Unveiling the Battle Against Workers’ Compensation Fraud: Lessons from the Peyman Heidary Case
On April 12, 2024, a Riverside County jury sentenced Peyman Heidary, a former chiropractor, to 54 years, eight months in state prison and ordered him to pay more than $23 million in fines for his role in a massive workers’ compensation fraud scheme. Heidary was convicted of 68 counts of insurance fraud, conspiracy, money laundering, and other charges in orchestrating a complex scheme that totaled $150 million. The ruling, one of the largest of its type in 25 years, leaves workers’ compensation fraud advocates with mixed emotions. Pleased that justice has been handed down, the unease that such systemic manipulation occurred in the first place lingers. However, the ruling is considered a victory as it sends a clear and forceful message that exploitation of a system put in place to protect injured workers will not be tolerated.
The Current Situation
In a scheme like Heidary’s, perpetrators are often extremely well-versed in the complexities and nuances of workers’ compensation insurance and are highly capable of exploiting the system to their extreme financial gain – all without consideration for those they are potentially hurting. In simple terms, a predatory scheme of this nature works by drawing from both the medical and legal sides of a workers’ compensation claim. Injured employees may be illegally solicited by attorneys working within the scheme, then referred to fraudulent clinics and healthcare providers who, in turn, refer to specialists or other practitioners also involved in the scheme. Those healthcare providers then prescribe inflated and potentially unnecessary medical plans designed to maximize billing, and then send those inflated bills on to insurance companies. Meanwhile, throughout the process, kickbacks exist to financially incentivize individual players and further muddy ethical intentions and behavior.
Workers’ compensation fraud hurts not only those directly involved, but affects all. While injured workers may receive unnecessary medical care that can cause more harm than help them recover, there is also a burden of further missed work for many of these employees and their employers which results in added costs.
To protect against this predatory behavior that seizes on injured workers and exploits the system put in place to protect such individuals, it is necessary for all insurance brokers to collectively raise their voices in the interests of their clients.
Action Insurance Carriers Can Take Now
Carriers should have their Special Investigation Units (SIUs) pull all files connected to individual doctors, attorneys, and other parties who have been named or convicted in fraudulent cases. An insurance provider’s internal system can pull files to follow a claim’s path and look for opportunities of reimbursement and recovery for their clients. The damage done per individual claim may be insignificant on a financial level. However, when fraudulent claims are compiled, the sum adds up to big money. Carriers can take a holistic view of these fraudulent or inflated claims and assess the negative impact they have inflicted in terms of increased cost, higher premiums, difficulty qualifying, and other ripple effects.
A carrier’s SIU can also look retroactively at a policy to determine prior damage. Essentially, “fake money” due to exploitative charges and claims can be damaging to a policy. Even if recovery is not an option, this information can help show an underwriter a more accurate representation of costs when it is time for renewal.
Preventative Action Going Forward
From an insurance carrier perspective, steps can be taken to help prevent workers’ compensation fraud. For instance, always scrutinize counsel selection. There may be signs that an injured employee has been ‘capped’, meaning an attorney has paid a commission to an agent to secure the employee as a client. This is illegal client solicitation and can be a precursor to further fraudulent or illegal activity. Ways to spot capping are noting the location of both the attorney and the injured employee. It’s illogical in many instances for a client to seek an attorney several cities away, yet this is often seen in cases with capped clients. Also, simply inquiring how an injured employee acquired their attorney and understanding the backstory of their workers’ compensation claim initiation can bring clarity to the legitimacy of a claim.
Looking for multiple claims that read like a singular protocol of care – regardless of the employee’s injury – may also signify manipulation of a workers’ compensation claim. For instance, if an injured employee presents with a sprained thumb and is prescribed the same care plan that an employee with a mild burn or with fractured arm also receives, then investigation may be warranted as a boilerplate care plan may be in place to maximize billing regardless of injury.
Finally, calling your advocate or liaison with your insurance broker when something seems off can serve as a preventative measure against fraudulent workers’ compensation claims. When a situation warrants scrutiny, liaisons and advocates will often make calls to suspicious providers or industrial clinics to convey that they are watching in terms of how an injured employee’s workers’ compensation claim proceeds. In some cases, this notice of monitoring acts as a warning against fraudulent practices
Conclusion
Ultimately, the big takeaway is that if insurance brokers do not collectively call out and hold accountable the predatory, fraudulent individuals and systems perpetrating workers’ compensation claims, the costs of workers’ compensation insurance goes up for all. Individual injured workers may suffer harm due to unnecessary medical procedures, doubt may be cast on legitimate injured employees, and trust is lost between individuals and the healthcare and insurance systems. With a united voice and vigilance, those in the insurance industry can help safeguard workers’ compensation against unethical and predatory practices for the benefit of all.
