The Stench of Fraud: Why Workers’ Comp Can No Longer Be a Closed System

The subject of fraud in workers’ compensation usually refers to claimants who fraudulently file claims to get benefits that don’t belong to them.

But there is another kind of fraud in workers’ compensation…the kind of fraud perpetrated by physicians, hospitals, and other medical facilities, either against the injured workers or against the system itself.

Why this kind of fraud exists is for the same reason that fraud conducted by larcenous and bogus claimant’s exists. Greed.

In a post today on his blog, CA attorney, David De Paolo mentions several cases where physicians or hospitals were charged with using phony or unapproved implants on patients.

Kickbacks, defrauding of insurance companies, and compounding problems are just the tip of the iceberg. One individual, who I will call Ms. X, has been a victim of not only of fraud, but of abuse by the medical providers she was forced to go to under CA work comp laws.

To summarize her experience, let me just say that she endured three epidurals that not only hurt her, they may have damaged her muscles and nerves, and even a defense attorney, in a letter to convince her to settle for a few thousand dollars, said that she was being harmed. Anesthesia was administered against her will, and the legal system took advantage of her as well.

Medical records and forms were changed, doctors treated her with contempt, and her life has been turned upside down and would have been homeless if not for her sister.

Those of you who have read my blog these nearly two years, know that I have been passionate about giving injured workers the best medical care available, and at the lowest cost possible. I know that the American health care system is broken and dysfunctional, but now it seems that it is actually harmful to those whose medical condition is the result of a workplace injury.

Those who criticize my idea to implement medical tourism into workers’ comp should look themselves in a mirror and ask themselves this question: do we really provide injured workers with the best medical care possible, given our broken and dysfunctional health care and workers’ comp systems, and because we have been strait-jacketed into this situation by antiquated state statutes and laws that actually perpetuate this fraud and abuse?

To the medical tourism industry, I am asking the following question that you need to answer, and answer affirmatively so that the health care industry will take you seriously. Will you follow the lead of these fraudsters and hucksters and use phony or unapproved implants on your medical tourism patients, or will you guarantee that you will use FDA approved and legitimate implants and will dispense drugs that have not been compounded in suspect labs? And will you agree to weed out those providers, mostly in the cosmetic and plastic surgery arena, and see that they are turned into the appropriate authorities in their home countries, because they are giving medical tourism a bad name.

And will both the medical tourism and workers’ comp industry promise that patients such as Ms. X will not be maimed and battered by a corrupt and fraud-prone workers’ comp and health care system?

Maybe it is time to get rid of the bad doctors, medical facilities, lawyers, and workers’ comp personnel who care more about their jobs and the profits of the companies that provide services to the workers’ comp industry, than the health and welfare of every single injured worker. And maybe it is time to seriously look at some out of the box solutions to the problems our broken, corrupt, and dysfunctional system is causing injured workers. Medical tourism could be one of those solutions.


This entry was posted in Abuse, Fraud, Health Care, Medical Malpractice, Medical Tourism, Patient Safety, Unethical behavior, Workers' Compensation and tagged , , , , , , , on by .

About Transforming Workers' Comp

Have worked in the Insurance and Risk Management industry for more than thirty years in New York, Florida and Texas in the Claims and Risk Management spheres, primarily in Workers’ Compensation Claims, Auto No-Fault and Property & Casualty Claims Administration and Claims Management. Have experience in Risk and Insurance Business Analysis, Risk Management Information Systems, and Insurance Data Processing and Data Management. Received my Master’s in Health Administration (MHA) degree from Florida Atlantic University in Boca Raton, Florida in December 2011. Received my Master of Arts (MA) degree in American History from New York University, and received my Bachelor of Arts (BA) degree in Liberal Arts (Political Science/History/Social Sciences) from SUNY Brockport. I have studied World History, Global Politics, and have a strong interest in the future of human civilization in all aspects; economic, political and social. I am looking for new opportunities that will utilize my previous experience and MHA degree. I am available for speaking engagements and am willing to travel. LinkedIn Profile: Resume:

8 thoughts on “The Stench of Fraud: Why Workers’ Comp Can No Longer Be a Closed System

  1. Transforming Workers' Comp Post author

    Richard’s Note:

    Just in case any of you want to know what I know about fraud in workers’ comp and in the insurance industry as a whole, in my first insurance job out of college, I worked for a small public adjusting firm as a clerical, and the men in my office, while licensed by the state, no doubt passed money under the table to the insurance company and general adjusters who were settling property and casualty claims. One of my boss’s friends ran a small anti-fraud organization until his untimely death while crossing the Long Island Rail Road tracks after getting on the wrong train.

