The Orange County District Attorney’s Office wants a 42% boost in funding to combat what it calls rampant workers’ compensation fraud here.
The office also wants to bolster its investigation and prosecution of fraud at medical clinics in OC, which is considered the “epicenter” in the state for large-scale “fraud mills,” it said.
The charges are from an application for funds the district attorney’s office filed with the state’s Department of Insurance more than a month ago.
The application discloses that search warrants were served in mid-April on three unidentified “fraud mills.”
The OC application asks for $2.6 million to pay for lawyers and investigators to find workers’ comp fraud for the 12 months starting July 1. It also claims that OC had the second highest number of suspected fraud claims in the state from 2002 to 2004.
The focus on enforcement has shifted dramatically.
OC’s legal system handled nearly $98 million in workers’ comp fraud from July 1 to April 15. That’s way up from the $2.3 million in fraud reported in the same period a year earlier.
It’s not clear how much funding investigators will receive from the state, said Elizabeth A. Henderson, assistant district attorney in charge of the economic crimes unit in OC.
“The commissioner (John Garamendi) and the fraud assessment commission decide how much money is to be allotted to each county,” she said.
An insurance department spokeswoman said funding could be decided June 22 during a meeting of the Department of Insurance’s fraud assessment commission. The funding comes from a portion of insurance premiums paid by employers.
John Riddle, president of Irvine-based Information Networking Co., a 20-employee builder of computer networks, is supportive of the district attorney’s bid to boost funding.
“They are trying to figure out the No. 1 scammer in the county and drill down from there,” said Riddle, who said his workers’ comp costs rose more than 100% from 2001 to 2003. “I’d be very supportive if we could cut down on fraud. It’s an absolutely huge issue.”
Other highlights in the district attorney’s application include:
The office expects to launch 80 new investigations in the upcoming year, with 37 investigations to be carried over from the current period. Roughly 35 new prosecutions are planned in the following year.
Large scale provider fraud investigations will result in additional criminal cases being filed.
The goal of the Orange County District Attorney’s Office during the next three years is to continue to target ring-based fraud activity, focus on outpatient surgery fraud, increase the number of investigators and continue to target uninsured employers and “underground economic activity” in the construction and services industries.
Illegal billing practices by medical workers, as well as ring-based criminal “capping activity,” is a big problem in OC, the application states. The amount of losses has a “significant impact” on workers’ comp insurance costs, it said.
Capping is a well-organized crime in the county. In a capping scam, lawyers and medical providers recruit marketers, or “cappers,” to find people who will file false workers’ comp and auto insurance claims, or exaggerate the extent of their injuries.
Cappers are paid well by medical and legal providers, who need a continuing source of people to generate fraudulent claims.
“We are actively prosecuting various types of workers’ compensation fraud and will continue to be balanced in our approach,” Henderson said. “However, provider fraud is an important component of our program.”
In the past few years, OC has become the “epicenter” of a large amount of medical provider fraud in both the workers’ comp and medical insurance areas, according to the district attorney’s office.
Some outpatient surgery centers have recruited patients from around the state and the country to undergo unnecessary surgical procedures in return for compensation, according to the application.
The operators of the clinics, the medical professionals, the cappers and even the patients have profited from this fraud, it says.
One case cited in the document involved Buena Park-based Unity Outpatient Surgery Center. Owners Tam Vu Pham and his wife, Hoang Ngo, were among those arrested last summer.
They allegedly profited by paying more than 5,000 healthy patients nationwide to have unnecessary surgery. The scheme involved billing insurance companies and filing workers’ comp claims.
In that case, the OC district attorney’s office filed criminal charges against eight people. The scam created more than $14 million in losses to insurers.
“The investigation is ongoing, but suggests that additional fraud mills of this type exist in this county,” the application said.
