Workers’ compensation medical fraud drives up costs for California employers and insurers, and much of it is committed by providers, not injured workers. Clinics, surgery centers, pharmacies and medical-legal evaluators that pay for patient referrals or bill for care that was never needed can face whistleblower lawsuits under California’s Insurance Frauds Prevention Act. The insiders who report them may share in the recovery.
On this page: Fraud schemes · A Long Beach example · Laws · Who reports · Whistleblower share · Injured workers · Retaliation · Fees · FAQ
Smith Trial Group represents billing and front-office staff, schedulers, marketers, medical assistants, chiropractors, physicians and others who know how a workers’ compensation provider is defrauding insurers. Attorney Cardon Smith spent years defending Fortune 500 companies in complex litigation and served as a law clerk to a federal judge. Consultations are free and confidential.
Common Workers’ Compensation Medical Fraud Schemes
- Paying for patients. Paying “cappers,” marketers or other providers for each injured worker they steer to a particular clinic, surgeon or hospital.
- Kickbacks between providers. Surgeons, chiropractors, imaging centers, labs, pharmacies and equipment suppliers paying each other for referrals, often disguised as “marketing,” “management” or “consulting” fees.
- Unnecessary treatment. Surgeries, injections, therapy, testing or durable medical equipment ordered because they pay well, not because the worker needs them.
- Pharmacy and compounded-drug schemes. Prescribing high-priced compounded creams, patches or medications in volume, sometimes with a share of the profits going back to the prescriber.
- Medical-legal billing fraud. Billing for evaluations, reports or record reviews that were never performed, or that were ghost-written and signed by someone else.
- Billing for services not rendered. Interpreter services, transportation, therapy visits or follow-up appointments that never happened.
- Lien mills. Filing large volumes of liens for questionable treatment to pressure insurers into settling.
A Long Beach Example
One of the largest workers’ compensation fraud cases in California history centered on a Long Beach hospital. Federal prosecutors charged that over about 15 years, the hospital’s owner paid kickbacks to doctors, chiropractors and marketers to refer thousands of patients for spinal surgeries, producing more than $580 million in fraudulent bills, mostly to California’s workers’ compensation system (U.S. Department of Justice). That was a criminal case. Smith Trial Group was not involved. Schemes like it can also support civil whistleblower lawsuits that pay a share of the recovery to the insider who reports them.
The Laws That Apply
- California Insurance Frauds Prevention Act (Insurance Code 1871.7). Makes it unlawful to knowingly use runners, cappers or steerers to procure patients for workers’ compensation benefits, and reaches false or fraudulent claims to insurers. A private whistleblower can file the case on behalf of the State of California and share in the recovery.
- Labor Code 3215. Makes it a crime to offer, pay or accept anything of value for referring clients or patients for workers’ compensation services.
- Labor Code 139.21. Requires the Division of Workers’ Compensation to suspend providers convicted of certain fraud and kickback crimes from the workers’ compensation system, and sets special procedures for their liens.
- Federal False Claims Act. When the fraud reaches federal workers’ compensation (claims for federal employees) or Medicare and Medi-Cal, the federal and California False Claims Acts may also apply.
Who Sees Workers’ Compensation Fraud
- Billing, collections and lien staff
- Front-desk staff, schedulers and patient coordinators
- Marketing staff and “liaisons” told to bring in patients
- Medical assistants, therapists, chiropractors and physicians
- Pharmacy technicians and pharmacists
- Staff at medical-legal, interpreter and transportation companies
Whistleblower Share and Penalties
Under the Insurance Frauds Prevention Act, a defendant can owe $5,000 to $10,000 for each fraudulent claim, plus an assessment of up to three times the amount of each claim. In schemes that bill thousands of claims, those amounts add up quickly.
| If the case is… | Whistleblower’s share of the recovery |
|---|---|
| Taken over by the District Attorney or Insurance Commissioner | 30% to 40% |
| Pursued by the whistleblower after the government declines | 40% to 50%, plus reasonable attorney’s fees and costs paid by the defendant |
The share depends on how much the whistleblower contributed and the facts of the case. No amount is guaranteed. A case must generally be filed within three years after the facts are discovered, and never more than eight years after the violation.
If You Are an Injured Worker
Many injured workers are steered to providers without knowing about the money changing hands behind the scenes. If you were pressured to see a particular doctor, received treatment you did not ask for, or were offered money or gifts to go to a clinic, you may have information that matters. Reporting provider fraud is separate from your own workers’ compensation claim. Talk to a lawyer about both before you take any steps.
Protection From Retaliation
An employee who is fired, demoted, threatened or harassed for lawful acts in support of an insurance fraud case may be entitled to reinstatement, two times back pay plus interest, special damages and attorney’s fees. California Labor Code section 1102.5 also protects employees who report suspected violations of law. See whistleblower retaliation.
Before You Report
- Use a personal phone, email and computer, not a work device, to contact a lawyer.
- Do not discuss your concerns with coworkers or post about them online.
- Talk to a lawyer before you copy or take documents. Patient medical records are protected, and there are limits on what you may take.
Our Role and Fees
Smith Trial Group represents whistleblowers from the first confidential meeting through investigation, settlement or trial. We handle whistleblower cases on a contingency fee basis. You pay no attorney’s fees unless there is a recovery. Smith Trial Group is based in Newport Beach and represents whistleblowers throughout California.
Frequently Asked Questions
Can I get a reward for reporting workers’ compensation fraud?
Possibly. California’s Insurance Frauds Prevention Act lets a whistleblower who files a successful case receive 30 to 50 percent of the recovery, depending on whether the government takes over the case. No amount is guaranteed.
Is it illegal for a clinic to pay marketers to bring in injured workers?
Paying for referrals of workers’ compensation patients can violate Labor Code 3215 and the Insurance Frauds Prevention Act’s ban on runners and cappers. Whether a particular arrangement crosses the line depends on how it works, so a lawyer should review the details.
I work at the clinic. Will I get in trouble for what I know?
Employees who were told to follow a scheme are often the most valuable whistleblowers. A person who planned and started the fraud cannot share in the recovery, but staff who report it generally can. Talk to a lawyer confidentially before you do anything else.
Does reporting provider fraud affect my own workers’ compensation claim?
Reporting fraud by a provider is separate from your own benefits claim. A lawyer can help you protect both.
How long do I have to file?
Generally three years after the facts are discovered, and never more than eight years after the violation. Waiting can also allow someone else to file first.
What does it cost to hire a workers’ compensation fraud whistleblower lawyer?
We handle whistleblower cases on a contingency fee basis. You pay no attorney’s fees unless there is a recovery.
Talk confidentially with a workers’ compensation fraud whistleblower lawyer
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