    When I worked for a workers’ comp carrier as a claims examiner, one of our investigators showed us a video tape of a claimant who was not supposed to be lifting anything heavy, taking bags of groceries out of the trunk of his car. And having worked in the New York insurance industry, you hear about and are exposed to cases of fraud at all levels, from claimants to brokers and agents, and service providers.

    The cases mentioned in David De Paolo’s post are not just limited to CA. Other states have similar, if not other kinds of fraud and abuse, so the problem is nation-wide. But maybe we need to realize that to reduce fraud and abuse, we need to open up the system and let some fresh air and fresh ideas into it.


  2. Mike Hussnatter

    Richard well let me just say that I found your article interesting. As for medical tourism I am not sure on that one but I do agree that the treatment system for WC claims by Dr’s and Hospitals is out of hand. There is no doubt in my mind that there is abuse and fraud. Having spent pretty much my entire adult life in the industry of claims management ( I worked as a WC adjuster for 6 years or so, a BI and PD adjuster for a year, Nurse case management for 2 years but most of my career in the Private Investigations industry rooting out fraud and helping in the defense against fraudulent Insurance Claims of all kinds ) I can tell you that there are MANY types of fraud involved in the WC system no matter what state you are looking at. Just as there are many types of fraud in the Medicare system…..what concerns me is that this fraud is not only conducted by the little guy out there. I think it is time that we all took a look around us and…..


    One of my biggest concerns about the industry is those companies that should know better are now involved in some of the biggest fraud out there. This is something you may want to look into and start bringing to the forefront in your blogs and speaking engagements. I am talking about fraud on Insured companies and large self insured companies by Carriers and TPA’s… YEP! I said it. That’s the Big Elephant in the corner in the Claims Industry and I am shocked that we don’t hear more about it. I am also shocked that is such a litigious society some large law firm has not taken it upon themselves to start a class action lawsuit on behalf of Large Insured Companies or Self Insured Companies to recoup millions of dollars lost and protect future businesses from this fraud. I also can tell you that many if not all vendors or ancillary claims service companies out there don’t really want to bring up this issue as they fear the backlash from Carriers and TPA’s.

    The bottom line is that we have gotten away from a system where the adjuster had the say in what Ancillary Claims Service Vendors they would like to use such as Nurse Case Management, Vocational Case Management, Bill Review, Surveillance and Investigations, IME, DME, FCE the list goes on and on and I am sure you get the idea. Adjusters had many companies to choose from and they would use the services of those providers that gave them the best service and best results for the most reasonable cost. Now I know some out there would argue that sometimes adjusters would wind up using some companies based on who took them to lunch this week or who had the best looking sales rep etc. But I can assure you that this was not the norm and it was easily detected and squashed by claims supervisors and managers. Most of the time the adjusters were held accountable for the vendors they used and they would eventually find vendors that did a great job for them and in turn that made their jobs as adjusters easier. The system that we now see is again one built on GREED and, as I see it FRAUD. Look at it this way if you are a WC Carrier you should be making your money like all other lines of insurance business. You take in a premium based on the risk and when the premium amount is larger than the loss amount ….there is your profit ( I know I greatly oversimplified that but you get the idea ) Well that is not enough for them… Carriers have come to realize that they can make more money off of the claims by doing some of the ancillary services themselves (which hey I have no problem with that) But here is where I see a problem. Now instead of providing those ancillary services themselves they “Contract” with an outside vendor in the industry to give them the work and then they take enter into a “Revenue Sharing or Profit Sharing Agreement with that vendor” Now what makes this any different than Kick Back.? The same goes for TPA’s on that side of the problem. TPA’s (again oversimplified but follow me here) They should make their profits by agreeing to charge a certain amount of money whether it be flat rate or T&E for the administering of a WC claim. In other words we will charge you X amount of dollars for each medical only file and X amount of dollars for each lost time file that we administer on your behalf……Well again this was not enough for them. That plus the TPA industry became so darn competitive that they got more creative and started undercutting each other on the claims administration end if they could get some of the money back on the ancillary services. So what we now have is the same type of system. The TPA’s and again (I do have to say this is NOT ALL TPA’s and NOT ALL WC CARRIERS but by now a very large majority of them) have entered into “Revenue Sharing or Profit Sharing Agreements” with Ancillary Service Vendors. Again out of pure Greed and as I see it FRAUD Against those Self Insured’s that hire them.

