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Lessons Learned From a Corporate Lien Claimant’s Demise

The news that Premier Medical Management voluntarily dismissed seventy million dollars ($70,000,000) in liens provides little insight into the long and arduous journey some carriers embarked upon to challenge what some consider the largest fraudulent lien case in California history. Some insights can be gleaned from this less than pleasant trip which those carriers, their law firms and Parker, Kern, Nard & Wenzel began some years ago.

Typically, questionable liens from providers follow patterns; excessive testing, frequent office visits with unusual amounts of time spent with the patient, treating physicians coding visits as medical-legal visits, upcoding and unbundling. When those patterns overlap with a pattern of physician referrals and vendor and the problem is institutional rather than individual misbehavior.

Over time, more than one workers’ compensation carrier realized that the source of this mischief was Premier Medical Management Systems, Inc. The Premier business plan sought to profit from the California workers’ compensation system by controlling and manipulating medical, chiropractic, and physical therapy services together with other ancillary services such as interpreting, transportation, durable medical equipment, prescription medications and ambulatory surgery centers.

Despite the fact that Premier was not, and could not, be licensed to practice medicine [Business and Professions Code §2400], its executives sought to manage and control the provision of medical and other services to California’s injured workers. In the course of litigation the collective defendants in the consolidated lien case alleged that Premier case managers directed patients to a dozen different Premier providers for testing and procedures that were not medically necessary. It was also alleged that medical legal reports were created and edited by Premier and that Premier affixed physician signatures stamps to these medical reports.

The relationship of Premier to these providers was based upon a contract which provided that Premier would “manage” a physicians practice and acquire patients in return for a percentage of the doctor’s billing. Premier acquired office space, hired both front and back office employees and controlled every aspect of the health practitioners “practice.” The overarching “management” of the physician’s practice became a significant piece of evidence concerning whether Premier was engaged in the “corporate practice of medicine.”  It also raised issues of “capping” and incestuous referrals between Premier providers to generate excessive and unnecessary medical and diagnostic procedures.

In the Spring of 2004, several carriers (later joined by numerous others) sought to “consolidate” all Premier liens for the purpose of litigating the issues noted above. In discussing the scope of discovery in these consolidated cases, Judge Kahn noted the issues to be litigated in his November 30, 2004 opinion decision and Order when he stated:

” Defendants are denying liability for the liens on various theories including but not limited to improper referral, kickbacks, upcoding, unlawful practice of physical therapy, and unlawful practice of chiropractic. Only one of the issues is illegal practice of medicine. Until discovery is complete and issues are framed it is premature to decide any issues.”

Premier struck back after consolidation was ordered by filing two civil lawsuits alleging that the involved carriers were in violation of the Cartwright Act (Business and Professions Code §16720) which is California’s antitrust statute, as well as Business and Professions Code §17200 (Unfair Business Practice Act) and 18 USC 1961 et seq. which is the Racketeer Influenced and Corrupt Organizations Act (RICO). Premier sought $15,000,000 in damages from the collective carriers.

Parker, Kern, Nard & Wenzel was one of a number of law firms which fought the civil lawsuit and filed a Motion to Dismiss (CCP 425.16; Strategic Lawsuit Against Public Participation)). Ultimately, the Premier lawsuit was dismissed by the Court of Appeals (Premier v. CIGA (2006) 136 Cal.App 4th 464). In addition, the legal fees incurred by this office and others in the successful Motion to Dismiss were awarded to the carriers.  That left the consolidated workers’ compensation case to determine the validity of the liens.

Premier’s undoing three (3) years later, was the result of the steadfast efforts of the carriers and lead counsel Cliff Sweet. The carriers, through Sweet and others, pushed for discovery sanctions and dismissal while Premier sought to avoid disclosure of details of its enterprise by asserting the Fifth Amendment. Megan Rogers and Richard Kern of Parker, Kern, Nard & Wenzel collaborated with Cliff Sweet to compel the testimony of Premier’s officers, and executives by drafting the brief contesting Premier’s Fifth Amendment position at the same time the Los Angeles District Attorney was moving towards an indictment of those same principals.

The tireless efforts of the carriers and their counsel ultimately resulted in the voluntary dismissal of Premier’s liens as reported by the news media.

The lesson learned is that persistence does pay. There were many overtures to settle as Premier attempted to “divide and conquer” the involved carriers. By maintaining a united legal position and not “legitimizing” Premier’s scheme by settling piecemeal, the Premier business model collapsed.

Ultimately, that collapse began years earlier with the detailed analysis of individual adjustors in discerning the “unusual” billing practices of a lien claimant.

Since this article was written, Judge Kahn has held a hearing at which numerous lien claimants have suggested that Premier lacked authority to dismiss their liens. Judge Kahn has suggested that each aggrieved lien claimant file a Petition for Reconsideration concerning that issue.