal search warrants in December 1999. The U.S. Attorney Office in Dallas initially accepted the case, but later transferred it to the Dallas County District Attorney Office. Dallas County Criminal District Attorney Bill Hill negotiated the plea agreement, which Recovery Analysis accepted on April 12, 2002.
Recovery Analysis has offices in Dallas and De Soto.
MAY 1, 2002—The Stephens County Grand Jury has indicted Eric Beaver on felony charges related to workers’ compensation fraud. Beaver allegedly took $4,686.98 in temporary income benefits (TIBs) from Texas Mutual Insurance Company after he was no longer eligible for the TIBs.
Beaver allegedly suffered an on-the-job injury while working for Orbit Plastic Pipe Inc. He started collecting TIBs checks from Texas Mutual Insurance Company when his doctor declared that Beaver was unable to return to work because of the injury.
He later took a new job with another company, but hid the fact that he was working again from Texas Mutual Insurance Company, so he could continue to collect TIBs. State law specifies that an injured worker is eligible for TIBs only when he or she is unable to return to work because of a work-related injury.
Texas MutualSM investigators presented a criminal case to District Attorney Stephen Bristow on February 22, 2002, alleging that Beaver had violated Section 418.001 of the Texas Labor Code. The Stephens County Grand Jury met on April 17, 2002, and returned an indictment charging Beaver with “fraudulently obtaining workers’ compensation insurance benefits,” a state jail felony.
Note: A grand jury indictment is a formal accusation--not a conviction--of criminal conduct.
APRIL 23, 2002—A Travis County grand jury indicted Texas Home Exteriors Inc. and its vice president, Derek Baker, of a third-degree felony yesterday. The charges allege that Baker and Texas Home Exteriors falsified a workers’ compensation claim to Texas Mutual Insurance Company.
According to Texas MutualSM investigator Sandra Milburn, Baker allegedly reported an injured worker as a covered employee under the company’s workers’ compensation policy. Further scrutiny revealed that the injured worker was not a covered Texas Home Exteriors employee. Because the injured worker worked for an uninsured independent contractor, the injured worker was not legally entitled to workers’ compensation benefits.
Donna Crosby is the assistant district attorney handling the Texas Home Exteriors case.
Note: A grand jury indictment is a formal accusation--not a conviction--of criminal conduct.