    A common thread that you will often see in these agreements is that the vendors that participate in these large Revenue Sharing or Profit Sharing Agreements tend to be “National Vendors” that say they operate throughout the entire country and also will tell you with a straight face that they have their “Own employees” handle all of the work when I can tell you for sure that this is not the case. Most if not all of them have a VPN – Vendor Provider Network or some form of it. Again this is word play just like Revenue Sharing instead of Kick Back, this is VPN instead of SUB CONTRACTING which no Carrier or TPA wants to hear. They will all tell you that they do not sub contract.

    I really think it is about time that Self Insured companies that have their claims administered by a TPA and even Insured Companies start taking a closer look at their policies and start having some say themselves in what companies are used for ancillary services on their claims. I don’t care if you are an Insured or Self Insured….If a claim is being paid out make no mistake about it that money is your money not the money of the TPA or Carrier so please treat it as though it is your money.

    Your Carrier or TPA will most likely tell you that they are the industry professionals and the companies they have chose to use for these services have been chosen because they provide the best service for the best price blah, blah, blah. Do not believe them. Look at their pricing and service for yourselves and again think about all of the issues this brings up. If you as the Carrier or TPA are getting “Revenue Sharing” for a providers service what incentive is there to get the best pricing or even make sure you are using the service wisely….In the end it just means more money in your pockets at the expense of the Self Insured or Insured.


    1. Transforming Workers' Comp Post author


      Thank you for your comment. Having been away from the claims arena for a considerable amount of time (not by choice), I am certainly familiar with some of the things that go on in claims, but your description is more in depth than I could ever discuss.

      Fraud exists in all businesses, but to stand behind outdated laws, regulations and rules, and claim that the system works for the injured worker and that alternatives are ridiculous and a non-starter, because some judge or jury won’t award surgery in a medical tourism destination is not only short-sighted, it is feeding the greed and avarice of those who prey upon workers, their employers and the carriers.

      As my blog is focused on medical tourism for work comp, perhaps you might want to start your own blog and bring these issues to light.

      Thanks again!



  3. Cecilia Watt

    Thank you Ms. Krasner! I am grateful. I hope that we can continue to shine a light on these horrific strategies against the injured worker and prevent any future events! Cecilia Date: Fri, 11 Jul 2014 03:11:15 +0000 To:


  4. T.B.

    I personally will go anywhere it’s found to be the BEST medical help for my injuries. In fact I am in full medical control which allows me to see whatever Dr. I want & all Dr.’s get approvals for all requests as long as they go directly to the adjuster who is familiar with the case. If someone else other than the adjuster rec’s the RFA, it is dealt with as usual, fwd’d to an external URO, though the URO is probably used to more towards their auto & hm claims since the adjuster admitted there’s no Physician on staff to approve anything or a clinic when the IW needs to see “their” Dr.’s. I currently have to use my husband’s ER’s IC since the adjuster has chosen to stop working on my case. Probably since the ER has obtained a new carrier right before information of my claim hit their ex-mod rating. The aduster stated the IC is geared towards home & auto, with a handful of adjuster’s in the WC dept. The process WAS to receive a Dr.’s request, call the Dr. if there’s a need for an automatic verbal approval & write up an in-house approved Review, while using the URO’s Review #’s on their letterhead. A message on the certified approval review would always be hand written “Per ****, No MPN to worry about”. Sad part is, those reviews, #’s, & Medical reports are never fwd’d to the URO, all further URO reviews wouldn’t have ALL necessary medical reports or knowledge of an in-house review, for a fair, well informed review. Such as the case when for 6 months all reviews went through in-house, so any URO reviewer has a medical determination stated that I am not in need of any care since I hadn’t been seeing anyone. In fact, I had been denied necessary & already certified medications since the reviewer believed I had enough time for weening, but @ the same time, isn’t aware of a surgery I had, the increased pain since, or any other type of treatment.

    Although I took the time to fax any missing reports & reviews received from the adjuster, the URO still hasn’t listed them in the report’s shown to make any determination off of. The Medical Director @ the URO/TPA is fully aware of the situation, both that I am not eligible, much less required to be delayed for going through an external review process due to the ER’s failure to post & provide their WC info. per LC 3550-3552 & Title 8 Reg. 9880-9883 & LC 4628 (?)

    Although EVERYONE within DIR/DWC is aware of the failure of the ER to post & provide, as well as never submitting my claim form to their IC; which I had to email the ER Office Mgr. to complete after I downloaded the form to complete my part, I was also never informed where their clinic or MPN is. It was the IC who informed me that neither the ER nor IC has anywhere I HAD to go to or MPN. I was also told the ER never replied to any requests from the IC about my injuries via the form to provide to both the IC & OSHA as well as my wages. The adjuster asked what I was making when I got hurt, but my wages were much higher prior to the recent change from salary to hrly. The ER didn’t pay for OT or breaks, though I was not a Mgr. or any form of Mgmt. to find me exempt from OT.

    At this point, 4 yrs later, no one investigated my claim. In failing to do so, I requested the new adjuster to have someone do so in order that the IC & their URO stop conducting their illegal, unlawful & delays of providing my requested treatment. It also effects my accurate compensation if the DLSE isn’t included in the Wage area of investigation so they can assist in obtaining my due wages. When the judge asked the Defense if a Wage statement has been rec’d, she said no & soon after the hearing mailed me a computer printscreen page showing my hrly wage which I informed the adjuster back in 2010, prior to any Atty ‘s involved. What she gave me was clearly NOT a proper Wage stmt. I can only hope the judge see’s the lackadaisical ways the Defense is doing her job & just wants my case gone! But if the ER is already considered “non-insured” by the LC’s & Reg.’s, all she has to do is pay the bills & my wages. She’s the one wasting court time & $, that’s for sure!

    Unfortunately, the ER makes EE’s sign their rights away for everything, which made me hesitate seeing a Dr. until the IC told me it’s the law to have WC provided by the ER for a industrial injury. Although I already tried to request my wages due, the Labor Dept. simply saw the General Agreement & automatically denied me my wages for signing the illegal Agreement.

    I then went on to experience the QME request, which there too was done fraudulently when the adjuster stated that I HAD to see a QME though there wasn’t any medical reason to. The form was provided w/the Specialty already chosen by the adjuster, though as an unrepresented injured worker at the time, I had the legal right & make an appt. I was seeing a Neurologist at the time but the adjuster already chose “Spine”-which bares the question how a QME can be on a panel of Spine when his Specialty is hand, shoulder & knee. He didn’t even know what or maybe why a Dr. was requesting a Bone scan! . I had a collapsed cervical level, lumbar & knee injuries along with Psyche but didn’t ask for a QME in psyche at the initial time for the panel. All I know is, between 2 different cases, 3 yrs apart with 3 panels chosen w/3 different Specialties, how the same QME come on ea. one? How can he can qualified if none of his reports are ever found in system & watch judges just look past it while signing off on ratings or Settlements? Disgusting to see Atty’s knowing they are lying in a court of law.

    In summary, regarding a system of fraud, I have exper’d the following, while keeping in mind, the ER lost all medical control both as their legal requirements to post & provide their WC info. as well as all other employment rights were never done, but instead were made to never obtain those rights by signing a General or Severance Agreement during or at time of termination:
    1) No inspection: after injury on part of IC for the injury nor prior to & during yrly audit to find misclassifying EE’s; OSHA after being informed of injuries, unsafe working conditions, lack of safety postings & I & I log -due to believing Corp. Atty that none of reported violations were true except postings violation but still didn’t f/u to inspect; Dep. Of Ins. for the reported Premium Ins. Fraud for both the WC & Auto policies; DIR for reported WC fraud both by myself & the DOI; DWC for reporting of the same but also IMR, QME & IC failing to pay reimbursement for sel-procured medical treatment.
    2) IC & URO/TPA do not ea. have the same reports & reviews, allowing reviews to either be denied, delayed or modified.
    3) A PQME chosen in 3 different scenario’s/2 different cases without being qualified in the Specialty chosen, never has filed his reports correctly in either 2 seperate cases which get shredded by the local district office instead of going through the clearly identified routes, which includes a judge to review how ratings had been calculated to return as necessary, has had medical malpractice suits against him but appear to end up being Settled w/out prejudice & too many other laws & reg.’s failing to adhere to, but even when all involved, incl. the Medical Unit, no one has conducted an investigation. Ex-parte communication w/Defense, allowing Def. to schedule appt.’s though I have legal right to; receiving correspondence without Joint signatues; failing to physically sign, not stamp appt. letters & reports; last heard a shocking story – QME office personnel states only the IC/Atty can make appt. because it’s who pays the bills that matter! I have found billings ofthis QME to charge for services NEVER rendard as well. Many other actions done illegally between IC Atty & QME w/Medical Unit & District office fully aware of.
    4) Informing DIR A.D. of IC’s adjuster failure to submit medical reports/records to IMR requesting penalties but no contact from anyone; informed of the UR conducting reviews not only w/out the legal requirement for my case, charging ER for services unnecessary, ect.
    5) Found a Status hearing form already signed by judge but no hearing schedlued or occured.
    6) I & A officer refusing to advise much less listen to me about my case in order to inform how to move fwd.; was given copy of my letter from DOI at request of judge indicating the statement made that it’s DIR’S responsibility to investigate insurers but haven’t received anything after 2 weeks.
    7) Saw Defense speaking about my case to someone else in court house who in turn went to judge after hearing asking judge why allowing my case to fwd, trying to influence judge to throw itout since iit’s wasting tax people’s $, but I haven’t been the one asking for hearings.

    I of course have much more evidence to the facts I am describing of the corruption of the system that I find is just sickening!

    With no disrespect to Mr. De Paolo, while I understand you don’t look fondly upon IW’s who are looking out to “get back at or stick it to them” type, I guess I have a bit of that in me. I mean, if its $5,000 a day penalty for the ER/IC for failing to provide an IMR certified treatment after fighting for it….but at the same time, I try not to waste any time of others, esp. a court. So while it might appear to others as though some IW’s are doing that w/all of our time on our hands when the system keeps accepting hearings w/out proof of cause nor reads objections to see @ least 1 side gives their reason not to have a hearing, it can be the fault of the EE’s of the system as well.

    In fact, in the Policy & Procedures, it states that even if a filing, as per myelf & my “Objection” to an MSC hearing since the Defense was on a mission to make me P & S/MMI though my Primary never ever indicated such & disagreed to a 0% impairment raring from my shoulder after it had surgery, along w/the QME trying to state that I have no limits in my daily activities though I never completed the questionaire which is perjury on his part, a court can still accept the filing as it is though one ever read it. It was addressed to a judge. The I & A officer merely stated it wasn’t written correctly, that she’d let the judge know, but that the judge probably wouldn’t read it.

    There is no such thing as “Due Course” in the system. & when I get $ for my education, I will be taking courses in law & will be giving free advice & assistance to those who need it while going through any of this because no deserves to be treated like this EVER!


    1. Transforming Workers' Comp Post author

      Your comment rambles on so much that it is hard to follow and to understand because you use abbreviations that only you and others like you understand. But what I got from it is the same sort of abuse that Ms. X has endured, and that is symptomatic of a medical-legal system that is out of control. but it is also symptomatic of what happens in one state when the “people” get to pass referenda that only adds complexity and confusion to what should be a simple means to properly treat and compensate injured workers. add to that the ideological battle between left and right, and you get reform measures that leave the injured more injured than if they had never sustained an on the job injury in the first place.


  5. Irene Padilla

    The National Worker’s Compensation Reform wrote into law in 1972, by then President Richard M. Nixon, which gave companies the ability to be self insured. Therein lies the biggest problem. The employers own the claims, thus hiring TPA’s, defense attorneys, Medical examiners that will be paid to say a worker was not injured or made or ill by the employer. So much money is poured into litigating the claim, money that could go to the injured or ill worker. Take the self-insured certification away. One of the 3 reasons to be self-insured was to make sure that the workplace is a healthy & safe one. With the amount of injuries starting in early 90’s on this alone, most companies would not be self-insured today or for the last couple of decades.
    The idea of being self-insured, owning the claim, thus producing the wanted outcome for the employer is akin to owning a human being (slave mentality) and making decisions on what the employer will do for the employee. Take the self-insurance out of the employers hands and much of the greed accompanied with fraud & corruption will disappear along with allowing injuries or illnesses to not flourish. So will stopping the need for TPA’s who make the decision for the employer along with worker comp boards, attorneys, judges, medical legal examiners(Qualified, Independent & Agreed ME’s ), employer paid for fraud units, AND most of a the claim money would actually go to injured workers for recovery. Isn’t this what workers compensation was to be for?
    By the way. A judge in Florida just declared that exclusive remedy was unconstitutional. He’s right because as it stands right now, there IS HARDLY anything left for the injured or ill workers in the comp system as a whole and in CA this is also true as well as other states. The word the judge used, was ERODED, That there is so little left for injured or ill workers.



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.